Gugel v. New Orleans Nat. Bank
| Decision Date | 22 February 1917 |
| Docket Number | 2906. |
| Parties | GUGEL et al. v. NEW ORLEANS NAT. BANK. [a1] |
| Court | U.S. Court of Appeals — Fifth Circuit |
The mortgage note referred to provided that:
'In case it shall become necessary to institute legal proceedings for the recovery of the amount of said note, or any part thereof, the purchaser binds and obligates itself to pay the fees of the attorney at law who may be employed for that purpose, which fees are hereby fixed at 10 per cent. of the amount which may be due.' Edwin T. Merrick, Ralph J. Schwarz, John Dymond, Jr., and A. Giffen Levy, all of New Orleans, La., for petitioners.
Gustave Lemle and W. Catesby Jones, both of New Orleans, La., for respondent.
Before WALKER, Circuit Judge, and GRUBB, District Judge.
This is a petition to superintend and revise an order of the District Court for the Eastern District of Louisiana, the effect of which was to disallow the referee and trustee commissions and the attorney for the trustee a fee out of the proceeds of the sale of personal and real property, on which there were liens and mortgages greater in amount than the amount realized from the sale of the property. The District Judge allowed to the trustee the amount it would have been required to expend to foreclose the liens in the state court, but disallowed commissions based on the general administration of the estate by the referee and trustee and the general attorney's fee for counsel for the trustee. The District Court also declined to recognize the claimed right of the holder of the first mortgage to an attorney's fee, out of the proceeds of the sale, of 10 per cent., as provided for in the mortgage note. These are the two questions presented for review.
The contention of the trustee is that, whatever may have been the law before the amendment of June 25, 1910, to the Bankruptcy Act, as to the right of the trustee to commissions and attorney's fees to be paid out of the funds realized from the sale of the mortgaged property, though the funds were insufficient to satisfy the mortgage liens on it, the matter is set at rest by that amendment, which provides that trustees shall receive commissions on all moneys disbursed or turned over to any person, including lienholders. If the reference in the added words is to the source of payment, the language is undoubtedly broad enough to include payment at the expense of the lienholder. However, there seem to be two possible constructions that may be given the language-- one that it relates to the basis of computation of the commission, and has no reference to the source from which payment is to be made; and the other, that it has reference to the source of payment as well. There is nothing in the language of the amendment that would force the latter construction. It is necessary, therefore, to look beyond the language to the purpose to be subserved and the results that follow from the respective constructions, in order to reach a conclusion.
The purpose of Congress was evidently to increase the compensation of the trustee, but not necessarily at the expense of lienholders and with the effect of displacing their liens. Section 67d forbids such a construction. The purpose to increase is worked out by enlarging the basis of computation, so as to include amounts paid or turned over to lienholders, upon which, before the amendment, commissions were not, in many districts, computed, even where the payments of commissions, when so computed, were to be made out of the fund going to unsecured creditors. There was therefore, a field of operation for the amendment without attributing to it the effect to displace liens and mortgages. To give it this broader construction would have the effect of imposing on the lienholder the burden of the expense of the general administration of the bankrupt estate, in which he has no interest and from which he derives no benefit. We cannot think that Congress intended any such inequitable result. Imposing upon the lienholder the burden of the cost of the general administration of an insolvent estate, when he has ample security for his debt, is a denial of an adequate remedy for the collection of the debt secured by the...
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