1 N.Y.S. 919 | N.Y. Sup. Ct. | 1888
The controversy presented by this appeal has arisen out of the management of the Bossmore Hotel in the city of New York, and the conduct of the appellant as receiver. The business of the hotel was carried on by the firm of Hawley D. Clapp & Son. Hawley D. Clapp died on the 5th of January, 1880, leaving Bobert C. Clapp, his son, his surviving partner. He made a will and codicil, previous to his decease, by which he empowered the surviving partner to carry on the business of the hotel for the benefit of himself, and of the testator’s widow and his other children; and he appointed the surviving partner, together with Mortimer B. Clapp, another son, as the executors of his will; and letters testamentary were issued by the surrogate of the county of New York to these two executors. The business of the hotel was carried on by this surviving partner at a loss, although it bad been attended with profit during the life-time of his father, and the management of the estate by the executors was improvident and unsuccessful; and Huida H. Clapp, the plaintiff in the action, and the widow of the testator, in June, 1881, brought this action for the removal of the executors, and the appointment of a receiver of all the personal property of the testator, together with the lease, good-will, furniture, fixtures, and property of the hotel. The executors, as well as the other children of the testator, were made parties to this action, and it finally resulted in the appointment of the appellant as receiver of all and singular the personal property of which the testator died possessed, and also of the good-will, furniture, fixtures, property, and stores of the firm of Hawley D. Clapp & Son, of the Bossmore Hotel, with the power to continue the management of the hotel until such time as the court might determine, or it should be thought judicious to have the same sold, and to liquidate the accounts of the executors. This order was made on the 15th of June, 1881, and the appellant accepted the appointment, and gave the security required to make it complete. He immediately entered into the possession of the hotel, together with its furniture, fixtures, property, and stores, and continued to carry on its business as receiver, under this order, until the 16th of November, 1883, when he was induced to resign and surrender his receivership; and Henry A. Callan was, with the consent of all the parties, appointed as receiver in the place and stead of Thomas B. Band. The order by which this change was made, directed a reference to take and state the accounts of Band, and to ascertain his expenses and advancements, and the allowance to be made to him for his services while in the exercise of his authority and the discharge of his duties as receiver.
An application was made to the surrogate of the county of New York to remove the executors from their offices because of their mismanagement of the estate of the testator, and on the 19th of December, 1882, a decree was
While Bobert 0. Clapp carried on the business of the hotel, he drew from the assets and moneys of the estate the sum of $15,166.14, which he at no time refunded; and the receiver, being chargeable with and having knowledge of this overdraft, took no measures whatever to obtain this money from him. Heither did he apply to the court, at any time, for instructions as to what he should do, or whether an action should be brought against Bobert C. Clapp to recover this sum of money; but he wholly neglected it, as a matter of no interest or importance to himself in the exercise of his authority as a receiver, neither did he make any report to the court of the condition of the business of the hotel, nor any statement concerning it, until an application was made
In the course of his management, the receiver employed the same person as his attorney and counsel who had been employed by Robert C. Clapp while the business was in his hands, and who continued afterwards to be his attorney and counsel. This was not in consonance with his duty; for that requires the selection by the receiver of a person to act as his legal adviser, where that may become a necessity, who has not been identified with the legal business of either of the parties to the action. Camming v. Edgerton, 9 Bosw. 684; Warren v. Sprague, 4 Edw. Ch. 416; Edw. Rec. (2d Ed.) 110. This rule is, however, subject to the qualification that where the employment is made in good faith, with the assent of the parties, it will escape the condemnation or censure of the court. But that this counsel was so employed has certainly not been proven with any degree of probable clearness in the proceeding.
The counsel, with his family, made his home at the hotel while the business was being carried on by the receiver, and in that manner incurred an indebtedness to the receiver amounting to the sum of $2,773.49. Ho part of this was collected by the receiver, but it -was applied by his successor, together with the additional sum of $1,500, to the payment of the account for legal services of this attorney and counsel. The widow and family of Mr. Clapp also lived and boarded at the hotel during the same time. Bills were rendered to them by the receiver, but they were allowed to remain unpaid until they amounted to the sum of $12,982.55. As to these accounts, made with the receiver himself, he was at liberty to take whatever measures might have been necessary to collect them, and add the money to the business of the hotel. But that he wholly and entirely failed to do; and in this respect, as the fact has been found on ample proof, disregarded the duties and obligations of his office.
As the result of the hearing before the referee, he allowed the receiver full commissions up to the 16th of September, 1882, amounting to the sum of $9,762.62. Of this sum the receiver who succeeded the appellant paid to his predecessor the sum of $5,000, leaving, as the referee sustained his right to fees and commissions, the balance of $4,762.62 unpaid. The receiver himself, in his accounts, claimed a balance of $15,995.15; but the residue over the balance stated by the referee was denied to the receiver because of his neglect and misconduct in the management of the business of his office. When the case came before the special term, the conclusion of the referee was considered to be too liberal in favor of the receiver, and the court held that his conduct had been such as to deprive him altogether of the right to commissions by way of compensation. That decision was placed very much upon the various acts of neglect and misconduct which have already been mentioned; and it seems to be sustained by the rule of law mentioned in Stehman’s Appeal, supra, where, in the course of the decision, it was declared by the court that “compensation to trustees is allowed, in this and our sister states, as the reward of faithful execution of the trust confided.” “To compensate sloth, ignorance, reckless confusion, and procrastinating delay, by which the interests of the cestui que trust are impaired, instead of being promoted, would be to prevent the very object our system has in view in allowing compensation to trustees, by offering a premium to incapacity or dishonesty.” And Flag v. Mann, 3 Sum. 84, and In re Insurance Co., 32 Hun, 78, confirm this principle. It is
By the order appointing his successor in office, Callan was, in like manner as Rand himself had been, invested with all and singular the personal property of the testator, and of the good-will, furniture, fixtures, and stores of the Rossmore Hotel, and empowered to carry on its business. He was entitled to
The court has denied compensation to the attorney and counsel for the services rendered by him, on account of his employment by the receiver being unlawful and improper. But while he may have been delinquent in the advice given by him to the receiver, and induced him to neglect proceedings, or to take measures, which should have been adopted by him to secure the possession of the personal estate of the testator, there were services performed by him in litigations to which the receiver was a party, the fidelity and sufficiency of which have not been questioned or impeached; and for these services he ought to be compensated, subject to any loss that his own professional conduct may have produced by way of inducing carelessness, negligence, or inactivity on the part of the receiver. For the services which were necessary or valuable to the receiver, and performed by the attorney with the usual fidelity and ability of counsel, he ought to be compensated; but the compensation should not be made without proof of the nature and value of the services rendered. The evidence before the referee was altogether too general, which was given to prove the services rendered, as well as their value. Still, as the case was made to appear, he was entitled to be allowed something for the professional services rendered by him; but the allowance should not be made upon the scale, which is not uncommon in the case of receivers, that they may pay with great liberality because they are not using their own property or money to make such payments. This has become by far too common a criterion to be supported, or allowed to be followed, by the courts. What the attorney and counsel should receive is a fair remuneration for the services performed by him, and in no manner influenced by or connected with his relations with Robert 0. Clapp, for whom he was at the same time professionally acting. This will in no view include compensation for services performed in resisting the motion to discontinue the action, and for which the counsel had made a charge of $650. The referee was right in excluding that charge, and the order from which the appeal has been brought confirmed that disposition. This subject should be considered closed in the litigation, and excluded from all further consideration by the referee.
The order should be so far reversed as to direct the referee to take further proof concerning the actual value of the services of the attorney and counsel, so far as they were essential to the estate, and uninfluenced by the.relations of the attorney and counsel with Robert 0. Clapp; and also to show what loss the estate sustained by the failure of the receiver to report to the court the offers made for the purchase of the leasehold estate, for his neglect to proceed with the enforcement or collection of the testator’s claim against the Westchester property, and for the failure of the receiver to obtain the personal estate in the hands or possession of one or both of the executors, and whether any, and if so what, loss or injury has been sustained by the receiver’s neglect to proceed to obtain liberty to proceed against Robert C. Clapp for the collection of the indebtedness owing by him, and that owing by the counsel for the board of himself and his family, and by the widow and children of the testator, and from the failure and omission of the receiver to report to the court as he was required to do byits rules and practice; and to take anyproof offered by the receiver pertinent to his right to commissions; and he should also notify any creditors there may be of the testator himself to appear upon the hearing, and become parties to the proceeding. His report should be made and filed without any unnecessary delay, and with all practicable speed.
Beady, J., concurs.
NOTE.
Receivers—Powers and Duties in General—Accounting—Removal. Respecting the compensation allowed to receivers, see Radford v. Folsom, (Iowa,) 7 N. W. Rep. 604; Howe v. Jones, (Iowa,) 23 N. W. Rep. 376; Jaffray v. Raab, (Iowa,) 33 N. W. Rep. 337; Trust Co. v. Railway Co., 32 Fed. Rep. 187; Trust Co. v. Railway Co., (N. Y.) 5 N. E. Rep. 316. As to their powers, duties, and liabilities in general, see Radford v. Folsom, supra; How v. Jones, (Iowa,) 14 N. W. Rep. 193; Wyckoff v. Scofield, (N. Y.) 9 N. E. Rep. 498; Bank v. Kimball, (N. J.) 6 Atl. Rep. 491; Burroughs v. Gaither, (Md.) 7 Atl. Rep 243; Thompson v. Holladay, (Or.) 14 Pac. Rep. 725; Beers v. Railway Co., 84 Fed. Rep. 244.
As to when a receiver may be required to account, see In re Allin, 8 Fed. Rep. 753; La Fayette Co. v. Neely, 21 Fed. Rep. 738; How v. Jones, (Iowa,) 14 N. W. Rep. 193.
receiver is appointed to subserve the interests, not alone of the party on whose application the appointment is made, but of all persons interested in the matter committed to his care. Bank v. Iron-Works, (Mich.) 27 N.W. Rep. 657. The fact that a receiver of a bankrupt estate is the brother of complainant is per se no ground for his removal, the complainant being a trustee suing for the benefit of defrauded creditors of the bankrupt, Shainwald v. Lewis, 8 Fed. Rep. 878; and in such case the receiver may employ complainant’s solicitor. Id. The receiver of an insolvent railroad company cannot unjustly discriminate in charges imposed upon rival shippers over Ms road, in order to increase his revenues; such conduct would warrant his removal. Handy v. Railroad Co., 31 Fed. Rep. 689. The removal of a receiver is within the sound discretion of the court appointing him, under the circumstances of each case. Bank v. Iron-Works, supra.
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