Source: https://www.legalcrystal.com/case/97543/rfc-vs-bankers-trust-co
Timestamp: 2016-12-06 07:27:07
Document Index: 644065851

Matched Legal Cases: ['§ 77', '§ 77', '§ 77', '§ 77', '§ 1', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 77', '§ 48', '§ 77', '§ 77']

Rfc Vs Bankers Trust Co - Citation 97543 - Court Judgment | LegalCrystal
Save as PDF Add a Tag Add a Note Semantics Visualize Rfc Vs. Bankers Trust Co. - Court Judgment	LegalCrystal Citationlegalcrystal.com/97543CourtUS Supreme CourtDecided OnFeb-08-1943Case Number318 U.S. 163AppellantRfcRespondentBankers Trust Co.Excerpt:.....the commission shall at such time or times as it may deem appropriate, after hearing, fix the maximum allowances which may be allowed by the court pursuant to the provisions of paragraph (12) of this subsection (c) and, after hearing, if the commission shall deem it necessary, the maximum compensation which may be allowed by the court pursuant to the provisions of paragraph (2) of this subsection (c)."
RFC v. Bankers Trust Co. - 318 U.S. 163 (1943)
1. The term "debtor's estate" as used in § 77(c)(12) of the Bankruptcy Act embraces cash deposited with an indenture trustee. P.
318 U. S. 167
2. The services and expenses of the indenture trustee in this case were rendered and incurred "in connection with the proceedings and plan" of reorganization, within the meaning of § 77(c)(12) of the Bankruptcy Act. P.
3. Section 77(c)(12) of the Bankruptcy Act, which authorize, within such maximum as may be fixed by the Interstate Commerce Commission, an allowance out of the debtor's estate for reasonable expenses incurred in connection with the proceedings and plan of reorganization, and for reasonable compensation for services in connection therewith by trustees under indentures,
applicable to the claim here of an indenture trustee for services and expenses. P.
4. The function of the Interstate Commerce Commission under § 77(c)(12) of the Bankruptcy Act is that of a factfinding body. The bankruptcy court may not set aside the Commission's findings of fact when they are supported by the evidence, but may determine all questions of law. The only question of law which can arise with respect to a maximum amount fixed by the Commission is whether there is substantial evidence to support the Commission's finding. If there is not, the court may set aside the finding and refer the matter back to the Commission. The court's action upon the claim is appealable, independently of other issues, to the Circuit Court of Appeals. P.
5. As here construed and applied, § 77(c)(12) does not contravene Art. III, § 1 of the Federal Constitution, or the Fifth Amendment. P.
318 U. S. 168
This controversy arises in a proceeding under § 77 of the Bankruptcy Act [
] for the reorganization of the St. Louis-San Francisco Railway Company system, part of which is the Kansas City, Fort Scott & Memphis Railway, under a mortgage of whose property the respondent Bankers
Trust Company is trustee. The respondent obtained leave to intervene in the District Court and before the Interstate Commerce Commission, [
] and participated in the proceedings.
"compensation for services rendered or for expenses (including reasonable attorneys fees) incurred either under clause (12) of subsection c of Section 77 [
] . . . or otherwise."
In 266, the respondent alleged that the services had "not been rendered or incurred
in connection with the proceedings and plan'" for reorganization, but by respondent as trustee under the mortgage in performance of its fiduciary duties, for the benefit of the trust estate, as distinguished from the debtor's estate.
The Commission held hearings on 267 and on other claims for allowances under § 77(c)(12). In a report, it held that it had jurisdiction to fix a maximum amount to cover the items embraced in respondent's claim in 267, which it found were rendered in connection with the proceedings and the plan during the pendency of the § 77 proceeding. [
] It fixed maxima below the amounts claimed for the several items of service and expense.
The court refrained from passing on this portion of the Commission's report. The petitioner appealed from the order in 266, and the Circuit Court of Appeals affirmed the judgment. [
] Due to the importance of the questions raised in the administration of the statute and a conflict of decision, [
Section 77(c)(12), which appears in the margin, [
] empowers
The respondent contends that the expenses and services for which compensation was allowed were not those referred to in § 77(c)(12). This notwithstanding acquiescence in the holdings of the court below, which we think correct, that the term "debtor's estate," as used in the act, embraces cash deposited with the indenture trustee, and that the services and expenses in question were rendered and incurred "in connection with the proceedings and plan." [
The basis of the contention and of the decision below is that the services and expenses in question are "not within the meaning of" the subsection, as the claim for their allowance is based upon the contract expressed in the mortgage, [
] and is for services required by the mortgage
The main argument advanced in support of the judgment is that to apply § 77(c)(12), to the respondent's claims would violate the Fifth Amendment of the Constitution by depriving the courts of power to determine whether the Commission's decision was contrary to law or without evidence to support it, and by destroying respondent's vested property rights. In addition, it is urged that, by Art. III, Section 1, the judicial power of the United States is vested exclusively in the courts, and matters of private right may not be relegated to administrative bodies for trial. The statute, fairly applied in the circumstances disclosed by the record, does not contravene any constitutional provision.
Three diverse conclusions respecting the effect of § 77(c)(12) have been expressed by the courts. It has been held that the maximum fixed by the Commission is, in all circumstances, binding and unalterable. [
] The court below has concluded that the subsection has no application to the claims of an indenture trustee, secured by a lien on the trust estate pursuant to the mortgage contract. The District Court of Connecticut has decided that the
court may set aside the maximum named by the Commission if found unreasonably low, and return the matter to the Commission for a fresh determination. [
] The petitioner states its view that, "while the statute is not entirely clear, judicial review of the maximum is permitted." After mentioning matters of law which are for the court's determination on review of the Commission's report, such as whether the services in question are to be compensated under the provisions of the Act, and others we need not mention, the petitioner refers to § 77(e), [
] which provides that the judge shall approve the plan if satisfied,
None of these views seems to us rightly to construe the statute. We think the Congress did not intend to deny the courts all power of review of Commission action in such cases. The statute plainly requires reference to the Commission of claims of the class under consideration, a hearing by that body, the setting of a maximum, and action by the court on the footing of the Commission's report. It does not contemplate a hearing
on the issue of the reasonable worth of the services rendered or the propriety of the expenses incurred, or a reappraisal by the court of the facts. Moreover, the procedure suggested by petitioner does not comport with the evident purpose of § 77(c)(12), which appears to treat the court's action with respect to such claims as a matter distinct from his final action on the plan as a whole under § 77(e).
46 F.Supp. 236.
In re Chicago, M., St. P. & P. R. Co.,
121 F.2d 371;
In re Chicago & N.W. Ry. Co.,
35 F.Supp. 230;
In re Chicago, G.W. R. Co.,
29 F.Supp. 149. It is suggested this view is sustained by the legislative history of the section. But the changes made by amendment in another section (77(e)) are not helpful, and the testimony before the Judiciary Committee of the House is neither the sort of legislative material this court holds relevant to the construction of a statute nor is it clear or definite upon the point at issue.
In re New York, N.H. & H. R. Co., supra,
fully disclosed and are reasonable, or are to be subject to the approval of the judge." The changes made by the 1935 amendments are significant. The total amount of fees and expenses fixed by the Commission became a ceiling beneath which the judge could make readjustments, but above which he could not go. Prior to those amendments, judicial review of the maximum fixed by the Commission might have been permissible. But the changes made in 1935 clearly indicate, as Judge Evans said in
In re Chicago, M. St. P. & P. R. Co.,
121 F.2d 371, 374, that the "court was ultimately to determine the amount of the fees," its action however being "limited by the maximum fixed by the Commission." The legislative history of the 1935 amendments supports that view. [
] Indeed, the Committee
Reports stated [
] that the "allowances to be made by the court" were to be "within the maximum prescribed by the Commission." H.Rep. No. 1283, 74th Cong., 1st Sess., p. 3; S.Rep. No. 1336, 74th Cong., 1st Sess., p. 4.
That construction also squares with other provisions of § 77. Thus, subsection (c)(12) provides that the judge may make an allowance "within such maximum limits as are fixed by the Commission." It also requires the Commission to "fix the maximum allowances which may be allowed by the court." They indicate to me that, in line with the minority views in
, which § 77 adopted (
Congressman La Guardia, 76th Cong.Rec. 72nd Cong., 2d Sess., p. 5358), the drain on the cash resources of railroads was to be controlled by entrusting to the Commission the responsibility for determining the total amount of cash which should be expended for fees and expenses. Within those limits, the courts could make a fair allocation among
In re Chicago, M., St. P. & P. R. Co., supra,
pp. 374-375. The court felt that, since subsection (c)(12) spoke of the "maximum limits" and "maximum allowances" fixed by the Commission, the findings of the Commission as to the maximum amount which each claimant could receive were conclusive. But that interpretation is difficult to reconcile with the requirement of subsection (e)(2) that the judge must find the allowances "reasonable." The use of the plural in subsection (c)(12) only indicates that the maximum allowance for fees and the maximum allowance for expenses are both to be fixed by the Commission.
My conclusion that the aggregate maximum allowances fixed by the Commission are not reviewable does not make § 77(c)(12) and (e)(2) unconstitutional. It is Congress which has the power under the Constitution to establish "uniform Laws on the subject of Bankruptcies throughout the United States." Article I, Sec. 8, Cl. 4. The scope of the bankruptcy power is not restricted to that which has been exercised.
Continental Illinois Nat. Bank & Trust Co. v. Chicago, R.I. & P. Ry. Co.,
-671. The fact that Congress has customarily entrusted administration of the various bankruptcy acts to the courts does not mean that it must do so. As stated by Judge Evans in
p. 375, "the power of Congress to deal with bankruptcy carries with it the right to select the tribunal, even going outside of courts, to administer debtors' estates." When it comes to fees for services rendered or expenses incurred in connection with bankruptcy proceedings, Congress has plenary power. In § 48 of the general bankruptcy Act, Congress has prescribed the schedule of fees for receivers, marshals, and trustees. It could provide that no fees for services rendered during the bankruptcy proceedings might be paid from the estate. The 1935 amendments to § 77 originally were recommended by the committees
on that basis. H.Rep. No.1283,
p. 3; S.Rep. No.1336,
p. 4. Having that power, Congress could fix fees for attorneys and others on a
Cf. Hines v. Lowrey,
305 U. S. 85
. In lieu of any such rigid system of control, it could bring to its aid the services of the Commission and vest in it complete authority over all allowances. That clearly would not involve any question of delegation of judicial power.
See Sunshine Coal Co. v. Adkins,
. Hence, when Congress granted the Commission exclusive authority over the maximum amount of allowances, it did not give § 77 a constitutional infirmity.
"Mr. Burgess. That [
] is an appeal from the court's fixation, of course, but that would have to be within the maximum, so I do not know of any appeal."
Hearings on H.R. 6249, House Committee on the Judiciary, 74th Cong., 1st Sess., Ser. 3, p. 86.
the testimony of Commissioner Mahaffie at p. 70, which is also quoted in
In re Chicago, M. St. P. & P. R. Co., supra,
The committee print of the bill provided for allowances of expenses and of compensation.
subsections (c)(12) and (e)(2) of H.R. 6249, 74th Cong., 1st Sess., Hearings on H.R. 6249,
pp. 6, 7. As recommended by both the House and Senate committees, allowances for expenses, but not for compensation, were provided. The provision for allowances of fees was later restored. 79 Cong.Rec. 74th Cong., 1st Sess., p. 13765.