that an indenture trustee closely affiliated with a committee shares the committee's conflicts of interest.

In this case the indenture trustee was also indenture trustee for neighboring apartment properties and dominated the committees representing the bonds of those other companies. Two members of respondent committee were also members of one of those other committees. There was no unitary plan of reorganization for these several properties. But there were dealings between them by their common representatives-dealings attacked by petitioner as unfair to the instant company and defended by respondents as fair.

That is not all.

Counsel to the committee was not only counsel to the indenture trustee in this reorganization; it was also counsel to the indenture trustee and the committees for the neighboring properties. And respondent-counsel had acted as general counsel for one of the two principal underwriters 10 during the fianancing of the property here involved; and that underwriter's prospectus was under attack in these proceedings.11

Under Ch. X of the Chandler Act the bankruptcy court has plenary power to review all fees and expenses in connection with the reorganization from whatever source they may be payable.12 Reasonable compensation for

10

11

'Chicago Trust Co., which was also the original indenture trustee. Respondent-counsel denies that it acted as counsel in that particular transaction or knew of the alleged misrepresentation in the prospectus at the time, and asserts that it did not learn of the contents of the circular until a question was raised concerning it during this reorganization proceeding. We accept its version of the facts.

"Sec. 221 (4) provides: "The judge shall confirm a plan if satisfied that . . . all payments made or promised by the debtor or by a corporation issuing securities or acquiring property under the plan or by any other person, for services and for costs and expenses in, or in connection with, the proceeding or in connection with the plan

Opinion of the Court.

13

312 U.S.

services rendered may be allowed.1 The claimant, however, has the burden of proving their worth. Furthermore, "reasonable compensation for services rendered" necessarily implies loyal and disinterested service in the interest of those for whom the claimant purported to act. Amercian United Mutual Life Ins. Co. v. City of Avon Park, 311 U. S. 138. Where a claimant, who represented members of the investing public, was serving more than one master or was subject to conflicting interests, he should be denied compensation. It is no answer to say that fraud or unfairness were not shown to have resulted. Cf. Jackson v. Smith, 254 U. S. 586, 589. The principle enunciated by Chief Justice Taft in a case involving a contract to split fees in violation of the bankruptcy rules, is apposite here: "What is struck at in the refusal to enforce contracts of this kind is not only actual evil results but their tendency to evil in other cases." Weil v. Neary, 278 U. S. 160, 173. Furthermore, the incidence of a particular conflict of interest can seldom be measured with any degree of certainty. The bankruptcy court need not speculate as to whether the result of the conflict was to delay action where speed was essential, to close the record of past transactions where publicity and investigation were needed, to compromise claims by inattention where vigilant assertion was necessary, or otherwise to dilute the undivided loyalty owed to those whom the claimant purported to represent. Where an actual conflict of interest exists, no more need be shown in this type of case to support a denial of compensation.

Protective committees, as well as indenture trustees, are fiduciaries. Bullard v. City of Cisco, 290 U. S. 179;

and incident to the reorganization, have been fully disclosed to the judge and are reasonable or, if to be fixed after confirmation of the plan, will be subject to the approval of the judge; ...

"Indenture trustees, committees, and their attorneys are included among those to whom the compensation may be allowed. § 242.

Jewett v. Commonwealth Bond Corp., 241 App. Div. 131; 271 N. Y. S. 522; Bergelt v. Roberts, 144 Misc. 832; 258 N. Y. S. 905, aff'd 236 App. Div. 777; 258 N. Y. S. 1086; Carter v. First Nat'l Bank, 128 Md. 581; 98 A. 77. Cf. Nichol v. Sensenbrenner, 220 Wis. 165; 263 N. W. 650. A fiduciary who represents security holders in a reorganization may not perfect his claim to compensation by insisting that, although he had conflicting interests, he served his several masters equally well or that his primary loyalty was not weakened by the pull of his secondary one. Only strict adherence to these equitable principles can keep the standard of conduct for fiduciaries "at a level higher than that trodden by the crowd." See Mr. Justice Cardozo in Meinhard v. Salmon, 249 N. Y. 458, 464; 164 N. E. 545.

The findings of the District Court that these claimants represented conflicting interests are amply supported by the evidence.

Some discrimination, however, is necessary in applying the foregoing rule to claims for expenses. Reimbursement for "proper costs and expenses incurred in connection with the administration" of the estate may be allowed.1 The rule disallowing compensation because of conflicting interests may be equally effective to bar recovery of the expenditures made by a claimant subject to conflicting interests. Plainly expenditures are not "proper" within the meaning of the Act where the claimant cannot show that they were made in furtherance of a project exclusively devoted to the interests of those whom the claimant purported to represent. On the other hand, those expenditures normally should be allowed which have clearly benefited the estate. Scott on Trusts (1939), § 245.1. Thus where taxes have been paid, needful repairs or additions to the property have been made, or the like, equity does not permit the estate

to retain those benefits without paying for them. Such classification of expenses, at times difficult, rests in the sound discretion of the bankruptcy court. The District Court drew no such distinction but proceeded on the theory that reimbursement for all expenses must be denied. But it is not apparent that all of them fall within the prohibited category.

The other points raised by petitioner are so plainly without merit that they do not warrant mention.

For the reasons stated we reverse the judgment of the Circuit Court of Appeals and remand the cause to the District Court for further proceedings in conformity with this opinion.

Reversed.

MARYLAND CASUALTY CO. v. PACIFIC COAL & OIL CO. ET AL.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SIXTH CIRCUIT.

No. 194. Argued January 9, 1941-Decided February 3, 1941.

1. To support a suit under the Declaratory Judgment Act, the facts must show a substantial controversy, real and immediate between parties having adverse legal interests. P. 273.

2. An insurer issued a policy covering liability of the insured for personal injuries caused by automobiles "hired by the insured." Under the policy and the state law, an injured party could keep the policy from lapsing by serving notice of the accident, etc., if the insured failed to do so; and, if successful in obtaining judgment against the insured, could enforce it by supplementary proceedings against the insurer. The insured having been sued in the state court for personal injuries sustained in a collision between a truck driven by an employee of the insured and the automobile of the claimant, the insurer brought suit in the federal court against the insured and the claimant, alleging that the truck was not "hired by the insured" and contending that it was not bound to defend the state court suit or to indemnify the insured. Held:

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Opinion of the Court.

(1) That diverse citizenship and jurisdictional amount being present, the insurer's suit involved an "actual controversy" cognizable under the Declaratory Judgment Act. P. 273.

(2) An injunction to restrain the proceedings in the state court is prohibited by § 265 of the Judicial Code. P. 274. 111 F. 2d 214, reversed.

CERTIORARI, 311 U. S. 625, to review the affirmance of a decree in a suit for a declaratory judgment.

Mr. Parker Fulton, with whom Mr. Paca Oberlin was on the brief, for petitioner.

No appearance for respondents.

MR. JUSTICE MURPHY delivered the opinion of the Court.

Petitioner issued a conventional liability policy to the insured, the Pacific Coal & Oil Co., in which it agreed to indemnify the insured for any sums the latter might be required to pay to third parties for injuries to person and property caused by automobiles hired by the insured. Petitioner also agreed that it would defend any action covered by the policy which was brought against the insured to recover damages for such injuries.

While the policy was in force, a collision occurred between an automobile driven by respondent Orteca and a truck driven by an employee of the insured. Orteca brought an action in an Ohio state court against the insured to recover damages resulting from injuries sustained in this collision. Apparently this action has not proceeded to judgment.

Petitioner then brought this action against the insured and Orteca. Its complaint set forth the facts detailed above and further alleged that at the time of the collision the employee of the insured was driving a truck sold to him by the insured on a conditional sales contract.