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IN RE JOSLYN

November 8, 1951

IN RE JOSLYN.


The opinion of the court was delivered by: Igoe, District Judge.

This voluntary bankruptcy proceeding, filed originally on February 27, 1936, and in which an order of discharge was entered on June 29, 1936, was reopened on May 20, 1946. Thereafter, in addition to other proceedings, two plenary suits were filed in this District Court by the Bankruptcy Trustee, entitled Young v. Handwork, et al., No. 46 C 2082, and Young v. First National Bank of Chicago, D.C., 85 F. Supp. 68. In these suits the Bankruptcy Trustee sought to recover for the bankruptcy estate the interest of the bankrupt in two certain trusts created by his father and mother in the year 1935. These plenary suits have been resisted on the ground that the trust interests were not subject to bankruptcy administration. The complaints of the Bankruptcy Trustee in both of the plenary suits were ordered dismissed in the District Court on defendants' motions. The Court of Appeals reversed the order entered in Young v. Handwork et al., 7 Cir., 179 F.2d 70, and remanded the cause for further proceedings in the District Court. The case of Young v. The First National Bank of Chicago is still pending in the Court of Appeals as Cause No. 10035-6.

Except for claims that have been paid or waived, it appears that the only claim against the bankruptcy estate was for a certain stockholder's liability of the bankrupt with respect to 1142 shares of stock of the Chicago Bank of Commerce, having a par value of $50 per share and upon which the bankrupt had a stockholder's liability of $57,100.

Several attempts were made to settle the claim of the Bankruptcy Trustee against the trust interests for amounts less than the total amount of this claim against the bankruptcy estate. The last such proposed settlement, in the amount of $45,000 plus costs and expenses of the proceeding, was disapproved by the Honorable Elwyn R. Shaw, Judge of this Court, on the ground that the trust interests were not subject to administration in bankruptcy and that "it would be contrary to the public interest to approve the proposed compromise settlement." The Court of Appeals, in an appeal from Judge Shaw's order, In re Joslyn's Estate, 7 Cir., 171 F.2d 159, rendered an opinion on December 3, 1948, which said in part at page 165: "In what manner the public interest would have been affected by an approval of the compromise we are unable to discern. After all, it was proposed by the bankrupt for the purpose of terminating this protracted litigation, and we think such an objective would have been favorable rather than contrary to the public interest."

On June 30, 1950, the bankrupt filed a petition in this bankruptcy proceeding in which he prayed for the entry of an order directing that his liability as a stockholder of the Chicago Bank of Commerce be determined, and directing that all persons claiming fees shall file their petitions therefor within a period to be fixed by the Court. In his petition, the bankrupt represented to the Court that he was able to pay all claims which were provable against his estate. He sought a judicial determination of such claims, and asked that the costs, fees and expenses assessable against the bankruptcy estate be determined and that he be permitted to pay the same.

The Bankruptcy Trustee filed his answer to this petition. In addition, Wade Fetzer, Jr., and certain other parties claiming an interest in any amount recovered on behalf of the depositors of the Chicago Bank of Commerce, were granted leave to and did thereafter file their intervening petition. The Bankrupt's petition, the answer thereto, the intervening petition and other pleadings were referred to Referee Austin Hall for hearing and report.

The Referee heard evidence and considered briefs filed by all parties, and thereafter in a voluminous and well-considered report recommended that the prayer of the petition of the bankrupt be granted.

Since the only claim against the bankruptcy estate is one for a bank stockholder's liability, and since an action respecting that stockholder's liability is pending in the Superior Court of Cook County in the case of Hillmer et al. v. Chicago Bank of Commerce, No. 560305, the Referee recommended in his report dated March 16, 1951 that the amount of that claim be determined by the Superior Court, and that thereafter the claim as determined by the Superior Court should be filed, allowed, and paid in this proceeding. As pointed out by the Referee: "* * * to hear the evidence in the instant proceeding on the questions of which of the bank's creditors are also creditors of the bankrupt herein, and how much of the bank's debts accruing in the period of the bankrupt's ownership of stock from February 10, 1932 to June 25, 1932, remain unpaid, would mean that this court would have to hear and determine virtually all of the issues that have already been tried in the representative creditors' suit No. 560305 * * *."

After briefs were filed and the cause taken under advisement by this court, a petition was filed on July 12, 1951 in the Superior Court case by Marcellus L. Joslyn, father of the bankrupt, offering to pay the bankrupt's full stockholder's liability of $57,100, provided the Superior Court would determine the stockholder's liability and enter its judgment. As a result of that action, judgment for $57,100 was entered on July 18, 1951 against the bankrupt, which was thereafter paid by Marcellus L. Joslyn to Luke F. Cunniff, the Receiver appointed in the Superior Court case. Satisfaction of judgment was given and filed in the Superior Court case, and a release of liability was executed and delivered by the Receiver, Luke F. Cunniff.

Following this action, the bankrupt filed a motion in this court for summary judgment setting forth the proceedings taken in the Superior Court resulting in a payment of his stockholder's liability and a satisfaction and release of the stockholder's liability claim. Certified copies of the Superior Court orders and of the release were filed in support of the motion for summary judgment.

Other matters, including a motion to remove the Bankruptcy Trustee, were filed in this cause, which need not be passed upon at the present time in order to dispose of this bankruptcy case and the other litigation which has grown out of it.

There is no conceivable objection to the payment in full of a bankrupt's creditors.

The payment, satisfaction and release of the stockholder's liability claim and the disclaimer of Marcellus L. Joslyn and Dr. Ralph C. Hamill leave this court with a bankruptcy case without creditors or claimants and with no justifiable reason for holding open this case except for the allowance and payment of claims for fees and expenses. Although the creditors of the bank may not have received payment in full of their claims as depositors of the defunct bank, the bankrupt's liability to them was limited to the sum of $57,100 and was extinguished by the payment of that sum.

The Bankruptcy Trustee suggests that instead of such a simple and equitable method of disposing of this case, there should have been a full accounting in this court between the stockholders and the creditors of the Chicago Bank of Commerce, and that the creditors of that bank, numbering more than 13,000, should be notified of the pendency of this proceeding, and that claims should be determined and allowed only as to those creditors of that bank who might file their claims in this court.

It strikes this court that it would be unreasonable and improper to require notice to be given to the more than 13,000 depositors and other creditors of Chicago Bank of Commerce and to permit the filing and determination of such claims in this proceeding. Such depositors and other creditors of the defunct bank, including the Benevolent and Protective Order of Elks and the six or seven other depositors which filed individual claim in this proceeding, filed their claims many years ago with the State Auditor of Public Accounts, and have received distributions of dividends as members of the class of creditors represented by Hillmer et al. in the Superior Court case No. 560305. Nor ...


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