# Petition — Collins v. Johnston > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1636%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1981 - **Citation:** 452 U.S. 940 ## Text ’% Office - Supreme Court, U.S. | g 0 FILED ! “1754 APR 20 1981 No. ———-— TEVAS, ‘ii CLERK IN THE Supreme Coot of the United States OCTOBER TERM, 1980 WEBSTER A. COLLINS, HERBERT R. MORRISON, HELEN O. MORRISON, AND GLEN A. WILKINSON, + Petitioners, DAvID R. JOHNSTON, THE NORTHWESTERN BANK, AND JAMES. R. GILLEY, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT CALVIN H. Coss, JR. (Counsel of Record) STEPTOE & JOHNSON 1250 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 862-2000 T. WINFIELD BLACKWELL, JR. JACK F. CANADY BLACKWELL, BLACKWELL, CANADY & ELLER 2100 Wachovia Building Winston-Salem, N.C. 27102 (919) 722-7161 HENRY A. MITCHELL, JR. CARL N. PATTERSON, JR. SMITH, ANDERSON, BLOUNT, DORSETT, MITCHELL & JERNIGAN P.O. Box 31 Raleigh, N.C. 27602 (919) 821-1220 Attorneys for Petitioners SO SRS EOE REPENS RRR A RTS - 789-0096 - WASHINGTON, D.C. 20001 WILSON - EPES PRINTING Co., INC. -% QUESTION PRESENTED Whether a reorganization trustee may, in order to re- lieve the debtor’s estate of claims by defrauded investors, cooperate with those investors by paying their costs in a joint lawsuit asserting related claims against the debt- or’s former management and others charged with de- frauding the debtor and its investors. (i) , TABLE OF CONTENTS Page QUESTION PRESENTED ....................-... é ‘ i yp SS Be lt) gL) yy i En DCTS iv er AE UN icteritericcines cinlisorteneioesssionpta 1 P JURISDICTIONAL STATEMENT .................--...---------- 1 z APPLICABLE STATUTES AND REGULATIONS... 2 STATEMENT OF THE CASE .......0.0022222222..----:0se--e0ee--- 2 REASONS FOR GRANTING THE WRIT .................... 8 I. THE DECISION OF THE COURT OF AP- PEALS RAISES AN IMPORTANT AND RE- CURRING QUESTION CONCERNING THE AUTHORITY OF THE TRUSTEE IN REOR- GANIZATION WHICH URGENTLY NEEDS RESOLUTION BY THIS COURT .................... 8 II. REVIEW OF THE JUDGMENT BELOW IS REQUIRED TO RESOLVE THE CONFLICT TERE WE SIETS. WRMIUIEED cececieerscccssesesincontonncenbonencie 18 GPL ILIIIIM, ssshtieseriecpnescvin ncpesscniunemninesiatoneniealbibiadetiaiieedtt 20 (iii) PRECEDING PAGE WAS BLANK | -% iv TABLE OF AUTHORITIES Cases Page American Employers’ Insurance Co. Vv. King Re- sources Co., 556 F.2d 471 (10th Cir. 1977) -....... 13 In re Associated Gas & Electric Co., 149 F.2d 996 (2d Cir.), cert. denied, 326 U.S. 736 (1945) -....... 13 Caplin v. Marine Midland Grace Trust Co., 406 A SO Se ited nonnee 10, 14, 15, 16, 17 Carpenter Vv. Hall, 311 F. Supp. 1099 (S.D. Tex. Odo indcnces shied aeptenlesideeconeicalniiinabecntiibaladaaeenesin 13 In re Credit Industrial Corp., 366 F.2d 402 (2d RS GMI DRE SRR SEN 6 SNOT ARO 13 Dietrich Corp. v. King Resources Co., 583 F.2d ae Re | SPR ee a 13 Dorfman Vv. First Boston Corp., Fed. Sec. L. Rep. (CCH) 7 94,155 (E.D. Pa. 1978) ........................ 13 In re Equity Funding Corp. of America, 519 F.2d TE Ce Ne BE archer ciceticraindalies ic Bctccntes 12, 18 In re Equity Funding Corp. of America, 416 F. Supp. 182 (C.D. Cal. 1975) ...................... 12, 18, 17,18 In re Farrington Manufacturing Co., 540 F.2d ih ictaleitigercinne icicsiasnsleiyrmnacestmesns 18, 15 In re Four Seasons Nursing Centers of America, Inc., 472 F.2d 747 (10th Cir. 1973) ................... 18 In re Four Seasons Nursing Centers of America, Inc., 357 F. Supp. 594 (W.D. Okla. 1973) -......... 12, 18 Gilbert v. Bagley, 492 F. Supp. 714 (M.D.N.C. WOOD: » vocsciesieatesctanidivensacimatadaaiivaiiadaticnagidiplies 14 Marrero Vv. Abraham, 473 F. Supp. 1271 (E.D. La. BIPEA sciegsthisclun tice abdcebsbnietinctnbasteon bgaiesoriciaiinimaisanillaaiaio bode 16 McLean V. Alexander, 449 F. Supp. 1251 (D. Del. 1978), rev’d on other grounds, 599 F.2d 1190 Ee HD PIII TIE incvctnsniichsnietnaaeiatlentecststighabeiiibbantiasebee 16 Northwest Airlines, Inc. v. Transport Workers Union, 49 U.S.L.W. 3428 (U.S., argued Dec. 2, I re lla in a related context: “Failure to learn of the entry of judgment is the principal ground on which extensions of time for appeal are granted.” Babich v. Clower, 528 F.2d 298, 295 (4th Cir. 1975). Accordingly, the March 12, 1979 order of the Bankruptcy Court denying ap- pellants Johnston’s and Northwestern’s motions for ex- tensions of time within which to appeal the order of January 16, 1979 will be vacated, and the Bankruptcy Court will be directed to grant the motions. Because the Bankruptcy Court should have allowed appellants to file notices of appeal regarding the order of January 16, the Court will now consider the appropriateness of that order. As a general proposition, it is beyond dispute that the Trustee’s duty is to act in the best interests of the Debtors’ estate. Protection of the rights and interests of creditors and shareholders, with which the Trustee is charged, depends largely upon the success of the Trustee in managing the estate, and his actions must be calcu- lated to bring direct benefit to the estate. There is of course no question regarding the Trustee’s authority to sue on behalf of the estate. Expenditure of the estate’s funds in this regard is entirely proper, for success by the Trustee in Gilbert will accrue directly to the benefit of the estate. Of concern to appellants, however, is use of the estate’s resources to help prosecute actions by the shareholder plaintiffs in Gilbert and all the plaintiffs in Fulk. Should these plaintiffs prevail, not one dime of their recovery will go into the treasury of the Debtors’ estate. The Trustee asserts that expenditure of the estate’s funds to help support the Gilbert action may be justified on three grounds: ! (a) recovery by plaintiff stockholders in Gilbert would eliminate claims which might otherwise be made in the reorganization proceeding ... ; (b) the close interrelationship of the claims of the 12a Trustee . . . and the shareholder plaintiffs... clearly indicates that a strong and vigorous prose- cution of the shareholders’ claims through discovery and into trial would prove to be a material benefit to the discovery and proof of evidence to support the Trustee’s claims; [and] (c) proof of matters which support the basis for the claims of the plaintiff shareholders against the defendants, insofar as these claims are distinct from the Trustee’s action, could . . » expedite and facilitate the objection to claims which have been filed by certain of the defendants in the reorganization proceedings. With respect to Fulk, the Trustee argues that “[p]en- sion-related claims are entitled to special consideration in a reorganization proceeding and may even be entitled to treatment as a first priority administrative expense.” He further notes that the Trustee is charged with at- tempting to continue operation of the Debtors’ estate, and that this duty cannot be fulfilled without boosting and maintaining the morale of the employees—a task made much easier if compensation owed from employee benefit plans is paid to the employees. Notwithstanding the apparent logic of the Trustee’s arguments, his authority is strictly prescribed by the Bankruptcy Act. Congress might well have decided to grant the Trustee broad license either to sue on behalf of or provide financial assistance to third parties with claims against the estate. The Court has concluded, how- ever, that the Bankruptcy Act contemplates a narrower range of options for the Trustee. He may only bring actions and expend funds on behalf of the estate. If he is successful, his duty is then to apportion, in accordance with the provisions of the Act, whatever recovery he reaps among the various parties with claims against the estate. Claimants of course include creditors, sharehold- ers, and in this case employees. The high priority af- forded pension-related claims does not mean the Trustee 18a may expend funds of the estate to support a class action suit by employees, as meritorious as it may appear. It theans instead that, when the time comes to attempt to satisfy the obligations of the Debtors, employees thereof are entitled to stand near the front of the line. That shareholders and employees will no doubt have claims against the estate does not justify the Trustee’s reaching into the estate’s coffers to help them sue former officers, directors, and fiduciaries of the estate. The shareholders and employees’ causes of action against these defendants are independent from whatever claims they may also wish to pursue against the estate. The leading case in this area, cited and relied upon by both the Trustee and the appellants, is Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416 (1972). As the Trustee notes in his brief, Caplin is a decision regarding a “Trustee’s standing to sue, not... the appropriate- ness of litigation-related expenditures whith may benefit the estate.” That the Supreme Court did not have occa- sion to address this latter issue does not prevent this Court from applying to the instant case the principles on which Caplin rests. Caplin involved a suit brought by a Chapter X Trustee, on behalf of those persons owning debentures issued by the bankrupt company, against the indenture trustee for breach of its duty owed to the debenture holders. The Trustee in Caplin argued, among other things, that it was in a “better position than debt investors to discover and to prosecute claims based on the alleged failure of an indenture trustee to live up to the provision of the indenture.” Jd. at 427. The Court disagreed, noting that “Congress has established an elaborate system of controls with respect to indenture trustees and reorgani- zation proceedings, and nowhere in the statutory scheme is there any suggestion that the trustee in reorganiza- tion is to assume the responsibility of suing third parties on behalf of debenture holders.” Jd. at 428. Then, in a lda passage critical to the instant case, the Court referred to 11 U.S.C. § 567(8), which is the pivotal provision af the Bankruptcy Act prescribing the powers and duties of the Trustee, and asserted that “there is nothing in the section that enables [the Trustee] to collect money not owed to the estate.” Jd. The rationale of the Court’s holding in Caplin is unmistakable. The Trustee may only act for the direct benefit of the estate. In asking this Court to limit Caplin to cases where the Trustee actually is suing on behalf of some third party claimant, as op- posed to cases where the Trustee is merely footing the bill, the Trustee is requesting the Court to allow him to do indirectly what Caplin forbids his doing directly.* For the foregoing reasons, the Court has concluded that the Bankruptcy Court’s order of January 16, 1979 must be vacated, and the Trustee’s application of Janu- ary 15, 1979 must be denied to the extent it sought authority to use the funds of the estate to help support claims other than that brought by the Trustee. An appropriate order shall issue. /s/ Robert R. Merhige United States District Judge * At least two other courts have applied this rationale. In Rochelle v. Marine Midland Grace Trust Co., 56856 F.2d 523, 527 (9th Cir. 1976), Judge Hufstedler cited Caplin in summarily affirming the district court’s dismissal of a suit brought by the Trustee on behalf of the Debtor’s creditors and debenture pur- chasers: “[A] reorganization trustee has no standing to maintain the action on the part of any person or entity other than his debtor corporation.” Similarly, in King v. Sharp, 68 F.R.D. 60, 68 (N.D. Tex. 1974), the Court noted that: “Congress has not seen fit to endow a Chapter X Trustee with the freedom to champion causes that will produce benefits to third parties. If the bankrupt estate has no cause of action in its own right, then the Trustee has no authority to institute suite as a class representative or otherw.se for the benefit of third parties.” i io cae MI aii SRN AUR eR aR RR UU NEM a i | lda APPENDIX C . IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA Winston-Salem Division In Chapter X Reorganization Numbers B-77-695 B-77-696 B-77-697 B-77-698 B-77-699 B-77-700 B-77-701 B-77-702 [Filed Sept. 5, 1979] IN THE MATTER OF: THE WASHINGTON GROUP, INC., CONVENIENT SYSTEMS, INC., WASHINGTON MILLS COMPANY, JOHNSTON MILLS COMPANY, JOHNSTON MILLS ExXPoRT COMPANY, SPINNERS PROCESSING COMPANY, WASHINGTON WEAVING COMPANY and WASHINGTON MILLS SALES CORPORATION, Debtors. ORDER For the reasons stated in the memorandum of the Court this day filed, and deeming it proper so to do, it is ADJUDGED and ORDERED as follows: 1. The orders of the Bankruptcy Court dated March 12, 1979 and January 16, 1979 are hereby vacated; and 2. The Bankruptcy Court is directed (a) to enter an order granting appellants’ request for a retroactive ex- tension of time within which to file their Notices of l6a Appeal, and (b) to enter an order denying the Trustee’s application of January 15, 1979 requesting authority to utilize funds of the Debtors to defray the costs of prose- cuting Gilbert, et al. v. Bagley, et al., No. C-78-335-WS, and Fulk, et al. v. Bagley, et al., No. C-78-333-WS, ex- cept that the Trustee may utilize the Debtor’s fund to prosecute that portion of the Gilbert action in which the Trustee is suing on behalf of the Debtors’ estate: Let the Clerk send copies of the memorandum and this order to all counsel of record. /s/ Robert Merhige ROBERT MERHIGE United States District Judge 17a APPENDIX D IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA In Chapter X Reorganization Numbers B-77-695, B-77-696, B-77-697, B-77-698, B-77-699, B-77-700, B-77-701, B-77-702 [Filed: July 25, 1979] IN THE MATTER OF: THE WASHINGTON GROUP, INC., CONVENIENT SYSTEMS, INC., WASHINGTON MILLS COMPANY, JOHNSTON MILLS COMPANY, JOHNSTON MILLS EXPORT COMPANY, SPINNERS PROCESSING COMPANY, WASHINGTON WEAVING COMPANY and WASHINGTON MILLS SALES CORPORATION, Debtors. ORDER GRANTING AUTHORITY TO PROSECUTE LEGAL ACTIONS BASED ON FRAUD, MISCONDUCT, IRREGULARITIES, OR MISMANAGEMENT OF THE DEBTOR CORPORATIONS At Greensboro, in said district, on the 25th day of July, 1978. Upon the annexed Application of the Trustee for the above-named Debtors, the Court having found the facts to be as stated therein, and for good cause shown; it is 18a ORDERED that R. A. Gilbert, Trustee, be, and he is hereby, granted permission and authority to take what- ever action is deemed appropriate to assert claims or causes of action based on fraud, misconduct, irregulari- ties, or mismanagement of the Debtor corporations against any and all corporations, entities or individuals who might be deemed liable for such acts, and, if the Trustee deems it appropriate, that he be, and he is here- by, granted authorization to join with other plaintiffs in the prosecution of such claims or causes of action. /s/ Rufus W. Reynolds RuFus W. REYNOLDS Bankruptcy Judge *-% 19a APPENDIX E IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA In Chapter X Reorganization Numbers B-77-695, B-77-696, B-77-697, B-77-698, B-77-699, B-77-700, B-77-701, and B-77-702. [Filed Jan. 15, 1979] IN THE MATTER OF: THE WASHINGTON GROUP, INC., CONVENIENT SYSTEMS, INC., WASHINGTON MILLS COMPANY, JOHNSTON MILLS COMPANY, JOHNSTON MILLS EXPORT COMPANY, SPINNERS PROCESSING COMPANY, WASHINGTON WEAVING COMPANY and WASHINGTON MILLS SALES CORPORATION, Debtors. ORDER AUTHORIZING EXPENDITURE OF FUNDS FOR COSTS IN PLENARY CLASS ACTIONS At Greensboro, N. C., in said District, this 16th day of January, 1979. Upon the annexed Application of R. A. Gilbert, Trustee of the above named Debtors, the Court having deter- mined that said Application was one which might be heard ex parte and the Court having found as facts the matters stated in said Application; and for sufficient reasons appearing and good cause shown, it is 7% °% 20a ORDERED, ADJUDGED AND DECREED that the Trustee be and he is hereby authorized to use the funds of the Debtors to assist in defraying the reasonable and necessary costs of maintaining the two class actions known and designated as Gilbert, et al. v. Bagley, et al. and Fulk, et al. v. Bagley, et al., which class actions are presently pending in the United States District Court for the Middle District of North Carolina, save and ex- cept payment of professional fees of the attorneys for the class action plaintiffs. /8/ Rufus W. Reynolds RuFus W. REYNOLDS Bankruptcy Judge 2la APPENDIX F IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA In Chapter X Reorganization Numbers B-77-695, _ B-77-696, c B-77-697, _ B-77-698, B-77-699, B-77-700, B-77-701, and B-77-702. [Filed Mar. 12, 1979] IN THE MATTER OF: THE WASHINGTON GROUP, INC., CONVENIENT SYSTEMS, INC., | WASHINGTON MILLS CoMPANY, JOHNSTON MILLS COMPANY, JOHNSTON MILLS EXPORT COMPANY, SPINNERS PROCESSING COMPANY, WASHINGTON WEAVING COMPANY and WASHINGTON MILLS SALES CORPORATION, Debtors. ORDER DENYING MOTIONS FOR EXTENSION OF TIME IN WHICH TO FILE NOTICE OF APPEAL At Greensboro, in said district, on the 12th day of March, 1979. This matter coming on for hearing and being heard on the motions of The Northwestern Bank and David R. Johnston seeking an extension of time in which to file notice of appeal of an order entered by this Court on January 16, 1979, and the Court finding that said motions were not filed within ten days following the date of entry of said order; and the Court having concluded -% °? 22a that it does not have authority under the provisions of Rule 802(c) and Rule 10-801, Rules of Bankruptcy Pro- cedure, to extend the time for filing notice of appeal once the initial ten-day period has expired; and the Court further concluding that if it did have such author- ity, in the exercise of its discretion it would deny the motions for extension of time in which to file notice of appeal; it is ORDERED that the motions filed on behalf of The Northwestern Bank and David R. Johnston on February 9, 1979 seeking an extension of time for filing their notices of appeal be, and the same hereby are, denied, and since this Court has concluded it is without authority to act, such denial is without prejudice to The North- western Bank and David R. Johnston to renew and pre- sent these same motions to the United States District Judge. /s/ Rufus W. Reynolds RuFrus W. REYNOLDS Bankruptcy Judge ‘% 23a APPENDIX G UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 79-1644 Davip R. JOHNSTON; THE NORTHWESTERN BANK; et al., a Appellees R. A. GILBERT, TRUSTEE, Appellant No. 79-1653 DAvip R. JOHNSTON; THE NORTHWESTERN BANK; et al., rs Appellees GEORGE W. FULK, et al., Appellants No. 79-1654 Davip R. JOHNSTON; THE NORTHWESTERN BANK; et al., ry Appellees WEBSTER A. COLLINS, et al., Appellants ORDER On September 5, 1979 the district court reversed a January 16, 1979 order of the bankruptcy court author- izing the expenditure of funds and costs in two class actions, the short styles of which are Gilbert v. Bagley, No. C-78-885-WS (M.D. N.C.), and Fulk v. Bagley, No. C-78-8338-WS (MD NC) [sic]. The expenditure of funds 24a and costs was to be used by the trustee to aid and assist in the prosecution of said civil suits on behalf of the bank- rupt estate, which had been authorized by order dated July 21, 1978. Later, by opinion dated May 15, 1980, the bankruptcy court, in an opinion in another but related matter, indi- cated that its initial authority to proceed with the Gil- bert and Fulk civil actions in the Middle District of North Carolina, and the expenditure of funds for that purpose, had been a mistake. Nevertheless, orders of the bankruptcy court, above mentioned, of July 21, 1978 and January 15, 1979, are yet extant, and, so far as we are advised, are unmodified except by the order of the dis- trict court of September 5, 1979, above mentioned, which is the order appealed from. No reason has been brought to our attention why the orders of the bankruptcy court authorizing the trustee to proceed with the Gilbert and Fulk cases, and authoriz- ing the expenditure of funds on that account, could not be later revoked by the bankruptcy court. If that were done, the instant appeal might well be moot. But the orders of the bankruptcy court of July 21, 1978 and January 16, 1979 are yet in full force and virtue but for the order of the district court appealed from. We are thus of opinion the case is not now moot, and it is accordingly ADJUDGED and ORDERED that the motion to dismiss the appeal on account of mootness shall be, and the same hereby is, denied. With the concurrences of Judge Haynsworth and Judge Hall. /s/ H. Emory Widener For the Court 25a APPENDIX H UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT November 04, 1980 TO: Henry C. Ikenberry, Esq. TT. Winfield Blackwell, Esq. James D. Hutchinson, Esq. Jack F. Canady, Esq. Howard H. Stahl, Esq. Laura Stone, Esq. Roy G. Hall, Esq. Charles G. Cole, Esq. W. Donald Carroll, Esq. John H. Northey, Esq. | Lloyd Caudle, Esq. NOTICE OF JUDGMENT Judgment was entered in Case No. 79-1653 this date. The Court’s opinion is enclosed. Petition for Rehearing (FRAP 40) Filing Time A petition may be filed within 14 days after judg- ment. No extensions will be granted save for the most compelling reasons. Requests based on grounds such as miscalculation of time or a need to consult with others will be peremptorily denied. Purpose A petition should only be made to direct the Court’s attention to one or more of the following situations: 1. A material fact or law overlooked in the decision. 2. A change in the law which occurred after the case was submitted and which was overlooked by the panel. 3. An apparent conflict of another decision of the Court which is not addressed in the opinion. 26a The filing of a petition in order merely to reargue the case is an abuse of the privilege. Statement of Counsel A petition shall contain an introductory statement that, in counsel’s judgment, one or more of the situ- ations exists which is described in the “Purpose Sec- tion” discussed above. Thereafter, the points to be raised, succintly stated, shall then be listed in the statement. Lacking such a statement, the petition will be returned to counsel without filing. Form The 15 page limit allowed by the Rule shall be ob- served. The Court requires 15 copies of the peti- tion; however, a pro.se party who is indigent may file the original only. Bill of Costs (FRAP 39) Filing Time A party to whom costs are allowed, who desires taxation of costs, shall file a bill of costs within 14 days after judgment. Mandate (FRAP 41) Issuance Time The mandate is issued 21 days after judgment. A timely petition for rehearing will stay the issuance. If the petition is denied, the mandate will issue 7 days later. If a stay of mandate is sought, only the original of a motion need be filed. WILLIAM K. SLATE, II Clerk Enclosure 4CCA 28 Rev. 9/17/79 27a APPENDIX I UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT Nos. 79-1644, 79-1653, 79-1654 [Filed Jan. 19, 1981] . DAvID R. JOHNSTON, THE NORTHWESTERN BANK, JAMES R. GILLEY, Appellees, Vs. R. A. GILBERT, TRUSTEE, GEORGE W. FuLK, THOMAS W. SHELTON, WILLIAM F.. SUDDETH, WEBSTER A. COLLINS, HERBERT R. MORRISON, HELEN O. MORRISON, W. O. GREGORY and GLEN A. WILKINSON, Appellants, IN THE MATTER OF: THE WASHINGTON GROUP, INC., CONVENIENT SYSTEMS, INC., WASHINGTON MILLS COMPANY, JOHNSTON MILLS EXPORT Co., SPINNERS PROCESSING Co., WASHINGTON WEAVING Co., and WASHINGTON MILLS SALES CorP., Debtors. ORDER Upon consideration of the petition for rehearing, no request for a poll of the court being made on the sugges- tion for rehearing en banc, and with the concurrence of Judge Butzner and Judge Sprouse, *% 28a IT IS ORDERED that the petition be, and it is here- by, denied. FOR THE CouRT: /s/ Clement F. Haynsworth Chief Judge Fourth Circuit January 14, 1981 29a APPENDIX J Sections 70(a), 186, 187 and 189 of the Bankruptcy Act, 11 U.S.C. §§110(a), 586, 587 and 589 (1976) provide: $110. Title to property (a) The trustee of the estate of a bankrupt and his successor or successors, if any, upon his or their appoint- ment and qualification, shall in turn be vested by opera- tion of law with the title of the bankrupt as of the date of the filing of the petition initiating a proceeding under this title, except insofar as it is to property which is held to be exempt, to all of the following kinds of prop- erty wherever located (1) documents relating to his prop- erty; (2) interests in patents, patent rights, copyrights, and trademarks, and in applications therefor: Provided, That in case the trustee, within thirty days after appoint- ment and qualification, does not notify the applicant for a patent, copyright, or trade-mark of his election to prosecute the application to allowance or rejection, the bankrupt may apply to the court for an order reyesting him with the title thereto, which petition shall be granted unless for cause shown by the trustee the court grants further time to the trustee for making such election; and such applicant may, in any event, at any time peti- tion the court to be revested with such title in case the trustee shall fail to prosecute such application with rea- sonable diligence; and the court, upon revesting the bankrupt with such title, shall direct the trustee to exe- cute proper instruments of transfer to make the same effective in law and upon the records; (8) powers which he might have exercised for his own benefit, but not those which he might have exercised solely for some other per- son; (4) property transferred by him in fraud of his creditors; (5) property, including rights of action, which prior to the filing of the petition he could by any means have transferred or which might have been levied upon -% 80a and sold under judicial process against him, or otherwise seized, impounded, or sequestered: Provided, That rights of action ex delicto for libel, slander, injuries to the per- son of the bankrupt or of a relative, whether or not resulting in death, seduction, and criminal conversation shall not vest in the trustee unless by the law of the State such rights of action are subject to attachment, execution, garnisment, sequestration, or other judicial process: And provided further, That when any bankrupt, who is a natural person, shall have any insurance policy which has a cash surrender value payable to himself, his estate, or personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, otherwise the policy shall pass to the trustee as assets; (6) rights of action arising upon contracts, or usury, or the unlawful taking or detention of or injury to his property; (7) contingent remainders, executory devises and limitations, rights of entry for condition broken, rights or possibilities of reverter, and like inter- est in real property, which were nonassignable prior to bankruptcy and which, within six months thereafter, become assignable interests or estates or give rise to powers in the bankrupt to acquire assignable interests or estates; and (8) property held by an assignee for the benefit of creditors appointed under an assignment which constituted an act of bankruptcy, which property shall, for the purposes of this title, be deemed to be held by the assignee as the agent of the bankrupt and shall be subject to the summary jurisdiction of the court. All property, wherever located, except insofar as it is property which is held to be exempt, which vests in the ‘% 8la bankrupt within six months after bankruptcy by bequest, devise or inheritance shall vest in the trustee and his successor or successors, if any, upon his or their appoint- ment and qualification, as of the date when it vested in the bankrupt, and shall be free and discharged from any transfer made or suffered by the bankrupt after bank- ruptcy. All property, wherever located, except insofar as it is property which is held to be exempt, in which the bank- rupt has at the date of bankruptcy an estate or interest by the entirety and which within six months after bank- ruptcy becomes transferable in whole or in part solely by the bankrupt shall, to the extent it becomes so trans- ferable, vest in the trustee and his successor or succes- sors, if any, upon his or their appointment and qualifi- cation, as of the date of bankruptcy. The title of the trustee shall not be affected by the prior possession of a receiver or other officer of any court. § 586. Trustee; title A trustee, upon his appointment and qualification, shall be vested with such title as a trustee appointed under section 72 of this title would have. $587. Rights, powers, and duties of trustee Where not inconsistent with the provisions of this chapter, a trustee, upon his appointment and qualifica- tion, shall be vested with the same rights, be subject to the same duties, and exercise the same powers as a trustee appointed under section 72 of this title, and, if authorized by the judge, shall have and may exercise such additional rights and powers as a receiver in equity would have if appointed by a court of the United States for the property of the debtor. *% 82a § 589. Operation of business and management of prop- erty; reports A trustee or debtor in possession, upon authorization by the judge, shall operate the business and manage the property of the debtor during such period, limited or indefinite, as the judge may from time to time fix, and during such operation or management shall file reports thereof with the court at such intervals as the court may designate. : * a” a * Rule 10-208 of the Federal Rules of Bankruptcy Pro- cedure provides: (a) Trustee. A trustee shall (1) file the lists as re- quired by Rule 10-108; (2) unless otherwise ordered, make a report at the meeting provided for in Rule 10- 212 which shall include a summary of his operations of the business and inanagement of the property; (3) file with the court within the times fixed by the court, peri- odie reports and summaries of the operations of the business, and such other information as may be required by the court; (4) investigate the acts, conduct, liabilities and iinancial condition of the debtor, the operation of its business and the desirability of the continuance thereof, and any other matter relevant to the case or to the formulation of a plan; (5) file a report with the court concerning any facts ascertained by him pertaining to fraud, misconduct, mismanagement, and irregularities, and to any cause of action available to the estate; (6) if the court so authorizes, examine the directors and officers of the debtor and any other witnesses concerning the foregoing matters; (7) as soon as practicable, file a statement of his investigations, and cause copies or a summary thereof to be mailed to the creditors, stockhold- ers, indenture trustees, the Securities and Exchange Commission, and such other persons as the court may designate; (8) notify creditors and stockholders that they -% 83a may submit to him plans or suggestions for the formula- tion of a plan, within a time fixed by him in such notice; (9) file a plan or report as required by Rule 10-301 (c) (1); (10) within 30 days after the date of the order confirming the plan or within such other time as the court may fix, file a report with the court concerning the action taken by him and the progress made in the consummation of the plan and file such further reports as the court may direct until the plan has been consum- mated; and (11) after consummation of a plan, file an application for a final decree showing that the plan has been consummated, and the names and addresses, if known, of the holders of claims or interests which have not been surrendered or released in accordance with the provisions of the plan and the nature and amounts of such claims or interests, and such other facts as may be necessary to enable the court to pass upon the provisions to be included in the final decree. a BS * - --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1636%3A1. Public record. Not legal advice.