Klein v. Rancho Montana De Oro, Inc.

• Decision Date: 02 January 1959
• Docket Number: No. 15833.,15833.
• Citation: 263 F.2d 764
• Parties: William KLEIN, Bernard B. Stimmel, and David Blonder, Appellants, v. RANCHO MONTANA DE ORO, INC., Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

263 F.2d 764 (1959)

William KLEIN, Bernard B. Stimmel, and David Blonder, Appellants, v. RANCHO MONTANA DE ORO, INC., Appellee.

No. 15833.

United States Court of Appeals Ninth Circuit.

January 2, 1959.

COPYRIGHT MATERIAL OMITTED

Roy B. Woolsey; David Blonder, Los Angeles, Cal., William Klein, Bernard B. Stimmel, San Francisco, Cal., for appellants.

Morris Lavine, Los Angeles, Cal., for appellee.

Before POPE, BARNES, and HAMLEY, Circuit Judges.

HAMLEY, Circuit Judge.

This is an appeal from two orders entered by the district court in an arrangement proceeding brought under chapter XI of the Bankruptcy Act, § 301 et seq., 11 U.S.C.A. § 701 et seq. The debtor and appellee is Rancho Montana De Oro, Inc., a California corporation.

The appellants, all attorneys, are William Klein, Bernard B. Stimmel, and David Blonder. Their interest in the arrangement proceedings is based upon their claims for compensation for legal services. Klein and Stimmel assertedly rendered legal service to the debtor before the arrangement proceedings were instituted. Blonder claimed to have rendered legal service to the estate, as attorney for the debtor, in the early stages of the proceeding.

The two orders appealed from are dated October 21 and 25, 1957, respectively. In the order of October 21, the court disallowed the major portion of the claims of Klein, Stimmel, and Blonder. In the order of October 25, the court denied a motion to vacate and to set aside an order of June 25, 1957, confirming a plan of arrangement.

We will first discuss the appeal from the order of October 21, 1957. On June 4, 1958, we denied appellee's motion to dismiss this appeal. When the case thereafter came on for argument on the merits, appellee orally and in writing urged us to reconsider this motion.

The principal reason advanced by appellee for dismissal of the appeal from the order of October 21, 1957, is that the notice of appeal was not timely.

If the notice of appeal from an order entered in an arrangement proceeding is not filed within the time prescribed in § 25, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 48, sub. a, we are without jurisdiction, and the appeal must be dismissed. In re Aqua Hotel Corporation, 9 Cir., 251 F.2d 138, 143.

It is provided in § 25, sub. a that appeals under the Bankruptcy Act shall be taken within thirty days after written notice to the aggrieved party of the entry of the judgment, order, or decree complained of, proof of such notice to be filed within five days after service. This period, however, is extended to thirty-three days where such service is made by mail. Wilson v. Shamrock Amusement Corporation, 9 Cir., 221 F.2d 687. Section 25, sub. a further provides that if such a notice is not served and filed, appeals shall be taken within forty days from the entry of such judgment, order, or decree.

The appeal from the order of October 21, 1957, was filed November 29, 1957. While this notice of appeal refers to two orders of "October 25, 1957," this is not the correct date of the second order appealed from. This second order, as described in the notice of appeal, limited the amount of recovery allowed to appellants individually, and was entered on October 21, 1957.¹

Courts are liberal in construing the sufficiency of notices of appeal. Hoiness v. United States, 335 U.S. 297, 69 S.Ct. 70, 93 L.Ed. 16; Martin v. Clarke, 7 Cir., 105 F.2d 685, 124 A.L.R. 497. The error in the notice of appeal concerning the date of the order appealed from is immaterial when, as here, the identity of the order is established by other recitals in the notice of appeal. See Porter v. Borden's Dairy Delivery Co., 9 Cir., 156 F.2d 798.

No proof of service of notice of entry of the order of October 21 was filed. Appellants therefore had forty days within which to file notice of appeal. In re Aqua Hotel Corporation, supra. The notice of appeal of November 29, 1957, was filed on the thirty-ninth day, and was therefore timely.

The other reasons advanced by appellee for dismissal of the appeal from this order have been examined, but do not, in our view, warrant dismissal. The appeal from the order of October 21 will therefore be considered on the merits.

In the order of October 21, the court disposed of a number of pending matters, only two of which are relevant to this appeal. One of these was a creditor's claim which Stimmel had filed on behalf of Klein and himself on April 16, 1957. The other was a petition, filed by Blonder on September 5, 1957, for the allowance of compensation for services rendered early in the arrangement proceedings.

With regard to the disposition made of the creditor's claim filed by Klein and Stimmel, appellants argue that the order of October 21 should be reversed for the following reasons: (1) The order is not supported by adequate findings of fact and conclusions of law; (2) the trial court erroneously ruled that, as a matter of law, Klein and Stimmel were not entitled to compensation for services rendered prior to the instituting of the arrangement proceedings; (3) reception of testimony, in the absence of appellants or their counsel, in opposition to the claim of Klein and Stimmel denied them due process of law; and (4) under the evidence and in view of the appropriate standards to be applied, it was error to disallow the major portion of Klein and Stimmel's claim.

Rule 52(a), Fed.R.Civ.P. 28 U.S.C.A., requiring that in all actions tried upon the facts without a jury the court shall find the facts specially and state separately its conclusions of law thereon, is applicable in bankruptcy proceedings. See Perry v. Baumann, 9 Cir., 122 F.2d 409. In keeping with this rule, an order of a district court disposing of a contested creditor's claim must be supported by findings of fact. Humphrey v. Hart, 9 Cir., 157 F.2d 844.

The creditor's claim filed by Klein and Stimmel was contested. In the original claim it was asserted that they performed services for the corporation prior to the instituting of the arrangement proceedings. These services, according to the claim, consisted of efforts to refinance the existing indebtedness of the corporation. It was also stated that this service was rendered pursuant to an express contract with the corporation, under which Klein and Stimmel were to receive $25,000. It was further stated that the services contracted for were fully performed and that the net amount due under the contract, after taking into account certain advances and payments, was $24,602.63.

On September 4, 1957, the trustee filed objections to this claim. The issues raised by these objections were as follows: (1) Did the corporation enter into a contract with Klein and Stimmel of the kind alleged? (2) If so, was it fully performed by Klein and Stimmel? (3) If there was no contract fixing a fee, but Klein and Stimmel rendered services for the corporation at its request before these arrangement proceedings were begun, what would be just and fair compensation to them for such services?²

The order of October 21 contains no recitals denominated "findings of fact." However, it contains a paragraph discussing the claim of Klein and Stimmel which, to the extent warranted by its content, will be regarded as findings of fact.³

The only recital in this paragraph relative to the claimed contract is the statement that "no contract was ever submitted in writing to this court or received its approval." If the court meant to imply by this statement that a contract between a debtor and an attorney for services to be rendered prior and unrelated to bankruptcy proceedings cannot provide the basis for a creditor's claim unless the contract has been submitted to and approved by the bankruptcy court, such a legal conclusion is erroneous. There is no such requirement. In any event, this recital is not a finding of fact on the issue of whether the parties had entered into such a contract.

Having failed to make such a finding, the court did not reach the factual question of whether such a contract, if entered into, had been fully performed by Klein and Stimmel.

Concerning the third factual issue — what would be just and fair compensation to Klein and Stimmel in the absence of a contract — several statements contained in the quoted paragraph of the order of October 21 must be examined.

First, the court stated that "most of these services were not strictly legal in nature, but efforts toward refinancing the property." While this is unquestionably true, it has no relevance with regard to the fixing of just and fair compensation. There is no rule that calls for disallowance or limitation of a creditor's claim filed by an attorney for prebankruptcy services because the service was in the nature of business advice or financial assistance rather than legal advice and assistance.

Next, the court stated: "The size of the claim would warrant the court in rejecting it entirely." Where a creditor files an obviously inflated claim, this can well affect the credibility to be attached to his testimony as to the service rendered and its value. The words just quoted might therefore have constituted a fitting prelude to a finding of fact that the just and fair compensation to which Klein and Stimmel were entitled was substantially less than that which they claimed.

But no such finding of fact was made, nor was there a finding of any kind as to what the fair and just compensation for their services would be.⁴ Instead, the court stated:

"* * * Fees may only be paid for services in aid of the administration of an estate, In re Owl Drug Co. D.C., 16 F.Supp. 139, 145. No contract was ever submitted in writing to this court or received its approval. Nothing appears that shows any particular benefit to the estate."

This language and the fact that the Owl Drug Company case was cited indicate that the court was not dealing with the claim of Klein and Stimmel as a creditor's claim. It was dealing with this claim as if it were for allowances for...