author: LEDERLE, District Judge.

text:
    In re MT. FOREST FUR FARMS OF AMERICA, Inc.
    No. 24331.
    District Court, D. Michigan, S. D.
    Aug. 24, 1945.

      The attorneys involved are listed in the findings [No. 1]. In addition to this—
    Lester S. Moll, of Detroit, Mich., for Vermilion Bay Land Co., reorganized debt- or.
    C. J. Odenweller, Jr., of Cleveland, Ohio, for Securities and Exchange Commission.
   LEDERLE, District Judge.

Findings of Fact

1. This corporate reorganization proceeding of Mt. Forest Fur Farms of America, Inc., a Delaware corporation, is presently before the court on petitions for final allowances of fees and disbursements requested by the following applicants, in the following amounts:

Referees in Bankruptcy George A. Marston and Walter I. McKenzie, Special Masters, both of Detroit, Mich., Frank Fitzgerald, Trustee, of Detroit, Mich., Robert S. Marx, Carl Runge, and Lawrence I. Levi, General Counsel, all of Detroit, Mich., for Trustee, Julian G. McIntosh, Special Counsel, of Detroit, Mich., for Trustee, Monaghan, Crowley, Clark & Kellogg, Special Counsel, of Detroit, Mich., for Trustee, Fraser, Shumaker, Kendrick & Winn, of Toledo, Ohio, Counsel for Debtor, (including $500 fees of Gharles S. Abbott, local counsel) S. J. Dyer, Shareholder of Debtor and representative of a group of Indiana shareholders, Indianapolis, Indiana, Irwin H. Boesel, Shareholder of Debtor and of Michigan Mt. Forest Corporation, of which he was President, Springfield, Ohio, Harold R. Smith, Attorney, of Detroit, Mich., Hugh R. Francis, of Detroit, Mich., Second Successor State Court Receiver for Michigan Mt. Forest Corporation, Harold M. Shapero, of Detroit, Mich., and J. Adrian Rosenburg, of Jackson, Mich., Attorneys for Contractholders, Anderson, Wilcox, Lacy & Lawson, of Detroit, Mich., former Attorneys for stockholders committee and debtor corporation, John P. Neudorfer, of Detroit, Mich., First Successor State Court Receiver for Michigan Mt. Forest Corporation, Harley Waitman, J. Fred Wuerth, Clyde M. McGuffie, et al., shareholders in both the Debtor and the Michigan Mt. Forest Corporations, (For their attorneys, Hull, Brown & Fischer and Richard Ford) all of Detroit, Mich., Ernest D. Skinner, George A. Lehman and John R. Westenbarger, beneficially interested in the stock and/or income from stock described as Claim No. 792, Royal Oak, Mich., Amount Claimed Fees Expenses 25.000. 00 24.500.00 65.000. 00 $2,303.78 18.120.00 2,500.00 56.57 52.500.00 85.44 560.00 5,853.04 (including expenses) 40.000. 00 305.91 3.000. 00 7.250.00 299.82 35.000. 00 2.000. 00 5,000.00 11,012.50 869.45 1,635.60

Amount Claimed Edward T. Kelley and Darden & Brashear, all of Detroit, Mich., Attorneys for Stockholders Committee of Debtor since April Fees Expenses 21, 1944, Darden & Brashear, of Detroit, Mich., Attorneys for Stockholders Committee of 10,000.00 125.00 Debtor from 1938 to April 21, 1944, Stockholders Committee of Debtor, Albion, 7,500.00 108.00 Mich., Fowler & Fowler, of Knoxville, Tenn., Associate Counsel of Harold R. Smith in proceedings in Tennessee to reorganize 5,000.00 2,057.53 Michigan Mt. Forest Corporation, (No amount requested) Totals $319,235.54 $8,407.10

Objections were filed to practically all such petitions, and extensive hearings were held thereon, towards the conclusion of which counsel for the Securities and Exchange Commission presented the Commission’s advisory recommendations.

2. The fur farm enterprise was organized to develop fur bearing animals for the commercial markets. Many thousands of investors contributed approximately one and a half million dollars to the enterprise. Various stock interests, muskrat ranching contracts covering pairs of muskrats, and marshland contracts for deeds to swamp acreage with trapping leases back to the corporation, were sold to the general public. Among properties acquired by the Debtor, were large tracts in the Louisiana swamps and bayous. An account of the use of this locality as the principal source of supply for the world muskrat market, which appears in the March, 1945, Readers’ Digest, at page 77, under the title “Louisiana’s Fabulous Muskrat Marshland,” aptly summarizes trapping-lease practices which the Trustee has followed throughout this proceeding. Some mineral and oil rights were also acquired by Debtor in connection with the acquisition of the Louisiana property. The enterprise originated as a Michigan copartnership, which later transferred to Mt. Forest Fur Farm, a Michigan corporation. The present Debtor was incorporated as a Delaware corporation in March, 1928, and the Michigan corporation transferred the business to the Debtor and purportedly received 48% of the Debtor’s capital stock.

3. On August 15, 1938, the Debtor filed herein its voluntary petition for corporate reorganization in accordance with the provisions of Section 77B of Chapter VIII of the National Bankruptcy Act, 11 U.S.C.A. § 207. On the same day, the petition was approved, and Frank FitzGerald, a competent attorney with considerable experience in corporate reorganization matters, was appointed Temporary Trustee. This appointment was later made permanent at a hearing held upon notice to all interested parties. Three days after institution of this proceeding, Robert S. Marx, Carl Runge and Lawrence I. Levi, outstanding members of the legal profession with a nationwide practice and a large staff of associates and assistants, were appointed general counsel for the Trustee, and Julian G. McIntosh, a competent attorney who possessed considerable background knowledge of the Debtor’s complicated affairs, was appointed special counsel to assist with Louisiana property and tax matters. Under such appointments, these attorneys have represented the Trustee throughout. A competent and outstanding Toledo legal firm, Fraser, Shumaker, Kendrick and Winn, with some assistance from Charles S. Abbott as local counsel, represented the Debtor from the inception of this proceeding until the Board of Directors of the reorganized Debtor retained Lester S. Moll as attorney to represent the Debtor at these fee hearings. No petition for allowance has been filed herein by this latter attorney. Since the effective date of the Chandler Act, this proceeding has been conducted in accordance with the corporate reorganization sections thereof, 11 U.S.C.A. §§ 501-676. Upon request of the court, the Securities and Exchange Commission formally appeared in this proceeding shortly after its institution. The representatives of this Commission have taken an active part herein. They have given unstintingly of their time and talent, and have rendered splendid public services in this connection.

4. At the time this proceeding was instituted, the Debtor had been involved for many years in the Michigan state court receivership case of Kimball v. Bangs et al., Wayne Circuit No. 180,924, which had been pending since March, 1930, and Debt- or was on the brink of losing all its property to satisfy liens for receivership expenses. It had practically no income or cash resources. Funds were raised by subscription to pay the initial filing fee of this reorganization proceeding. An injunction in the state court receivership case purportedly enjoined parties in interest from seeking relief under the National Bankruptcy Act. Some of the interested parties went outside the jurisdiction of the state court, namely, to Toledo, Ohio, and there engaged attorneys who prepared and filed the necessary documents for instituting the instant proceeding.

5. Throughout the tumultuous and litigious history of the fur farm enterprise, its progress has been continuously hampered and impeded by internecine warfare between various groups and factions of stockholders and interested parties. This continued dissension has contributed materially to the complexity of this reorganization proceeding as well as to the necessary services of the Trustee and his counsel, and, particularly in the initial stages, counsel for the Debtor.

6. Immediately upon institution of this proceeding, attacks were made by Harry J. Merritt, State Court Receiver, and his attorneys upon the jurisdiction of this court, the bona fides of the reorganization petition, the order approving it, the appointment of a Trustee, and two restraining orders entered in aid of this court’s jurisdiction. After a vigorous contest in this court, appeals were taken. The opinion affirming this court’s decision, reported as In re Mt. Forest Fur Farms of America, 6 Cir., 103 F.2d 69, succinctly narrates the highlights ■of the Debtor’s litigation to that point. Certiorari was sought and denied. Merritt v. Mt. Forest Fur Farms of America, 308 U.S. 583, 60 S.Ct. 105, 84 L.Ed. 488.

In the interim between this court’s initial decision on the so-called jurisdictional phase and the affirmance thereof in the Circuit Court of Appeals, another group of shareholders, Cora L. Baker et al., represented by the attorneys for the State Court Receiver and another firm of attorneys, also contested this court’s jurisdiction. This followed a course parallel to the first jurisdictional contest up to the point of filing appeal on March 16, 1939. This appeal was abandoned upon denial of cer-tiorari to review the affirmance of the first jurisdictional decision.

In addition, while the first jurisdictional contest was pending before this court, the movants -therein applied to the Circuit Court of Appeals for a writ of mandamus seeking dismissal of this proceeding. Counsel for the Trustee argued this matter orally, and the writ was refused.

The Trustee and his counsel collaborated with counsel for the Debtor in rendering the necessary services in the jurisdictional phase of this proceeding.

7. Four days after the Trustee’s appointment, he sought and received approval of the first of a series of very successful trapping leases which he consummated with the assistance of his special counsel. This heralded a new era in the Debtor’s business, whereby a vigorous program of developing trapping potentialities was initiated and carried out in place of the lethargic waste of Debtor’s assets which had characterized its management prior to institution of this reorganization proceeding. These leases were the source of the first income of any consequence produced for the Debtor in a considerable time.

8. A week after institution of this proceeding, an order was entered on the Trustee’s petition requiring several large oil and sulphur companies to show cause why they should not be enjoined from further exploitation of Debtor’s Louisiana property and required to account for the proceeds of past exploitation. The respondents denied this court’s jurisdiction and that Debtor had any interest in the minerals and oils. Hearings on this mineral contest were adjourned until the so-called general jurisdictional phase of this proceeding was finally determined. Thereafter, this so-called mineral -phase was prosecuted vigorously. See: In re Mt. Forest Fur Farms of America, 6 Cir., 122 F.2d 232, certiorari denied 314 U.S. 701, 62 S.Ct. 480, 86 L.Ed. 561, rehearing denied 315 U.S. 826, 62 S.Ct. 622, 86 L.Ed. 1222. A settlement was consummated with approval of this court in June, 1942, after notice to interested parties. Under this settlement, the Debtor received cash of $225,000, a royalty of 90 per ton on all future sulphur production, approximately l/30th royalty on all future oil production, and Moran and Heller, owners of an override on Debtor’s mineral interests, agreed to pay 8% of all reorganization expenses, including the allowances under consideration.

Petitions for compensation to date were filed in November, 1942, and were heard by a Referee in Bankruptcy, sitting as Special Master. Upon suggestion of the Securities & Exchange Commission, each petitioner, with the exception of counsel for the Debt- or, made an allocation of the part of his application which related to this so-called mineral phase. No exceptions were filed to the report and recommendation of the Special Master on this mineral fee matter, and order confirming the same was entered on December 24, 1942. This order provided that the allowances therein confirmed constituted final allowances for services performed in connection with the mineral phase of this proceeding. These fees were paid at the time of entry of such order and no appeal was taken therefrom. All parties, except counsel for the Debtor, have conceded that the matter of allowances connected with the mineral phase of this proceeding is res adjudicata, and that disallowed requests connected with such phase should not be considered.

9. In 1939, the Trustee and his counsel instituted proceedings seeking rejection of certain executory contracts for the conveyance of 40% of Debtor’s Louisiana mineral rights to Detroit and Louisiana attorneys for the State Court Receiver for services in connection with the state court receivership.

As a result thereof, the contracts of the two Louisiana attorneys were rejected by agreement, and they were given the right to file claims herein on a quantum meruit basis for services to date of rejection. Claims covering these services were ultimately heard by a Referee, sitting as Special Master, and no exception being taken to his report recommending a combined fee of $25,000 to them for legal services, the report was confirmed.

After a hearing, the Detroit attorneys’ contract with the State Court Receiver was rejected in this court, and appeal taken. After the appeal record was filed, the appeal was dismissed in June, 1942, at the time of the mineral settlement, as such settlement also included a compromise of the receivership claims arising out of the state court receivership allowances. Thereby, the Receiver’s claim for fees allowed by the State Court in the amount of $35,000 was compromised for $6,000, and the claims of the Detroit attorneys for the Receiver, totalling $90,000, were compromised for $29,000.

10. Following disposition of the jurisdictional and mineral phases of this proceeding, which made heavy demands upon the time of court appointees and counsel for the Debtor, the next large undertaking in this proceeding was the hearing and disposition of some 3300 claims of stockholders, ranching contract holders, marshland contract holders, unit holders and creditors. Extensive hearings were held before the Referees, acting as Special Masters, from February, 1942, until July, 1944. These claims had been filed under notices and orders therefor, the first of which the Trustee and his counsel had obtained three months after institution of this proceeding. Counsel for the Trustee performed the bulk of the necessary legal work in this connection, including notifying interested parties, filing objections to claims, conducting hearings on objections, conducting a voluminous correspondence necessitated particularly by the number and inexperience of thousands of small investors, and preparing all findings and reports filed by the Special Masters, with the exception of finding and certificate on review in connection with one small stock interest to which two adverse parties claimed ownership.

Determination of these claims was not aided by the activities of the second successor State Court Receiver and his counsel in this connection.

11. One of the parties to the state court receivership case is the Mt. Forest Fur Farm, a Michigan corporation. The sole asset of the Michigan corporation was its claim to ownership of 48% of the Debtor’s capital stock. Ownership of this stock is disputed by the so-called “Westenbarger group,” headed by one John Westenbarger. Westenbarger claims that all this stock was purchased by him for $1,000.= The validity of this Westenbarger transfer was attacked in the state court receivership case. A settlement was reached and incorporated into a stipulation filed in that case, whereby, among other things, the Westenbarger group and the Michigan corporation group were each to receive roughly one-half of the income of the stock. Westenbarger is now seeking to have such stipulation can-celled in the state court receivership case.

Late in 1943, Hugh Francis, second successor State Court Receiver, appointed by the state court to represent all persons claiming adverse interests in this 48% of the Debtor’s stock, and his counsel, Harold R. Smith, intervened in this reorganization proceeding. At the time of his appointments as counsel for the first and second successor State Court Receivers, Mr. Smith represented privately one factional interest, the so-called Westenbarger group. Mr. Smith also claims a part of this Westen-barger stock individually. His formal intervention in the instant proceeding has been solely in the name of the second successor State Court Receiver.

In connection with the matter of determining claims in this reorganization proceeding the Trustee and his counsel filed objections to Claim No. 792, the claim of the Michigan corporation covering 48% of the Debtor’s stock. Thereupon, a dispute arose between the so-called Westenbarger group and the Michigan Corporation or Bangs group as to which was to defend said claim against the Trustee’s objections. The Westenbarger group filed a petition in the state court receivership case for the appointment of a receiver for the Michigan corporation. Thereupon, the Bangs group petitioned the District Court in Tennessee for the corporate reorganization of the Michigan corporation. One allegation of such Tennessee petition for reorganization of the Michigan corporation was a claim to ownership of the Louisiana mineral rights owned by the Debtor herein, the Delaware corporation. The Tennessee District Court issued an order enjoining further proceedings in any court pertaining to the Michigan corporation.

In an attempt to avoid another tangent of prolonged litigation suggested by these legal maneuvers, the Trustee and his counsel summoned interested parties to a conference in Knoxville, Tennessee, in March, 1943. As a result thereof, a proposed settlement agreement was entered into, which contemplated disposition of all outstanding controversies existing among the Trustee, the Michigan Corporation or Bangs group, the Westenbarger group, and a group of so-called Unitholders who had purchased units of interest in the Michigan corporation during the pendency of the state court receivership case. This proposed compromise was abandoned when the Michigan state court filed a written opinion in June, 1943, overruling a request for reconsideration of its first disapproval thereof.

This compromise contemplated disposition of the Michigan corporation claim of 48% of the Debtor’s stock by allocating thereto 25% (instead of the present 31%) of the stock in the reorganized Debtor, out of which said 25%, 11%% was to go to the Westenbarger group and the remainder to the Michigan corporation or Bangs group, subject to a distribution thereof to the Unitholders. The consummation of this compromise would have materially shortened this Debtor’s corporate reorganization and the state court receivership case.

The Tennessee District Court dismissed its proceeding in November 1943, and appeal from such decision was later dismissed by the Circuit Court of Appeals.

The Trustee and his counsel and counsel for the Securities and Exchange Commission participated in such Tennessee proceeding. With the concurrence of the Securities and Exchange Commission and counsel for the instant Debtor, the Trustee and his counsel took such action as necessary to protect the interests of this estate in such Tennessee proceeding.

12. In the interim, Mr. Smith, in the name of the State Court Receiver, instigated and prosecuted a number of proceedings against the Trustee herein for the purpose of enhancing the position of the state court receivership. Among these was a petition seeking to modify the restraining orders entered at the inception of this proceeding in aid of this court’s jurisdiction. In December 1943, an order was entered denying his petition to modify and requiring adverse claimants to this disputed 48% of Debtor’s stock to litigate their controversy in this reorganization proceeding. An appeal was taken by the second successor State Court Receiver, concurred in by the Waitman Group mentioned in finding 16 (n) hereof. This appeal proceeded to the point where briefs were filed, and was then settled in connection with the settlement incorporated into the Plan hereinafter referred to. The necessary legal work to protect the interests of this estate in this connection was performed by counsel for the Trustee.

13. During the summer of 1944, claims against the Debtor for federal income taxes were compromised. One of these was a claim arising out of deficiencies on the 1926-1927 returns of the Michigan corporation, for which the Government claimed this Debtor liable as transferee of the Michigan corporation’s assets. This claim, in the amount of $30,000, was compromised for $10,000. The other was a claimed deficiency of $180,000 growing out of accruals for administration expenses deducted in the Trustee’s income tax returns during the years of this reorganization proceeding, as well as deductions of compensation and expenses in connection with the mineral phase of this proceeding. The Government claimed these deductions were improper because they represented additions to capital and not deductible expenses. Under the compromise, the accruals of administration expenses were approved subject to a review upon termination of this proceeding, and the mineral-cost part of the claimed deficiency was compromised for $50,000.

The necessary negotiation and legal work in connection with settlement of these tax claims were performed by counsel for the Trustee.

14. In May, 1944, the Trustee’s proposed Plan was filed. It was approved by the Securities and Exchange Commission after counsel for the Trustee argued orally before the full Commission for such action. A number of hearings were held thereon before the Referee, sitting as Special Master. Amendments were proposed, and the preliminary approval of the Plan for submission to stockholders and creditors was recommended by the Special Master on September 25, 1944. This recommendation was confirmed in October. Counsel for the Trustee submitted the Plan to the thousands of interested parties and presented the report of such action to this court. The Plan was confirmed on November 27, 1944.

The Plan, as confirmed, is concededly a compromise, mainly of a number pf potential lawsuits which could have kept this Debtor embroiled in litigation for many more years. It is substantially the plan advocated by the Trustee and his counsel throughout this proceeding as an equitable recognition of the rights of the investing public, except that these court appointees had advocated a non-recognition of the Michigan corporation claim to 48% of Debtor’s capital stock, which the Trustee claimed was fraudulently issued by interlocking directorates of the Michigan and Delaware corporations, and, further, that the Westenbarger Group’s claim thereto was invalid because purchased in collusion with the former State Court Receiver and should not be recognized beyond the one thousand dollars cash for which Westen-barger had purportedly purchased 48% of the Debtor’s stock.

In brief, the Plan settles the controversy over this 48% of the Debtor’s stock by providing that 31% of the stock of the reorganized Debtor should be issued to the second successor State Court Receiver in consideration for his surrendering certificates for 48% of the Debtor’s stock, leaving for determination in the state court receivership case whether the Westenbarger Group or the Michigan Corporation (Bangs) Group owns such stock. The Debtor’s “A” stock, which was preferred as to liquidation, is exchangeable on the ratio of 6 shares of stock in the reorganized Debtor for 5 shares of old stock. “B” stock is exchangeable share for share. “C” stock, all comprising a part of the Westenbarger-Michigan Corporation disputed 48%, is eliminated in conjunction with compromise of the disputed 48% of the old for 31% of the new stock. Ranching contract holders, by waiving their claims for breach of their contracts, get stock in the reorganized Debtor upon the same basis of exchange as contract holders had been entitled to exchange such contracts for “B” stock during 1928 and 1929, prior to institution of the state court receivership case. “C” marshland contract holders, in exchange for warranty deeds to the Debtor of acreage deeded to them and a cancellation of their leases running to the Debtor, receive back in cash the original purchase price they paid, plus accrued interest. All general unsecured creditors are paid in full. All holders of State Court Receiver’s certificates for moneys contributed to pay taxes, are paid in full. The principal of preferred labor claims is paid in full and promissory notes given for accrued interest. A Voting Trust of five voting trustees was set up, composed of Messrs. Harold R. Smith, Edward T. Kelley and Richard Ford, of Detroit, Scott Ford, of Jackson, and S. J. Dyer, of Indianapolis, representatives of various factional interests in the Debtor, who are compensated at the rate of $100 per year.

15. The Trustee has consummated the Plan, and executed the necessary documents of transfer to the reorganized Debt- or, now named the Vermilion Bay Land Company. The Voting Trustees met and elected themselves directors' of the reorganized Debtor. The directors met and elected officers as follows: Harold R. Smith, of Detroit, President at an annual salary of $3,600; Edward T. Kelley, of Detroit, Secretary at an annual salary of $600; Ernest D. Skinner, of Royal Oak, Michigan, Treasurer and Assistant Secretary at an annual salary of $1,200, with an arrangement for an allowance up to $1,200 annually for rent and stenographic services in maintaining the corporation’s business office in conjunction with his suburban real estate office.

The reorganized Debtor is not an operating company. It presently owns some 50,-000 acres of land in Louisiana, has on hand some $125,000 cash, and has an annual income of approximately $80,000 from oil, sulphur and muskrat trapping royalties. Ordinary administration expenses of this estate have been paid. Fees and expenses connected with the mineral phase of this proceeding have been paid. Administrative allowances of the state court receivership up to the time of institution of this reorganization proceeding have been paid out of this general estate. The Plan has been consummated. The Trustee has filed his final account and petitioned for entry of a final decree. Hearing thereon has been held, and the decree will be entered upon termination of this fee matter, which is the only undisposed of matter. Such decree will approve the Trustee’s account, close the estate, and limit to five years the time for exchange of securities.

16. The individual applications will be considered under alphabetical subdivisions of this finding. In this connection, no consideration is being given to the disallowed portion of requests for fees connected with the mineral phase of this proceeding.

(a) The Referees in Bankruptcy of this court, acting under references as Special Masters, very ably heard, determined and reported a number of special matters in connection with this reorganization, spent considerable time thereon, and relieved the court of innumerable detail and time-consuming matters. They were assisted in the difficult and arduous task of preparing Master’s findings and reports by counsel for the Trustee, who prepared all but one report on a small claim.

By agreement between the Judges of this Court and the Referees in Bankruptcy, from August 5, 1938 until Subdivision (j) was formally added to Local Bankruptcy Rule 124 on July 23, 1943, no fees were to be requested by, or allowed to, the Referees for services in any bankruptcy matter referred to them as Special Masters.

Their request for fees for services as Special Masters prior to July 23, 1943, is being disallowed.

The reasonable value of the Special Masters’ services rendered in this proceeding since July 23, 1943, is $5,000.

(b) Under the seven-year trusteeship of Frank FitzGerald, the Debtor’s business wás very ably and efficiently managed, its assets conserved and enhanced, the estate administered, its involved litigation conducted, and a successful Plan of Reorganization brought to fruition. In the light of the considerable time and talent the Trustee has spent in this proceeding, his request for a final allowance in the amount of $24,500 appears reasonable.

An attack on the reasonableness of his requested allowance for managing and administering the estate, conducting the litigation and formulating and consummating a Plan of Reorganization, was made by the management of the reorganized Debtor. The amount requested by the Trustee, plus a $2,000 interim allowance made him, is some $2,000 per year less than present management salaries.

The reasonable value of the Trustee’s services rendered in this proceeding is $24,-500.

(c) Robert S. Marx, Carl Runge and Lawrence I. Levi, and their associates and assistants, have performed a monumental task and rendered highly valuable services as general counsel for the Trustee from the time of their appointment at the inception of this proceeding down to and through their able conduct of the final fee hearings and the consummation of the Plan. They have participated in all phases of the proceeding, which has made great demands upon their time and talent. They have devoted in excess of 6500 hours of necessary legal services to this estate. They are largely responsible for the orderly administration of this estate and the successful reorganization of the Debtor. In view of the vast amount of services performed, the size of the estate, the number and intricacy of the problems encountered, the responsibility involved, the learning, skill and time employed, the necessity for the services and the results accomplished, their request for fees in the amount of $65,000 appears modest.

The reasonable value of their services rendered in this proceeding is $65,000, and their reasonable expenses, properly incurred in this proceeding, amount to $2,303.78.

(d) Julian G. McIntosh, as special counsel for the Trustee to assist with special Louisiana property and tax matters, has rendered very valuable specialized services for this estate. The success of the Louisiana property development is due largely to his able efforts, and he was of assistance to general counsel in the jurisdictional phase of this proceeding.

The reasonable value of his services rendered in this proceeding is $12,500.

(e) Monaghan, Crowley, Clark & Kellogg, appointed as special counsel for the Trustee on August 19, 1938, to represent the Trustee in connection with an appeal in the state court receivership case, which was later dropped, performed valuable specialized services for the Trustee at the commencement of this proceeding. During the fee hearings, $1,000 of their $2,500 request was withdrawn because it covered services rendered for individual litigants whom they were representing in the state court receivership case. They have been paid $500 on account.

The reasonable value of their uncompensated services rendered in this proceeding is $500, and their reasonable expenses, properly incurred in this proceeding, amount to $56.57.

(f) Fraser, Shumaker, Kendrick & Winn, as counsel for the Debtor from the inception of this proceeding to the time of commencement of the final fee hearings, rendered very valuable services to this estate, particularly in the jurisdictional phase hereof. They have co-operated with the court appointees in administering the estate, conducting litigation, and the formulation of a successful plan.

In so far as their present request contemplates consideration of services performed in connection with the mineral phase of this proceeding, it is being disallowed.

The reasonable value of their other services rendered in this proceeding is $17,-500, which includes $500 allocable to their local counsel, Charles S. Abbott. Their reasonable expenses, properly incurred in this proceeding, amount to $85.44.

(g) S. J. Dyer, a shareholder of the Debtor, represented a group of Indiana shareholders and made several trips to Detroit to attend hearings and conferences when the Plan was being-formulated, often at the request of counsel for the Trustee. He was of some aid in formulating the plan. He has requested merely reimbursement of out-of-pocket expenses in the amount of $560, without any request for fees.

His reasonable expenses, properly incurred in connection with the plan approved in this proceeding, amount to $560.

(h) Irwin H. Boesel, shareholder and former president of the corporation, has requested fees of $5,853.04, including reimbursement of expenses.

Services rendered and items of expense incurred prior to institution of this proceeding are being disallowed, as they were not in contemplation of or in aid of this proceeding.

Of the balance, $822.46 represents actual out-of-pocket expenses. Part of his services and expenses were connected with protecting his private interests. During the early stages of this proceeding, he rendered some assistance to the Trustee and his counsel in understanding various factional problems with which they were confronted. This aided in the administration of this estate and the formulation of the Plan.

The reasonable value of such services rendered in this proceeding in connection with the administration of this estate and formulation of the Plan is $500, and his reasonable out-of-pocket expenses, so incurred, amount to $250.

(i) Harold R. Smith, appearing formally herein as state court appointed attorney for the second successor State Court Receiver, also represents privately the so-called West-enbarger Group, himself as having a private interest in the Westenbarger claims, and was state court appointed attorney for the first successor State Court Receiver. He has requested out of this reorganization estate an allowance of fees in the amount of $40,000 and expenses of $305.91. This latter amount represents a balance of disbursements over the amount of $1,400 paid thereon by Lehman & Skinner, members of the W estenbarger Group (claimed by them in application considered in subdivision (o) hereof), and $240.71 paid to him by Hull, Brown & Fischer, attorneys for the Waitman Group, mentioned hereinafter in subdivision (n) hereof.

At the time of filing his petition for fees, Mr. Smith had been in this proceeding by formal intervention for one year of its then six-year existence. Although at times it is difficult to reconcile his various representations, his services were performed for the promotion and benefit of the various special interests he represents. Much of his service was not connected with this proceeding. A great amount of his time and expenses is directly connected with prosecution and administration of the state court receivership case. Some of his services antedated his intervention herein. Of the 1676 hours’ work scheduled for the period since November, 1942, 800 hours were performed prior to October 15, 1943, the date he prepared and filed petition for intervention in this proceeding. In many phases of this proceeding, he duplicated the work of counsel for the Trustee. Substantially all his services were unnecessary to, in part antagonistic to, and in part hampered, the orderly administration of this complicated estate and the formulation of a plan. Other than representation of his special clients and interests, his participation herein was that of a volunteer. He did not benefit the general estate, either in the administration thereof or in the formulation of a plan. For the type of services rendered, the amount of his request is unreasonable and excessive. He has a fee arrangement with various of the parties he represents. He should look to the private interests and the state court estate he represents for his compensation.

(j) Hugh R. Francis, second successor State Court Receiver, in whose name Mr. Smith performed a great part of the services just previously described, for the most part was a passive onlooker in this proceeding. He represented and served special interests. His actual participation in this proceeding was slight and of no direct or tangible benefit to this general estate, either in the administration thereof or in the formulation of a plan. He should look to the state court estate he represents for his compensation.

(k) John P. Neudorfer was appointed first successor State Court Receiver. He never intervened in this proceeding. His services were performed as a state court fiduciary in the state court proceeding. Such connection as he had with this reorganization proceeding was incidental, and of no benefit to this reorganization estate. He should look to the state court estate he represented for his compensation.

(l) Harold M. Shapero and J. Adrian Rosenburg represent a group of ranching contract holders, whose equitable claims were conceded throughout by the Trustee and his counsel while questioning the legal enforcibility thereof. These contracts received recognition in the Plan. These attorneys performed no services which aided in the general administration of this estate. Their services in connection with the formulation of a plan were primarily for, and of benefit to, their special clients, and did not aid the general estate. They have a lien for fees on stock to be distributed to their clients, to which they should resort for their fees for services rendered on behalf of such clients.

(m) Anderson, Wilcox, Lacy & Lawson were attorneys for a stockholders’ committee and for a short time, the Debtor, prior to the time the Toledo attorneys were retained and instituted this proceeding on behalf of the Debtor. These attorneys were instrumental in preserving assets of the Debtor that were finally acquired by the Trustee at the time petition for reorganization was filed. This was of value to the Debtor, but these attorneys did not participate in this proceeding. While their impartial efforts in attempting to break the impasse resulting from the state court receivership are commendable, these attorneys did not render services in contemplation of this proceeding, aid in the administration of this estate nor in the formulation of a plan. The Act does not provide for an allowance for this type of service.

(n) Harley C. Waitman et ah, a group of shareholders in both the Delaware and Michigan corporations, have petitioned for the allowance of $5,000 fees to themselves and, nominally for reimbursement as expenses, of $11,102.50 fees paid to their attorneys, Hull, Brown & Fischer and Richard Ford, and other expenses of $869.45. This last item includes the aforementioned $240.71 paid Harold R. Smith in March, 1944, as one-half the cost of printing record on appeal from this court’s decision refusing to modify its restraining orders and requiring adverse claimants to 48% of this Debtor’s stock to litigate their controversy in this proceeding. Fees set by, and paid to, their counsel are unreasonable as compared to other fee requests and allowances herein. Part of the legal services were performed in conjunction with the attorney for the second successor State Court Receiver, and not compensable for the reasons assigned to that petition for fees. This Waitman Group and their counsel performed no services, nor incurred any expenses, which aided in the general administration of this estate. Their services and expenses in connection with the formulation of a plan were primarily for, and of benefit to, their special interests, and did not aid the general estate.

(o) John Westenbarger, Ernest D. Skinner and George A. Lehman, beneficially interested in the stock of the Michigan corporation, have petitioned for expenses of $1,-635.60. These men are members of the so-called Westenbarger Group, claiming to own through the Michigan corporation 48% of Debtor’s stock purchased by Mr. Westenbarger for $1,000, which is the subject matter of the state court litigation. Their disbursements were expended primarily to finance the activities of the attorney for the first and second successor State Court Receiver. This attorney did not, however, appear in this proceeding as attorney of record for this Westenbarger Group other than in filing their present application. The Westenbarger Group never formally intervened herein. As expenses to be reimbursed out of this general estate, their request is subject to the specific objections assigned to their attorney’s application for fees and expenses. The expenditure of these amounts did not aid in the general administration of this estate nor in the formulation of a plan.

(p) Edward T. Kelley and Darden & Brashear, attorneys for a stockholders’ committee since March, 1944, have petitioned for fees of $10,000 and expenses of $125. Darden & Brashear have petitioned for fees of $7,500 and expenses of $108 for legal services ante-dating Mr. Kelley’s retainer. In the initial stages of this proceeding, Darden & Brashear were counsel for the original State Court Receiver, and Mr. Kelley was associated with Monaghan, Crowley, Clark & Kellogg, special counsel for the Trustee herein. As counsel for the stockholders’ committee, these petitioners performed no services which aided in the general administration of this estate. Their services in connection with the formulation of a plan were primarily for, and of benefit to, their special clients, and did not aid the general estate.

(q) Floyd M. Langworthy et al., stockholders’ committee, represented by the attorneys just mentioned, performed no services which benefited the general administration of the estate or aided in the formulation of a plan. Their services were primarily for, and of benefit to, their private interests.

(r) Fowler & Fowler, associate counsel for the second successor State Court Receiver in the Tennessee proceeding, have petitioned for an unspecified amount of fees. The Trustee was represented by his counsel at the Tennessee proceeding, and, with the concurrence of the Securities & Exchange Commission and counsel for the Debtor, took such steps as necessary to protect the interests of this reorganization estate. These applicants performed no services in the instant proceeding, nor any which aided in the administration of this estate or in the formulation of the Plan. They were appointed by another court, to represent an alleged stockholder of this Dehtor, in a third proceeding, and should look to the special estate they represented for compensation.

Conclusions of Law

1. The reorganization petition herein, under Section 77B of Chapter VIII of the National Bankruptcy Act, having been approved within three months of the effective date of the Chandler Act, Chapter X of such latter Act applies' in its entirety to this proceeding. 11 U.S.C.A. § 676(c).

2. When an order is entered allowing final compensation on a concluded phase of a corporate reorganization proceeding under Chapter X of the Chandler Act, and no appeal is taken either within 30 days after written notice thereof, proof of service of which has been filed within 5 days after service, or within 40 days after entry of such order if such notice be not served and filed, the order becomes final and res adjudicata of all matters therein decided. Consequently, any disallowed portions of requests for fees connected with the mineral phase of this proceeding are being disallowed. 11 U.S.C.A. §§ 48, 650.

3. An understanding between a court and Referees in Bankruptcy thereof, that no fees should be allowed them in connection with services rendered by them as Special Masters in matters referred to them under the National Bankruptcy Act, respected and followed for many years, is a rule of court which must be adhered to.

4. Local Bankruptcy Rule 124(j) became effective July 3, 1943, and applied prospectively only to services performed by the Referees as Special Masters. Consequently, the request of the Referees for the allowance of fees as Special Masters for services performed prior to July 3, 1943, is being disallowed.

5. Having in mind the conservation and preservation of this estate and the interest of creditors and stockholders therein, the extent and nature of the services of the various applicants for allowances for services and disbursements, the labor, time and trouble involved, the results achieved, the character and importance of the matters, the learning, skill and experience required and exercised, the size of the estate, the responsibility undertaken, the ability of the Debtor to pay, the contingency or absoluteness of fees, and having further in mind that the following applicants have rendered services and properly incurred expenses in this proceeding in the amounts set opposite their respective names, which .this court has found to be reasonable, an order will be entered fixing the amounts to be paid to each of the following applicants, respectively, as follows, in accordance with 11 U.S.C.A. § 641, viz.:

George A. Marston & Walter I. McKenzie, Referees in Bankruptcy, as Special Masters,
Frank FitzGerald, as Trustee,
Robert S. Marx, Carl Runge and Lawrence I. Levi, as general counsel for the Trustee,
Julian G. McIntosh, as special counsel for the Trustee,
Monaghan, Crowley, Clark & Kellogg, as special counsel for the Trustee,
Fraser, Shumaker, Kendrick & Winn, as counsel for the Debtor (including $500 fees allocable to their local counsel, Charles S. Abbott)

6. Having in mind the foregoing general considerations in allowing fees and expenses, and having further in mind that the following applicants have rendered services and properly incurred expenses in aiding with the administration of this estate or the formulation of the Plan approved herein, in the amounts set opposite their respective names, which this court has found to be reasonable, such order will fix the amounts to be paid each of the following applicants, respectively, in accordance with 11 U.S.C.A. § 642, as follows :

Fees Expenses
S. J. Dyer, shareholder, $560.00
Irwin H. Boesel, shareholder and former president, $500.00 250.00

7. The following applicants have not rendered any services or incurred any expenses in this proceeding, or in connection with the administration of this estate or the plan approved herein, and such order will, therefore, disallow in toto their applications for the allowance of fees and reimbursement of expenses, in accordance with 11 U.S.C.A. §§ 641, 642, viz.:

Harold R. Smith;
Hugh R. Francis;
John P. Neudorfer;
Harold M. Shapero and J. Adrian Rosen-burg;
Anderson, Wilcox, Lacy & Lawson;
Harley C. Waitman, et al, and their attorneys, Hull, Brown & Fischer and Richard Ford;
John Westenbarger, Ernest D. Skinner and George A. Lehman;
Fees Expenses
$ 5,000.00
24.500.00
65,000.00 $2,303.7^
.12,500.00
500.00 56.57
17.500.00 85.44
Edward T. Kelley and Darden & Era-shear ;
Darden and Braschear;
Floyd M. Langworthy, et al;
Fowler & Fowler.

8. Such order shall also specifically disallow the portion of any partially allowed petition for fees and expenses which is not by such order specifically allowed.

9. For convenience, these findings and conclusions, together with order in accordance herewith, are being mimeographed,, and a mimeographed copy of each document will be mailed to each applicant, at the respective addresses listed in finding one, and to counsel for the reorganized Debtor, and proof of such mailing filed simultaneously with entry of such documents.


source: Caselaw Access Project

author: CHESNUT, District Judge.

license: Public Domain

text:
    STEELE v. DENNIS et al. LEWIS v. SAME.
    Civ. A. Nos. 2453, 2454.
    District Court, D. Maryland.
    July 20, 1945.
    Hilary W. Gans, of Baltimore, Md., and Robert E. Lynch, of Washington, D. C., for plaintiff.
    Clater W. Smith, of Baltimore, Md., for-defendant Robert V. Dennis.
    Robert E. Coughlan Jr., of Baltimore, Md., for defendant Langenfelders.
   CHESNUT, District Judge.

The above cases are suits for personal injuries growing out of a collision between two automobiles on a Maryland highway on October 23, 1944. In each case the defendant, Robert V. Dennis, has filed a motion to dismiss the suit against him on the ground that although he was personally-served with process in Maryland, he is a non-resident of the State, being a citizen of the State of Arkansas and having a permanent residence at Little Rock in that State; and that while driving one of the automobiles on a Maryland road at the time of the accident, he was in Maryland only because he was a member of the United States Naval Air Force and was stationed temporarily at the U. S. Naval Air Station at Patuxent, Maryland, where he had been since September 1944.

The plaintiff in case No. 2453 is a citizen of the State of Kansas, and in case No. 2454 the plaintiff is a citizen of the State of California. It appears from the pleadings and statement of counsel at the hearing on the motions that the collision occurred while the defendant Dennis was driving a passenger automobile which collided with a parked truck owned by the defendants George and C. J. Langenfelder, who are citizens of the State of Maryland. The plaintiffs were passengers in the automobile driven by the defendant Dennis.

The motions to dismiss are based on 28 U.S.C.A. § 112, relating to federal venue, which provides that “No civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant; but where the jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant.”

In both instant cases, neither the plaintiff nor the defendant Dennis is an inhabitant ■of this Maryland district. As the jurisdiction of the court in these cases is based ■only on diverse citizenship, the section clearly is applicable and entitled the defendant Dennis to a dismissal of the suit against him unless he has expressly by his conduct or by implication of law, consented to the venue jurisdiction. Camp v. Gress, 250 U.S. 308, 39 S.Ct. 478, 63 L.Ed. 997. It has been held in many cases that this restriction on venue is only for the personal convenience of the defendant and may be waived by him either expressly or impliedly. Commercial Casualty Ins. Co. v. Consolidated Stone Co. 6 Cir., 278 U.S. 177, 179, 49 S.Ct. 98, 73 L.Ed. 252.

There is no contention that the defendant has expressly waived the point but counsel for the plaintiffs contend that by virtue of the applicable Maryland statute, Md.Ann, Code 1943 Supp. Art. 66y2, § 106, there has been an implied waiver in law. The statute referred to is one of a now well-known class of state statutes which provides in effect that non-resident motorists by their use of Maryland highways, consent to be sued by a service of process upon the Secretary of State as their attorney for causes of action growing out of any accident or collision in which they may be involved while operating a motor vehicle on the State highway. The statute provides, subsection (a), that the process in any such suit may be served on the Secretary of State and “shall be sufficient service upon the said non-resident individual, firm or corporation, and have full force and effect in any court and before any Justice of the Peace or Trial Magistrate of this State.” There are other procedural provisions with respect to the forwarding of the notice to the non-resident or service of copy of the papers upon him in another jurisdiction.

In the instant case the particular type of service authorized by the statute has not been resorted to because the defendant Dennis has been personally served in Maryland by the Marshal of the court; but the contention of counsel for the plaintiffs is that the voluntary use of the Maryland highways by the defendant evidences his consent to be sued in Maryland courts and likewise this federal court in Maryland.

The provision of section 112(a) is derived from the Acts of March 3, 1887 and August 13, 1888 which superseded the Act of March 3, 1875 which permitted suits not only against inhabitants, but also where the defendants were “found” in the district. In the recent Supreme Court case of Neirbo Co. v. Bethlehem Corp., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167, 128 A.L.R. 1437, it was said that the elimination by the act of 1887 of the alternative “found” provision had no proper bearing on the previously well-established principle that the defendant in a diverse citizenship case, could waive the statutory provision for his benefit and that the privilege to rely upon it might be lost by failure to assert, it seasonably, by formal submission in a case, or by submission through conduct. Accordingly it was determined that in a suit by a nonresident against a foreign corporation the latter’s compliance with a State statute requiring the appointment of a resident agent for service in suits in the State constituted a consent to be sued either in the State or federal courts of the State. The decision was largely based on Chief Justice Waites’ opinion in Ex parte Schollenberger, 96 U.S. 369, 376, 24 L.Ed. 853, which arose under the earlier Act of 1875. In the latter case it was said: “It was insisted in argument that the statute confines the right of suit to the courts of the State; but we cannot so construe it. There is nothing to manifest such an intention; and the object of the legislature evidently was to relieve the citizens of Pennsylvania from the necessity of going outside of the State to secure judicial redress upon their contracts made with foreign insurance companies, it is but reasonable to suppose that they were entirely at liberty to select the court in the State having jurisdiction of the subject matter, which, in their judgment, was the most convenient and desirable. * * * While the Circuit Court may not be technically a court of the Commonwealth, it is a court within it; and that, as we think, was all the legislature intended to provide for.”

Both the Schollenberger and Neirbo cases dealt with suits against foreign corporations, and much of the discussion is therefore applicable to corporations rather than individuals. But after a careful rereading of the Neirbo case I conclude that it is applicable in principle to the instant case. The precise question presented is whether by his use of the Maryland highways, in accordance with the Maryland statute, the defendant has consented to be sued in this federal court. Clearly by statute he has consented to be sued in the State court by the form of service prescribed by the Act. No point has been made here that personal service on a defendant in this State is less effective as bearing on consent than if the less direct form of service authorized by the Act had been had. I think it logically follows from the principle of the Neirbo and Schollenberger cases that the defendant’s consent to be sued in the federal court is implied from his voluntary use of the Maryland highways.

It has been held in a number of recent federal decisions that service on a non-resident motorist in accordance with State statutes of the pattern of the Maryland statute are effective in suits brought in the federal court against such non-residents. O’Donnell v. Slade, D.C.Pa., 5 F.Supp. 265; Williams v. James, D.C.La., 34 F.Supp. 61, 70. See also Malkin v. Arundel Corp., D.C.Md., 36 F.Supp. 948; Vogel v. Crown Cork & Seal Co., D.C.Md., 36 F.Supp. 74; Bennett v. Standard Oil Co. of New Jersey, D.C. Md., 33 F.Supp. 871; International Union v. Tennessee Copper Co., D.C.Tenn., 31 F. Supp. 1015. But the case that is the most directly in point is Krueger v. Hider, D.C. S.C., 48 F.Supp. 708, 710, where a nonresident motorist was sued in the district court of South Carolina by a non-resident of the State on a cause of action arising on the highways of the State. The applicable South Carolina statute was generally similar to the Maryland statute. In the opinion District Judge Waring held that the defendant had waived the privilege of the federal venue statute, 28 U.S.C.A. § 112(a), by the use of the State highways. He said: “This statement of law might have been seriously questioned before the decision in the Neirbo case hereinabove cited, but since the decision in that case it appears to me to be an inescapable and sound conclusion.”

As we are dealing here with a statute which was designed only for the convenience of the defendant, it seems appropriate to consider some practical aspects of the situation. Although a citizen of Arkansas the defendant has for some time past been in the Naval Service of the United States, subject of course, to transfer from place to place in accordance with the exigencies of the government. At the time of the accident he was not merely in transit through the State as he had been stationed in Maryland for some weeks theretofore and was still in the State at the time of the bringing of the suit. No question has been presented to the court with respect to the defendant’s rights or privileges under the Soldiers’ and Sailors’ Civil Relief Act, 50 U.S.C.A.Appendix § 501 et seq. With regard to the defendant’s convenience, it is indisputable that he could be sued by the plaintiffs in a Maryland State Court. If so sued as a non-resident he might wish to remove the case to this federal court. This he could do, where the amount in controversy, as in these cases, exceeds $3,000, if he were sued independently and without the joinder of his co-defendants in these cases. But if they were also joined with him as defendants in a suit in the State court, it is at least very doubtful whether he would have that right of removal, as under the pleadings before the court there would seem to be no clearly separable controversy. Still another comment may be deemed relevant. At the hearing on the motion counsel for the co-defendants, the Langenfelders, who are Maryland citizens, stated that if the motions to dismiss made by the defendant Dennis should be sustained, a petition would possibly be filed to nevertheless bring Dennis into the cases as a third-party defendant under rule 14(a) of the new Federal Rules of Civil procedure, 28 U.S. C.A., following section 723c. Whether this could effectively be done is, of course, unnecessary to now decide. There is at least some basis for the contention that it might be done. See Malkin v. Arundel Corporation, D.C.Md., 36 F.Supp. 948; Lesnik v. Republic Industrial Corporation, 2 Cir., 144 F.2d 968, 973, 975, 977; Vol.I, Moore’s Federal Practice, pp. 741, 742, and Supp. p. 749 et seq.

I conclude that the motions in both cases to dismiss must . be overruled. Counsel may present the appropriate orders in due course.


author: BARD, District Judge.

text:
    PERLBERG et al. v. NORTHWESTERN MUT. LIFE INS. CO.
    Civil Action No. 3615.
    District Court, E. D. Pennsylvania.
    Aug. 6, 1945.
    A. J. Goldin and Arthur S. Arnold, both of Philadelphia, Pa., for plaintiff.
    Joseph S. Conwell, Jr., and Joseph S. Conwell, of Pepper, Bodine, Stokes & Schoch, all of Philadelphia, Pa., and William E. Jones, of Milwaukee, Wis., for defendant.
   BARD, District Judge.

Plaintiffs seek- a declaratory judgment under the Federal Declaratory Judgment-Act to determine their rights under the extended automatic insurance clause of a life insurance policy and to obtain judicial construction thereof. The matter comes before the Court on pleadings and proof. Defendant offered no evidence at the conclusion of plaintiff’s case, but submitted a motion to dismiss under Rule 41 (b), Federal Rules of Civil Procedure, and, in the alternative, a motion for summary judgment under Rule 56(b), 28 U.S.C.A. following Section 723c. The cause will be adjudicated on the motion to dismiss.

On October 15, 1918, defendant issued policy No. 1283523 on the life of Nathan Perlberg agreeing therein to pay upon the death of the insured to the named beneficiaries the sum of $10,000. The present beneficiaries of the policy are Sidney Perl-berg and Maxwell E. Verlin. The insured paid all premiums due on the policy in cash, by the application of dividends, or by borrowing from the insurer, and has continued to pay the quarterly premiums until the present time. As of January 15, 1945, the reserve on the policy was $5260.-20. The insured borrowed substantial sums from defendant on the security of the policy and this indebtedness, together with interest, amounted to $5251.22 on January 15, 1945.

On November 17, 1943, the insured wrote to defendant requesting a calculation of the extended period of insurance in the event of default in the payment of premium on the next due date. Defendant computed that, in the event of default on January 15, 1944, the insured would be entitled to term insurance for thirty-two days from the date of default in the amount of $4962 under the provisions of the policy. Plaintiffs dispute defendant’s method of computing the extended term insurance and seek, in this petition for declaratory judgment, judicial interpretation of the relevant clauses in the policy and a declaration that defendant calculate the extended term insurance in accordance with plaintiffs interpretation of the policy.

Section 274d of the Judicial Code, 28 U.S.C.A. § 400, provides, in part: “(1) In cases of actual controversy * * * the courts of the United States shall have power upon petition * * * to declare rights and other legal relations of any interested party petitioning for such declaration * * * and such declaration shall have the force and effect of a final judgment or decree * * A petition for declaratory judgment is no different than any other form of action except that an accomplished injury need not be shown, but all other essentials of a justiciable controversy must be present. Samuel Goldwyn, Inc. v. United Artists Corporation, 3 Cir., 113 F.2d 703. The first five words of the statute are in recognition of the constitutional limitation upon federal courts to determine only cases and controversies. Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450. In Aetna Life Insurance Co. v. Haworth, 300 U.S 227, 57 S.Ct. 461, 81 L.Ed. 617, 108 A. L.R. 1000, rehearing denied 300 U.S. 687, 57 S.Ct. 667, 81 L.Ed. 889, the Supreme Court of the United States defined what is meant by “cases of actual controversy” under the Act, at page 240 of 300 U.S., at page 464 of 57 S.Ct., 81 L.Ed. 617, 108 A.L.R. 1000: “A ‘controversy’ in this sense must be one that is appropriate for judicial determination. * * * A justiciable controversy is thus distinguished from a difference or dispute of a hypothetical or abstract character; from one that is academic or moot. * * * The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. * * * It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” See Dewey & Almy Chemical Co. v. American Anode, Inc., 3 Cir., 137 F.2d 68, certiorari denied 320 U.S. 761, 64 S.Ct. 70, 88 L.Ed. 454.

Provision 12c of the policy, the section plaintiffs seek to have interpreted, grants extended term insurance to the insured “upon default in payment of premium.” The insured is not eligible under this clause for extended term insurance until he has defaulted in the payment of premiums. But, until the date of trial, the insured has continued to pay the premiums as they have come due. Although the insured has not defaulted, he asks this court to declare his rights under provision 12c of the policy if and when he does default in the future.

Borchard, in his book “Declaratory Judgments” (2d Ed.), discussing the ripeness of issue, says at page 56: “The danger or dilemma of the plaintiff must be present, not contingent on the happening of hypothetical future events — although it may involve future benefits or disadvantages — and the prejudice to his position must be actual and genuine and not merely possible or remote. * * * Where plaintiff is merely in doubt as to his rights, under a written instrument * * * (and) some event must happen before the plaintiff’s right fully accrues, the action is naturally considered as prematurely brought.” Under the present state of facts the policy is not in default and any declaration of the effect, upon default in the payment of premiums, of provision 12c would necessarily have to be based on a hypothetical set of facts. Such declarations are without the scope of declaratory judgments. Dewey & Almy Chemical Co. v. American Anode, Inc., supra. Until plaintiff’s hypothesis of default becomes an actuality the differences of the parties will not be ripe for adjudication and a petition for a declaration of rights would be premature. Petitioner’s position is not improved merely because he challenged the defendant to take a position as to insured’s rights under the policy and then disputed defendant’s conclusion. F. W. Maurer & Sons Co. v. Andrews, D.C.E.D.Pa., 30 F.Supp. 637.

A judgment in this suit could not be binding and final as to plaintiffs’ rights under the non-forfeiture provisions of the policy. If the declaration would be adverse to the insured, he would not be bound to accept extended term insurance under the policy as the court might interpret it, but he could demand paid-up insurance, accept the cash surrender value or continue the policy in full force by tendering the premiums when due. The insured has not, as yet, irrevocably bound himself to accept extended term insurance and, in fact, is not yet eligible to claim it since he is not in default. Since it is within the insured’s power to make the declaration he seeks purely academic by acts within his own control, the court should decline decision of the matter as unripe. The decision could not finally settle the rights of the parties under the non-forfeiture provisions. Angell v. Schram, 6 Cir., 109 F.2d 380; Metropolitan Life Ins. Co. v. Hobeika, D. C.E.D.S.C., 23 F.Supp. 1.

Petitioners have a concrete problem and are in need of legal advice. But their problem is not sufficiently removed from the hypothetical to bring it within the jurisdiction of this court. F. W. Maurer & Sons Co. v. Andrews, supra.

Petitioners have neither alleged nor proved facts bringing their case within the tests set forth in the Aetna Life Insurance Co. case, and the petition must therefore be dismissed.

       Act of June 14, 1934, c. 512, 48 Stat. 955, as amended August 30, 1935, c. 829, § 405, 49 Stat. 1027, Jud.Code § 274d, 28 U.S.C.A. § 400.

       The pertinent clauses of the policy are as follows:
      “12. Non-Forfeiture and Loan Provisions. The following Non-Forfeiture and Loan provisions shall become operative only after payment of premiums for two full years and no request, revocation or change in connection with such provisions shall be effective until duly made in writing and filed at the Home Office of the Company:
      “12a. The cash surrender value of this Policy at any time prior to default in premium payment or within the grace period, shall be the then reserve on the Policy and any dividend additions then existing, less any indebtedness to the Company on account hereof, and less also a surrender charge which during the fifth or any previous policy year shall be at the rate of ten dollars per $1,000 of insurance and thereafter shall diminish annually at the rate of one dollar per $1,000 of insurance.
      “12b. Upon request of the Insured, and Assigns if any, made prior to default in premium payment and remaining unrevoked, the premiums thereafter falling due and not paid will be charged as a premium loan with interest at a rate not to exceed six per cent, per annum, pi-ovided the then cash surrender value be sufficient to cover such loan. Any premium loan may be repaid at any time.
      “12c. Upon default in payment of premuim, unless paid within the grace period, the amount of this Policy and any existing dividend additions, less any indebtedness to the Company on account hereof, shall be extended automatically as non-participating term insurance for such time from the date of default as the then cash surrender value will provide at the net single premium rate for the attained age of the Insured according to the American Experience Table of Mortality with interest at three per cent.
      “12d. Participating paid-up insurance for such an amount as the then cash surrender value, including any policy loan indebtedness which shall remain as a lien against this Policy, will provide at the net single premium rate for the attained age of the Insured according to the American Experience Table of Mortality with interest at three per cent., may be secured in lieu of automatic extended term insurance upon written request of the Insured, with the Beneficiary and Assigns, if any, made prior to default in premium payment or within the grace period.
      “12e. Change from automatic extended term insurance to paid-up insurance, or vice versa, may be made in accordance with the respective provisions therefor at any time prior to default in premium payment or within the grace period.
      “12f. Upon receipt of this Policy and a full and valid surrender of all claims hereunder, without the consent or participation of any beneficiary not irrevocably designated, the Company will pay its then cash surrender value. While this Policy is in full force, including the grace period, the surrender value will be as stated in the preceding paragraph numbered 12a, and thereafter shall be the full reserve on the form of insurance then in force, less any indebtedness to the Company on account hereof.”


author: GIBSON, District Judge.

text:
    LORD MFG. CO. v. COLLISSON.
    Civ. A. No. 75.
    District Court, W. D. Pennsylvania, at Erie.
    Aug. 14, 1945.

      W. Pitt Gifford and Hugh C. Lord, both of Erie, Pa., and Jo Baily Brown, of Pittsburgh, Pa., for plaintiff.
    Charles F. Uhl, U. S. Attorney, of Pittsburgh, Pa., for Western District of Pennsylvania, Rawlings Ragland, of Washington, D. C., Acting Head, Claims Dept. John Frank, of Washington, D. C., Atty. Dept, of Justice, and Lt. Edmund Doyle, U. S. N., of Cincinnati, Ohio, for defendant
   GIBSON, District Judge.

The Lord Manufacturing Company, plaintiff, brings this action for a preliminary injunction to restrain N. H. Collisson, defendant, from transferring or seizing certain property of the Lord Manufacturing Company not already seized. The defendant, in turn, has filed a Motion for Dismissal or Summary Judgment.

On argument of these motions, these facts appeared:

Lord Manufacturing Company is engaged in the manufacture of certain vibration-proof hinges and mountings used in aircraft. Due to a dispute between the United States and the plaintiff as to the price to be charged for plaintiff’s product, the President of the United States exercised the powers granted by Title VIII of the Revenue Act of 1943, 50 U.S.C.A. Appendix, § 1192 and Section 9 of the Selective Training and Service Act, 50 U.S.C.A.Appendix, § 309, and issued an Executive Order directing seizure of the plaintiff’s plant. Executive Order 9493, 9 Fed.Reg. 12860, October 24, 1944. This order directed the Secretary of the ■ Navy to take over plaintiff’s plant and facilities at Erie, Pennsylvania, and to take over facilities used in connection with the main operation “to the extent that he may deem necessary.”

On October 25, 1944, Naval Officers, under Executive Order, seized plaintiff’s plant at Erie. Plaintiff had substantial amounts of machinery at other places'which were operated by independent subcontractors, making parts used in plaintiff’s final product. (See No. 6, Findings of Fact.) This machinery was not seized, and it is the status of this machinery which is in dispute in this case.

The Navy Department continued the same arrangement with the subcontractors that plaintiff had made, but cancellation of contracts with these subcontractors made some of the outside machinery idle.

Defendant Collisson, nine months after the seizure, has ordered the transfer of certain machinery located at the Lovell Manufacturing Company, one of the subcontractors, to the plaintiff’s plant. Plaintiff also contends that defendant has leased ceitain of plaintiff’s machinery located at the Metric Metal Works, another subcontractor, to third parties outside the Metric Metal Works plant. Defendant admits that he will take such other machinery owned by plaintiff from the subcontractors as he may need it for use in connection with the main plant. Thus the controversy depends upon defendant’s right to control the outside machinery.

The defendant has proceeded, and is proposing to further proceed, without lawful authority in its claim over the property of plaintiff not definitely seized. In coming to such conclusion the court is not putting any forced construction upon the Executive Order, by which the United States and its agents would be precluded from seizure of any of plaintiff’s property not seized and described in the first exercise of power under the Order. The Government, with reasonable promptitude, might have included in the seizure any property of plaintiff necessary for the war effort. Whether a delay of nine months, and the recognition of the limited rights of subcontractors in the meantime, discloses such reasonable ' promptitude is hardly open to question. But he that as it may, it is not the actual question involved in the instant case.

If the defendant were now claiming a seizure at or within a reasonable time after October 25, 1944, or even if he claimed a seizure as of the present, a different controversy would be before the court than actually exists. The contention of defendant is not that any seizure did exist or now exists. His claim is that he has the right, by virtue of the original Order, to require plaintiff to hold all its property in the hands (or formerly in the hands) of subcontractors subject to his orders, and that he, without formal seizure, may require delivery of parts of it to him if and zvhen he may need them for use in the main plant. By his contention he proposes to deny all use of the property to plaintiff, although making it liable for its preservation, in order that he later may, or may not, obtain a part of it for use in the main plant.

The defendant’s position is without authority of law. When the United States requires real estate it files its petition to condemn it, thereby making itself liable to the owner for its value. When it seizes a plant, as in the instant case, it is required to do so in such manner as to make itself liable for the preservation of the property taken over and to make it plain just what property has been seized. If property, even though described, has not been taken over and the United States has never entered into possession of it, no liability for its seizure exists. See Marion & R. V. Ry. Co. v. United States, 270 U.S. 280, 46 S.Ct. 253, 70 L.Ed. 585. In the instant case the Navy Department never took possession of the property in the hands of subcontractors, but continued to deal with the said subcontractors and the owners in apparent recognition of their rights and in substantial admission that it was not part of the seized property.

The defendant, in addition to his rather tenuous claim of right under the original order, has presented several defenses along technical lines.

He contends that this is a suit against the United States, which cannot bp made a party; also that plaintiff has a remedy at law by suit in the Court of Claims against the United States; also that defendant’s superiors, not joined, are essential parties.

This action is not against the United States. The charge is that defendant has wrongfully invaded the property rights of plaintiff, and the remedy is to be sought in equity to restrain him. See Philadelphia Co. v. Stimson, 223 U.S. 605, 32 S.Ct. 340, 56 L.Ed. 570; Lane v. Watts, 234 U.S. 525, 34 S.Ct. 965, 58 L.Ed. 1440; Payne v. Central Pac. Ry. Co., 255 U.S. 228, 41 S.Ct. 314, 65 L.Ed. 598; Ickes v. Fox, 300 U.S. 82, 97, 57 S.Ct. 412, 81 L.Ed. 525.

The superiors of defendant are not essential parties. This is the active officer in charge of the work. He and his superiors are acting without lawful authority. Each of them may be liable, and individually liable, but that does not mean that all must be joined, particularly when the effect of the joinder would defeat the action by reason of inability to serve some of the parties. Acting as he has been without lawful authority no need for joinder of superiors is required.

Some time was consumed by counsel in argument in connection with an agreement entered into by defendant and plaintiff after the seizure of the plant. That agreement related to property desired neither by plaintiff nor defendant for use in the plant, and by it the plaintiff was allowed to sell the property in question and the United States was relieved of any claim for liability therefor. The defendant points to it and says that plaintiff might obtain leave to sell certain of the property originally in the hands of subcontractors if it will apply to defendant and obtain permission to do so. The answer is that it might or might not obtain the permission and in any event is not required to ask such permission where defendant is acting without authority of law. This agreement is of no particular moment in the instant action.

The motion for a preliminary injunction will be granted.