In Re Citrone Development Corp.

106 B.R. 359, 1989 Bankr. LEXIS 1873, 1989 WL 129896
CourtUnited States Bankruptcy Court, S.D. New York
DecidedOctober 25, 1989
Docket19-35338
StatusPublished
Cited by8 cases

This text of 106 B.R. 359 (In Re Citrone Development Corp.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Citrone Development Corp., 106 B.R. 359, 1989 Bankr. LEXIS 1873, 1989 WL 129896 (N.Y. 1989).

Opinion

HOWARD SCHWARTZBERG, Bankruptcy Judge.

Sidney Turner, attorney for the former Chapter 11 debtor, Citrone Development Corp., seeks final compensation for his ser *360 vices which were performed before the debtor was converted for Chapter 7 liquidation, pursuant to a motion made by the United States trustee. The Chapter 7 trustee has not completely administered this case and there is no clear picture as to what assets, if any, are on hand for distribution.

Sidney Turner’s application relates back to a time before the debtor filed its Chapter 11 petition and includes services performed in connection with a state court foreclosure action commenced by a mortgagee bank against the debtor. A judgment of foreclosure was obtained by the mortgagee in the sum of approximately $2,400,000.00. The only asset in this estate is a shopping center which is encumbered by mortgages which arose out of the financing and construction of the shopping center, totalling approximately $2,500,000.00.

On October 13, 1987, three creditors filed with this court an involuntary petition against the debtor under Chapter 7 of the Bankruptcy Code.

On February 1, 1988, Sidney Turner was authorized by order of this court to represent the debtor. Accordingly, any compen-sable legal services performed by Turner cannot include any activities before February 1, 1988, the date of his retention.

On February 3, 1988, the debtor filed with this court a voluntary petition for reorganizational relief under Chapter 11 of the Bankruptcy Code. The debtor first proposed to form a new corporation and sell its shopping center to the new corporation. The creditors, who were offered stock in the proposed corporation, successfully objected to the proposal. The debtor then proposed to assign its sole asset to an insider corporation controlled by the debt- or’s principal in exchange for which the insider corporation would assume the debt- or’s mortgage. Once again the creditors successfully objected to the debtor’s motion to accomplish this proposal.

By motion dated December 21, 1988, the United States trustee moved to convert this case for liquidation under Chapter 7 of the Bankruptcy Code because the debtor failed to file monthly operating statements and failed to comply with the United States trustee’s operating guidelines. Additionally, the debtor did not file a plan of reorganization or a disclosure statement. In the absence of any progress in this case and the fact that the debtor had not taken any action to benefit its creditors in their voluntary Chapter 11 petition, this court granted the United States trustee’s petition for conversion on January 20, 1989.

By motion dated January 30, 1989, Sidney Turner moved to be relieved as attorney for the debtor, which motion was granted by order of this court dated February 12, 1989.

For the period between February 1,1987, when Sidney Turner was retained as attorney for the debtor, and February 12, 1989, when he was relieved at his own request, he appeared at several creditor’s meetings and in this court in connection with the proposals to sell and assign the debtor’s sole asset in the face of the mortgage foreclosure judgment. Had an order for relief been entered in connection with the original involuntary petition on October 23, 1987, the creditors would have been spared two years of delay in the enforcement of their rights. During the Chapter 11 period, the debtor did nothing tangible to benefit any of its creditors. The proposed sale of the debtor’s corporation to a corporation controlled by its principal would not have advanced the interests of the creditors because they would simply have to chase another corporation for the debts owed by this debtor.

Neither the debtor nor its attorney performed the duties imposed under Chapter 11 or under the United State’s trustee’s operating guidelines in that no plan of reorganization was filed nor were monthly operating statements submitted. Hence, there was no forward movement towards any reorganization contemplated under Chapter 11 which might have a reasonable prospect of success.

In reviewing the posture of this case it is also clear that after payment of the so-called “burial expenses” imposed under 11 U.S.C. § 726(b), which have priority in a superseding Chapter 7 case over the subor *361 dinated administrative expenses in the aborted Chapter 11 case, there will be relatively few remaining funds, if any, to satisfy the attorney fees with respect to the Chapter 11 case.

The trustee in bankruptcy objected to Sidney Turner’s application on the ground that he failed to describe how his services benefitted the estate. The United States trustee did not appear because Sidney Turner failed to submit a copy of his application to the United States trustee before the hearing. No other parties in interest were given notice of the hearing, despite the requirement in 11 U.S.C. § 330(a) which requires notice “to any parties in interest and to the United States trustee.”

The application in support of the $55,-000.00 fee sought by Sidney Turner consists mainly of 19 pages containing a list of every telephone call he made or received in connection with this case. There is no description as to what subjects or issues were discussed or how these telephone calls had any significance in this ease. Indeed, names are listed without any indication as to who these people are or what connection, if any, they had to this case. There is no listing of any litigation or adversary actions commenced, probably because there were none. There is no reference to any preferences recovered, fraudulent conveyances set aside, turnover proceedings commenced, claims objected to or assets recovered for this estate, probably because the answer would also be none. There were two motions involving the proposed sale and assignment of the debtor’s sole asset, both of which were denied by the court following opposition by the creditors. The applicant also opposed a creditor’s motion for relief from the automatic stay and a motion made by the United States trustee for conversion of the case. Some time was spent preparing the Chapter 11 petition and drafting a plan which was never filed. Some time was spent attending creditor’s meetings. The bulk of the time for which-compensation is sought related to the unde-tailed list of telephone calls.

DISCUSSION

It was not until 1973 that an attorney for a debtor in an aborted arrangement case under Chapter XI of the former Bankruptcy Act could receive compensation in the Second Circuit for service rendered to the debtor, notwithstanding the conversion of the case for liquidation. In re Casco Fashions, 490 F.2d 1197 (2d Cir.1973). The Court of Appeals ruled that the debtor’s attorney could be awarded compensation out of the estate over the objection of the trustee in bankruptcy because:

what the attorneys for the debtor have accomplished along the lines indicated will diminish pro tanto

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Cite This Page — Counsel Stack

Bluebook (online)
106 B.R. 359, 1989 Bankr. LEXIS 1873, 1989 WL 129896, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-citrone-development-corp-nysb-1989.