Soteres v. Scroggins

439 F.2d 1351
CourtCourt of Appeals for the Fifth Circuit
DecidedMarch 15, 1971
DocketNo. 30756
StatusPublished

This text of 439 F.2d 1351 (Soteres v. Scroggins) 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
Soteres v. Scroggins, 439 F.2d 1351 (5th Cir. 1971).

Opinion

WISDOM, Circuit Judge:

In this bankruptcy case the net estate amounted to about $46,000. The principal creditors object to the award of fees of about $8,000 to Frank W. Scroggins who served as Receiver, Trustee and Attorney for himself as Trustee. They object also to fees of $2,000 awarded to A. Mims Wilkinson, Jr., for filing the bankruptcy petition and for alleged extraordinary services to the bankrupts. We remand the case for a hearing and findings that will support fair and reasonable fees to Mr. Scroggins and Mr. Wilkinson.

Mr. and Mrs. James P. Soteres made the mistake of lending $40,000 to Mrs. Soteres’s sister, Mrs. Kiki Kazakos, and her husband, John Kazakos, to enable the Kazakos’ to engage in the liquor business. They did so as a partnership under the names of Orbit Liquor Store and Orbit Beer and Wine Package Store (Orbit). Repayments were slow, disputes' [1353]*1353arose, disputes followed disputes. Mrs. Soteres attached part of the liquor stock. Then Mr. Soteres filed two suits against Orbit and the Kazakos’; one of these wént to a default judgment and a garnishment followed.

Wilkinson, attorney for the debtors, filed voluntary petitions in bankruptcy April 30, 1969, for the Kazakos’ individually and as members of the partnership doing business as Orbit. Scroggins was appointed Receiver May 1. After taking inventory, May 5 he reopened the liquor store. As he pointed out in his report to the creditors, Scroggins thought

that the best interest of the estate would be served by operating the store with the hope that the trustee could sell it as a going business.

May 21 Scroggins was appointed Trustee at a meeting of the creditors. May 31 the store was closed permanently. June 16 Scroggins received an offer to buy the business and its assets. July 15 the sale was confirmed. The total net assets available for distribution at the end of the proceedings amounted to $45,-985.

The referee awarded Scroggins $1,-199.70 for serving as receiver from May 1 to May 21; $1,749.70 for serving as Trustee from May 21; and $5,000 for acting as attorney for the trustee. Thus Scroggin’s attorney’s fees amounted to approximately 11% of the estate and his total fees for his activities in all three capacities amounted to more than 17 % of the estate.

The referee awarded Wilkinson, attorney for the bankrupts, $2,000 for his services in filing the petition for bankruptcy and appointment of a receiver and for alleged extraordinary services to the bankrupt estate. This was in addition to recognition of his claim for previous services as attorney for the debtors.

These awards raise the question whether the referee failed to act in accordance with the prescription that “the Bankruptcy Act is meant to be an act for the relief of debtors rather than an act for the relief of attorneys and court officers.” Collier, Bankruptcy Vol. 3, 62.05 [1] p. 1429. It is impossible to answer this question definitively on appeal because of the ambiguous itemizations of time spent by attorneys and the failure of the referee to make meaningful findings of fact in support of his awards.

This appeal raises the following issues.

(1) The appellants, the creditors, argue that 18 U.S.C. 3006A of the Criminal Justice Act of 1964, which authorizes specific fees for attorneys appointed to represent indigent criminal defendants, should be taken as amending 11 U.S.C. § 76a authorizing discretionary attorney’s fees in bankruptcy proceedings. This argument is too frivolous for discussion.

(2) The appellants contest the awards of attorney’s fees to A. Mims Wilkinson. Wilkinson was attorney for the bankrupt. He also had a claim of his own against the estate growing out of past legal services, and he represented another creditor of the estate (Smith). The referee awarded him $500 for drawing up the petition for voluntary bankruptcy and appointment of a receiver and $1500 as attorney for the bankrupt. Wilkinson did not itemize the time supporting either award. The district court remanded the $1500 award to the referee for Wilkinson to submit an itemization of time and for the referee to make supplementary findings regarding the nature of the services performed by Wilkinson. Wilkinson itemized his claim, but the referee failed to make any findings as directed, simply reawarding $1500. Nevertheless, the district court affirmed the award as within the referee’s discretion.

The award of $500 for filing the petition for bankruptcy and appointment of a receiver is invalid because Wilkinson failed to itemize his claim. The award of $1500 is invalid because on remand Wilkinson’s showing was insufficient to support the compensability of his services and the referee failed to make any finding as to the nature of the compensable services. The itemization offered by Wilkinson indicates that much [1354]*1354of the time was spent in services that were not properly compensable out of the estate. See In re Progress Lektro Shave Corp., 2 Cir. 1941, 117 F.2d 602; Collier, Bankruptcy Vol. 3, 62.31. Such activities would be noncompensable if they were done to protect the interests of Wilkinson and Smith as creditors or if, though beneficial to the estate, they were unauthorized, volunteer services, duplicating the duties of the trustee and attorney for the trustee. Also, legal services designed to benefit the bankrupt personally may not be compensable out of the estate. See, e. g. In re Eastwood, D.Or.1965, 239 F.Supp. 847.

On remand, after a detailed itemization by Wilkinson indicating the purpose to which the services were directed, the referee shall make findings as to which of the services are compensable and to what proper purpose they were directed.

(3) The appellants attack the award of attorney’s fees to Scroggins. In addition to serving as receiver and trustee — receiving the maximum statutory fee for his service in each capacity— Scroggins served as attorney for the trustee. He submitted a time record in support of his claim for attorney’s fees. The referee awarded him $5,000. Appellants allege that much of the time itemized in support of Scroggins’s claim was spent on duties that were to be performed by the receiver or trustee. To award him attorney’s fees, for this time would result in paying him twice. Appellants also argue that some of the time entries relate to work done before Scroggins’s appointment as attorney for the trustee. It is obvious from the time record that both these allegations are true. The district court recognized the confusion of function, but refused to remand on the ground that time was not the only factor to be considered in determining attorney’s fees.

While we agree that time is not the only factor, we think that there is a serious problem when one person acts as trustee and attorney and fails to distinguish in his claim for fees those tasks that are properly the tasks of an attorney. See Fine v. Weinberg, 4 Cir. 1967, 384 F.2d 471; In re General Economics Corp., 2 Cir. 1966, 360 F.2d 762; Finn v. Childs Co., 2 Cir. 1950, 181 F.2d 431

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Related

Finn v. Childs Co.
181 F.2d 431 (Second Circuit, 1950)
Beecher v. Leavenworth State Bank
184 F.2d 498 (Ninth Circuit, 1950)
In Re Progress Lektro Shave Corporation
117 F.2d 602 (Second Circuit, 1941)
In Re National Accessories, Inc.
13 F. Supp. 278 (D. Nebraska, 1936)
In Re Eastwood
239 F. Supp. 847 (D. Oregon, 1965)
In re Duke
15 F.2d 92 (U.S. Circuit Court for the District of Eastern Missouri, 1924)
In re General Economics Corp.
360 F.2d 762 (Second Circuit, 1966)
Fine v. Weinberg
384 F.2d 471 (Fourth Circuit, 1967)
In re United States Products Corp.
57 F. Supp. 239 (N.D. California, 1944)

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Bluebook (online)
439 F.2d 1351, Counsel Stack Legal Research, https://law.counselstack.com/opinion/soteres-v-scroggins-ca5-1971.