Parsons

23 N.E. 50, 150 Mass. 343, 1890 Mass. LEXIS 276

• Court: Massachusetts Supreme Judicial Court
• Decided: January 1, 1890
• Status: Published

Opinion

Holmes, J.

It seems to have been well settled, under the United States Bankrupt Acts, that a person intending to file a voluntary petition in bankruptcy had a right to pay counsel in advance for services to be rendered in procuring his discharge, and was not confined to what was necessary to get the property into the hands of an assignee. Otherwise, it was said, the law would be of no avail to him. Flournoy v. Newton, 8 Ga. 306, 310. Lyon v. Marshall, 11 Barb. 241. In re Rosenfeld, 2 Bankr. Reg. 116, 122. It was held to follow that such a person might sell property at a fair price in order to raise money for the same purpose. In re Keefer, 4 Bankr. Beg. 389. The intimation that he could not mortgage the same property to the same end, in In re Evans, 3 Bankr. Reg. 261, seems to have been doubted by both bench and bar. In re Mallory, 4 Bankr. Reg. 153, 156. Bump on Bankruptcy, (9th ed.) 249.

The understanding and practice as to paying counsel in advance for services under our insolvent laws have been like what prevailed under the Bankrupt Acts, and we see no reason to doubt their correctness. The provision against transfers with a view to prevent property from coming to the hands of the assignee (Pub. Sts. c. 157, § 98) is the only one bearing upon it.

* If that does not invalidate a bona fide and reasonable payment, it cannot invalidate a fair and honest mortgage to secure reason-, able compensation for such services as the insolvent has a right to pay for in cash. If the mortgage should be found to have been a device to defeat creditors, the case would be different.

It is not necessary now to decide whether the debtor can charge his estate in any way for services to be rendered him in case of adverse proceedings between his assignee or his creditors and himself. We interpret the statements in the petition as to services rendered and to be rendered as meaning only the usual services necessary to obtain the insolvents’ discharge. It is true, that, if we were to construe the allegations of the petition strictly against the petitioner, the consideration might be taken to embrace services of a more extensive kind, and that we should meet the further difficulty that the note was for a larger sum than was paid by the petitioner, and, if invalid in part, was invalid altogether. If, as may have been the case, the note was given only as security for whatever might turn out to be the fair value of the services rendered, that fact should have been alleged. But as the ground on which the judge of insolvency disallowed the sum paid by the assignee appears to have been the general one that the note and mortgage were void irrespective of their amount or of the nature of the services to be rendered, the petition ought not to be dismissed, unless we are prepared to adopt that general principle.- The judge of insolvency, therefore, should be directed to find what would have been a reasonable compensation for such services as the debtors had a right to pay for out of their estate, and to allow the assignee’s payment to that amount, if the debtors’ contract only contemplated such services.

The judge, no doubt, will scrutinize carefully the nature of the services rendered, and the amount of the charge proper to be allowed in dealing with an estate of six hundred dollars.

Decree accordingly.

See St. 1889, c. 420.