In re Curtis

• Decision Date: 22 March 1900
• Docket Number: 654.
• Citation: 100 F. 784
• Parties: In re CURTIS et al.
• Court: U.S. Court of Appeals — Seventh Circuit

100 F. 784

In re CURTIS et al.

No. 654.

United States Court of Appeals, Seventh Circuit.

March 22, 1900

This is an appeal by the trustees in bankruptcy from an order of the district court sitting in bankruptcy, made October 17, 1899 allowing the sum of $12,500 to counsel for the petitioning creditors for professional services. On August 11, 1898, the bankrupts, co-partners transacting a banking business under the name of the 'Bank of Waverly,' made a voluntary assignment of their property for the benefit of their creditors, pursuant to the statutes of the state of Illinois. On the 1st day of November, 1898, three creditors, having claims to the requisite amount, filed in the district court their petition, seeking an adjudication in bankruptcy against the bankrupts, alleging for act of bankruptcy committed the making of the voluntary assignment. On the 4th day of November, 1898, the debtors answered the petition, admitting the facts alleged, but setting up facts by way of estoppel upon the petitioners to prosecute their petition. On the 25th day of November, 1898, the petitioning creditors filed an amended petition in explanation of the facts asserted against them by way of estoppel, and also asserting additional acts of bankruptcy by alleged fraudulent transfer of property by the bankrupts within the period prescribed by the act. On the 2d day of December, 1898, four other creditors of the bankrupts filed their petition asking leave to join and become parties to the petition seeking an adjudication in bankruptcy, and leave so to do was granted by the court. On the 12th day of December, 1898, the bankrupts filed an answer to the amended petition, reasserting the estoppel charged, taking issue upon the additional acts of bankruptcy alleged, and, as to the intervening petition of the four creditors joining with the creditors in the original petition, denying indebtedness to two of them, admitting an indebtedness of over $900 to the other two, but asserting the like estoppel as to all four of them. There being the requisite number of creditors and the requisite amount of debts, without counting the two creditors whose debts were denied, and not including Caruthers, one of the petitioning creditors, the matter was submitted to the district court sitting in bankruptcy upon the question whether the creditors seeking adjudication were estopped by the filing of their claims under the voluntary assignment. The district court in Re Curtis, 91 F. 737, held that the petitioning creditors were not estopped, and entered a decree adjudicating bankruptcy; from which decree the bankrupts appealed to this court, where the decree was affirmed (In re Curtis, 36 C.C.A. 430, 94 F. 630). Thereafter, on the 6th day of October, 1899, counsel for the petitioning creditors presented a petition to the district court praying for the allowance of 'one reasonable attorney's fee' for services to the petitioning creditors in procuring the adjudication in bankruptcy, to be charged against and paid out of the estate pursuant to the bankrupt act, and asserting that the trustees had in possession over $30,000 in money. The trustees appeared to this application, and the matter was submitted to the court for determination upon the record of the proceedings, and without the evidence of any professional gentlemen touching the value of the services rendered. The court below, on the 17th day of October, 1899, entered an order awarding the allowance mentioned. This order is brought here for review on appeal by the trustees.

Burke Vancil, for appellants.

Bluford Wilson, for appellee.

Before WOODS and JENKINS, Circuit Judges, and BUNN, District Judge.

JENKINS Circuit Judge, after the foregoing statement of the case, .

In the administration of an estate in bankruptcy the law permits the allowance of 'one reasonable attorney's fee for the professional service actually rendered * * * to the petitioning creditors in involuntary cases.' 30 Stat.c 541, § 64b, subd. 3. The act grants an appeal to this court from an order of the district court sitting in bankruptcy allowing or rejecting any claim exceeding $500 against the bankrupt estate. 30 Stat.c. 541, § 25a, subd. 3. This clearly lodges in the appellate court the right to review the allowance of any such claim. The attorney for the petitioning creditors is entitled to this reasonable fee as of right. Its allowance or disallowance is not matter of discretion. So also, the amount to be allowed does not rest in mere discretion. The amount must in all cases be reasonable, to be determined upon evidence of the service performed and of its value, and, in the absence of evidence of its value, by the court from knowledge of its worth. The amount to be allowed rests in legal judgment and judicial discretion, but not in unrestrained discretion, and that judgment and judicial discretion are subject to review. We are loath to disturb a finding upon a question of this character, unless fully persuaded that the judgment of the court was founded in misconception of the ground upon which the allowance should be based, or, if proceeding upon correct grounds, that the amount allowed was largely excessive or greatly inadequate. The question is one of delicacy, but the duty of review may not be put in hand concerning the character and value of the service rendered, and of the grounds upon which the allowance was predicated. The elements which enter into and should control judgment upon the value of professional services we think to be these: The nature of the service, the time necessarily employed therein, the amount involved, the responsibility assumed, and the result obtained.

The service was rendered in the procuring of an adjudication of bankruptcy. The petition was presented by three creditors and alleged for act of bankruptcy the making of a voluntary assignment after the bankrupt law went into operation. The answer admitted the facts alleged, but asserted that Caruthers, one of the petitioning creditors, had actively participated in the proceedings in the state court under the voluntary assignment, that the other two had filed their claims with the assignee, and charged that the petitioners were thereby estopped to prosecute their petition. The amended petition sought to excuse the acts claimed to work an estoppel, and asserted a fraudulent conveyance of real estate by the debtors. The answer thereto took issue upon the alleged fraudulent conveyance, reasserted the estoppel against the original petitioners, charged that the four creditors who were allowed to join as petitioners were likewise estopped because they had filed their claims with the assignee, and denied indebtedness to two of them. It will thus be seen that upon the merits of the original petition the case was simple. Creditors to the requisite number and amount were united in the petition. Their claims were not disputed, and the act of bankruptcy charged was admitted. The difficulty encountered arose wholly from the embarrassing position in which these creditors had placed themselves by their voluntary acts in filing their claims with the assignee under the proceedings in the state court. The court below held against the estoppel upon the ground that after the passage of the bankrupt law a voluntary assignment was absolutely void, that the proceedings under the law of the state to carry the assignment into effect were coram non judice, and that any act of creditors under such void proceedings could not work an estoppel. This court, however, placed its decision upon the ground that there was no estoppel because no action had been taken upon the claims filed, with the exception of Caruthers, and that no detriment, in a legal sense, had resulted from the filing of the claims; that, omitting the claim of Caruthers, who had actively participated in the proceedings, creditors to the requisite number and amount were united in the petition; that the question was whether by electing one remedy the creditors were precluded from asserting another and supposed better remedy. We held upon the facts of the case, and following our ruling in Oil Co. v. Hawkins, 46 U.S.App. 115, 20 C.C.A. 468, 74 F. 395, 33 L.R.A. 739, that they were not precluded. This was the nature of the service that was rendered, and involved the investigation and discussion of the questions whether a voluntary assignment after the passage of the bankruptcy law was void, or voidable merely, of the doctrine of estoppel in pais, and of the election of remedies. These questions were important, requiring careful study and legal ability for their proper presentation to the court. It may be doubted, however, whether the estate should be charged in entirety for the service thus rendered. The clear meaning of the bankrupt act (section 64b, subd. 3), is that the service to petitioning creditors chargeable upon the estate is limited to the service rendered in procuring the adjudication. We take it that such service is charged upon the estate because of the supposed general benefit thereby accruing to the body of creditors, and upon the principle that he who shares the fruit should share the cost of gathering it. The main subject of the litigation went to the right of the petitioning creditors to invoke the law, not whether the debtors had committed an act of bankruptcy. But for the plight in which the petitioning creditors were involved, the necessary service would have been slight. It is questionable whether, under such circumstances, the increased cost of litigation should be charged upon the estate, unless all other creditors, or most of them, stood in the same plight. The record here does not fully disclose the fact, but we think the fair inference from all that appears is that all, or nearly all, of the other...