Nolte v. Hudson Nav. Co., No. 61.

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: L. HAND, SWAN, and CHASE, Circuit
• Citation: 47 F.2d 166
• Parties: NOLTE et al. v. HUDSON NAV. CO. et al., and three other cases.
• Docket Number: No. 61.
• Decision Date: 12 January 1931

47 F.2d 166 (1931)

NOLTE et al.
v.
HUDSON NAV. CO. et al., and three other cases.

No. 61.

Circuit Court of Appeals, Second Circuit.

January 12, 1931.

George Pfeil, of New York City (Ambrose C. Hindman and Boardman Wright, both of New York City, of counsel), for appellants.

Arthur J. W. Hilly, Corporation Counsel, of New York City (Isaac F. Cohen and Joseph H. Miles, both of New York City, of counsel), for claimant.

Taylor, Blanc, Capron & Marsh, of New York City (Mansfield Ferry and Edward E. Watts, Jr., both of New York City, of counsel), for appellee City Bank Farmers' Trust Co.

Graham, McMahon, Buell & Knox, of New York City (Edward W. McMahon, of New York City, of counsel), for appellee National Commercial Bank & Trust Co.

Taylor, Blanc, Capron & Marsh, of New York City, for appellee Reorganization Managers.

Mansfield Ferry, of New York City, for appellee New Jersey Steamboat 5's.

Before L. HAND, SWAN, and CHASE, Circuit Judges.

47 F.2d 167

CHASE, Circuit Judge.

Following the remand by this court when this cause was last here, see 31 F.(2d) 527, an application was made by the attorneys for certain unsecured creditors for an allowance for counsel fees on the ground that through their efforts a fund had been preserved for distribution to the general creditors. As appears in the above-mentioned opinion, there were three classes of creditors: (1) Holders of Hudson Navigation 6's, for whose benefit funds known as parcel A were held; (2) holders of New Jersey Steamboat 5's, for whose benefit funds known as parcel B were held; and (3) unsecured creditors who were to share ratably in what was known as the free assets fund. A former decree, which will be referred to as that of December 1, 1925, was and is controlling, and provided that, when and if the funds in parcel A were exhausted before the Hudson Navigation 6's were fully paid, any balance over would share in the free assets fund. There was a similar provision as to parcel B in regard to the New Jersey Steamboat 5's. The attorneys whose petition for fee allowance was denied did not increase the total of the funds held for distribution to the creditors as a whole, but did succeed, under the decision above referred to, in having the proceeds of the security applied to bond principal so that the extent to which the bondholders may share in the free assets fund was limited and the New Jersey Steamboat 5's will not share at all. This had the effect of releasing about $42,000 already in that fund for application to the claims of unsecured creditors who would not otherwise have shared in that amount, since it would have gone to the bondholders.

These petitioning attorneys were actually employed by only 12 per cent. of the amount of the unsecured claims. While the remaining 88 per cent. will benefit ratably in the distribution of that portion of the fund which would have gone to the bondholders, the District Court refused to allow fees out of the fund to these attorneys on the ground that they had brought no new money into court for distribution, prevented none from going out, or done more than "cause the transfer of a portion of an existing sum held in court from one set to another set of the parties to the cause." In view of this, the court was of the opinion that it was without power to make the allowances. For the reasons below, we think the court, in holding as a matter of law that it was without the power, denied the petitioners a right they had to have it exercise its discretion in the matter of whether or not to make an allowance. Trustees of Internal Improv. Fund v. Greenough, 105 U. S. 527, 26 L. Ed. 1157. To be sure, any allowance, in strictness should be only to creditors who have incurred expenses for the benefit of the entire class, but, "when an allowance to the complainant is proper on account of solicitors' fees, it may be made directly to the solicitors themselves, without any application by their immediate client." Central Railroad & Bkg. Co. v. Pettus, 113 U. S. 116, 5 S. Ct. 387, 28 L. Ed. 915. See, also, Colley v. Wolcott (C. C. A.) 187 F. 595.

While the result of the efforts for which an allowance is asked was not to increase the total of the funds to be distributed, as in the Greenough Case, supra, the amount to be distributed to creditors of the class to which the clients of the petitioning attorneys...