Dickinson Industrial Site v. Cowan/Opinion of the Court

A plan of reorganization of petitioner under § 77B of the Bankruptcy Act, 48 Stat. 912, 11 U.S.C.A. § 207, was confirmed on February 23, 1938. Respondents are members of a bondholders' committee who sought an allowance in those proceedings. On October 26, 1938, they were awarded $2,000 for services rendered, $20,000 having been asked. On November 25, 1938, they petitioned the Circuit Court of Appeals for leave to appeal from that order. The appeal was allowed. Petitioner moved to dismiss the appeal on the ground that the Court of Appeals had no jurisdiction to allow it, the argument being that respondent had an appeal as of right which could only be taken by filing a notice of appeal in the District Court. The Circuit Court of Appeals denied petitioner's motion to dismiss and modified the order by increasing the allowance to $10,000. In re Albert Dickinson Co., 7 Cir., 104 F.2d 771. We granted certiorari, 308 U.S. 543, 60 S.Ct. 139, 84 L.Ed. --, because of a conflict of that ruling with London v. O'Dougherty, 2 Cir., 102 F.2d 524, which held that appeals from compensation orders involving $500 or more could be had as a matter of right under the Chandler Act, 52 Stat. 840, 11 U.S.C.A. § 1 et seq.

First. The Circuit Court of Appeals held that the provisions of the Chandler Act, which became effective on September 22, 1938 (§ 7, 11 U.S.C.A. § 1 note), were applicable to this appeal. We think that follows from § 6, sub. b of the Act, 11 U.S.C.A. § 1 note, which states that 'Except as otherwise provided in this amendatory Act, the provisions of this amendatory Act shall govern proceedings so far as practicable in cases pending when it takes effect; * *  * .' Where, as here, appeal is taken after the effective date of the act, it is clearly 'practicable' to apply the new appeal provisions. Contrary to respondents' contention, § 276, sub. c(2), 11 U.S.C.A. § 676, sub. c(2), is not applicable to appeals. It provides that the provisions of Ch. X (the successor to § 77B) shall apply to pending proceedings 'to the extent that the judge shall deem their application practicable' where the petition in such proceedings was approved more than three months before the effective date of the amendatory act. But that relates solely to proceedings in the district court. The 'judge' referred to in that section means a 'judge of a court of bankruptcy'. Section 1(20), 11 U.S.C.A. § 1(20). Such court does not include the Circuit Court of Appeals. Section 1(10). Hence the application of the new appeal provisions to this type of case is not dependent on a determination of practicability by the district judge under § 276, sub. c(2).

Second. Petitioner's argument that the appeal in this case could be taken as a matter of right requires an analysis of § 24 and § 250 of the Chandler Act, 11 U.S.C.A. §§ 47, 650. Sec. 24 provides in part:

'a. The Circuit Courts of Appeals of the United States and the United States Court of Appeals for the District of Columbia, in vacation, in chambers, and during their respective terms, as now or as they may be hereafter held, are hereby invested with appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy, to review, affirm, revise, or reverse, both in matters of law and in matters of fact: Provided, however, That the jurisdiction upon appeal from a judgment on a verdict rendered by a jury, shall extend to matters of law only: Provided further, That when any order, decree, or judgment involves less than $500, an appeal therefrom may be taken only upon allowance of the appellate court.

'b. Such appellate jurisdiction shall be exercised by appeal and in the form and manner of an appeal.'

'Appeals may be taken in matters of law or fact from orders making or refusing to make allowances of compensation or reimbursement, and may, in the manner and within the time provided for appeals by this Act (title,), be taken to and allowed by the circuit court of appeals independently of other appeals in the proceeding, and shall be summarily heard upon the original papers.' Petitioner contends that Congress by § 24 created a single test-the amount of the order appealed from-for determining whether leave to appeal was necessary and that the words 'allowed by' in § 250 refer to appeals from orders of allowances of less than $500.

Our view, however, is that appeals from all orders making or refusing to make allowances of compensation or reimbursement under Ch. X of the Chandler Act may be had only at the discretion of the Circuit Court of Appeals.

Under § 77B, sub. c(9) it was provided that 'appeals from orders fixing such allowances may be taken to the Circuit Court of Appeals independently of other appeals in the proceeding and shall be heard summarily.' And it was held by this Court in Shulman v. Wilson-Sheridan Hotel Co., 301 U.S. 172, 57 S.Ct. 680, 81 L.Ed. 986, that those appeals could not be had as a matter of right but only in the discretion of the appellate court as provided in former § 24, sub. b. That was the way the matter stood when § 250 was drafted. The history of that section shows that it was derived from § 77B, sub. c(9). But, significantly, the words 'and allowed by' were added-words not present in § 77B, sub. c(9). The result plainly was (1) to carry over into the new act the rule of Shulman v. Wilson-Sheridan Hotel Co., supra, and (2) to set apart in a separate section the provisions for appeals from that type of order so as to make those appeals no longer dependent on § 24, which had become a storm center for the revisionists. If the House did not intend the latter result, then the addition of the words 'and allowed by' were wholly needless, as under the House revision of § 24 appeals from compensation orders would have been discretionary with the appellate court.

Hence under the House Bill as it reached the Senate, it seems clear that no such appeals could be had as a matter of right. In the Senate the present § 24 was substituted for the House provision; but the present § 250 was not altered in any respect material here. It is clear from the Senate hearings and Committee Report that the Senate was interested only in the elimination from § 24 of the old distinctions between 'controversies arising in bankruptcy proceedings' and 'proceedings' in bankruptcy. There was not the slightest intimation of any dissatisfaction with the rule of Shulman v. Wilson-Sheridan Hotel Co., supra, or with § 250 as it passed the House. To be sure, the Senate Committee Report is somewhat ambiguous. But it is perhaps significant that that report in commenting on § 24 stated not that it 'abolished' but that it 'practically abolished' the distinction between appeals as of right and appeals by leave of the appellate courts.

More important, however, is the matter of statutory construction. To hold that an appeal from a compensation order is governed by § 24 the words 'taken to and allowed by' in § 250 must be read 'taken to or allowed by'. Only then can appeals from compensation orders involving less than $500 be governed by 'allowed by' and appeals from all other such orders be governed by 'taken to'. In the face of the foregoing history we do not believe we are justified in substituting 'or' for 'and'. The inappropriateness of it is somewhat emphasized by the history of 'taken to' which in Shulman v. Wilson-Sheridan Hotel Co., supra, was held not to permit an appeal as of right. It is further emphasized by considerations of policy.

The history of fees in corporate reorganizations contains many sordid chapters. One of the purposes of § 77B was to place those fees under more effective control. Buttressing that control was § 77B, sub. c(9) which, together with former § 24, sub. b, made appeals from compensation orders discretionary with the appellate court. We should not depart from that policy in absence of a clear expression from Congress of its desire for a change. Fee claimants are either officers of the court or fiduciaries, such as members of committees, whose claims for allowance from the estate are based only on service rendered to and benefits received by the estate. Allowance or disallowance involves an exercise of sound discretion by the court based on that statutory standard. Unlike appeals from other orders, appeals from compensation orders therefore normally involve only one question of law-abuse of discretion. These factors not only emphasize the appropriateness of the separate treatment by Congress of appeals from compensation orders; they reinforce the interpretation of § 250 which restricts these appeals. For certainly it seems sound policy to require fiduciaries to make out a prima facie case of inequitable treatment in order to be heard before the appellate court. To allow these appeals as a matter of right is to encourage an unseemly parade to the appellate courts and to add to the time and expense of administration. We will not resolve any ambiguities in favor of that alternative.

Whether or not the Circuit Court of Appeals erred in modifying the order so as to grant respondents an increased allowance was not raised in the petition for certiorari and hence has not been considered here. Helis v. Ward, 308 U.S. 365, 60 S.Ct. 283, 84 L.Ed. 327.

Affirmed.