In re Medina Quarry Co., No. 17

No. 17 | 2d Cir. | Nov 13, 1911

PER CURIAM.

[1] Irrespective of any general equity power, there is authority under section 64b of the bankruptcy act, as amended in 1903, to allow the reasonable expenses of one or more creditors, where property transferred or concealed by a bankrupt has been, through their efforts, recovered for the benefit of the estate. And, in our opinion, if the allowances in question cannot be sustained under this statute, they cannot be sustained under any other provision or gen..eral power. -None is broader.

. The property recovered in this case was that which was covered by the lease and bill of sale to the Orleans Company.- The setting aside of the Kessler mortgage added nothing to the estate. It merely settled a question as ,to priority among creditors in distribution.

On a record concededly incomplete we must accept the finding of the District Court that the facts which were ascertained by Messrs. Houpt and Ryan in the New York examination prior to the appoint- . ment- of the trustee contributed materially to the successful issue of the subsequent proceedings to set aside the lease and bill of sale. In our opinion the District Court, under the statute referred to, had the .fight to make allowances in payment for the services and expenses of such examination. As the District Judge says, such evidence'tended to secure the recovery of property fraudulently transferred. Moreover, ás we understand it, the testimony in question was actually used in the subsequent litigation which resulted in the recovery of the property, and the' estate was saved thereby the expense of taking it over again, even if it had been available.

But, while this ruling would justify certain allowances to Messrs. Houpt and Ryan, it would not, as we view the record, justify us in permitting the allowances as made to stand. Evidently the District Judgej in making allowances, to these attorneys, took into consideration "services which were helpful in rejecting claims, setting aside claimed priorities, and in securing the appointment of a proper trustee. But it cannot be said that these were services which resulted in the recovery of any property, within the meaning of the statute, or which created any fund which would justify allowances under general equity powers. The stipulation that the allowances are reasonable compensation for the services rendered has no bearing, when it appears that only a part, of the services can be allowed for. The cause must be remanded, for making new allowances for the particular services stated.

We perceive no ground upon which the allowance to Mr. Groat -can he justified. He did not recover any property for the estate, or create any fund, by “drawing papers for the examination of the bankrupt and for the appointment of a receiver, and arguments and services on such application.” No receiver was appointed, and whatever effect the examination of the bankrupt may have had was altogether too remotely related to the subsequent recovery of property to justify an allowance out of the estate.

Neither do we perceive any ground upon which the allowance to Mr. Reed can be justified. His services were directed toward defeating the Kessler mortgage, and related to priorities .rather than to the enhancement of the estate.

As already indicated, the record is most incomplete, and we should . hesitate to reverse, without all the facts before us, were it not that we can imagine no state of facts, consistent with the statements in the opinion of the District Judge, which would call for different conclusions of law than those above stated.

[2] Technically the allowances should be made to tlie creditors for their expenses in employing counsel, and not to the attorneys themselves; and, while such objection, standing alone,'would not warrant a reversal of the order, we think that, as this case is to be remanded, the new allowances for the services and expenses of Messrs. Houpt and Ryan should be made to the creditors whom they represent, rather than to them.

The order of the District Court is reversed, without costs, and the cause remanded for further proceedings in accordance with this opinion.