In re LE Elliott Brokerage Co., 9850.

• Decision Date: 06 May 1942
• Docket Number: No. 9850.,9850.
• Citation: 48 F. Supp. 144
• Parties: In re L. E. ELLIOTT BROKERAGE CO.
• Court: U.S. District Court — District of Kansas

48 F. Supp. 144

In re L. E. ELLIOTT BROKERAGE CO.

No. 9850.

District Court, D. Kansas, First Division.

May 6, 1942.

Forrest J. Horton, of Salina, Kan., pro se.

Homer B. Jenkins, of Salina, Kan., for trustee.

BRISTOW, Referee.

The issue now before the court for determination arises from an application for an attorney's fee filed herein by Forrest J. Horton as attorney for certain wage claimants and the objections filed thereto by the trustee upon the ground that the estate is not liable for any such fee. There is no objection to the amount asked. There are present the applicant in person and the trustee by his attorney Homer B. Jenkins.

There is no dispute as to the facts. For several years before the petition in bankruptcy was filed, the bankrupts had been engaged in the wholesale distribution of fresh fruits, vegetables and groceries. After adjudication there was filed herein claims by six former employees of the bankrupts for overtime wages due them under the provisions of the Federal Fair Labor Standards Act of 1938, 29 U.S.C.A. § 201 et seq. They asked for priority of payment. After due hearing five of the claims were allowed but without priority. The sixth was disallowed and expunged.

A few days later Mr. Horton filed an application for the payment to him of a fee for the prosecution of these claims. He based such application upon Sec. 16(b) of the Fair Labor Standards Act which provides that action may be brought in any court of competent jurisdiction by an employee for unpaid overtime and that "the court in such action shall, in addition to any judgment awarded to the plaintiff * * * allow a reasonable attorney's fee to be paid by the defendant, and costs of the action". So far as I have been able to find there is no reported decision construing this provision as applied to claims in bankruptcy. The Act makes no mention of claims in bankruptcy and it, therefore, becomes necessary to determine from general principles whether this provision permits the payment out of the bankrupt estate of a fee to an attorney who obtains the allowance of a claim for compensation due under the Act. It is hardly necessary to cite authority for the statement that under the bankruptcy clause of the Constitution, article 1, § 8, cl. 4, Congress and Congress alone may determine what claims shall be payable in bankruptcy and the order of their payment, subject only to such restrictions upon the exercise of its powers as may be found in other parts of the Constitution.

The Bankruptcy Act, 11 U.S.C.A. § 1 et seq., carefully specifies what distribution may be made of the assets of a bankrupt estate. Among attorneys' fees which may be paid out of such assets are a reasonable fee for the attorney for the petitioning creditors, for the bankrupt, for the trustee and receiver and for attorneys for creditors when rendering certain specific services in behalf of the estate (See Sec. 64, 11 U.S. C.A. § 104), but nowhere is there any provision for the payment of fees to attorneys who obtain the allowance of claims filed by creditors in the bankruptcy proceeding. In the new 14th Edition of Collier on Bankruptcy, Vol. 3, p. 1535, it is stated: "Although bankruptcy courts are vested with equitable powers and are frequently authoritatively called courts of equity, yet the Act and the General Orders 11 U.S.C.A. following section 53, in their present carefully revised form, must normally be considered both as the only source and at the same time as a deliberate limitation on the exercise of judicial discretion. Allowances to creditors for costs and expenses in certain situations enumerated in the Act (in general in Sec. 64, sub. a) and the General Orders are a matter of right, not of discretion. The correlative, we believe, is also the general rule: that equitable considerations cannot authorize the allowance of costs and expenses to creditors in situations not enumerated in the Act or the General Orders." See also p. 1565 of the same volume: "No allowance will be made to a creditor's attorney for proving his client's claim."

Before the amendments to the Bankruptcy Act passed in 1938, debts granted priority by State Law were granted priority in bankruptcy. In some states a provision in a note for an attorney's fee, if the note is placed in the hands of an attorney for collection, is valid and recognized in bankruptcy but such fees become merely a part of the general claim of the creditor. They are never allowable in bankruptcy as a fee payable to the attorney with right...