Court Opinion

ID: 8828288
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:54:42.201275+00
Date Added: 2024-06-11T17:04:50.679656
License: Public Domain

MAYER, Circuit Judge
(after stating the facts as above).  As the facts infra will indicate, we think the order of substitution was made in a “controversy arising in a bankruptcy proceeding” under section 24a (Comp. St. § 9608), as distinguished from a “proceeding in bankruptcy” within section 24b. While part of the other order would fall under section 24b, so much thereof as is concerned in the present controversy falls under section 24a. We shall therefore dismiss the petitions to revise and entertain the appeals. In re Nagel (C. C. A.) 278 Fed. 105; In the Matter of B. & R. Glove Corp. (C. C. A.) 279 Fed. 372.
The record is voluminous, but the essential facts are few and simple. The history of the previous relations of and litigation between the Bronx Exposition Company (hereinafter called the Bronx Co.) and the Exposition Catering Company (hereinafter called the Exposition Co.), the alleged bankrupt, are wholly immaterial to the present controversy. A petition in involuntary bankruptcy was filed on May 27, 1921, against Exposition Co. by Bronx Co., one Berg, arid one Spahn, and a receiver was appointed ex parte by the District Court. A few days later, Mr. Myers was retained on behalf of Exposition Co., through its president, Mr. Ritchey, who paid Mr. Myers $1,000. This sum, according to Mr. Myers, was not paid by Exposition Co., but by Mr. Ritchey “out of his own funds, for the purpose of protecting his stock interest in the Exposition Catering Company, Inc.”
Of course, Exposition Co., the alleged bankrupt, could not pay any retainer to Mr. Myers, after the petition in bankruptcy had been filed. Its property was then in custodia legis. If the bankruptcy proceeding had followed the usual routine, an award of compensation to Mr. Myers, as attorney for the alleged bankrupt, would have rested entirely in the discretion of the bankruptcy court, and that court could award something or nothing within the limits of judicial discretion. On June 6, 1921, on behalf of Exposition Co., Mr. Myers interposed an answer to the petition, and, as the result of a motion made by Mr. Myers, tire cause was set for trial for June 14, 1921.
Before the cause came on to be tried, Mr. Clarence J. Hand, attorney for Bronx Co. and for Starlight Amusement Company, and Mr. Myers opened up negotiations for settlement — it is not important (who started these negotiations — and on June 16, 1921, a written agreement was entered into between “Starlight Amusement Company, Inc.,” on the one hand, and “Daniel P. Ritchey and Exposition Catering Company, Iric.,” on the other. The evidence is that Mr. Myers actively participated in this agreement and was fully aware of its contents.
The agreement, in substance, was that Starlight Co. was to purchase and Exposition Co. was to sell all of the latter’s property of every kind, as well as the corporate stock, for $60,000, part cash, part notes. Subsequently, when the transaction was closed, Starlight Co. *331paid $50,000, instead of $60,000, part cash and part notes. The closing was set for July 15, 1921, the trial having meanwhile been adjourned. Mr. Ritchey was the actual owner of all of the stock of Exposition Co., and hence was a party to the agreement.
The written agreement, which took the form of a letter from Starlight Co. and an acceptance by Ritchey and Exposition Co., could not be more explicit. It provided:
“Our interest in the Starlight Amusement Park, located at Bast 177th street, New York Oity, is such that we would be interested in acquiring the food and restaurant privileges which we understand you now own and operate under an agreement of lease with the Bronx Exposition, Inc., dated on or about June, 1917.
“We further understand that you are willing to sell your lease and all the buildings, equipment, and other property located at the park, put there under said lease by you or by persons or corporations acting under you, for the operation of the concession covered by that lease, and also that you are willing to turn over the entire capital stock of the Exposition Catering Company, Inc., and all its assets of every nature, free and clear, without obligation of any nature excepting a disputed rental claim of the Bronx Exposition, Inc., for a flat rental of $12,000 per year. We also understand that you are willing to dispose of your stock in the Bronx Exposition, Inc.
“We are willing to purchase the above-mentioned property, provided that you will undertake to turn same over to us free and clear, excepting for claims of the Bronx Exposition, Inc.” (Italics ours.)
From the foregoing, it will be seen that Exposition Co. and Ritchey were selling (1) everything at the Starlight Amusement Park; (2) the entire capital stock of Exposition Co.; and (3) inclusive or in addition, as the case might be, “all its (Exposition Co.’s) assets of every kind and nature.” After this transaction was closed, Exposition Co., of course, owned nothing. All it had ever had became the property of Starlight Co.
Contemporaneously with the closing, a bill of sale (in stock form) of the Exposition Co.’s interest in the personal property at Starlight Park was executed and delivered to the Starlight Co. interests. It is suggested that, as the wording of this bill of sale was confined to property at Starlight Park, the parties did not transfer nor intend to transfer all their property, including moneys referred to infra in the custody of the bankruptcy court. This contention is wholly without merit. Obviously a bill of sale would not be appropriate for the transfer of capital stock nor of property in the hands of the bankruptcy court.
A bill of sale, however, was necessary and proper in connection with the personal property at Starlight Park, and was merely the usual paper or instrument in furtherance of the transaction and not in limitation thereof. At the time of closing, it was a necessary precaution that creditors of Exposition Co. should be paid, and therefore $10,000 was placed in Mr. Myers’ hands by Starlight Co. “to be used only” to satisfy the claims of creditors and we understand that no claim is made as to the balance, if any, of this fund.
Various proceedings were had to relieve the property of the expense of a receivership and the receiver was discharged on June 30, 1921. After all matters were disposed of, there remained in the receiver’s *332hands $935.30 belonging to Exposition Co., alleged bankrupt. It is to this fund (now $804.60 after deducting expenses of reference) that Mr., Myers lays claim.
Upon the state of facts, supra, we are unable to see any theory upon which such a claim can be based. Any agreement between Mr. Ritchey and Mr. Myers, made prior to the agreement of sale to Starlight Co., that Mr. Myers should be compensated out of the alleged bankrupt’s estate (and such is 'stated to have been made), could not, upon the facts of this case, affect the rights of $tarlight Co., the purchaser of the assets.
 There is no merit in the suggestion that, when the receiver was discharged and the property returned' to the alleged bankrupt, by ah order dated June 30,1921, Mr. Myers obtained a lien on the property which was still in the custody of the bankruptcy court and subject to its administration, and, in any event, the agreement of June 16, 1921, which was carried out on July 15, 1921, with the knowledge, consent, and active aid of Mr. Myers, settled the rights of all concerned. If Mr. Myers thought he was entitled to compensation out of the alleged bankrupt’s estate, he should have protected himself by reservation in the agreement of June 16, 1921, or by some other appropriate means.
But the agreement of June 16, 1921, for which he was part sponsor, transferred all the property of Exposition Co. to Starlight Co., and the latter became the owner, free and clear, of that property, including the $935.30 left in the receiver’s hands. In such circumstances, where Mr. Myers had no lien on the fund nor on the papers, the case had no resemblance to The Flush (C. C. A.) 277 Fed. 25.
Where there is no lien, and, as here, the facts show no services to the client (here the alleged bankrupt), for which the attorney can recover, a substitution can be made at the will of the client, and the court below was right in ordering the substitution on this particular state of facts.
The petitions to revise are dismissed, with costs, and the orders appealed from affirmed, with costs.