Petitioner contends that since Section 206 of the Chandler Act, 11 U.S.C.A. § 606, accords creditors the right to be heard on all matters arising in a reorganization proceeding, it necessarily follows that such creditors' counsel shall be compensated out of the estate whether or not such services have benefited the estate. Such a conclusion does not follow where the conduct of petitioner and his counsel prove of no benefit to the Debtor's estate.
Where a creditor or his attorney is a volunteer, he can be compensated from the Debtor's estate only if his services contributed to the confirmation or defeat of a plan, or were beneficial to the administration of the estate. Porto Rican American Tobacco Co., 2 Cir., 117 F.2d 599, 601; In re Postal Telegraph & Cable Corp. et al., 2 Cir., 1941, 119 F.2d 861; In re Star Electric Motor Co., D.C., 67 F.Supp. 58; In re National Radiator Co., D.C., 29 F.Supp. 804; Collier on Bankruptcy, page 4560, in a construction of the language of Sec. 243.
In any event, whether the claim is considered under Section 242 or Section 243 of the Act, the services must benefit the estate if compensation is to be allowed, unless such performance is under the direction of the court. In re Postal Telegraph & Cable Corp. et al., supra; Porto Rican American Tobacco Co., supra.
It is quite reasonable to believe that Congress intended a strict construction of Section 243, since the Section involved the activity of volunteers, of whom there could be many, and whose multiplicity of plans and views, if compensated for, could fritter away the Debtor estate. A reorganization proceeding should not be diverted into a proceeding for benefit of those claiming compensation for administration. Sullivan & Cromwell v. Colorado Fuel & Iron Co., 10 Cir., 1938, 96 F.2d 219.
I must, therefore, conclude that where a creditor is a volunteer and is unable to secure majority approval of his plan presented for confirmation, said creditor must personally assume and pay any expense incurred. Sartorius et al. v. Bardo et al., 2 Cir., 1938, 95 F.2d 387.
Petitioner cannot reasonably contend that his plan contributed substantially to rejection of the initial plan proposed by the trustee, for petitioner himself avers that the plan exists in amended form; or, if I conclude that the initial plan has been rejected, petitioner's opposition thereto was only a fragment of the opposition exerted by the majority of merchandise creditors.
Were I to conclude that the plan of petitioner's counsel was beneficial to the estate, yet it is apparent that counsel acted solely for the interest of petitioner, the creditor by whom he was named to act. Even if services are beneficial to the administration of an estate, but were rendered in the sole interest of a creditor or stockholder, our courts have sustained the view that allowances may not be made for such services. Matter of Craigie Arms, Inc., supra; R.F.C. of Wash. D.C. et al. v. Herring et al., 9 Cir., 1940, 110 F.2d 320.
The claim of petitioner for reimbursement as an administrative expense of the amount paid by him to his counsel must be denied.
An appropriate Order is filed.
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