Pratt v. Bothe

• Decision Date: 29 June 1904
• Docket Number: 1,283.
• Citation: 130 F. 670
• Parties: PRATT v. BOTHE.
• Court: U.S. Court of Appeals — Sixth Circuit

130 F. 670

PRATT v. BOTHE.

No. 1,283.

United States Court of Appeals, Sixth Circuit.

June 29, 1904

This is an appeal from an order made by the District Court in a proceeding in a bankruptcy case wherein Flora B. Hawley had been adjudicated a bankrupt, which order denied a petition of the appellant praying that the trustee be directed to pay the petitioner, out of the moneys in his hands belonging to the estate of the bankrupt, the balance claimed to be due to him for services as an attorney and counselor at law rendered to the bankrupt, and for disbursements made for her while in such professional service. A schedule stating the items of the account was appended to the petition, consisting of:

Disbursements made up of items of traveling expenses, telegrams, and the like, from February 12 to April 28, 1903, amounting to $35 97

Charges for services rendered by Pratt to Hawley, commencing with December 6, 1902, down to and including May 14, 1903 amounting to . . . 765 00

Services of George P. Cobb, of counsel for Hawley in the bankruptcy proceedings . . . 100 00

And services of Henry Weber and A. R. Miller for making estimate of the value of the buildings on the real estate belonging to Hawley, and their attendance to testify as to the same 50 00

Making a total of . . . $950 97

Upon which there are credits amounting to . . . 150 00

Leaving a balance due Pratt of . . . $800 97

The petition for an adjudication of bankruptcy was filed January 28, 1903. It appears from the appellant's petition and proofs that the charges were incurred by the bankrupt during a period extending from somewhat less than 2 months before the petition of the creditors was filed until 3 1/2 months thereafter.

The bankrupt had been engaged in business as a merchant at Bay City, Mich., for several years and had become embarrassed and unable to meet her obligations. On the 6th of December, 1902, she consulted the appellant, to advise her as to what course she had best pursue. Further consultations ensued, and on January 12, 1903, she paid the appellant $50 in part payment for his services, and, to secure him for the balance of his services, gave him a mortgage on her stock of merchandise, conditioned for the payment of $200 on the 27th day of January, 1903, and further that she would 'well and truly pay or cause to be paid to the second party at maturity all such other sums in which the said first party may become indebted to said second party for his services hereafter rendered and disbursements and expenses paid, or otherwise, and also for any other indebtedness that may be incurred to other counsel employed by said second party in connection with said first party's affairs. ' On the same day she executed another mortgage on the same property to one Jeffery, as trustee, to secure all her creditors; the amount of her indebtedness being then estimated at $13,000, but which eventually proved to be as much as $15,500. Apparently both these mortgages were given upon the suggestion of the appellant. The appellant, as he claims, made an agreement with Mrs. Hawley that, in case her creditors should acquiesce in the mortgage to Jeffery, his fee should be the sum of $250, but that, in case they instituted bankruptcy proceedings, he should have such further compensation as might be reasonable for his services and expenses. The creditors did not acquiesce in the mortgage to Jeffery, but on January 28th filed their petition for an adjudication of bankruptcy against Mrs. Hawley, as above stated; the ground thereof being that the giving of the mortgages above mentioned constituted him, defended Mrs. Hawley; and a protracted trial before a jury was had, which resulted in a finding against her. This was followed by an adjudication of bankruptcy on May 9, 1903. On June 8th the appellant filed with the referee his petition for the allowance of the claim now in controversy. It was opposed by the trustee, not, as we infer from the record before us, upon the ground that the charges were unreasonable of themselves, but upon the ground that the claim was not, in law, allowable. The referee allowed a charge of $37.50 for services in preparing the schedules required to be filed by the bankrupt, and certified the case to the District Judge for his instruction as to the other charges included in the claim of the petitioner. The amount of the claim for services rendered before the filing of the petition by creditors was the sum of $241.75, and the appellant admitted that he had been paid the sum of $150, $90 of which was paid February 2, 1903, after the filing of the creditor's petition. The balance claimed by him on that portion of his whole claim was therefore $91.75. The District Judge, in response to the questions certified by the referee, gave his opinion (1) that the $37.50 for preparing the bankrupt's schedules was properly allowed; (2) that the petition should, in respect of all other charges of the appellant, be disallowed; (3) but that the balance of $91.75 for services rendered before the filing of the petition of creditors might be allowed as an ordinary debt of the bankrupt upon the surrender of the $150, which was, as the court held, an unlawful preference. An order to this effect having been entered, the petitioner has appealed. He has also, out of caution, brought the case up by petition for revision. As there is no controversy in respect to any question of fact upon the case as presented to us, it matters little which method of procedure is recognized. We incline to the view, however, that the case is properly before us on the appeal (Cunningham v. German Ins. Bank, 103 F. 932, 43 C.C.A. 377), and will consider and determine it upon that footing.

Frank S. Pratt, in pro. per.

Graves, Hatch, Millis & Goodenough, for appellant.

Lee E. Joslyn, for appellee.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

SEVERENS Circuit Judge, having made the preceding statement of the case, .

The contention of the appellant is that his whole claim, to the extent that it has not been paid, should be allowed as a charge upon the fund in the hands of the trustee, and should be paid before distribution to general creditors. He founds his claim upon the provision of section 60d of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 562 (U.S.Comp.St. 1901, p. 3446), which reads as follows:

'If a debtor shall directly or indirectly, in contemplation of the filing of a petition by or against him, pay money or transfer property to an attorney and counselor at law, solicitor in equity, or proctor in admiralty for services to be rendered, the transaction shall be examined by the court on petition of the trustee or any creditors and shall only be valid to the extent of a reasonable amount to be determined by the court and the excess may be recovered by the trustee for the benefit of the estate.'

The construction which the appellant thinks should be imposed upon this paragraph is that it validates any such payment or transfer for services to be rendered to the debtor, whether to be rendered before or after a petition in bankruptcy is filed against him, and whether or not he is adjudged a bankrupt, subject only to the determination of the court as to whether the amount paid or transferred is reasonable. For the trustee, on the other hand, it is contended that it has relation only to services which may be rendered to the debtor prior to the institution of bankruptcy proceedings against the debtor, upon which he shall have been adjudged a bankrupt. It must be admitted that the language of this provision of the act is obscure. And the bankruptcy courts have found difficulty in settling its meaning. ...