In re Breakwater Co.

• Decision Date: 02 February 1915
• Docket Number: 5029.
• Citation: 220 F. 226
• Parties: In re BREAKWATER CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

220 F. 226

In re BREAKWATER CO.

No. 5029.

United States District Court, E.D. Pennsylvania.

February 2, 1915

Henry C. Willcox, of New York City, for petitioner American Surety Co., of New York.

Owen J Roberts, of Philadelphia, Pa., for trustee.

THOMPSON District Judge.

The question for decision in the present case is whether fees of $6,500 each ordered paid to the referee and trustee are greater than allowed by the Bankruptcy Act (Act July 1, 1898 c. 541, 30 Stat. 544 (U.S. Comp. St. 1913, Secs. 9585 9656)).

When the trustee was elected, the property of the bankrupt, which was engaged in building breakwaters for the United States government, was distributed throughout various states of the Union, the Hawaiian Islands, and the Province of Ontario, Canada. It consisted, inter alia, of stone quarries with their various equipment, floating equipment, bills receivable, and cash.

The trustee's account shows the amount of the inventory and appraisements, together with uninventoried assets, to be $1,066,467.91. Against this property was a mortgage of $1,000,000, under which bonds to that amount were outstanding and coupons amounting to $50,000 were due. Upon an order of the referee authorized by the vote of the creditors, the assets were sold by the trustee to Alexander B. Siegel, acting for the bondholders, subject to the lien of the mortgage and all other valid liens for $75,000.

It appears by the record that various efforts had been made by the trustee to make some disposition of the assets of the company which would to the greatest possible extent benefit the unsecured creditors. In addition to the liens of the mortgage, admiralty liens existed against the floating equipment of the company approximating $75,000. A claim had been filed by the Assets Realization Company, the mortgagee, in the amount of $1,028,384.17, and the aggregate indebtedness shown by the schedules was $2,888,173.49.

After various attempts to save the property as a going business for the benefit of the creditors, through the efforts of the trustee, a corporation was formed known as Coast & Lakes Contracting Corporation, and a plan was submitted to the creditors for the purchase by that company directly, or through an intermediary, of all the real estate, plant, and equipment of the Breakwater Company for the purpose of completing the existing contracts of the bankrupt and continuing its business. The stock capitalization of the company as authorized provided for 15,000 shares of preferred stock of the par value of $100 each, $1,500,000; and 10,000 shares of common stock of the par value of $100 each, $1,000,000.

It was proposed, in consideration of the sale of the assets of the bankrupt to the company by the trustee for the sum of $75,000 in cash subject to the liens, that the holders of the mortgage bonds receive 10 shares of preferred stock for each $1,000 bond, taking up $1,000,000 of preferred stock, and the holders of coupons amounting to $50,000 receive preferred stock at par to that amount, the balance of the preferred stock to be reserved for future issue; that unsecured creditors consisting of holders of unsecured notes of and claims against the Breakwater Company receive for their claims 50 per cent. of the face amount thereof, or approximately $700,000, in common stock; the balance of common stock, as far as material to the question arising in this case, to be reserved for future issue. The holders of the first mortgage bonds were required to deposit their bonds with the coupons with a nominee of the company. The unsecured creditors were required to file and prove their claims before the referee and assign their notes and claims to a nominee of the company. The sale, in pursuance of the foregoing plan, was authorized at a meeting of the creditors and the property sold by the trustee, and the sale was confirmed by the referee and subsequently by the court.

The position of the referee is that the fees payable to himself and the trustee are to be based upon the total amount of stock in the corporation issued to the secured and unsecured creditors of the bankrupt. The position of counsel for the trustee at the hearing (who also presented an argument for the referee's contentions) is that the commissions should be based upon the actual property administered in relieving the estate of lien indebtedness amounting to over $1,100,000. For...