In re Chicago, M., St. P. & PR Co.

• Decision Date: 24 November 1943
• Docket Number: No. 8366.,8366.
• Citation: 138 F.2d 433
• Parties: In re CHICAGO, M., ST. P. & P. R. CO. ABRAMS et al. v. SCANDRETT et al.
• Court: U.S. Court of Appeals — Seventh Circuit

138 F.2d 433 (1943)

In re CHICAGO, M., ST. P. & P. R. CO.

ABRAMS et al. v. SCANDRETT et al.

No. 8366.

Circuit Court of Appeals, Seventh Circuit.

November 4, 1943.

Rehearing Denied November 24, 1943.

Meyer Abrams, of Chicago, Ill. (Shulman, Shulman & Abrams, of Chicago, Ill., of counsel), for appellants.

Kenneth F. Burgess, Douglas F. Smith, George Ragland, Jr., A. N. Whitlock, and M. L. Bluhm, all of Chicago, Ill., for appellees.

Before KERNER and MINTON, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Here, as they did in Abrams v. Scandrett et al., 7 Cir., 121 F.2d 371, appellants complain that the District Court improperly overruled their objections to the finding and order of the Interstate Commerce Commission, made in connection with a plan of reorganization, denying them fees or expenses from the debtor estate. The nature of the services rendered, the pertinent surrounding circumstances and the legal issues involved are set forth in our earlier opinion and need no repetition.

We concluded then that the District Court was "powerless to allow appellants any sum." Subsequently, however, the Supreme Court, in Reconstruction Finance Corp. v. Bankers Trust Co., Trustee, 318 U.S. 163, 63 S.Ct. 515, 87 L.Ed. ___, held that the District Court has power to determine, as a matter of law, whether substantial evidence sustains the Commission's finding as to maximum allowances. Consequently, on March 22, 1943, we reversed the cause and remanded it to the District Court with directions to examine the evidence and determine whether it supports the finding. Thereafter the District Court entered its findings and conclusions, stating that it had examined the record and determined that "there is substantial evidence to sustain the finding." Thereupon appellants' objections were overruled. This appeal followed.

Appellants insist that, (1) the court did not enter specific findings and conclusions as required by Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c; (2) the record contains no substantial evidence supporting the finding; (3) the Commission had no jurisdiction to fix a maximum of fees and expenses for appellants of "nothing."

We think there was no misapprehension upon the part of the District Court as to its duty under the applicable act of Congress and the Rules of Civil Procedure. As the Supreme Court announced, in Reconstruction Finance Corp. v. Bankers Trust Co., Trustee, supra, Section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205, lodges in the Commission alone the power to find the facts as to fees and expenses to be paid from the estate and charges it with the duty to determine the maximum to be allowed any applicant. The District Court may not review the facts any more than it may review those found by a jury; it may only inquire, as a matter of law, if a finding is challenged, whether it is supported by substantial evidence. This we directed the District Court to do and this it did, concluding, as a matter of law, that substantial evidence sustains the finding. It had no power to make findings of fact contemplated by Rule 52(a).

Appellants insist, however, that the court erred in concluding that substantial evidence supports the finding. The reorganization had to do with a railroad company and a capital investment of many millions of dollars, including extensive mortgage bonds of divers issues and priorities, as well as capital stock. Appellants represented, as counsel, a relatively small group of adjustment mortgage bondholders. The Institutional Investors Group, likewise represented by counsel, appeared for like parties, owners of some $10,000,000 in bonds. Other holders of substantial amounts of the same bonds were permitted to intervene and participate.

Appellants attended some hearings, spent considerable time and incurred expenses and claim that the Commission could properly have found only that their services were of benefit to the estate in that they had brought about appointment of independent trustees and abandonment of certain undesirable features of the original plan and had made constructive suggestions leading to an improved plan. Many counsel representing divergent interests made many suggestions; the proceeding was pending before the Commission for an extended period of time and that body was in position to observe the actions of respective counsel and to judge of the value of the services rendered by them. It knew far better than any other agency, who had contributed to the solution of the perplexing problems encountered in the evolution and promulgation of a reasonable and workable plan for the successful reorganization of a sadly involved debtor. Speaking more specifically, it appears that counsel for the debtor, for the Institutional Investors' Group and for other interests of the same category as those represented by appellants, actively participated. Whether it was their services or those of appellants which were of benefit to the estate was a question of fact peculiarly fit to be determined from the evidence.

As to the claim that appellants secured appointment of independent trustees, it should be observed that the Act requires such action and that the District Court had full cognizance of its duty in that respect. As to the contention that appellants brought about elimination of objectionable features, again, the Commission knew better than this court or the District Court why changes were made and who should be credited with constructive effort in bringing them about. Thus the record discloses that a committee of the board of directors of the debtor, two years after the plan was first offered, recommended that, in view of then existing financial, industrial and economic conditions, the original proposal should not be consummated. Appellants did not attend the hearing at which this occurred. Nor is there anything in the...