Matter of Boston and Maine Corp., Bankruptcy No. 70-250-M.

• Decision Date: 15 October 1985
• Docket Number: Bankruptcy No. 70-250-M.
• Citation: 54 BR 938
• Court: U.S. District Court — District of Massachusetts
• Parties: In the Matter of BOSTON AND MAINE CORPORATION, Debtor.

54 B.R. 938 (1985)

In the Matter of BOSTON AND MAINE CORPORATION, Debtor.

Bankruptcy No. 70-250-M.

United States District Court, D. Massachusetts.

October 15, 1985.

Benjamin H. Lacy (Hill & Barlow, Boston, Mass.), for Manager of the Segregated Account.

Edward T. Robinson (Gaston Snow & Ely Bartlett, Boston, Mass.), for Madison Fund, Inc.

MEMORANDUM on the

Application of Madison Fund, Inc. For Allowance Under Section 77(c)(12)

FRANK J. MURRAY, Senior District Judge.

Madison Fund, Inc. (the "Applicant"), seeks an order from the court allowing payment out of the estate of the Debtor of expenses incurred, including attorneys' fees, for services rendered during the reorganization period. Applicant's claim for the allowance sought is based on Section 77(c)(12) of the Bankruptcy Act 11 U.S.C. § 205(c)(12) as follows:

Within such maximum limits as are fixed by the Interstate Commerce Commission, the judge may make an allowance, to be paid out of the debtor\'s estate, for the actual and reasonable expenses (including reasonable attorney\'s fees) incurred in connection with the proceedings and the plan by parties in interest. . . .

As the holder of $10.3 million face value first mortgage bonds of the Debtor's $46.3 million outstanding, the Applicant was a creditor and a party in interest of the Debtor's estate. The Applicant seeks an allowance equivalent to attorneys' fees it paid to the law firm of Gaston Snow & Ely Bartlett in the amount of $83,409.25, and other expenses incurred in the amount of $4,626.15, a total of $88,035.40. The Commission, pursuant to Section 77(c)(12), has fixed the maximum limit within which an allowance may be made and has filed its decision with the court.

Under Section 77(c)(12), expenses and costs may be allowed a party in interest as properly reimbursable out of the estate for services and activities which, while beneficial to the creditor's private interests, meet the requirement of providing benefit to the reorganization process and the estate. A creditor or other party in interest is not entitled to an allowance out of the estate for expenses incurred for services rendered or activities engaged in which were undertaken solely or primarily in serving the private interests of the actor. Recourse may be had to the reorganization process as a whole, and its several stages, to determine whether the efforts of the party in interest and its counsel may be accounted beneficial to the reorganization and the estate. In making that determination the court "is faced, not with applying a litmus-like test, but with exercising a prudent and realistic judgment". In the Matter of Penn Central Transportation Company, Debtor, 23 B.R. 499 (E.D.Pa.1982). Services for which a party in interest may be allowed expenses and costs may turn on the results attained such as, for example, protecting or increasing assets, or toward decreasing the Debtor's indebtedness, or otherwise in rendering commendable assistance to the Debtor's Trustees or to the creditors. The distinction to be made between those services for which reimbursement may be made and those which are not reimbursable is not susceptible of exhaustive definition. However, services which are merely duplicative of services of the Debtor's Trustees, or other officers of the court, and do not result in measurable benefit to the estate are not reimbursable; nor are the expenses or costs of services reimbursable which take on the aspect of merely "watchdog services". Matter of New York, New Haven & Hartford Railroad Co., 421 F.Supp. 249, 258 (D.Conn.1976).

The Applicant has designated the time span from June 16, 1977 to November 21, 1979 as the period within which the claim of reimbursable expenses and fees were incurred. During this period there were two matters before this court in which the Applicant as a bondholder had a private interest: the petition of the Debtor's Trustees for authority to finance a tender offer to redeem Debtor's first mortgage bonds at a discount, and the Applicant's effort to secure an order for payment of interest on the outstanding bonds.

In the Spring of 1977 the Debtor's Trustees petitioned the court for authority to use the major portion of the proceeds (restricted funds) of the sale of the Commuter Rail properties to make the tender offer. Before the petition was filed, the Debtor's Trustees consulted with, among others, counsel for the first mortgage indenture trustees and executives of the Applicant, to assess the degree of response by bondholders. Specifically, the Trustees sought to acquire $37.0 million face amount of the bonds using $32.0 million of the restricted funds, by tendering to bondholders $850 for each bond of $1,000 face value, with all accrued interest on the bond waived. The court heard the Trustees' petition and, determining that the redemption proposal was intertwined with the plan of reorganization, transferred the petition in November 1977 to the Commission....