Court Opinion

ID: 6861107
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:48:46.284153+00
Date Added: 2024-06-11T16:05:14.693780
License: Public Domain

AUGUSTUS N. HAND, Circuit Judge
(dissenting in part).
I agree with the majority opinion as to the disposition of the appeal by Mr. Gross, but dissent from the ruling as to the commissions claimed by the referee in bankruptcy Mr. O’Connor. It seems to me that we have been referred to no authority that in any way disturbs the decision of Judge Galston as to the basis for fixing the referee’s commissions and that his conclusion was inevitable because of the express terms of the Bankruptcy Act (11 USCA). It is perfectly true that referees’ commissions have ordinarily been figured upon the par value of notes that have been offered by a bankrupt in a composition, but I do not find that the point that they should be valued has ever been raised, and, in the absence of an objection, it may have been quite proper to value them at the face amount where no other value was suggested.
The material portion of Bankr. Act, § 40a, as amended (11 USCA § 68 (a), which regulates referees’ compensation, is the following :
“Referees shall receive as full compensation for their services * * * one-half of 1 per centum on the amount to be paid to creditors upon the confirmation of a composition.”
I cannot see how “the amount to be paid to creditors upon the confirmation of a composition” means anything but the value of the property (in this case bonds of the bankrupt) which the creditors are to receive at the time when the order of confirmation is made. Any other interpretation puts form above substance and ignores reality.
Our decision in Re H. Batterman Co. (C. C. A.) 231 F. 699, is thought to be contra, but I cannot see that it is opposed to my view. In that case a composition was offered by the bankrupt corporation of 65 per cent, in cash. Some of the creditors offered to waive a deposit of cash and to take instead 15 per cent in cash furnished by II. B. Claflin Corporation and 85 per cent, in notes of another company indorsed by Claflin. We affirmed the court below in holding that the alternative offer made in consideration of the waiver of the deposit of 65 per cent, in cash was to be considered as the equivalent of the latter amount and allowed the referee commissions as though the 65 per cent, in cash had been deposited. The decision seems in accord with that of Judge Galston in the case at bar, for it involved valuing the 15 per cent, of cash and the 85 per cent, in notes at 65 per cent, in cash and calculating the commissions on the latter sum.
The decision of Judge Morton in Re Mills Tea & Butter Co. (D. C.) 235 F. 815, was to the same effect as In re Batterman Co., supra. He valued an offer of 100 per cent, in stock of a new corporation, offered as an alternative option for 25 per cent, in cash, as the equivalent of the latter, and allowed commissions to the referee on the latter sum.
Kinkead v. J. Bacon & Sons (C. C. A.) 230 F. 362, is another decision by a distinguished court thought to be contra to the ruling of the court below, but it merely held that a waiver by certain creditors of the deposit of cash to be paid on a composition would not affect the right of the referee to commissions on such sums.
There can be no doubt that the referee in receiving commissions as figured by the court below received his statutory percentage on the value of the amount “to be paid to creditors” at the time of the confirmation of the composition. This, rather than a compensation calculated on an illusory basis that has no relation to market values, seems, if not absolutely required by the statute, certainly in accordance with a just and reasonable construction of it.
In my opinion the order of the court below should be in all respects affirmed.