In re Rolnick

• Decision Date: 03 December 1923
• Docket Number: 80.
• Citation: 294 F. 817
• Parties: In re ROLNICK et al.
• Court: U.S. Court of Appeals — Second Circuit

294 F. 817

In re ROLNICK et al.

No. 80.

United States Court of Appeals, Second Circuit.

December 3, 1923

R. M S. Putnam and A. Joseph Geist, both of New York City, for petitioner.

Shaine & Weinrib, of New York City, for respondent.

Before ROGERS, MANTON, and MAYER, Circuit Judges.

ROGERS Circuit Judge.

It appears that on October 27, 1922, an involuntary petition in bankruptcy was filed in the District Court against the bankrupts, and such proceedings were thereafter had that an order was duly entered adjudicating them to be bankrupts, and subsequently a trustee was elected by the creditors and duly qualified.

Prior to the filing of the petition in involuntary bankruptcy, the bankrupts, being at the time under apprehension of bankruptcy and fearing the institution of various civil and criminal proceedings with respect to their insolvent condition, called upon Louis Dorfman, the petitioner herein, and retained him to represent them in all proceedings, of whatever nature, that might arise out of the circumstances in which they might find themselves and they paid to him, prior to the filing of the petition in involuntary bankruptcy above referred to, the sum of $2,850 as a fee for representing them and protecting their interests in any proceedings which might thereafter arise.

Thereafter the petition in involuntary bankruptcy having been filed, the bankrupts were charged with criminal offenses in connection with the alleged concealment of their property and defrauding their creditors. They were arrested and held in bail, and the petitioner, Dorfman, rendered to the bankrupts professional services, both in the bankruptcy proceedings and in the criminal proceedings above mentioned. At the time the petitioner filed his petition to revise, the criminal proceedings were still pending, and the petitioner states that he expects that he will be called upon under his retainer to defend the bankrupts after an indictment.

It appears, also, that on April 3, 1923, after due notice of the motion had been given, the referee in bankruptcy made an order fixing the petitioner's fee at $300 for his services in the bankruptcy proceedings proper, and requiring him to pay over to the trustee the sum of $2,550, that being the balance of the sum of $2,850 which the bankrupts originally placed in his hands to pay him for the professional services which it seemed to them he might be called upon to render. This order the petitioner asked the District Court to review. That court, on June 15, 1923, affirming the order of the referee, rendered a memorandum opinion, from which we quote as follows:

'When the bankrupt pays money in return for an agreement to render legal services to him in future, he thereby acquires something of value in return for the money which he has paid, namely, the right to receive the services in question, and, in the event that they are refused, the right to sue and recover for breach of contract. It will not be suggested, I think, that on the eve of bankruptcy a prospective bankrupt could pay money to a physician and in return therefor receive an agreement whereby professional medical services would be performed in future, and it certainly cannot be contended that a bankrupt could pay over to a dealer in merchandise on the eve of bankruptcy a sum of money and receive therefor an agreement (and acquiring the rights thereof), whereby at some future time merchandise was to be delivered to him. In other words, the estate of a bankrupt cannot be diverted by any arrangement which will permit the bankrupt to benefit after his adjudication in a manner which would have been impossible, had he not diverted assets of the estate prior to the petition. Such an agreement seems to me to be so unreasonable that it cannot have judicial sanction, and the order of the referee is therefore affirmed.'

Thereafter, and on June 21, 1923, the District Judge filed a supplemental opinion, in which he said:

'Since the foregoing memorandum was filed the attorney in question has advised me that he desires to review this determination. It is therefore, that I was mistaken in my understanding with reference to his attitude. It is apparent that he desires to hold as much of this estate as possible, and it is quite obvious that the practice which he has attempted to follow will encourage practitioners who have no moral scruples to attempt to secure substantial sums on the eve of bankruptcy many times, upon the mere pretext that professional services are to be

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