In re Watco Corporation, 6374 and 6394

• Decision Date: 05 February 1938
• Docket Number: 6375 and 6395,6376 and 6396.,No. 6374 and 6394,6374 and 6394
• Citation: 95 F.2d 249
• Parties: In re WATCO CORPORATION. CHRIS SCHROEDER & SON CO. et al. v. WATCO CORPORATION et al. DROUGHT et al. v. SAME. SCANDRETT et al. v. SAME.
• Court: U.S. Court of Appeals — Seventh Circuit

95 F.2d 249 (1938)

In re WATCO CORPORATION.

CHRIS SCHROEDER & SON CO. et al. v. WATCO CORPORATION et al.

DROUGHT et al. v. SAME.

SCANDRETT et al. v. SAME.

Nos. 6374 and 6394; 6375 and 6395; 6376 and 6396.

Circuit Court of Appeals, Seventh Circuit.

February 5, 1938.

Wm. H. Voss, of Milwaukee, Wis., for appellants in Nos. 6374 and 6394.

Ralph J. Drought, of Milwaukee, Wis., for appellants in Nos. 6375 and 6395.

Eugene L. McIntyre, of Milwaukee, Wis. (Rodger M. Trump, of Milwaukee, Wis., of counsel), for appellants in Nos. 6376 and 6396.

James E. Coleman and John S. Barry, both of Milwaukee, Wis., for appellee Watco Corporation.

Martin R. Paulsen, of Milwaukee, Wis., for appellees bondholders.

Before EVANS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

EVANS, Circuit Judge.

For the sake of brevity all the appeals will be disposed of in one opinion. All are by parties dissatisfied with the award made to them for services rendered (1) either as attorneys representing the trustees named in the mortgage who foreclosed the same in the state court and who also rendered services in the reorganization proceedings (Fish, Marshutz & Hoffman); (2) or for legal services rendered as attorneys for the Chicago, Milwaukee & St. Paul Railroad in protecting their client who owned the land upon which the warehouses were erected and who sought to terminate the lease upon the lessee's failure to pay the taxes and rentals (Bender, Trump, McIntyre & Freeman); (3) or for legal services rendered by Drought & Drought for bondholders in the state foreclosure suit and in the reorganization proceedings; (4) or for bondholders' committee expenses incurred in the reorganization proceedings.

The service charges of the various claimants may be divided into two classes: (a) services rendered in the foreclosure suit in the state court which resulted in a decree allowing

                  Fish, Marshutz & Hoffman, as attorneys for
                   the trustees of the Schroeder mortgage....... $3,000
                  Chris. Schroeder & Son Co. and Walter
                   Schroeder compensation as trustees of
                   Schroeder mortgage, plus disbursements.......    200
                  Drought & Drought, as attorneys for the
                   Schroeder bondholders' committee.............    750
                  Bender, Trump, McIntyre & Freeman as attorneys
                   for the C. M. & St. Paul Railroad............  1,500
                

and (b) services rendered in the instant proceedings wherein the parties continued either to litigate questions similar to those presented in the state court or sought to advance the reorganization plan which was finally adopted, or opposed or favored claims of certain creditors.

So much has been written by us on the subject of fees and their reasonableness and the proper approach which their determination necessitates, that it is hardly excusable for us to again state the rules or the determining factors in their allowance.

We state our conclusions only.

(1) The rule announced in Re 211 E. Delaware Place Bldg. Corporation, D. C., 13 F.Supp. 473, is applicable here.

(2) The finality of the fee ruling by the state court in the foreclosure decree must be determined by the rule laid down in Shulman et al. v. Wilson-Sheridan Hotel Co., 301 U.S. 172, 57 S.Ct. 680, 81 L.Ed. 986.

(3) This court is entirely in sympathy with the position of the district judge and with his desire to protect the creditors. On the other hand, we are convinced that it is as important that fees for meritorious services actually rendered and necessary to effectuate a reorganization should be allowed as it is that the court should prevent the undue enrichment of attorneys for services of no value to the debtor.

(4) In determining the reasonableness of the solicitors' fees we are to look to the actual value of the property covered by the mortgage rather than to the face value of the mortgage, to determine the amount involved.

Applying these general observations to the facts disclosed by the record before us, we conclude:

The decree of the state court in the foreclosure suit which allowed Drought and Drought $750 is not subject to attack. It is binding upon us.

The same applies to the fees ($1500) allowed Bender, Trump, McIntyre & Freeman.

The allowance of fees for the attorneys in the foreclosure suit ($3,000) may be subject to revision. The rule announced in Shulman v. Wilson-Sheridan Hotel Co., supra, governs. As to this allowance of $3,000 for solicitors' fees in the foreclosure suit we are satisfied they were worth the $3,000 allowed by the state court. Not only was there a foreclosure of mortgages aggregating approximately $300,000 on property worth perhaps half that amount, but there was a sharply contested battle between the landlord and the creditors of the lessee, with the loss of the entire property a real possibility. The default in the payment of rent and the failure of the mortgagee (the lessee) to pay its taxes, caused the landlord, the Chicago, Milwaukee & St. Paul Railroad Co., to insist upon a termination of the lease. If the effort of the railroad had been successful there would be no res for distribution.

The allowance of fees to all the parties in the state court suit may have been questioned on appeal. Whether such attack would have been successful, we need not determine, although their allowance was...