Carlisle, Brown & Carlisle, Attorneys at Law Petitioning v. Carolina Scenic Stages, in The Matter of Carolina Scenic Stages, Debtor, 242 F.2d 259, 4th Cir. (1957)
242 F.
2d 259
CARLISLE, BROWN & CARLISLE, Attorneys at Law
Petitioning
Claimants, Appellants.
v.
CAROLINA SCENIC STAGES, Respondent, Appellee.
In the Matter of CAROLINA SCENIC STAGES, Debtor.
No. 7358.
United States Court of Appeals Fourth Circuit.
Argued Jan. 25, 1957.
Decided March 7, 1957.
1
Howard Carlisle Bean, Spartanburg, S.C. (Carlisle, Brown & Carlisle,
Spartanburg, S.C., on the brief), for appellants.
Thomas A. Wofford, Greenville, S.C. (J. Nat Hamrick, Rutherfordton, N.C., on
the brief), for appellee.
Before PARKER, Chief Judge, SOBELOFF, Circuit Judge, and GILLIAM,
District Judge.
GILLIAM, District Judge.
This appeal was taken by petitioners from an order of the District Judge, which
disallowed their claim for a fee of $2,500. The claim was filed in a Chapter 10
Proceeding in Bankruptcy, 11 U.S.C.A. 501 et seq., and, it is alleged, covers
services performed while the case was being handled by a State Court Receiver
prior to the institution of proceedings in bankruptcy, which services, it is also
alleged, benefited all the creditors of the defendant, Carolina Scenic Stages.
It should be noted at the outset that the matter was one within the sound
judicial discretion of the trial Court and under the cases its decree should not be
set aside unless it appears that there was an abuse of that discretion. This Court
had the question before it in the somewhat similar case of Jett v. Merchants and
Planters Bank, 228 F.2d 156. It is stated in the opinion at page 158:
'This was a matter within the sound judicial discretion of the trial court.' And at
page 159: 'Since we think there was no abuse of discretion on the part of the
District Court in proctor's petition for a fee, the decree of the District Court is
affirmed.'
To properly focus the question of whether the District Court abused its
discretion we must look to the course of the litigation which began in a South
Carolina State Court, was then transferred to the jurisdiction of the United
States Court under a Chapter 11 Proceeding in Bankruptcy, 11 U.S.C.A. 701
et seq., then returned to the State's jurisdiction, and finally came back to the
jurisdiction of the United States Court by way of a Chapter 10 Proceeding in
Bankruptcy. This narration of the course of the litigation leading to the filing of
the claim for the fee is found in appellants' brief:
'After the Debtor, Carolina Scenic Stages, had been in the custody and control
of the Court of Common Pleas of South Carolina, through its duly appointed
and acting Receiver for a period of about twenty months, the Debtor without
notice filed a petition under Ch. 11, Title 11, U.S.C.A., seeking an arrangement
with its creditors and further seeking an order requiring the Receiver of the
State Court to turn over to the Debtor the assets held by said Receiver pursuant
to orders of the Court of Common Pleas. The petition was filed in the office of
the Clerk of the United States District Court for the Western District of South
Carolina on May 22, 1953. On the same day, Judge C. C. Wyche approved the
petition of the Debtor and, among other things, ordered the State Court
Receiver to turn over to the Debtor all of the property of the Debtor without
requiring bond for the protection of the creditors.
10
'Appellants, who represented several of the creditors of Debtor, filed an appeal
from the turnover order and moved before Honorable George Bell Timmerman,
Judge Wyche having disqualified himself from further action and consideration
of the matter, for an order of supersedeas staying the order of Judge Wyche
pending an appeal to this Court. The motion was argued May 29, 1953,
resulting in an order dated June 4, 1953, dismissing the petition for an order of
supersedeas. Prior to the argument on the motion just above referred to,
appellants, representing the B. F. Goodrich Company, a creditor of the Debtor,
served notice of appeal from the order of Judge Wyche of May 22, 1953, to this
Court. Such Notice of Appeal was filed in the office of the Clerk of the United
States District Court for the Western District of South Carolina on May 27,
1953.
11
'Thereafter, on May 27, 1953, the State Court Receiver noticed a motion to
vacate the order of May 22, 1953. The motion was heard by Judge Timmerman
who overruled it by an order filed May 29, 1953, from which the Receiver
appealed in due course.
12
'Pending the appeal by B. F. Goodrich Company to this Court, appellants
moved before the Honorable John J. Parker, Chief Judge of this Court, for an
order of supersedeas and stay of proceedings pending the hearing of the appeal.
The application for supersedeas was denied conditioned upon a good and
sufficient bond in the penal sum of $30,000. being filed by Debtor in the
District Court. After the disapproval of the first bond offered on motion of
appellants, a second bond of $30,000. cash was filed and approved. Judge
Parker also ordered that the appeal of appellants' client and that of the State
Court Receiver (from the overruling of the motion to vacate the turnover
provisions of the May 22, 1953 order of Judge Wyche) be consolidated and
heard together at the October, 1953 term of this Court.
13
'The appeal was heard October 5, 1953, and resulted in a decision of this Court
which held that since the State receivership had been in operation for more than
four months, Debtor was precluded from filing a petition under Chapter 11,
Title 11, U.S.C.A., Stevens v. Carolina Scenic Stages, 208 F.2d 332, certiorari.
denied. 347 U.S. 917, 74 S.Ct. 515 (98 L.Ed. 1072). Prior to the denial by the
Supreme Court of the petition for writ of certiorari, appellants were informed
that one of their clients, The B. F. Goodrich Company, had sold and assigned
its claim and was no longer interested in the outcome of the litigation.
Nevertheless, appellants continued as attorneys of record until the order of the
Supreme Court denying certiorari.'
14
Certain other pertinent facts, about which there is no controversy, should be
noted. At the time appellants were filing the motions and appeals referred to
they were representing The B. F. Goodrich Company and other creditors, who
paid them fees in excess of $9,200; the State Court Receiver was effectively
prosecuting an identical appeal from the order of May 22, 1953, which order
was directed to him, and in connection with such appeal and at the argument
before this Court was ably represented by his own counsel who were
compensated from the funds of the estate; appellants were never authorized by
the Court or other creditors to undertake any action for the benefit of the
creditors generally and it seemed up to the time that the petition for a fee was
filed appellants were acting in behalf of the creditors by whom they were
employed and well paid.
15
If this fee is allowed it will be paid by those who had not employed appellants,
while they have already paid those attorneys employed by them, who without
appellants' aid undoubtedly would have achieved the identical result. The
general rule, no doubt, is that the right of an attorney at law to collect
compensation for his services depends upon the fact of employment; in other
words, the creation of the relation of attorney and client by contract, express or
implied, is essential to the right of an attorney to compensation. Jett v.
Merchants and Planters Bank, above cited. In that case, 228 F.2d at page 159,
the Court said: 'Proctors were employed by, and acted for, their clients who
employed them. The activities of Proctors were directed towards securing the
payment of the claims of their own clients. Under such circumstances, where
benefits incidentally accrue to others as a result of the proper discharge of
counsel's duty to their own client, such services may well be noncompensable.'
While the cases present exceptions to the general rule, whether the facts in the
particular case justify a departure from it should be left to the judicial discretion
of the presiding Judge who is familiar with the 'ins and outs' of the entire
business. The cases cited by appellants only show that there are both real and
apparent exceptions to the general rule; they do not go so far as to justify this
Court in saying that the trial Judge abused the discretion vested in him. In
Sprague v. Ticonic Nat. Bank, 307 U.S. 161, 167, 59 S.Ct. 777, 780, 83 L.Ed.
1184, one of the cases cited by appellants, the Court said: 'In any event such
allowances are appropriate only in exceptional cases and for dominating
reasons of justice.' There the Court only said that the trial Judge had the power
to make the allowance, not that he should have made it. Here the trial Judge did
not rule that he could not allow the fee, he fully considered it and concluded
that in fairness and justice to all concerned he should not. It can hardly be
maintained, in view of the reasoning set forth in the Judge's order, that there are
'dominating reasons of justice' which require this Court to set aside that order.
16
In the lower Court's order the following findings and conclusions, among
others, appear: 'The Court cannot sustain claimants position. To do so would
require the state to pay twice for the same legal services, since the receiver was
represented by his own attorneys who were paid for the estate * * * If, as
claimants contend, their services inured to the benefit of the receiver, then it is
equally true that the services of the receiver's attorneys inured to the benefit of
claimants' clients * * * Claimants place significance on the fact that prior to the
argument of the appeal, claimants' largest client * * * assigned its claim of
$50,000. to another creditor and discharged claimants. They say that this fact
emphasizes that they were really representing the receiver during the argument
of the appeal, since their largest client no longer had an interest. But their
services were nonetheless uninvited in so far as the receiver was concerned.
They remained in the case on appeal because they continued to represent other
clients who were interested therein and for no other justifiable reason.
Moreover, they were paid a fee of $9,200. by Goodrich for their services
rendered in the appeal prior to the assignment and more fees of an undisclosed
amount from the other clients they represented; these payments accent the fact
that any additional fee from the estate would only result in multiple
compensation for their services in the appeal.' These findings are supported by
the evidence and the conclusions are sound.
17
The opinion of Judge Augustus Hand in In re Paramount Publix Corporation, 2
Cir., 85 F.2d 588, at page 590, though that case arose under a 77B proceeding
for reorganization, 11 U.S.C.A., 207, contains these statements of principles
which we think may be appropriately applied here: 'Both in proceedings in
equity and in bankruptcy simpliciter it is the ordinary rule that attorneys
representing creditors * * * must look for compensation to their clients, rather
than to the general estate * * * This is because the estate is ordinarily
represented by a receiver or trustee whose duty it is to take all steps necessary
to protect it * * *.' At page 591. 'If some other committee or person proposes to
seek compensation out of the general assets, there should be an application to
the court for recognition, preferably in advance of the rendition of the services
for which compensation is to be sought'; At page 592. 'Usually it is proper to
award compensation to individuals * * * only where no one is in the field to
protect the interest of the individual or class for which the person or small
group speaks, and under all circumstances compensation should be allowed
only where services are reasonably required, whether those rendering them be
committees or individuals.'
18
We are not convinced that the trial Court abused its discretion in denying the
petition, or that its action in doing so was not just and equitable to all concerned
under the undisputed facts. The order is affirmed.
19
Affirmed.
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