In Re National Store Fixture Co.

37 B.R. 481, 10 Collier Bankr. Cas. 2d 764, 1984 Bankr. LEXIS 6210, 11 Bankr. Ct. Dec. (CRR) 710
CourtUnited States Bankruptcy Court, W.D. Missouri
DecidedFebruary 24, 1984
Docket18-50478
StatusPublished
Cited by5 cases

This text of 37 B.R. 481 (In Re National Store Fixture Co.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re National Store Fixture Co., 37 B.R. 481, 10 Collier Bankr. Cas. 2d 764, 1984 Bankr. LEXIS 6210, 11 Bankr. Ct. Dec. (CRR) 710 (Mo. 1984).

Opinions

MEMORANDUM OPINION AND ORDER

JOEL PELOPSKY, Bankruptcy Judge.

In this case debtor has moved to disqualify and remove the trustee by reason of the language of Rule 5002, Rules of Bankruptcy Procedure. That Rule provides that:

“No person may be appointed as a trustee or examiner or be employed as an attorney, accountant, appraiser, auctioneer, or other professional person pursuant to § 327 or § 1103 of the Code if (1) the person is a relative of any judge of the court making the appointment or approving the employment or (2) the person is or has been so connected with any judge of the court making the appointment or approving the employment as to render such appointment or employment improper. Whenever under this rule a person is ineligible for appointment or employment, the person’s firm, partnership, corporation, or any other form of business association or relationship, and all members, associates and professional employees thereof are also ineligible for appointment or employment.”

The Court finds that there are no disputes of material fact, that no hearing is necessary and that the issue may be resolved on the pleadings and briefs of the parties and of the United States which has intervened.

The Court takes judicial notice of the following facts:

(1) The trustee is a member of the panel of trustees of this court, having been so [483]*483selected by the Director of the Administrative Office of the United States Courts pursuant to powers granted the Director by § 604(f) of Title 28, U.S.C.

(2) The trustee was selected by an employee of the office of the Clerk of this bankruptcy court by determining which member of the panel was eligible for appointment in this asset case. The trustees are appointed in asset cases on a rotating basis and a trustee is eligible generally when his last appointment in such a case is prior to the time any other trustee was appointed.

(3) No judge of the bankruptcy court is consulted when such an appointment is made.

(4) The order of appointment is executed by the Clerk of the court or her designee using a signature stamp of the judge who draws the case, again by rotation selection.

(5) The trustee in this case is a member of a firm in which another member is a son of a sitting bankruptcy judge of this district.

I

Prior to the effective date of Rule 5002 which was August 1, 1983, the rule on prohibited appointments was Rule 505 which provided that:

“(a) Appointment or Employment of Relative of or Person Connected with Judge or Referee. No person may be appointed as trustee, receiver, marshal, or appraiser or employed as accountant or auctioneer in a bankruptcy case (1) if he is a relative of any judge or referee of the court making the appointment or authorizing the employment, or (2) if he is so connected with any judge or referee of the court making the appointment or authorizing the employment as to render such appointment or employment improper.
(b) Disqualification of Judge or Referee from Acting in Case: Relationship to Party or Attorney; Interest in Case; Appearance of Influence. Any judge or referee shall disqualify himself in any bankruptcy case (1) in which he is a relative of any party or his attorney, has a substantial, direct or indirect interest, has been of counsel, or is or has been a material witness, or (2) if his acting therein would justify the impression that any person can improperly influence him or unduly enjoy his favor, or that he is affected by the kinship, rank, position, or influence of any party or other person, (c) Disqualification of Judge or Referee from Authorizing Employment of Attorney. Any judge or referee shall disqualify himself from authorizing the employment and from determining the compensation of (1) a relative as an attorney in a bankruptcy case, or (2) an attorney in a bankruptcy case if the judge or referee is so connected with the attorney as to render it improper for him to authorize such employment”.

Rule 505(a) prohibited appointment as trustee, receiver, marshal or appraiser- as well as employment as accountant or auctioneer of a person who’ was “a relative of any judge or referee of the court making the appointment”. The fair reading of the provision was to the effect that no judge or referee could appoint to any of the named positions a relative of any judge if all the appointing officers sat on the same court as, for example, judges of a multi-judge district.

But a relative could serve as attorney in bankruptcy matters, even as attorney for the trustee. See the advisory committee note to Rule 505. The language of Rule 505(a) did not prohibit the appointment or employment as attorney of a relative of any judge of the court, but only barred the related judge from authorizing employment or approving compensation. Rule 505(c).

The revision of the Rule broadened its reach. The prohibitions contained in Rule 505(a) were carried over but redefined and enlarged. Under Rule 5002 no relative of any judge of the court could be appointed as trustee or examiner or employed as attorney, accountant, appraiser, auctioneer or other professional person. In addition the last sentence of the Rule extends the ineli[484]*484gibility to the relative’s “firm, partnership ... or any other form of business association

Attorneys were added to the group of categories from which relatives were barred. The class prohibited from serving is enlarged beyond blood lines to include persons involved in certain types of business relationships with the relative. In the instance before the Court the trustee sought to be removed is a law partner of a relative of a judge of the court. The plain language of Rule 5002 prohibits such an appointment.

II

Various sections of the Bankruptcy Code apply to trustees. Section 321 provides that “[a] person may serve as trustee in a case under this title only if such person is — (1) an individual that is competent to perform the duties of trustee and, in a case under chapter 7 ... resides or has an office in the judicial district within which the case is pending ... ”. The trustee here has served for many years in that capacity. He has an office in this judicial district.

There is no suggestion that the word “competent” is used as a term of art as, for example, it is used in mental health statutes. Rule 209, Rules of Bankruptcy Procedure, In re Leader Mercantile Co., 36 F.2d 745 (5th Cir.1929); Matter of Chapter 13 Cases, 19 B.R. 713 (Bkrtcy.W.D.Wash.1982); In re Parr, 3 B.R. 692 (Bkrtcy.E.D.N.Y.1980). A person may be competent to perform the duties of the trustee even though he might not be eligible. The trustee here is competent.

Section 322 provides for qualification of a trustee once selected. The prerequisite is that the person selected post a bond in the amount required by the court with sufficient surety. Section 701 provides for the appointment of an interim trustee who is a disinterested person. Section 702 sets forth procedures for the election of a trustee by creditors. Section 1104 permits appointment of a trustee in a reorganization case. Section 1302(d) authorizes appointment of a standing trustee in the district to manage Chapter 13 cases. None of these statutory provisions prohibits appointment of a person who has a business relationship with a person who is himself ineligible to be appointed by reason of consanguinity.

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In Re National Store Fixture Co.
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Cite This Page — Counsel Stack

Bluebook (online)
37 B.R. 481, 10 Collier Bankr. Cas. 2d 764, 1984 Bankr. LEXIS 6210, 11 Bankr. Ct. Dec. (CRR) 710, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-national-store-fixture-co-mowb-1984.