138 P. 1155 | Utah | 1914
Tbis is an appeal by certain creditors of said Bombinos, doing business as Bombino Bros., from an order or judgment of tbe district court of Salt Labe County in wbicb certain allowances were made to one Raymond Ray, as tbe as-signee of said Bombino Brothers, and for fees paid to an accountant, and for attorneys’ fees for services rendered for said assignee by said accountant and by bis attorneys, Messrs. King & King.
Tbe facts, in brief, are as follows:
On tbe 6tb day of February, 1912, tbe said V. and Go. Bombino, as Bombino Bros., made a general assignment of all of tbeir property, under our statute, to said Raymond Ray, for tbe benefit of tbeir creditors. Tbe assignee immediately took possession of tbe business and property of said assignors, consisting of a saloon, á rooming bouse, and a grocery store, including tbe furniture, mercbandise, and other property connected therewith. Tbe assignee filed an inventory on tbe 10th day of February, 1912, showing tbe entire assets of tbe assignors to be of tbe value of $15,293.10, wbicb value, through errors and corrections, was subsequently reduced to $11,628.42; and liabilities were shown to be $7316.45. On tbe 15th day of February, 1912, tbe as-signee filed an affidavit from wbicb it was made to appear that it was for tbe best interests of all concerned that tbe business theretofore carried on by tbe assignors be continued, and, in order to do so, be asked permission from said district court to purchase tbe necessary goods from day to day for tbe
Tbe only question we can pass on is whether tbe district court exceeded its power in making tbe allowances.
There is a great diversity of opinion among tbe numerous federal District Courts and tbe state courts respecting tbe precise limit, of power of tbe state courts with regard to dealing with tbe assigned property in case a common-law or statutory assignment is made by an insolvent debtor for tbe benefit of bis creditors, where such insolvent subsequently, and within four months from tbe date of tbe assignment, is adjudged a bankrupt. Indeed, if one is not careful with regard to the facts and circumstances of tbe particular case referred to, and loses sight of tbe real purpose of Congress in passing tbe bankruptcy act, tbe many and apparently conflicting decisions may become really bewildering. As we view it, however, there should not be much difficulty in finding a limit beyond wbicb tbe state courts cannot go in attempting to administer upon a bankrupt estate, although an assignment was made for tbe benefit of creditors before bankruptcy pro
In 1 Loveland on Bankruptcy (4th Ed.) section 38, the author in discussing the “Jurisdiction of Property Assigned for the Benefit of Creditors,” says:
“If proceedings in bankruptcy are instituted within four months after a general assignment and followed by an adjudication, the*146 court of bankruptcy is entitled to administer the estate, and the jurisdiction of the state court must yield to the paramount authority of the bankruptcy court.”
It is also said in. tlie same section:
“If no bankruptcy proceedings are instituted within four months, the state court may proceed to administer the estate, and the proceeding cannot be assailed by a trustee in bankruptcy subsequently appointed, or by creditors.”
“(1) Is a claim for professional services rendered to a bankrupt corporation in preparation of a general assignment, valid under the law of Tennessee, entitled to he paid as a preferential claim out of the estate óf the corporation in the hands of a trustee in bankruptcy, when the corporation
In referring to the effect that bankruptcy proceedings have upon a general assignment for the benefit of creditors, where such proceedings are instituted within four months after the assignment is made, Mr. Justice Holmes, in speaking for the court, says:
“It is admitted that a general assignment for the benefit of ■creditors, made within four months from the filing of a petition 'in bankruptcy, is void against the trustee in bankruptcy, so far as it interferes with his administering of the property assigned.”
This could not be denied. The court then proceeds to show that, although in instituting bankruptcy proceedings the legal -effect of a general assignment is destroyed, yet the assignee
“We are not prepared to go further than to allow compensation for services which were beneficial to the estate. Beyond that point we must throw the risk of his conduct on the assignee, as he was chargeable with knowledge of what might happen.”
In view of wbat bas been said, tbe order or judgment making tbe allowances in tbis case cannot be permitted to stand. As appears from tbe decision of Randolph v. Scruggs, supra, tbe cláims for compensation in question, even tbougb they are proper, are nevertheless to be presented to, passed on, and allowed by tbe bankruptcy court, and that that court cannot declare at least some of them preferred claims. If, therefore, tbe court, which is given power to adjudicate sucb claims cannot declare at least some of them preferred claims, we cannot see bow a state court, without sucb power, can do so; It may well be that there are creditors of tbe bankrupt who have preferential rights, and, if so, tbe bankruptcy court is tbe proper place to determine that fact; and that court is also tbe forum in which to determine wbat claims, if gny, shall be preferred. Moreover, it is for tbe bankruptcy courts, in accordance with adjudications made by those courts, to determine wbat, in any given ease, constitute wbat are denominated as beneficial services for tbe estate. All those things should be adjudged by tbe court to which is given tbe power to administer tbe estate. It is palpable that only one court should administer upon tbe bankrupt estate. Where tbis is attempted by two courts, as is tbe case here, some one is most likely to suffer in bis legal rights. Tbis is well illustrated in tbis case. Here every claim for services presented by the assignee whether for himself, bis counsel, or bis accountant, say nothing about other expenses, is in effect declared to be a preferred claim, and tbe creditors of tbe bankrupt must take wbat is left of tbe estate, if anything. Tbe evidence with regard to whether the amount claimed for services rendered before bankruptcy proceedings were commenced is reasonable or otherwise is not before us, and as to that matter we express no opinion. With regard to the allowance of $242,19 to tbe accountant and tbe allowance of $205.28 to tbe assignee, and tbe other for $350 for attorneys’ fees, tbe case is different. These allowances were all made for services rendered after tbe bankruptcy proceedings
As to those three items, therefore, the district court was without power to allow them, and as to them the judgment is reversed, and the cause is remanded to that court, with directions to vacate and set aside the judgment allowing those amounts, and to modify the same to that extent, and to direct the assignee to turn over all moneys and property in his hands to the trustee in bankruptcy, and to file his claim for services in the bankruptcy court. Appellant to recover costs ■■on this appeal.