IN RE BARRY YAO COMPANY

• Decision Date: 18 January 1961
• Docket Number: No. 16701.,16701.
• Parties: In the Matter of BARRY YAO COMPANY, a copartnership, and Barry Yao, an individual, Bankrupts. Francis F. QUITTNER et al., Appellants, v. Bertram S. HARRIS, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

286 F.2d 299 (1961)

In the Matter of BARRY YAO COMPANY, a copartnership, and Barry Yao, an individual, Bankrupts.

Francis F. QUITTNER et al., Appellants, v. Bertram S. HARRIS, Appellee.

No. 16701.

United States Court of Appeals Ninth Circuit.

January 18, 1961.

Joseph A. Ball, Long Beach, Cal., Milford S. Zimmerman, Zimmerman, Kelly & Thody. J. E. Simpson, Francis F. Quittner and Quittner & Stutman, Los Angeles, Cal., for appellants.

Bertram S. Harris, Los Angeles, Cal., for appellee.

Before BARNES, HAMLIN and JERTBERG, Circuit Judges.

HAMLIN, Circuit Judge.

In a bankruptcy proceeding in the Southern District of California, Francis F. Quittner, Quittner & Stutman, Milford S. Zimmerman, and Zimmerman, Kelly & Thody, hereinafter called the appellants, were appointed as special counsel for the receiver to represent him in contesting the will of Lottie Barry in a proceeding then pending in the Superior Court of Los Angeles County.¹ Prior to the appointment by the referee the appellants were informed that their compensation would be contingent upon recovery. Approximately six months later the will contest was settled, and the sum of $15,000 was paid into the bankrupt estate therefrom. The appellants filed a petition in the bankruptcy proceeding asking for the allowance of attorneys' fees on a contingent basis of 33 1/3% of the amount recovered.² In the same bankruptcy proceeding Bertram S. Harris, attorney for certain petitioning creditors therein, filed a petition asking that he be allowed $3000 attorney's fees and an additional $5000 for extraordinary services alleged to have been performed by him for the benefit of the estate. The referee, after a hearing, allowed to appellants approximately 25% of the amount recovered, to-wit, $3,767, and allowed Mr. Harris and his associate the sum of $1,250 as fees for representing the petitioning creditors and intervenors.³ The order providing for attorneys' fees to appellants and to Harris was dated November 21, 1957. On November 29, Harris filed a petition for the review of this order. He asserted that he had performed substantial services for the bankrupt estate, that he had been largely instrumental in obtaining a settlement of the will contest, and that he should have had a greater allowance for attorney's fees. He ended his petition for review as follows:

"Wherefore, your Petitioner prays for a review of the said Order of November 21, 1957, by a Judge of the United States District Court, and that said Order be reversed as to the Attorney\'s Fees in the sum of $900.00 allowed to Bertram S. Harris, and to Quittner & Stutman and Zimmerman, Kelly & Thody as Special Counsel; that no fees whatever be awarded to them for the reason that all services rendered by them were solely for the benefit of Bill Barry, a Bankrupt herein, and not for the Creditors, inasmuch as they represented adverse interests;⁴ that if any fee should be awarded to them, a fee of $400.00 would be reasonable for the very little work done by them; and, that an Order be entered herein rendering the fees sought by your Petitioner in his original Petition filed on or about the 10th day of May, 1957."

When the matter came before the district court on April 15, 1958, the record shows that the following proceedings occurred:

"The Clerk: The matter of Barry Yao, 624-10.

"Mr. Quittner: Ready.

"Mr. Zimmerman: Ready, your Honor.

"Mr. Harris: Ready, your Honor.

"Mr. Zimmerman: Your Honor suggested yesterday that he wanted testimony in this proceeding, and I think in the interest of clarifying a few situations to your Honor — I don\'t think there is any objection from either counsel — it might be better to have a brief statement even though out of order because it is not the Petitioner on the probate matters which gives rise to the bankruptcy situation, so I would respectfully suggest to your Honor if I might take the stand for a very few moments to outline the more or less non-controversial situations which will lead up to the only issues which could be present here —

"The Court: I am not interested, unless you wish to offer evidence as to what services were performed or the reasonable value of them. I am satisfied with the Referee\'s findings as to those matters⁵ but some serious charges were made here by Mr. Harris on the conflict of interest that I feel we should make some inquiry into.

"As far as what Mr. Harris did or the receiver I don\'t see how he could possibly be allowed any fee for what he did because he was never employed, as was pointed out in the memorandum, or never authorized to act for the receiver.

"Mr. Zimmerman: I think, your Honor, that a very brief statement on my part from the stand might address itself with help to your Honor on this question of conflict of interest on this.

"The Court: Very well. Is that satisfactory to you to proceed in that manner, Mr. Harris?

"Mr. Harris: That is satisfactory, yes."

Thereafter, Milford S. Zimmerman and Francis F. Quittner testified as witnesses before the court.

On March 31, 1959, almost one year later, the district judge filed a written order, 172 F.Supp. 375, reversing the referee's order and denying appellants any fees as special counsel. He reviewed the objections to appellants' fees that Harris had set forth in his petition for review of the referee's order and then stated:

"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 * * * 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. § 102d."

* * * * * *

"Here Messrs. Quittner and Zimmerman failed fully and accurately to disclose the material facts as to the `value and extent\' of their services as special counsel for the receiver, not only seeking fees for services actually rendered prior to their appointment

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