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In re Delux Court Apartments Inc.

December 10, 1936

IN RE DELUX COURT APARTMENTS, INC.; CHICAGO TITLE & TRUST CO.
v.
DELUXE COURT APARTMENTS, INC., ET AL.



Appeals from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.

Author: Briggle

Before SPARKS, Circuit Judge, and LINDLEY and BRIGGLE, District Judges.

BRIGGLE, District Judge.

This appeal propounds the direct question -- Was the federal District Court, in a proceeding under section 77B of the Bankruptcy Act, as amended, 11 U.S.C.A. § 207, at liberty to consider and fix a fee to be paid to a trustee under a mortgage lien for its services and the services of its attorneys, growing out of a foreclosure proceeding in the state court, where the state court had, more than fifteen months before the institution of the bankruptcy proceeding by its decree of foreclosure, fixed and determined such fees and made them a lien on the mortgaged premises superior to the lien of the mortgage indebtedness in accordance with the terms and provisions of such mortgage?

The corporate debtor herein, DeLuxe Court Apartments, Inc., being the owner of the equity in certain Chicago real estate, filed its petition for reorganization under section 77B of the Bankruptcy Act, as amended (11 U.S.C.A. § 207), on October 24, 1935. A plan of reorganization was presented which was afterwards, on March 2, 1936, duly confirmed by the District Court, and the validity of same is not now challenged.

Prior thereto and on July 14, 1934, a decree of foreclosure had been entered by the superior court of Cook county in a proceeding to foreclose the lien of a certain trust deed upon the property of the debtor. In and by that decree the fees of the appellant and its solicitors for services and expenses in connection with the foreclosure were fixed at $5,419, made up among other items of an allowance for trustee's fees of $1,100 and for attorneys' fees of $4,000. The decree provided that such allowances should be a lien upon the premises of the debtor superior to that of the mortgage bondholders. No appeal was prosecuted from this decree and the same remained in full force and effect at the time of the reorganization proceeding herein.

The plan of reorganization recited the foregoing allowances and, among other things, provided:

"The following prior claims shall be paid in full:

"1. (a) Claims for administration expenses and obligations incurred in the foreclosure proceedings hereinabove described, as well as all claims for administration expenses of reorganization.

"(b) Claim for taxes.

"2. (Provision for bondholders not now material.)

"3. (Provisions for stockholders not now material)."

The order of confirmation provided, among other things, as follows:

"The plan contemplates that funds will be required for the ...


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