In re New York Investors
| Decision Date | 22 July 1935 |
| Docket Number | No. 492,493.,492 |
| Citation | 79 F.2d 182 |
| Parties | In re NEW YORK INVESTORS, Inc. RECONSTRUCTION FINANCE CORPORATION v. ENDELMAN et al. |
| Court | U.S. Court of Appeals — Second Circuit |
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Root, Clark, Buckner & Ballentine, of New York City (William P. Palmer and Everett I. Willis, both of New York City, of counsel), for appellant.
Edward Endelman. of New York City, pro se.
Powell & Ruch, of New York City (Clinton J. Ruch, of New York City, of counsel), for appellees Powell & Ruch and Charles H. Kelby and Clifford S. Kelsey, as trustees.
Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
The appellees Kelby and Kelsey were appointed equity receivers of New York Investors, Inc., on July 14, 1933, and remained such until January 7, 1935. Their work thus covered about eighteen months, and upon its termination they became trustees in the reorganization proceeding instituted by the debtor under section 77B of the Bankruptcy Act (11 USCA § 207). On June 29, 1934, they were appointed trustees of Prudence-Bonds Corporation, a subsidiary of New York Investors, Inc., in a similar reorganization proceeding, so that their time was considerably occupied during the final six months of the receivership of the latter company in the affairs of the Prudence-Bonds Corporation. The receivership of New York Investors, Inc., was particularly difficult because of the numerous large subsidiaries of which it owned the stock and the intricate relations of these subsidiaries with the debtor and in many cases with one another. Proper administration of the receivership by the receivers and their attorneys Powell & Ruch required constant attention, as well as skill and training of a high order. Judge Kelby and Mr. Kelsey have each received an interim allowance of $20,000. The former has been awarded $25,000 more and the latter $10,000 more as final allowances. Each allowance was fixed by the court which had appointed the equity receivers, and was thereafter ordered paid from the debtor's estate by the court in the 77B proceeding. The same judge who had charge of the estate from the beginning made the orders in each court.
The Reconstruction Finance Corporation, a secured creditor having a claim of $20,000,000, intervened in the 77B proceeding and objected to the foregoing allowances, as well as to the others we shall discuss, on the ground that they are excessive. It has chiefly objected to any final allowances at this time, when the prospects of a reorganization are yet uncertain and the yield of the estate in reorganization or, if reorganization shall fail, in liquidation, cannot be foreseen.
In an opinion denying the motions by the appellees to dismiss the appeals by the Reconstruction Finance Corporation, which is to be filed herewith, 79 F.(2d) 179, we have held that the court in the reorganization proceeding was authorized under section 77B (i) of the act (11 USCA § 207 (i) to reduce the allowances fixed in the equity receivership, if they were found to be unreasonable. There remain for consideration the questions whether only ad interim allowances should be made at present and whether, in case final allowances are appropriate at this time, those granted have been too large.
Although section 77B (i) only provides for "payment of such reasonable administrative expenses and allowances in the prior proceeding as may be fixed by the court appointing said receiver or prior trustee" and does not in so many words authorize ad interim payments, we have no doubt that the section 77B court may employ any fair method to determine what allowances are "reasonable," and to that end may authorize payments on account if it is otherwise difficult to determine what under the circumstances is proper compensation. But here the work in the receivership is completed, there are ample assets with which to pay the expenses of the receivers, and we can see nothing to be gained by delaying a final settlement. We therefore shall dispose of the allowances at the present time.
Judge Kelby during the first three months of the receivership not only performed all the usual services of a receiver, but substantially all legal services required, and apparently gave the receivership a great part of his time. During the last six months of his tenure he also acted as trustee of the Prudence-Bonds Corporation and in that capacity will be entitled to remuneration. In view of the fact that the receivership had free assets of only about $1,200,000 and that the total assets, of a book valuation of $42,000,000, are of uncertain value and are to a great extent pledged to the appellant, an allowance to Judge Kelby of $37,500 seems more reasonable than that awarded by the court below. We accordingly reduce the total of $45,000 to $37,500, and direct a further payment to him of $17,500, instead of $25,000.
Mr. Kelsey's allowance by the court below, if reduced in the same way, would aggregate $25,000, and the further payment to him would amount to $5,000. His work for the receivership seems to have been largely concerned with attending to claims filed with the receivers and with care of the bank accounts and office of the debtor. As this work was divided with work for the Prudence-Bonds Corporation or as trustee thereof, and as he seems to have had no individual office expenses, we think such allowance reasonable. Accordingly, the total allowed to him is reduced from $30,000 to $25,000, and a further payment to him of $5,000, instead of $10,000, is directed.
The compensation awarded to Messrs. Powell and Ruch seems far too large. Though we realize the difficulty and intricacy of the problems with which they have had to deal and the training and skill necessary for their solution, they were engaged on this receivership for only fifteen months, and received an ad interim allowance of $32,500, and during the same period were paid $25,000 by the receivers out of collections on the so-called Ringling collateral by virtue of the terms of the collateral agreement. While this payment did not come out of...
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