5 A.2d 890 | Pa. | 1939
These appeals are from the denial of counsel fees in proceedings reported as Levin et al. and Peoples-PittsburghTrust Company, Trustee, v. Pittsburgh United Corporation etal.,
Toward the end of the five-year period specified in the agreement, holders of common stock instituted suits against United and others to enjoin it from carrying out the Schiller agreement. United informed the trustee that it was advised by counsel that the existence of these suits would prevent compliance with the agreement. To meet that situation, the trustee, on March 6, 1937, filed its bill, in substance, for specific performance and in the course of the litigation was represented by its own counsel. It named as defendants not only United but also a number of holders of preferred stock (the parties of the first part to the Schiller agreement) and the common stockholders who had brought the suits to restrain United from complying with the agreement. The appellants at number 42 accepted service and appeared for preferred stockholder defendants and filed a joint answer on their behalf admitting the averments of fact contained in the bill and joining in the prayers for relief. At the same time, Lillian Levin and William C. McEldowney, holders of preferred stock of United, by counsel now appellants at number 48, filed a bill also asking specific performance. On a petition filed by the same counsel on her behalf, Helen Jacobs, holder of preferred stock not stamped (a term defined later) pursuant to the Schiller agreement, was allowed to intervene; in consequence of that representation, they claim fees as for services to holders of unstamped preferred stock. *111
The two suits for specific performance were tried together. The trustee-plaintiff promptly appealed to this court. In addition, separate appeals were taken by preferred stockholder defendants, represented by the present appellants at number 42, and by the plaintiffs, Levin and McEldowney and the intervener Helen Jacobs, then represented by present appellants in number 48. All the appeals were disposed of in the opinion reported in
It is for the services rendered from the time the Schiller agreement became effective in 1932 until the decision of this court, that appellants at number 42 claim compensation out of the fund available for the retirement of preferred shares. Appellants at number 48, having represented the intervening preferred stockholder, ask compensation for their services on the ground that, by acting for her, they benefited all unstamped preferred stock. The learned court below dismissed the first claim on the ground that claimants had not brought themselves within the rule authorizing the allowance of fees; the second was dismissed on other grounds which need not be separately dealt with as we all agree that both claims fail for the same reason. Counsel for the trustee, in opposing the claims, not only do not suggest that the services for which the claims are made were not valuable but, on the contrary, concede the fact.
The Schiller agreement imposed active duties of importance on the trustee and specifically authorized it to employ and to compensate counsel. Its counsel prepared the bill and conducted the litigation from beginning to end. Appellants' brief states that "At the trial the burden was assumed by the Trustee's counsel." Both claimants also participated, one appearing for preferred shareholders named as defendants, and the other for Levin, McEldowney and Jacobs, but neither gave notice2 to the trustee that they would ask for compensation *112 out of the fund available for the redemption of the preferred stock. On the contrary, there is evidence that makes strongly against the first appellants. "Q. Did you or anyone else make a suggestion at any time that you enter your appearance or your firm's appearance in connection with the trustee's Specific Performance proceeding? A. Yes; I talked to Mr. Arensberg [counsel for the trustee] about it and I had the impression he was not adverse to it but of course, he said he had to put it up to his clients and he told me the next day they did not wish to have it done. Q. Did he say why? A. I don't remember that he did, but I had the impression — I don't know whether I got it in his words or others — I had the impression they did not want to cause unnecessary friction with Mr. Hillman. . . ."
When the petitions for counsel fees were presented, a rule was granted on all parties of record and on all holders of preferred stock to show cause why the prayers of the petitions should not be granted; service by mail and by publication was also directed. A number of preferred stockholders filed objections; appellants state that "about 4% of the preferred shareholders owning less than 7% of the preferred objected to the payment."
The general rule is that a trust estate must bear the expense of its administration and the cases show that when a claim for counsel fees is made it must appear that the services for which fees are claimed were necessary; incidental benefit tocestuis is insufficient. Our cases illustrate this in a variety of circumstances. In Com. v. City Trust, etc., Co.,
In Com. ex rel. v. Order of Solon,
In Hempstead et al. v. Meadville Theological School,
In Harrison's Estate,
In Evans v. Diamond Alkali Co.,
A brief examination of the relations between United, its shareholders and the trustee, as affected by the Schiller agreement, will disclose the conditions to which the rule must be applied.
United had ceased doing the business it was incorporated to transact;3 little remained except to liquidate; *116
the higher the price of Steel common the better the liquidation. The preferred shareholders were interested in the protection of their superior hold on the corporate assets from impairment by efforts of the common stockholders to improve theirs by delaying liquidation in the hope of a rise in the price of the Steel stock. The preferred holders' superior position was originally created by the Articles of Incorporation,4 not by the Schiller agreement, which, except as to those agreeing otherwise, could not diminish the rights originally vested in them; these could only be affected by charter amendment; non-assenting preferred stockholders were entitled to insist *117
on their rights.5 The preferred shareholders who submitted their certificates for stamping6 limited their formerly existing rights; those who did not have the certificates stamped retained all the rights originally vested; they had not subordinated their shares and for that reason were made beneficiaries by the decree of this court:
The trustee, as has been said, had active duties to perform: among other provisions on the subject the following appears in the agreement: "Promptly following the close of business on February 16, 1937, the Trustee shall take or cause to be taken every action necessary or proper in order that the provisions of subdivision (2) [relating *118 to distribution of assets] of Article Tenth hereof shall be fully and punctually complied with and the holders of shares of preferred stock who in accordance with the provisions of said Article Tenth have elected to have their shares of preferred stock retired on March 1, 1937, may receive the price therefor in the manner and at the time specified in said subdivision (2) of Article Tenth hereof." It is therefore unimportant, in disposing of these appeals, that one set of appellants represented holders of stamped and the other of unstamped certificates. The fund for redemption resulting from the conversion of the Steel common at the prevailing market price was not sufficient to redeem all the Preferred Shares on the terms stated in the certificates, and as it was not proposed to distribute to less than all, in the manner allowed by the certificates, it became essential to treat all alike.
The trustee, by its own counsel, the employment of which, at the expense of the trust, was authorized by the agreement, promptly filed its bill to obtain performance of the agreement to retire the preferred stock. If the trustee had refused or neglected to proceed and had made action by appellants' clients necessary to enforce the agreement, appellants would have brought themselves within the rule charging the value of their services on the fund.7 But there is no suggestion that the trustee failed in any respect to perform any duty imposed on it by the trust or otherwise. The sufficiency of its bill in equity and the competency of its counsel are conceded by appellants.8 Some of the property was in *119 the possession of the trustee and the rest was potentially within its grasp; it was a condition which directly resulted from the Schiller agreement for the achievement of which appellants had been paid. There is evidence that appellants rendered service to preferred stockholders during the five-year period following the execution of the agreement but, in the circumstances, compensation is not payable out of the fund but by the parties to whom the service was rendered. After that agreement came into effect, it was unnecessary to procure the restoration of any trust property because none had been diverted; none was in jeopardy. The trustee had not omitted to do anything required to be done by it. By its suit, the property and affairs of United were brought under the control of the court. The trustee necessarily brought in as defendants the other parties to the agreement, preferred stockholders, parties of the first part, and United, of the second part. As we understand it, when the cases were tried, holders of 53,254 shares of preferred stock had had their certificates stamped, leaving 4,958 shares unstamped.9 Holders of unstamped shares were affected by the intervention of Helen Jacobs; it is immaterial, for present purposes, whether such shareholders were plaintiffs or defendants; the fact is that sufficient parties were brought on the record to support the decree for the retirement of all the preferred stock. It is clear that the record shows no necessity for supplementing, at the expense of the fund, the services of the *120 trustee's counsel by the service of other counsel whether acting, in the one case, for defendant holders of stamped preferred stock or, in the other, for the intervening holders of unstamped certificates. The appellants brought no property under the control of the court which was not already there as the result of the trustee's act. In the argument it is said that appellants appeared for a class, but that is not enough to bring them within the rule applied in cases cited, because the record shows that the trustee's proceeding was in all respects adequate.
The orders appealed from are affirmed, costs of the appeals to be paid out of the fund for distribution.
The agreement set forth that aside from its franchise and treasury stock, United's assets consisted of 108,402 shares Steel common, and as of December 31, 1931, cash $178,713.14; that "(2) With the exception of its liability to its stockholders, preferred and common, and its current obligations for interest, taxes and operating expenses, which, as and when due and payable, can readily be and will be paid out of its cash on hand, its known liabilities aggregate $1,040,000.00, represented by bills payable."