201 F. 762 | E.D.S.C. | 1912
This cause came on to be heard upon the application of Messrs. Willcox & Willcox for fees as counsel for the plaintiff herein and for the receivers, and also upon the application for fees of Joseph A. McCullough, Esq., heretofore appointed special master, and was heard upon these applications, the report of the standing master thereon, the testimony taken on these applications, and generally the record in the cause.
The facts appear to be as follows:
On the 7th day of March, 1908, George F. Buell presented his bill of complaint in this cause to Hon. J. C. Pritchard, United States Circuit Judge, against the Kanawha Lumber Corporation. In that he set out that he was the secretary of the defendant corporation, which owed him the sum of $187.50 on account of unpaid salary, and was also a stockholder in the corporation, being the owner of 100 shares of its capital stock, that the total liabilities of the corporation were about $133,000, and that the value of its assets was about $531,000. The bill stated that the company was involved, and could not get funds to carry on its business, and that the only way in which it could proceed and be saved as a property for .the corporation and stockholders would be by the carrying on the business by receivers appointed by this court, who could conduct its business at a profit and prevent its disintegration by being subjected to numerous actions and suits and the claims of creditors under levy and sale, and prayed that the court would appoint receivers to take charge of the assets and property of the corporation and conduct its business. On the same day the defendant, the Kanawha Lumber Corporation, presented its answer, admitting the allegations of the bill, and joining with the complainant in its prayer for relief. The attorneys for the complainant, George F. Buell, were Messrs. Willcox & Willcox, and the attorney for the Kanawha Lumber Corporation was Mr. Henry E- Davis. On presentation of the bill of complaint and the answer the Honorable J. C. Pritchard, United States Circuit Judge, made an order dated the 7th March, 1908, appointing three receivers to take possession of all the assets of the Kanawha Lumber Corporation, with power to carry on and continue its business. The bill and order were filed on March 9, 1908.' A few days afterwards, on the 10th March, 1908, Messrs. Willcox & Willcox, signing themselves as attorneys for the receivers, gave, notice to Mr. Davis as attorney for the defendant that they would apply to Judge-Pritchard at his chambers for an order authorizing the receivers, among other things, to issue receivers’ certificates to an amount not exceeding $30,000. It appears that a bill of complaint and answer of the same tenor as those in the Circuit Court for this district had been filed in the District Court of the United States for the Eastern District of Virginia, and that the notice
A certified copy of this order was by direction of the court in the order sent from the Circuit Court of the United States for the Eastern District of Virginia to, and filed in the proceedings in this court on 20th March, 1908. On the 28th July, 1908, the receivers appointed by Judge Pritchard filed a statement in the form of a balance sheet as of March 9, 1908, showing the total assets of the Kanawha Lumber' Corporation to be according to the book entries filed by them, $427,016.57. The receivers, in pursuance of the order authorizing them, issued the certificates up to the full amount of $30,000, and these certificates, with interest according to their terms to an amount aggregating for the same some $35,000, are all still due and unpaid. In September, 1908, certain petitioners, viz., D. C. Boyce, E. M. Boyce, Bettie Boyce, the Murchison National Bank, and the Charleston National Bank, filed an intervening petition in the cause to have the court direct the receivers to stop all operation, and also that the receivers appointed by the court should be removed. This petition was after-wards also joined in by the Bank of Horry, the Burroughs & Collins Company, and the Horry ITardware Company. Another petition was filed on September 19, 1908, on behalf of George E. Buell, the complainant, W. C. Lewis, Laura Lewis, and W. S. Lewis, also asking that the receivers be removed. The receivers filed their answers to the petition, and it was ordered by air order made by Judge Pritchard on September 19, 1908, that all matters and things referred to in the petition and the answer of the receivers and all issues arising thereon be referred to the Plonorable Joseph A. McCullough of Greenville, S. C., as special master, to take the testimony and report the evidence with his findings of fact thereon to the United States Circuit Court for this district. The special master took the testimony and made his report, and, the cause coming on to be heard upon the same, Judge Pritchard by an order dated April 21, 1909, allowed the receivers to continue to operate for a limited time, and refused to remove the receivers, but allowed the receiver, J. C. Causey, Jr., to resign, and appointed J. J. Britt in his place, and referred the cause back to the special master to take proof of claim and report. Later, by an order dated July 6, 1909, Judge Pritchard allowed James J. Britt to resign,,
By interim orders the sale of all.the property had been ordered, which has been made, and it appears that there are now in the hands of the receivers remaining after the payments and disbursements made by them as a total result remaining of all the sales in cash and notes respectively, $38,240.94, representing the entire assets to be administered at this date. This is subject to the payment of whatever may be the incidental and necessary costs of the court, to be paid out of this fund the claim of the Russell Wheel & Foundry Company, amounting to some $3,719, with some four years interest to be added, and the claim of the Climax Manufactory Company, amounting to some $1,050. with four years interest. It is also stated, although the record does not show, that there is some $2,000 still due upon unpaid bills of the receivers. From the fund in court, therefore, there must be first deducted in any event the total of the claims due to the Russell Wheel & Foundry Company, and the Climax Manufactory Company, viz., at least $5,000, leaving applicable to the payment of receivers’ certificates the sum of not more than $33,240.94, while the total amount due upon the receivers’ certificates with interest to date is stated to be not less than $35,000. So that, in any event, there will not be enough to pay off these certificates, with interest in full.
There is now presented to the court claims on behalf of Messrs. Willcox & Willcox, attorneys, for $7,500, and of the special master, J. A. McCullough, Esq., for compensation of $1,000, making a total of $8,500 to be deducted from this fund, which, "if taken from the fund, would leave only applicable to the receivers’ certificates the sum of $26,000, irrespective of any other incidental costs of court to be paid out of the same. The question for the court to decide now is whether these applications of Messrs. Willcox & Willcox and Joseph A. McCullough, Esq., should be allowed as payments to be made out of this fund ahead of the certificates.
The issuing of receivers’ certificates is the exercising of an extraordinary power by a court of equity, and is done for the purpose of saving and preserving property whose destruction or loss or impairment is threatened. Their issue for purposes of business operations began apparently in the issuance of receivers’ certificates for the purposes of public service corporations so as to permit them to perform their duties to the public by continuing their operation; the court holding that the performance of these public duties came before all other demands upon a public service corporation. It was therefore held by the court that in the case of a public service corporation re
1. As to the claim of Messrs. Willcox & Willcox.
It appears from the testimony that the bill of complaint was filed for the purpose, riot of enforcing claims against the corporation, but for the benefit of the corporation, by enabling receivers, if appointed for its benefit, to obtain money through the machinery of the court whereby to keep the corporation a going concern. The whole proceedings were initiated with the knowledge and consent of the officers of the corporation, and, in fact, by its officers and other stockholders for the benefit of the corporation. The testimony shows that the complainant, Buell, was .the secretary of the corporation, that he was a creditor for a very inconsiderable amount for unpaid salary, and that in filing this bill initiating these proceedings he' was acting really under the authority and by the instruction of the corporation so as to obtain the appointment of Receivers to hold the property and carry on the concern. By the appointment of these receivers the corporation and its stockholders obtained the position of having the corporation kept as a going concern out of the reach of creditors who might be inclined to enforce their debts at law, and thus enabled to use its assets to raise funds having precedence in payment over other
The court has gone carefully over the question and the circumstances of the cases in which the allowance of fees to counsel is made in equity causes, and has consulted the following cases among others: Lynch v. De Bernal, 9 Wall. 315, 19 L. Ed. 714; Hauenstein v. Lynham, 100 U. S. 483, 25 L. Ed. 628; Trustees v. Greenough, 105 U. S. 527, 26 L. Ed. 1157; Central R. R. v. Pettus, 113 U. S. 116, 5 Sup. Ct. 387, 28 L. Ed. 915; Hobbs v. McLean, 117 U. S. 567, 6 Sup. Ct. 870, 29 L. Ed. 940; Thompson v. Phenix Ins. Co., 136
The custom of allowing compensation to solicitors out of a fund in court originated as it appears in England in courts of equity, where costs as between solicitor and client would be allowed out of the fund to the solicitors of the complainant in the proceeding upon the theory that where one litigant had proceeded, and at his own expense had either created or preserved or protected a fund, and others were entitled to claim and did claim in the results of his labors, it was not fair that the person who had taken the risk and cost and expenses of litigation should bear all the costs, but that those who shared in the fruits of it should bear their fair pro rata share. This rule was eminently fair and proper. It simply went to the extent that, where meritorious results were actually achieved, that those who lay by in inaction should not be allowed to await the result, escape all expenses if the case be lost, but, if successful, share the actual benefits by receiving their portion of this success, without contributing their share of the expenses. As it would have been futile and unnecessary to subject the successful plaintiff to a suit at law against each that
Next, as to the compensation for the. services claimed by them to have been performed for the receivers appointed under the order of court. In this case, it wouldl not appear that they were in any different position essentially than that of any lawyer who acts as counsel for a man whose property is mortgaged. A man owning real estate and who has all his property mortgaged cannot give the attorneys acting for him a lien upon the proceeds of that real estate ahead of the mortgagee. The expenses of receivers, including their counsel fees, are presumed in the first instance to be paid out of the income from property in their hands. This is more especially so where they are allowed to operate the property, and carry on the business as in the present case. They will be allowed to be paid out of the principal in special cases where the services of the receiver, including those of his counsd, were procured by, or actually protected or preserved the property for, the lienholders. But, where a receiver i^ procured by
The complainant havirig come into this court and sought its relief is liable to all such costs and expenses as such complainant is by law required to pay.
Upon a proper petition or application to that effect, with which the complainant is duly served according to the practice of this court in such'intervening applications, the court will be in a position to determine whether the complainant should not be decreed to pay the reasonable value of the services of Messrs. Willcox & Willcox to the, re
This claim stands upon a very different basis from the other, inasmuch as the special master is presumed to act under the appointment of the court and for the benefit of the court in assisting it in forwarding the cause-and arriving at a decree. The special master in this case was appointed after these receivers’ certificates had been authorized to be issued, pledging all the assets for their payment. ■ He was appointed by the court originally to assist it under the issues in an intervening petition brought by D. C. Boyce and others. He was not appointed at the instance or for the benefit in any way of the holders of these receivers’ certificates. The fact is he was appointed in a manner wholly independent of the rights of the innocent holders of these certificates. He was appointed by reason of the proceedings instituted by certain stockholders of the corporation to have the receivers who had been appointed at the® instance and the solicitation of the complainant removed from office. The principal service of the special piaster was to take the testimony and report upon the issues involved in this application under the contest made by the receivers not to be removed. Under these circumstances, he stands in the same position as any other officer of the court entitled to fees as costs in a cause. The officers of the court are entitled to require the prepayment of costs and compensation before they perform their services. If they do not require payment in advance, they are entitled to have their legal costs taxed and enter up judgment against the party responsible,' or, if there is a fund in court applicable to the payment thereof, to have the court pay them direct out of the fund applicable. It does not appear to the court that there is any fund in the court applicable to the payment of the fees of Mr. McCullough as special master in this case. The fund in court is by the decrees made in this court pledged to the payment of, first, the claims of the Climax Manufactory Company and the Russell Wheel & Foundry Company, and, next, of the holders of the receivers’ certificates. From this fund can be deducted only such fees and compensation to officers of the court as are proper to be deducted as arising out of some matter germane to or affecting the issuance and liquidation and settlement of these claims and certificates as procured by the holders or by which they have been protected or benefited. The compensation of Mr. McCullough would not appear to fall within any of these categories. His services were pro-’ cured for purposes with which the holders of these certificates had nothing to do. His services were performed. The question then is, Who is responsible for his compensation? Under ordinary circumstances, the complainant is responsible for such fees and costs ás are incurred through matters arising out of .the litigation initiated by him.
But the issues under which Mr. McCullough was appointed were