Opinion
No. 4934.
March 10, 1934.
Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; George A. Carpenter, Judge.
Suit by William F. Stelzer and others against Charles A. Volland, individually, and doing business as the Chicago Lawn Pure Ice Company, who was subsequently adjudged a bankrupt, and wherein Henry W. Lang, Jr., and another, copartners doing business as the Acme Ice Company, were made parties. From a decree overruling exceptions and confirming the report of the special master, plaintiffs appeal.
Decree reversed, and cause remanded, with directions.
Appellants brought this suit to enjoin Charles A. Volland and the Chicago Lawn Pure Ice Company, and all claiming under them from operating an ice manufacturing plant on the premises at 3604 West 59th Street, Chicago. Subsequently, Charles A. Volland doing business as the Chicago Lawn Pure Ice Company was adjudged bankrupt, and M.M. Martin was elected trustee of the bankrupt estate. Proceedings were thereupon instituted by said trustee whereby the bill pending in the state court was transferred to the United States District Court for trial and disposition.
Long prior to the institution of this suit, the City of Chicago enacted a comprehensive zoning ordinance covering the entire city and regulating through zones the character of the buildings which could be erected in the city. The property upon which the building in question was erected fell under what was termed the C-2 class. In this zone ice plants for ice storage could be erected, but not ice plants for the manufacture of ice.
Volland obtained a permit to erect a building described as an ice storage plant. The plans for his building, which were submitted to the building department and approved, apparently contemplated the erection of an ice manufacturing plant. Immediately upon the commencement of work upon said plant, appellant, who was president of the Lawn Civic Association, protested and made formal complaint against the erection of said building. Hearings were had which resulted in the denial of the appeal from the ruling of the building commissioner by the Zoning Board of Appeals. Application to the Circuit Court of Cook County for a writ of certiorari was then made, and in the meantime the construction of the plant was completed. The Circuit Court of Cook County denied certiorari on the ground that the permit merely authorized the erection of an ice storage plant and that until the ice storage plant was used as an ice manufacturing plant, no injunctive relief was obtainable. Thereafter, the City Council of Chicago passed an ordinance rezoning the half block immediately to the rear of the ice plant so as to make it lawful to maintain and operate bankrupt's ice manufacturing plant. The plant thereupon began the manufacture of ice under the name of Chicago Lawn Pure Ice Company.
When the cause came on for hearing before the District Court, an order of reference was made to Garfield Charles as special master for "hearing and report." Charles was also the referee to whom the bankrupt estate of Volland had been referred for administration. After a full hearing before said special master, a report with findings was submitted, to which exceptions were filed. The court upon hearing the matter overruled the exceptions and confirmed the report of the special master. This appeal followed.
Donald P. Vail, of Chicago, Ill., for appellants.
Isadore Wolfsohn, David F. Dockman, and Arthur Chittick, all of Chicago, Ill., for substituted appellees.
Joseph B. Fleming and Adrian L. Hoover, both of Chicago, Ill. (Dudley F. Jessopp, of Chicago, Ill., of counsel), for intervening appellee.
Before EVANS, SPARKS, and FITZ HENRY, Circuit Judges.
We find it impossible to pass upon the merits of the controversy involved in this litigation. The cause was submitted to a special master for determination. The decree of the District Court was based on the findings of the special master. The special master was disqualified to act because of interest in the outcome. As he was disqualified from acting as special master because of such interest, his findings can not be used as the basis of a decree in appellees' favor.
Mr. Garfield Charles, the special master to whom this cause was referred, was the referee in bankruptcy in the District Court for the Northern District of Illinois, Eastern Division, to whom the estate of Volland was referred. As such referee he was entitled to receive as his compensation "one per centum commissions on all moneys disbursed to creditors by the trustee," in said estate. 11 USCA § 68. A decision favorable to the trustee of the bankrupt estate necessarily enhanced the value of the assets of said estate and therefore increased the compensation of the referee. The cost of the building was approximately $140,000, and the increase in fees due to the enhanced value of the property of the estate of said bankrupt was considerable.
This ruling is not intended to and does not deny to the District Court the right to refer proper cases to one as special master who is a referee in bankruptcy. Causes which do not involve bankrupt estates and the determination of which in no way affects, directly or indirectly, the amount of fees which a referee may receive as such referee, may, provided the other essential facts appear, be referred to one as special master who occupies the position of referee. Of course references, expressly authorized by the Bankruptcy Act, may also be made to the referee.
What is not permitted is for a judicial officer, whether he be a judge, master, referee, or receiver, to act in any such respective capacity when his action may result in his individual enrichment or when he, in his official position, may be embarrassed by the taking of any inconsistent judicial or official position, even though it does not actually enrich him. In other words, we are merely applying the rule that a master or any other judicial officer or quasi-judicial officer is disqualified if he has an interest, however small, in the general or special fund or property affected by the suit, a decisive issue of which he is called upon to decide. Folda v. Zilmer (C.C.A.) 14 F.2d 843; State v. Aldridge, 212 Ala. 660, 103 So. 835, 39 A.L.R. 1470; Marsh v. Ferguson (Tex.Civ.App.) 262 S.W. 805; Metsker v. Whitsell, 181 Ind. 126, 103 N.E. 1078; Conkling v. Crosby, 29 Ariz. 60, 239 P. 506; Quatman v. Superior Ct. of Glenn County, 64 Cal.App. 203, 221 P. 666, 668. He is likewise disqualified if for any other reason he occupies a position which is inconsistent with that which he must assume when he acts in a judicial or quasi-judicial position. In fact, if it be embarrassing for him to freely act in the judicial or quasi-judicial position, he is disqualified. For a discussion of what interest is disqualifying and when trial by one having a personal interest is denial of due process, see Tumey v. Ohio, 273 U.S. 510, 47 S. Ct. 437, 71 L. Ed. 749, 50 A.L.R. 1243.
As the decree must be reversed and the cause remanded to the District Court for further proceedings, it may not be inappropriate to further observe that in our opinion this is not a proper case for a reference to a special master. While a court of equity is not limited in its power to refer issues or the entire suit to a special master (Ex parte Peterson, 253 U.S. 300, 40 S. Ct. 543, 64 L. Ed. 919), it by no means follows that all suits should be referred or that there is no discretion to be exercised in determining what suits or what issues should be referred to a special master. This is particularly true of compulsory references.
Supreme Court Equity Rule 59 (28 US CA § 723) reads:
"Reference to Master — Exceptional, Not Usual. — Save in matters of account, a reference to a master shall be the exception, not the rule, and shall be made only upon a showing that some exceptional condition requires it."
In the instant case the reference was of a plenary suit brought by a property holder to protect, through injunctive relief, his property from alleged injury caused by the construction of an ice manufacturing plant near his residence. Not a single issue, but the entire case, was referred. It was not a proceeding nor controversy growing out of the administration of an estate in bankruptcy. The issue determinative of the suit was not one of accounting, but turned on a single issue of fact. That narrow issue of fact, which was presented to the court by the litigants, was an important one — a controversy between the citizen — a property owner — and one claiming under an ordinance of the City of Chicago. The former charged that the rezoning of the block wherein he lived was arbitrary and unreasonable and inimical to public welfare. He charged and attempted to prove that the city was corruptly influenced in making its decision. This charge his adversary denied. The litigants were entitled to have this issue determined by the court rather than by a special master.
The decree is reversed, and the cause remanded with directions to proceed in accordance with the views herein expressed.