Haffenberg v. Chicago Title & Trust Co.

KOHLSAAT, Circuit Judge (after stating the facts as above). [1] This cause is properly here on appeal. In re Friend, 134 Fed. 783, 67 C. C. A. 500; Louisville Trust Co. v. Comingor, 184 U. S. 18, 22 Sup. Ct. 293, 46 L. Ed. 413. [2, 3] The subject-matter of the petition of the trustee consists in moneys paid over to the respondents by or for the bankrupt prior to the filing of the petition to have the latter adjudged a bankrupt, which moneys respondents claim as their own. The petition falls within section 23 of the bankruptcy act, and is, in effect, a plenary proceeding; as distinguished from a proceeding in bankruptcy. Such being the case, the matter could not be disposed of in a summary proceeding (Louisville Trust Company v. Comingor, supra; Bardes v. Hawarden Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175; In re Friend, supra), and could only be entertained in the manner provided in section 23b as amended. ■ Even though the consent set out in this section be deemed necessary under the facts of this case, such consent “means consent' to the tribunal in which the controversy is to be carried on and not to the mode of procedure, which is regulated by general principles of' law unless other provision is made.” Sinsheimer v. Simonson, 107 Fed. 898, 47 C. C. A. 51. [4, 5] While it appears from the record that no summons was issued against respondents, the petition was substantially in the form of a bill praying for specific and general relief. Without raising any objection to the jurisdiction of the court, the defendants below filed their several answers and went to hearing, thereby consenting to the jurisdiction of the District Court. Though summary in form, the substance of the proceedings was of a plenary character, and had reference only to controversies at law and in equity between trustees and adverse claimants as set out in section 23. Appellant properly so considered them and made no attempt to defend or justify the fee of $1,000 in question, which was a matter in bankruptcy (In re Wood & Henderson, 210 U. S. 246, 28 Sup. Ct. 621, 52 L. Ed. 1136), and as such not cognizable in a plenary suit. In re Friend, supra. Section 60d, upon which the decree ordering the repayment of this $1,000 was-based, reads as follows,, viz,: ... , [877] “(d) If a debtor shall, directly or indirectly, in contemplation of tbe filing of a petition by or against him, pay money or transfer property to an attorney and counselor at law, solicitor in equity, or proctor in admiralty for services to be rendered, tbe transaction shall be re-examined by the court on petition of the trustee or any creditor and shall only be hold valid to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the trustee for the benefit of the estate.” There is nothing in the pleadings to raise an issue with regard to the fee paid in this case. There is in the record no petition upon which the court could base an inquiry into the reasonableness of the fee. It does not appear that the trustee knew anything about the payment until the hearing, nor was there any attempt to put Haffen-berg upon notice that the reasonableness of the fee would be inquired into. It would have been a simple matter to have presented a petition and to have caused the attorney to be brought before the court in a summary manner for examination as to the reasonableness of his fee. As said in Re Wood & Henderson, supra: “This is not a case of preference, where part of the estate is transferred to a creditor so as to give him more of the estate than to others of the same class under section 60 of the bankruptcy act, nor is it a case of fraudulent conveyance under section 67. To undertake to bring within this definition of a preference, requiring a plenary action for its recovery, the protection given a bankrupt’s estate because of a transfer of property or money to an attorney or counselor for services to be rendered in contemplation of filing a petition in bankruptcy is to add to tbe clearly defined preferences contemplated by tbe act, and is to include entirely different transactions not embraced in the statutory definitions of a preference as Congress has defined that term. The section makes no provision for the service of process, and in that view snch reasonable notice to tbe parties affected should be required as is appropriate to the case and an opportunity should be given them to be heard. The petition by the trustee to re-examine a transaction between the bankrupt and his attorney under this section is administrative in character, of which the court of bankruptcy has jurisdiction irrespective of section R3 of the act.” It is plain that it was in the mind of Congress to make the adjustment of attorney’s fees, as covered by section 60d, no elaborate or plenary proceeding. The bankruptcy court alone in the first instance has jurisdiction to pass upon the justice of the fee, and it has such jurisdiction only when the matter is presented in such a manner as to fully advise the respondent of the investigation. In re Wood & Henderson, supra; In re Rosser, 4 Am. Bankr. Rep. 153, 159, 101 Fed. 562, 41 C. C. A. 497. So far as shown, no proof was called for or produced, nor does it appear that the court was advised of what would have been a reasonable fee. True, the order recites that the court heard the evidence adduced. This is not preserved, if any was in fact adduced in addition to that filed by the special master. However that may be, there is here, as above stated, an entire absence of pleadings, in this case a petition, upon which such evidence could be heard or such order predicated. Hailenberg, having had no opportunity to defend the reasonableness of his fee, was to that extent deprived of his property rights without due process of law. Until the petition was filed as provided for in section 60d, and Haffenberg notified to appear and submit to an investigation as to the reasonableness of his fee in the manner provided by the act, and in the absence [878] of any waiver of his rights in the premises, the court was without jurisdiction to pass upon the subject-matter. The decree of the District Court, in so far as it directs the repayment of said sum of $1,000 by said Haffenberg, is reversed.