Lewis v. Fisher

Urner, J., delivered the opinion of the Court. The order under review on this appeal provides for compensation to the appellees for their services as members of a committee appointed for the protection of the interests of bondholders of the Tolchester Beach Improvement Company. The present bondholders object to the allowance of any compensation to the committee. In support of the objection it is alleged that the committee acted in disregard of limitations upon its authority and in opposition to the interests of the bondholders.

The specific ground of this contention is that the committee, after purchasing the property of the Tolchester Beach Improvement Company at mortgage foreclosure sale, proceeded to resell it without the consent of the bondholders, and then contested their exceptions to a judicial ratification of the resale. That litigation resulted in an ⁴³ order of the Circuit Court ratifying the resale, but upon appeal to this court the order was reversed. Lewis v. Fisher, 172 Md. 201 , 191 A. 250 . The appellate ruling was that the agreement for the appointment of the committee did not authorize it to make the sales which it had reported.

After the case was remanded, a formal plan of reorganization was proposed by the bondholders, approved by the committee, submitted to the court, and eventually made operative. The plan included the following provisions: “All proceedings under this plan shall be subject to the further order of the Circuit Court, and the Committee shall be authorized to do all things and to take all such action, subject to the approval of the Circuit Court, as may be necessary or convenient to carry out the details of the plan herein submitted. The expenses and compensation of the Committee shall be subject to the appoval of the Circuit Court which shall have power to enforce the payment thereof by imposing a lien upon the property or by decree against Tolch.ester Lines, Inc., or in such manner as may be appropriate.” When the order appealed from was passed on August 4th, 1937, the committee had been serving for a period of two and a half years. Each of the three members of the committee was allowed by the order, in full compensation for his services, the sum of $1,250.

In the brief of the appellants there is no suggestion that the work of the committee would not ordinarily be worth the amounts provided by the order, but it is contended that the committee’s right to compensation has been wholly forfeited by its effort to sustain, against the desire of a majority of the bondholders, the reported resales of the corporate property in which they were interested. It is first to be noted that, after the litigation over the resales had been finally terminated, on appeal, in favor of the bondholders, the plan of reorganization proposed by them contemplated, in the provision we have quoted, that the committee would receive such compensation as the Circuit Court should approve. But apart from that ⁴⁴ consideration, we have not found in the record a sufficient reason to conclude that the committee should be denied any compensation whatsoever for the long, active, and difficult services which they are proved, without dispute, to have rendered. The resales which the committee contracted to make, subject to ratification by the court, were for a total amount approximately equal to the face value of the bonds, and largely in excess of their previous market value.

Prior to that time various plans of reorganization had been proposed and found unsatisfactory. It appears to have been the honest belief of the committee that the interests of the bondholders would be best served by an advantageous sale of the property by which the bonds were secured. There can be no doubt as to the honesty of their belief as laymen, having the advice of capable counsel, the allowance of whose fee is not questioned, that they were authorized by the terms of the agreement, prescribing their powers and duties, to make the sales to which, when reported, the appellants filed exceptions. In that view they were sustained by the decision of the Circuit Court.

When the committee made the sales referred to, the appellants had not yet acquired any right to intervene as exceptants. It was nearly a month after the sales were contracted to be made that the appellants first became interested in the bonds as purchasers of the deposit certificates by which the bonds were represented. At the time of their intervention for the purpose of filing exceptions to the committee’s report of sales, they held certificates for only two-thirds of the bond issue. The other bondowners do not appear to have objected to the committee’s policy.

It was a legitimate question as to whether or not it was the duty of the committee to abide by the contracts of sale notwithstanding the objections which the appellants interposed upon the basis of their subsequently