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Schwartz v. Mills
192 F.2d 727
2d Cir.
1951
Check Treatment

*1 good books, in the and the evidence is

for what it is worth. a matter As

course, hardly in a anything it is worth Clements, Ga.

doubtful case.” White v.

232, 242.2 care, impressed patience,

We are efforts

and wisdom of the trial court in its parties fair diffi-

to assure the trial unseemly

cult and find no issues. We court, rulings

error in

judgment is therefore affirmed. v. MILLS.

SCHWARTZ

No. Docket 22036. Appeals

United States Court of

Second Circuit.

Argued Oct.

Decided Nov.

Frаnk, Judge, Circuit dissented. proof race-ancestry family”. Georgia Code, 2. The rule 38-303, as to Section Allen, is not so strict as the rule as to Lamar v. 108 Ga. 33 S.E. pedigree which confines evidence of reputation “general repute *2 Simon,

Joseph City Lewis of New York Cohen, City, (Rubin of New York on the brief), petitioning creditor-appellant. City, Welling, of New York N. William appellee. SWAN, Judge, Before Chief FRANK, Judges. CLARK and Circuit CLARK, Judge. Circuit validity appeal attacks the This appointment bankruptcy of a trustee in ma'de a referee on failure of choice objecting creditors. An challenged right of another claimant vote, -repeats challenge here review, petition for of his denial action, by affirmance of the referee’s court. district Corp., bankrupt is A Grade Foods adjudicated petition on a which was filed 22, 1950, by appellant December and other explicit. notably was us refers creditors’ clear creditors. The first individuals, eight primarily corpora- since February held on Some relative, officer, appeared, tion cannot presenting claims or director however, this, $93,000 $100,000. It also limited to stock- about Of *3 presented for Thus the lan- up was made of the claim holders Co., Inc., by guage appear to be in- Packing New York Meat of the statute Schneider, fifty applicable Meat, president per cent York the claimant and to New its stockholder, corporation. president and West Hills Park likewise Memorial Doneca, Cir., 374, bankrupt half owner of A. v. 9 131F.2d Grade objections creditors, Over оf other petitioner go But seeks to behind permitted referee claim to voted this corporate form, Pepper Litton, citing trustee; in con- the election and in 281, 238, 308 U.S. 60 84 L.Ed. S.Ct. sequence neither of the two candidates Taylor Electric v. Standard Gas & upon necessary being voted received the 59 83 L.Ed. U.S. S.Ct. majority in both number and amount of bankruptcy 669. It is course true claims, required by of the Bank- 56§ pierce proverbial courts can and must ruptcy Act, Thereupon 11 U.S.C.A. § corporate the interests veil in of substan person the referee chose the trustee in the justice tial subordinate claims Mills, Henry serving A. who had been corporate affiliates individual insiders appointment by as receiver under the dis- advantage who have ‍‌​‌‌​‌​​‌‌‌‌​‌​‌‌​​‌​​‌​‌‌​​‌‌‌​‌‌‌‌​​‌‌‌​‌​‌​‌‌‍obtained unfair trict court and who wаs also the nominee position. from favored we their But do par- of the New York Meat interests. All expressed not think that the doctrines agreed qualified ties that Mills was both .and in such cover cases the situation at bar. disinterested. Nonetheless creditor mechanically For subordination is not auto and, sought by review court district identity showing matic between there, losing appeals now to us. the stockholders and officers claimant corporations;

Petitioner’s first contention relies and debtor have tradi upon the both tionally New York Meat the elements of facts stressed fraud family injury interests, A corporations, Grade are to the debtor actual by illegality owned and controlled the same indi have thus held that mere under viduals, purchase that their officesare the antitrust laws in the of a claim located building, require same and that affairs would subordination. the business West not Tyler, Cir., by each have been dominated 52nd Theatre Co. F.2d long tra intercompany given dition of 128. Petitioner here no hint He transactions. argues conveyance, therefore of fraudulent even even manufac though New claim, York directly mismanagement. tured own Further does A Grade stock, objection it is equity he makes no on the broad nevertheless within the disfran provision chising ground bankrupt election is a, added to con sub. § Act, trolled, a, ground a valid by U.S.C. sub. had the Chan reversal dler support Amendments been adduced. That section presently important part McGill, provides now true bankrupt, that the creditors of a Brewery that in In re Loewеr’s “exclusive Gambrinus bankrupt’s or, Co., Cir., relatives where the this court affirmed corporation, is a D.C.S.D.N.Y., F.Supp. 909, hold, exclusive of its members, officers, stock-holders or upon objections and a full trial filed the members of its trustee, board of corpora directors or a claim of a solvent trustees or of other similar controlling having the same stockholders bodies,” appoint trustee, shall pro debtor should be subordinated to the claims appointment vision the court creditors. this was stated quoted law, creditors fail act. applied This lan as an-absolute rule of to be guage employed thus injustice cause, notwithstanding might overturn the older tradition which allowed these classes to as would the case where corporation vote election of a trustee was itself insolvent and its seems con- claim” and “the consideration therefor.” prejudiced. On the

own creditors thus opinion report accepted of New York trary, filed the first Meat’s form, expressly described the consideration for the the situation the case eliminates “money corporation debt as loaned and borrowed of the creditor where creditors Claimant, affected; Alleged Bankrupt the the adversely they are show that tenor; goods, opinion clearly of like concurring wares merchandise sold and Bankrupt” merely in delivered to the said' judge concurs while the third special request. latter’s instance and particular result. equitable subordination Even where speak Some the older do cases indicated, appears judgment grounds statement, compiled in terms of a detailed this effect at reservation to without *4 care,” of the “with meticulous considera efficacy, it is “because is of dubious outset tion for the claim. cases cited in particular of-a state of affairs as on a based Bankruptcy. Collier on 14th Ed. multiplicity and renewal time and invites considering or not 1941. Without whether litigation administration of if and as the exacting requirements can have solvency. tem- -It progresses toward meaning day-to-day in the realities real porary only.” 3 on Bank- Collier solution meetings, of creditors’ we think the better Moreover, ruptcy 14th Ed. 1941. rule is no error will lie if there was inject issue a troublesome would serve ground reasonable the for allowancе. See purpose is to proceedings whose into initial Co., D.C.Mass., In re Rosenfeld-Goldman proceed ex- fiduciary who can elect a court F. 921. Proof of Claim should Hence conserving of the estate peditiously to the comply requirement be held to with the and, be, scrutiny if need the careful and the if for of consideration the statement At presented. least rejection of claims thereby supplied creditors and trustees are where result a considerable trial there must enough information to the circum explora- any, would need equities, giving the debt to be able stances rise now asserts tion; thus the trustee pass validity, legality, to test on its and he pursuant the referee to direction of accuracy. substantial alleged recovеr an brought suit to bankrupt to preferential payment the Here we think Proof suffi from petitioner’s voting nominee. for cient under this functional test. does not of those one appear petitioning not owe election the creditors or a trustee should Since actually must sue for restora- were harmed or whom he the trustee later Stowe, estate, bankrupt’s the statement. the succinctness of the misled of D.C.N.D.Cal., deficiency knowledge In re Anson Any 235 F. was in fact D.C.N.D.Tex., Co., during meeting. the creditors’ supplied Mercantile require adjudica- personal clearly to his knowl would testified this issue Schneider $20,000, can be settled. at or more subordination least edge tion before of loans indicate surely impasse circumstances create the when sufficient tо than unjust would be trustee. He also testified that subordination selection the delay company trial. That books showed the bank no such that the should be pending approximately $93,000, was at For there rupt here. claimant the case owed loaned, part money York Meat petition to force New the greater the time appears to be insolvency; and it now meat. In addition there was into balance Chapter report X for the voluntary reorganization in of accountants offered showing exact proceedings. committee Hence subordination creditors’ distinctly its creditors. as disclosed the bank unfair to claimed amount rupt’s was excluded books. This petitioner contends that even if Next of reasons. Had disqualified without statemеnt referee not thus York Meat is New resolved themselves into proceedings voting, Proof of Claim failed its validity a, as to the the merits requirements a trial on satisfy sub. of § specifies might have a, such evidence sub. U.S.C.A. hearsay. circum Under the considered “setting under oath -forth statement exactly proportion here, sup stances we think it owned in same all available plement parte Packing stock York Meat Co. the ex Proof of New statement companies. of Claim. See Memorial Park Schneider President of both West Hills Doneca, supra. As Packing Petitioner did not as President of Meat $93,000 proof sug sert that no claim all he filed on behalf existed its gest naming proxy against claim himself as fraudulent transactions between claim— — request bankrupt company. ant Nor did he held, adjournment make a formal attack at which the he purpose testified, Its claim. allowance for the was examined under oath and (con- vote was therefore not error. first as President Co. Bradley, cerning claim), Furriers v. F. then Sloan’s 2d 757. President of (concerning filing schedules). He shifted request ad Petitioner an mercurially capacity another, from one journment the ground that an involun resembling “doubles,” play- actor tary petition against New York Meat was hero’s both hero villainous days bankruptcy to be tried three Obviously, twin brother. came court, complains and now referee’s *5 claim, the vote Meat Co.’s one could request. showing His grant refusal his tell whether his motivation that of was best; injury quite of attenuated at bankrupt half-owner thе of half-owner hope apparently based on it was the company of asserting a creditor’s claim. adjudi proceedings result in the split- If ever there was an instance by cation, appointment followed the of a personality allegiance, or dual this is it.1 ap who would vote with him. trustee occurred, Schneider, proxy, the pears that in fact the trial voted Meat Co.’s never as $93,000claim Mills. subsequently for All other York Meat filed the credi- and New objected tors voluntary (on grounds under petition reorganization which I shall for later) voting discuss Chapter of the Act. U.S.C.A. the claim. X claims, seq. adjourn creditors’ All seven in Refusal number and et the $6,000, aggregating only has been were voted in meeting error when there is Levy. $93,000 behalf of one the As Meat such serious abuse discretion as un only Company’s any claim the justly prejudice one of creditor. See importance Mills, D.C.Mass., for Grat, prejudice voted that claim No vote, Levy lawfully could not was elected. here shown. Referee held that it had But the been law- Affirmed. result, fully deciding voted. As that no elected, appointed one was the Referee FRANK, Judge (dissenting). Circuit Mills, Company’s the Meat candidate. I begin ‍‌​‌‌​‌​​‌‌‌‌​‌​‌‌​​‌​​‌​‌‌​​‌‌‌​‌‌‌‌​​‌‌‌​‌​‌​‌‌‍by stating I it .think well disagree with the Referee. I think that my in facts somewhat more detail than the Levy was elected the to- seven claims done, bring in colleagues order to out $6,000, Company’s that Meat talling the aspects the case to I which dramatic Mills, voted for should not have majority opinion given in- think the been counted. because, attention. This do sufficient I аlthough Co., Brewery the amounts assets lia- In Loewers Gambrinus Re small, 318, involved are principles bilities we decided that where importance. considerable are of bankrupt here—the —as stockholders of a corporation were identical those of bankrupt, Corp., Grade A Foods had corporation, then, stockholders, any a creditor without two Schneider and but Ja- any cobs, owning They each one-half the of either kind of fraud or stock. unfair- attorney attorney appear for who filed an ance As had for 1. The appeared significantly Meat at ance for referred attorney parent company Meat to it as “the Co. appear subsidiary.” allowed He was to withdraw whatsoever, the claim of creditor nеss Analysis of H.R. tion of trustee.” corporation subordinated had be Cong. (1936) 157. 74th Sess. 2d ruling, of all other creditors. so designed propo by its amendment was Litton, Pepper cited and relied on in participation “from nents to exclude * * 84 L.Ed. 60 S.Ct. U.S. credi appointment a trustee Co,, Taylor Gas & Electric v. Standard a bank tors wihoare officers or directors of L.Ed. 59 S.Ct. appointment 306 U.S. rupt corporation, so that the veil,” corporate “pierced hold persons and we will the act of a trustee situation, ing creditors, in such a claim of are interested the estate bankrupt, corporation must be treated tie with the not because directly House exactly Hearings it were before personally.” as if held Judiciary on H.R. corporation.2 Committee on the stockholders 1st Cong. 75th Sess. 92. H.R. however, suggesting, am that the I Company’s have been claim should Hamilton4 Some remarks of Walton showing made subordinated technique ‘pierc- “A known as apply here: voting cite time of the trustee. I corporate uni- ing veil’ now all but Brewery Co. because there —with- case versally recognized courts. out the aid statute whatever—we always are our on the bench artists necessary disregard considered covering or count- adept locating the shadowy corporate insulation. Subordina- * * * There number of veils. Far less should indeed harsh. reports after case are the law case penetrate tissue-paper needed to insu- if two blandly assumed it is here, (1) lation as we have charters, they are separate concerns have only (2) a statu- in issue and we have *6 * * * two, larger fragments a tory provision Amendment —the * * * says imperium. a Such decision a, 11 U.S.C.A. sub. a sub. Section effect, your papers proper order ‘get prevent controlling to —which aims go will the returns.’ we behind bankrupt from for a trustee. only announce, with ‘this deals is court to True, statutory language the literal of that shadows; to with we no facilities deal have provision no than a claim a covers more ” that, in such Hamilton thinks substance.’ bankrupt company’s stockholders, directors instance, a “dare return court should to interpretation of the or officers. sim- affair to the down-to-earth a human corporation to include twin car- a statute possesses everyday it in the world.” plicity e., disqual- рut purpose, i. to patent ries my recipe for the instant case. That connection ify persons “too close with that proper My only point to it colleagues’ make is to answer counted in the selec- should their votes is. language to “the of the statute.” That opinions case, is, wife, 2. In one that it of the a man who like above Caesar’s got no suspicion. need there was said that have to Ton to have that ** * a different result to consider whether have an honest administration. required if would be if to We find we want have proper administration, got company bo affected. But have to would opinion, Judge bankruptcy any Learned influ- the other that divorce the question. Hand, mention tend minimize ef- did not even ence would to ficiency felt, administration, and we following excerpt from the is taken deliberation, provision after due Hunt, testimony of the of Mr. member Hearings before House essential.” Bankruptcy Conference National Judiciary on the on H.R. 6439 Committee sponsored amendment: “The the 44-a Cong. H.R. 75th 1st 94- Sess. seriously considered at matter has meetings of confer- various all Hamilton, Composition trying On are to arrive at is What we ence. Corporate 'Veil, person an address before the of a receiver and the selection Lawyers Society (1946) 18-19, absolutely impartial, who Brandéis trustee expressed it, have, as the courts does not entangling words, any alliances; in other they impossible know would “plain language” it is what my colleagues employ the it, they have said if it had. All they not adhere have about Yet I sure rule. am down words on to done is certain if called to write to such mere literalness kind. (said apply generally to situations of following statute construe prevent apply may some To literally been enacted these either Dean Pound5 to have meaning, states) plainly years ago general : “Be it what was in one of our every any undisposed leave of what there enacted that it shall unlawful any suppose provide reason for. person persons discharge loaded meant to Thus, in, enough judge along or is not for the firearm or firearms * * dictionary. except cannot public highway (He) in this use road or state * * * suppose purpose killing noxious or has for the been said animal, pur purpose.” should dangеrous or an officer in leave unexecuted its own Hand, duty.” Judge the inade And criticizing The idea of while suit quacy “plain sole language” judge of the school which would decide key entirely meaning legal came our according correct into his own notions of Aristotle,6 justice, system from the Roman via decried the school of sheer literal lawyers,7 ism which “dictionary thence Plowden. Said Plow- he dubbed (in 1574); may Pland, “The Judge opinions den law he resembled school.” for this kernel, court, expressed nut, which has a shell and has similar views. you Deposit and as be no nut Corp. Tremaine, will better Federal Ins. you shell, Cir., only you if make of the so use he remarked: law, you receive benefit guide interpreta will “There is no surer rely letter, only upon the and as the fruit tion of purpose than statute profit shell, sufficiently disclosed; nut lies in the so nor surer profit the fruit and of the law consists in mark of over solicitude for the than letter is, the sense more than the letter.”8 It to wince carrying purpose out that be * * then, day little late for our courts cause the formally words do not * * * always quite to stick legislation. said, letter of is, match it.” It Particularly strange is it for this court to Markham, in Cabell so, great do for our Judge, former Chief “one of the surest indexes of a mature Hand, bench, Learned developed and off jurisprudence not to make a *7 often disclosed serious unwisdom of fortress out dictionary; to re but 1933,9 such Writing a method. in he said member that always statutes have some judge really that “what a purpose is to does take object to accоmplish, whose * * * the language try before him and sympathetic imaginative discovery and is 11 to find out (legislators) what the guide meaning.” the surest to their In done, have case before him had been Co., Cir., Borella 2 63, v. Borden F.2d 145 * *10 Strictly before speaking, 64-65, them. Judge Hand wrote: can “We best Pound, 5. A Hundred Years of Judge repeating American 10. Here Hand was Law, Century Progress said, Law, in A of Aristotle Aristotle, and Plowden had See p. 1835-1935, I, 8. 1173b; Vol. Ethics, Nicomachean 2 Plowden, 450, Eng. (1574), 465-467 75 Ethics, 1137b; passage 6. Nicomachean Rep., 695-696. also N. L. R. B. v. quoted Victoria, is in Usatorre v. The Union, Cir., National Maritime 2 F. 175 Cir., 434, 2 172 F.2d note 12. 686, 7; 2d 4 690 notes and Usatorre v. Kiss, Equity See, g., Law, e. in and 7. Cir., Victoria, 434, The 2 172 F.2d 439- volume, Legal of Method Science 12-16; 441, v. and notes Commissioner (1917) 146. Cir., 243, Estate, 2 Beck’s 245 Johnson, Cir., 2 Eyston note Slifka v. 161 Studd, 8. Plowden’s comments on v. 467, 450, Plowden, Eng.Rep. 467, 470. 2 75 465— 688, 695-699. affirming, Supremе Court, in 11. In 404, Judge Cabell, Hand, Markham Ear 326 U.S. Learned How is a Free 9. Rendering Decision, Series, 90 S.Ct. L.Ed. said: I in Lectures, a Law (National policy Advisory of as the letter “The as well No. guide (1933). in law a to decision.” on Radio Education is Council

73á person read degree precision a always, a which here, by re meaning reach the understand; and, but purpose, good faith can underlying to course precision necessary is trying project degree to a to attain guide, with that as a cannot person reading faith specific how we think a bad occasion persons, purpose, a would misunderstand.” actuated it, presented dealt if it had been have with only well that not remember say is a time. To that them at the legislators, lawyers, judges men but truism, process a but hazardous is indeed activity14 prob- every kind meet that it, escape literal we cannot once we abandon “interpre- lem communication call interpretation far more unre method —a tation.” alone seem mathematicians consistently recognized liable.” He has complete problem with able solve the colloquial a have “the words of statute satisfaction, although mathematicians not the fixed artificial content of scien suggest more than satisfaction penumbra, symbols; tific have a illusion;16 certainly to-- sometimes an connotation, they express fringe, dim can- lawyers language that their day know will, an which it is our attitude into approximate that of mathema- begin to duty penetrate must en which we ‍‌​‌‌​‌​​‌‌‌‌​‌​‌‌​​‌​​‌​‌‌​​‌‌‌​‌‌‌‌​​‌‌‌​‌​‌​‌‌‍may join Indeed, times, lawyers ticians. * * * it, force can when we ascertain rejoice resources of “the expression.” regardless imprecision ambiguity.” leadership, Judge Hand’s 12 Under may be, deny one can However spurned canon of inter court has “legislative intention” is sometimes pretation English which an formu court fiction;18 then the good effort enough attain to deal lated thus: “It is not 22; Frank, Cir., Page (1942) Ickelheimer, 12. Read Commissioner (1949) 660, 662, dis- 278. A.L.R. Courts On Trial 132 F.2d senting opinion; Lehigh Valley Coal cf. Gray pointed Gray, Na- 18. So out. Yensavage, Co. v. F. (2d ed.) Sec. ture and Sources Law 552-553. 370. (1891) 1 Q.B. re Castrom exaggeratedly, Interestingly, if a bit Radin, quoting, “Ascertainment Congress Literary has much teach in this situa- criticism the intention of say: lawyers lawyers impossible,” much went —as “interpre- literary by this Jackson critics —about “If statement Justice tеach thinking of ‘intention’ in accordance tation.” fields, given problem meaning usually it, in still other with the As to (1950) Open Popper, Society group idea or ideas minds cf. beings, 213-218, human I minds determinate enthusiastically agree fully him. *8 lawyers’ course, the communication Of however, generally term, The of use the problem area is not restricted the implies that bloodless and sinewless fic- also, g., in is found e. of statutes. ‘leg- interpreters, imaginary the tion contracts, wills, and all connection with Qesetegeber, islator,’ legislateur, le der notably writings, in reference other legiferens, homo own cousin to finding in of facts trial courts. to the spectre man.’ What ‘economic (1949) 186ff, Frank, Trial Courts on See think, thought or did intended or 309; Fuller, Law Contract Basic imagine, intend, imagined did not or 666-670; Wurzel, (1947) Methods Ju сreated, utterly irrelevant, since he is Thinking (1904) in The Science ridical purpose having particular 394-400; (1917) Legal Method interpreter imputed to intention Cir., Pennsylvania R. Ricketts But if we have in mind not him. 760-764, pages 757, at 164 A.L. beings, figment, but actual human opinion. concurring R. them, who voted in hundred several Fair Labor Act Standards favor Psychology Hadamard, Inven- Representatives the House (1945) Field Mathematical in the Senate, Justice Jackson overwhelm- 6-8. Chs. saying ingly right that we cannot possibly (1945), determine what their intentions Burke, of Motives A Grammar were, beyond p. 56; Richards, the actual words used How Introduction attorney’s irksome, liter- interpret may held that deceased become court bankrupt may inviting exit claim for rendered the alism seem an services corporation pur- Obviously, might as pеrplexity. legislative be voted. But when the alive, pose discoverable, attorney longer although ambiguously was no variety expressed danger influencing of rea- no the election (for one of a of his sons),19 then, Holmes20 and Learned a manner favorable to the as warned, stay company. was the priggishly to That non-existence Hand have precise controlling of the words within the enclosure factor is shown page opinion, that a court in its 131 F.2d at is a Holmes counselled said mistake. ought may with 376: court not be school-marmish “While it be true that we could legislators, say exceptions “This to them: other statute on .add * * * equitable you boys will grounds teach to be more careful think there present suppose the next time.” The case seems are grounds no such We here. interpretation bankrupt’s me to denying be one where literal reason for spells just judicial uppishness. attorney right to vote a trustee he, creditors, would be that with other interprets My colleagues’ decision might, fraud, appoint by collusion or amendment with such literalness trustee who through would favor his voters consequence astonishing it has the of ascrib- malfeasance, misfeasance, nonfeasance, or actually Congress en- aim partiality, expense at the of the other in- persons who, franchising before the amend- persons. terested might Whatever reason ment, For, permitted were not to vote. advanced, it is clear that it could not previous 1938,many courts had forbidden apply here attorney beсause the is dead. claims of even fide credi- bona disinterested Being dead, way there would be no by proxies tors to be voted who were offi- which he might anyone. take advantage of bankrupt.21 attorneys cers believe, We therefore, that if the claim my colleagues hold thanks to the properly allowed, were it was entitled to its “plain statute, language” of the amended vote.” Schneider, (President) officer voted, bankrupt, properly proxy, decision, As bolster my to their col- creditor, Company. claim of leagues possibly intimate that might shown, at the voting, time Perhaps my colleagues had this curious Levy, creditors, the nominee of the consequence when, justify in mind their disqualified: interpretation, they Referring something literal cited West Hills Cir., Doneсa, record, Memorial Park 131 F.2d not my say colleagues point. which I think is not in There the begun trustee “now asserts” that he has Radin, Study A repeated in the statute.” Case paraphrased, and others have Statutory Interpretation: legislature Western cannot foresee and de Lenroot, Rev. particulars Co. v. 35 Calif.Law Union scribe all covered Wurzel, (1945) purpose (policy) loc. 222-223. Cf. cit. of the statute. supra. 355—356. citations note ambiguous expression S., 20. Johnson v. U. always (a) L.R.A.,N.S., duo to means carelessness: International Judges, Stevedoring lecture Haverty, of whom like to *9 v. Co. 272 U.S. possibly legislatures, 50, 52, cannot themselves 47 S.Ct. 71 L.Ed. 157. ambiguities own com in their avoid all Sitting, D.C.S.D.N.Y., 917; In re Sperbeck positions. Bur v. A. L. See Rokersdres, D.C.S.D.N.Y., In re Cir., 451- 190 F.2d & bank 206; (14 Bankruptcy F. 3 Collier on ed. 15; (b) the Sometimes and note 1941) § 56.03. ambiguоus. deliberately legislature Apropos (1947) 359, Jaffe, the court’s reference to Col.L.Rev. “exceptions adding Press, eq to the D. statute on Associated U. S. 366-367: C., grounds,” Pekelis, F.Supp. 362, 370; uitable see the citations re the “equity statute,” Welfare, Jurisprudence of a Slifka John For a Caso son, Often, (1944) notes 5 Research 11 Soc. passage Plowden and 6. warned Aristotle postpone afford the preferential pay- as to alleged so suit to recover an themselves ment, of the claims any whose claims owners a chance not from persons appoint proxies, in order Levy, vote or to new were voted for but from prevent proxies voting those un- disenfranchisement. served as But, aside, challenged since claims. all else Company’s claim 2. Evеn if time of the was no trustee at the affiliation-defect, suffer from the voting, that, beginning it follows to vote. should have been allowed fact, such be suit it is not a fact which a, Bankruptcy For Section sub. have been Referee at could before the “proof Act—11 that a U.S.C.A. 93—states time of the us now election or is before of claim shall consist of a statement under part ought as a there- record. We oath, creditor, signed by in writing and ignore most, unsup- fore to it. At it is an claim; setting forth the the consideration ported, unsworn, self-serving declaration * * *” therefore; To a claim set forth by proves the trustee nothing which about properly, enough the creditor must tell any the basis for the suit or the fact details about the circumstances terms preference. alleged brought. If the trustee (1) transaction to enable suit, ‍‌​‌‌​‌​​‌‌‌‌​‌​‌‌​​‌​​‌​‌‌​​‌‌‌​‌‌‌‌​​‌‌‌​‌​‌​‌‌‍only he may have done so expose dig creditors to out fraud it, the idea that tell he could us about illegality in the (2) claim and allow disqualified. evidence that his rival was pass referee intelligently. claim quotes equal- The trustee also in his brief an Although approved claim can ly partisan (not statement under made disallowed, later challenged oath) to the Referee trustee’s own importance courts have recognized lawyer $1,000 may that there have been a screening early out fraudulent claims at preferential payment proxies.23 A to the for, stage, impartial since a fair and trus mere unsworn assertion from so biased tee bankrupt is an essential of a successful not, course, source disqualify could should not cy fraudulent claims proceeding, proxies any or their nominee than the more election. Further to a trustee’s contribute trustee’s own outside-the-record assertion more, of claim shifts a valid presently prox- engaged suing that he is going forward with evidence burden of opponent’s supporters. have, ies of his We fraud, stage, objecting cred later at then, evidence before us on proof has itself itors; formal proxies decide whether or not those had probative of the claim’s force as evidence illegally preferred by challenged. Whitney v. validity if later Moreover, there was no evidence that these Dresser, 26 S.Ct. 50 L. 200 U.S. Inc., proxies actively 584; Elting, D.C.S.D. had their own In re Louis ap- solicited Ed. Falk, N.Y., F.Suрp. D.C.S.D. pointment attempt in an to run the election reasons, N.Y., F.Supp. For these interests, own as the assignee’s in their require prima to show courts a creditor Stowe, attorneys had done in Re D.C.N.D. good that he before has a claim Cal., 235 F. 463. But if Referee had facie the- allow him to vote a trustee. case, would, suspected that this was the he think, have been to examine obliged stage, I It is true at this subject, and, least, may claim oath proxies on the state the of his basis Welling: bankrupt’s, is, Honor, on behalf Your cial account. 23. “Mr. ought say testimony, receiver, I I further recited that think Jacobs’ proxies definitely run to know what this: I notice that didn’t money payment trus- The examination was in for. The Feder Cohen. investigate bankrupt, course, Jacobs, will, an officer of thе dis- tee surrounding pay- the business circumstances closed that closed may hope- ment and and while business take action down paid necessary recover, lessly insolvent, think $1000 was and I *10 report bankrupt duty is the on behalf of receiver’s man Jacobs bankrupt’s funds to so an election of a trustee of the Messrs. assure out which, independence according to and Cohen whose Feder —” spe- testimony, deposited was

737 Co., Coventry if re Evans Furniture affidavit; be believed D.C.N. is entitled to he D.N.Y., stubs, memos, self-contradictory. If 166 F. 516. Check testimony not word, or be evidencing *11 claim on assertion, objected to the Certainly, leagues’ it claim.24 contained in competent there was no supplement ground information that to nothing did at all.25 any debt existed original that defects of the evidence or cure the tо out, They certainly, pointed as I have testimony Hills Memo were in West as the did evi Doneca, bring to forward obligation under no rial Park v. stubs, disprove failed a claim my colleagues. No check dence to cited submitted; tests statutory every particular no em meet the memos, to or notes were prima ployees validity. or disinterested testi witnesses of even facie fied that the loans were made all. Company’s was on So, claim since Meat put No accountant was on stand purposes, I insufficient face testify findings com about by a ma- think that candidate elected flimsiest pany’s had the claim books. The jority in amount o-f the other number and important, no support imaginable. More creditors, e., ap- Levy, i. should have validity pass reason on its Referee could trustee, Mills, pointed the trustee ably; no know where creditor would Referee, claim named has no valid begin peti investigate validity. here, my the office. contrary to col- tioning creditors you specifically You haven’t cheeked “Q. know what “Q. Do any money made, where, due New whether was loans were A? I didn’t check York A. Grade York Grade A Poods? the New Meat to May, 1950, that. of about twen- To I know A. ty any odd dollars. thousand checks that “Q. You haven’t any you loan from money “Q. Do know of loaned from York to was New petition May, to the date A? A. No were shown Grade checks involuntary proceeding in this mat- me, sir. A. No. ter? you your testify on “Q. Didn’t direct knowledge your “Q. You have your knowledge own examination that you any be- loans madе own whatsoever $20,000 there loaned knew right. May, date, is that 1950 to tween you A. while were there? Yes. Right. A. you your own And know that “Q. your know own “Q. You ‍‌​‌‌​‌​​‌‌‌‌​‌​‌‌​​‌​​‌​‌‌​​‌‌‌​‌‌‌‌​​‌‌‌​‌​‌​‌‌‍don’t knowledge? (Emphasis A. Yes.” add- part any knowledge whether ed.) you ninety-three stated thousand moneys loaned, object or for fur- there for meats 25. “Mr. Peder: I to this claim you repeat please ground you? A. Will there is no do ther evidence * * * moneys question? No. loaned or borrowed from you bankrupt, alleged What find out about New York Meat “Q. * * * During Packing Co., made? A. If Your that had been Inc. Hon- loans objection period please, of time? I renew the present Well, Up nothing A. time. how the “Q. there indicate twenty know, $92,029.38 was some far as I there amount of arrived at. dollars. thousand is no schedule attached whatso- odd There you No, find that what did “Q. the nature of this claim in ever' to show way. A. Prom this statement out? $93,000 accountant, amount said is- the Well, proof of claim “The Referee: money A Poods Grade was owed go into have to detail. doesn’t Meat, approximately New York to the has to have “Mr. Peder: He per was cash the balance cent to indicate that there ** fresh meat. loan. you sign an affidavit “Q. Did Well, the affidavit of “The Referee: moneys and borrowed loaned money loaned or claimant mentions ninety-three amounting to some odd borrowed. Yes, according to A. dollars? thousand report. There should be some “Mr. Peder: accountant’s something your you manner to checks in some know of own “Q. But didn’t knowledge? loan.” indicate that checked. I haven’t A. that сred- notes the loan should another creditor doubts Greenfield, D.C.Pa., disprove suspects attached. In If he an re itor must it. 193 preference from facts 98. All this information essential illegal F. validity. that, Bronx to must In re a determination of claim’s he show too. Co., Cir., 624. How else if claim Ice 66 F.2d can a referee Cream tell Precisely this reason—so on face barred the statute of for Ballantine, claims—the get can clues to fraudulent limitations? See In re D.C. N.D.N.Y., claimant must tell all about the transaction 232 F. 271. can he tell if How money giving rise to the debt. If he fails do the been loaned at usurious so, prima validity, supra. Falk, his claim has no rate of interest? In re facie allowed, or and cannot be not whether It has suggested because of creditors introduce evidence to provision for a creditors’ Pringle In show its fraudulent nature. re bankrupt publicly which examined, Co., Cir., Engineering Mfg. & 164 F.2d longer any is no need informative there for 299, 302. suggestion claims. That lacks cogency. Thus, vague claims no more non- Creditors without clues should have to informative struck than this one have been question bankrupt every possible about “expenses charged down. Debts for type might of fraud that involved Dankrupt”, Pringle Engineering In re & every presented payment. claim for Such Co., rendered”, Mfg. supra; “services Hut- questioning indiscriminate be- soon Coffman, 640; “print- son 100F.2d * * * perfunctory come altogether. be omitted bankrupt at done for request”, Ridge Packing In re Blue Creditors should able to their concentrate D.C.N.D.Pa., 621; “deficiency inquiries on those claims that elicit sus- * * on mortgаge, chattel on goods, picion on their face. * * * wares and merchandise sold Company’s The New York Meat claim * * * bankrupt”, In re Federal rates a flat zero on all the tests of valid Hosiery Works, Cir., Silk claim, according cases. 900; “goods delivered”, sold and In re made, show when loans were in what Elting, D.C.S.D.N.D., Louis F.Supp. amounts, matured, they interest, what 733—all these have been held The bad. bore, any, they purposes creditor must tell when the transactions made. The were President of the Meat occurred, specific goods or services Company also, saw, as we the President passed, prices charges short, at what — —in bankrupt in an inconsistent normally everything a acute businessman —testified way and most inconclusive about the claim. wants know about bill beforе he After signing an affidavit under oath acknowledges it. owed Company the Meat about applies same rule to claims for loans, $93,000in Schneider said the stand “money loaned and borrowed the bank knew, far “as was [he] rupt.” The dates of the loans should be twenty Later, odd thousand dollars” owed. itemized; the amounts loaned in each testified, purely hearsay he statements stance; purposes for which money accountant, part the claim—he lent; maturity the terms and dates of part didn’t know what meats sold. —was repayment; the rate of interest charged. itemizing No schedule sales an- See, g., Falk, supra; Lansaw, e. In re In re to the He nexed claim. said did not D.C.Mo., 365; F. Wooten, D.C Meat Company know whether the owed .S.D.N.C., 670; F. In re Castle Braid anything net effect Co., D.C.S.D.N.Y., 224; testimony F. In re Cen of Schneider’s was to cast doubt Mills, tury D.C.N.Y., Silk F. truth of even the informa- scanty

Case Details

Case Name: Schwartz v. Mills
Court Name: Court of Appeals for the Second Circuit
Date Published: Nov 15, 1951
Citation: 192 F.2d 727
Docket Number: 22036_1
Court Abbreviation: 2d Cir.
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