In re Lahongrais, 1661.

• Decision Date: 27 May 1925
• Docket Number: No. 1661.,1661.
• Citation: 5 F.2d 899
• Parties: In re LAHONGRAIS. Petition of MARCHAND.
• Court: U.S. Court of Appeals — First Circuit

5 F.2d 899 (1925)

In re LAHONGRAIS Petition of MARCHAND.

No. 1661.

Circuit Court of Appeals, First Circuit.

May 27, 1925.

Antonsanti & La Costa, of San Juan, Porto Rico, for petitioner, submitting on brief by leave of court.

Nelson Gammans, of New York City, for respondent.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

BINGHAM, Circuit Judge.

This is a petition to revise an order of the federal District Court for Porto Rico, vacating an administrative order of a former referee in bankruptcy whose resignation had been accepted for gross abuses and evil administration of the Bankruptcy Law (Comp. St. § 9585 et seq.) in the Ponce division.

It appears that one Lahongrais filed a voluntary petition in bankruptcy on the 21st day of December, 1921; that adjudication was thereafter had, and the case referred to the referee in the Ponce division above referred to; that thereafter the present petitioner, Perez Marchand, attorney for the bankrupt, on the 16th day of January, 1922, filed a petition with said referee asking that he be allowed $3,000 out of the bankrupt estate for services rendered the bankrupt, but alleged to be for the benefit of the estate; that, on January 17, 1922, the referee allowed the petitioner $2,500, and ordered the trustee to pay the same, which was paid the following day; that this order was made without notice to creditors; that, on February 29, 1923, 11 creditors of the bankrupt, doing business in New York, filed a petition with the District Judge, in which they set out that they were creditors whose claims had been allowed; that the referee above referred to, in January, 1922, entered an order allowing Perez Marchand, as attorney for the bankrupt, $2,500, and ordered immediate payment; that the allowance was grossly excessive; that, in so far as the services related to matters which lawfully could be paid out of the bankrupt's estate, they did not exceed $250 in value; that the order was without notice to creditors; that the petition for allowance upon which the order was granted represented that the bankrupt's estate was worth $60,000, whereas in fact it was worth not more than $12,000; that the petitioners did not learn of said allowance until January, 1923; that they acted immediately on receiving such information, and have not been guilty of laches; that application had been made to the trustee to take action toward recovering said allowance, or the major part thereof; and that he had refused to take action. The prayer was that Perez Marchand be ordered to return to the trustee the sum of $2,250.

An answer was filed, in which the respondent objected to the jurisdiction of the court on the ground that it was an attempt to review an order and decision of a referee in bankruptcy which was rendered more than a year before said petition was sued out, and contrary to rule 88 of that court and General Order in Bankruptcy 27; and for further answer the respondent averred that the referee "proceeded on a bona fide basis of a percentage of the estate when he ordered payment to" Perez Marchand; that the referee "in good faith followed precedent of this very court in similar cases"; that Perez Marchand "filed his petition for, and obtained payment of, fees in this case when the estate was known to the referee in charge to justify the amount received"; and that the remedy sought "will result in an unjust and harsh discrimination against" the respondent.

A hearing was had before the District Judge on the petition, answer, and affidavits in support thereof, who found that the facts set out in the petition were true.

In answer to the contention that the action of the petitioning creditors was in violation of rule 88 of the District Court and General Order in Bankruptcy 27, the court said:

"I consider that it is an honest and proper attempt on the part of these creditors to protect themselves against an illegal, unauthorized, and unjustified action taken by the former referee in bankruptcy in favor of a certain attorney representing the bankrupt, and that it is the duty of the court to correct such action."

The court also held that the respondent had no vested right in the money, as claimed in his answer; that, when he received the money, "he took it subject to the review of this court upon a proper petition"; that there had been "no laches on the part of the petitioners"; that the proofs showed that the "petitioning creditors acted with proper promptness in applying to the judge of this court for relief against the payment"; that, "assuming that the estate had been actually worth $60,000, the allowance of $2,500 in cash to the attorney for the bankrupt within a few days after the filing of the petition would have been grossly excessive"; and that "the former referee showed either undue favoritism or...