Source: https://www.legalcrystal.com/case/90452/re-wood-henderson
Timestamp: 2019-12-07 03:58:28
Document Index: 596632682

Matched Legal Cases: ['§ 60', '§ 60', '§ 60', '§ 60', '§ 60', '§ 60', '§ 67', '§ 60', '§ 60', 'sui generis', '§ 60', '§ 60', '§ 67', '§ 60', '§ 60', '§ 60', '§ 60', '§ 60', '§ 60', '§ 60']

In Re Wood and Henderson - Citation 90452 - Court Judgment | LegalCrystal
In Re Wood and Henderson - Court Judgment
LegalCrystal Citation legalcrystal.com/90452
Case Number 210 U.S. 246
Appellant In Re Wood and Henderson
in re wood & henderson - 210 u.s. 246 (1908) u.s. supreme court in re wood & henderson, 210 u.s. 246 (1908) in re wood & henderson no. 167 submitted march 6, 1908 decided may 18, 1908 210 u.s. 246 certificate from the circuit court of appeals for the eighth circuit syllabus congress has the right to establish a uniform system of bankruptcy throughout the united states, and having given jurisdiction to a particular court to administer the property, that court may, in some proper way, call upon all parties interested to appear and assert their rights. the bankruptcy court, or its referee, in which the bankruptcy proceedings are pending, has jurisdiction under § 60 d of the bankruptcy act to reexamine, on.....
In re Wood & Henderson - 210 U.S. 246 (1908)
U.S. Supreme Court In re Wood & Henderson, 210 U.S. 246 (1908)
The bankruptcy court, or its referee, in which the bankruptcy proceedings are pending, has jurisdiction under § 60 d of the Bankruptcy Act to reexamine, on petition of the trustee, the validity of a payment or transfer made by the bankrupt in contemplation of bankruptcy to an attorney for legal services to be rendered by him, and to ascertain and adjudge what is a reasonable amount to be allowed for such services and to direct repayment of any excess to the trustee, and if the attorney is a nonresident of the district, an order directing him to show cause or a citation or notice of the proposed hearing may be served without the district.
The facts certified are: R. H. Williams had been adjudicated a bankrupt on January 13, 1904, in the District Court of the United States for Colorado. On the seventeenth of May, 1905, it appears that the trustee in bankruptcy (following § 60 d ) petitioned the court, representing that the bankrupt, in contemplation of filing the petition in bankruptcy, did pay to certain counsel, the petitioners in this case at Hot Springs, Arkansas, $5,000 in cash, and transfer to them a certificate of deposit for $3,000, and a certificate of deposit for $1,795; that said money and property were transferred to said counsel, Wood and Henderson, by said Williams, in contemplation of the filing of a petition in bankruptcy against him, within four months of the filing thereof, for legal services to be rendered thereafter by said Wood and Henderson. They were thereupon ordered to appear at the office of the referee, in the City of Colorado Springs in the State of Colorado, on June 20, 1905, and show cause, if any they had, why an order should not be made determining and adjudicating the reasonable value of the services rendered by the said attorneys for the said bankrupt, and that, in default of their appearance, the referee would proceed to hear and determine the matter on the evidence presented. It was ordered that a copy of the citation, together with a copy of the petition, be served on Wood and Henderson at Hot Springs, Arkansas, at least twenty days before the day set for the hearing. On the first day of August, 1905, the referee in bankruptcy, holding a court of bankruptcy, made the following order:
"1. Has a district court of the United States, sitting in bankruptcy, in which the proceedings in bankruptcy are pending, or its referee, jurisdiction under § 60 d of the Bankrupt Act to reexamine, on petition of the trustee in bankruptcy, the validity of the payment of money or the transfer of property by the bankrupt, made in contemplation of the filing of a petition by or against him in bankruptcy, to an attorney or counselor at law, for services to be rendered to him by such attorney or counselor, and to ascertain and adjudge the extent of the reasonable amount to be allowed for such services, and to direct that the excess may be recovered by the trustee for the benefit of the estate, in the instance where
An answer to these questions involves the construction of § 60 d of the Bankruptcy Act of 1898, which reads:
"60 d . If a debtor shall, directly or indirectly, in contemplation of the filing of a petition by or against him, pay money or transfer property to an attorney and counselor at law, solicitor in equity, or proctor in admiralty for services to be rendered, the transaction shall be reexamined by the court on the petition of the trustee or any creditor, and shall only be held valid to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the trustee for the benefit of the estate."
Section 60 d added a feature to the Bankruptcy Act not found in former acts regulating practice and procedure in bankruptcy; therefore adjudications upon other provisions of the Bankruptcy Act, or concerning the Judiciary Act giving jurisdiction to the courts of the United States, have no binding effect in the construction of this section.
This is not a case of preference, where part of the estate is transferred to a creditor so as to give to him more of the estate than to others of the same class, under § 60 of the Bankruptcy Act, nor is it a case of fraudulent conveyance under § 67. It is a transfer in consideration of future services, to be reduced if found unreasonable in amount. In Furth v. Stahl, 205 Pa. 439, the opinion is by Mr. Justice Mitchell, and, speaking for the Supreme Court of Pennsylvania, the learned justice, after quoting § 60 d , says:
The same statute was before the Court of Appeals for the Sixth Circuit in the case of Bothe v. Pratt, 130 F. 670. In that case, in speaking of the provisions of § 60 d , Judge Severens, speaking for the court, said:
Section 60 d is sui generis, and does not contemplate the bringing of plenary suits or the recovery of preferential transfers in another jurisdiction. It recognizes the temptation of a filing debtor to deal too liberally with his property in employing counsel to protect him in view of financial reverses and probable failure. It recognizes the right of such a debtor to have the aid and advice of counsel, and, in contemplation of bankruptcy proceedings which shall strip him of his property, to make provisions for reasonable compensation to his counsel. And, in view of the circumstances, the act makes provision that the bankruptcy court administering the estate may, if the trustee or any creditor question the transaction, reexamine it with a view to a determination of its reasonableness.
We see no reason why notice of the proceedings under § 60 d may not be by mail or otherwise, as the court shall direct, so that an opportunity is given to appear in the court where the
It is true that the state courts, under the Bankruptcy Act as it stood before the amendment of February, 1903, were given jurisdiction to entertain suits to recover preferences, to the exclusion of the federal courts, unless the defendant consented to be sued in the federal court. Bardes v. The Bank, 178 U. S. 524 . The district courts had jurisdiction only over proceedings in bankruptcy, as distinct from plenary suits against third persons having possession of transferred property, to be exercised when the district court had acquired jurisdiction of the bankrupt's property. Bardes v. The Bank, supra; White v. Schloerb, 178 U. S. 542 ; Bryan v. Bernheimer, 181 U. S. 188 ; Whitney v. Wenman, 198 U. S. 539 .
Section 60 d is a part of the original Bankruptcy Act of 1898, and intended by Congress to be a part of a uniform system of bankruptcy, to be consistently administered by the courts given jurisdiction. Suppose, then, instead of obtaining the order in the district court administering the property, the trustee, because he could not get personal service upon the attorneys, had gone to any court within the limits of the State of Arkansas,
state or federal, upon the theory of a preference, and obtained jurisdiction by valid service of process -- it was in the power of the defendants to end this suit by refusing to consent to the jurisdiction of such court. If suit was begun in the state court of Arkansas, that court would have answered, as did the Supreme Court of Missouri in Swartz v. Frank, 183 Mo. 439, the Bankruptcy Act confers no jurisdiction upon a state court to entertain an application of the trustee, or of a creditor, to reduce the provision made for counsel; that jurisdiction is given alone to the district court of the United States administering the property. If the action had been brought in the United States court, it would have made the same answer; and, in addition thereto, the jurisdiction of the circuit or district court of the United States could have been ousted, prior to the amendment of 1903, by the defendants' withholding their consent to the jurisdiction of the federal court. It is true that, by the amendment referred to (the Act of February, 1903), concurrent jurisdiction with the state courts is now given to the federal courts of suits for the recovery of property under § 60, subdivision b, and § 67, subdivision e. These last-named sections have reference to suits to recover preferences or fraudulent conveyances. No attempt has been made to change the exercise of jurisdiction under § 60 d . The transfer to counsel may be wholly sustained; it is certainly valid to the extent that it is reasonable. It is neither a preference nor a fraudulent conveyance, as defined by §§ 60 b or 67 e of the act.
It is to be noted that in this case, as the statement of the certificate shows, the district court rendered no judgment against the defendant for a recovery of the excess, but directed the trustee to bring an action therefor. It simply assumed and exercised the jurisdiction conferred by § 60 d to determine the amount of the excessive transfer for a counsel fee provided in view of filing a petition in bankruptcy. It may be that this order, though binding upon the parties, cannot be made finally effectual until a judgment is rendered in a jurisdiction where it can be executed.
"This provision [60 d ] recognizes this fact [the right to employ counsel] and approves the payment by the bankrupt to such attorney of reasonable compensation. The reasonableness of it may be inquired of by the court upon the petition of the trustee or any creditor. This proceeding is administrative in character, in which the jurisdiction of the court is not dependent on the service of process, but is expressly given by statute, and a notice of hearing therein, given by mail a reasonable time before the hearing, is sufficient."
The construction which we have given § 60 d does not deprive parties of rights secured under the Seventh Amendment of the Constitution to trials by jury in suits at common law where the value in controversy exceeds twenty dollars. This provision of the Constitution extends to rights and remedies peculiarly legal in their nature, and such as it was proper to extend in courts of law by the appropriate modes and proceedings of such courts. Shields v. Thomas, 18 How. 253, 59 U. S. 262 .
"SEC. 60 d . If a debtor shall, directly or indirectly, in contemplation of the filing of a petition by or against him, pay money or transfer property to an attorney and counselor at law, solicitor in equity, or proctor in admiralty, for services to be rendered, the transaction shall be reexamined by the court on petition of the trustee or any creditor, and shall only be held valid to the extent of a reasonable amount, to be determined by the court, and the excess may be recovered by the trustee for the benefit of the estate."
Construing the Judiciary Act of 1789, it was said in Toland v. Sprague, 12 Pet. 300, 37 U. S. 328 :
How appropriate, in this connection, is the language of Mr. Justice Bradley, delivering the opinion of the court in Boyd v. United States, 116 U. S. 616 , 116 U. S. 635 , where, speaking of an attack upon another constitutional provision, he says:
"Illegitimate and unconstitutional practices get their first footing in that way -- namely, by silent approaches and slight deviations from legal modes of procedure. This can only be obviated by adhering to the rule that constitutional provisions for the security of person and property should be liberally construed. A close and literal construction deprives them of half their efficacy, and leads to gradual depreciation of the right, as if it consisted more in sound than in substance. It is the duty of courts to be watchful for the constitutional rights of the citizens, and against any stealthy encroachments thereon. Their motto should be obsta principiis. "
"SEC. 60 a. A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, or after the filing of the petition, and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class."
and comes within the spirit, if not the letter, of § 60 a, which provides that
While § 60 d is not in the Bankruptcy Act of 1867, obviously it was specially inserted in the present act for the purpose of making clear the liability of counsel receiving payment in advance. It is simply a declaration that an excessive prepayment to counsel employed with a view to bankruptcy proceedings is to be considered, so far as the excess is concerned, a preference, and recoverable by the trustee in bankruptcy. And, unless a contrary intent be clearly manifested, the proceeding to recover that preference should be in the same way and by the same tribunals that have jurisdiction of any other proceeding to recover money or property given by way of preference. It would be giving an unreasonable extension to language to make it not simply a declaration of the right to recover, but also a limitation of the tribunal in which the recovery can be had or the amount due determined -- a limitation not obtaining in respect to any other preference.
Again, it is suggested that § 60 d provides for proceedings in the bankruptcy court -- no vesting of jurisdiction in any other than that court -- and it is said there is no provision for a plenary suit to recover the amount of the excessive prepayment and none for a jury. But, by the Bankrupt Act of March 2, 1867, the general jurisdiction over bankruptcy proceedings was vested in the court in which they were commenced, and there was no special provision for ancillary proceedings in the courts of other districts, and yet it was decided that those ancillary proceedings might be held; that that seemed to be the necessary result of the general jurisdiction conferred, and to be in harmony with the design and scope of the act. As said by Mr. Justice Bradley, in Lathrop v. Drake, 91 U. S. 516 , 91 U. S. 518 :