Strauss v. Pine Block Bldg. Corp.

LINDLEY, District Judge. This is an appeal from an order entered jn corporate reorganization proceeding, under sect¡ons 777^ 7743 Qf tbe Bankruptcy Act> as amended; n u.s.C.A. §§ 206, 207, disaijowfog jn parf; fees 0f foe trustee under a trust deed and bis couns¿i jn a foreclosure ^ prosecuted t0 a decree of foreclosure entered February 10, 1932. That decree found that the trustee was entitled to the sum of $550 for services “rendered and to be rendered”; that his solicitors “have ren- ^ aM ^ render ya3uab2e gerv¡ces„ 7QQQ and, reasonable value £ < • * ■, , , for such services as have been rendered - . , v . and are yet to be rendered by said solici- . „ JA - . « .« . J t ^ . tors : and that under Inc terms of the trust « . h , , « «. deed the trustee and his solicitors were en- .. . . ,, , ,, ^ titled to priority over the bondholders, -r . . 1 , . ,, - - Nothing was done m the foreclosure pro- , . . ., , £ ^ ceedmgs subsequent to the entry of the deH J cree' On August 16, 1935, a petition for corporate reorganization was filed in the District Court and in due course of events a p]an Gf reorganization was offered by the bondholders, through their regularly author¡zed committee, which was approved, The trustee filed his claimj asking for com_ pensation for llimself iu the sum of $550 ; for fos sobcitors $7,000; for reimbursement 0f 5254 pajd £0 foe Chicago Title & Trust Company for foreclosure minutes and $100 for foreclosure minutes thereafter to be submitted and $20.95 for stenographer’s services in the foreclosure suit. The bondholders’ committee objected to the claim. The District Court allowed to the trustce $250 and to his solicitors $2,000, and disallowed the other amounts claimed. It pointed out that nothing had been done or could be done under the decree of foreclosure; that there had been, and could be, no sale; that, inasmuch as the allowances fixed by decree were not only for the services rendered but also for those to be renclered, there had been a failure of considera- , ,, ,,, , , , tion as to all services to be rendered and that therefore, so far as such services entered into the claim, it could make no allow\nce-, Appd'a“ insists that- inasmuch as lhc dfree of s ate courtrwas ^1; it b(j ^ fuI1 forcc’ credit and effect 111 ,tbe bankruptcy court and that it was entitled to all the sums claimed, or that evidence should have been submitted upon the value of services rendered and that of those to be rendered. [240] As has been pointed out by this court in Re Deluxe Court Apartment, 86 F.(2d) 772, and In re 1030 North Dearborn Bldg. Corp., 86 F.(2d) 775, as well as in other cases decided prior thereto, such as In re Sorenson (C.C.A.) 77 F.(2d) 166, the decree of*e state c°Vrt ™as a fina Judf ment. It does not follow, however, that the amount allowed therein is, under any and all circumstances, binding upon the District C?u^-U«der subsfti°n (0 °f section 77B of the Bankruptcy Act as amended (11 U S. C.A. § 207(i), the court is charged with the duty to determine the reasonable value of services to the estate, and, inasmuch as the decree of the state court was not certain in its terms, and was dealing with services to be rendered in the future, which have not been and cannot be performed, it was incumbent upon the District Court to disapprove such amount of the allowance as represented compensation for such services. As the District Judge pointed out, the services may have been of benefit to the estate to the extent that they were rendered prior to the entry of the decree, but thereafter there was a complete lapse of activity, and, as to all services to be rendered, allowance for which was included in the decree, as the District Court aptly pointed out, the consideration failed. The bondholders, for whom the trustee was a fiduciary and who were most vitally interested m the property, objected to any allowance to the fiduciary for services to be rendered, to which the state court gave consideration in- making its allowance. As pointed out in the two cases mentioned, In re Deluxe Court Apartment, and In re 1030 North Dearborn Building Corp., supra, upon intervention of the bankruptcy proceedings and termination of the services of the trustee and his counsel, it does no violence to the state court decree for the bankruptcy court to ascertain what, if any, services have not been performed and to effectuate an abatement of so much of the state court award. From the memorandum of the District Court, it is obvious that this rule was followed in the present case. It is said boweveri that the court should have received evidence as to the yalue of seryices rendered and t0 be ren. dered. Clearly the burden of proof was Up0n j-be objector. But here the court had before it the ver¡fied daim tbe decree of the state court reciting ±¿ full history of tbe litigation> tbe creditors> petition, the plan of reorganization, the petitions of the varjous parties for compensation, and was fully advised as to just what had been done by the interested parties. This was the evjdence upon which both claimant and objector rested, and the chancellor, in the absence of request from either party for 0pp0rtUnity to offer additional evidence, was justified in making his findings upon wba(- was before him. A trial judge who has previously been a trial lawyer is not utterly without knowledge as to the value 0f services of counsel in a court of equity, Had the parties desired to submit addition-a¡ evidence, they were at liberty to request dle court to receive the same. The order was one peculiarly within the court’s discretion, and we find no abuse thereof, what we haye said applies equally tQ the daim for aliowance 0f $100 for additional expense in obtaining memoranda as to f.be The decree of the state court found that $164 was a reasonable amount for such services up to the time of decree and tbat $100 would be a reasonable value for services thereafter to be rendered. The $164 has ^een P^d. There is no evidence sh°7 tllat any additional services were thereafter rendered. The state court found that the trustee was entitled to a stenographer’s fee in the sum of $20.95 for services prior to the decree. This was an actual expense incurred and should have been allowed by the District Court, and as to this item the decree is reversed. In all other respects, it is affirmed.