Chicago, T. H. & S. E. Ry. Co. v. Chicago, M., St. P. & P. R.

164 F.2d 119, 1947 U.S. App. LEXIS 2909
CourtCourt of Appeals for the Seventh Circuit
DecidedNovember 6, 1947
DocketNo. 9275
StatusPublished

This text of 164 F.2d 119 (Chicago, T. H. & S. E. Ry. Co. v. Chicago, M., St. P. & P. R.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chicago, T. H. & S. E. Ry. Co. v. Chicago, M., St. P. & P. R., 164 F.2d 119, 1947 U.S. App. LEXIS 2909 (7th Cir. 1947).

Opinion

MAJOR, Circuit Judge.

This appeal is from an order of the District Court, entered November 5, 1946, denying allowance for compensation to the members of the Chicago, Terre Haute and Southeastern Railway Company First Lien Bondholders’ Committee (hereinafter called the committee), for services alleged to have been rendered in connection with the reorganization proceedings of Chicago, Mil[120]*120vvaukee, St. Paul and Pacific Railroad Company (hereinafter called Milwaukee). On November 26, 1945, the court entered an order fixing the time within which claims were to be filed for expenses incurred and services rendered in connection with the reorganization proceedings.

Pursuant to this order, the appellant committee, consisting of Charles B. Roberts, John E. Blunt, Lemuel H. McHenry and Roger H. Williams, filed its claim for services rendered, the denial of which forms the basis of the present controversy. So far as here pertinent, the petition prayed “for an allowance to the Committee of $20,000 as compensation to it and its members for division among them as they may agree and as may be in their opinion proportionate to the time and labor spent by each in connection herewith and in proportion to the accomplishments of each in aid of the bondholders represented by them and in aid of the consummation of the Plan herein * *. ” The petition also sought compensation for attorneys who represented the committee and other expenses incurred by the committee and its attorneys, which were allowed and are not involved in this appeal.

The committee’s petition for allowance and other similar petitions for compensation in respect to services rendered and expenses incurred from September 1, 1943 to the conclusion of the reorganization proceeding was transmitted to the Interstate Commerce Commission for the fixing of maximum limits, pursuant to Sec. 77, sub. c(12) of the Bankruptcy Act, 11 U.S.C.A. § 205, sub. c(12). The Commission concluded that Section 77, sub. c(12) did not permit the allowance of the committee’s claim, and refused to fix a maximum limit therefor. The court below in the order appealed from approved the report and order of the Commission to the effect that no allowance should be made from the debt- or’s estate for compensation to the committee members.

We think it not important to enter any detailed discussion of the relation existing between the debtor corporation and the Chicago, Terre Haute and Southeastern Railway Company (referred to as Terre Haute), whose bonds were represented by the committee. The position occupied by Terre Haute with reference to the Milwaukee and the provision made in the reorganization proceeding for Terre Haute and its bondholders is described in Group of Institutional Investors et al. v. Chicago, Milwaukee, St. Paul and Pacific Railroad Co., 318 U.S. 523, on page 546 et seq., 63 S.Ct. 727, 87 L.Ed. 959. It appears therefrom, as well as from the record before us, that the committee contested''the plan of reorganization as it pertained to Terre Haute and received an adverse decision at the hands of the Supreme Court. It is sufficient here to note that Terre Haute .was not a property of Milwaukee but their relations stem from a long-term lease in which Terre Haute was the lessor and Milwaukee the lessee, and that the plan of reorganization required that “substantially all” of the bondholders of Terre Haute agree to the plan as a condition of its becoming effective as to it.

The committee, having failed to sustain its position in the Supreme Court; was confronted with the difficult problem of deciding a course to pursue in the interest of those whom it represented. The record discloses that a number of plans were discussed and considered and that it was finally determined by the committee that it was for the best interest of the Terre Haute bondholders to approve the plan as it pertained to Terre Haute and thereby assist in its confirmation. It was for services rendered by the committee in obtaming the approval of such bondholders that it sought the allowance in question.

The committee devotes much effort in showing that it was generally responsible for procuring the approval of the bondholders represented by it, as well as the importance and benefit which inured to the reorganized company by reason of such approval. We think there is no point in detailing either the efforts of the committee in this respect or the benefits which the reorganized company derived therefrom. This is so for the reason that such matters are not in dispute. In fact, it appears to be conceded on all sides that the services rendered by the committee were valuable [121]*121and that the result obtained was of benefit to the reorganized company. While it may be a matter of some conjecture, it is not unreasonable to conclude that without such services the approval of the necessary bondholders could not have been obtained. Neither is there any question as to the-reasonableness of the committee’s claim.

Numerous issues are raised and discussed, but we think they are all encompassed within the primary issue as to whether Sec. 77, sub. c(12) is controlling; and, if so, was the power of the court as to the committee’s claim limited thereby?

Sec. 77, sub. c(12) provides:

“Within such maximum limits ■ as are fixed by the Commission, the judge may make an allowance, to be paid out of the debtor’s estate, for the actual and reason-aide expenses (including reasonable attorney’s fees) incurred in connection with the proceedings and plan by parties in interest and by reorganization managers and committees or other representatives of creditors and stockholders, and within such limits may make an allowance to be paid out of the debtor’s estate for the actual and reasonable expenses incurred in connection with the proceedings and plan and reasonable compensation for services in connection therewith by trustees under indentures, depositaries and such assistants as the Commission with the approval of the judge may especially employ.”

A study of this provision makes it plain, so we think, .that Congress placed a limitation not only upon those who could receive compensation but a further limitation that their allowance must be within a maximum' amount fixed by the Commission. Also as to those, the right to receive compensation was limited to services rendered “in connection with the proceedings arid plan.” As to other parties and groups, including “committees,” their right to an allowance was limited to a reimbursement for the actual and reasonable expenses incurred “in connection with the proceedings and plan.” It hardly seems reasonable to think that Congress authorized compensation for attorneys and trustees and inadvertently failed to make similar provision for a committee. That Congress had committees specifically in mind is evidenced from the. fact that provision was made for an allowance for their expenses. The fact that no provision was made for their compensation is a persuasive indication that Congress intended that they should have none. After all, a committee usually represents a group of bondholders or other creditors, and its primary responsibility is to those whom it represents. Reconstruction Finance Corporation v. Bankers Trust Co., 318 U.S. 163, 63 S.Ct 515, 87 L.Ed.

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Bluebook (online)
164 F.2d 119, 1947 U.S. App. LEXIS 2909, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chicago-t-h-s-e-ry-co-v-chicago-m-st-p-p-r-ca7-1947.