SNEED, Circuit Judge:
Appellant Chester Salomon, trustee in bankruptcy of Robin International, Inc., challenges an order of the bankruptcy court. The court awarded interim counsel fees to Donald M. Logan from a fund accumulated by International Environmental Dynamics, Inc., a debtor and a debtor in possession in a case arising under Chapter XI of the former Bankruptcy Act. Robin International, Inc. claims an interest in the monies awarded to Logan and contends that the award of fees imperils that interest.
The district court dismissed the appeal from the bankruptcy court's order on alternative grounds. We reverse the district court's first alternative holding that appellant lacks standing to challenge the order. We affirm, however, the district court's second alternative holding that the bankruptcy court did not abuse its discretion in awarding fees to Logan.
This case involves a complex and extended bankruptcy proceeding instituted by International Environmental Dynamics, Inc. (IED) in 1970 under Chapter XI of the Bankruptcy Act. 11 U.S.C. § 701 et seq. (1976) (repealed 1978). As part of the reorganization proposal, IED's creditors were divided into two groups, the Rogers creditors and the Anstey creditors. The plan also separated the business affairs of IED as debtor in possession from the affairs of IED as a corporate entity. In 1977 and 1978, the debtor in possession received monetary advances from the Anstey and Rogers creditors and from corporate IED. These advances were used to protect IED's primary asset, a partially developed business property, from foreclosure for nonpayment of local taxes.
In December 1980, the economic future of this property brightened and the bankruptcy court approved an agreement with Perini
The Perini agreement also budgeted $500,000 for payment of interim fees to counsel. In January 1981, the bankruptcy court issued orders allowing interim fees of $300,000 to the counsel for the debtor in possession and $225,000 to the counsel for the Rogers creditors. These awards depleted the amount allocated for interim fees.
On January 7, 1981, the debtor in possession moved the bankruptcy court to authorize reimbursement for sums advanced for preservation of the property by the Anstey and Rogers creditors and the corporate IED. The trustee for Robin International, Inc. (Robin) filed an answer contending that the sums attributed to corporate IED had in fact been paid by Robin.
At a hearing on February 10, 1981, Donald M. Logan, counsel for the Anstey creditors, applied for interim fees. The disbursing agent informed the court that there were other claimants to the funds held in the certificate of deposit. The court proposed an order allowing Logan $175,000 from the funds held in the certificate of deposit. At another hearing on April 6, 1981, the court heard Logan's application for fees and Robin's evidence in support of its claims. The bankruptcy court then proposed that Logan be paid fees of $175,000 from the amount held in the certificate of deposit and that Robin receive the rest without prejudice to its right to further reimbursement when other funds become available. When Robin failed to respond to the proposal, the bankruptcy court ordered Logan paid from the certificate. The bankruptcy court did not purport to rule on Robin's claims in its order allowing Logan fees.
The district court dismissed Robin's appeal from the order on alternative grounds. It held either that Robin lacked standing to appeal because it was not an aggrieved party under section 39c of the Bankruptcy Act, or that the bankruptcy court's order did not constitute an abuse of discretion.
Section 24a of the Bankruptcy Act provides our jurisdiction to decide Robin's appeal. The Bankruptcy Reform Act of 1978 (the Code) repealed section 24a and replaced it with 28 U.S.C. §§ 1293(a) and (b). The Code, however, also established a transition period between October 1, 1979 and April 1, 1984. During the transition period cases initiated under the Act are governed by the old law while newly filed bankruptcies are governed by the Code.
In relevant part, section 24a provides:
11 U.S.C. § 47(a) (1976) (repealed 1978) (emphasis added).
An order authorizing the interim award of attorneys' fees is an interlocutory order, e.g., In re Callister, 673 F.2d 305, 306-07 (10th Cir.1982) (per curiam), which order is appealable under section 24a only if it arises in "proceedings in bankruptcy," as opposed to "controversies arising in proceedings in bankruptcy." Dalton Equipment Co. v. Brown, 594 F.2d 195, 196 (9th Cir.1979).
Moreover, we reject appellee Logan's suggestion that we lack jurisdiction because this case is moot. Logan argues that In re Roberts Farms, Inc., 652 F.2d 793 (9th Cir.1981), indicates that this case is moot because Robin failed to obtain a stay of the bankruptcy court's order and the disputed funds have already been paid to Logan.
Neither of these grounds for our holding in Roberts Farms compels a finding of mootness in this case. Because Logan is a party to this appeal, this court could fashion effective relief by remanding with instructions to the bankruptcy court to order the return of erroneously disbursed funds. Cf. Burbank Anti-Noise Group v. Goldschmidt, 623 F.2d 115, 116 (9th Cir.1980) (per curiam), cert. denied, 450 U.S. 965, 101 S.Ct. 1481, 67 L.Ed.2d 614 (1981). Nor would it be inequitable to hear the merits of Robin's appeal. Logan has known since 1981 that Robin contests the bankruptcy court's order that he be paid from the certificate of deposit. We therefore conclude that this case is not moot and we have jurisdiction to hear Robin's appeal.
The district court erred in concluding that Robin lacked standing because it was not an aggrieved person within the meaning of section 39c of the Act. Section 39c permits appeal by a "person aggrieved by an order of a referee." 11 U.S.C. § 67(c) (1976) (repealed 1978). To have standing to appeal, Robin must show that it was "directly and adversely affected pecuniarily by the order of the bankruptcy court." In re Fondiller, 707 F.2d 441, 442 (9th Cir.1983).
Klein v. Rancho Montana de Oro, Inc., 263 F.2d 764 (9th Cir.1959), is apposite. In Klein, the court suggested that an order disposing of assets from which a claimant seeks to be paid "adversely affects" that claimant so as to confer standing to challenge the order. See id. at 771-72. It was unnecessary for the court to so hold, however, because there were ample additional funds from which those seeking review of the order could be paid. See id. at 772.
In this case we adopt the suggestion in Klein and hold that in a case involving competing claims to a limited fund, a claimant has standing to appeal an order disposing of assets from which the claimant seeks to be paid. Robin satisfies this test for standing because it asserts a claim to the funds that the bankruptcy court awarded to Logan.
PROPRIETY OF THE BANKRUPTCY COURT'S ORDER
An award of fees in a bankruptcy proceeding will not be disturbed unless the awarding court has abused its discretion or erroneously applied the law. Southwestern Media, Inc. v. Rau, 708 F.2d 419, 422 (9th Cir.1983).
Contrary to Robin's suggestion, the amounts allocated for interim counsel fees and other expenses in the Perini agreement were not cast in concrete. The Perini
Robin's claim essentially is that the bankruptcy court failed to protect its possible interest in the funds placed in the certificate of deposit. The bankruptcy court has not yet ruled on Robin's claims, but it is reasonable to expect that additional funds will be available to pay legitimate claims. In these circumstances, it cannot be said that the order of fees to Logan was an abuse of the bankruptcy court's equitable power to distribute assets.
Our holding that the bankruptcy court did not abuse its discretion reflects our understanding that the final adjustment of the interests of corporate IED, the Rogers creditors, and the Anstey creditors will assure that IED is compensated for its advances in a manner equivalent to that in which the Anstey and Rogers creditors are compensated. The record shows that the bankruptcy court has treated IED's advances as administrative expenses identical to those made by the Rogers and Anstey creditors. Corporate IED is therefore entitled to full reimbursement with interest for its contribution to the debtor in possession.
In re J.M. Wells, Inc. held that a bankrupt whose debts substantially exceed his assets does not have standing to appeal an award of attorneys' fees paid out of the estate. 575 F.2d at 330-31; see also Skelton v. Clements, 408 F.2d 353, 354 (9th Cir.), cert. denied, 394 U.S. 933, 89 S.Ct. 1202, 22 L.Ed.2d 462 (1969) (hopelessly insolvent debtor does not have standing to appeal orders affecting the size of the estate). That rule is inapplicable here because Robin does not claim standing as a surrogate for the bankrupt IED, but instead alleges that it is itself entitled to the disputed funds.