*1 not here matter we do case et PRUDENCE SILBIGER al. v. decide. BONDS CORPORATION. the suits were (1) That We conclude: 168, No. Docket 21536. Texas, contrary to against State Amendment; (2) the Eleventh Appeals States United Court complaints state cause did not fail to Second Circuit. granted; relief could action Argued 31, Jan. 1950. dismissing Court erred (3) that the complaints. 7, Decided March 1950. below is re- judgment The of the Court April 5, Rehearing Denied for fur- and the cause is remanded versed with the proceedings not inconsistent ther expressed.
views herein and Remanded.
Reversed
DOOLEY, (concurring). Judge District holding fully
I concur ap- on filed in Federal court and now
suits against
peal are State Tex- not suits Court, judgment
as joinder in the
with a reservation
query on the trial deter- what to whether or the suits
mine as attempts
State court effect set
aside, suspend of the Inter- annul or orders I am not Commerce Commission.
state open ques- enough an that this can be
sure
tion, be unfortun- and mention of it could The seem to make clear that
ate. cases court, present although suits in Federal obstruction, brought to are not combat suits to enforce orders Interstate Commission, jurisdic-
Commerce within U.S.C.A.,
tional sense of what used 28, 41, Air- (27).
Title Sec. sub. Seaboard Daniel, Company
line Railroad v. U.S. 426, 580;
118, 68 S.Ct. 92 L.Ed. Illinois v. Public Company
Central Util- Railroad Illinois, 493,
ities Commission U.S. 170, L.Ed. on Conversely, S.Ct. parity reasoning, I that the suits doubt pending in the State as same now
stand, properly can ever be deemed suits aside, suspend orders
to set annul
Interstate Commerce Commission within jurisdictional sense of what used to be
U.S.C.A., (28). Sec. Title sub. statutes, jurisdictional
like nature said subdivisions, separate two
once is re- in the fact same have
flected since in the 1948
been combined and revision single Title 28 constitute the
said now Sec. *2 Haselkorn, City, for Milton York New
Weil, Manges. Gotshal Schwartz, City, Aaron York New Joseph Nemerov. HAND, Judge,
Before L. Chief CHASE, Judges. SWAN and Circuit HAND, Judge. Chief L. appeal,
This is an by leave of this Corporation of “Prudence (New Bonds Corporation)” and Reconstruction Finance Corporation, from an bankruptcy, order in awarding allowances to four of at sets torneys performed services in the re organization Debtor, Prudence Bonds Corporation, begun in 1934 under 77B of § Act, Bankruptcy U.S.C.A. § appellant The active is the “New Cor poration,” which organized to take complete liquidation over ' Debtor; property of the the Reconstruc Corporation tion appellant other —the —we shall disregard, for po its interests' and- sitions are identical with those- of the Corporation.” The were allowances for services rendered in what con n venience we shall call the “Construction Proceeding,” which we De decided in cember, 1947, and for details of which reported opinion.1 our A we refer master made allowancesin affirmed, judge and we appeal, ques gave leave to “limited to- the represented.” of conflict of interest tion “Publicly series of Held-’ Those Bonds” in, stipulated whose interest we allowed full, sufficed, so far as collateral Series”, call other shall call the “Deficit Series.” we shall series were awarded out allowances The “Surplus Series”, all the -collateral roughly proportion allocated were profited by by which these series amounts attorneys al appeal. to whom awarded Samuel Sil lowances McCarty, City, New York M. Charles Miller; Weil, Arthur biger; Gotshai Dealy, ap- City, for New York F. James pellants. Nemerov; Joseph Manges; attorneys that these either objections Brooklyn, Y., pro Silbiger, Samuel N. se. conflicting interests Proceeding,” or Marks, City, New York their Lester for “Construction H. Chapter X, violated 249 of Miller. § clients Arthur Eddy Corporation, F.2d 157. v. Prudence Bonds reorganization file facts is free to both and 649. Since U.S.C.A. § prefers though select which one those even Silbiger are different case of & its Miller, success will be to the detriment of in that Gotshal or of *3 appeals other. Manges, the we will consider
separately. Although Silbiger acquitted tois Silbiger’s Allowance any disloyalty Eddy personally, of to we say cannot the same as to his two other in re Silbiger was retained the clients, Mrs. Born Reilly, and Mrs. who one, Eddy, organization held bonds only Series,” held bonds in “Deficit and “Surplus Series” and even more in several Silbiger pro whom had in “Deficit Series.” Since bonds several ceedings surcharge to the accounts of the “Surplus securing each the collateral “indenture trustees” of those series. These pay enough than to Series” was no more recoveries; proceedings had but, resulted in interest, full, principal that series in and they completed since had all been before appeal Silbiger’s result of the “Con the the “Construction Proceeding” was be Proceeding” was to take from struction gun, Silbiger and argues they since —as what the “Deficit Series” the district — separate were suits from the reorganiza give it and had awarded them and more to tion, first the is whether re “Surplus Eddy the Series.” Because to lation, for Mrs. Born or Mrs “Surplus” held in both and bonds “Deficit Reilly, ended with entry the of the final Series,” his individual interest the “Con in each accounting. order We hold that Proceeding” conflicting; struction was it did not. accountings part were “Surplus of was for the final decision the itself; reorganization indeed, the it Series,” was full he would receive interest the foundation our decision in Central upon the bonds which he held in those Hanover Bank & Trust Co. v. series, President dividend but he would lose out and Directors of Manhattan Company2 “Surplus the collateral of the Series” they step that were a in the collection of upon which he the bonds held the “De assets; the Debtor’s and it Series,” only was appear although it does not ficit they justiciable that reason that were record the final the whether on balance bankruptcy at all vigorous over the pro lost, if he would have won or the decision test True, of the “indenture trustees.” it the district court been affirmed. does necessarily follow, not because the explained ac Silbiger that he the situa swore part countings reorganization, po the Eddy, him to who told to take the tion Silbiger’s beyond retainer extended upon appeal. he did the He sition conclusion; but that was in their fact hearings he did it maintains take at the the court; recoveries from the case. The “indenture master and the before the and, produced a fund trustees” to which although the the de of the “Deficit this, argues bondholders Series” Silbiger’s claimed nies briefs entitled, they so far as plain, to the lower court not not is pay necessary off the importance, to Series” as sue claims; prior other position the outset his sume Proceeding” accept necessary “Construction was unchanged. We was master’s questions precisely decide the finding “clearly to so aris as not erroneous” that he immaterial explained Eddy “respective ing. pos whether rights to sibility surplus Bondholders,” of a had arisen Public before accountings had Eddy completed; each after “chose claim that Series arise, did claim stand on its own feet.” whenever bonds must As it, objections Series” arose with appear when we discuss the “Deficit and put an unreasonable allowances of Miller and limit Manges, we think retainer of “Deficit Gotshal Series” say conflicting that he did who holds claims in bondholders to not creditor under 105 F.2d accept If we Born’s bondholders what were.” his clients’ share take collect Silbiger, testimony, everything left claim he other “Surplus Series” and ever the least, explain did him conflict if who very At ants did absorb. Eddy’s “Surplus between his wife’s bonds and wished take the side of he though Silbiger’s memory even be more Series,” duty make sure it was thought apparently reliable—as the master “Deficit Series” the interest of —what he Born was definite told far from competent and disinterested protected by enough Silbiger to authorize sides to take Indeed, plain that persons. it is rep anything If against Mrs. Born. could thought that continued himself *4 justify doing suggest we so—which not “Con do “Deficit Series” resent the explanation least a pages —at clear was neces- two Proceeding,” on for struction that, “Surplus won, sary if the Series” reply in this his brief and three of “Surplus foregoing she was sure to lose. For the that, interest a if the of argued he by Silbiger’s we that earn reasons hold retainer be limited were to Series” Reilly Mrs. him Born and still bound “indenture trus Mrs. the ings collateral of the represent Bank, to them in the never “Construction tee,” should Manhattan the Proceeding.” that but surplus, the theless not receive go “Deficit Series.” the should to duty But his was not confined these to explained however, asserts, that he He appeared two When individuals. he for Reilly the Born and Mrs. fully to Mrs. any any his three of clients press the claims got leave to- and situation accounting proceedings, appeared he on As to Mrs. “Surplus Series.” the of of all behalf the bondholders the series of certainly true. She Reilly, not was accounting. concerned in that That fol- Eddy for acted her Eddy’s and sister was being from lows his his for services by virtue attorney of power of a under in each proceeding pockets such out of the supposed that mistakenly Silbiger which bondholders; of all those for it is obvious ordinary circum- In might Eddy do so. lawfully he money that could not take from true; but, have been that would stances whom those to he had rendered no services.3 only “Deficit Bonds” Reilly held since Mrs. Therefore, Silbiger attorney became the by lose success of to the was and -certain for all bondholders of those “Deficit Bonds,” Eddy was not “Surplus the Series,” in accountings ap- whose he had her, his interest speak for position to a ; peared argued and when he side must This hers were conflict. in the “Construction Pro- Series” not, Silbiger; if it was plain to duty ceeding,” it with his to conflicted husband Bom’s have been. Mrs. it should any “Deficit Series.” the bondholders all her; the master found that acted Thus, duty his not the conflict was opinion as to him to “his Silbiger stated Born, Reilly and but Mrs. limited to Mrs. Public rights of the Bond- priority “De- to all of those extended bondholders intention Series and his to in each holders any for which had at time Series” ficit on behalf Mr. rights such advocate appeared. Also, accepted Eddy.” Born that by the Certainly beginning respective Silbiger opinion to Century it had a become -com Seventeenth bondholders, and did not “rights” of rep mon-place an must not “any for his wife claim him assert ask interests;4 opposed and the usual resent money legally not which did a share consequence been that he has is debarred her,” to let but was satisfied belong to either, any fee from mat receiving from according his “proceed (Silbiger’s) him successful labors.5 Nor will rights ter how his legal what opinion of Anony- King, Co., Higbee Yelverton 32. Young 65 4. Shire v. U.S. 324 v. mous, v. 7 Modern L.Ed. 890. Berner 89 S.Ct. Cir., Bldg. Corp., 175 Equitable Office Apple, Cir., States v. 292 F. 5. United F.2d Hazard, 935, 940. Eisenmann v. pleasure; prove, agree its we urge, let him the court hear allowance; loyalties failure he have a full of his in fact the conflict conduct; disposed exception we make an has had no influence consequence imposes usual prohibition the conse- which absolute pay. pay. appears all There- all us forfeiture of an quence is a forfeiture adequate penalty, if we follow the course Silbiger must be allowance fore denied Equitable we whatever, be- took Berner v. Office unless distinction there where, Corporation, Building supra,7 corporate reorganization an al- tween a though partes. We think the evidence did show ordinary suit inter Berner, attorney, purpose there also had is such distinction. advantage Bankruptcy Act prohibition is insure the violated § allegiance buying any shares, himself of the Debtor’s the client of the undivided attorney; given which he had relative situations information on adequately pro- bought relative is otherwise them. How the client tected, paid in penalty mitigated, far is not should *5 court, part party op- although has whose side he leave the there by the district inevitably posed, penalty. authority exercising a the result is for our our own will, in Loew in the be confessed v. first instance.8 We It must discretion city lowever, Gillespie, supra,6 say the having 'interests of now—all the issues the yet appear protected, argued regard fully have been we been should —that any pay Judge denied the it an abuse cut Lehman discretion not to the as whatever; nevertheless, by we think that in at If allowance least one-third. the wishes, reorganization proceeding may it corporate go “New a it be- impose court, an entire for- not fore district seek a still is reasonable the allowance, when it do not wish comes further cut. We to indicate feiture of the any group enough, can part out that we think cut of one-third attorney’s prejudiced by recognize the di- we departing for we are have been applied bar allegiance. In the case at the from doctrine that has with vided “Surplus severity. will great come Within the limit we allowance out could; Series,” set, the which won all it hence leave decision the prejudice court, question possible although is as to the must not only the be Corpo- far “Deficit How should to a master. If the “New Series.” referred Corpora- penalty? press The “New not wish to that effect ration” does the matter further, the represented tion” the interests of “De- the allowance stand at two- Pro- ficit the “Construction the sum Series” thirds of awarded. least doubtful wheth- ceeding,” and it is at Weil, The Allowances Miller and er, Silbiger presented the situation if Manges. Gotshal and court, be and asked to freed the district objections The to the allowances of Mil- in order of his duties to those series Weil, Manges ler and of Gotshal and Series,” “Surplus espouse side same, may and we consider them thought as judge would have neces- The clients one. of each held no appointed bonds sary should 1934, Debtor when organiza- to him addition petition filed, bought but tion Corporation.” agree We that Sil- indiscriminately bonds this series sold duty he did
biger his when failed time, time to as seemed to and learn them present matter to 616, 830, 722; 90 Misc. 153 N.Y.S. 155, 6. affirmed Herrick v. Cate 112 N.E. N.Y. App.Div. 889, Gillespie, Daly 512; 173 157 ly, 90 N.Y.S. 1133. Loew v. 1 830, 616, 173 affirmed 153 N.Y.S. Misc. 218. 175 F.2d 7. Strong 1133; App.Div. 889, N.Y.S. 157 Bldg. Memphis Loan & Investment Railway Co., v. International Fuller v. Street 675, Union, Cir., L.R.A. Ill. N.E. 47 110 F.2d Co., 792; v. Trust Trimble Guardian Mo. 148 S.W. speculative profit. which opportunities to offer are included. To hold claims always and traded otherwise Miller’s clients held at force him to choose peril “Surplus in more Series” than which claim bonds of and forfeit should win Series”; Weil, other wrong; Gotshal “Deficit he turned out to be Manges’ dealings were more we can clients’ conceive of no reason should put bonds Series.” When the him in predicament. of “Deficit such a More- over, began, Proceeding” “Construction after he has decided which one of attorneys dividend, retained them his larger clients of both these claims offers- in the Fifth on their behalf we' can equally intervene why see no reason- he ; “Surplus press Series—a before should not claim to a success- Series”— master, they and in the' district court expense ful issue at the of the other claim. pressed True, claims of bonds for full doing these .so he fiduciary assumes a n they duty When interest out the collateral. towards the members of the class position unsuccessful Miller did own; whose adopts as his but Manges Weil, appeal, Gotshal and he does not do so as to the members of did; .awarded to both and the allowances Therefore, the other-class. clients “Surplus : apportioned Miller, all and of Manges Gotshal and Series,” Silbiger. in. case of duty assumed no the bonds of “De- “New, objections Corporation” raises two Series”; consequence ficit and in' their at- First, that, argues to these allowances. torneys allowances out in both “Sur- since the held bonds clients Series.” Series,” plus Series” and “Deficit *6 Although objection the second of each, fi- they assumed a filed claims Corporation” the “New plausible, is more duciary both relation to creditors we think that it too is not valid. So far series, spite conflict between as the second sentence is di (cid:127) § attorneys made effort to them. The no against any rected “committee or attorney” existed, ascertain whether such a conflict who trades in corpora securities of the they chargeable with notice that were tion, it does bar, not cover the case at be existed, acting by for cause the clients were any not members of party their clients’ Series” became a to “committee,” attorneys and the Second, “New did not breach of trust. Cor- trade in that, themselves the bonds. If poration” argues when their clients all, clients were within the at attorneys intervene in the section retained the to * * * Series, “representatives” they Fifth became they was' because “acting were series, representative all the bonds in that and that fiduciary a capacity,” or trading in the “committee”; 249 forbade their bonds “other” than as a sincq, § upon pain losing anj series of that by attorneys retaining press to their claims expenses, right be reimbursed their to Series, they in the Fifth did assume some - including attorneys. the fees Mil- of their “fiduciary” sort of relation towards all the understanding ler had an with his clients series, bondholders of that we will as- pay him they to his serv- argument, they sume for acted “in ices, fully paid by so as he was not .far representative fiduciary or capacity” allowance; any although there evi- is within the meaning However, § agreement in dence such' an case although upon assumption the clients Weil, Manges. Gotshal and any right compensation lost or reim- bursement, we see why no reason their plain We think it first the. disability attorneys, should extend to their objection is valid. The creditor of a though even certainly assume—what is corporation reorganization who holds open debate—that an charged conflicting claims filing two is warranted in alternative; both of them in when by with notice his client trades se- them, merely filing corporation. Judge he does curities of not assume Cole- any duty disability to either of has decided among the classes man that the is not they not, extended,9 will agree. proceed against The section so and we impute by client expressly subrogation attorney’s fault does not claim, any, Upon client’s misconduct— for his him. these possibilities assuming strong pass, is not too we do not for the clients parties are not only proceeding word. what his own dis- declares be, heard. ability if on his account he The allowances to Miller shall own Weil, buys charge Manges him with his that to To Gotshal and sells. him, proper compel at dealings client’s would should be allowed. labor, keep losing risk all either to Nemerov’s Allowance. eye dealings (which in upon those imperil appeal practice irritating as to leave to so was “limited to the relations); their of conflict repre- the continuance of interest sented”; blindly put any right at his to be con- mercy. Attorneys repeatedly accept cedes client’s that Nemerov did not “serve con- flicting Hence, although in reliance interests.” retainers such cases it is courts, they get why from hard to allowances see he should have been en- largesse, no doubt often from clients of whose titled to this juris- we have no responsibility they financial are not sure. diction over his allowance. Why compelled they run should appeal The disbursements on this of Mil- client, they chance that the over whom can ler and those Manges Gotshal and control, may profitable exercise no find it allowed; will be so far as disburse- corporation’s speculate in the securities? ments were appeal occasioned speculation Indeed that itself one to Silbiger’s allowance, Corpora- the “New Congress attached no further dis- tion” collect them out of allow- compensation ability than the loss of or ance. reimbursement, which is far milder con- modified; Order and cause remanded for sequence than attends the breach of full- proceedings further in accordance with fledged fiduciary duties. opinion. the foregoing *7 hand, will On the other not foreclose Rehearing Petitions possibility there be recourse agreed, client if has as CURIAM. PER did, pay attorney client
Miller’s so saying opin- in our made mistake We attorney’s far as the allowance does not do Corporation’ represent- ‘New that “the ion available, recourse so.10 Were such the ‘Deficit interests of Series’ ed the ” be that result would the client would se Proceeding.’ true, It is ‘Construction of that says, cure services at it re- as the allowance; expense pay those who proceeding; in that on to take sides fused and it follow that the client hand, would bene is also true that Prudence it the other fited amount he have Corporation sides, would take did Realization attorney, if the were denied II and III of its brief in this in Points allowance, much less so of the allow argued payable interest ance as is in fact deducted from the client’s upon Series” should be lim- Assuming that dividend. the client is a income earned the collat- ited representative pledged secure those series. The “person fiduciary in a eral will, therefore, sentence assuming capacity,” and result read as so follows: amended words, within the “reimbursement incurred,” Corporation expenses Realization perhaps Prudence “The costs proper represented to deduct the the interests the ‘Deficit amount we would dividends, Proceeding,’ ‘Construction from the have mentioned client’s Series’ suffice; whether, least far it is at doubtful Sil- as these so far and so * Mortgage Company, Corporation, D.C., Guarantee In re Inland Gas re 9. In 785, 226, F.Supp. F.Supp. D.C., respect to Leckas the court with to the award situation presented biger had maintenance, an his of denial to freed to be and asked 'espouse wages, award for the decree is affirmed. in order duties to those series Series,’ judge ‘Surplus the side of the necessary thought it appointed in addition attorney should be Re- the Prudence to him Corporation.”
alization
Petitions denied.
DEVER v. VISIC. No. 12757. Appeals
United Court States Fifth Circuit. 31, 1950. March LINE. S. ISLAND v. CATALINA S. LECKAS LECKAS. LINE v. S. S.
CATALINA ISLAND
No. 12426. Appeals Court
United States Ninth. Circuit.
March *8 Duhaime, Atty.,
Ernest L. Asst. S.U. Miami, Fla., Phillips, Atty., H. S. U. S. Cal., Fla., appellant. Fall, Pedro, ap- Tampa, for David A. San pellant Leckas. Dence, Breslow, Charles' Walter E. B. Angeles, Cal., Miami, Fla., appellee. Gallagher, Los B.
Lasher S.S. Line. appellant Catalina Island HUTCHESON, Judge, Before Chief RUSSELL, DENMAN, Judge, Judges. Circuit WALLER Chief Before ORR, Judges. Circuit STEPHENS WALLER, Judge. Circuit CURIAM. PER brings appeal THe Government corpus order in habeas amply proceed- evidence sus- the appearing .final ings in the United States District and decree of the Court finding tains