Intern. Environmental Dynamics, Inc., In re

• Decision Date: 13 October 1983
• Docket Number: No. 81-4514,81-4514
• Citation: 718 F.2d 322
• Parties: Bankr. L. Rep. P 69,428 In re INTERNATIONAL ENVIRONMENTAL DYNAMICS, INC., a Delaware corporation, Debtor. Chester B. SALOMON, Trustee in Bankruptcy of Robin International, Inc., Appellant, v. Donald M. LOGAN, International Environmental Dynamics, Inc., a Debtor in Possession, William J. Currer, Jr., as Disbursing Agent, John V. Rogers, Jerry Barbour, Jules Becker, Dee Cameron, Joseph Gereghty, et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 322

718 F.2d 322

Bankr. L. Rep. P 69,428

In re INTERNATIONAL ENVIRONMENTAL DYNAMICS, INC., a Delaware corporation, Debtor Chester B. SALOMON, Trustee in Bankruptcy of Robin International, Inc., Appellant, v. Donald M. LOGAN, International Environmental Dynamics, Inc. a Debtor in Possession, William J. Currer, Jr., as Disbursing Agent, John V. Rogers, Jerry Barbour, Jules Becker, Dee Cameron, Joseph Gereghty, et al., Appellees.

No. 81-4514.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 10, 1983.

Decided Oct. 13, 1983.

Issac M. Pachulski, Anthony Castanares, Stutman, Treister & Glatt, Los Angeles, Cal., Chester B. Salomon, New York City, for appellant.

Robert Reeser, Oakland, Cal., Donald Logan, Palo Alto, Cal., William J. Currer, Jr., Los Angeles, Cal., for appellees.

Appeal from the United States District Court for the Northern District of California.

Before SNEED, FARRIS, and REINHARDT, Circuit Judges.

SNEED, Circuit Judge:

Appellant Chester Salomon, trustee in bankruptcy of Robin International, Inc., challenges an order of the bankruptcy court. The court awarded interim counsel fees to Donald M. Logan from a fund accumulated by International Environmental Dynamics, Inc., a debtor and a debtor in possession in a case arising under Chapter XI of the former Bankruptcy Act. Robin International, Inc. claims an interest in the monies awarded to Logan and contends that the award of fees imperils that interest.

The district court dismissed the appeal from the bankruptcy court's order on alternative grounds. We reverse the district court's first alternative holding that appellant lacks standing to challenge the order. We affirm, however, the district court's second alternative holding that the bankruptcy court did not abuse its discretion in awarding fees to Logan.

I. FACTS

This case involves a complex and extended bankruptcy proceeding instituted by International Environmental Dynamics, Inc. (IED) in 1970 under Chapter XI of the Bankruptcy Act. 11 U.S.C. Sec. 701 et seq. (1976) (repealed 1978). As part of the reorganization proposal, IED's creditors were divided into two groups, the Rogers creditors and the Anstey creditors. The plan also separated the business affairs of IED as debtor in possession from the affairs of IED as a corporate entity. In 1977 and 1978, the debtor in possession received monetary advances from the Anstey and Rogers creditors and from corporate IED. These advances were used to protect IED's primary asset, a partially developed business property, from foreclosure for nonpayment of local taxes. ¹

In December 1980, the economic future of this property brightened and the bankruptcy court approved an agreement with Perini Land & Development Company that provided funds for the development of the property and for payment of the administrative expenses of the estate. The Perini agreement gave promise of returning sums sufficient to perform IED's Plan of Arrangement and to provide corporate IED and the Rogers and Anstey creditors with a substantial excess. The agreement provided for an initial advance of $2.7 million. Approximately $1 million was allocated to reimburse advances made to the estate; of this amount, $597,000 was allocated to reimburse corporate IED.

The Perini agreement also budgeted $500,000 for payment of interim fees to counsel. In January 1981, the bankruptcy court issued orders allowing interim fees of $300,000 to the counsel for the debtor in possession and $225,000 to the counsel for the Rogers creditors. These awards depleted the amount allocated for interim fees.

On January 7, 1981, the debtor in possession moved the bankruptcy court to authorize reimbursement for sums advanced for preservation of the property by the Anstey and Rogers creditors and the corporate IED. The trustee for Robin International, Inc. (Robin) filed an answer contending that the sums attributed to corporate IED had in fact been paid by Robin. ² By order dated January 30, 1981, the bankruptcy court authorized reimbursement for advances made to the debtor by the Rogers and Anstey creditors. ³ The court, however, withheld the amount allocated to IED pending determination of the person or persons entitled to it. The money was placed in a certificate of deposit.

At a hearing on February 10, 1981, Donald M. Logan, counsel for the Anstey creditors, applied for interim fees. The disbursing agent informed the court that there were other claimants to the funds held in the certificate of deposit. The court proposed an order allowing Logan $175,000 from the funds held in the certificate of deposit. At another hearing on April 6, 1981, the court heard Logan's application for fees and Robin's evidence in support of its claims. The bankruptcy court then proposed that Logan be paid fees of $175,000 from the amount held in the certificate of deposit and that Robin receive the rest without prejudice to its right to further reimbursement when other funds become available. When Robin failed to respond to the proposal, the bankruptcy court ordered Logan paid from the certificate. The bankruptcy court did not purport to rule on Robin's claims in its order allowing Logan fees.

The district court dismissed Robin's appeal from the order on alternative grounds. It held either that Robin lacked standing to appeal because it was not an aggrieved party under section 39c of the Bankruptcy Act, or that the bankruptcy court's order did not constitute an abuse of discretion.

II. JURISDICTION

Section 24a of the Bankruptcy Act provides our jurisdiction to decide Robin's appeal. The Bankruptcy Reform Act of 1978 (the Code) repealed section 24a and replaced it with 28 U.S.C. Secs. 1293(a) and (b). The Code, however, also established a transition period between October 1, 1979 and April 1, 1984. During the transition period cases initiated under the Act are governed by the old law while newly filed bankruptcies are governed by the Code. ⁴ Section 24a of the Act is therefore the pertinent jurisdictional provision in this case. See e.g., In re Cross, 666 F.2d 873, 877 (5th Cir. Unit B 1982); In re Continental Investment Corp., 637 F.2d 1, 3 & n. 1 (1st Cir.1980); Dail v. United States, 635 F.2d 315, 317 & n. 4 (4th Cir.1980), cert. denied, 454 U.S. 838, 102 S.Ct. 144, 70 L.Ed.2d 120 (1981); cf. In re Cochise College Park, Inc., 703 F.2d 1339, 1344 (9th Cir.1983) (Section 24a establishes jurisdiction for appeal from summary judgment in case filed under Bankruptcy Act).

In relevant part, section 24a provides:

The United States courts of appeals ... are invested with appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy, to review, affirm, revise, or reverse, both in matters of law and in matters of fact ....

11 U.S.C. Sec. 47(a) (1976) (repealed 1978) (emphasis added).

An order authorizing the interim award of attorneys' fees is an interlocutory order, e.g., In re Callister, 673 F.2d 305, 306-07 (10th Cir.1982) (per curiam), which order is appealable under section 24a only if it arises in "proceedings in bankruptcy," as opposed to "controversies arising in proceedings in bankruptcy." Dalton Equipment Co. v. Brown, 594 F.2d 195, 196 (9th Cir.1979). ⁵ "Proceedings are those matters of an administrative character, including questions between the bankrupt and his creditors, which are presented in the ordinary course of the administration of the bankrupt's estate." Id. at 197 (quoting 2 Collier on Bankruptcy p 24.12 (14th ed. 1976) ); see also In re Christ's Church of the Golden Rule, 172 F.2d 523, 524 (9th Cir.1949). ⁶ An order granting attorneys' fees arises in "proceedings in bankruptcy" and is therefore appealable under section 24a. See Warren v. Palmer, 130 F.2d 887 (2d Cir.1942) (per curiam); 2 Collier on Bankruptcy p 24.14 (14th ed. 1976); cf. Young Properties Corp. v. United Equity Corp., 534 F.2d 847, 853 (9th Cir.), cert. denied, 429 U.S. 830, 97 S.Ct. 90, 50 L.Ed.2d 94 (1976) (proceedings include determination of fee to be paid to the bankruptcy officials and orders for disposition of property of the bankrupt) (dicta).

Moreover, we reject appellee Logan's suggestion that we lack jurisdiction because this case is moot. Logan argues that In re Roberts Farms, Inc., 652 F.2d 793 (9th Cir.1981), indicates that this case is moot because Robin failed to obtain a stay of the bankruptcy court's order and the disputed funds have already been paid to Logan. ⁷ Roberts Farms dismissed as moot an appeal by trustees challenging bankruptcy orders that disallowed certain claims, confirmed a plan of arrangement, and approved a settlement with the FDIC. Id. at 794. By the time of the appeal, the plan of arrangement had been substantially completed. We concluded that the plan of arrangement had been so far implemented that it would be impossible to fashion effective relief. Id. at 797. As an alternative ground for finding the case moot, we held that appellant's failure to obtain a stay had permitted such a comprehensive change in circumstances as to render it inequitable for this court to consider the merits of the appeal. Id. at 798.

Neither of these grounds for our holding in Roberts Farms compels a finding of mootness in this case. Because Logan is a party to this appeal, this court could fashion effective relief by remanding with instructions to the bankruptcy court to order the return of erroneously disbursed funds. Cf. Burbank Anti-Noise Group v. Goldschmidt, 623 F.2d 115, 116 (9th Cir.1980) (per curiam), cert. denied, 450 U.S. 965, 101 S.Ct. 1481, 67 L.Ed.2d 614 (1981). Nor would it be inequitable to hear the merits of Robin's appeal. Logan has known since 1981 that Robin contests the bankruptcy court's order that he be paid from the certificate of deposit. We therefore conclude that this case is not moot and we have jurisdiction...