In re William F. Fisher & Co.

LANNING, District Judge. At the first meeting of the creditors of William F. Fisher & Co., held on December 15, 1902, Frederick Weigel and Samuel F. Wylie were appointed trustees of the bankrupt’s estate. The trustees immediately qualified and entered upon the duties of their respective offices. On October 31, 1904, they presented their petition to the referee to whom the cause had been referred, praying that they might be authorized to make sale of the property of the bankrupt. After the filing of this petition due notice was given to the creditors of the bankrupt of a hearing thereon, and also of the election of a third trustee, at a meeting of the creditors to be held on December 5, 1904. On December 5th, at the creditors’ meeting, they appointed Nathan W. Clayton as the third trustee of the bankrupt’s estate. He accepted the appointment, filed his bond, and, by a writing annexed to the petition of the two trustees previously appointed, joined in the prayer for the sale of the bankrupt’s property. By an order dated December 24, 1904, the referee directed that the property be.sold at not less than $65,000, by private sale within 30 days from the date of the order, or, if such private sale could not be effected within that time, then by public vendue, and that, if the highest bid should be less than the appraised value of the property, no deed or bill of sale should be executed until the sale should have first been approved by the court. This order is now before me on the petition of Charles J. Peshall for review in accordance with the provisions of general order 27 (89 Fed. xi, 32 C. C. A. xxvii). In the petition for review it is objected (1) that the order of sale is erroneous in that a petition for composition is now pending in the cause; (2) that the petition of Samuel F. Wylie and Frederick Weigel for authority to sell the property was not filed in the office of the clerk of this court, or presented to the judge of the court, as required by the bankruptcy act; and (3) that the order to sell is fatally defective, because but two trustees were appointed at the first meeting of the creditors of the bankrupt. The first objection, namely, that a petition for composition is now pending, is not valid. It is true that an effort to effect a composition with the creditors of the bankrupt has been made, but the money necessary to pay taxes and other debts having priority, required to be deposited by section 12b of Bankr. Act July 1, 1898, c. 541, 30 Stat. 549 [U. S. Comp. St. 1901, p. 3427, has not been deposited, though several months have intervened since the court declared that such deposit must be made before any composition could be confirmed. The second objection, namely, that the petition praying for authority to sell the property was not filed with the clerk of this court or presented to the judge of the court, is also invalid. It is true that section 70b of the Bankruptcy Act (30 Stat. 566 [U. S. Comp. St. 1901, p. 3451]) provides that real and personal property shall, when practicable, be sold subject to the approval of the court, but it is the general practice, after a case has been referred to a referee, to present the petition for an order of sale to the referee, and for him to grant or deny the order. In Boveland’s Bankruptcy, p. 702, it is said: “Whenever it is necessary or advisable in the opinion of the trustee to make a sale, it would seem, from the language of the statute, that it must [225] be done ‘under the direction of the court.’ He should apply to the judge or referee (usually the referee) for permission to sell property, specifying particularly what property is to be sold.” Forms 42, 43, 44, 45, and 46 of orders for the sale of the property of bankrupts’ estates, prepared by the Supreme Court, all show that the orders are to be made by referees. The third objection is that the order of sale is invalid, and should be set aside, for the reason that the creditors of the bankrupt at their first meeting elected but two trustees. Section 44 of the Bankruptcy Act (30 Stat. 557 [U. S. Comp. St. 1901, p. 3438]) provides that: “The creditors of a bankrupt estate shall, at their first meeting after the adjudication, or after a vacancy has occurred in the office of trustee, or after an estate has been re-opened, or after a composition has been set aside or a discharge revoked, or if there is a vacancy in the office of trustee, appoint one trustee or three trustees of such estate. If the creditors do not appoint a trustee or trustees as herein provided, the court shall do so.” The point made by the objecting creditor is that, as the creditors at their first meeting elected two trustees, and not one trustee or three trustees, the appointment was absolutely void. I am not willing so to hold, especially in view of what was done in this case. It is true that the petition praying for an order to sell the property was originally signed by the two trustees Weigel and Wylie only, but, anticipating the objection to the power of the referee to make an order of sale upon that petition, notice was given to the creditors that at the time of the hearing upon the petition an election of a third trustee would be had. Such election was had, and the trustee, Clayton, accepted his appointment, duly qualified by filing his bond, and also joined in the petition of the other two trustees for the sale of the property. I think this action cured whatever defect existed in the previous action of the creditors. The objection that the appointment of the three trustees is so irregular that they cannot convey a good title to the real estate is not sound. This court has the power to direct the real and personal property of a bankrupt’s estate to be sold. If the title to the bankrupt’s estate was not vested in the two trustees upon their appointment and qualification, it became vested in the three trustees after the appointment and qualification of Mr. Clayton. See section 70 of the Bankruptcy Act (30 Stat. 565 [U. S. Comp. St. 1901, p. 3451]). As this, court has general jurisdiction of the subject-matter of the sales of the properties of bankrupts’ estates, a title conveyed by the three trustees in this case under an'Order of this court could not be successfully assailed in any collateral proceeding. The record of the case shows that three trustees have been elected. It is true that they were not all elected at the first meeting of the creditors; but the requirement that they shall be elected at such first meeting must be regarded as directory, and', not mandatory. And, since it is clear that the creditors intended to-elect more than one trustee, and in fact did elect but two, a fair construction of section 44 of the Bankruptcy Act (30 Stat. 557 [U. S. Comp. St. 1901, p. 3438]) will lead to the conclusion that a vacancy existed in the office of the third trustee. That vacancy was subsequently supplied at a meeting of the creditors duly called. The referee liad no power to fill that vacancy unless the creditors, after the calling [226] of another meeting by the referee, had themselves failed to elect. See In re MacKellar (D. C.) 116 Fed. 547; In re Hare (D. C.) 119 Fed. 246. I am of the opinion that the objections to the order of sale are not valid. The petition for review will therefore be dismissed.