The opinion of the court was delivered by: INCH
In 1933 the New York Title and Mortgage Company encountered financial difficulties. It had guaranteed and issued mortgage certificates in Series Q. The company went through a reorganization and among other things a plan was proposed and adopted for the readjustment, modification or reorganization of all of the holders of the mortgage investments represented by this Series Q. First mortgage certificates, etc. This plan, after some modifications, was approved by the Supreme Court of New York, New York County (Mr. Justice Frankenthaler, January 28, 1935).
The plan, which was before the referee (Trustees' Exhibit 1), provides for the appointment of three trustees who were given the title to and all the rights and powers of owners of the trust estate. Their duties and obligations were carefully set forth and finally it was provided in Article XVII of the Plan and Trust Indenture as follows: "The trustees herein named and their sucessors in trust, hereby waive the right to statutory commissions and hereby agree that their aggregate annual compensation shall be determined and fixed by the court upon the settlement of their accounts filed pursuant to Article XIV upon the basis of time, effort and accomplishments on the part of each trustee, but in no event shall such aggregate annual compensation exceed 1/4 of 1 percent of the total principal amount of the outstanding Series Q certificates".
Article XIV, above referred to, states that the trustees shall, among other things, file semi-annually an inventory and full and true account of their trust.
It apparently was throught best by the court to make allowances to the trustees semi-annually after they duly accounted, in accordance with Article XIV. The court would then decide what that compensation should be "upon the basis of time, efforts and accomplishments on the part of each trustee" (Article XVII).
The trust approximated $10,000,000 in properties and mortgages at the beginning of the trusteeship of the three trustees.During the succeeding years after the semiannual accounting and due approval of same by the court the trustees duly applied for allowances and in the case of Mittlemann he was allowed by the court compensation which varied. In some instances he was allowed $4,000, in others $5,300, and in another $3,900. In other words there was no fixed sum to which a trustee could be entitled at the end of a period. Compensation depended upon many circumstances, all of which had to be considered carefully by the court, and while there is no indication here to such action it was possible for the court to award a larger sum to one trustee than to another, according to the facts presented in the accounting, the limit however being that the aggregate sum to all of the trustees could not exceed 1/4 of 1 percent of the total principal amount of the outstanding certificates of the Series.
In accordance with the Plan the trustees had waived any "commission" and agreed to leave their "compensation" to the court. At the hearing before the referee the trustee was allowed to amend his petition and order to show cause by substituting the word "compensation" for the word "commission" which, under the trust indenture, they were not to receive.
Mittlemann was one of these trustees and duly qualified after his appointment on October 24, 1935.
In accordance with the regular procedure and the Plan, Mittlemann and his co-trustees, on a or about April 10, 1939, duly filed their semi-annual inventory and account for the period of July 1, 1938 to December 31, 1938 and sought the approval and judicial settlement thereof. They also sought compensations for their work as usual.
Thereafter, on May 5, after due notice, a hearing was held before the court. Decision was reserved by the court on both the matter of approving and judicially settling the account of the trustees, and the question of their compensation for the period in question. By his petition, dated May 4, 1939 (bankrupt's Exhibit 1), Mittlemann applied for "an allowance in such sum as may be fairly compensatory and as may likewise be fair, reasonable and equitable to all parties in interest".
The court naturally did not at once pass upon this petition for allowance nor judicially approve the accounting.Anyone knowing the amount of work that was before the late lamented Mr. Justice Frankenthaler wonders how he accomplished the tremendous amount of work that he did.
The application was made as I have said in May 1939. On September 1, 1939, Mittlemann filed a voluntary petition in bankruptcy and was duly adjudicated that day. No approval of his accounts had been made at that time and no allowance had been granted to him by the court. On September 5, 1939, however, the trustees' accounts were judicially approved and the court then made an allowance to Mittlemann, as such trustee, of $3,750. Not until then could Mittlemann be sure that he would get anything. In fact common experience shows that an appointee of the court, such as Mittlemann was, cannot be sure of compensation until an order to that effect has duly entered and been not appealed from. Such compensation may be reduced or even denied on appeal and, in some rare cases, may be increased.
In making such allowance as this, the court was required by the Plan as well as by the decisions to carefully and fairly consider the "time, efforts and accomplishments on the part of each trustee" aside from first carefully examining the semiannual report before the judicial approving.This is not a case of earning a salary or wages. It is peculiarly one requiring knowledge and fair appraisal of the value of the services, by the court.
The referee has decided that this allowance, granted to Mittlemann on September 5 or 6 (its date of entry order), 1939, by the State Supreme Court, belongs to the bankrupt estate of Mittlemann who had been duly adjudicated a bankrupt on Sepgember 1, 1939, in this court. ...