In re Kross

• Decision Date: 05 October 1899
• Citation: 96 F. 816
• Parties: In re KROSS.
• Court: U.S. District Court — Southern District of New York

96 F. 816

In re KROSS.

United States District Court, S.D. New York.

October 5, 1899

Otto H Droege, for bankrupt.

BROWN District Judge.

The question has been certified to me by the referee in charge of the above case, whether an attorney's fee should be allowed and paid out of the assets to the bankrupt's attorney under section 64, subd. b, par. 3, in the absence of any special benefit of those services to the estate. Ex parte O'Connell, 92 F. 889. The act of 1867 contained no such provision.

The practice has obtained to some extent among the referees in this district, to allow an attorney's fee in such cases and this practice seems to me to be in accordance with the intent of the act. The 'necessary cost of preserving the estate' is provided for by paragraph 1, which is not only separate from paragraph 3, but has a higher order of priority of payment than paragraph 3. When the services of the bankrupt's attorney have been necessarily sought and rendered in getting in or preserving the estate, they are included in paragraph 1, and are entitled to that priority of payment. The further provisions of paragraph 3 must be designed for something different; and nothing in this paragraph indicates that the attorney's fee there provided for is to be restricted to services beneficial to the estate or rendered primarily in its interest. On the contrary, it is stated to be 'for professional services actually rendered * * * to the bankrupt. ' This shows that what is contemplated is a service rendered primarily to the bankrupt rather than to his estate; while it is also equally a benefit to creditors by putting the estate in course of an equal distribution in bankruptcy without still greater expense to them. Its association also with the allowance of a similar fee 'for services rendered to the petitioning creditors,' in involuntary cases, as well as for services 'to the bankrupt' in such cases, while performing the duties prescribed by the act, indicates a common purpose, and that there should be no such distinction as to allow the fee in the one class of cases and exclude it in the other. Among the first and most important duties specially enjoined by the act upon the bankrupt in involuntary cases that presumably require an attorney's services, are those stated in paragraph 8 of section 7, viz the preparation and filing of schedules of his property and creditors, with all the particulars there specified. In voluntary cases, the same schedules are required to accompany the petition; and ordinarily bankrupts are unable to prepare such papers properly, or to comply with the rules and orders pertaining thereto, except by the aid of a professional attorney. This clause of paragraph 3, therefore, indicates the general nature of the services for which a fee is designed to be allowed; viz. those professional services which presumably are necessary and indispensable to the bankrupt to enable him to perform the duties required of him by the act for the benefit of creditors on the one hand, or to secure his own correlative right to a discharge on the other.

The circumstance that the allowance of this fee is associated with 'the cost of administration,' seems to me of little or no adverse weight. Strictly and narrowly construed the words 'cost of administration' might not alone include such a fee, but be restrained to the expense of handling the estate, converting it into money, and distributing it. But paragraph 3 evidently means to enlarge the scope of this clause by adding, that it shall 'include one attorney's fee for services actually rendered to the petitioning creditors * * * or to the bankrupt in voluntary cases. ' Such a charge is, moreover, germane to the subject, and if not strictly a part of the 'cost of administration,' is so closely akin to it as to be fairly included in the same order of preferred expenses; since the court cannot administer an estate without acquiring jurisdiction over it, and jurisdiction can only be acquired through a voluntary or an involuntary petition, for...