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United States v. Code Products Corp.

decided: June 28, 1966.

UNITED STATES OF AMERICA
v.
CODE PRODUCTS CORPORATION ET AL. SALLY SHEERR, APPELLANT



Kalodner, Hastie and Smith, Circuit Judges.

Author: Kalodner

KALODNER, Circuit Judge.

Did the District Court improvidently exercise its discretion in the allowances made to the Receiver and his counsel as compensation for their services in the instant receivership proceeding?

That is the single question presented on this appeal from the Order of the District Court insofar as it awarded $10,000 and $11,000, respectively, to Francis T. Anderson, Esq., Receiver, and Walter Stein, Esq., his counsel, in addition to interim allowances of $8,000 each received in the course of the receivership.

The appellant, Sally Sheerr, held a first mortgage on 4566 Baker Street, Philadelphia, Pa., the receivership's prime asset. The District Court in its Order directed payment to her of $41,613.52 upon her claim of $83,680.00 as the mortgagee.*fn1

The sum of the appellant's position is that (1) the receivership benefited little, if any, by reason of the services of the Receiver and his counsel; (2) they duplicated their services; (3) the allowances made to the Receiver and his counsel were "excessive" in relation to the results which they accomplished and to the size of the receivership estate; and, (4) they submitted inadequate proofs as to their services.

In reply, the Receiver and his counsel urge that the record establishes that the District Court properly exercised its discretion in making the challenged allowances.

These undisputed facts may be preliminarily stated before proceeding to a discussion of the issue presented:

The instant receivership proceeding was instituted by the United States*fn2 on August 6, 1957, against the Code Products Corporation ("Code") and other defendants, to enforce federal tax liens against Code's properties, and to determine the validity and priorities of the other claims and liens against the properties. The Receiver was appointed on August 27, 1957 and his counsel on October 3, 1957.

The receivership estate consisted of four pieces of property and some machinery owned by Code. Three of the properties were sold for a total of $14,830 during the first three years of the receivership; the fourth, a factory building, at 4566 Baker Street, Philadelphia, Pa., was sold in May, 1964, for $87,000. The machinery owned by Code was sold at the same time for $1,000.

In addition to the $102,830 realized through these sales the Receiver collected $83,287 in rentals, and some miscellaneous income which swelled the total of gross receipts of the receivership to $188,246.*fn3 Of this total, $109,633 was disbursed in operating expenses and allowances to prior claimants other than the parties here; the $78,613 remaining was distributed as follows: a total of $37,000 to the Receiver and his counsel -- $18,000 and $19,000 respectively -- and $41,613 to the appellant on her first mortgage lien claim of $83,680, as set forth in note 1.

In its Opinion "Sur Petitions for Allowances", the District Court noted that "the receiver was not authorized to, and did not, carry on the business of the debtor [Code]"; the property at 4566 Baker Street "was an untenanted factory building badly in need of repairs", and "Its value at the time the receiver took possession may be taken as $60,000 to $70,000."

The allowances made to the Receiver and his counsel were premised in most part on their claimed services in connection with the problems attendant to the renting and ultimate sale of the Baker Street property.

Counsel for the Receiver in his Petition for Compensation stated that in the course of the receivership (almost seven years) he, "and his law firm, together with receiver have spent approximately 740 hours." The Receiver, in his Petition, stated that he "devoted in excess of 700 hours" and that "his counsel's activity encompasses the same general activity as that of your ...


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