Case Name: In re DETROIT MORTGAGE CORPORATION. Petition of DELAND
Court: United States Court of Appeals for the Sixth Circuit
Jurisdiction: United States
Decision Date: 1926-05-19
Citations: 12 F.2d 889
Docket Number: No. 4396
Parties: In re DETROIT MORTGAGE CORPORATION. Petition of DELAND.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 12
Pages: 889–891

Head Matter:
In re DETROIT MORTGAGE CORPORATION. Petition of DELAND.
(Circuit Court of Appeals, Sixth Circuit.
May 19, 1926.)
No. 4396.
Lee E. Joslyn, of Detroit, Mich. (Joslyn, Joslyn & Joslyn, of Detroit, Mich., on the brief), for appellant.
John C. Bills, of Detroit, Mich. (Stevenson; Butzel, Eaman & Long, of Detroit, Mich., on the brief), for appellee.
Before DENISON, MACK, and MOOR-MAN, Circuit Judges.

Opinion:
MACK, Circuit Judge
(after stating the facts as above).
1. It is not eóntested that, but for the agreement of the parties, the receiver's fees would have been charged, at least primarily, to the petitioning creditors on a dismissal of their petition, and that they are to be paid in this case out of the estate only because of the agreement of the parties. The real question, therefore, is whether or not sections 48 and 72 limit such fees, when payable, not out of the estate, but by the petitioning creditors. On this exact question no case has been cited to or found by us. Each side argues that the legislative history of section 48, as amended in 1910, supports its contention. Senate Report No. 691, 61st Congress, 2d Session, May 16, 1910; 45 Cong. Rec. pt. 3 (1910) pp. 2260-2280, 7933.
Remington in his .Bankruptcy (third edition, volume 1, sections 411, 460, and 488), expresses, the opinion that sections 48 and 72 of the act were intended to govern the fees to be allowed in the event of adjudication and the consequent appointment of a trustee when they would necessarily come out of the bankrupt estate; that it was the protection of bankrupt estates and the ofttimes .numerous small creditors thereof with which Congress was concerned, and not petitioning creditors, well able to protect themselves in the event of a contest, as to the reasonableness of such charges to he taxed as costs against them.
We cannot concur in this reasoning, or in these conclusions, because, however meritorious these considerations may be, they find no support in the text or context of the Bankruptcy Act. If on the face of the papers the jurisdictional facts are stated, the bankruptcy court has jurisdiction of the cause, even though those jurisdictional facts should subsequently not be proven. That jurisdiction includes the appointment of receivers.
Section 2 (3) of the act (Comp. St. § 9586) expressly authorizes the appointment of receivers to take charge of the property until the petition is dismissed or the trustee has qualified. It follows therefrom that, when a receiver is appointed, it is not because of any general equitable powers in the bankruptcy court, but because of the express provisions of the act, and in full contemplation of the possibility that the petition in bankruptcy may ultimately be dismissed, either for failure of proof or by agreement of all parties. Therefore, in the absence of express provision to the contrary, wherever the act makes provision in respect to the compensation of a receiver, that provision must be deemed to apply, irrespective of whether the petition is ultimately dismissed or the trustee is appointed, and irrespective likewise of whether payment is to be made by petitioning creditors or the estate. In our judgment, sections 48 and 72 govern the situation.
2. Because of section 72, the compensation allowed to the receiver's rental department must be deemed payment on account of the statutory commissions. The fact that the receiver has several branches of its business, and through one of them performs services for which it might have employed a third person, no more entitles it to additional compensation therefor than would legal services rendered hy a lawyer to the estate of which he is receiver entitle him to additional compensation.
3. Clearly, too, under section 48, no compensation can be based upon the value of property turned back to the alleged bankrupt. However great the hardship resulting from this construction, the language of the act is in this respect entirely clear.
4. In so far as moneys came to the receiver, not because of debts due the alleged bankrupt but because it was a trustee under mortgage loans, no compensation therefor can be allowed in this case. The bankruptcy receivership did not extend, and could not have extended, over the trust activities.
5. Double compensation for continuation of the business by the receiver is allowable, even though the alleged corporate bankrupt's right to do business in Michigan had theretofore been canceled.
Decree reversed, and cause remanded for further proceedings, in accordance with the views herein expressed.