The opinion of the court was delivered by: WALKER
In 1926, Arcturus Radio Company was incorporated under and in pursuance to the laws of the State of Delaware. The name thereof was subsequently changed to Arcturus Radio Tube Company (hereinafter referred to as "Arcturus"). The corporation engaged in the manufacture and sale of radio tubes with a factory, research laboratory, sales and general offices at 720 Frelinghuysen Avenue, Newark, New Jersey.
On December 1, 1937, a special meeting of the Board of Directors of said corporation was held and authorization given for the filing of a petition for reorganization under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. The petition for reorganization was filed after the close of business on December 3, 1937, and on December 13, 1937, this court, by order, approved the filing of the petition and provided for the operation of the business. The debtor continued in possession to July 2, 1940 [date of appointment of trustees, under plan of reorganization (liquidation) under Chapter X, 11 U.S.C.A. § 501 et seq.]. It discontinued manufacturing radio tubes in February, 1940, but not the sale thereof.
The deficit of the company at the close of business on December 31, 1937, was $298,955.72.
In July, 1932, Arcturus had issued and outstanding 600,000 shares of no par value common stock at $3,774,000. In order to wipe out a December 31, 1931, deficit of $1,058,636.19, it, in 1932, changed its authorized stock from 600,000 shares of no par value to 1,200,000 shares with a par value of $1 each. The shareholders changed one share of old for two shares of new, and this resulted in a reduction of $2,574,000 in the capital of the company, which amount was credited to capital surplus. $1,058,636.19, the then existing deficit of the company was charged to the newly created capital surplus.
The entire capital surplus created by the stock adjustment in 1932 was entirely wiped out by December 31, 1936, and there then existed a deficit of $165,438.32. The deficit on the books of the debtor in December, 1937, at the time of filing the petition under Section 77B was as hereinbefore stated $298,955.72. It should be noted, and it has been noted, that the officers of the debtor in 1937 effective January 1, 1937, reclassified groups of fixed assets and revised the basis and rates of depreciation. As a result, the depreciation charged to operation in 1937 was $28,055.62 as compared with $50,008.81 for the year 1936, or a decrease of approximately $22,000, which decreases the loss for 1937 by that amount.
The foregoing gives a brief word picture of the financial history of the debtor up to January, 1938, when it was continued in possession by an order of this court.
The debtor in possession operating its plant during the calendar year 1938 lost $48,435.65, or approximately $4,000 per month. Had the same amount of depreciation been charged on the books for 1938 as was charged for 1936, the net loss would have aggregated approximately $70,000 for 1938.
The net loss for the year 1939 under the management of the debtor in possession was $57,487.75. If the 1936 rates of depreciation were charged the loss would have been $80,000 for the period. The net losses for the months of January and February, 1940, aggregate $51,169.66.
The total loss as shown on the books of the debtor from January 1, 1938, up to February 29, 1940, amounts to $157,093.06.
The foregoing recital is deemed necessary in order to have a clear approach to the determination of the fees to be awarded the various counsel and committees who have given of their time and efforts in this reorganization proceeding.
It was decided by the various parties in interest early in 1940, that the debtor could not continue to manufacture and sell tubes and that something be accomplished forthwith to either liquidate or work out some immediate solution, for the situation was growing worse daily. A plan was finally evolved whereby a complete liquidation of the assets of the corporation was to be accomplished in accordance with the terms and conditions finally approved by this court. An order of consummation has been entered.
Allowances and expenses have been asked of the court, and they are hereinafter more particularly set forth; objections have been made to the greater part of the fees requested.
The amount of fees to be charged against a bankrupt estate is an expense of administration subject to examination and approval of the court. In re National Department Stores, Inc., D.C., 11 F.Supp. 633, at page 637. The Court is not without instructions in making allowances. The Supreme Court has said: "Extravagant costs of administration in the winding up of estates in bankruptcy have been denounced as crying evils." Realty ...