Henry v. Henry

HEAD, J.

Thomas Henry, of Mobile, died February 9th, 1886, leaving his wife, Mary, and three children, viz., Thomas J., John and Mary Ellen. The latter after-wards married Frank G. Ruffin, Jr. He left a considerable estate, all of which, by will, he devised and bequeathed to his wife, except a pecuniary legacy of $1,000 to each of his three children. She was named executrix without bond. She probated the will February 27th, 1886, in the probate court of Mobile county, and received letters testamentary. Thomas Henry was a crockery merchant in Mobile, in partnership with his son John, under the name of Thomas Henry & Son; but he furnished all the capital, and, it seems, in fact, that when he died he owned the whole business if a settlement of the partnership had then been made. After his death, the widow (we suppose deeming herself the owner of her husband’s estate, as she was, subject to debts and the pecuniary legacies), entered into co-partnership with her son, John, to carry on the same business ; and they did carry it oh, under the same firm name of Thomas Henry & Son, until it was terminated by this litigation, in May, 1891. The testator left a large city real estate, but it was heavily incumbered by mortgages. The widow had the possession and use of it until dispossessed by this litigation, in May, 1891. Meanwhile, the estate was badly managed. The widow was old and infirm and unable to give it much attention, and she relied chiefly on her son, John, to manage it. He did not prove a success. The mercantile business, under his charge, was unsuccessful; the stock and assets constantly declined and debts accumulated. The real estate was suffered to grow into bad repair, and its annual rental income to be considerably diminished. Mortgages upon it to over $30,000 were not discharged, and the interest on the mortgage debts not well kept paid up. Taxes were not all paid. Besides the mortgage debts, the testator owed some $1,800 which remained unpaid. The legacies to Thomas J., Henry and Mrs. Ruffin were not paid. The executrix did nothing in court, in the way of administering the estate, except to probate the will. She took no steps looking to a settlement. In this condition of affairs, Thomas J. Henry retained the law firm of McCarron & Lewis to collect his legacy, and, on the 18th day of May, 1891, they filed this bill for him, for that purpose ; malting the executrix and other legatees defendants. Thomas J. Heinry, of course, had no other interest in the estate than the collection of his legacy. So that was paid, it did not concern him, pecuniarily, what became of the rest; but, uhe estate being involved, as we have indicated, it was indispensable to the coercive collection of his legacy' that a full account oí the assets, debts, and unpaid legacies be taken. Hence the bill, as a means to the prime end, prayed for such an account, and further that the administration be removed to the chancery court and there settled. The court shortly afterwards passed a decree assuming jurisdiction of the administration and settlement of the estate. Ordinarily., in such cases, the personal representative, being brought before the court, is there, under the orders and decrees of the court, required to perform his office, retaining in his possession the assets of the estate and administering them, as by law and the orders of the court he must; and; in discharge of these duties, he is allowed the benefit of necessary legal counsel, the reasonable cost of which the court will reimburse him from the trust estate, unless it appears the expense, though necessary, was superinduced by his own fault. In the present case, ■ however, it was conceded by all parties, including the executi ix herself, that she, by reason of her age and general incapacity, was incapable of performing the office well; and by consent of all the parties, the complainant in the bill, Thomas J. Henry, a few days after the bill was filed, was appointed receiver in the cause. The powers and duties conferred upon him by the order of his appointment, and as they were subsequently enlarged by an additional order, will be set out by the reporter ; and from them it will be seen, that, by the consent of all parties in interest, this receiver was, for all practicable purposes of administration, substituted for the executrix, and clothed with all her powers, with the exception, (which was an important one), that he was not authorized to pay debts, or defend suits pending or instituted against the executrix.

The authority of the receiver having been specifically defined by the court, all other authority on his part was excluded, and the powers and duties of the executrix, which, by law, appertained to her office, were displaced, by his appointment and the specification of his authority, to the extent only that such specification expressed or fairly implied. She retained all powers and duties, in reference to the administration, not expressly or by necessary implication, conferred upon the receiver. She could not, of course, have performed any act which might have conflicted with the authority of the receiver. Occupying this position; substituted, as it were, within certain limitations, for the executrix, he, like her, became entitled, upon his appointment, to the benefit of counsel to guide and assist him in the discharge of his duties, and for all sums reasonably paid out by him for such counsel, the court should have reimbursed him from the trust estate. -The assignments of error, on behalf of the receiver, as such, involve, alone, questions touching the allowance of counsel fees and receiver’s compensation. As to the latter, that was settled by the order of his appointment. He accepted the office with a salary prescribed. That salary he received. It is undoubtedly true, that, if unforeseen extraordinary labor had developed, it would have been competent and proper in the court, in the exercise of its discretion, to make him a further allowance. This was not a case for the exercise of that discretion. He evidently knew the condition of the estate when he accepted the trust. Practically, everything he did, in the line of his duty, was foreshadowed in the order of his appointment, and the orders enlarging his powers made only a short time thereafter. The greatest liberality was extended him in the allowance of help. A most ample corps of men, at a cost enormous in proportion to the value of the stock, was employed to dispose of the old, badly damaged stock of goods, which realized only $8,000, or a little over. Attorneys collected the claims for him, at a commission of about twenty-five per cent. Real estate agents took charge of the real estate, rented it out and collected the rents for him, at a commission of five per cent. An expert accountant was allowed him, at a cost of three hundred dollars, to make out his brother John’s account, as surviving partner, from the books of Thomas Henry & Son. The gross amount of assets realized by him amounted to a trifle over $10,000 ; and for his services and expenses in producing this result, and looking after the insurance and repairs of the property, the table thereof in the printed brief of appellees’ counsel, which we take to be correct without going through the voluminous record to verify it, shows that he paid and was allowed the unprecedented amount of $4,665, besides the fees of his solicitors, for all of whose services in and about the receivership, an allowance of $1,500 was made by the dourt. All this was done during a period of six months. These expenditures do not include insurance premiums and costs of repairs. We think $100 per month to oversee a business of this size and character, and under these circumstances, a most abundant allowance, particularly to one whose services previously commanded only $10 or $15 per week and board. Let nothing more be said touching his claim for additional compensation.

We recur then to the allowance of counsel fees claimed by the receiver. $1,500 were allowed by the court. $2,500 more are claimed, making in all $4,000. When a receiver is appointed and property is committed to him, as such, he becomes the officer and custodian of the court. It is his duty to keep the property committed to him according to the directions and orders of the court. If the office be of an administrative character, or in the nature of a trust being administered by the court, or for the purpose of carrying on a business, it is his duty to administer it, likewise, under and in pursuance of the orders and directions of the court. Strictly speaking, he has no right to make any contract binding the property, or to pay out the funds in his hands, as receiver, without first obtaining the authority of the court. But it is clearly his right and duty, whenever it becomes necessary, in the performance of the duties of his office, to incur an expense, or make a contract or obligation, or pay out funds, to apply to the court and obtain an order authorizing him to do so, and prescribing, definitely, when the court deems it necessary, the terms of the authorized undertaking, and the sum or sums to be paid ; and that when he acts in accordance with this authority, he will be protected by the court against personal loss or responsibility, and granted allowance for the sum or sums so paid out. In some jurisdictions, the tendency is not to recognize any obligation or expense incurred or paid by a receiver, and to make him no allowance therefor, unless incurred or paid in pursuance of authority so previously obtained. We would adopt, however, the more liberal rule which generally obtains in reference to administrative trusts, that if a receiver, without previous authority, but upon his own responsibility, incurs an expense in the discharge of his duties, which he shows to have been necessary, and such as the court would have authorized if application had been made in advance, to accord him the like indemnity which would have been accorded if the previous authority had been obtained. The attitude of the present receiver'is such that he now comes before the court asking the allowance under the last named condition, viz.: allowance for counsel fees for solicitors whom he employed on his own responsibility, without previous authority, for services already rendered. He can not claim to occupy any other position, for if the action of the court appealed from was upon an application in behalf of the solicitors themselves for an allowance of fees to be paid directly to them from the funds in the custody of the court, or to be charged upon the property in the custody of the court, he has no interest in, and is not prejudiced by, such action. The solicitors themselves are the parties to complain. Treating him then as claiming the allowance in his own behalf, has he shown a case entitling him to it? What are the principles which govern in the allowance of counsel fees, to a fiduciary who has incurred them without the authority of the court? First, it is for necessary legal assistance that allowance may lee made. A trustee has no authority to employ attorneys, at the expense of the estate, to perform the ordinary duties of the trust or office which any ordinarily competent business man is presumed to be capable of performing. Those are his duties, and he is paid for them. It is for services requiring special legal skill that he will be allowed counsel fees. To illustrate : He may have an attorney to obtain for him a necessary order of court to sell a stock of goods ; but he can carry out the order as well as the attorney. He knows, as well, the character of the goods, their value, what salesmen and bookkeepers are reasonably necessary and what he ought reasonably to pay for their services, and the best manner of disposing of the goods. His acceptance of the trust presupposes that he is capable of performing all such duties, and if he employs attorneys to advise and assist him, in performing them, he must do so at his own expense. So also, no legal skill is required in insuring and repairing storehouses and renting them out and collecting rents. Any business man, also, can assess and pay taxes. If a demand is made upon the receiver of questionable legality, he may have legal advice and aid in reference to it. If he has a demand upon another whose legality is questioned, or which requires legal aid to enforce it, he may have.an attorney. Second^. It is for legal services for which he has paid the attorney, that he can claim allowance from the estate. Indeed, this is true, if he had employed the counsel under an express order of the court previously obtained, prescribing the terms of the employment and the- amount to be paid. In that case, when he comes to render his accounts, he would be required to show that the services had been rendered and that he had paid for the same, not in excess of the amount allowed by the court, before he would be allowed credit for the same. His position in this regard is the same as any other accounting officer or trustee. We have long since settled, in this State, in the case of an executor or administrator claiming credit for a disbursement alleged to have been made by him, that he must, if disputed, prove, not only the correctness of the demand, but that he has paid it. — Gaunt v. Tucker, 18 Ala. 27 ; Pearson v. Barrington, 32 Ala. 227 ; Bates v. Vary, 40 Ala. 421; Teague v. Corbitt, 57 Ala. 529; Harwood v. Pearson, 60 Ala. 410; Jenks v. Terrell, 73 Ala. 238 ; High on Receivers, § 805. The cases of Bates 'v. Vary and Teague v. Corbitt, supra, were upon the allowance of counsel fees. In the .latter case, the court say : “In this, as in all cases in which a trustee claims a credit, it must be shown he has paid the counsel the amount for which a credit is claimed.” We think this rule is one wholesome in its influences, and should be upheld with a steady hand. When a trustee or receiver contracts for professional aid, it is his duty to act with the same care and prudence that a cautious and prudent man would, in making a like contract for his own benefit. He should seek to get competent counsel, upon terms most favorable to the estate. To secure this, not only in reference to counsel fees, but all other expenses of the trust which he takes upon himself to contract without previous authority of the court, he must know when lie incurs them, that he can not obtain allowance for them until he shows that they were necessary and that he has paid them, and the amount paid- therefor, their reasonable value. In no case, except when the cestuis que trust are sui juris and waive it, should a court suffer a credit to stand, or be entered upon the account of any trustee, for expenses incurred without a previous order, whether for attorney’s fees or otherwise, until he satisfies the court by proof, 1. That the expense was a reasonably necessary one, and for a service not within the ordinary duties which the trustee should himself perform. 2. That the amount claimed is the fair and reasonable value of the service ; and, 3. That the amount has been actually paid, in good faith, by the trustee. If the courts would vigorously enforce this rule, trust estates would not suffer, as many have suffered in the past. The loose practice of executors, administrators, guardians and other trustees, of employing counsel, generally, without regard to cost; without effort to obtain the best terms practicable for the estate; with no thought of personal responsibility, or expectation of payment until allowance is made, but, too often, upon the assumption, expressly or impliedly indulged by both, that the attorney shall receive only what he may induce the court to allow from the funds in hand, after the service has been rendered, is fraught with evil, and should not be encouraged. Under its influence, estates have, not infrequently, been, in large measure, swallowed up in cost, and, in some instances, courts, created to protect the helpless, actually brought into public disfavor. We mean no reflection upon any one connected with this cause. Our observations are to emphasize the wisdom of the rule we re-affirm. We will not be understood as holding that when the chancery court has a fund in gremio legis — a fund in the hands of its officer— it may not direct a claim shown to have been properly incurred by the trustee, although without previous authority, to be paid, from the funds in court, directly to the party in whose favor it was incurred. Cases may arise where this course will best conserve the rights of all. That is a question, however, which concerns the creditor. The trustee or receiver, who has had the receipt and disbursement of the funds of the estate, can not complain of the court’s refusal to exercise this power. If the claim is a proper one, he should have paid it himself and asked allowance for it. The present appeal, as we have said, is by the receiver. He alone assigns errors. We can not consider the rights of Mc-Carron & Lewis, the solicitors, if any, upon their petition which the chancery court denied. They are not before this court. The case so stands before us, that the receiver is here alone, as the complaining party, asking for allowance for an item of expense, incurred by him, without previous authority, which he has not paid, and may never pay. It can not be allowed. If the case came before us from an application by the receiver to the court to raise a cash fund from the property of the trust estate, to enable him to pay expenses necessarily and reasonably incurred in the discharge of his official duties, a different question would be presented. What our decision would be, if so presented, we need not indicate*.

This disposes of the errors assigned by the receiver, as such; but the parties have elaborately argued the validity of the various items of fees claimed in behalf of his counsel, in respect, first, of the right of the receiver to incur them, and, second, the reasonableness of their amounts. It may not be amiss in us to lay down some rules governing the rights of the receiver .to contract them. We shall say nothing as to the reasonableness of the amounts claimed. 1. The services of the solicitors to the time the receiver was appointed were, as a matter of course, rendered for the client, the complainant in the bill, its object being the collection of the legacy. This includes procuring the appointment of a receiver. The services being rendered for the personal benefit of the complainant, were comprehended in his retainer of the counsel to collect his legacy. It was proper to allow the receiver, if he had paid it, a reasonable fee for such general legal advice, as he obtained and the nature of his duties, made necessary. In making such allowance, careful discrimination should be observed, as we have already said, between the ordinary duties which the receiver is presumed to know how to perform, as well as one skilled in the law, and those duties which require such special skill. If he commanded the time and trouble of the attorneys to advise and assist him about matters which any good business man could perform, he must pay for it himself. 2. Again, regard should be had to the receiver’s authority. If he undertook to do that which was outside his charter of powers, he can not charge the estate in his hands with expenses incurred therein. As we have said, he had, under the orders of his appointment, no authority touching the debts owing by the estate, except to pay the taxes. . The office of executrix was not entirely superseded. She was before the court, and necessarily so. She retained all official functions not conferred upon the receiver, and in their exercise, she could apply for and obtain the aid of the court, who had plenary power over the receiver, herself as executrix, and the trust estate. She thus had the means of looking after and caring for the debts which were pressing and threatening sales of the property, to the same extent the receiver would have had, if he had been authorized in that behalf. If he undertook to perform her retained functions, he did so upon his own.responsibility, and must bear personally the expense incurred. Advice of his counsel, in such matters, should have been eliminated, in estimating the reasonable value of the general retainer. 3. The receiver applied to the court for an order to sell the real estate to pay legacies and debts, and the court entertained the application. For this service, a reasonable fee, if paid, should have been allowed. It would seem, however, that this fee should not be estimated by the charges usually made for obtaining such orders in the court of probate, for the following reasons : At the expense of the estate, the court had required its register to ascertain and report all claims against the estate, which was done. The receiver’s inventory of the assets was before the court. In a proceeding in the probate court, these — the existing debts and insufficiency of personal assets to pay them — are jurisdictional facts which must be skillfully set forth in order to a valid sale of the realty, and the petitioner, through competent counsel, must undergo the labor and skill of seeing that jurisdiction of the persons of all the interested parties is acquired, and producing the proper proof, in the proper way, in support of the desired order; but here, the chancery court had already ascertained and put upon its records, all necessary data. The parties were all before the court. The receiver’s counsel had practically nothing to do but to invoke the record, and ask for the order. 4. A reasonable fee should have been allowed for attending to the settlement of the receiver’s accounts, guided by the amount involved and the labor attending it. If there was litigation concerning items of the account, regard should be had to its result. A. trustee can not engage in unsuccessful disputes with the cestuis que trust, over his accounts, and charge them with the cost. 5. It was within the receiver’s duties to look after the estate’s claim against John Henry, and he was entitled to a counsel in the matter. It was his duty to be diligent to ascertain all the facts, within his reach, respecting the merits and value of the claim, and fairly lay them before his counsel; and if he did so, and his counsel, who are reputable lawyers, advised him that it was his duty to sue, he had a right to engage them to bring the suit, and should have been reimbursed the reasonable cost thereof. In fixing the amount, regard should have been had to the nature and probable value to the estate of the demand, the character of the proceeding necessai’y to enforce it, and the labor and skill attending it. 6. The same may be said of the suit against the savings bank. The indications of the record are that this suit was without merit, and that the receiver knew it, though his counsel were misled. Besides, the unfortunate letter of the receiver to his old mother, which we find in the record, betokens intense bitterness of feelings towards her and his brother, in regard to this claim. We forbear to make public its contents. May we not hope the letter was no sooner sent than regretted. If he brought the suit to gratify such feelings', without properly informing his counsel of the facts of the case, the estate should not bear its cost. 7. As we have said, the receiver had nothing to do with the debts of the estate, or suits against the executrix. Most clearly, he was entitled to no solicitors fees for the M. & N. W. R. R. Co. case.

The complainant assigns as error the refusal of the court to allow him interest on the legacy. Conceding that he was at one time entitled to interest, he clearly waived it. By order of the court, all persons having claims against the estate were required to file them with the register, who was required to report them to the court. The legatees treated the order as embracing legacies, and filed their claims therefor, making no claim for interest. The register reported, giving the amount due on each debt, including interest, and giving each legacy at $1,000, without interest. On motion of complainant, the report was confirmed without objection. Afterwards the executrix and'residuary devisee raised a sufficient sum of money to pay off the debts and legacies (which did not include the mortgage debts) so reported and confirmed, and paid the same; and the real estate was restored to her possession, whereby all the purposes of the litigation were accomplished. The bill did not claim interest on the legacy. After all this, the complainant came in and asked for interest, to be charged on the real estate — the personal assets having all been exhausted. The chancellor properly disallowed the claim.

Affirmed.

Case Details

Case Name: Henry v. Henry

Court Name: Supreme Court of Alabama

Date Published: Nov 15, 1893

Citation: 103 Ala. 582

Court Abbreviation: Ala.