220 F. 226 | E.D. Pa. | 1915
The question for decision in the present case is whether fees of $6,500 each ordered paid to the referee and trustee are greater than allowed by the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1913, §§ 9585, 9656]).
When the trustee was elected, the property of the bankrupt, which was engaged in building breakwaters for the United States government, was distributed throughout various states of the Union, the Hawaiian Islands, and the Province of Ontario, Canada: It consisted, inter alia, of stone quarries with their various equipment, floating equipment, bills receivable, and cash.
The trustee’s account shows the amount of the inventory and ap-praisements, together with uninventoried assets, to be $1,066,467.91. Against this property was a mortgage of $1,000,000, under which bonds to that amount were outstanding and coupons amounting to $50,000 were due. Upon an order of the referee authorized by the vote of the creditors, the assets were sold by the trustee to Alexander B. Siegel,' acting for the bondholders, subject to the lien of the mortgage and all other valid liens for $75,000.
It appears by the record that various efforts had been made by the trustee to make some disposition of the assets of the company which would to the greatest possible extent benefit the unsecured creditors. In addition to the liens of the mortgage, admiralty liens existed against the floating equipment of the company approximating $75,000. A claim had been filed by the Assets Realization Company, the mortgagee, in the amount of $1,028,384.17, and the aggregate indebtedness shown by the schedules was $2,888,173.49.
After various attempts to save the property as a going business for the benefit of the creditors, through the efforts of the trustee, a corporation was formed known as Coast & Lakes Contracting Corporation, and a plan was submitted to the creditors for the purchase by that company directly, or through an intermediary, of all the real estate, plant, and equipment of the Breakwater Company for the purpose of completing the existing contracts of the bankrupt and continuing its business. The stock capitalization of the company as authorized provided for 15,000 shares of preferred stock of the par value of $100 each, $1,500,000; and 10,000 shares of common stock of the par value of $100 each, $1,000,000.
It was proposed, in consideration of the sale of the assets of the bankrupt to the company by the trustee for the sum of $75,000 in- cash subject to the liens, that the holders of the mortgage bonds receive 10 shares of preferred stock for each $1,000 bond, taking up $1,000,000 of preferred stock, and the holders of coupons amounting to $50,000 receive preferred stock at par to that amount, the balance of the pTe-ferred stock to be reserved for future issue; that unsecured creditors consisting of holders of unsecured notes of and claims against the Breakwater Company receive for their claims 50 per cent, of the face amount thereof, or approximately $700,000, in common stock; the bal-anee of common stock, as far as material to the question arising in this ease, to be reserved for future issue. The holders of the first mortgage bonds were required to deposit their bonds with the coupons with a nominee of the company. The unsecured creditors were required to
The position of the referee is that the fees payable to himself and the trustee are to be based upon the total amount of stock in the cor-poi'ation issued to the secured and unsecured creditors of the bankrupt. The position of counsel for the trustee at the hearing (who also presented an argument for the referee’s contentions) is that the commissions should be based upon the actual property administered in relieving the estate of lien indebtedness amounting to over $1,100,000. For reasons hereinafter stated, the creditors at a-meeting duly called authorized payment to the referee of $6,500 and a like amount to the trustee, and ■the referee thereupon ordered the fees in these amounts to be paid. The American Surety Company, which was surety upon contracts of the bankrupt and having at the time a duly proved and allowed claim of $3,241.96, was the only creditor to vote against the allowance of the fees; creditors approximating 1,000,000 voting in the affirmative. It appears that the surety company has since proved additional claims amounting to approximately $82,000, and has other contingent claims yet to be liquidated. The contention of the American Surety Company is that, inasmuch as the sale was made subject to the lien of the first mortgage for the sum of $75,000, the fees of the referee must be based upon the actual cash disbursed to creditors by the trustee under section 40 of the Bankruptcy Act, and those of the trustee upon the cash disbursed or turned over to any person including lien holders under section 48.
The position of the petitioner, briefly stated, is that, inasmuch as the assets of the company were not converted by the sale, but were sold subject to the lien, the only funds disbursed by the trustee in bankruptcy consist of the balance of $75,000 in excess of the liens, together with such other money as has come into his hands from other sources, and that the sale did not discharge the lien, so that neither actually rior constructively has the amount of the liens passed through the hands of the trustee. The petitioner’s position, in the opinion of the court, is not sound because it depends exclusively upon the terms of the order of sale and not upon the entire transaction in which the order of sale had a part in carrying out the proposition of the Coast & Lakes Contracting Corporation, and overlooks the position of the trustee with relation to the administration of the assets of the bankrupt and the distribution of their value to mortgage bondholders and unsecured creditors. Under the organization plan in pursuance of which the sale was made, it is true that the sale was made subject to liens, but the mortgage bondholders were to surrender their bonds and to receive therefor preferred stock and the unsecured creditors to surrender their notes and claims and receive therefor common stock. Thus the stock of the corporation was transferred to the bondholders and to the unsecured creditors in consideration of the transfer of their claims; the corporation in payment of their claims receiving the entire property of the bankrupt