Source: http://www.chanrobles.com/usa/us_supremecourt/289/472/case.php
Timestamp: 2017-12-11 16:57:37
Document Index: 459364219

Matched Legal Cases: ['§ 60', '§ 96', '§ 60', '§ 21', '§ 64', '§ 64']

CONRAD, RUBIN & LESSER V. PENDER, 289 U. S. 472 (1933) - US SUPREME COURT DECISIONS ON-LINE
US Supreme Court Decisions On-Line> Volume 289 > CONRAD, RUBIN & LESSER V. PENDER, 289 U. S. 472 (1933)
Subscribe to Cases that cite 289 U. S. 472
1. Payments made by the debtor in contemplation of bankruptcy "to an attorney and counselor at law, solicitor in equity, or proctor in admiralty," "for services to be rendered," are subject to be summarily chanroblesvirtualawlibrary
By an order made by a referee in bankruptcy under § 60(d) of the Bankruptcy Act (11 U.S.C. § 96(d)), appellants were directed to turn over to the trustee in bankruptcy the sum of $2,000, which was part of an amount paid to them by the bankrupt corporation for legal services chanroblesvirtualawlibrary
The only question presented is raised by the appellants' challenge of the jurisdiction of the referee to reexamine the payment under § 60(d). The payment was made on November 5, 1930, and the petition in bankruptcy was filed twelve days later. There is no room for controversy as to the facts, which are thus stated by the Court of Appeals: the corporation was in financial difficulties and unable to meet its maturing obligations. Prior to retaining the appellants, it had engaged another attorney to negotiate a settlement with its creditors, and a meeting with some of its creditors had been held. Apparently the appellants were retained to supplement the efforts of that attorney, to whom $750 had already been paid upon a promised fee of $2,000. The testimony of one of the appellants, given at an examination under § 21(a), was to the effect that he was to negotiate with creditors for a 50 percent cash settlement and was to assist the corporation in hypothecating its accounts receivable in order to obtain the necessary money to carry out such a settlement. His affidavit, submitted in opposition to the referee's jurisdiction, stated that the most extreme course which was within the contemplation of himself and David Bell, bankrupt's president, was continuance of the business under an equity receivership, although that course was not contemplated if the business could be continued under the supervision of a a committee of creditors or of a representative of the New York Creditors' Adjustment Bureau, Inc. It also appeared that, within two weeks prior to November 5th, when the appellants' retainer was paid, David Bell had withdrawn chanroblesvirtualawlibrary
The language of the provision, and the indicated scope of the legal services embraced within it, distinguish it chanroblesvirtualawlibrary
from the provision of § 64(b)(3), 11 U.S.C. 104(b)(3), [Footnote 2] with respect to the priority of a reasonable attorney's fee in the distribution of an estate in bankruptcy. [Footnote 3] See Furth v. Stahl, 205 Pa. 439, 442, 55 A. 29, 30; Pratt v. Bothe, 130 F.6d 0, 673. Section 60(d) relates to payments and transfers made by the bankrupt prior to bankruptcy from his own property for services to be rendered to him, § 64(b)(3) to an allowance to be made for legal services out of the estate under administration. See In re Rolnick, 294 F.8d 7, 819. The services within the latter provision are those rendered in aid of the administration of the estate and the carrying out of the provisions of the Act. See Randolph v. Scruggs, 190 U. S. 533, 190 U. S. 539; In re Kross, 96 F.8d 6; In re Mayer, 101 F.6d 5; In re Rosenthal & Lehman, 120 F.8d 8; In re Christianson, 175 F.8d 7. Section 60(d), authorizing a reexamination of payments and transfers by the bankrupt for services to be rendered, has a broader scope. It contains no intimation of an intention to limit the jurisdiction to reexamine to a particular sort of legal services for the payment of which the debtor has disposed of his property. The point of the provision conferring jurisdiction for a summary reexamination is not the specific nature of the legal services to be rendered, but that the chanroblesvirtualawlibrary
We agree with the Court of Appeals that the criteria of jurisdiction to reexamine are distinct from the criteria of the decision on the merits. As to the jurisdiction to reexamine, the controlling question is with respect to the state of mind of the debtor and whether the thought of bankruptcy was the impelling cause of the transaction. Compare United States v. Wells, 283 U. S. 102, 283 U. S. 117-118; Tripp v. Mitschrich, 211 F.4d 4, 427. If the payment or transfer was thus motivated, it may be reexamined and its reasonableness be determined. Undoubtedly, while the question thus relates to the debtor's motive, the nature of the services which he seeks and for which he pays may be taken into consideration as it may throw light upon his motive. It is not impossible that the services may have been so wholly separate from any exigency of bankruptcy as to indicate that the thought of bankruptcy was in no sense controlling. But, given the fact that the payment or transfer was in contemplation of bankruptcy, the inducement of the transaction affords, from the standpoint of the statute, sufficient ground for authorizing a summary inquiry into its reasonableness. The manifest purpose of the provision is to safeguard the assets of those who are acting in contemplation of bankruptcy, so that these assets may be brought quickly and without unnecessary expense into the hands of the trustee, and to provide a restraint upon opportunities to make an unreasonable disposition of property through arrangement for excessive payments for prospective legal services. In re Wood & Henderson, supra; Pratt v. Bothe, supra. We said in the case of Wood & Henderson that the statute
In this view, we are unable to conclude that the question whether the services for which the payment or transfer is made are "germane to the aims of the Bankruptcy Act," as suggested in some of the decisions, [Footnote 4] furnishes the test of the jurisdiction to reexamine. The test of jurisdiction, we repeat, is given by the express language of the statute. In the exercise of jurisdiction, all questions bearing upon the reasonableness of the transaction, including the purpose and nature of the services, are open to consideration. But it is insisted in the instant case that the payment to appellants could not properly be regarded as made in contemplation of bankruptcy, and hence within the jurisdiction to reexamine, because the payment was for the purpose of engaging appellants to conduct negotiations with creditors in order to arrange for an extension of time, and, if necessary, for the operation of the business under the creditors' supervision, and thus to avoid a forced liquidation and ultimately to restore the business to a sound basis. We find no ground for saying that the fact that such purposes were in view establishes, as matter of law, that the payment was not in contemplation chanroblesvirtualawlibrary
Cf. In re Kross, 96 F.8d 6, 818, 819; In re Habegger, 139 F.6d 3, 627; In re Christianson, 175 F.8d 7, 868; In re Secord, 296 F.2d 1, 232.
See In re Habegger, 139 F.6d 3; In re Stolp, 199 F.4d 8; In re Rolnick, 294 F.8d 7; In re Lang, 20 F.2d 239; Quinn v. Union National Bank, 32 F.2d 762.