28, 1965, and more likely that it had been contemplated for a substantial period of time prior thereto. The record of its financial affairs from January 1965, as developed in the proceedings on the S.E.C. motion to dismiss the Chapter XI petition, indicate this probability.
According to the testimony of Mr. Gross, the firm of Gross and Gross intended initially to handle the contemplated reorganization proceedings. Subsequently it was decided that the matter was too complicated and Mr. Gross called Myron S. Lehman by telephone on June 1, 1965 to discuss the matter. After discussion over the telephone, Mr. Lehman recommended Ravin and Ravin as cocounsel and on that date Mr. Gross and Mr. Lehman called Nathan Ravin to discuss the matter with him. Except for the telephone conversations on June 1st, there were no legal services rendered. The three met in Englewood with officers of Imperial on June 2, 1965. A considerable period of time was spent discussing legal fees. Agreement was reached as to a joint fee of $45,000 and a check in the amount of $28,595.50 dated May 28, 1965 and payable to the order of Bristol Financial Corporation (one of the debtors) was endorsed to the order of Imperial and further endorsed by the president of Imperial to the order of "Ravin and Ravin". This check was deposited in the account of "Ravin and Ravin, Special".
The amount of this check represented the discounted proceeds of the sale of a mortgage note in the principal sum of $38,250 resulting in a net loss to Imperial of face value in the sum of $9,562.50. The transaction also included an increase in the interest rate from 6 1/2% to 8% resulting in an additional cost to Imperial of $1,633.67 over the mortgage term. Accordingly, we have a situation where, on the face of the transaction, it cost Imperial $11,196.17 in order to make legal fees in the amount of $28,595.50 available to counsel. All counsel deny any knowledge of the underlying mortgage note sale transaction by virtue of which the check in the amount of $28,595.50 was obtained. Myron S. Lehman and Nathan Ravin deny that they were aware of the fact that a check in the amount of $24,000 was received by Gross and Gross prior to the filing of the Chapter XI proceeding and, further, that they were not aware that three other checks in the amounts of $11,000, $24,000, and $15,000 had been turned over to Gross and Gross. According to them, they learned of this many months after the filing of the Chapter XI petition.
The check in the amount of $28,595.50 seems to have been intended as legal fees which Ravin and Ravin and Myron S. Lehman would share after deduction of the disbursement for filing fees. As far as can be determined from the record, it seems to have been understood that the balance of the agreed counsel fee of $45,000 would be paid by Imperial directly to Gross and Gross.
After the conferences as to legal fees and the financial state of Imperial's affairs were concluded on June 2, 1965, preparation of papers to initiate a Chapter XI proceeding began. Mr. Lehman stated that he participated with Nathan Ravin in the preparation of these papers, but it seems to this Court in the light of all of the testimony that his assistance, if any, was minimal consisting chiefly of making secretarial assistance available to Nathan Ravin. Admittedly Mr. Gross did not prepare any papers for filing. There is, however, evidence that Mr. Gross was present with Mr. Ravin in his office while papers were being prepared and that he was in the Clerk's office on June 3, 1965 when the Chapter XI petition was filed. Nathan Ravin did the actual work. His brother, Morris Ravin, who was at home ill, participated in telephone consultations.
The services rendered by each of counsel after the initial conference on June 2, 1965 are summarized in the following testimony of Nathan Ravin:
Q. Did you do any work, any further work for Imperial on June 2nd after the conference?