In re Old Algiers

• Decision Date: 05 December 1938
• Docket Number: No. 167.,167.
• Citation: 100 F.2d 374
• Parties: In re OLD ALGIERS, Inc.
• Court: U.S. Court of Appeals — Second Circuit

100 F.2d 374 (1938)

In re OLD ALGIERS, Inc.

No. 167.

Circuit Court of Appeals, Second Circuit.

December 5, 1938.

Cohen & Wedeen, of New York City (Sidney Wedeen, of New York City, of counsel), for appellants.

Before MANTON, SWAN, and CHASE, Circuit Judges.

SWAN, Circuit Judge.

On April 19, 1938, a voluntary petition for reorganization of the debtor corporation, Old Algiers, was approved as properly filed. Thereafter, on June 3, 1938, an order for liquidation was entered. The estate is still in the course of administration, about $1,500 being in the possession of the trustee in bankruptcy and the time for filing claims not expiring until December 10, 1938. Prior to the entry of the order of liquidation the appellants rendered services as counsel and secretary respectively to a creditors committee. On September 22, 1938, they filed their petition for an order applying Chapter 10, Article 13 of the Chandler Act to the pending proceedings and fixing a time for a hearing to consider their applications for allowances. Their petition was denied. It is conceded that, except for the amendments to section 77B introduced by the Chandler Act, the appellants' services could not be compensated out of the estate since reorganization failed. Sartorius v. Bardo, 2 Cir., 95 F.2d 387, 389; In re Manhattan Music Hall, D.C.S.D.N.Y., 14 F.Supp. 48, 55-57; In re Higgin Mfg. Co., D.C.E.D.Ky., 19 F.Supp. 120, 122; In re Geiser Mfg. Co., D.C.M. D.Pa., 23 F.Supp. 482, 484. But it is contended that the Chandler Act amendments are applicable to the present proceedings and entitle the appellants to a hearing upon their applications for allowances. How much, if anything, should be allowed for the services is not presented by this record; the question is merely whether the applications should be considered by the district judge.

Section 242 of the Chandler Act, 11 U. S.C.A. § 642, declares:

"The judge may allow reasonable compensation for services rendered * * * in connection with the administration of an estate in a proceeding under this chapter or in connection with a plan approved by the judge, whether or not accepted by creditors and stockholders or finally confirmed by the judge— "(1) by * * * committees or representatives of creditors or stockholders; * * * and

"(3) by the attorneys or agents for any of the foregoing * * *."

Section 246, 11 U.S.C.A. § 646, provides: "Upon the dismissal of a proceeding under this chapter, or the entry of an order adjudging the debtor a bankrupt, the judge may allow reasonable compensation for services rendered and reimbursement for proper costs and expenses incurred in such proceeding prior to such dismissal or order of adjudication by any persons entitled thereto, as provided in this chapter, and shall make provision for the payment thereof, and for the payment of all proper costs and expenses incurred by officers in such proceedings."

Section 247, 11 U.S.C.A. § 647, relates to fixing a time of hearing for consideration of applications for allowances, and giving notice thereof. It is apparent, therefore, that if these provisions are applicable the appellants are entitled to a hearing.

The Chandler Act went into effect on September 22, 1938, but Congress plainly declared its purpose to have the provisions of Chapter 10, Article 13, apply to reorganization proceedings then pending. By section 276(c), 11 U.S.C.A. § 676(c), such proceedings are divided into two groups, as follows:

"(1) if the petition in such proceedings was approved within three months prior to the effective date of this amendatory Act, the provisions of this chapter shall apply in their entirety to such proceedings; and

"(2) If the petition in such proceedings was approved more than three months before the effective date of this amendatory Act, the provisions of this chapter shall apply to such proceedings to the extent that the judge shall deem their application practicable; and * * *."

Since the petition in the proceedings at bar was approved on April 19, 1938, this case falls within the second group and the new provisions are to be applied "to the extent that the judge shall deem their application practicable."

The discretion conferred upon the district judge to determine whether it is "practicable" to apply the new provisions to pending proceedings begun prior to June 22, 1938 should not lightly be overridden; but the adoption of an erroneous test of practicability constitutes an abuse of discretion which is within the province of an appellate court to correct. In the case at bar the district judge expressed the view that section 276(c) (2), 11 U.S.C.A. § 676(c) (2), means that the new provisions are to be applied only in so far as their application "may benefit the estate." We are unable to agree that benefit to the estate can be the test of practicability. Under such a test the amendatory provisions permitting the judge to allow compensation out of the estate although reorganization has been determined to be impossible, could never be applied to cases begun before June 22, 1938. Yet it is clear that Congress contemplated that it...