Becker v. Thomas

• Decision Date: 20 September 1926
• Docket Number: No. 7160.,7160.
• Citation: 14 F.2d 829
• Parties: BECKER et al. v. THOMAS. In re FARMERS' CREAMERY & ICE CREAM CO.
• Court: U.S. Court of Appeals — Eighth Circuit

14 F.2d 829 (1926)

BECKER et al. v. THOMAS In re FARMERS' CREAMERY & ICE CREAM CO.

No. 7160.

Circuit Court of Appeals, Eighth Circuit.

September 20, 1926.

Frank G. Drenning, of Topeka, Kan., for appellants.

Robert L. Webb, of Topeka, Kan. (Robert Stone, George T. McDermott and Beryl R. Johnson, all of Topeka, Kan., on the brief), for appellee.

Before SANBORN, STONE and KENYON, Circuit Judges.

KENYON, Circuit Judge.

The Farmers' Creamery & Ice Cream Company, a corporation, was on February 7, 1924, in the District Court of the United States for the District of Kansas, First Division, adjudged a bankrupt.

The controversy presented for our consideration arises out of said bankruptcy proceedings in the following manner: The bankrupt's assets consisted of real and personal property. An offer of $28,000 having been made therefor, upon application of appellants, R. L. Thomas was on February 21, 1924, appointed a receiver to make sale thereof. On March 6, 1924, said Thomas was elected trustee of the bankrupt estate by the creditors, and duly qualified as such. One C. A. Marker, who had been president of the defunct company, made some claim of title to the real property in the city of Topeka, which had been occupied by the bankrupt corporation, and upon which property the Kaw Valley National Bank held a mortgage for the sum of $6,000, the property also being subject to a mortgage given appellant Henry Becker in trust to secure an indebtedness of some $18,803.80 and interest, which was also secured by a chattel mortgage on personal property.

February 28, 1924, appellants filed proof of their claims as preferred, in the sum of $18,803.80, and asked that the mortgages on the plant and equipment of the bankrupt corporation be declared valid prior liens, and that the real and personal property be sold by the trustee free and clear from liens, and that the proceeds be applied to the payment of the mortgage indebtedness.

March 18, 1924, they applied for an order requiring C. A. Marker to appear and show his interest, if any, in the real property of the defunct corporation. He entered his appearance. Appellants were represented by Mr. Frank G. Drenning, their counsel in this case. Marker appeared for himself, and R. L. Webb appeared for the trustee. A trial was had consuming five days' time. The testimony was taken in shorthand by a reporter. The referee filed findings of fact and conclusions of law, which were confirmed by the Judge of the United States District Court of Kansas, in which he held that Marker had no equity in the real property occupied by the bankrupt.

About April 30, 1924, appellants filed a bid to purchase from the trustee all the assets of the bankrupt estate, including real and personal property covered by valid mortgage liens. This bid was the only one made for the property. The trustee in bankruptcy filed objections, but, after numerous conferences held between the bidders, Becker and Blakely, and the trustee, a sale was agreed upon on May 24, 1924. The terms of the sale, which were not based on the written offer, were that Becker and Blakely would pay $1,062.73 in cash for the unmortgaged personal property, and $26,500 for the mortgaged real and personal property, the $26,500 to be paid by Becker and Blakely paying to the trustee in cash an amount sufficient to cover certain expenses connected with the proceedings in the bankruptcy court in testing and determining Marker's alleged claim of title to the real property and the preservation of the same during the controversy, also the trustee, referee, and attorney fees, amounting to $2,- 329.86, which they paid on the 28th day of May, 1924, by giving their checks to the trustee. Further, Becker and Blakely were to pay the mortgage to the Kaw Valley National Bank on the real property and to surrender to the trustee the notes and the mortgages held by them on the bankrupt's property. They gave to the trustee receipts showing payments in full of the liens in the sum of $20,223.19, and also paid the mortgage due the Kaw Valley National Bank in the sum of $6,300.

The controversy arises over the payment of a part of the $2,329.86, appellants claiming that they were wrongfully compelled to pay allowances to R. L. Thomas as receiver and as trustee, also fees of the referee and of R. L. Webb as attorney for services rendered the trustee in protecting the interests of the general creditors. Appellants filed petition asking that the sum of $1,485.84, so wrongfully exacted in the payment of fees, commissions, and expenses, be refunded to them.

The court referred the issues of law and fact arising under the petition for refund and the answer of the trustee, to E. R. Adams, as a special master, for hearing and trial, he to report his findings of fact and conclusions of law to the court. The matter was tried by the special master at Topeka, Kan., January 27, 1925, and he made certain findings of fact which may be summarized as follows: That on February 28, 1924, Blakely and Becker filed in the bankruptcy proceedings an application for the court to enter an order directing the sale of the real and personal property of the bankrupt estate free and clear of all liens; that after it had been determined by the court that C. A. Marker had no title to the real property, the property then being in a position to be sold, Becker and Blakely filed a written offer of $26,500 for said real and personal property; that the trustee in bankruptcy filed written objections to this; that thereafter numerous conferences were held between said Becker and Blakely and the trustee; and that finally, on the 24th day of May, 1924, a sale was agreed upon, not on the basis of the written offer, but on verbal negotiations and agreements, the terms of which we have heretofore set forth.

Findings 5, 6, 7, and 8, respectively, of the special master are as follows:

"(5) I specifically find that one of the elements of the bid of Becker and Blakely, which was finally accepted by the trustee, was that they would pay the costs and fees mentioned in the foregoing paragraph.

"(6) At the time of the sale to Becker and Blakely, the trustee had on hand the sum of only $128.40.

"(7) On that date the terms of sale were finally agreed upon (May 24, 1924), Becker and Blakely and their attorney, Frank G. Drenning, were in the office of the referee in bankruptcy, and there was then presented to them by the referee an itemized list of the expenses and costs which were to be paid by them as a part of their bid, said items being as follows:

                  R.L. Thomas, commission as receiver     $147.50
                  R.L. Thomas, premium, receiver
                   bond, ..............................     32.50
                  R.L. Thomas, expense ................     25.00
                  R.L. Thomas, commission as trustee ..    405.00
                  Referee in Bankruptcy, commission ...    244.14
                  R.L. Webb, attorney for trustee .....    500.00
                  F.G. Drenning, attorney for bankrupt
                   ....................................    750.00
                  F.G. Drenning, expenses .............     94.02
                  J.E. Whitmere, transcribing evidence      35.00
                  Gas .................................     31.32
                  Light ...............................      8.13
                  Telephone ...........................     19.55
                  Appraisers ..........................     15.00
                  Witnesses ...........................     22.70
                                                        _________
                  Total ............................... $2,329.86
                

"(8) I find that the commissions charged by the receiver, trustee, and referee were computed as provided by the Bankruptcy Act, and further find that the fees allowed to attorneys were reasonable."

The special master also found that on May 28, 1924, Becker and Blakely gave their checks to the trustee for this $2,329.86; that the trustee issued checks in payment of the items of cost in finding 7, including the fee of Mr. Drenning, the attorney for Becker and Blakely; that, after the payment of the said $2,329.86 to the trustee, the real and personal property was conveyed to Becker and Blakely; that no steps at any time were taken to question the amounts which they had paid in cash covering said costs until the filing of the present petitions on the 18th day of November, 1924.

The special master submitted his conclusions, which were that the sale to Becker and Blakely was made with the understanding and agreement on their part to pay in cash the costs in the bankruptcy proceedings, which were agreed upon as $2,329.86; and that, "had it not been for their agreement to pay these items of costs, the trustee would not have sold the property to them;" that Becker and Blakely by their present petition sought to obtain a review of the order of the referee, and that they were barred from such relief, "for they failed to file a petition for review of the order of the referee within the time required by law," but had allowed six months to expire before filing their present petition; and the special master...