Calhoun v. Hertwig
| Decision Date | 20 October 1966 |
| Docket Number | No. 23347.,23347. |
| Citation | 363 F.2d 257 |
| Parties | John K. CALHOUN, individually and as attorney for the Estate of C. F. Calhoun, Appellant, v. Charles C. HERTWIG, Trustee, et al., Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
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Charles E. Watkins, Jr., Atlanta, Ga., for appellant.
Charles M. Cork, T. Baldwin Martin, Jr., Wallace Miller, Jr., Macon, Ga., Paul R. Ervin, Charlotte, N. C., for appellees.
Before TUTTLE, Chief Judge, BELL, Circuit Judge and KILKENNY,* District Judge.
Appellants were the attorneys for the estate of C. F. Calhoun, a creditor involved in the reorganization under Chapter X of the Bankruptcy Act of Den-Nap Electric Mold Co. and two related corporations, Poplar Foundries, Inc. and Precision Recapping Equipment Co. They petitioned the District Court for $11,367.60 in attorneys' fees and $873.04 expenses to which they claim that they are entitled for services rendered in the reorganization proceedings. This appeal is taken under § 250 of the Bankruptcy Act, 11 U.S.C.A. § 650, from an order denying their claim.
The facts are that these corporations applied for relief in 1961 under Chapter X of the Bankruptcy Act. The dominant figures in each of the corporations were the majority stockholders who were also the chief executive officers. The three corporations were treated as one in the reorganization proceedings so as to eliminate any problem regarding inter-corporate debts or other obligations or arrangements. Appellants, Messrs. Calhoun, Russell and Watkins, participated in the proceedings as counsel for the estate of C. F. Calhoun, the father of one of appellants. Mr. Calhoun was a stockholder in and a creditor of Den-Nap by reason of its purchase of certain patent rights and equipment from him. The exact amount of his claim was disputed as we shall see. The creditor corporations were operated by a trustee from 1961 until the date of the completed reorganization in 1965.
On February 12, 1965, a meeting was held to discuss an initial reorganization plan suggested by the debtors. This plan provided for payment to the general creditors of forty cents on the dollar, together with full payment of all secured and priority claims and costs of administration. Substantially all of the Calhoun claim was in the forty per cent category. The trustee and all creditors except the Calhoun estate were willing to accept the plan. Appellants, as the Calhoun attorneys, considered the plan unfair and refused to accept it. They then contacted numerous companies in an effort to find a purchaser for the debtors' assets so as to make possible a better plan. They were successful in finding a purchaser, the Super Mold Corporation of California. This company in fact came to Macon and inspected the properties on the very next day, February 13, 1965. A sale to Super Mold would have made possible a reorganization plan which would more nearly satisfy the claims of the creditors.
Appellants drafted and filed a plan on March 22, 1965, which was based on the increased assets from the sale to Super Mold Corporation. The creditors' committee submitted their own revised plan on March 26, 1965. On March 30, 1965, a hearing was held at which time the court had all the submitted plans before it. After explanation of the three plans the court adjourned until the afternoon of the same day. This recess was taken for the purpose of giving the interested parties an opportunity to reach a mutually satisfactory agreement. The difficulty in agreeing on a plan stemmed from the fact that the amount of the Calhoun claim was disputed. The disputed amount was approximately $26,000 which was largely made up of interest accruing since the initiation of the reorganization proceedings in 1961 plus attorneys' fees on the accelerated portions of certain notes. Finally, an agreement was reached which provided that all of the other general creditors would voluntarily reduce their claims by eleven per cent in order to raise the $26,000 which the Calhoun estate claimed and thus pay the Calhoun claim in full.
When the hearing was reconvened in the afternoon the compromise agreement was explained; and the parties agreed to submit to the court a written plan embodying the features of it. At this time the following colloquy took place between the court and Mr. Calhoun, counsel for his father's estate:
Counsel for the debtors objected to this payment to the Calhoun estate on the ground of unjust enrichment but counsel for the trustee and also for the creditors' committee recommended that it be approved. Counsel for the creditors' committee stated that he acceded to avoid further delay and to recognize the efforts of counsel for the Calhoun estate in finding Super Mold and thus bringing about a better payment plan for the creditors. The plan was approved by the court, unanimously accepted by the creditors and confirmed by the court.
At the time of this colloquy between the court and Mr. Calhoun, the proposed plan of reorganization submitted by Mr. Calhoun, as executor of his father's estate and as counsel for the estate, was before the court. It contemplated a purchase of the stock of the reorganized corporation by Super Mold Corporation, and provided for fees as follows:
"Subject to the agreement of the successful purchaser and/or the order of the Court, the Trustee shall deliver to the authors of this Plan such amount of the Class A Common Stock in the Reorganized Corporation as the parties may agree upon as the reasonable fee...
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