Boston & Providence R. R. Corp., In re

• Decision Date: 17 July 1974
• Docket Number: No. 74-1159,74-1159
• Citation: 501 F.2d 545
• Court: U.S. Court of Appeals — First Circuit
• Parties: In re BOSTON & PROVIDENCE RAILROAD CORPORATION. In re BOSTON & PROVIDENCE RAILROAD DEVELOPMENT GROUP, et al., Appellants.

Page 545

501 F.2d 545

In re BOSTON & PROVIDENCE RAILROAD CORPORATION In re BOSTON & PROVIDENCE RAILROAD DEVELOPMENT GROUP, et al., Appellants.

No. 74-1159.

United States Court of Appeals, First Circuit.

Argued June 5, 1974.

Decided July 17, 1974.

Charles R. Nesson, Cambridge, Mass., with whom Harvey A. Silverglate, Thomas G. Shapiro, and Silverglate, Shapiro & Gertner, Boston, Mass., were on memorandum, for appellants.

Arthur P. Schmidt, Boston, Mass., with whom Gaston, Snow & Ely Bartlett Boston, Mass., was on memorandum for National Shawmut Bank of Boston, Charge Trustee, appellee.

Alan L. Lefkowitz, Boston, Mass., John L. Davidson, Jr., and Greenfield, Davidson & Mandelstamm, St. Louis, Mo., on memorandum for Dumaines, appellee.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

COFFIN, Chief Judge.

Appellant seeks to prevent the distribution of funds held by the National Shawmut Bank as Charge Trustee, under an Indenture executed pursuant to the plan of reorganization (Plan) for the Boston and Providence Railway Corporation (B&P). The Indenture imposed upon all B&P real estate an equitable charge for the benefit of holders of Certificates of Contingent Beneficiary Interest (CCBI's), issued pursuant to the Plan. By preventing the distribution, appellant hopes to reach funds remaining from the recent sale of certain former B&P real estate by the Reorganization Trustees of the Penn Central Transportation Company to the Commonwealth of Massachusetts and the Massachusetts Bay Transport Authority, to the extent that the Debtor's Expense Fund of approximately $600,000, established by the Plan, is insufficient to meet appellant's claims for compensation and expenses.

The district court denied and dismissed appellant's motion for a preliminary injunction against the distribution of funds by the Charge Trustee, and permanently enjoined him from interfering with the Charge Trustee's receipt and distribution of the proceeds of the sale of the real estate. The district court also assessed attorney's fees against appellant, for his 'vexatious and groundless motion'. Appellant has moved for summary reversal and vacation of the judgment. The Charge Trustee and Dumaines, a voluntary association holding a large number of CCBI's, have moved for affirmance and summary dismissal.

The district court's denial of appellant's motion for a preliminary injunction was based both upon a determination that appellant was unlikely to prevail on the merits of his claim for compensation and expenses, above and beyond the amount held in the expense fund by the B&P Trustees, and upon a balancing of harms.

Appellant, having been paid $90,000 for his services in connection with the Plan covering the years 1954-1966, has submitted two additional claims, one for $150,000 for the years 1966-1971 and a claim for $453,000, based on the 'success factor' of his effort to obtain inclusion in the Plan of the CCBI's-- which, reflecting the appreciating value of B&P's real estate, have multiplied severalfold in value. This claim relates to services performed before 1966. A third type of claim, urged before us but not in the district court, is that for promotional services in the nature of trying to bring about a sale of some of B&P's real estate to the Commonwealth of Massachusetts and the Massachusetts Bay Transportation Authority, which sale occurred in 1973, in the sum of $12,000,000. ¹ Appellant characterizes this as an equitable charge within the principle of Sprague v. Ticonic National Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939). This claim is not liquidated in amount and, insofar as it relates to services performed between 1966 and 1971, is apparently a component of the $150,000 claim. To the extent that there is a claim for such services post-1971, the record before us is silent.

In any case, since appellant's liquidated claims alone exceed the Debtor's Expense Fund, and other expenses are also being paid from the Fund, appellant seeks to hold up final distribution by the Charge Trustee of the $682,909 until his claims are finally adjudicated. It is the position of the Charge Trustee, Dumaines, and the Penn Central Trustees that appellant lacks a valid claim but that even if he had one, he could look only to the Debtor's Expense Fund.

We deal with the latter contention first. We see no need to delve back into this thirty-five year old litigation beyond our prior opinion on appeal from confirmation of the Plan, In the Matter of Boston & Providence R. Corp., 413 F.2d 137 (1969). When we were considering that appeal, there was some doubt whether the Plan's provision of $550,000 for expenses of reorganization was to cover all expenses, past and future. Since the Interstate Commerce Commission (Commission) had already approved over $500,000 in allowances for the period ending June 30, 1966, the problem of adequacy of the Fund was real. We requested comment from the Commission and noted in our opinion that the Commission had 'ruled that the pertinent section of the plan does not impose a maximum limit on the amount of the administration claims but governs the amount to be kept available at the time of consummation of the plan.' 413 F.2d at 140.

In other words, claims already approved would not be charged to the Fund, and the full $550,000 would be available for all future allowances. Appellant views our language differently, concluding that, in his words, the Fund would be 'unlimited'. By this we understand him to mean that the Fund would be replenished after paying each future allowance so that it would be kept at a $550,000 figure until the last fee was paid. We have difficulty in seeing how the limiting words 'at the time of consummation' can be reconciled with openendness. ² If, however, there was room left for doubt by our language, we see no room whatsoever after the district court's unappealed 'Consummation Order and Final Decree', dated February 23, 1971, which directed, in Section V, that $550,000 be set aside for claims not paid prior to consummation, and reserved jurisdiction to make allowances of compensation for services 'heretofore or hereafter rendered . . . out of said fund of $550,000.' The date of consummation was April 20, 1971. Appellant, in asserting the legitimacy of his claim to go beyond the Fund, has not mentioned in his brief or affidavits the significance of this provision.

This leaves appellant's theory, if not yet a claim, of an equitable charge for promotional services, for the years 1966-1971 to the extent left open by the Commission for pursuit elsewhere than against the Debtor's Expense Fund, and for the years subsequent to 1971. While Ticonic, supra, did recognize the merit of awarding legal fees for counsel whose efforts benefitted others than his client, it was dealing with the familiar field of litigation. What obstacles there may be for one who, though a lawyer, claims compensation for unbargained for promotional services of the kind alluded to by appellant we do not know. We are not at this juncture so confident that we can say that he has demonstrated a probability of success.

The district court, therefore, was clearly within its discretion in deeming that appellant had shown little likelihood of success in establishing a claim to assets in the hands of the Charge Trustee, should the Debtor's Expense Fund be found insufficient for claims chargeable to it. Another aspect of 'success on the merits' is the substantiality of appellant's claims them-selves, which we now address briefly.

The $150,000 claim for services rendered between 1966 and 1971 was denied by the Commission on February 4, 1974 (Finance Docket No. 12131, Served February 28, 1974), with the comment that appellant's efforts for the 1966-1971 period had 'failed to produce any definable benefit to the estate'. (Slip op. p. 871.) Appellant's objections to this report are yet to be heard by the district court, but, in the face of an adverse Commission report, he cannot be said to have demonstrated a probability of success. Even if he were successful, however, the Debtor's Expense Fund could honor this claim.

The $453,000 claim for pre-July 1, 1966 services attributable to the 'success factor' was denied by the Commission on October 5, 1973 (Finance Docket No. 12131, Served October 16, 1973). The Commission...