651 F.2d 1349 (10th Cir. 1981), 79-1256, Matter of King Resources Co.

Docket Nº:79-1256.
Citation:651 F.2d 1349
Party Name:In the Matter of KING RESOURCES COMPANY and International Resources, Ltd., Debtors. KING RESOURCES COMPANY and International Resources, Ltd., Debtors-Appellees, v. PHOENIX RESOURCES COMPANY, Appellant.
Case Date:March 13, 1981
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 1349

651 F.2d 1349 (10th Cir. 1981)

In the Matter of KING RESOURCES COMPANY and International

Resources, Ltd.,

Debtors. KING RESOURCES COMPANY and International Resources,

Ltd., Debtors-Appellees,

v.

PHOENIX RESOURCES COMPANY, Appellant.

No. 79-1256.

United States Court of Appeals, Tenth Circuit

March 13, 1981

Argued Oct. 19, 1980.

Page 1350

Miles M. Gersh, Denver, Colo. (William R. Fishman and David H. Drennen, Denver, Colo., on brief) of Fishman, Gengler & Geman, P.C., Denver, Colo., for appellant.

Thomas J. Kerwin of Kerwin & Elliott, P.C., Denver, Colo. (Jane Anne Murphy of Kerwin & Elliott, P.C., Denver, Colo., John E. Hoffman, Jr. and Stephen F. Ellman of Shearman & Sterling, New York City, with him on brief), for debtor-appellee Citibank, N.A.

Thomas S. Nichols, Denver, Colo. (Robert L. Shanstrom, Denver, Colo., with him on brief) of Davis, Graham & Stubbs, Denver, Colo., for debtor-appellee United Bank of Denver, N.A.

Before SETH, Chief Judge, SEYMOUR, Circuit Judge, and PALMIERI, District Judge [*].

SETH, Chief Judge.

This is an appeal by Phoenix Resources Company, the successor to King Resources Company by a Chapter X reorganization. The appeal raises a question as to the validity of fees-compensation-reimbursement awarded to United Bank of Denver, N.A. and to Citibank, N.A. for their services as indenture trustees during the course of the reorganization.

The trial court made the awards over the objections of the Securities and Exchange Commission and Phoenix Resources. The objections were based on section 249 of the Bankruptcy Act which they asserted prohibited such fees when the fiduciaries had voluntarily sold their individual claims during the course of the proceedings.

The trial court held in substance that section 249 was superseded by Bankruptcy Rule 10-215 which permitted such fees on court approval of the sale of claims.

Appellee banks, as mentioned, were the trustees in indentures issued by King Resources. With the Chapter X proceedings their duties to the indenture holders continued with the added responsibility to protect the holders during the reorganization. This was a difficult task but was not an uncommon one for indenture trustees. The banks were thus active from the outset of the proceedings in the formulation of plans, negotiations with others, and participation in the confirmation hearings. There is nothing in the record to show that the banks sought to be relieved as trustees. The indenture holders ultimately received or will receive shares of stock in the successor corporation. There is no suggestion that these holders were not faithfully and diligently represented by the banks.

The indenture trustees as fiduciaries so represented claims against the debtor which in total were approximately 42 percent of pre-petition allowed claims. The trust indentures were by their terms subordinated to the "senior" debts. The principal difference between the position of the indenture holders and the senior debt creditors related to the conversion rights and this was a substantial dispute. Values were changing and an amended plan was approved February 4, 1976. The United Bank sought compensation-fees-reimbursement in the amount of $343,756.78, and Citibank in the amount of $556,016.30.

The problem in this appeal arises from the fact that in the reorganization proceedings these two banks also represented themselves in seeking to recover on debts owed to them by King Resources. Each bank had made loans of about three million dollars to King Resources and the debts arose from these loans. Claims were filed in the estate for these debts along with the other creditors, and the banks participated in such capacity in the formulation of the plan of reorganization, negotiation with other claimants, and in pre-confirmation. The plan was confirmed in October of 1977. The claims of the banks were allowed during the course of the proceedings.

The two banks, after the Bankruptcy Court had approved the Plan of Reorganization

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in May of 1977, decided to sell their individual claims. Thus United Bank in...

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