30 F. Supp. 8 | W.D. Ky. | 1939
The attorneys for the trustee in bankruptcy have' made application for a fee of $2,000.
The attorneys for the petitioning creditors have made application for a fee of $2,000/
The attorney for L. R. Barnes, one of the large general creditors, has made application .for a fee of $2,500.
Objections haye been .made by interested parties to all three applications on the grounds that the amount asked for in each case is .excessive, and with respect to the second and third applications above referred to the services rendered are either in whole or in part not of the kind for which an allowance can • be made as a charge against the bankrupt estate. ,
The petitioning creditors on September 8, 1937 filed an involuntary petition in bankruptcy against Kate Rudy, surviving partner of J. A. Rudy and Sons, and J. A. ,Rudy and Sons .as a partnership. Petitioners agreed to an extension of time for answer until October 4th, 1937. The bankrupt failed to file an answer within the extended period and was adjudicated a bankrupt on October 11, 1937. John G. Russell was appointed trustee in bankruptcy on November 1, 1937 and immediately thereafter he petitioned the Court for the appointment of the firm of McMurry, Katterjohri ánd Reed and of James E. Moore as his attorneys.- This appointment was. duly made by the Court. The estate has been completely administered and all claims, secured, and unsecured paid in full, with the exception of accounts, receivable and
Total general claims paid......$58,516.16
Total lien claims paid......... 14,168.82
Total costs of preservation of estate and administration
Paid ........................ 8,952.93
Total cash on hand............ 7,433.46
The allowance of fees by the Court as charges against the bankrupt estate is governed by Section 64, sub. b(l), of the Bankruptcy Act, being Section 104, sub. a(l), 11 U.S.C.A. as amended by the Act of 1938, which provides in part as follows:
“The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment, shall be (1) the actual and necessary costs and expenses of preserving the estate subsequent to filing the petition; * * * the costs and expenses of administration * * * and one reasonable attorney’s fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning creditors in involuntary cases and to the bankrupt in voluntary and involuntary cases, as the court may allow; * * *.”
The payment of a fee to the attorney for the trustee, where such employment has been authorized by an order of Court, is considered as one of the expenses of administration and accordingly authorized by the foregoing section of the statute. The affidavit of the attorneys for the trustee shows that they performed the usual and ordinary duties arising in such cases, that no complicated questions arose which required an unusual amount of time or study, and that the major portion of the assets of the bankrupt estate consisted of accounts receivable which were collected largely by the trustee without the necessity of legal assistance. On the other hand, the size, of the estate involved and its successful administration, paying all creditors in full, are items to be considered. Under such., circumstances the Court is of . the-opinion that á fee of $2,000 is not unr reasonable, ■ and is accordingly allowed. Supporting affidavits of well-known attorneys value the services- at $2,500.
The affidavit of the aftorneys. for the petitioning creditors setting out the services rendered includes services for which no allowance can be legally made against the bankrupt estate. It is well settled as a general rule that the fee of the attorney for the petitioning creditors is restricted to services in preparing the petition, and prosecuting it to adjudication of bankruptcy. Calhoun v. Stratton, 6 Cir., 61 F.2d 302; In re Consolidated Factors Corporation; 2 Cir., 59 F.2d 193; In re Eureka Upholstering Co., Inc., 2 Cir., 48 F.2d 95. Among the services listed in the present application are services rendered in successfully resisting a composition offer of 50%, which resulted in finally securing for creditors á 100% payment, and also services in successfully resisting a claim of a creditor in the approximate amount of $25,000. In the case of In re Kinnane Company’s Estate, 6 Cir., 242 F. 769, it was expressly held that services rendered in resisting a composition offer are no, part of the administration of the bankrupt, estate, and that no authority ex ists for allowing compensation for such services. The Circuit Court of Appeals for the 6th Circuit has also held in the case of In re Roadarmour, 177 F. 379, that no- allowance should be made to attorneys for creditors for successfully resisting a claim against the bankrupt estate where the trustee has not refused to act. Such duty is primarily that of the trustee and his attorney, and the estate cannot be burdened with the expense of services voluntarily rendered by others who have 'not been employed and under circumstances where counsel appointed -by the' Court is available for the services in question. Other cases holding to the same effect are In re Medina Quarry Co., 2 Cir., 191 F. 815, and In re Otto-Johnson Mercantile Co., 10 Cir., 48 F.2d 741. The attorney for the petitioning creditors is. entitled to have considered by the Court the time spent, the intricacy of questions involved, the size of the estate, the opposition encountered, and the results achieved, including, the benefit to creditors by subjecting- the estate to the jurisdiction of the bankruptcy court and thus preventing preferences and other practices which if not stopped would result in' considerable damage to creditors generally. Opinion evidence touching the reasonableness of the fee, as well as' the-
The application of the attorney for one of the large general creditors for a fee of $2,500 must be first considered as to the validity of the claim in its entirety rather than the size of the fee. There is no claim of employment by the trustee, nor is there any claim that the attorney in question represented in any way, in conjunction with other attorneys, the petitioning creditors. It is claimed that valuable services were rendered in successfully opposing the composition offer of 50% and in successfully opposing the allowance of a claim on the part of another creditor in the approximate amount of $25,000. It will be noticed that the attorneys for the petitioning creditors also claim credit for similar services. It appears well settled as a general rule that no fee can b’e állowed against the
“That throughout all of said time after the appointment of a- trustee and selection of counsel for him herein, the said trustee and his counsel neglected and. failed to take any steps or do any act to prosecute the disallowance of the said claim, or to cause the said asserted lien upon the real estate to be discharged, and but • for the aforesaid acts of your petitioners the said estate would.have been forced to pay the said claim asserted as aforesaid.”
This falls far short of having a situation where the trustee and his counsél refused to take action. It is presumed that-this language was carefully chosen and that the facts did not support an allegation of a demand on the trustee and a refusal to act, but if the language was inadvertently used and counsel desires to amend his claim by: alleging a demand ■ and refusal further consideration. can be given' to this- claim. It also appears' from claimant’s petition that the creditor Barnes “has' heretofore paid and agreed to pay a substantial fee” to the attorney who. represented him in this proceeding and that any fee allowed herein will be divided between Barnes and .the attorney. Accordingly, this is in substance an effort to secure reimbursement to the creditor for fees paid and to be paid by him to his attorney under' a previously- existing employment. Under the authorities ábove referred to I am of the opinion that I have-no authority under the. Bankruptcy Act to make any allowance to the attorney for this individual creditor' which would be a charge upon the assets of the bankrupt estate. Accordingly, this application is denied in its entirety. .
There remains to be considered the ruling of the Referee in reducing a claim filed by The Butterick Company from its original amount of $1,493.26 to $163.25. The Butterick Company seeks a review of this ruling. The claim arises out of a contract dated March 19, 1937 and effective April 2, 193-7 between The Butterick Company and the bankrupt by which the company shipped to the partnership a stock of Butterick patterns at a cost of $1,250. New patterns as issued by the company were to be shipped monthly to support this basic stock. The partnership agreed to promptly re-order patterns which it sold and agreed to pay on or before the 10th of the month succeeding the month of shipment for all goods purchased other than the basic stock. The $1,250 for the basic stock was to remain as a standing unpaid balance which the partnership agreed to pay on termination of business relations with interest at 5% per annum