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IN RE NEW YORK INVESTORS

February 15, 1943

In re NEW YORK INVESTORS, Inc.


The opinion of the court was delivered by: BYERS

BYERS, District Judge.

Exceptions have been filed to the report of the referee dated January 27, 1943, fixing allowances, by the trustee and one creditor, but concerning only the following items: The former challenges allowances: To attorney for petitioning cred- itors $ 1,530.00 To David Berdon & Co., account- ant 3,588.75 The creditor, Reconstruction Finance Corporation, excepts to the foregoing, and to the allow- ance To attorney for bankrupt (in ex- cess of $750) 3,105.95 Total $ 8,224.70

This bankruptcy proceeding is the result of the filing of a petition for reorganization on December 31, 1934, under the then Section 77B, Bankr.Act, 11 U.S.C.A. § 207, which developed into an order of liquidation in bankruptcy on December 14, 1938.

 A petition in bankruptcy had been filed on October 13, 1933, which was abandoned after many of the allegations in the petition had been successfully contested, and apparently that proceeding lapsed, prior to or at the time that the petition for reorganization under Section 77B was filed.

 The allowances under review are for services rendered in that primary bankruptcy proceeding.

 The referee's report does not deal with allowances which were made in the 77B proceeding, although other of the voluminous papers now under examination indicate that the attorney for the bankrupt received allowances aggregating $11,500 for services performed in connection with an equity receivership (which antedated the bankruptcy) and in the said 77B proceedings.

 The attorney for the petitioning creditors is said to have received an allowance of $750 plus disbursements in the 77B proceeding, and three of the petitioning creditors whom he represented in that aspect of the matter were the same persons for whom the petition was filed in the bankruptcy proceeding.

 Reference is made to this subject because it would seem that the allowances made in connection with the 77B proceeding could have covered all services out of which that proceeding grew or as a result of which it was before the court. Section 244 of the present Act 11 U.S.C.A. § 644 seems to support such an inference.

 A like situation was considered in Re Middle West Utilities Co., D.C., 17 F.Supp. 359, at page 371. So much of the language of that opinion justifies quotation: "The attorneys for the petitioners in the original bankruptcy suit ask compensation in the reorganization proceedings for services rendered prior to the filing of the 77B petition. There was no adjudication of bankruptcy. There was no administration of an estate in bankruptcy. There was no estate of a bankrupt."

 The court is therefore without the benefit of any discussion by the referee of this aspect of the matter of the questioned allowances.

 This proceeding bids fair to yield a dividend to creditors of slightly in excess of 2%, which is some reason for scrutinizing the pending application rather closely. Since the R.F.C. claims represent about 50% of the debts, its protests invite careful consideration.

 Turning now to the items in question:

 A. The allowance to the attorney for petitioning creditors.

 This reveals a peculiar arrangement, in that Archibald Palmer seeks an allowance as counsel to Messrs. Schiff, Dorfman, Stein & Brof, who are not named as the attorneys of record in the notice to creditors concerning these applications. The referee states that Mr. Palmer says that he is entitled to 50% of the fee to be allowed to the said firm as attorneys for the petitioning creditors, and ...


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