The opinion of the court was delivered by: TYLER
F. Ralph Nogg, trustee in reorganization of the debtors, has applied to this court for authority to reimburse United States Trust Company of New York ("trust company") as trustee under a certain collateral trust indenture ("the Trust Agreement") for stated administrative expenses and counsel fees. After a final hearing in court on November 22, 1967, some of the interested parties have also submitted in writing statements of their positions in respect to this application.
On April 21, 1965, just prior to the filing of the original petition for reorganization in this court, debtor Yale Express System, Inc. ("Yale Express") entered into the Trust Agreement with the trust company as trustee for First National City Bank and certain other major institutional creditors of the debtors. Under the Trust Agreement, Yale Express deposited substantial assets for the purpose of securing loans by First National City Bank and other creditors. Among other things, the Trust Agreement paved the way for a new loan to Yale Express in the amount of $2,625,000.00.
Of some relevance to the present application are the provisions of Section 15 of the Trust Agreement to the following effect:
"The Company [Yale Express], from time to time upon request, will pay the Trustee [the trust company] reasonable compensation for its services hereunder and under the Security Instruments and will pay or reimburse the Trustee for all its costs, expenses and charges hereunder and under the Security Instruments (including, without limitation, expenses of taking, sale or other proceedings, the reasonable compensation and expenses of the Trustee hereunder and under the Security Instruments, reasonable attorneys' fees and expenses, court costs and other expenses incurred and expenditures or advances made by the Trustee or any holder of any of the Senior Indebtedness in the protection, exercise or enforcement of any right, power or remedy and the compensation and expenses of agents of the Trustee not regularly in its employ), and for all such costs, expenses and charges and for the indemnity provided in Sections 12(d) and 12(i) the Trustee shall have a prior claim against any moneys coming into its hands hereunder and may apply such moneys to the payments, reimbursement or satisfaction of such costs, expenses and charges and indemnity prior to any other application of such moneys."
From the effective date of the Trust Agreement and continuing after the petitions for reorganization were filed and up to the present date, the trust company has continued to receive, retain and invest assets and cash of the debtors. In the course of performing its duties in the implementation of the Trust Agreement, there can be no serious question but that the trust company has faithfully administered and applied the collateral trust to the benefit of the creditors and debtors in reorganization, with concomitant usefulness to these reorganization proceedings.
In connection with the drafting and execution of the Trust Agreement and the performance by the trust company of its obligations thereunder, Messrs. Cadwalader, Wickersham and Taft ("Cadwalader"), a law firm in New York City, has represented the trust company. On or about June 7, 1965, Cadwalader rendered its first statement to the trust company requesting a fee of $20,000.00 for services rendered to that date. Thereafter, Cadwalader rendered two other bills for services rendered for the period from June 8, 1965 through July 21, 1967. The total legal fees billed by Cadwalader to the trust company amount to $23,250.00, plus disbursements in the sum of $133.47.
Furthermore, the trust company has submitted to the trustee in reorganization its various bills covering a period of about two years and three months from April 21, 1965 through July 15, 1967 in the total amount of $15,003.88. It is these bills and statements of the trust company and its counsel for which the trustee in reorganization here seeks authority to pay.
On September 11, 1967, prior to the final hearing on this application, counsel for the reorganization trustee and counsel for the First National City Bank entered into a stipulation regarding this particular application. That stipulation, which has been filed in court, provides as follows in significant part:
"IT IS HEREBY STIPULATED by and between the undersigned, attorneys for the parties named below, that (1) the payment by the Trustee of fees and expenses to United States Trust shall not prejudice the right of the Trustee, if the Trust Agreement is declared to be voidable and is voided, to assert that he is entitled to be reimbursed by the beneficiaries under the Trust Agreement for such payments, and (2) the right of the Trustee to assert that he is entitled to be reimbursed by the beneficiaries under the Trust Agreement for such payments shall be without prejudice to the right of the beneficiaries to assert that they are not required to reimburse the Trustee for such payments."
During the summer and fall of 1967, representatives of the Securities and Exchange Commission ("SEC") checked and discussed with representatives of the trust company and its counsel all items and matters for which reimbursement is sought.
Before specifically considering the bills submitted by the trust company and Cadwalader to the reorganization trustee, it should be noted that at the final hearing no creditor or other interested party opposed payment of any kind to the trust company and its counsel except The Bank of New York, as trustee for the subordinated Yale Express debenture holders. The SEC noted an exception to certain specific items, which exceptions will be discussed hereinafter. Similarly, counsel for the reorganization trustee noted his exception to at least one specific item also to be discussed below.
The bases of opposition of The Bank of New York can be briefly summarized. First, it is urged by counsel for The Bank of New York that, particularly inasmuch as the trust company is protected by its lien acquired on April 21, 1965, there is no compelling reason for payment now of the fees and expenses of the trust company and its counsel. Second, it is urged that this reorganization court presently cannot measure the precise benefits to the reorganization of Yale Express and its affiliated debtors from the implementation of the Trust Agreement by the trust company. Finally, although it does not appear that counsel presses this point too vigorously, it is suggested ...