Texas Bank & Trust Company of Dallas v. Crippen, 15897.

• Decision Date: 05 September 1956
• Docket Number: No. 15897.,15897.
• Citation: 235 F.2d 472
• Parties: TEXAS BANK & TRUST COMPANY OF DALLAS, and Republic National Bank of Dallas, Trustee, Appellants, v. Elijah CRIPPEN, Trustee of Bankers Discount Corporation, Debtor, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

235 F.2d 472 (1956)

TEXAS BANK & TRUST COMPANY OF DALLAS, and Republic National Bank of Dallas, Trustee, Appellants, v. Elijah CRIPPEN, Trustee of Bankers Discount Corporation, Debtor, Appellee.

No. 15897.

United States Court of Appeals Fifth Circuit.

August 3, 1956.

Rehearing Denied September 5, 1956.

John B. Stigall, Jr., Larry DeBogory, DeBogory & DeBogory, Dallas, Tex., for appellants.

Thomas R. Hartnett, III, Dallas, Tex., for appellee.

Before TUTTLE, CAMERON and JONES, Circuit Judges.

JONES, Circuit Judge.

This appeal had its origin in the proceedings for the reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. §§ 501-676, of Bankers Discount Corporation, herein called the debtor. The matters presented by this appeal were before us about a year ago. Republic National Bank of Dallas v. Crippen, 5 Cir., 1955, 224 F.2d 565. We there reversed the order by which the district court rejected the claims of the two banks which were appellants there and here. The appellant, Republic National Bank of Dallas, herein called the Republic Bank, had been the trustee under an open-end indenture dated March 24, 1952, securing an issue of collateral trust notes. The Republic Bank, as trustee, held from time to time under the pledge of the indenture a varying number in substantial dollar amounts of purchase money obligations which had been given by buyers in connection with the acquisition of motor vehicles, furniture, equipment and appliances, as well as some other intangible collateral. The indenture is a lengthy agreement between the debtor and the Republic Bank which covers fifty-nine printed pages of record. Among its terms are provisions for the compensation and expenses of the trustee, including the following:

"V(c) (4) * * *

"At all times hereunder Trustee will be reimbursed for any costs and expenses incurred in connection with action taken by Trustee, and where action is taken at the request of a Collateral Trust Note holder or holders, the Trustee may require indemnification in advance for costs, expenses and any liability that may be incurred.

* * * * * *

"VIII(d) Trustee shall be entitled to reasonable compensation for all services rendered by it in the execution of the Trusts hereby created and to reimbursement of any and all necessary and reasonable expenses, charges, counsel fees and other disbursements incurred by Trustee in the discharge of its duties as such; and, for the purpose of securing the payment of said compensation and disbursements, Trustee and its successors are hereby given and granted a first lien upon the collateral deposited hereunder and upon the proceeds thereof."

These provisions were supplemented by a letter dated March 26, 1952, from the Republic Bank to the debtor setting up a formula for computing the trustee's compensation. The body of this letter read:

"With reference to our appointment as Trustee for Collateral Trust Notes to be issued under Indenture dated March 24, 1952, we wish to advise our fee for acting in this capacity is as follows: acceptance fee, $500.00; annual fee, ¾ of 1% per annum of the amount of collateral on deposit each month, computed on the last day of each month, and payable monthly.

"This annual charge is subject to review and revision at the end of a six month period."

On the basis of the foregoing letter agreement the debtor paid the Republic Bank to the end of March, 1953, the last full month before the inception of proceedings in the bankruptcy court.

The Texas Bank & Trust Company, which will be referred to as the Texas Bank, made loans to the debtor evidenced by promissory notes and secured by the pledge of intangible collateral. The notes provided for the payment of principal, interest and attorneys' fees.

The debtor filed a petition on April 29, 1953, under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. §§ 701-799, for an arrangement with its unsecured creditors. A receiver was appointed by the court on the following day. The plan provided for two other finance companies to advance funds and to collect customer paper, and to receive five per cent. interest on the advances and ten per cent. of collections. The finance companies were given a first priority of payment and the bank creditors were next in line. This arrangement was approved on June 15, 1953. On August 24, 1953, the court removed the receiver and restored the estate to the debtor for management by a creditors' committee.

On March 31, 1954, creditors filed a petition for reorganization of the debtor under Chapter X of the Bankruptcy Act. This plan provided that:

"The balance due on the principal and regular rate of interest to the secured creditors in Class 1 shall be paid in cash at the time of consummation of the plan, but said secured creditors shall receive nothing for costs, attorneys\' fees, penalty interest, nor any other amount."

This plan was not accepted by either of the appellant banks. The appellee, Elijah Crippen, who had been appointed by the court as Trustee of the debtor in the reorganization proceedings submitted an amended plan containing, in lieu of the proviso quoted, the following:

"1. The balance due on the principal and regular rate of interest to the secured creditors in Class 1 (whether collateral of said creditors is sufficient to secure them or not) shall be paid in cash at the time of consummation of the plan. Said secured creditors and the Republic National Bank as Trustee under a Collateral Trust Agreement shall further receive in cash their costs, Trustee\'s fees and attorneys\' fees in an amount allowed by the Court but said secured creditors shall not receive any penalty interest. The amounts to be paid to secured creditors under this plan shall not be charged with any costs of Court nor any other costs in connection with any proceeding."

This plan was accepted by all of the secured creditors and by substantially all of the unsecured creditors.

The Republic Bank filed a claim which was broken down into several categories. It sought

                  Fees measured by the contract percentages ...........   $11,879.97
                  Extraordinary services of bank personnel with respect
                   to indenture provisions ............................     6,500.00
                  Special attorneys for consultations .................     2,500.00
                  Federal Deposit Insurance Corporation law suit ......     2,500.00
                  Attorneys' fees in bankruptcy .......................    20,000.00
                  Special services of bank personnel in preparation
                   extra reports and special auditing .................    10,081.00
                  Out-of-pocket expense ...............................       500.00
                                                                          __________
                                                                          $53,960.97
                

The Texas Bank filed a claim for attorneys' fees which were originally computed at the contract rate of ten per cent. but subsequently reduced to $7,500.00. The court refused to hear testimony on these claims and disallowed them. On appeal ...