[289 U.S. 472, 473] Messrs. Samuel Rubin and David J. Colton, both of New York City, for petitioner.
Mr. George C. Levin, of New York City, for respondent.
Mr. Chief Justice HUGHES delivered the opinion of the Court.
By an order made by a deferee in bankruptcy under section 60d of the Bankruptcy Act (11 U.S.C. 96(d), 11 USCA 96(d), appellants were directed to turn over to the trustee in bankruptcy the sum of $2,000, which was part of an amount paid to them by the bankrupt corporation for legal serv- [289 U.S. 472, 474] ices rendered shortly before the filing of an involuntary petition. The order was sustained by the District Court (In re David Bell Scarves, Inc., 52 F.(2d) 755) and by the Circuit Court of Appeals. 61 F.(2d) 771. This Court granted certiorari. Conrad, Rubin & Lesser v. Pender, 289 U.S. 715 , 53 S.Ct. 526, 77 L.Ed. --.
The only question presented is raised by the appellants' challenge of the jurisdiction of the referee to re-examine the payment under section 60d. The payment was made on November 5, 1930, and the petition in bankruptcy was filed twelve days later. There is no room for controversy as to the facts which are thus stated by the Court of Appeals: The corporation was in financial difficulties and unable to meet its maturing obligations. Prior to retaining the appellants, it had engaged another attorney to negotiate a settlement with its creditors, and a meeting with some of its creditors had been held. Apparently the appellants wee retained to supplement the efforts of that attorney, to whom $750 had already been paid upon a promised fee of $2,000. The testimony of one of the appellants, given at an examination under section 21a (11 USCA 44(a), was to the effect that he was to negotiate with creditors for a 50 per cent. cash settlement and was to assist the corporation in hypothecating its accounts receivable in order to obtain the necessary money to carry out such a settlement. His affidavit, submitted in opposition to the referee's jurisdiction, stated that the most extreme course which was within the contemplation of himself and David Bell, bankrupt's president, was continuance of the business under an equity receivership, although that course was not contemplated if the business could be continued under the supervision of a a committee of creditors or of a representative of the New York Creditors' Adjustment Bureau, Inc. It also appeared that within two weeks prior to November 5th, when the appellants' retainer was paid, David Bell had withdrawn [289 U.S. 472, 475] $1,500 from the corporation, and his brother, an employee, had withdrawn $ 750. The cash resources of the corporation were so low that appellants' retainer could not be paid until a sale of merchandise was made, and the purchaser's check for $2,500 was then indorsed to appellants.
The District Court concluded that the thought of bankruptcy was the impelling motive of the debtor corporation when its president retained appellants. And the Court of Appeals was of the opinion that in these circumstances the payment ws made 'in contemplation' of bankruptcy within the meaning of section 60d.