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IN RE GENERAL CARPET CORP.

April 4, 1941

In re GENERAL CARPET CORPORATION


The opinion of the court was delivered by: KALODNER

During the guady 20's and the dazed 30's many of those who had dealings with bankrupt estates regarded them as "happy hunting grounds".

The situation became so shocking that an aroused Congress enacted the Chandler Act in 1938. In plain and unmistakable terms the Chandler Act in Sections 241, 242 and 243, 11 U.S.C.A. §§ 641, 642, 643, erected safeguards against exploitation of bankrupt estates by the prospectors for gold, who appeared to regard them as privately staked out "claims".

 Despite the plain terms of the Chandler Act governing allowances to those connected with the administration of bankrupt estates, there still seem to be some who seek to nullify the public policy enunciated by the Congress and who continue to regard bankrupt estates as "grab bags".

 The instant case prompts these observations.

 Under the provisions of the Chandler Act, June 22, 1938, section 7, subs. a, b, 11 U.S.C.A. § 25, subs. a, b, duties are imposed upon bankrupts to cooperate with the court and the bankruptcy trustee in all matters pertaining to the bankrupt estate.

 Section 7, sub. a(3), provides that the bankrupt shall "examine and report to his trustee concerning the correctness of all proofs of claim filed against his estate", and (7) "in case of any person having to his knowledge proved a false claim against his estate, disclose that fact immediately to his trustee" and (8) to file schedules listing his creditors "showing * * * the amount due to or claimed by each of them, the consideration thereof * * *"; (10) that the bankrupt shall "submit to an examination concerning * * * his dealings with his creditors and other persons * * * and in addition, all matters which may affect the administration and settlement of his estate * * *."

 Section 7, sub. a(10) further provides "that when the bankrupt is required to attend for examination, except at the first meeting and at the hearing upon objections, if any, to his discharge, he shall be paid actual and necessary traveling expenses for any distance in excess of 100 miles from his place of residence at the date of bankruptcy * * *."

 Section 7, sub. b, provides that "where the bankrupt is a corporation, its officers, the members of its obard of directors or trustees or of other similar controlling bodies * * * shall perform the duties imposed upon the bankrupt * * *."

 In the instant case, Isaac L. Rice was secretary and a director of the General Carpet Corporation when it filed a petition for reorganization under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, on August 24, 1938. Efforts at reorganization having failed, the General Carpet Corporation was adjudicated a bankrupt on February 20, 1939. The Chandler Act is applicable herein by virtue of section 276, sub. c(1), 11 U.S.C.A. § 676, sub. c(1).

 Rice has filed a petition for a certificate of review of an order by the referee disallowing his claims totaling $2,545 for services alleged to have been rendered to the trustee in bankruptcy.

 The alleged services were rendered in connection with claims against the bankrupt estate.

 The petition for the certificate of review is utterly without merit. Rice's presumption in demanding $2,545 for his services is equalled only by the shocking size of the fee which he seeks.

 As to the latter, the record discloses that in connection with one disputed claim Rice seeks $2,000 for his services. As to that transaction, Rice is asking $1,500 for appearing on three days at the referee's office -- at the rate of $500 a day. Very modestly, too, he asks $100 for a "conference" with counsel for the trustee in bankruptcy; $300 for "thirty hours of study"; $50 for "correspondence" with counsel for the trustee in bankruptcy (the correspondence, incidentally, ...


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