Trustees to deposit funds in designated banks, § 61. Expenses of administering estates; report, § 62. Debts to be paid; order of payment, § 64. Dividends, payment when declared, § 65; unclaimed to be paid into court by trustee, § 66. Recovery of property fraudulently transferred, § 67. Title to property vested in trustee; sales of property, etc., § 70. To the General Orders: Duties of trustee, XVII. Sales of property, how conducted, XVIII. Proof of claims, duties as to; re-examination, XXI. Redemption of property by trustee; settlement of claims or debt, Payment of money by trustee on warrant, XXIX. Application for arbitration of controversy, XXXIII. To the Official Forms: List of claims and dividends to be delivered to trustee, No. 40. Notice of dividends; creditor's letter, No. 41. Petition and order for sale of real estate, No. 42; for redemption of property from lien, No. 43; for sale subject to lien, No. 44; for private sale, No. 45; for sale of perishable property, No. 46. Report of exempt property, No. 47; return of no assets, No. 48. Account of trustee, No. 49; oath to final account, No. 50; order allowing account and discharging trustee, No. 51. See, also, Supplementary Forms, Nos. 228-261, Vol. III, post. SYNOPSIS OF SECTION DUTIES OF TRUSTEES I. Scope of Section, 1042. a. In general, 1042. b. Compelling trustee to act, 1044. c. Wishes of creditors, 1044. II. Collection of Assets, 1045. a. In general, 1045. b. Liability for negligence, 1046. c. Suits by trustees, 1047. (1) IN GENERAL, 1047. (2) RIGHT TO SUE, 1048. (3) CONSENT OF REFEREE OR COURT, 1048. (4) SUITS BY TRUSTEES OF BANKRUPT CORPORATIONS, 1049. (5) SUITS FOR OTHER PURPOSES, 1049. (6) PRACTICE GENERALLY, 1051. (7) Costs, 1052. d. Property vested in trustees, 1052. (1) IN GENERAL, 1052. (2) RULE EXISTING PRIOR TO 1910, 1052. (3) EFFECT OF AMENDMENT OF 1910, 1053. (4) AMENDMENT TO BE CONSTRUED WITH § 70, 1058. (6) UNRECORDED LIENS, 1060. (7) PROPERTY AFFECTED, 1061. (8) PRIORITY OF DEBTS, 1061. (9) CONDITIONAL SALE CONTRACTS, 1062. (10) CHATTEL MORTGAGES, 1062. (11) FRAUDULENT TRANSFERS, 1063. e. Sales by trustees, 1063. f. Employment of attorneys, 1063. g. Rapidity in administration, 1063. III. Accounts and Reports, 1061. b. Practice, 1066. c. Supplemental report, 1066. IV. Distribution, 1066. a. In general, 1066. b. Expenses of administration, 1067. c. Payment of priorities, 1067. d. Dividends, 1067. e. Method of payment, 1067. V. Miscellaneous Duties, 1068. b. Furnishing information, 1069. c. Other duties, 1070. VI. Concurrence of Two of Three Trustees Necessary, 1070. VII. Trustee to Record Certified Copy of Adjudication, 1070. a. In general. I. SCOPE OF SECTION The duties of the trustee enumerated in this section are not exclusive. Other duties are put on the trustee in many Further additional duties are sections scattered through the law. prescribed in General Order XVII. or the creditors by resolution, may direct still other things to be done by the trustee, provided they are within the customary functions of such officers. While the trustee is technically at all times under the direction of the court, he should be ready to act upon his own responsibility and intelligence in the administration of the estate, resorting to the court for advice and instructions where matters of a complicated nature and of great importance have arisen. His paramount duty is to conserve and advance the interests of the estate entrusted to him, which he can only do by keeping himself clear of alliances which tempt to make the estate's interest subordinate to his own. Vested with the title of the bankrupt,* he is also the representative of the creditors, and should deal fairly between them and 3 1. See "Cross-references," ante. 2. The privilege of trustees to apply for advice cannot be abused by running to the court to settle every question that may appear to an irresolute trustee to be desirable to have settled without responsibility of action on his part. Nor can this practice be resorted to for the purpose of carrying on litigation between himself and adverse parties in an informal and irregular way. Trustees in bankruptcy are sui generis. In re Baber (D. C., Tenn.), 9 Am. B. R. 406, 119 Fed. 520. It may be safely said that if a trustee bears in mind that he is the representative of the estate considered as a whole, is bound to be vigilant and attentive in advancing its interests, and is under obligation to seek to carry out in the strictest good faith the provisions of the bankrupt act where they seem to apply plainly to the estate committed to his charge, he is not likely to go far wrong in doing, or in refusing to do, what may be asked of him by the creditors. In doubtful cases, the referee and the court will solve the perplexities of the trustee. In re Baird (D. C., Pa.), 7 Am. B. R. 448, 112 Fed. 960. 3. Matter of Webster Loose Leaf 2 Filing Co. (D. C., N. Y.), 42 Am. B. R. 125, 252 Fed. 959. 4. Compare Bankr. Act, § 70-a. 5. In re Gray, 3 Am. B. R. 647, 47 N. Y. App. Div. 554; In re Griffith, 1 N. B. N. 546; In re Kindt, 2 N. B. N. Rep. 369. Compare Barker v. Bankers' Ass'n, Fed. Cas. 986; In re Rockford, R. I. & St. L. R. Co., Fed. Cas. 11,978; Crooks v. Stuart, 7 Fed. 800; also Eyster v. Gaff, 91 U. S. 521; Glenny v. Langdon, 98 U. S. 20; Dudley v. Easton, 104 U. S. 99; Batchelder & Lincoln Co. v. Whitmore (C. C. A., 1st Cir.), 10 Am. B. R. 641, 122 Fed. 355, where it was.held that the trustee represents those who were creditors at the time the petition was filed. Trice v. Coolidge Banking Co. (D. C., Ga.), 39 Am. B. R. 843, 242 Fed. 175; Barber v. Wiemer (Ia. Sup. Co.), 40 Am. B. R. 752, 165 N. W. 440. Representatives of creditors.-“By the clearest implication," says Judge McCormick, "he represents all the creditors, and as such representative has an interest in the just administration of the estate which belongs to the creditors." Atkins v. Wilcox (C. C. A., 5th Cir.), 5 Am. B. R. 313, 316, 105 Fed. 595. the bankrupt." He is, further, a quasi officer of the court, and as such is subject to its direction in all matters concerning money or property which may come into his possession by virtue of his office. As in the case of other court officers, payments made to him under a mistake of law are recoverable." b. Compelling trustee to act. The trustee does not act judicially, but only administratively, and if he refuses to oppose a claim or to move for its reconsideration when he ought to do so, he may be compelled to act or to permit the objecting creditors to act in his name.1 10 c. Wishes of creditors. It is not necessarily the duty of the trustee to follow the wishes of a majority in number and amount of the creditors in prosecuting or defending suits. He is to exercise his own judgment. But when his own judgment concurs with that of a great majority of all the creditors who speak, all having the opportunity to speak, and also with that of the referee or court in charge, it would seem plain that such judgment should control." As a rule, 6. In re Wrisley Co. (C. C. A., 7th Cir.), 13 Am. B. R. 193, 196, 133 Fed. 388, 390, the court said: "In all matters between creditors and bankrupt he should stand indifferent. His sole care should be to make the most out of the estate, and that primarily in the interest of the creditors. When he goes beyond that, and seeks to aid the bankrupt at the expense of the creditors, and by concealment or by false representations induces creditors to act contrary to their interest, he violates his duty, and should be removed." 7. In re Ryan, Fed. Cas. 12,182; United States v. Dewey, 39 Fed. 251; Gavilan v. Lugo (D. C., Porto Rico), 39 Am. B. R. 326, 9 P. R. Fed. 344. Trustee as quasi officer. As was said by Judge Purnell in the case of McLean v. Mayo (D. C., N. Car.), 7 Am. B. R. 115, 113 Fed. 106: "While the Bankruptcy Act creates the office of trustee in bankruptcy such trustee is a quasi officer of the court in a qualified sense. He is in reality elected by, and represents the creditors of, the bankrupt, under the provisions of the Bankruptcy Act. The bankruptcy court will protect the trustee in the discharge of his quasi official duties; but as the representative of the credi tors his duties as such representative must be discharged, not as an officer of the court, strictly speaking, but as provided in the Bankruptcy Act." 8. In re Howard (D. C., Cal.), 12 Am. B. R. 462, 130 Fed. 1004. 9. Carpenter v. Southworth (C. C. A., 2d Cir.), 21 Am. B. R. 390, 165 Fed. 428. 10. In re Stern (C. C. A., 8th Cir.), 16 Am. B. R. 510, 144 Fed. 956. A proceeding for the re-examination of claims should be taken in the interests of all the creditors, and not be permitted at the instance of any one creditor unless demanded by the interests of all. If the trustee should without sufficient reason refuse to proceed, the court by its order may compel him to do so, or remove him for disobedience. In re Lewensohn (C. C. A., 2d Cir.), 9 Am. B. R. 368, 121 Fed. 538. Where the trustee, upon the request of a creditor, has declined to appeal, the district court has power to either direct an appeal by the trustee or to make an order permitting the creditor to appeal in the name of the trustee. Chatfield v. O'Dwyer (C. C. A., 8th Cir.), 4 Am. B. R. 313, 101 Fed. 797. 11. In re Kearney Bros. (D. C., N. Y.), 25 Am. B. R. 757, 184 Fed. 190. however, save in the common and simpler steps of administration, he should consult the wishes of the creditors; in many matters the law requires him to do this.12 The creditors usually decide. First meetings should be continued and kept alive for this purpose. The referee in charge may, in extreme cases, disapprove. Such action is, however, not usual. II. COLLECTION OF ASSETS a. In general.-Subdivisions 2 and 3 of this section make it the duty of the trustee to collect the assets of the bankrupt, reduce them to money, and deposit the proceeds in designated depositories. The amendatory act of 1910 amended subdivision 2 by conferring upon the trustee certain rights of creditors in respect to property belonging to the bankrupt estate, and making him more distinctively the representative of the creditor as to assets within and without the custody of the court. By subdivision 1 he must pay over and account for interest on the assets. He may carry out the statutory directions by, for instance, collecting accounts, even by suit 13 or securing the necessary orders to compel the bankrupt to deliver over property belonging to the bankrupt estate, or selling goods or lands,15 or 12. Compare Bankr. Act, §§ 11-b-c, 26, etc.; In re Baber (D. C., Tenn.), 9 Am. B. R. 406, 119 Fed. 520. 13. Duty to sue.-The duties of the trustee are prescribed by the Bankruptcy Act, and he must institute litigations whenever it is necessary for the purpose of collecting or reducing to money the assets of the bankrupt estate. By this obligation is not meant that he should burden the assets of the estate with costs and expenses arising out of all manner of questions that may be presented for litigation. There should be probable cause at least for believing that a right of action exists before the bankrupt estate is so burdened. In re Meadows, Williams & Co. (D. C., N. Y.), 25 Am. B. R. 100, 181 Fed. 911, citing Collier on Bankruptcy (7th ed.), p. 541. 14. An order that a bankrupt pay over money, which provides that in default thereof he be held guilty of contempt, and the marshal directed to arrest him and confine him in jail until he complies with said order, or is discharged, is erroneous, as leaving the question of default and contempt of 14 court to the marshal, upon which question the bankrupt is entitled to a hearing on the return of an order to show cause upon such default. In re Baum (C. C. A., 8th Cir.), 22 Am. B. R. 295, 169 Fed. 410. An order to compel a bankrupt jeweler to turn over property to his trustee to cover a shortage in his stock of jewelry, or its proceeds, which the bankrupt explained had been stolen from his rooms in his absence, will not be granted where the evidence is insufficient to substantiate the claim of robbery. In re Chamelin (D. C., Pa.), 25 Am. B. R. 570, 184 Fed. 553. Pleadings. A petition by a trustee in bankruptcy to compel the bankrupt to turn over to the trustee certain moneys is insufficient where it does not allege that the amount claimed has been received by the bankrupt or is or has been in his possession, or under his control or which does not state facts from which either possession or control can be inferred. Matter of Levy (D. C., Pa.), 43 Am. B. R. 590, 259 Fed. 316. 15. Compare Bankr. Act, § 70-b; General Order XVIII. |