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IN RE INTERNATIONAL POWER SECS. CORP.

April 24, 1953

In re INTERNATIONAL POWER SECURITIES CORP


The opinion of the court was delivered by: SMITH

This is a corporate reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. The matter if before the Court at this time on the petitions for allowances filed herein pursuant to sections 241 and 242 of the Act, 11 U.S.C.A. §§ 641 and 642. There are twenty-seven separate petitions for allowances, most of them voluminous, and therefore a detailed discussion of the claims for compensation would seem impractical. However, a brief discussion of the principles by which we have been guided in the evaluation of the services rendered by the petitioners seems appropriate.

The representatives of the Securities and Exchange Commission have given careful consideration to the petitions for allowances and have submitted their report thereon in open court. Their recommendations were of assistance to the Court in the evaluation of the services rendered by the respective petitioners, and we have therefore accorded these recommendations the weight to which they are entitled under the law. Finn v. Childs Co., 2 Cir., 181 F.2d 431, 437 et seq; In re Philadelphia & Reading Coal & Iron Co., D.C., 61 F.Supp. 120, 124; See also In re Midland United Co., D.C., 64 F.Supp. 399. We are fully aware that these recommendations are not conclusive, but it is our opinion that they should be given great weight, especially where, as here, their report indicates a careful study of the petitions for allowances and a reasonable evaluation of the services rendered by the respective petitioners. Ibid.

 The necessary and reasonable limits of this opinion will not permit an adequate recital of the long history of the proceedings or a complete discussion of the many problems attendant upon the formulation of an equitable and feasible plan of reorganization. There were more than 800 petitions, orders, reports, proofs of service, and other documents filed in the proceedings. The hearings on the plan of reorganization, and the amendments thereto, consumed many days and resulted in a record of approximately 2,000 pages. The problems presented were numerous and at times were very complex.

 When these proceedings were initiated the principal assets of the debtor were: three mortgages on the utility properties of Societa Edison of Milan, Italy, hereinafter identified as the Edison Company; domestic securities of the approximate value of $ 1,800,000; shares of stock in the Edison Company; and a small amount of cash. The mortgages were held by the Bankers Trust Company, the indenture trustee, as security for three separate bond issues. The Edison Company defaulted on the mortgages and as a consequence the debtor was unable to meet the payments due on the outstanding bonds, which represented the principal indebtedness of the debtor, except for its indebtedness on preferred stock.

 The laws enacted by the Empire of Italy, and thereafter by the Republic of Italy, to protect its economy during the war and thereafter, necessarily prevented not only the remittances of payments due on the mortgages but also the submission of an equitable proposal of settlement essential to the formulation of a plan of reorganization. The situation was further complicated by certain of the regulations necessarily adopted by our Department of State. When these difficulties were overcome the Edison Company and the Italian Public Utility Credit Institute submitted a joint proposal of settlement upon which the amended plan of reorganization was based. This plan of reorganization was approved by the Court as fair, equitable and feasible, after extensive hearings, and was later confirmed.

 These proceedings were initiated on February 24, 1941, and except for matters incidental to the consummation of the plan of reorganization, were concluded by- : confirmation of an equitable and feasible plan of reorganization on June 28, 1951. This long delay, which was unavoidable, was not detrimental to the estate and ultimately proved advantageous not only to the estate but also to the bondholders and preferred stockholders. The advantages may be briefly summarized as follows: first, the realization of income on the domestic securities; second, the sale of these securities when the market was most favorable; third, the realization of income on investments in government bonds; and fourth, the approval and adoption, after the termination of hostilities, of a more favorable proposal of settlement. The estate was efficiently and competently administered and the proceedings were concededly successful.

 It should be observed that prospective plans of reorganization which were suggested and considered earlier in the proceedings were abandoned because it appeared that they could not have been effected without great sacrifice, particularly of the interests of the preferred stockholders. The delay therefore contributed to the ultimate achievement of a more equitable result.

 Applications for Allowances under Section 241 of the Act.

 The petitions for allowances filed herein by the trustee, attorneys for the trustee, attorneys for the debtor, and special attorneys engaged by the trustee with permission of the Court, are governed by section 241 of the Act, U.S.C.A. § 641. These petitioners are entitled to 'reasonable compensation for services rendered' and, therefore, in an endeavor to fairly evaluate their services we have considered the following factors: the nature and extent of the services rendered; the complexities of the many problems presented; the consequent responsibility undertaken; the experience required and the degree of proficiency exercised; and the time necessarily consumed by the respective petitioners in the discharge of their duties. Cf. Newman v. Ambassador Apartments, 3 Cir., 101 F.2d 307; Steere v. Baldwin Locomotive Works, 3 Cir., 98 F.2d 889, and other cases hereinafter cited. We have given consideration also to the ability of the debtor to meet the claims for compensation.

 Attorneys for Debtor.

 Burke, Sheridan and Hourigan, attorneys for the debtor, have requested an allowance of $ 750 and reimbursement for costs in the amount of $ 100. This request is fair and reasonable, and the Securities and Exchange Commission has recommended that it be granted. These petitioners will therefore be granted an allowance of $ 750 and reimbursement for costs in the amount of $ 100.

 John J. Murphy, the trustee, has requested an allowance of $ 175,000, which includes the ad interim allowances heretofore granted. This petitioner administered the estate efficiently and with competence, and he actively participated in the formulation of an acceptable plan of reorganization. His administration of the portfolio of domestic securities required competence and a knowledge of market conditions, and it cannot be doubted that his advice was of assistance to the Court and beneficial not only to the estate but also to the security holders.

 However, many of his duties were routine, to wit: the preparation of financial reports, income tax returns, etc.; the publication and distribution of reports, notices, etc.; the supervision of ad interim payments to bondholders; the supervision of extensive correspondence; and his attendance at the many hearing and conferences. There were times when even these routine tasks were not too burdensome, particularly during the years of the war and for a short time thereafter, when the proceedings were comparatively and unavoidable inactive.

 It is our opinion that the fair and reasonable value of the services rendered and to be rendered by the Trustee is $ 84,000, and therefore an allowance in said amount will be granted. We are fully aware that a competent executive would well command higher compensation in private business, but it must be remembered that a trustee serves in a quasi public capacity and he cannot expect to be compensated on the same basis. The allowance here made the Trustee is intended to include the ad interim payments heretofore made to him.

 Attorneys for Trustee.

 Milton, McNulty and Augelli, attorneys for the trustee, have requested an allowance of $ 200,000, which includes the ad interim allowances heretofore granted. These petitioners represented the trustee since March 6, 1941, and the nature and extent of the services rendered are specified in a schedule of 172 pages annexed to their printed petition. Their services were of the nature usually rendered by the attorney for the debtor in proceedings of this character, and they included: extensive inquiry into the affairs of the debtor; the preparation of numerous pleadings, orders, notices and other documents; the preparation and trial of litigation; participation in the preliminary negotiations with the representatives of the Italian Public Utility Credit Institute and the Edison Company, both here and in Italy; participation in many conferences with the representatives of security holders and others in New York, Boston and Washington; attendance at and participation in numerous hearings, including the hearings on the plan of reorganization; extensive research relevant to the many problems which arose both during the course of administration and in the formulation of the plan of reorganization; and, an active participation in the formulation of the plan of reorganization which was ultimately approved and confirmed.

 The petition discloses that more than 7,000 hours were expended by senior partners of the firm and their associates; of these hours two-thirds are allocated to services performed by partners, and one-third to services performed by associates. We would ordinarily regard as excessive and unnecessary much of the time expended by senior partners, but we recognize that in this proceeding there were many unusual and complicated problems which, in our opinion, required their personal attention.

 It is our opinion that the fair and reasonable value of the services rendered and to be rendered by the attorneys for the trustee is $ 150,000, and that costs incurred in the amount of $ 1,960 are properly reimbursable. The petitioners will therefore be allowed said amounts. The allowance here made is intended to include the ad interim payments heretofore made the petitioners. This allowance is consistent with the recommendation of the Securities and Exchange Commission.

 Special Attorneys.

 There is no real dispute as to the value of the services rendered by these petitioners although their claim for compensation is in excess of that recommended by the Securities and Exchange Commission. They have, however, acquiesced in the said recommendation. The fair and reasonable value of the services rendered by these petitioners if $ 9,000, and the cost incurred in the amount of $ 500 are properly reimbursable. An allowance in the total of these amounts will therefore be granted.

 Angelo P. Serini, special attorney for the trustee, was engaged to make a study of the Italian law. This petitioner is a competent lawyer who has a comprehensive knowledge of both Italian and local law. His services included the study and analysis of the proposal of settlement and other documents; the study and analysis of the proposed plan of reorganization in the light of the Italian law; the preparation of memoranda; the preparation of legal documents essential to the consummation of the plan of reorganization; and participation in several conferences.

 A fair appraisal of the value of his services requires a consideration of his competence and unusual ability; if we were to evaluate his services solely on the basis of time expended, his compensation would be clearly inadequate. The fair and reasonable value of the services rendered by this petitioner is $ 12,500, and the necessary costs incurred in the amount of $ 76.97 are properly reimbursable. An allowance in the total of these amounts will therefore be granted.

 Serafino C. Irelli, an attorney in Italy, was specially appointed by the Court to aid the trustee in the consummation of the plan of reorganization. He acted as agent of the trustee, and his duties were ministerial in nature. The fair and reasonable value of the services rendered by him is $ 1,000, and the necessary costs incurred in the amount of $ 31 are properly reimbursable. An allowance in the total of these amounts will be granted this applicant.

 Attorney for Indenture Trustee and Exchange Agent.

 Engel, Judge, Miller and Sterling have requested an allowance of $ 4,500 for special services rendered the Colonial Trust Company, indenture trustee and exchange agent under the plan of reorganization. These attorneys were engaged, with the permission of the Court, to perform certain services which were admittedly not contemplated at the time the Colonial Trust Company was appointed, and it is here conceded that they are entitled to reasonable compensation for these services. The Securities and Exchange Commission has recommended an allowance of $ 2,000, which in our opinion represents fair and reasonable compensation. These petitioners have also asserted a claim ...


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