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January 7, 1949


The opinion of the court was delivered by: KNOX

The debtor in this proceeding owns the land and building at 120 Broadway in downtown Manhattan, one of the world's most valuable office building properties. A voluntary petition in reorganization was filed in April, 1941, and it was only after six long years that a plan of reorganization was finally consummated. The details of the proceeding are so fully described in the discussion of the several applications that no useful purpose would be served by repeating them here.

One introductory observation should be made: Counsel for the Debtor has stated that the net current assets as at February 29, 1948 total $ 1,077,606.50. This is the net remaining after payment of $ 178,000 by way of allowances made prior to that date. If I were to follow the S.E.C.'s recommendation on the final hearing for allowances, the total allowances and disbursements would be $ 672,102.91. Those granted by me total $ 792,521.57. These figures include allowances made prior to February 29, 1948 in the sum of $ 178,000. Since that date, under the order of August 31, 1948, allowances and disbursements have been paid in the sum of $ 303,955.57. In other words, of the total of $ 792,521.58 allowed by me $ 481,955.57 have already been paid, leaving a balance of $ 310,566.01 to be paid in accordance with this opinion.

 If an appeal should be taken by the applicant representing William Doyle and Adelaide Knight from the denial of any compensation to him, and that appeal should be upheld, he would be allowed in all probability a substantial fee. In that event, other allowances possibly would have to undergo revision. Should an appeal be taken, the court will give consideration to what if anything should be done pending appeal.

 Application of J. Donald Duncan.

 J. Donald Duncan, disinterested Trustee herein, entered upon his duties on April 10, 1941, and continued to perform them until the consummation of the reorganization now in effect. He requests that his compensation be fixed at $ 200,000. He has heretofore received the sum of $ 95,000, which, of course, will be credited upon the fee about to be determined.

 The Securities and Exchange Commission expressed the view that Mr. Duncan's compensation should not exceed $ 125,000, or approximately $ 17,850 per annum.

 Throughout this administration, the disinterested trustee has devoted himself to the complicated and intricate problems that continued constantly to come before him. He did so with energy, intelligence and complete fidelity to all concerned. The character of his services has given me personal satisfaction and what he has done has been of incalculable aid to the Court. His comprehension and understanding of the matters involved in this administration were at the disposal, at all times, of the parties in interest and they made free and full use of the information that was needed for their enlightenment. With one exception, these interests, I think, will freely admit that petitioner was uniformly courteous and considerate and that he was impeccable in the way of fairness and impartiality. Such, at any rate, is my firm conviction.

 Such, too, seems to be the conviction of the Commission. As illustrative of this, I quote from the statement made by Mr. Finnigan:

 'As I said * * * Mr. Duncan did not sit back and let other people run the property, but he personally took over and, as I said metaphorically, he rolled up his sleeves, and really did a job. * * *

 'I think that it would be unfair * * * not to make several points. In the first place, I have already referred to the obviously successful negotiations with the City on the question of the tax certiorari proceedings. However, I have not pointed out that the mortgage which I have extolled of $ 14,500,000 was obtained ultimately by Mr. Duncan. There is no question that he was the man who was up there * * * at the John Hancock Mutual Life Insurance Company, and there is no question either that throughout the proceedings, Mr. Duncan had been urging upon everybody that the way to reorganize * * * was to get the funded debt down to where there could be no danger of catastrophe if business fell off.

 'There were other things in connection with Mr. Duncan's operation of the property, and one of them was the very tender subject of relations with the labor unions. I do not recall the exact facts, but at the beginning of the proceeding the union had not taken over all the service employees of the building. There were I think one or two unions in there, but a lot of the employees were not members of the union. Since these proceedings, they have all joined, and your Honor will recall what the Major (Hooker) refers to as the time no one now living will forget when all the buildings were all tied up with elevator strikes, and Equitable was not.

 'Relations as far as we have been able to ascertain between the unions and the present management * * * have been excellent * * * and I think that a great deal of the credit for that spirit of relations goes to the trustee and his counsel, and to the additional trustee. I think that is a very fine thing.

 'The first two plans were proposed by Mr. Duncan after consultation and a lot of conferences with the various interested parties, as to some of which Mr. Riddell was hurt because he was not invited to attend. However, these were not laid down on the desk by Mr. Duncan with the attitude 'This is my idea; take it or leave it.'

 'A great deal of time was spent in trying to work things out so that when things were brought to the attention of the Court, they would be agreeable to practically everybody and there would be no prolonged litigation. Obviously, he could not (always) do it in view of his sincere feelings, which I need not point out, the S.E.C. shared and supported, that there was no equity for the stock * * *

 'I have mentioned that Mr. Duncan very seriously took over the duties of operating the property, and that is I think illustrated in connection with the larger leases that he personally handled. For example, I am sure he has incurred some life long enemies in the case of some of the officials of the Bankers Club, * * * but he assumed or he felt that it was his duty to do the best he could in getting these tenants to pay up, and I feel he has done so.

 'Certainly the record of the percentage of rentals and the foot rental per square foot indicates that he has done a good job. However, * * * we cannot lose sight of the fact that this is a reorganization proceeding, and that persons are not paid in reorganization proceedings on the same basis as they are paid in private practice.'

 On the basis of this last premise, Mr. Finnigan expressed the thought that the Trustee's compensation should not exceed $ 125,000.

 From the foregoing recital of the scope and skill of Mr. Duncan's contribution to these proceedings, it is apparent that he is a man of initiative and executive capacity, and one who shirked no responsibility. Such qualities, when displayed in or out of a reorganization proceeding, have a value which must be recognized, and, in my opinion, an allowance of $ 125,000 would not do this adequately. This is particularly true when account is taken of the fact that, for seven years, Mr. Duncan has had to carry his share of his office overhead, and that the time he has given to this administration, has deprived him of the opportunity of devoting his talents to far more lucrative employment. After the demonstration of the capacity that the Trustee has here shown, and having before me the knowledge that he has been charged with the responsibility of handling almost $ 30,000,000 of the debtor's funds, I would feel myself to be both niggardly and parsimonious if I were to award him less than $ 175,000 or about $ 25,000 per year. His fee is fixed at $ 175,000. Disbursements of $ 232.71 have already been paid.

 Application of Harry E. Miller.

 Throughout the years that this proceeding has been in court, this applicant has served as the Additional Trustee of the debtor. For services thus performed he has received an annual salary of $ 15,000. From 1938, until the day on which the petition for reorganization was filed, Mr. Miller served as the debtor's President and Treasurer. In this dual capacity, he was paid a salary of $ 15,000 per annum.

 For many years prior to 1938, in fact since 1921, petitioner was an officer of the debtor. Over this period of time, he became intimately acquainted with all the details of management of an enormous enterprise. It is fair to say, I think, that his knowledge of the necessities of the Equitable Office Building Corporation is probably superior to that of any other person.

 Since the initiation of this proceeding, that knowledge has been at the free disposal of the disinterested trustee, the parties immediately concerned, the Securities and Exchange Commission, and the Court. Without his wisdom, experience and integrity, the administration would have been one of extreme difficulty. If inquiry were to be made of those who have had occasion to discuss the affairs of the debtor with Mr. Miller, I think it probable that each of them would say that his services have been invaluable.

 Notwithstanding all this, the income of Mr. Miller has remained static. In the meanwhile, the wages of elevator operators, charwomen, mechanics, engineers, carpenters and other employees of the building have been substantially increased, one or more times.

 Now that the debtor has been reorganized, it is appropriate that Mr. Miller's contribution to that result be recognized. He requests a supplemental allowance of $ 35,000. The Securities and Exchange Commission, while it concedes that this applicant 'worked nights and he worked Saturdays and Sundays on occasions, because whenever one asked him for a figure or a chart, or schedule, one got it,' and that, due to his ingenuity, he saved this estate something like $ 5,500 a year, thinks that the compensation now payable to Mr. Miller should not exceed $ 10,000.

 This sum, in my judgment, is inadequate. If during the administration, the Trustee had requested me to authorize the payment to Mr. Miller of a salary in excess of $ 15,000 per year, I have no doubt that the request would have been granted. I think, therefore, that in justice to Mr. Miller, the least that I can do in the way of recognition of his work is to allow him $ 15,000.

 Application of Henry S. Hooker, Attorney for the Trustees.

 In the performance of the services for which Major Hooker now seeks compensation, he and his associates consumed approximately 10,596 hours. The work performed was not only voluminous, but intricate, involved, highly technical, and in some respects, novel. By this I mean that the attorney for the trustee was required, due to the war, to deal with numerous governmental agencies whose requirements and exactions increased his burdens far beyond the ones that otherwise would have been imposed upon him.

 In addition to this, he was confronted by the necessity of dealing with the problems of union labor; and also with matters of taxation that were of vital importance to the debtor. Notwithstanding my familiarity with the proceeding, a perusal of Major Hooker's petition recalls to mind details of his activities that I had forgotten but which, looked at in retrospect, are amazing in scope, and impressive in their intricacy, complexity and importance.

 Directly, or indirectly, through the activities of this petitioner, large sums of money accrued to the debtor's estate, or were saved from dissipation. Included therein are tax refunds from both the city and federal governments, recoveries from defaulting tenants, and the elimination of labor claims which, had they been sustained, would have aggregated the expenditure of something like $ 200,000.

 That these services were well performed and deserved substantial compensation, there can be no doubt. Petitioner requests an allowance of $ 300,000. The Securities and Exchange Commission believes that the amount is excessive for the size of the estate (say $ 23,000,000 to $ 25,000,000) and that many of the services performed were of a routine nature and the maximum reasonable fee should not exceed $ 175,000. In my judgment, the total compensation of this petitioner should be fixed at $ 200,000, plus disbursements of $ 202.24. Petitioner has heretofore received as compensation the sum of $ 135,000 which amount of course, will be credited upon his fee as above determined. His disbursements have already been paid.

 Application of McNamara & Seymour, as attorneys for the Debtor.

 For a period of more than fifteen years prior to the date on which this proceeding was instituted, these petitioners were attorneys for the debtor.

 When the necessity for filing a petition under Chapter X became apparent, these applicants arranged for a special meeting of the debtor's directorate, and for the adoption of a resolution approving of the action under contemplation. Thereupon, they prepared the petition and submitted it to the Court. It was approved, and Trustees of the Debtor were appointed.

 Upon this event, they arranged for the bonds required of the trustees, sent appropriate notices to all parties in interest, conferred with a number of them, and apprised the Trustees of many of the problems confronting them. From time to time thereafter, petitioners conferred with counsel for the Trustees, and also with counsel for Committees representing debenture holders and stockholders. They kept in touch with the progress of the administration, and gave attention to the details of the plan of reorganization submitted by the Trustees, as well as its modifications. Upon occasion, as the administration progressed, they gave expression of their views with respect to matters of fact and of law that demanded judicial security. Without the slightest intention of minimizing the practical value of these activities, candor requires me to say that many of these services, while helpful to the parties in interest, were of a more or less routine nature.

 When Mr. Berner became an active participant in the proceedings, and it became clear that there was a substantial possibility of saving most of the equity in the debtor's property for the benefit of stockholders, petitioners took a lively part in seeking to upset the 1946 plan of reorganization. In their efforts to achieve this objective, they became prominent actors in the litigation that followed, and which, from the standpoint of stockholders, as all of us know, and due to all persons who sought the accomplishment, was highly successful.

 Petitioners now ask that they receive $ 26,000 for services performed on behalf of the debtor, and that they be reimbursed for expenses incurred in the sum of $ 939.53. The time consumption in performing the work of this firm of attorneys was approximately 13,000 hours. They value this work at about $ 20 per hour.

 The Commission, while it approves the disbursement item claimed by petitioners, and although it says that what they did was helpful and beneficial from the standpoint of stockholders, and that 'they worked hard, and that the proposals they made were sufficiently involved to require a good deal of study in a limited time and under pressure' is of opinion that their compensation should not exceed $ 7,500.

 In view of the fact that McNamara & Seymour filed the petition herein, and were of undoubted help to the various parties in the way of advising them in regard to the debtor's prior history, and inasmuch as they vigorously asserted themselves in the successful effort to overthrow the 1946 plan of reorganization, I think that the Commission's estimate of the value of their services is too low. I shall fix their compensation at $ 15,000. They have, heretofore, received their disbursements, and have had $ 7,500 on account of their fee. They will be paid the additional sum of $ 7,500.

 Application of McNamara & Seymour

 for services rendered as associate

 attorneys for the Trustee.

 As pointed out above, this firm of attorneys for many years prior to the filing of the petition in this proceeding, was the attorney for the debtor. Following the onset of the administration, there were numerous matters then pending, and others to be begun, with which these petitioners were intimately acquainted. It appeared desirable, therefore, that their services should be utilized in carrying such matters to a conclusion.

 They had to do, primarily, with the prosecution of rent claims against tenants of the debtor's premises who had defaulted in the payment of rent, together with tax refund claims against both the City and the State of New York.

 A number of such claims necessitated tedious and prolonged litigation, both in original suits, and in supplementary proceedings.

 The net result of those activities on the part of these petitioners was that they recovered on rent claims in the sum of $ 124,944.58 and $ 9,575.02, on tax claims, a total of $ 134,519.60.

 The time expenditure in doing this work was 3,105 hours. The compensation requested is $ 40,000 together with their reimbursement of expenses in the sum of $ 462.80. During the course of the proceedings, and upon account of services rendered in their capacity as associate counsel to the trustees, these claimants received interim allowances of $ 28,500.

 The Commission objects to disbursements of $ 23.75 which were incurred for local car fares and telephone calls. With this deduction, it approves of applicants' disbursements in the sum of $ 439.05. To that extent, the disbursements are allowed.

 So far as petitioners' compensation is concerned, the Commission believes that it should not exceed $ 30,000. Its recommendation, in part, is based on the fact that practically all the work was done by members of the firm of McNamara & Seymour when, in the ordinary course of events, much of it might have been performed by subordinates. This probably is true. Furthermore, some of the work for which compensation is asked may also be included in what was done by these petitioners in the certiorari proceedings. I think, therefore, that I shall adopt the recommendation of the Commission, and fix the sum that McNamara & Seymour shall be allowed at $ 30,000 for services and $ 439.05 for disbursements, of which $ 28,500 has been paid for services and $ 439 for disbursements.

 Application of Olin, Murphy & Redmond, Attorneys for Empire Trust

 Company, Indenture Trustee.

 This firm of attorneys asks that it be compensated in the sum of $ 31,000. The Securities and Exchange Commission recommends that the petitioners be paid $ 17,500, together with $ 1,440.02 in repayment of their disbursements. This latter allowance has heretofore been authorized, and I have likewise directed that petitioners be paid $ 15,000 on account of their application for fees. I proceed to a determination of the amount they shall finally receive.

 In summarizing the services of these petitioners I cannot do better than to set forth a portion of the remarks made by Mr. Finnigan, representing the Securities and Exchange Commission, upon the hearings having to do with the several petitions for allowances that are presently before me. I quote:

 'Olin, Murphy & Redmond were retained as counsel by the Empire Trust Company at the beginning of the proceeding because of the conflicting interest of McNamara & Seymour, who were counsel for the debtor, and had previously represented the Empire Trust Company. Because it was then a new client they were called upon to do a great deal of work which Messrs. McNamara & Seymour would not have to do because of their familiarity with the proceeding. They had to go through and read the original indenture, the subsequent amendments, of which there were two, and the third mortgage which was issued in connection with the debentures for their additional security.

 'I think I may say that this firm * * * has taken a more active interest than one is accustomed to find taken by counsel for indenture trustees. Usually, they try to remain so neutral that you do not know they are in the proceeding until the time comes for allowances, but that is not true of Mr. Redmond. There were two aspects of the matter which required a great deal of study on his part, and which required determination by the Court. One was this question of the possible differentiation * * * of the debentures. There were two kinds of debentures, legended and unlegended. The legended debentures arose out of a proposal by the debtor to change the terms of the indenture pursuant to agreement so that instead of waiting until they were drawn by lot the debentures could create a market by being sold to the debtor * * * by means of the annual or semi-annual lottery, and it had very involved procedures whereby the Empire Trust Company, as depositary, kept the legended debentures that were bought in the market and were turned over to the debtor. The result was, in effect, to make the debenture sinking fund under the indenture to stretch out further than it would have (done) under the terms of the indenture itself.

 'Now, the very agreement, pursuant to which these debentures were legended, says that they should be held for the benefit and priority of the legended debenture holders, and there were almost $ 600,000. worth of legended debentures, and on the face of it it appeared that if they were to be held, as it was stated, for the benefit of the legended debentures, they would have to receive an allocation under the plan instead of being cancelled.

 'As the plan provided that the legended debenture holders would receive more than the unlegended debenture holders, it had to be explained. I mean there had to be testimony in the record. The late Mr. McNamara testified at some length to the reasons for the original agreement and so forth, but on the face of it it was something that had to be decided and it took time, and it took a great deal of ingenuity, I think, on Mr. Redmond's part to work out the arrangement whereby it was finally decided that there were not two classes of debentures.

 'He did one other thing that unfortunately resulted unsuccessfully, and that was for the proposal for the payment of interest on interest in which he was vociferously joined of course by counsel for the debenture holders' committee, and, as your Honor recalls, they had to go to the Circuit Court to find out that your Honor was right in the first place, and that they were not entitled to it. However, it was something that had to be decided. There were differences in this situation and the situation under which the Supreme Court and the Circuit Court had acted in other cases. We, for one, were sure of our ground and so was Mr. Duncan, and so I think was the Court, but still one cannot say it was not a triable issue, and the fact that the Circuit Court spent so much time in considering the argument appeared to everybody to be an assurance that they really had had something when they first went up there. I think that it was Mr. Redmond's duty, the indenture trustee's duty, to advance this argument, and that, as trustee for all the debentures, he had to go through with it, and he had to take the appeal.

 'In addition to that, because of his familiarity with indentures, mortgages and things of that kind, I think he was invaluable to the trustee's counsel in the preparation of various papers. I know that he spent a great deal of time with Major Hooker in going through the participation A's and the participation B's and the various maneuvers in connection with the Equitable mortgage in the first place, and also with those legended debentures and other things that were necessary for the Major to include in the 167 report,

 'The time spent by members of this firm total 1380 hours, and since Mr. Redmond spent 1310 of them, and it is hard to find that there was any evidence of duplication there, however, the Commission feels that the amount requested of $ 31,000, while it might be permissible outside of reorganization, is much too much in a reorganization proceeding, and that the maximum reasonable fee should not exceed $ 17,500.'

 Much as I respect the Commission's point of view, I am of opinion, after observing Mr. Redmond's work for a period of about seven years, and having in mind the responsibility that rested upon him in looking after interests that represented a value of more than $ 6,000,000, that the fee of his firm should not be less than $ 25,000. It will be fixed at that amount.

 Application of McDermott, Turner & Hart, as Attorneys for Empire

 Trust Company, Depositary for the Debtor's legended debentures.

 Due to a possible conflict of interest between the rights of the holders of the debtor's legended debentures and those which were not so marked, during the course of this administration, it became necessary for Empire Trust Company, as depositary of the legended debentures to be advised of the legended debentures to be advised with respect to this subject matter. For that purpose, the trust company retained this firm of attorneys. In doing the work assigned them, McDermott, Turner & Hart spent a total of 50 3/4 hours. In examining and considering the contents of papers served upon them in connection with other features of the administration, they spent an additional twenty-five hours. For the total of the services performed, petitioners ask that they be compensated in the sum of $ 2,000.

 With respect to this application, Mr. Finnigan said, inter alia:

 'Altogether they (petitioners) spent 75 hours, of which 25 were various routines, in considering papers which had nothing to do with the indenture trustee at all. Five or six, indeed, were spent in the preparation of this application for an allowance.

 'On the basis of the beneficial services performed, the Commission feels that even the $ 2,000 figure applied for is most excessive, and that a reasonable fee should not exceed $ 600.'

 My appraisal of the value of the work performed by these petitioners is $ 750, and their fee will be fixed at that sum.

 Application of Gerdes & Montgomery, Esqs., Attorneys for Wertheim &

 Company, Benjamin J. Friedman, Allen C. Dubois, as trustee under the

 Last Will of Maria C. Dubois, and Raymond H. White, owners and

 holders of $ 498,000, principal amount of the debtor's 5% Sinking Fund


 These petitioners entered these proceedings on or about April 27, 1943, some two years after the date on which the trusteeship was inaugurated. At that time, the trustees were engaged in the formulation of a proposed plan of reorganization. In connection with this procedure, petitioners had conferences with the trustee concerning the problems involved. They also engaged in conversations with the chairmen and counsel of the several committees of debenture bondholders with respect to the means and methods whereby a plan could be effected. In so doing, they were required to give attention to all proposals and suggestions then under consideration.

 From time to time, petitioners voiced opposition to some of the suggestions of the trustees, and on March 15, 1945, they filed a substitute plan of reorganization. Subsequently, and following various conversations, the trustee filed an amended plan which embodied numerous features that had been suggested by this firm of attorneys.

 When, in the course of the hearings on the proposal of the Trustee, the Court stated that, in its opinion, the stockholders were entitled to participate in the reorganization of the debtor, these petitioners, after conference with debenture bondholders, the Commission, and the stockholders, adopted the suggestion of the Court, and proposed amendments to the plan which would effectuate the Court's point of view.

 Following confirmation of the Trustee's amended plan of reorganization, Messrs. Gerdes & Montgomery actively participated in drafting the certificate of incorporation of the new company which was to serve as the vehicle of reorganization. They also took the lead in the preparation of the new company's by-laws, and in drafting the trust indenture that was to secure the new issue of bonds provided by the plan.

 Following the completion of these details, the directors of the new corporation retained petitioners to perform the legal services that were essential to the consummation of the approved plan. They prepared the necessary minutes and resolutions, and attended meetings of the new board. They also arranged for the listing of the securities of the new company on the New York Stock Exchange. They then took such steps as were necessary for the transfer of the debtor's assets to the new company. These services, as may easily be appreciated, required the expenditure of time, effort and ability. When all this had been done, and the 1946 plan was about to be consummated, the situation was completely changed by the proposal made upon behalf of the stockholders by the City Investing Company.

 In the litigation that followed, petitioners were leading actors in all that took place in the District Court, the Appellate tribunal of the Second Circuit and the Supreme Court of the United States.

 When the plan of 1946 was, in effect, set aside, petitioners urged their client, Wertheim & Company, to consider the advisability of offering, on its own behalf, to underwrite a plan for the payment of the debentures in full with interest, in accordance with the opinion of the Circuit Court, and in this they were entirely successful.

 In performing the work set forth in the petition now before me, Messrs. Gerdes & Montgomery state that the total time expended by their firm was not less than 1,900 hours. With the exception of 322 hours of work done by subordinates, the remainder occupied the time of Messrs. Gerdes and Montgomery, the Senior partners. The total compensation requested is $ 45,000. This sum is calculated on the basis of approximately $ 26 per hour for Senior's time and $ 13 per hour for that of Juniors. Petitioners ask also that they be reimbursed for expenses in the sum of $ 1,412.66.

 When the application of Gerdes & Montgomery was called for hearing in open court, Mr. Finnigan questioned their right to receive either compensation or reimbursement for expenses. He said:

 'Gerdes & Montgomery has appeared * * * as counsel for * * * Wertheim & Company, and really for what we might call the Wertheim group in that they represented not only Wertheim & Company, but several of its customers.

 'Your Honor will recall that Mr. Montgomery and Mr. Gerdes later took part in the proceedings involving this (present) plan of reorganization, and, as Mr. Montgomery points out in their application, he always took the position that he would rather give the stockholders an equity than have litigation.

 'There is no question that beneficial services were performed by this firm in connection with the plan that was almost consummated on July 8, 1946. There is some question as to whether the services subsequently performed in resisting the attempt to open the proceedings so that the plan finally adopted might be submitted were compensable, because they were completely unsuccessful. Of course, it was in a sense a novel question of law. However, there is a very serious consideration which in the viewpoint of the Commission makes it obligatory for this form to go to their clients for their fee.

 'The Wertheim group was not in the same position as the other debenture holders; what they were looking for was something different: They were looking for control of the building. That has been the subject of so much vituperation in the last two years that I hate to bring it up, but there is no question that when Wertheim bought all these bonds during the proceeding, and when their clients were advised by them -- because Mr. Hilson said they were -- to buy these bonds, they were doing it for a purpose different from the ordinary public investor who had bought a few bonds. * * *

 'I think that it may be safety said that the Wertheim group dominated the board of directors as approved by this Court, and as a matter of fact, Messrs. Gerdes & Montgomery were retained as counsel by that company.

 'I neglected, in discussing the legal principles which the Commission had in mind in making its recommendations, to make one further observation. The courts have held, and we believe it sound, that a person who represents a selfish -- I mean 'selfish' in the good faith sense -- interest is not entitled to be compensated for services which were collaterally of benefit, or incidentally of benefit to the whole estate.

 'Now, * * * in the beginning of the proceedings, Gerdes & Montgomery rendered services which unquestionably were beneficial. They were beneficial, however, from the viewpoint of Wertheim & Company, their client, although incidentally, and collaterally, they benefited the whole estate. I do not think there is any question for that reason, because of Wertheim's unquestionable selfish motive.

 'The things that guided them were loaded with potentialities so conflicting -- as a matter of fact, they did not happen; there never were, as far as we have been able to find out, any conflicts that resulted in any damage to the debenture holders, but under the law, as we see it, the fact that the potentialities existed is enough to condemn the relationship in so far as compensation from the Court is concerned, because the insider moves, the man with control, the man with 40 per cent of the debentures, moves obviously where his own interest lies, and in this case it was the control where people may act to the detriment of the debenture holders. I grant you I have not said that they did, but because of the potentialities, * * * , there should be no compensation paid out of the estate to Gerdes & Montgomery.

 ' * * * Wertheim & Company bought these bonds during the proceeding, these debentures, and there was no reason why they should not. They were not in a representative capacity, and when they acted with their clients, they did not come in here as a debtor, * * * they were blunt about who they were * * * because they felt free to pick up the debentures, they also have the same regard for the stock, and there is no reason why they should not have from their point of view.

 'One time they took over 7,000 shares of stock in their own name, although it belonged mostly to customers, which they had sold when it appeared there was not going to be an equity, and they and their clients had about 33,000 more to be in a position where they could come in with an underwriting, if necessary, as stockholders, since the debenture holders would not be affected by a plan which paid them off. There was nothing wrong in what they did, but I mention that to the Court because there were potentialities which could have been wrong, and the fact that the potentialities existed, in the eyes of the Commission, is enough to condemn them from receiving an allowance out of the estate.

 'Whatever fee they may receive from Wertheim & Company I think has been well and substantially earned but * * * they should not receive a fee out of this estate. * * * The same thing applies to disbursements. * * * They may look to their clients for the payment of them.

  'I suppose I should mention it, and that is as to several hours spent in the time included in this application which are in connection with conferences * * * on the new underwriting. However, counsel makes this differentiation that they did not represent Wertheim & Company as an underwriter, and, of course, if they did, there would be no question.

  'Hodges, Reavis, Pantaleoni & Downey did represent Wertheim as an underwriter, and have not come in and asked for a fee. If Gerdes & Montgomery had represented them throughout, there is no question that they could not come in and ask for a fee either. * * * It does not make any difference, because all the time it was the same Wertheim, whether he was buying debentures for the control of the building, or appearing as an underwriter for control in another way. It is still Wertheim & Company, and he should still pay his lawyers himself.'

  The record before me indicates that the present petitioner represented not only Wertheim & Company who held $ 436,000 principal amount of debentures, but also Benjamin J. Friedman, owner and holder of $ 50,000 par value of these securities, Allen C. DuBois who held $ 2,000, and Raymond H. White who held debentures to the extent of $ 10,000 par value. Subsequently Wertheim & Company increased their holdings.

  So far as Wertheim's alleged domination of the reorganized company is concerned, it should be stated that the Court, after giving consideration to the suggestions of all parties in interest, appointed the directors who during the early stages of the new company, were to control its destinies. That board was as follows:

  Howard S. Cullman, a nominee of the Granger Committee,

  Harry R. Amott, Chairman of the Amott Committee,

  J. Donald Duncan, a Trustee of the Debtor,

  Edwin I. Hilson, a partner of Wertheim & Company,

  Charles A. Dana, Nominee of the Stockholders' Committee,

  Jeffrey S. Granger, Chairman of the Granger Committee,

  John S. Traphagen, who represented debenture bondholders to the extent of debentures having a par value of $ 422,000.

  The officers of the new corporation were:

  Howard S. Cullman, Chairman of the Board,

  J. Donald Duncan, President,

  H. E. Miller, additional Trustee of the Debtor, Treasurer,

  James C. Lott, Secretary.

  It will thus be seen that Wertheim & Company, out of the seven members of the Board of Directors, had but one representative, viz., Edwin I. Hilson. None of the company's officers could have been said to be under the control of Wertheim & Company.

  During the conferences, discussions and court hearings that culminated in the 1946 plan of reorganization, petitioners consistently took the position that if it were possible for recognition to be given to stockholders, such course should be pursued. It also appears that, in 1947, after the 1946 plan was upset by the appellate court, and when the City Investing Company had retired from the scene, petitioners played a part in persuading Wertheim & Company to offer itself as an underwriter of the existing plan of reorganization. So far as I can discern, the conduct of Wertheim & Company in the proceedings that ensued is not open to the slightest criticism. That company did not dispose of their debentures until, under the new plan, they were to be paid off at par and interest. This sale is said to have been made solely for income tax purposes.

  Indeed, as Mr. Finnigan freely admits, there is nothing whatever to indicate that Wertheim & Company overreached or sought to overreach, any interest in this proceeding. The potentialities of wrong doing, on which the Commission asks that an allowance be denied to Gerdes & Montgomery, were common to each and every interest in this proceeding including the Court itself. In the absence of any evidence or indication, that Wertheim & Company were guilty of bad faith or corruption, and in the light of the admission of the Commission that the services of Gerdes & Montgomery were of benefit to this estate, it would, in my opinion be both ungenerous and unjust to deny them a right to compensation.

  Furthermore, when the 1946 plan came under attack, it is difficult to see why Gerdes & Montgomery should not resist the assault. That plan had been accepted by the requisite majority of both creditors and stockholders. After a full opportunity to stockholders to come forward with a better and more favorable plan, the court sanctioned the proposals of the Trustees and in this the Commission acquiesced. The time to appeal from my order of confirmation had expired, and, as a result, new equities had been created, and these involved novel questions of law. Committees of debenture holders whose rights were affected, along with Gerdes & Montgomery, also resisted the attacks upon the 1946 plan. With approval of the Commission, these interests have asked for, and are receiving compensation. Under these circumstances, it is, as I have previously indicated, entirely unfair not to recognize the earnest endeavors of these petitioners. See In re Philadelphia & Western Ry. Co., D.C., 73 F.Supp. 169.

  After careful consideration of the application of these petitioners, I am convinced that they are entitled to compensation. For work done, they ask that the labors of partners be rewarded at the rate of approximately $ 26 per hour, and that of Juniors at $ 13 per hour. These requests are far out of line with fees that I have been accustomed to award. If they were to be granted, it would mean that, on the basis of a seven-hour day, partners would be paid at the rate of about $ 182 per day, and Juniors at $ 91 per day. Compensation, on this scale, is far more than this reorganization can stand.

  For these reasons, I have concluded that the fee to be awarded to Gerdes & Montgomery should not exceed $ 25,000. In addition they will be repaid their disbursements of $ 1,412.66.

  Application of Hardy, Stancliffe & Hardy.

  Messrs. Hardy, Stancliffe & Hardy who here ask for a fee of $ 7,500, together with disbursements of $ 575.05, and who represented certain debenture bondholders, did not participate in these proceedings until July 11, 1946. At that time the decree of this court which had approved the Trustee's plan of reorganization, as amended, was under attack. It was then apparent that the attack, should it become successful, would seriously impair the position then held by petitioner's clients. In order to avert this possibility, petitioners entered the proceedings and participated in the litigation that followed. That their work was competent, and worthy of compensation from some source, I have no doubt.

  But, as matters turned out, I do not see that petitioner's efforts were of any benefit to the development of the plan of reorganization that has now been consummated. The most that can be said is that petitioner's work was little, if anything more, than a duplication of the efforts put forth by the attorneys for other debenture holders who had represented them from the inception of the proceeding. These last mentioned attorneys were entirely competent to protect the interests of the debenture holders, and valiantly sought to do so. Inasmuch as petitioner's clients wished to be represented by counsel of their own selection, they should, in my opinion, defray the expense of their course of action. It follows that the application of Hardy, Stancliffe & Hardy must be denied.

  Application of Emanuel Redfield.

  This petitioner is in much the same situation as Hardy, Stancliffe & Hardy whose petition for an allowance as set forth above, has been denied.

  Mr. Redfield first appeared in this proceeding on August 16, 1946. His clients were Isidor Frank and Arthur W. Lichtenstein, each of whom was the holder of the debenture bonds of the debtor.

  Upon their behalf, and in their interest, Mr. Redfield endeavored to sustain the order of this court, which, had it been executed, would have carried out the Trustee's reorganization plan. Petitioner acquainted himself with the facts of the case, consulted with parties in interest, prepared briefs, and argued his contentions before Mr. Justice Reed at New City, New York. His work was merely a duplication of that done by attorneys representing the long standing committee of debenture bondholders, and contributed nothing to the present plan of reorganization. In February, 1947, Mr. Redfield's clients sold their debentures and passed out of the reorganization picture. Thereafter, Mr. Redfield's interest in the proceedings was nothing more than academic. He should look to his clients, and not to the state, for services previously performed.

  The application is denied.

  Application of Harry R. Amott, Jesse L. Shepherd, Francis E. Smith,

  Hubert F. Young and Florence Abbott Buckingham, as Executrix of the

  Estate of Lee S. Buckingham, Deceased, Who with the Exception of the

  Executrix, Constituted a Debenture Holders Protective Committee, That

  Took an Active Part in These Proceedings.

  These applicants request that they be compensated in the aggregate amount of $ 29,140 and that they be reimbursed for their expenses in the sum of $ 1,957.99. The petition discloses that the members of the Committee devoted a total of 1914 hours in carrying on their work, such time being made up as follows:

  Mr. Amott . . . 1000 hours

  Mr. Buckingham . . . 100 hours

  Mr. Shepherd . . . 450 hours

  Mr. Smith . . . 114 hours

  Mr. Young . . . 250 hours

  Total . . . 1914 hours

  In this connection, it is suggested that Mr. Amott, Chairman of the Committee be paid at the rate of $ 20 per hour, and that the other Committeemen be paid at the rate of $ 10 per hour.

  The Securities and Exchange Commission is of opinion that the fees of the Committee as a whole should be limited to $ 12,500, plus reimbursement for expenses.

  Concerning the work of the Committee, Mr. Finnigan had this to say:

  ' * * * In the beginning of the proceeding they represented a great many debenture holders (559 separate holders of $ 1,883,500 of the bonds) and I assume that many of their clients were still debenture holders at the conclusion of the proceeding. It was necessary, therefore, for them to engage in a lot of services in connection with advising the debenture holders, and sending out to them letters.

  'They sent out a number of letters and * * * diligently asserted the rights of the debenture holders whenever it was necessary or advisable to do so.

  'Some claim is made in the application for (securing) that mortgage * * * of $ 14,750,000, and color is given to that claim of credit for that mortgage by the tentative commitment which was received and offered by Mr. Bernstein in evidence in August of 1947. That was a $ 15,000,000 mortgage, which was in a number of respects similar and in some respects dissimilar, to the $ 14,750,000 one eventually accepted by the Court.

  'I do not know whether this is the proper time to go fully into the question of that mortgage. I do not think it is, but I would like to point out that in February or March of 1947, Mr. Duncan had engaged in correspondence with the John Hancock Insurance Company, and copies of that correspondence are in the record.

  'Furthermore, there is no question, I believe, that it was Mr. Duncan who went up and saw the directors or trustees and hammered the nails home, as it were, and obtained the final terms which resulted in the very favorable mortgage that the company is now laboring under.

  'The Committee made a contribution, I think in connection with the first plan. The question arose as to the participation by the debenture holders in new stock, or in funded debt, and some of the debenture holders' representatives were insisting upon your Honor, chiefly for tax reasons, in having at least 80% of the debenture participation in the new plan expressed in terms of income bonds.

  'This committee through its counsel offered the suggestion that a 50 per cent participation in debentures and a 50 per cent participation in stock would make the plan more feasible, and would be as readily acceptable. Of course, the eventual one was 60 and 40, and the trustee's assertion that 80 per cent was entirely out of the question was supported by the recommendations of this committee and its counsel, so I think a definite contribution was made in the conferences which resulted in that formulation of that plan by the attitude taken through this committee by its counsel.

  'The committee held only five formal meetings, and while Mr. Amott was at a great many of the hearings, other members of the committee, because of their situation, did not feel it necessary to come, and I agree that there is no reason why the four of them should have appeared.'

  There is no doubt that Mr. Amott and his fellow committeemen were able and responsible men, and I am prepared to say that they were helpful in this proceeding. Nevertheless, I feel, all things considered, that the compensation here asked is excessive, and I shall fix the fees of the committee as a whole, at $ 15,000. It may be apportioned among petitioners as they see fit. Disbursements of $ 1,957.99 will also be allowed.

  Mr. Miller, the secretary of the Committee, will be allowed the sum of $ 500 for his services in that capacity.

  Application of Scribner & Miller, Attorneys for the Amott

  Committee of Bondholders.

  This firm of attorneys has filed a petition of 101 typewritten pages of legal cap paper, in which, in great detail, are set forth the activities in which the members of the firm participated. The petition concludes with this statement:

  'Your petitioners accordingly respectfully pray that they may be awarded compensation for services rendered to this estate in the amount of $ 83,200, which has been computed as follows:

  Partners 2605 hours at $ 30 per hour . . . $ 78,150

  Seniors 147 hours at $ 20 per hour . . . 2,940

  Juniors 217 hours at $ 10 per hour . . . 2,170

  Total . . . $ 83,260'

  Since the above petition was drawn, Scribner & Miller have devoted 103 additional hours to this proceeding.

  With respect to this application, Mr. Finnigan, speaking on behalf of the Securities and Exchange Commission, said:

  'Again I must advert to the Commission's criticism in the way in which attorneys keep their records. It was impossible for me * * * to determine what part of the time spent was in the opinion of the Commission compensable, and what time was just wasted effort or non-compensable, because non-successful. I found some difficulty in various assertions of time spent. For example, at one time, Mr. Bernstein talked about four things that he discussed at length, and when I got to his (time) sheet, he had only spent an hour. And at another time, he had reviewed at length six different topics and it only took an hour and a half. I don't know personally what he meant by 'at length', but that sort of thing just makes it impossible for the Commission to really allot the time that the attorney asserts in his application, or even to point out * * * how much of it is not compensable.

  'The Commission feels that Mr. Bernstein, that is, that Scribner & Miller, has done a good job in this proceeding. I do not know that I have anything to add that I have not included in my statement about their services to the Amott Committee.

  'Mr. Bernstein from the very beginning of the proceeding acted as a sort of a gadfly. He felt that he wanted to get things moving, and that the best way to get things moving was to go around and talk to people about what they could do. Well, I appreciate the inspiration that made him do it, but I do not think that there is any question that a lot of it was wasted time, especially in the beginning of the proceeding when nobody really knew what the reorganization was yet all about, and it is just impossible to include a lot of the time there spent as compensable time.

  'However, I think that the Commission's recommendation of $ 30,000 is a reasonable, and perhaps generous ...

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