American Engineering Co. v. Metropolitan By-Products Co.

275 F. 40 | 2d Cir. | 1921

WARD, Circuit Judge.

The question to be disposed of arises in an ordinary receivership in equity of the Metropolitan By-Products Company, Inc., in the United States District Court for the Eastern District of New York. A fund of $202,OCX) was deposited with the Central Union Trust Company, trustee, as collateral to secure the New York Sanitary Utilization Company for the performance by tire Metropolitan Company as lessee, of its covenants in a lease of the Sanitary Company’s garbage plant at Barren Island, N. Y. Any surplus remaining after the claims of the Sanitary Company will go to prior lien claimants.

Prior lien claimants were as follows: (1) Title Guarantee & Trust Company as trustee under the first mortgage of the Metropolitan Company dated July 2, 1916, to secure an issue of $1,000,000 of bonds, by Oscar A. Lewis, Esq. (2) Holders of certain preferred notes of the Metropolitan Company to the amount of $290,000, by Davison & Underhill, Esqs. (3) Columbia Trust Company as substituted trustee under a mortgage of the Metropolitan Company dated September 1, 1917, for $359,200 of bonds outstanding, by Davison & Underhill, Esqs., and Cullen & Dykman, Esqs. (4) The International Bank, relying on an agreement to be given receivers’ certificates to secure the unpaid balance of $30,000 of a loan to the receivers, by Shearman & Sterling, Esqs. The city of New York, holder of receivers’ certificates in the amount of $33,000, by the corporation counsel. ■ (5) The receivers’ creditors by Lewis & Kelsey, Esqs., attorneys for the receivers.

As a result of our opinion in 267 Fed. 90, there is a surplus of about $128,000.

Applications were made to the District Court by Mr. Oscar A. Lewis, Messrs. Davison & Underhill and Cullen & Dykman for allowances out of the fund for their services and expenses. August 27, 1920, the District Court awarded to Mr. Lewis $4,000, to Messrs. Davison & Underhill $15,141.14, to Messrs. Cullen & Dykman $3,117.90. November 17, 1920, upon an application by Messrs. Lewis & Kelsey as attorneys for the receiver, the court modified its decree of August 27 by adding an award to them of $15,000. These are appeals from that order.

[1] It is said that because the District Court reserved at the end of its decree of August 27th jurisdiction as to matters not therein disposed of, this award to Lewis & Kelsey is not final or appealable. But leave to apply at the foot of a decree for further relief is very usual, and does not prevent the decree from being final (French v. Shoemaker, 12 Wall. 86, 20 L. Ed. 270), or the order from being appealable (Farmers’ Loan & Trust Co., petitioner, 129 U.. S. 206, 9 Sup. Ct. 265, 32 L. Ed. 656; Odell v. Batterman Co., 223 Fed. 292, 138 C. C. A. 534.

[2] The attorneys for these various claimants were seeking to reduce the claim of the Sanitary Company upon the fund and so increase the surplus, each for the benefit of his own particular client and for no one else. There was not in any case a representative proceeding in which one party creates or preserves a fund not only for his own benefit but also for the benefit of others similarly situated, who, having received the benefit of the proceeding, ought in equity to contribute to the payment for those services. It is a misnomer to speak of these attorneys as either creating or preserving a fund, at least for the benefit of anybody else than their own clients. The fund existed to the knowledge of every ope, and the only question was which of the competing claimants was entitled to it. And this could not be known until a final distribution. Otherwise every one who had spent time and study in preparing a brief or in cross-examination of witnesses or in objecting to the special master’s report and the decree of the District Court as to this fund would be entitled to compensation out of it whether his client were ultimately found to have any interest in it or not. In point of fact neither the Title Guarantee & Trust Company as trustee nor the Columbia Trust Company as trustee have been awarded anything out of this fund, as may be seen from our opinion upon appeal from the final decree handed down herewith. No siich allowances are proper in the federal courts. The circumstances under which courts in equity and bankruptcy may allow compensation to an attorney out of a fund in the hands of the court for distribution are well expressed by Judge Dayton in Re Giliaspie (D. C.) 190 Fed. 88, as follows;

“The only proper cases that can arise where courts of equity and bankruptcy as well can award compensation to an attorney out of funds due others than his client is where, as I have heretofore indicated, such an attorney for one of a class has ‘created’ or secured a fund and brought it into the custody of the court, which fund is to inure, not alone to the benefit of his client, but to that of all those belonging to this class. In such cases the courts award compensation to the attorney out of the fund due to all, not on the theory of his having an attorney’s lien, but on the broader theory that all interested in the fund should contribute ratably to the cost of ‘creating’ or securing it. These principles are very clearly set forth in Trustees v. Greenough, 105 U. S. 527, 26 L. Ed. 1157; Central R. R. v. Pettus, 113 U. S. 116, 5 Sup. Ct. 387, 28 L. Ed. 915; Harrison v. Perea, 168 U. S 311, 18 Sup. Ct. 129, 42 L. Ed. 478; Jefferson Hotel Co. v. Brumbaugh (4th Circuit) 94 C. C. A. 279, 168 Fed. 867.”

It is fair to say that this reduction of the Sanitary Company’s claims was due to the efforts of Messrs. Davison & Underhill and Cullen & Dykman. Messrs. Lewis & Kelsey must look for their compensation to property actually coming into the hands of the receiver. The decree, modified by striking out this allowance, is affirmed without costs to either party.