Berry v. Root

148 F.2d 945, 1945 U.S. App. LEXIS 3246
CourtCourt of Appeals for the Fifth Circuit
DecidedApril 25, 1945
DocketNo. 11174
StatusPublished
Cited by14 cases

This text of 148 F.2d 945 (Berry v. Root) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Berry v. Root, 148 F.2d 945, 1945 U.S. App. LEXIS 3246 (5th Cir. 1945).

Opinion

SIBLEY, Circuit Judge.

This is an effort by attorneys to obtain an allowance by the bankruptcy court for fees for defeating a municipal bankruptcy proceeding, to be charged proportionately against all creditors benefitted thereby.

A municipal composition of bonded indebtedness under Chapter 9 of the Bankruptcy Act, 11 U.S.C.A. § 401 et seq., was undertaken by City of Coral Gables, whereby new bonds for less amounts would have been issued. The plan was opposed by American National Bank of Nashville, through its attorney at law Frank Berry, by Ed. C. Wright through his attorney at law Miller Walton, and by C. J. Root, Augustus T. Ashton and Fiduciary Counsel, Inc., through their counsel. There were other bondholders who did not consent but did not actively oppose, and $42,000 of bonds whose owners were unknown. All the bonds were of the same class, though some of the active litigants had obtained judgments and mandamuses for the levy of taxes to pay their several judgments. The opposition was unsuccessful in the district court, where an interlocutory decree of [946]*946confirmation was entered. The active litigants discussed a cooperative appeal on a basis of proportionate sharing of fees and expenses, but Root did not agree, and did not appeal. Ashton and Fiduciary Counsel, Inc., entered separate appeals, but on learning that the Bank and Wright would perfect their several appeals did not perfect their own, nor participate in the Circuit Court of Appeals. That court sustained Wright’s appeal, but did not sustain the Bank’s, held that the plan was not lawful, and reversed the decree of confirmation, with costs of appeal to Wright against the City, including a docket fee of $20. Wright v. City of Coral Gables, 5 Cir., 137 F.2d 192. The City obtained a certiorari from the Supreme Court. The attorneys Berry and Walton defended the certiorari and counsel for Fiduciary Counsel, Inc., was permitted to file a brief as amicus curiae. The Supreme Court affirmed the judgment by an equally divided court; City of Coral Gables v. Wright, 321 U.S. 753, 64 S.Ct. 779, 88 L.Ed. 1053, and denied a rehearing, 322 U.S. 768, 64 S.Ct. 941, 88 L.Ed. 1594, awarding costs to Wright against the City, including the usual attorney’s docket fee of $20. There being no lawful plan, Root, Ashton and Fiduciary Counsel, Inc., as well as Wright and the Bank, moved the dismissal of the composition proceeding, but before the entry of the judgment dismissing the case and awarding Wright his judgment against the City for costs-' of appeal and certiorari totaling $3,199.08, besides $40 for attorney’s docket fees, all of which was forthwith paid, Berry and Walton filed a petition for an allowance as in equity of a reasonable attorney’s fee for their labors in defeating the bankruptcy and preserving the bonds at their face amount, the fee to be charged proportionately against each bondholder benefitted, the City to be required to pay the several amounts so charged into court, as it became able to pay, instead of paying it over to the respective bondholders. The above recited facts were alleged in the petition. On motions to dismiss made by Root, Ashton and Fiduciary Counsel, Inc., and the City, an amendment was offered which stated that no contracts for fixed fees had been made by petitioners with Wright but he had paid some unstated amounts, less than a reasonable fee, and had agreed with the attorneys that he be considered as set-' tied with and discharged from further liability, and that the attorneys should on their own account seek further payment through the court; and the petitioners recognized that what Wright had paid should be credited upon the reasonable fee to be fixed by the court for the whole service.

The district judge thought the amendment added no strength to the petition and disallowed it. He then dismissed the petition because the facts alleged did not show a right to a fee allowance on equitable principles, and because the court as a court of bankruptcy had no authority to make such an allowance. From both judgments this appeal is taken.

The true question is whether the court of bankruptcy may and should award a fee to the counsel of one creditor who obtains the dismissal of the bankruptcy proceeding, and assess the fee proportionately against all the creditors of the same class with equitable garnishments against the debtor to pay the several assessments. While a court of bankruptcy often applies equitable principles, and may sometimes entertain a controversy in equity arising out of the bankruptcy in which it will follow the precedents and practice of a court of equity, yet as respects the original bankruptcy proceeding it is not strictly a court of equity, but a statutory court created by the Bankruptcy Act, and governed by it. As to that proceeding the Act of 1898 has not adopted the equity precedents and practices as to costs, including costs as between attorney and client, commonly called an allowance of attorney’s fees. The original Act and all its amendments and expansions have dealt specifically with the costs and attorney’s and other fees to be allowed, and have dealt jealously with them. The fees allowable for services in each kind of bankruptcy proceeding have been provided, and expressly or by implication others are excluded. We know of no provision and no precedent for allowing a fee, assessed against all benefitted, for service in dismissing any form of bankruptcy proceeding. In ordinary bankruptcy such a fee is provided for successful petitioning creditors, payable out of the estate as a priority debt. 11 U.S.C.A. § 104. None is provided for successful resistance of the petition whereby all creditors retain their claims as they were. Even when the bankruptcy is carried on to a conclusion, but a discharge is denied because of the efforts of one creditor benefitting all, we do not know of any authority to enforce contribution by all creditors to the fee of one, though of course the trustee’s attorney may be paid [947]*947as part of “the trustee’s expenses in opposing the bankrupt’s discharge.” Section 104.

In the form of bankruptcy here involved, a proceeding by a municipality for composition of its debts, under Chapter 9, the statute carefully defines the attorney’s fees that may be allowed, to be provided for in the plan of composition, 11 U.S.C.A. § 403, sub. b. None other can be allowed. Lea v. Patterson Saving Inst., 5 Cir., 142 F.2d 932. All these fees are for assistance in working out and securing the adoption of a plan of composition. No sort of fee is provided for opposing and wholly defeating it. Since in a municipal composition case there is no estate or fund before the court, except what the plan may provide, it is not practical to assess one. Indeed, it would generally be hard to determine whether the defeat of a plan acceptable to the majority, as here, was beneficial to creditors, or not. We understand, though it is not alleged, that because of improvement in general conditions in Florida and in the financial position of the City pending the litigation, the creditors will collect their unsealed bonds in full; but this benefit is not really due to the attorney’s services so much as to the adventitious improvement in the City’s finances.

It is argued that the Bankruptcy Act, 11 U.S.C.A. § 11, sub.

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Bluebook (online)
148 F.2d 945, 1945 U.S. App. LEXIS 3246, Counsel Stack Legal Research, https://law.counselstack.com/opinion/berry-v-root-ca5-1945.