In re Brigantine Beach Hotel Corp.

• Decision Date: 03 June 1952
• Docket Number: 10627,No. 10615,No. 10690.,10615,10690.
• Citation: 197 F.2d 296
• Parties: In re BRIGANTINE BEACH HOTEL CORP.
• Court: U.S. Court of Appeals — Third Circuit

197 F.2d 296 (1952)

In re BRIGANTINE BEACH HOTEL CORP.

Nos. 10615, 10627, No. 10690.

United States Court of Appeals Third Circuit.

Argued March 20, 1952.

Decided June 3, 1952.

Rehearing Denied June 26, 1952.

I. Emanuel Sauder, Philadelphia, Pa., for debtor.

A. David Epstein, Camden, N. J. (Gene R. Mariano, Camden, N. J., on the brief), for receiver.

Morris Bloom, Atlantic City, N. J., for himself as attorney for creditors.

Before McLAUGHLIN, STALEY and HASTIE, Circuit Judges.

McLAUGHLIN, Circuit Judge.

The appeals in Nos. 10,615 and 10,627 concern allowances made in a Chapter XI, 11 U.S.C.A. § 701 et seq., proceeding by the district court to the receiver and to the attorney for certain creditors. The allowances were ordered on October 5, 1951 as one of the results of a prior hearing at which the court had sought in part to determine the amount of money needed for deposit by the debtor under Section 337, sub. 2 of the Bankruptcy Act. 11 U.S.C.A. § 737, sub. 2. No. 10,615 is an appeal by the debtor objecting to both these allowances. No. 10,627 is by the creditors' attorney who complains that the amount given him was inadequate.

The appeal in No. 10,690 is by the debtor from the order of the district court of November 29, 1951 refusing confirmation of the proposed plan of arrangement and adjudging the debtor a bankrupt. The court accepted a petition for rehearing which was considered on the merits, following which the court entered an order on January 28, 1952 denying the petition. This appeal is also from that order.

Nos. 10,615 and 10,627 Receiver's Allowance

The debtor had, on January 26, 1951, filed an original petition for arangement of its unsecured debts under Chapter XI, Section 322. 11 U.S.C.A. § 722. These amounted to about $40,000. The appellee Mariano was appointed custodial receiver the same day. The main assets of the debtor consisted of a beach front hotel located in Brigantine Beach, N. J., which was appraised at $160,000 and personal property contained in the hotel appraised at $68,665.76. There was a first mortgage of $100,000 on the hotel. It was then closed for the winter season and remained closed until about June 1, 1951 when the court permitted its reopening upon terms designed to protect the estate. The operation of the hotel during the 1951 summer season was successful and resulted in a profit of approximately $25,000. When the court directed that requests for allowances be submitted, the receiver filed an amended petition on September 10, 1951 in the amount of $6,604.66. This sum allegedly represented the maximum compensation due the receiver under the governing statute. The court allowed the receiver $6,000.

The rate used as a basis for calculating the allowance was that set for operating receivers in Chapter V, Section 48, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 76, sub. a, and is not challenged by any of the parties. The principal amount upon which that rate was applied was $308,183.14¹ and it included two items which the debtor claims to be erroneous. The first of these is the sum of $228,665.76, representing the valuation of the real and personal property of the hotel. The second contested figure is $47,495.53 consisting of moneys disbursed by the receiver in the operation of the hotel. This was for such routine expenses as food, beverages, services and the like.

We agree with the debtor that the court was in error in including as a basis for calculating the receiver's commissions, in the event of confirmation, the value of the hotel real and personal property which was to be returned to the debtor on the confirmation of the proposed arrangement. With respect to the principal amount to be used in determining the receiver's compensation, Section 48, sub. f provides:

"* * * Such compensation shall be computed upon all moneys disbursed or turned over by him to any persons, including lienholders, upon all moneys to be paid to unsecured creditors upon the confirmation of the arrangement and thereafter, pursuant to the terms of the arrangement, and where under the arrangement any part of the consideration to be paid is other than money, upon the amount of the fair value of such consideration: Provided, however, That the court may, in respect to all moneys to be paid to such unsecured creditors after the confirmation of the arrangement, prescribe such time for the payment of the compensation computed thereon as in the particular case may be fair and equitable."

It is clear that the word "moneys" in the clause "* * * upon all moneys disbursed or turned over by him to any persons, including lienholders, * * *" is not the equivalent of property. See American Surety Co. v. Freed, 3 Cir., 224 F. 333; In re Detroit Mortgage Corp., 6 Cir., 12 F.2d 889, certiorari denied sub nom. Security Trust Co. v. De Land, 273 U.S. 713, 47 S.Ct. 107, 71 L.Ed. 854; In re Allied Owners Corp., 2 Cir., 79 F.2d 187, affirmed on other grounds sub nom. Callaghan v. Reconstruction Finance Corp., 297 U.S. 464, 466, 56 S.Ct. 519, 80 L.Ed. 804.² The receiver relies on the clause in that section which provides that "* * * where under the arrangement any part of the consideration to be paid is other than money, such compensation shall be computed upon the amount of the fair value of such consideration: * * *." Here the debtor proposed to pay the unsecured creditors 100% in cash, 5% immediately upon confirmation and the balance at stated intervals within twelve months after confirmation. The real and personal property of the hotel which was to be returned to the debtor under the proposed arrangement was no part of the consideration to be paid.

Included in the principal amount which the court used as a basis for computing the receiver's allowance in the event of confirmation was a total of $47,495.53 disbursed by the receiver for routine expenditures in the operation of the hotel. These included purchases of food and beverages, payment for heat and light, wages and similar costs. The debtor bases his objection to this sum on a construction of Section 48, sub. f which would limit the receiver to compensation computed solely upon the amount disbursed to unsecured creditors. Such an interpretation would render meaningless the first method of computing the receiver's allowance under Section 48, sub. f, "* * * upon all moneys disbursed or turned over by him to any persons, including lienholders, * *." As a result of the operation of the hotel by the receiver a profit in excess of $25,000 inured to the estate of the debtor. We think the court properly included the disbursements mentioned. Albers v. Dickinson, 8 Cir., 127 F.2d 957. And see 2 Collier on Bankruptcy (14th ed.) page 1804.

Allowance for attorney for creditors

The allowance of the fee to Morris Bloom, Esq., as attorney for certain creditors was in compensation for his services in a New Jersey state proceeding prior to the institution of this Chapter XI case. He had instituted the suit for the purpose of setting aside a conveyance of the debtor's hotel property. As a result of his action the debtor received a reconveyance of its principal asset. After careful study of the attorney's work the trial court felt that "* * * for the benefit derived by the estate of the debtor and the creditors herein, * * * a fair allowance to Mr. Bloom would be the sum of Seven Hundred ($700.00) Dollars, and it is so ordered."

There is a denial of the facts on which the application is founded, but this is not seriously pressed. Objection is also made on the ground that Chapter VII, Section 64, sub. a(1) of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a(1), does not provide that an attorney acting for creditors be directly compensated for services in recovering for the benefit of creditors property of a bankrupt transferred or concealed. It is conceded in the debtor's brief that the creditors themselves, in a proper case, making the application for fees paid by them to an attorney for such services could obtain their reasonable costs and expenses. In our view the filing of the petition by the attorney himself was a procedural irregularity hardly to be approved but not necessarily fatal to the allowance in the sense that it divested the district court of power to grant it. In re Medina Quarry Co., 2 Cir., 191 F. 815, 817. Under all of the circumstances we think the allowance of a fee to the attorney was within the discretion of the district judge and further, that the amount allowed was a rightful exercise of that same discretion.

No. 10,690

The order of October 5, 1951 from which the appeals in Nos. 10,615 and 10,627 arise also provided that the total amount of the fees and expenses allowed, $9,291.45, be deposited by the debtor with the receiver on or before October 5, 1951. October 15, 1951 was designated for final hearing on the confirmation of the plan; on the petition of the first mortgagee to lift the restraint against foreclosing; on the petition by the receiver for an order adjudging the debtor a bankrupt and on a reclamation petition. This hearing was held on the adjourned date, November 16, 1951, following which the district judge on November 29, 1951 made an order (entered the same day) refusing confirmation of the plan, adjudging the debtor a bankrupt and directing that bankruptcy be proceeded with pursuant to the provisions of the Act. On December 28, 1951 the debtor filed a petition for rehearing which the court accepted and set down for hearing on the merits. This was had on January 18, 1952, after which the court entered an order on January 28, 1952 denying the petition for rehearing. The debtor filed notice of appeal the same day from the order of November 29, 1951 and from the order of January 28, 1952.

Though no motion for dismissal of the appeal from the order of November 29, 1951 was filed by appellees, the claim is made that the appeal from that order, filed January 28, 1952, was taken too late. There is no doubt that the district court...