In re Barry Yao Company

• Citation: 172 F. Supp. 375
• Decision Date: 31 March 1959
• Docket Number: No. 62410.,62410.
• Court: U.S. District Court — Southern District of California
• Parties: In the Matter of BARRY YAO COMPANY, a co-partnership consisting of Barry Baruch, aka Bill Barry, and Jimmy Yao, co-partners; and Barry Baruch aka Bill Barry, an individual; and Jimmy Yao, an individual, Bankrupts.

172 F. Supp. 375

In the Matter of BARRY YAO COMPANY, a co-partnership consisting of Barry Baruch, aka Bill Barry, and Jimmy Yao, co-partners; and Barry Baruch aka Bill Barry, an individual; and Jimmy Yao, an individual, Bankrupts.

No. 62410.

United States District Court S. D. California, Central Division.

March 31, 1959.

Bertram S. Harris, Los Angeles, Cal., petitioner on review, pro se.

Francis F. Quittner and Milford S. Zimmerman, Los Angeles, Cal., respondents on review, pro se.

MATHES, District Judge.

These bankruptcy proceedings are now before the Court upon a petition for review of an order by the Referee in Bankruptcy allowing attorneys' fees to special counsel for the receiver and to the attorney for the creditors.

Proceedings were originally commenced in August of 1954 by the filing of an involuntary petition under § 18, sub. a of the Act 11 U.S.C.A. § 41, sub. a against (1) Barry Yao Company, a co-partnership, consisting of Lottie Barry, Bill Barry (Lottie's husband), and Jimmy Yao, copartners; and (2) Lottie Barry, Bill Barry, and Jimmy Yao, individually. Following intervention by various creditors, a receiver who eventually became trustee was appointed and took possession of the assets of the alleged bankrupts. Bankruptcy Act § 69, 11 U.S.C.A. § 109.

For reasons to be mentioned later, the proceedings against Lottie Barry, as an alleged general partner, were subsequently dismissed with prejudice. Thereafter in April of 1956, Bill Barry and Jimmy Yao consented to an adjudication of bankruptcy, and an order was entered accordingly. Bankruptcy Act § 18, subs. d, g, 11 U.S.C. § 41, subs. d, g.

In due course the proceedings drew to a close, petitions for fees and expenses were filed Bankruptcy Act § 62, subs. a, d, 11 U.S.C.A. § 102, subs. a, d and, following the final meeting of creditors Bankruptcy Act §§ 55, subs. e, 58, subs. a, 11 U.S.C.A. §§ 91 subs. e, 94 subs. a, the Referee entered the order under review Bankruptcy Act § 28, 11 U.S.C.A. 66. In February of 1958 the bankrupts were discharged pursuant to § 14 of the Act 11 U.S.C.A. § 32.

Within the prescribed period, Bertram Harris, as attorney for the petitioning creditor and various intervening creditors, filed his petition for review of the Referee's order Bankruptcy Act § 39, sub. c, 11 U.S.C.A. § 67, sub. c; Castle Cotton Mills Co. v. Gardner, 9 Cir., 1953, 207 F.2d 690, 691, praying that the order be reversed as "clearly erroneous" and an "abuse of discretion" as to (1) the attorney's fee of $900 allowed him for ordinary services as attorney for the petitioning and intervening creditors; (2) the denial of any fee at all to him for so-called extraordinary services rendered for the benefit of the bankrupt estate; and (3) the allowance of attorneys' fees in the sum of $3,767 to Francis F. Quittner, of the firm of Quittner & Stutman, and to Milford S. Zimmerman, of the firm of Zimmerman, Kelly and Thody, for services rendered on behalf of the bankrupt estate as special counsel for the receiver.

The petition for review further prays that no fees whatever be awarded to Messrs. Quittner and Zimmerman; and that an order be entered awarding to petitioner Harris the fees sought in his original petition, namely, $3,000 for ordinary services plus $5,000 for extraordinary services.

At the hearing on the petition for review, this Court opened the record and received new evidence. General Order 47, 11 U.S.C.A. following section 53; In re American Mail Line, Ltd., 9 Cir., 1940, 115 F.2d 196.

The petitioner on review vigorously asserts that Mr. Quittner, who had represented the bankrupts from the outset of the bankruptcy proceedings, and Mr. Zimmerman, who had represented bankrupt Bill Barry in contesting the will of alleged bankrupt Lottie Barry, his deceased wife, appeared for interests adverse to the bankrupt estate and hence should take nothing as special counsel for the receiver. See: General Order 44; 11 U.S.C.A. following section 53; Woods v. City National Bank & Trust Co. of Chicago, 1941, 312 U.S. 262, 267-269, 61 S.Ct. 493, 85 L.Ed. 820; In re Woodruff, 9 Cir., 1941, 121 F.2d 152, certiorari denied, Lynch v. Jackson, 1941, 314 U.S. 652, 62 S.Ct. 99, 86 L.Ed. 522; In re Stratton Inc., 2 Cir., 1931, 51 F.2d 984, certiorari denied Jonas & Neuburger v. General Motors Acceptance Corp., 1932, 284 U.S. 682, 52 S.Ct. 199, 76 L.Ed. 576; In re Rogers-Pyatt Shellac Co., 2 Cir., 1931, 51 F.2d 988.

Petitioner Harris urges further that even if Messrs. Quittner and Zimmerman are entitled to some compensation for their services, the Referee's allowance of $3,767 is "manifestly disproportionate" and that they should at most take $400 because of "the very little work done by them."

Also to be considered by the Court sua sponte, though not raised by the petitioner, are questions lurking throughout the record as to whether Messrs. Quittner and Zimmerman made full and accurate disclosure either (1), in the petition for their employment, of the facts as to the "necessity for employing counsel at all", as contemplated by General Order 44 11 U.S.C.A. following section 53; In re Woodruff, supra, 121 F.2d at page 155; cf.: In re Insull Utility Investments, Inc., 7 Cir., 1935, 74 F.2d 510; Rodgers v. Bromberg, 5 Cir., 1931, 53 F.2d 723, certiorari denied, 1932, 285 U.S. 542, 52 S.Ct. 314, 76 L.Ed. 934, or (2), in the petition for their fees, of the facts as to "the value and the extent of the services rendered", as contemplated by § 62, sub. d of the Act 11 U.S.C.A. § 102, sub. d.

From the entire record and the evidence adduced upon the hearing of the petition for review, the material facts are found as follows: Messrs. Quittner and Zimmerman were appointed special counsel for the receiver, Ralph Meyer, on June 27, 1955. At the time of this appointment, Mr. Quittner was representing the alleged bankrupts, Barry Yao Company and Bill Barry and Jimmy Yao, as he had done from the inception of the involuntary proceedings. He had previously also represented Lottie Barry who, until dismissed, was allegedly liable as a general partner for the debts of the bankrupt partnership.

On November 5, 1954, approximately three months after the involuntary petition was filed, Lottie Barry died. Shortly thereafter her will was admitted to probate, and Union Bank & Trust Co. of Los Angeles was appointed Special Administrator with powers of general administration, and retained as its attorneys Messrs. Charles Katz and Scheinman and Scheinman who, subsequent to November of 1954, have appeared for the estate of Lottie Barry, deceased, in these proceedings.

Following admission of Lottie Barry's will to probate, her surviving husband, Bill Barry, together with her two surviving sisters, all of whom were excluded by the will, filed a contest in the State court on the grounds that, at the time of making the will, the decedent was not of sound mind and had been subjected to the undue influence of one of the principal beneficiaries. Throughout the will contest, Bill Barry and the surviving sisters were represented by Mr. Zimmerman.

In the petition for an order authorizing the employment of Messrs. Quittner and Zimmerman as special counsel for the receiver, which Mr. Quittner prepared and the receiver executed and filed on June 27, 1955, it is inter alia alleged: that the will contest was then pending; that it appeared the will contest would be expensive, but "it is probable * * * that if negotiations are carried on with the * * * Special Administrator * * * and the beneficiaries that a compromise may be obtained * *"; that Messrs. Quittner and Zimmerman were then "fully familiar with this litigation and have made all necessary preparations for trial thereof"; and that the bankrupt estate will benefit to the extent of any recovery made on behalf of alleged bankrupt Bill Barry from Lottie's estate. See Bankruptcy Act § 70, sub. a, 11 U.S. C.A. § 110, sub. a.

The prayer of this petition under General Order 44 is that the receiver be allowed to employ Messrs. Quittner and Zimmerman for the purpose "of either completing the * * * litigation described * * * or presenting to this court for its approval * * * any proposed compromise that may be offered. * * *" On the same day, June 27, 1955, the Referee granted the petition and signed an order authorizing the employment.

Messrs. Quittner and Zimmerman then entered upon their duties as special counsel for the receiver. Six months later, in January of 1956, a final agreement on a settlement had been reached by the parties, ratified by the creditors, and approved by both the probate and the bankruptcy courts. Pursuant to that agreement, the Special Administrator of Lottie Barry's estate paid over to the bankrupt estate the agreed sum of $15,000. In return, the will contest handled by Messrs. Quittner and Zimmerman for the receiver was dismissed with prejudice, as was the claim theretofore pressed by Mr. Harris for the creditors that Lottie was liable as a general partner of the allegedly bankrupt partnership. Also dismissed were two state-court actions brought against Lottie by creditors represented by Mr. Harris. So the final settlement agreement covered other matters as well as the contest to Lottie's will.

Once the settlement was consummated, the authorized duties of Messrs. Quittner and Zimmerman as special counsel for the receiver came to an end, and they thereafter performed no services for the receiver or for the trustee. In due course they filed their petition for an allowance of fees outlining the services claimed to have been rendered for the bankrupt estate while serving as special counsel, and praying that they be awarded $5,000, i. e. one-third of the amount obtained under the settlement agreement. Upon this petition the Referee allowed attorney's fees of $3,767, as set forth in the order under review.

By their petition for fees, Messrs. Quittner and Zimmerman represented to the bankruptcy court, either expressly or by...