U.S. A. Motel Corp. v. Danning, s. 73-3224

• Decision Date: 08 August 1975
• Docket Number: 74-1179,Nos. 73-3224,s. 73-3224
• Parties: In the Matter of U.S.A. Motel Corporation, a California Corporation, Debtor. U.S.A. MOTEL CORPORATION, et al., Appellants, v. Curtis B. DANNING, Trustee, et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 117

521 F.2d 117

In the Matter of U.S.A. Motel Corporation, a California Corporation, Debtor U.S.A. MOTEL CORPORATION, et al., Appellants, v. Curtis B. DANNING, Trustee, et al., Appellees.

Nos. 73-3224, 74-1179.

United States Court of Appeals Ninth Circuit.

Aug. 8, 1975.

George M. Treister (argued), Los Angeles, Cal., for appellants.

Martin Gendel (argued), Los Angeles, Cal., Robert Driscoll (argued), South Pasadena, Cal., for appellees.

OPINION

Before WRIGHT and CHOY, Circuit Judges, and SOLOMON, ^* District Judge.

PER CURIAM:

In an earlier appeal, we reversed the trial court and dismissed the petition of U.S.A. Motel Corporation for reorganization under Chapter X of the Bankruptcy Act on the ground that it was not filed in good faith. We found that U.S.A Motel Corporation was not insolvent and that the proceedings were filed for two improper purposes: the liquidation of corporate assets and the resolution of internal disputes among shareholders. In re U.S.A. Motel Corporation, 450 F.2d 499 (9th Cir. 1971).

Upon remand, the District Court awarded:

$11,650 to the attorney for the petitioner;

$12,500 to the trustee;

$10,500 to the trustee's attorney;

$2,500 to the referee/special master.

The District Court ordered these amounts to be paid by U.S.A. Motel Corporation, which is solvent.

The board of U.S.A. Motel Corporation is now controlled by a group of stockholders who opposed the Chapter X proceedings and who now contend that no compensation should be awarded because of this Court's holding that the proceedings were not filed in good faith. In the alternative, they contend that the allowances were excessive.

The dismissal of a Chapter X petition for lack of good faith will not necessarily bar the award of compensation. See 6A Collier P 13.03(1) at 924, Smith v. Central Trust Co., 139 F.2d 733 (4th Cir. 1944), On remand from, Fidelity Assurance Association v. Sims, 318 U.S. 608, 63 S.Ct. 807, 87 L.Ed. 1032 (1943). We believe that compensation was appropriate in this case. When the petition was filed, the directors believed, although erroneously, that U.S.A. Motel Corporation was insolvent and could not meet its unsecured obligations. In addition, both the referee special master and the District Court denied motions to dismiss.

Nevertheless, the attorney for the debtor in a Chapter X proceeding is entitled to compensation from the estate only for services which benefited the estate. 6A Collier P 13.04 at 940; In re Porto Rican American Tobacco Co., 117 F.2d 599 (2d Cir. 1941). The trustee, his attorney, and the referee/special master are entitled to reasonable compensation. 11 U.S.C. § 641.

In our view, the $2,500 awarded the referee/special master is reasonable. We also hold that the award of $10,500 to the trustee's attorney, for almost 350 hours work, is reasonable.

We have considered the work performed by the trustee. The award of $12,500 for 200 hours work ($62.50 an hour) is grossly excessive. We hold that a fee of $35.00 an hour, or a total of $7,000, is adequate considering the nature of his responsibilities, and reduce the award to that amount.

We find that...