299 P. 41 | Colo. | 1931
Lead Opinion
THE George N. Sparling Coal Company and other general creditors of the Colorado Pulp and Paper Company, hereinafter called the company or pulp company, an insolvent corporation in the hands of a receiver, prosecute this writ of error to review various orders and decrees entered by the district court in the receivership matter. Plaintiffs in error will hereafter be designated as "Sparling," to include them all. The defendants in error herein are the Colorado Pulp and Paper Company, George W. Beck, as receiver thereof, Charles B. Myers, Joseph Buchhalter, Moses Buchhalter, Morris H. Block, Maurice H. Levy, Edward I. Levy, International Trust Company, I. Rude, Max Bronstine, Aaron Bronstein, Harry C. Davis and Stanley T. Wallbank.
This is a companion case to Myers v. Beck,
[1] 1. Our rule 35 reads: "Counsel will be confined to a discussion of the errors stated, but the court may, in its discretion, notice any other error appearing of record." We have employed this rule in the present instance, for reasons that must be apparent from a reading of the Rossi opinion.
[2] 2. In McClelland v. Merchants Miners Nat.Bank,
[3] 3. As said in Clark on Receivers, (1st Ed.) page 742, paragraph 678, "Creditors of a receivership whose claims had been proved and allowed under a decree have a right to be heard in that court upon any actions of the court or the receiver, by which they might claim to be aggrieved."
Our opinion in the Rossi case shows that there were *527 urgent reasons why the Sparling petition in intervention, filed January 16, 1928, should have been allowed, but since we have held the Myers-Rude stipulation to be void as against the rights of general creditors, and have determined other matters in such petition in Sparling's favor, we hope that this has overcome many, if not all, of the difficulties of general creditors. They will be allowed to reframe their petition, if they so desire, to meet the present situation.
[4] 4. On December 3, 1927, the claims of Sparling and other general creditors were allowed and judgments entered thereon in this proceeding. These claims amount approximately to the sum of $50,000. On November 26, 1928, plaintiffs in error in the present Sparling case, entered into a stipulation with the receiver, wherein it was agreed on certain conditions, that such creditors would accept sixty-five per cent of the face value of their claims in full settlement. On December 20, 1928, the court approved the stipulation, which was to effect that $10,000 should be paid immediately, and the balance in installments as rapidly as possible. The $10,000 was paid, pro rata among such creditors, but no more. At the time the stipulation was made, there was an upset price of $300,000 fixed by the court on the property. Instead of paying the creditors, the upset price was later removed, the property deteriorated and depreciated in value, Beck's liberal compensation and other receivership expenses continued, and about eighteen months after the stipulation was made, the pulp company real estate was struck off and attempted to be sold to two bondholders for $228,000, with their bonds as the purchase price. On account of this, the creditors were not paid any further sum beyond the $10,000, amounting to twenty per cent of their claims. Nevertheless, the district court held them to their agreement to pro rate on future dividends on a sixty-five per cent basis, as against one hundred per cent on other general claims, including the deficiency judgment for $24,242 in favor of Rude and *528 Bronstine. This was serious error. The promise of the general creditors to accept sixty-five per cent carried with it a promise on the part of the receiver, express or implied, to pay it, and that it should be paid within a reasonable time. Instead of receiving it, they have been compelled to litigate with the receiver not only as to this matter, but in many other things, on account of unlawful encroachments on the general fund, which is the general creditors' only source of payment. Such claims will be restored to a basis of one hundred per cent, with legal interest from the date of rendition of judgments thereon.
5. Sparling assigns error to the entry of the deficiency judgment in the sum of $24,242, in favor of I. Rude and Max Bronstine, purchasers at the attempted sale of all corporate property of the pulp company. Since we have directed that the sale be set aside, the deficiency judgment will fall with it, and it is unnecessary to discuss other arguments concerning it.
6. Sparling's eleventh assignment of error is that the court erred in overruling objections made to the several reports of the receiver. It is discussed in connection with other assignments. As we said in the 27th paragraph of our opinion in the Rossi case, "There have been so many individual items of unlawful disbursement that it is impossible for us to take them all up seriatim." We have therefore resorted to general classifications, which is amply sufficient for all present purposes. In paragraph 39 of the Rossi opinion will be found a general clause reversing orders, judgments and decrees inconsistent with this opinion, whether specifically mentioned or not. This is intended to give the district court a wide latitude, to correct all errors that have been made, whether as to unlawful preferences or otherwise. Complaints may be presented to the district court by any interested party, in such manner as the court may direct. This is the only way that an affair of this magnitude can be terminated, and justice be done to all concerned. *529
[5] 7. We here refer to the summary of fees and allowances to the receiver and his attorneys, as follows:
"George W. Beck as Receiver $ 5,500.00 George W. Beck as General Manager 12,500.00 George W. Beck, Receiver, additional allowance 2,000.00 ----------- Total $20,000.00
Receiver's Attorneys: Charles Ginsberg $7,200.00 Clifford J. Gobble 500.00 John S. Stidger 1,500.00 John S. Stidger 1,500.00 --------- Total 10,700.00 ---------- Grand Total $30,700.00"
A comparison of the above with the balance of about $40,000 and interest due general creditors, does not need much comment.
At this time we shall pass on only the one item of $2,000 additional allowance paid Beck as receiver. As shown by our statement of facts in the Rossi case, on January 26, 1927, Clifford J. Gobble, an attorney at law, practicing in Denver, and who is mentioned above as having been one of the receiver's attorneys, mailed a letter to the clerk of the district court at Brighton, Adams county. This letter is as follows:
"July 26, 1927.
"Geo. M. Griffin, Clerk of the District Court, Brighton, Colorado.
"Dear Sir:
"Enclosed herewith please find the following papers:
Petition of Receiver and Order of the Court to Repair Roof of Plant.
Order allowing Compensation for Receiver. *530
Order for Receiver to Defend Bankruptcy Proceedings.
"Please file the papers in case No. 2367, Charles B. Myers vs. Colorado Pulp and Paper Company.
Very truly yours,
(Signed) Clifford J. Gobble."
The "Order allowing Compensation for Receiver," mentioned in the letter, has reference to the $2,000 in question. The papers mentioned in the letter reached the clerk of the district court and were filed by him on July 27, 1927. The original letter is contained in the record and also the envelope in which it was enclosed. The envelope is post marked "Denver, July 26," and a photostatic copy of the order is enclosed, which shows an alteration in the date. It is claimed that the order for additional fees was made on July 26th, but that the date was changed to July 20th, so as to antedate the first petition in bankruptcy filed on July 23, 1927, and thereby escape the jurisdiction of the bankruptcy court. All surrounding circumstances bear out this conclusion. Another order, which authorizes the defense of the bankruptcy proceedings, is enclosed with the letter, is dated July 26th, and of course presupposes knowledge of such proceedings. The orders indicate that they were prepared at the same time, except for the mutilated date on the order allowing Beck $2,000 additional compensation. It will be set aside and Beck is ordered to refund the same. We do this with less hesitancy because we feel that he has been grossly overpaid. As to further refunds, if any, to be made by him on account of fees or compensations in any capacity, and also as to the fees paid to various attorneys, we believe, in view of our expressions of disapproval of the conduct of this matter from beginning to end, that counsel should be given a further opportunity to present their views on petition for rehearing.
The judgment is reversed and the cause remanded, *531 with directions for further proceedings not inconsistent with thus opinion. Costs to be assessed as directed inRossi v. Pulp Company.
MR. JUSTICE BUTLER not participating.
On Rehearing.
Addendum
VARIOUS petitions for rehearing and modification of opinion have been filed in this case as well as in Myersv. Beck, Myers v. Pulp Company and Rossi v. PulpCompany, all of which were consolidated and decided concurrently. General creditors do not ask for rehearing or modification except that some of the parties petition "for further and final determination of certain issues," which we left open for further consideration. That which we shall now say regarding the several applications will apply to the four causes named.
One of the questions left open relates to the fees allowed and paid George W. Beck, presented under separate assignments of error by Rossi and George N. Sparling Coal Company, and by cross assignments by bondholders. Creditors insist that such fees are grossly excessive, unreasonable, unjust, not warranted by the law or evidence, the services rendered or the results obtained, and that such fees involve duplicate payments for precisely the same services performed as receiver and general manager. We have directed the disallowance of one item in the sum of $2,000 and shall now consider the others, consisting of the sum of $5,500 paid and allowed as receiver's fees and the further sum of $12,500 on account of compensation as general manager.
Present counsel for the receiver says that the latter "has been commended by all parties on the manner in which he took charge of what was then an insolvent *532 corporation," and that his business ability is unquestioned, but no such encomiums in the records or briefs have been called to our attention, and if the corporation was insolvent when the receiver took charge, it was more so when he quit. His reports show that he conducted the business at a loss, and when he surrendered control, the estate was more deeply involved in litigation than ever, due largely to his own acts. And, aside from his reports, there is no computation of the loss of time and money to the general creditors in their incessant struggle to protect themselves from their own trustee.
[6] Beck was appointed as receiver of an insolvent corporation with orders to conduct it as a going concern with well-nigh plenary powers from the court, and a blanket injunction was issued to prevent interference with the performance of his duties. The order appointing him general manager accomplished little if anything except to increase his emoluments. The receiver's compensation is not to be measured by the number of his official titles covering the same duties. It may be added that he devoted only part-time to the pulp company business. His testimony shows that he was acting as receiver for two other companies and was also interested in a private business, although he testified that he devoted very little time to the latter. In respect to the pulp company, he said: "I spent what time was necessary at the mill, sometimes one or two hours each day, then went back to the office." This does not necessarily indicate that it was all the time that he spent on the pulp company business. He testified that he handled collections personally and solicited orders; he devoted part-time in his own office with his various enterprises, including the pulp company. Much time was consumed on legal matters, but to a large extent they were superinduced by his own unlawful acts against creditors and their resistance thereto from court to court. He argues justification in that everything he did was approved by the district court, but if this were a justification in every case, *533 it would deprive this court of ultimate supervisory powers over the receiver as well as the district court. We cannot either surrender this right or avoid our obligation to direct the course of judicial procedure
[7] The record speaks for itself, and for the reasons, heretofore stated, we must direct, in addition to the disallowance of the $2,000 item, that the sum of $12,500 paid and allowed the receiver as general manager be also disallowed as excessive and unwarranted, and that he restore to the pulp company estate all sums paid him as fees or compensation in excess of the sum of $5,500. It would not be without precedent if he were deprived of all compensation (Covington v. Hawes-LaAnna Co.,
[8] Fees of attorney Stidger. He did not come into the case until February, 1929, long after the bondholders' stipulation had become a fixture in the district court. He calls our attention for the first time to matters not briefed before, some of which were not even abstracted, from which it appears that he was greatly handicapped and embarrassed in the performance of his duties, especially for the reason that his correct views as to the invalidity of the above stipulation were neither in accord with those of the receiver, whom he was called upon to represent, nor with the attitude of the trial court with respect to it. Their views, irreconcilable with those of this attorney in many respects, checked efforts that otherwise he might have made, and added to his burdens. The order of the district court as to the amount of fees allowed Stidger will not be disturbed, nor those of attorney Walker who appeared as special counsel in the oral argument in this court in Myers v. Beck and Myers v. Rude.
[9] As to fees allowed attorneys Ginsberg and Gobble. This cause goes back to another judge for final *534
disposition as to these questions, also auditors fees and other matters. Many elements, not fully before us, may be necessarily taken into consideration in fixing such amounts, and nothing we have said should be interpreted as an attempt to interfere with the exercise of the discretion of the trial court in the final determination thereof. It will be guided by the general directions contained in the 27th paragraph of the Rossi opinion, and all persons who are not parties hereto will have an opportunity to be heard on any matter affecting their rights. We have not said that secured creditors have no right to participate in general assets in case their security is inadequate. See Erle v. Lane,
[10] The agreement of August 23, 1927, signed by Buchhalter, and others, shows that bond holders instituted the bankruptcy proceedings and had, or procured, certain creditors to file involuntary petitions against the pulp company. Later, certain general creditors filed applications for dismissal other. Some of them referred to Buchhalter and his associates as "instigators" of the proceedings, giving details; other creditors said they were "misled." The records before us fall to show that Buchhalter or his associates denied the charges, though Buchhalter objects to our use of the words "misrepresented" instead of "misled," but we used the words synonymously and we see no reason why we should not have done so in this connection. Counsel for the bondholders themselves introduced copies of some of the federal court records into this case and we must assume that they brought in all that were favorable to their cause.
No petition field herein is sufficient to convince us that we have overlooked or misapprehended any point to entitle any petitioner to a rehearing under our rule 48. We are more persuaded than ever that our decision is right. With the present additions, our opinion stands as originally written, except that we have revised paragraph 20 of the Rossi opinion as it now appears therein, to show *535 further facts and authorities in support of our conclusions.
[11, 12] One of the petitions for rehearing calls our attention to the fact that since the opinion herein was announced, the trial judge has ordered a transfer of the cause to another. If so, he was wholly without jurisdiction to so order while the matter was pending in this court. In view of what we have before said, we cannot, of course, without entirely ignoring our constitutional duty to exercise "a general superintending control over all inferior courts" (Colorado Constitution, section 2, article (6), permit that this case be further controlled by the judge who has heretofore heard it. We therefore direct that, upon issuance of mittimus herein, all further proceedings herein shall be conducted before the present presiding judge of the second judicial district.
Opinion modified and rehearing denied.
MR. JUSTICE BUTLER, not having participated in the original decision in any of the four consolidated cases, did not participate in the decision of the petition for rehearing.
On Rehearing.