creditor objecting to the allowance. The referee dismissed the petitions, thus refusing the allowance. It is this order of refusal which we are asked to review.
We may premise the discussion with some general propositions which will be accepted.
1. A creditor has the legal right to payment of the debt owing to him and the further right to refuse to compromise his claim by the acceptance of a less sum.
2. Out of consideration of the public interest, however, he may be required to surrender the exercise of the above rights to be exercised for him in the judgment of the whole body of creditors. The Bankruptcy Law does this by compelling him to accept of a composition offer which has the approval of the required majority of creditors and the sanction of the court.
3. Any creditor has the right to oppose any such composition just as he has the right, at his own expense, of defense in any litigation which concerns him.
This much is clear. No creditor, without a law empowering him so to do, could however impose the expense of any litigation in which he saw fit to engage upon another creditor who was unwilling and emphatically not upon one who was opposed to the litigation. There may be, however, a class of creditors, each member of which has a common share in a fund which may by effort be raised. If one of the class by his own efforts and at his own expense raises such a fund in which all share, there is room for the thought that he should contribute to the expense incurred for the common benefit in which he has part. This is somewhat akin to the principle on which salvage is allowed. In other words, he should not receive the fruit without sharing in the expense of raising it. This, however, would not impose upon him the expense of an effort which did not produce results. This thought underlies the provisions in the bankruptcy statute. All creditors have a proportional interest in a composition. Originally the trustee as the representative of creditors might act for them. This carried the consequence that the creditors bore the expense of opposing an offered composition. Willing or unwilling, they must pay it. This led to a change in the law withdrawing the power from the trustee unless authorized by the creditors to intervene. The incurring of the expense was thus committed to the judgment of the majority. Any creditor, however, was at liberty to oppose a composition notwithstanding it was one of which the creditors as a body had approved. The expense of such opposition he must, however, himself bear. Then came the provision of the law with which we are now concerned. With the wisdom of the policy thus introduced we have nothing to do. The claim made must rest upon this law. If the law allows it, the claim must be recognized but not otherwise. The law is found in section 64 of the amended act of 1926, section (b), cl. (4), 11 USCA § 104 (b) (4). The only condition imposed is that a composition offer must have been refused as a result of the opposition of individual creditors. Here this condition has been met. The right given is to have "in the discretion of the court, the reasonable expenses of such creditors in opposing such composition" allowed as an administration expense.
There is no need to make our own analysis of this act, because the learned referee has made one upon which he based the order now under review. This analysis is a complete and most admirable one. The inferences drawn in giving meaning to the act have in general our concurrence. There is, however, one which is basic and which was controlling of the order made, which we cannot accept. If the principle upon which the allowance is asked were that to which we have before alluded, that the objecting creditors had raised a common fund, the expense of raising which should be borne by all who shared in it, we think the conclusion reached by the referee would follow. This, however, is not the principle upon which the allowance must be made, if at all. The basis is the narrower one expressed in the Bankruptcy Act. The only condition there imposed is, as we have said, that the confirmation of the offered composition shall have been "refused or set aside." This condition, as we have also further said, has been met.We do not think we are at liberty to add further conditions which the act does not impose. The right given, however, is, as the referee has sagely commented, not an absolute one, but is subject to the exercise of the "discretion of the Court" in its allowance. The allowance is, moreover, limited to the "reasonable expense" incurred.
The original petition was by counsel for the allowance of a fee to him. Clearly he is given no such right by the act. The second petition is by a creditor who objected to the confirmation of the petition. It is based, however, upon no claim to be reimbursed the "reasonable expenses" which the creditor had incurred, but solely upon the claim of counsel as if he had represented and rendered services to the bankruptcy estate.
In making this comment we do not wish to be understood as distinguishing between an expense paid by the creditor and one incurred. Whatever question might thus arise is not before us. The petition does not ask for the allowance for "reasonable expenses" paid or incurred, but for counsel fees qua counsel fees for services, as we have said, as if rendered to the bankruptcy estate. Such claim we think was properly rejected.
The referee we think was further within his powers in exercising his discretion in allowing or refusing any allowance and in limiting any allowance made to the "reasonable expense" incurred. This "discretion" he has exercised.
We wish merely to disclaim the thought that to the condition that the opposition to confirmation of the composition must have been successful there may be added the further condition that the rejection of the composition offer has resulted in an increased dividend to creditors, before the opposing creditors may be reimbursed for the "reasonable expense" incurred. This does not mean, however, that the results of the rejection of the composition do not enter into the situation calling for the exercise of the "discretion of the Court." All we mean is that this is not controlling.
The practical result is that we approve the order of disallowance, but are not in accord with one of the reasons given for dismissing the claim.
The petition for review is dismissed, and the order made by the referee affirmed and confirmed.
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