In re Chocklett

274 F. Supp. 821, 1967 U.S. Dist. LEXIS 7604
CourtDistrict Court, W.D. Virginia
DecidedOctober 12, 1967
DocketNo. 66-BK-147-R
StatusPublished
Cited by3 cases

This text of 274 F. Supp. 821 (In re Chocklett) is published on Counsel Stack Legal Research, covering District Court, W.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Chocklett, 274 F. Supp. 821, 1967 U.S. Dist. LEXIS 7604 (W.D. Va. 1967).

Opinion

OPINION AND JUDGMENT

DALTON, Chief Judge.

• This case is before the court upon the petition of the Larami Corporation (hereinafter petitioner) to review the order of the referee in bankruptcy deny[822]*822ing petitioner’s motion to enjoin the trustee in bankruptcy from proceeding on a suit against petitioner allegedly improperly brought as in violation of General Order in Bankruptcy No. 44.1 11 U.S.C.A. following repealed section 53.

On March 18, 1966 Cecil G. Chocklett, Sr. (hereinafter bankrupt) filed a petition in bankruptcy and was duly discharged on October 31, 1966. During the process of administering the bankrupt’s estate the trustee in bankruptcy learned of a levy and sergeant’s sale against property of the bankrupt obtained by the petitioner on January 4, 1966 and sought to recover the proceeds as constituting a voidable preference. On October 28, 1966 the trustee orally requested the referee in bankruptcy to appoint an attorney to represent the trustee in his suit to avoid the alleged preference and recover the proceeds of the sale. The referee granted the trustee’s request although no verified petition had been filed by the trustee as required by General Order No. 44. Appointed counsel then filed suit on behalf of the trustee in the Hustings Court of the City of Roanoke, Virginia, seeking to recover the $1,352.00 the petitioner had recovered at the sergeant’s sale allegedly constituting the voidable preference. Petitioner filed a notice of intention to enjoin the trustee from proceeding in the Hustings Court and on July 26, 1967 a hearing was held on the motion. Petitioner there claimed that the trustee should be enjoined from proceeding in the Hustings Court because the suit was improperly brought since the attorney representing the trustee on the suit had been appointed by the court on October 28, 1966 without a verified petition ever having been filed as required by General Order No. 44: “No attorney for a receiver, trustee or debtor in possession shall be appointed except upon the order of the court, which shall be granted only upon the verified petition of the receiver, trustee or debtor in possession, * * He said the General Orders are mandatory, not discretionary and that the trustee’s suit in the Hustings Court suit should be dismissed with prejudice to his further proceedings thereon for failure to comply with the order. The referee denied petitioner’s motion, and after the trustee filed a verified petition, entered an order nunc pro tune as of October 28, 1966 the intended effect of which was to make counsel’s appointment valid under the order as of the original date of appointment. The referee stated in his order that the trustee’s failure to file a verified petition for appointment of counsel did not affect the validity of the suit brought in the Hustings Court even though the attorney was improperly appointed by the court.

[823]*823The question raised on petitioner’s petition for review is: does the entry of an order of appointment by the court under General Order No. 44 without a verified petition having been filed prevent trustee’s attorney from instituting a valid suit on the trustee’s behalf. The court finds that it does not.

General Order No. 44 as all General Orders in Bankruptcy was adopted by the Supreme Court of the United States to “explain, amplify and apply the provisions of the Bankruptcy Act.” They have the force and effect of law, Widett v. D’Andria, 241 F.2d 680 (1st Cir. 1957), In re Blair, 170 F.2d 830 (7th Cir. 1948), provided they do not conflict with the Bankruptcy Act, In re Markel, 195 F.Supp. 926 (E.D.Mich.1961), and they must be strictly construed and applied, In re H. L. Stratton, Inc., 51 F.2d 984 (2nd Cir. 1931); Widett, supra.

Under General Order No. 44 the trustee selects an attorney but the court is given a voice in the selection because the attorney is appointed by order^of the court only after he is carefully examined by the court. The order is designed to protect the bankrupt’s estate.

In the Widett case, supra, the court was faced with a problem similar to the one now before the court. It had to determine the question of the authority of counsel to act for the trustee in filing an appeal where counsel had not been appointed in the manner as required by Order No. 44. There the trustee in bankruptcy petitioned the District Court for review of the referee’s order. The petition was dismissed and the trustee by counsel filed notice of appeal. The attorneys representing the trustee who filed the notice of appeal, however, had not been appointed in accordance with General Order No. 44 and the appellee filed a motion to dismiss the appeal for lack of jurisdiction on the grounds that the attorneys had no standing to file the notice of appeal. The court denied the appellee’s motion and in holding that the trustee’s appeal was not subject to dismissal on the grounds that the attorneys who 'filed the notice of appeal had not been appointed in accordance with Order No. 44 said:

“The basic purpose of the Order is to protect the bankrupt’s estate — to conserve as much of it as possible for the creditors — first by preventing the unnecessary employment of attorneys to represent the officials having charge of the estate under the direction of the court, and second, when employment of attorneys is necessary, to assure that those employed are capable men who have no interest adverse to the estate. The only sanction provided in the Order is denial of fees and expenses to attorneys not appointed in conformity with its requirements.
“Certainly an appeal to this court from an order adverse to a Trustee in Bankruptcy does not necessarily harm but on the contrary may well benefit the estate. And such an appeal if successful benefits the estate as much when taken by counsel authorized to do so but not appointed as the Order requires as when taken by counsel who have been properly appointed. Even an unsuccessful appeal can harm the estate only by delay and to the extent of the costs that might be imposed, and these harms to the estate are the same whether the appeal was taken by regularly appointed counsel or by counsel acting for the Trustee but not appointed in conformity with the Order. Indeed, an unsuccessful appeal when taken by counsel not appointed by the court may harm the estate less than such an appeal when taken by court appointed counsel, for, if taken by counsel acting for the Trustee but not appointed as the Order requires, counsel’s fees and expenses may be denied, whereas we may assume that the fees and expenses of appointed counsel would not be denied except, perhaps, in the unlike[824]*824ly event that the appeal was frivolous and taken only for delay or to earn a fee. The sanction provided in the Order seems adequate to effectuate its purpose, at least as far as taking an appeal is concerned. We see no point in adding lack of authority to file notice of appeal to the sanction stated in the order.” 241 F.2d at 682-683.

We find that the holding of the court in Widett, supra, governs the filing of the suit in this case. Here the attorney was appointed also in non-compliance with Order No. 44.

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Cite This Page — Counsel Stack

Bluebook (online)
274 F. Supp. 821, 1967 U.S. Dist. LEXIS 7604, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-chocklett-vawd-1967.