under this provision are those directly connected with the bankruptcy proceeding; it was not the intent that an honest insolvent should lose the benefit of the act because he had no cash in hand with which to pay a lawyer to prepare the petition and schedules; but as to past services the claim of the lawyer is no better than that of any other creditor.35 Thus where payments are made to an attorney in the settlement of a running account, he is in the same position as any other creditor whose claim has been paid within the four months' period.3 If the services performed were reasonably necessary for the protection of the interests of the bankrupt, in contemplation of bankruptcy, compensation may be made therefor out of the bankrupt estate; the only question open in such a case being the reasonableness of the charge.337 336 something he acquires or is to acquire in the future, is not within the mischief the act was aimed against. Section 60, therefore, expressly recognizes this class of transactions, but as it is capable of abuse, provides for a reexamination and reduction if necessary to a reasonable amount, by the court on petition of the trustee or a creditor." This same section was before the court of appeals for the sixth circuit in the case of Pratt v. Bothe (C. C. A., 6th Cir.), 12 Am. B. R. 529, 130 Fed. 670. In that case Judge Severans, speaking for the court, said: "It would rather seem that Congress, engaged, as many signs indicate, in guarding the assets of those in contemplation of bankruptcy, to the end that they might be brought without unnecessary expenditure to the hands of the trustee for distribution to creditors, while it would not deny to the debtor the right to employ and pay for legal assistance in his affairs during that critical period, yet proposed a restraint upon that privilege by requiring that such payment should be reasonable in amount- - in short, proposed to apply to the incipient stage of bankruptcy the provident economy which it sought to apply to the administration of the bankrupt estate. The law gives the attorney the It may have been thought that there was the same reason for such restraint at that stage of affairs as subsequently. And it is to be observed that the transaction would not become the subject of revision unless bankruptcy ensued. It put attorneys, solicitors and proctors in no worse position than it did some classes of those having business with the debtor." 335. Tripp v. Mitschrich (C. C. A., 8th Cir.), 31 Am. B. R. 662, 211 Fed. 424; Magee v. Fox (C. C. A., 2d Cir.), 36 Am. B. R. 161, 229 Fed. 395. 336. In re Shiebler & Co. (D. C., N. Y.), 20 Am. B. R. 777, 163 Fed. 545; Magee v. Fox (C. C. A., 2d Cir.), 36 Am. B. R. 161, 229 Fed. 395. * * * 337. Matter of Humphreys (D. C., N. Car.), 34 Am. B. R. 655, 221 Fed. 997. In the case of In re Wood & Henderson, 210 U. S. 246, 20 Am. B. R. 1, 52 L. Ed. 1046, 28 Sup. Ct. 621, the court said: "The act recognizes the right of a debtor to have the aid and advice of counsel, and, in contemplation of bankruptcy proceedings which shall strip him of his property, to make provisions for reasonable compensation to his counsel. And in view of the circumstances, the act makes provision that the bankruptcy court administering the estate may, if the trustee or any creditor option, either of collecting his compensation in advance or of asking its allowance, as entitled to priority, under § 64-b (3); with, however, this exception, that, if he elects to pursue the former and presumably more tempting method, the court has the power to inquire into the payment and the trustee to recover any excess for the benefit of the estate. The general subject of the employment and compensation of attorneys is considered elsewhere.339 Other cases which have originated under this subsection are collated in the foot-note.340 338 b. Practice. Section 60-d is sui generis and does not contemplate the bringing of plenary suits for the recovery of preferential transfers in any jurisdiction. It recognizes the temptation of a failing. debtor to deal too liberally with his property in employing counsel to protect him in view of financial reverses and probable failure. It question the transaction, re-examine it with a view to a determination of its reasonableness." 338. In the case of In re Kross (D. C., N. Y.), 3 Am. B. R. 187, 190, 96 Fed. 816, Brown, J., used the following language: "While by the general terms of the act, the debtor is required to turn over all his unexempt property to the trustee, an exception is here created in favor of an attorney, to a reasonable amount, for services to be rendered to the debtor in bankruptcy; although this is valid so far only as subsequently approved by the court. The charges to be "approved" are, I cannot doubt, for the same services which the 'fee' is designed to be allowed for under section 64, subd. b, par. 3. Both paragraphs are to be construed together, so that it becomes immaterial in the result whether the attorney obtains his compensation in the first instance from the bankrupt under section 60 refunding what, if anything, is disallowed by the court, or whether he waits for an allowance by the court under section 64. The latter is evidently the more convenient and desirable practice, and considering that prior payment for an attorney's services to the bankrupt is expressly allowed by section 60, I cannot agree to any such construction of the act as would deprive the attorney of a proper compensation for a necessary service, merely because he did not take it out of the estate at his own estimate in advance." But compare In re Stolp (D. C., Wis.), 29 Am. B. R. 32, 199 Fed. 488, holding that the services must be actually rendered, if at all, before the institution of bankruptcy proceedings, and the payment or transfer specified in subsection d cannot apply to services rendered as specified in section 64-b, providing for an allowance to the bankrupt's attorney as part of the cost of administration, since the latter section refers to services rendered after the bankruptcy proceedings are instituted, to aid the bankrupt in performing his duties under the Act. 339. See discussion under section 62, post. 340. In re Lewin (D. C., Vt.), 4 Am. B. R. 632, 103 Fed. 850; In re Kross (D. C., N. Y.), 3 Am. B. R. 187, 96 Fed. 816; In re Goodwin, 2 N. B. N. Rep. 445; In re Tollett, 2 N. B. N. Rep. 1096; In re Corbett (D. C., Wis.), 5 Am. B. R. 224, 104 Fed. 872. Compare also, under the law of 1867, In re Sidle, Fed. Cas. 12,844; In re Sims, Fed. Cas. 12,888. recognizes the right of such debtor to have the aid and advice of counsel and in contemplation of bankruptcy proceedings which shall strip him of his property to make provisions for a reasonable compensation to his counsel, and in view of the circumstances the act makes provision that the bankruptcy court administering the estate may, if the trustee or any creditor questions the transaction, re-examine it with a view to a determination of its reasonableness.341 This re-examination has been held merely a part of the proceeding and therefore not affected by the now abrogated doctrine that suits to recover preferences must be brought in the State courts; 342 and where this method is pursued the amount thus attempted to be used is subject to revision in the court of original jurisdiction, and not elsewhere.343 The practice on proceedings of this character - the attorney being usually an officer of the court is both simple and summary. Being rarely resorted to, there are no stated rules or forms applicable. The amount paid must appear in Schedule B (4) of a voluntary petition. Proceedings to test the propriety of payments to an attorney for all services, namely, those rendered before the payment, as well as those services to be rendered in the bankruptcy proceeding itself, should be taken in the form of a motion to fix the allowance and for an order directing the return of the balance unless an issue is raised.344 The motion may be heard on affidavits or orally. A suit to recover will rarely be necessary; though an order to restore, if not obeyed, is perhaps not now the 341. In re Wood & Henderson, 210 U. S. 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621. 342. In re Lewin (D. C., Vt.), 4 Am. B. R. 632, 103 Fed. 850. The purpose and intent of this section has been carefully considered in the case of In re Habegger (C. C. A., 8th Cir.), 15 Am. B. R. 198, 71 C. C. A., 607, 139 Fed. 123. 343. In re Wood & Henderson, 210 U. S. 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621; Lazarus v. Prentice (Sup. Ct., U. S.), 234 U. S. 263, 32 Am. B. R. 559, 58 L. Ed. 1305, 34 Sup. Ct. 851. A State court has no jurisdiction to re-examine the transfer of property to counsel. In re Wood & Henderson, 210 U. S. 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621. 344. In re Shiebler & Co. (D. C., N. Y.), 20 Am. B. R. 777, 163 Fed. 545; Tripp v. Mitschrich (C. C. A., 8th Cir.), 31 Am. B. R. 662, 211 Fed. 424. In In re Wood & Henderson, 210 U. S. 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621, Mr. Justice Day said, referring to section 60-d: "This section does not undertake to provide for a plenary suit, but for an examination and order in the course of the administration of the estate with a view to permitting only a reasonable amount thereof to be deducted from it because of payments of money or transfers of property to attorneys or counsellors in contemplation of bankruptcy proceedings." Forms. See Forms in Bankruptcy, Nos. 181, 182, Vol. III, post. foundation for a proceeding in contempt.345 Since this section makes no provision for the service of process, it seems that such reasonable notice should be given to the parties affected, either by mail or otherwise as the court shall direct, so that an opportunity may be given them to appear in court and contest the reasonableness of the charges in question.3 Any notice to the attorney directed by the court is sufficient.347 346 345. Comingor v. Louisville Trust Co., 184 U. S. 18, 7 Am. B. R. 421, 49 L. Ed. 413, 22 Sup. Ct. 293. Compare In re Sims, Fed. 12,888. Payment to attorney in contemplation of bankruptcy; recovery of excess. -A petition by a trustee, for a re-examination by the court of payments by a debtor to an attorney in contemplation of bankruptcy, is a condition precedent to any determination by the referee that any portion of the amount paid to an attorney, as specified in the section, may be recovered by the trus tee for the benefit of the estate as an excess over and above what is reasonable. Matter of Union Dredging Co. (D. C., Del.), 35 Am. B. R. 555, 225 Fed. 188. 346. In re Wood & Henderson, 210 U. S. 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621; Haffenberg v. Chicago Title & Trust Co. (C. C. A., 7th Cir.), 27 Am. B. R. 708, 192 Fed. 874. 347. In re Lewin (D. C., Vt.), 4 Am. B. R. 632, 103 Fed. 850. SECTION SIXTY-ONE DEPOSITORIES FOR MONEY § 61. Depositories for Money.-a Courts of bankruptcy shall designate, by order, banking institutions as depositories for the money of bankrupt estates, as convenient as may be to the residences of trustees, and shall require bonds to the United States, subject to their approval to be given by such banking institutions, and may from time to time as occasion may require, by like order increase the number of depositories or the amount of any bond or change such depositories. Analogous provisions: In U. S.: None in the law; but see General Order XXVIII under the law of 1867. In Eng. See miscellaneous provisions in General Rules. In Can.: Act of 1919, § 26. Cross-references: To the law: Distribution of consideration of composition on confirmation, § 12-e. Duty of trustee to deposit money in designated depository, and disbursement thereof, § 47-a (3) (4). Filing bonds and suits thereon, § 50-h. To the General Orders: Payment of money deposited by check or warrant, XXIX. To the Rules: For designation of depositories in many of the districts, see Bankruptcy Rules, Vol. IV. post. To the Forms: Order designating depository, see Forms in Bankruptcy," (Vol. III, post) No. 391; bond of depository, Id. No. 392. SYNOPSIS OF SECTION I. Depositories for Money, 1341. a. Designation of banks, 1341. b. Depository to give bond: suit thereon, 1341. c. Disbursement of moneys by depositories, 1342. |