Farmers' Loan & Trust Co. v. New York Rys. Co., No. 235

No. 235 | 2d Cir. | May 26, 1914

WARD, Circuit Judge.

This is a proceeding to determine whether the fee of Bronson Winthrop, Esq., for legal services in connection with the foreclosure of the Central Park, North & East River Railroad Company shall be paid by the bondholders or out of the surplus proceeds going to the receiver of the railroad company.

The very unusual situation is presented of a -surplus' upon foreclosure of a railroad mortgage. Mr. Winthrop was not acting for the complainant, but for the Morton Trust Company, which as trustee was the holder of all the bonds secured by the mortgage which the complainant was seeking to foreclose. The interest of the Morton Trust Company was, like that of the complainant, to defeat the efforts of the Central Park Company to prevent foreclosure. It was a defendant not as owner of the bonds but by virtue of holding a subordinate lien. Mr. Taylor, the special master awarded Mr. Winthrop a fee of $500 out of the fund for his services on the practice side of filing an answer and aiding the machinery of foreclosure. He fixed the sum of $20,-000 as compensation for his general services, but held that they must be paid by his client, that is, out of the share coming to the bond holders. This was giving effect to his lien as an attorney upon the proceeds of his client’s caüse of action in the hands of the court. Such a lien is conferred by the state of New York, Judiciary Law (Consol. Laws, c. 30), § 475. Although there was no special agreement of employment, the Morton Trust Company was perfectly aware of the services rendered, and took the benefit of them, which is quite as effective. When Mr. Winthrop said in his letter of March 11, 1912, to the chairman of the joint committee on reorganization that the compensation then agreed on did “not include such allowances as may be awarded to me by the court for my services ’in that [the foreclosure] action,” he was contemplating the property selling for less than the mortgage, which may be said to be universally the case in railroad foreclosures. If in such a case the court had awarded trim a fee out of the fund, it would have been paid by the bondholders because the whole fund would go to them. There being a surplus, we think it would be inequitable to charge the fee on the fund, because the effect of so doing would be to make the Central Park Company pay it.

The order is affirmed.