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the courts in protecting debtors' estates from excessive charges and at the same time in equitably allocating compensation on the basis of the claimants' contributions to the administration of estates and the formulation of plans. A summary of interesting developments follows:

In Mason Mortgage & Investment Corp.,19 the trustee and his attorney filed applications for interim fees calculated on the basis of a percentage of their estimate of the value of their services for the total time devoted to the debtor's affairs. The Court held that it was impossible to determine what the value of any services rendered might be until the proceeding had been completed, and that any interim award based upon a percentage of a hypothetical amount assumed by an applicant to be the reasonable or full value of the services rendered to date would be improper.

In the Chamber of Commerce of the City of Newark,20 a proceeding in which the Commission was not participating, the Commission was granted permission to file a memorandum and present oral argument, amicus curiae, to oppose the petition of a firm of attorneys for the debtor which sought the Court's approval of a prior transfer of the debtor's bonds by a partner of the firm, as well as to oppose the firm's petition for allowance for legal services. During the Chapter X proceeding, the partner, who was co-executor of his father's will, and a beneficiary under the will, had sold $2,000 of the debtor's bonds which his father had owned. The Commission urged, and the Court agreed, that such sale was an absolute bar to compensation under Section 249.

In Selected Investments Corporation,21 an attorney who had represented the debtor in the Chapter X proceeding and the debtor's two principal officers in a pending action by the trustees against them for an accounting, 22 requested an allowance of $35,000. The District Court, in accordance with the Commission's recommendations, denied the request on the grounds that the attorney's services were not of benefit to the estate, and that he had represented conflicting interests. After obtaining leave to appeal, 23 the attorney later moved to dismiss his appeal, stating that he had accepted a $4,000 settlement from the reorganized debtor. The Commission objected to the settlement on

19 In the Matter of Mason Mortgage & Investment Corp., et al. (D.C. DC., Nos. 98-60 through 101-60).

* In the Matter of Chamber of Commerce of the City of Newark, New Jersey (D.C. N.J. No. B-73--60).

11 In the matter of Selected Investments Corporation (W.D. Okla., No. 10680).

22 The trustee eventually recovered a judgment in excess of $12,000,000. In addition, one of the clients was convicted of a violation of Section 17 of the Securities Act of 1933, See Burns v. U.8., 286 F. 2d 152 (C.A. 10, 1960).

* B. H. Carey v. Selected Investment Corporation (C.A. 10, No. 6804).

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the ground that all compensation was subject to approval by the reorganization court. Upon remand, the District Court again decided that no compensation should be paid. The attorney's appeal from such action was pending at the close of the fiscal year.

In Inland Gas Corporation, 24 the Commission objected to the application by a member of a committee for reimbursement of advances

a to the committee attorney, because the committee member had traded in the securities of one of the debtors in reorganization. The Commission argued that in Chapter X a committee and its attorney each had autonomous standing to apply for compensation for services rendered and for reimbursement of expenses incidental to such services, and that in seeking recovery from the estate for advances to his attorney, the committee member was requesting in effect to be subrogated to the attorney's rights. The Commission further argued that subrogation, as an equitable remedy, should not be permitted in this case in view of the substantial trading by the committee member. The District Court agreed and the Court of Appeals affirmed, stating that "we do not think the District Judge erred in enforcing the public policy inherent in the provisions of Section 219 of the Act” and in refusing to permit subrogation. 25

Appellant also argued that the Commission was estopped from reversing its own prior recommedation that reimbursement be allowed. The Court of Appeals held that the doctrine of equitable estoppel was not applicable to the Commission's correction of a mistake of law and that in any event the Commission's prior views were not binding upon the district judge. The Court also noted the statement of the Commission that it “necessarily acts in the light of its continuing experience and that it would be remiss in its duties if ... it failed to advise the District Court of what it believes to be the correct view of the facts and law ..." because at an earlier stage in the proceeding "it may have expressed a different view."

INTERVENTION IN CHAPTER XI PROCEEDINGS Chapter XI of the Bankruptcy Act provides a procedure by which debtors can effect arrangements with respect to their unsecured debts under court supervision. Where a proceeding is brought under that chapter but the facts indicate that it should have been brought under Chapter X, Section 328 of Chapter XI authorizes the Commission to make application to the court to dismiss the Chapter XI proceeding unless the debtor's petition is amended to comply with the requirements of Chapter X, or a creditors' petition under Chapter X is filed.

2 In the Matter of Inland Gas Corporation, et al. (D. Ky., No. 989-B). * Green Committee v. Williamson, 309 F. 2d 176 (C.A. 6, 1962).

Davega Stores Corporation filed a petition for an arrangement under Chapter XI of the Bankruptcy Act in February 1962.26 This company is engaged in the sale of sporting goods, photographic equipment and electrical appliances through a chain of 25 retail stores in the New York City area and concessions in discount centers in two other states. Davega's convertible debentures and its preferred and common stocks are publicly held and listed on the American Stock Exchange. The debtor had suffered substantial operating losses and had undergone several changes in management since 1959, and several attempts had been made to effect a merger or other financial arrangements with outside interests. In March 1962, the Commission filed a motion under Section 328 to dismiss the Chapter XI petition, and after lengthy hearings the motion was granted by the Court. Thereafter, the indenture trustee for the convertible debentures filed an involuntary Chapter X petition, the Chapter X petition was approved, and a disinterested trustee was appointed.

In Cal-West Aviation, Inc.,27 the debtor, which owns and operates an airport and associated facilities in San Mateo County, California, filed a petition for an arrangement under Chapter XI. The Commission moved to dismiss the petition, urging that a thorough reorganization and an independent investigation into the acts of former management were necessary and that Chapter XI did not provide adequate means for such a reorganization or proper safeguards for the interests of the debtor's 2,300 public investors. The debtor's amended Chapter X petition was thereafter approved by the Court.

Los Angeles Trust Deed & Mortgage Exchange 28 was in the business of purchasing second trust deed notes which it sold to investors in the form of "investment contracts.” It was the subject of an injunctive action brought by the Commission and a receiver was appointed. An involuntary petition in bankruptcy was filed in November 1960, an order of adjudication was entered in December 1960, and thereafter the debtor filed a Chapter XI petition. At the time the petition was filed, approximately $40,000,000 had been invested by some 10,000 investors in second deeds of trust. All the stock of the debtor was held by former officers.

In November 1961, the Commission filed a motion pursuant to Section 328, stressing the need for an independent investigation in order to protect the public investors and the fact that Chapter XI made no provision for such investigation. The District Court denied

* In the Matter of Davega Stores Corporation (S.D. N.Y., No. 62 B 147). * In the matter of Cal-West Aviation Inc. (N.D, Calif., No. 62708).

» In the Matter of L08 Angeles Trust Deed & Mortgage Exchange (S.D. Calif., No. 118, 178-Y).

the motion, and the Commission appealed. While the appeal was pending, the Chapter XI proceeding was dismissed and the bankruptcy proceeding was reinstated, thus rendering the appeal moot.

PUBLICATION OF BAR DATES

Substantial sums could be lost by public investors who fail to exchange outstanding securities of corporations which have been reorganized in recent years for new securities or cash distributable pursuant to the plans for reorganization of such corporations. To facilitate these exchanges, the Commission has published a list of securities of 125 corporations which have been reorganized, informing the public as to the cut-off or "bar date" after which the right to exchange such securities for cash or new securities will be lost.29

29 "Securities Required To Be Exchanged For Cash Or New Securities," Corporate Re organization Releases Nos. 163, 164, 172 (1962).

PART VIII

ADMINISTRATION OF THE TRUST INDENTURE ACT OF

1939

The Trust Indenture Act of 1939 requires that bonds, notes, debentures and similar securities publicly offered for sale, except as specifically exempted by the Act, be issued under an indenture which meets the requirements of the Act and has been duly qualified with the Commission. The Act requires that indentures to be qualified include specified provisions which provide means by which the rights of holders of securities issued under such indentures may be protected and enforced. These provisions relate to designated standards of eligibility and qualification of the corporate trustee to provide reasonable financial responsibility and to minimize conflicting interests. The Act outlaws exculpatory provisions formerly used to eliminate all liability of the indenture trustee and imposes on the trustee, after default, the duty to use the same degree of care and skill “in the exercise of the rights and powers invested in it by the indenture” as a prudent man would use in the conduct of his own affairs.

The provisions of the Trust Indenture Act are closely integrated with the requirements of the Securities Act. Registration pursuant to the Securities Act of securities to be issued under a trust indenture subject to the Trust Indenture Act is not permitted to become effective unless the indenture conforms to the requirements of the latter Act, and necessary information as to the trustee and the indenture must be contained in the registration statement. In the case of securities issued in exchange for other securities of the same issuer and securities issued under a plan approved by a court or other proper authority which, although exempted from the registration requirements of the Securities Act, are not exempted from the requirements of the Trust Indenture Act, the obligor must file an application for the qualification of the indenture, including a statement of the required information concerning the eligibility and qualification of the trustee.

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