110 Wis. 506 | Wis. | 1901
The present case is so impressive an illustration that we cannot ignore the duty to make it the text for some general remarks upon a tendency at the bar, and even with courts, which promises to develop into a most serious abuse, if it has not already done so. That tendency is to look upon funds in gremio legis as not sheltered by the same rights of ownership, and not entitled to the same protection from extortionate and unreasonable charges, as if they had remained under the control and custody of their owners. Some of the demands made against such funds could be justified only upon the view that they are already divested from all private ownership — that any part thereof which ultimately reaches those to whom they really belong does so only by grace, or by way of free gift; so that any deductions therefrom, however illogical in character or excessive in amount, cannot be subject for complaint by any one. This court, in some recent decisions, has attempted to check this tendency in certain of its phases. In re Donges's Estate, 103 Wis. 497; Patton v. Ludington, 103 Wis. 629, 651. While the statutory restrictions there enforced are, perhaps, not universally applicable, one of the principles announced should be constantly in mind, namely, that property should not be taken from its owner to pay the expenses of his adversary in litigation, directly or indirectly. The fact that such property is in the custody of the court is no justification. The tendency of which we speak has not gone unnoticed elsewhere. It has been characterized by Miller, J., as “ the grossest judicial abuse of the modern day.” Trustees v. Greenough, 105 U. S. 527, 538. It has led the New York court of appeals to admonish a trial court that it “ does not sit as a bandit dividing booty.” Att’y Gen. v. North American L. Ins. Co. 91 N. Y. 57. Valuable suggestions as to some of the limits upon receivership expenses are set forth in Henry v. Henry, 103 Ala. 582. As in cases of this character, the creditors or others interested in the
We have indulged thus much in generalization upon a very important subject because of the impossibility of prescribing fixed rules of law. Hardly any form of charge or disbursement which a receiver can imaginé is without some authority to support it. Indeed, it is hard to say that any may not, under some circumstances, be permissible. Only in the wise discretion and firmness of the courts can there be found prevention or remedy for the abuse and disgrace of judicial conservation of estates from their enemies, only to permit their destruction by the very salvers. If such abuses con
The record before us presents one of the most extreme oases of affirmative misconduct on the part of a receiver within the history of the court. Indeed, almost the only step taken by him which is not worthy of criticism is his disposal of the stock of goods coming to his hands. That stock he received about January 30, 1890, inventorying at cost about $14,000, and at the sheriff’s appraisal about $8,800. Within one month, to wit, on February 26th, he did, with commendable diligence, make a lump sale of the entire stock, under the order of the court, for $7,225, and received the money therefor. The following month he sold the only remaining asset in his hands — the safe — for $90. A month later he withdrew substantially all this money, except disbursements he had already made, from a respectable bank, in which a record of his cash transactions would have necessarily appeared. The money then drawn — $6,000, on April 12, 1890 — has never again appeared in any bank. It now transpires that he made loans of the money thus in his hands to various acquaintances upon interest, probably only a part of which have yet fully been discovered. He immediately retained, and commenced making large payments to, the attorneys who represented one class of contesting claimants for the proceeds of the assets in his hands, including in such payments their services in commencing the suit for sequestration and attacking the validity of the liens acquired by the appellants, Merchants’ Exchange Bank and Kalamazoo Knitting Company, for which he was in no way liable. He took no vouchers for such payments, and it is now impossible, from the evidence at least, to discover the purpose of several of the attorneys’ disbursements for which he paid them. He continued payments to the plaintiffs’ at
In the light of such a record it is unnecessary to consider the niceties of the rules governing conduct by receivers. Secret loaning of money, resistance of all demands for accounting, suppression of facts with reference to his handling
An earnest plea was made by the counsel, not exactly for the receiver’s innocence, but for his ignorance, contending that he had relied at all times upon the advice of his attorneys. "We cannot listen to this plea. He had selected as attorneys men who were interested in one side of the litigation, and who could not advise him impartially. This fact must have been obvious to the simplest mind. Again, it is impossible that he was oblivious of the fact that he was a creature and mere implement of the court, and that to that court he could always go for instruction and advice.' While it may in some cases, or on some subjects, be possible that the attorney for one of the antagonistic parties may be a safe adviser for the receiver, the probabilities are all against it. The practice of employing such counsel is a dangerous one, and should be discouraged. Ordinarily, attorneys already retained for the plaintiff are, by reason thereof, committed to a partisan purpose, and to the interest of their client, their duty to whom-.must usually exclude the impartial point of view which the receiver should maintain. Only when it is made entirely clear that the necessarily and properly prejudicial attitude of such counsel cannot have affected their service to the receiver should an}’' payments to them be approved, or their advice be recognized as any justification of the receiver’s acts. High, Receivers, §§ 216, 806; Adams v. Woods, 8 Cal. 306, 318; Heffron v. Flower, 35 Ill. App. 200; Farwell v. Great Western Tel. Co. 161 Ill. 522, 613.
In addition to the disallowance of compensation for his own services, the conduct of the receiver with reference to his final account is such that it would be an abuse of discretion to allow him any expenses incurred in the statement or settlement thereof. Conceding the propriety, in a proper case, of the estate bearing the expenses of passing the account of a court officer (see Richardson v. Tyson, post, p. 572), none of the circumstances are here present to warrant it. The financial transactions calling for presentation to the court were of the simplest. The receipt, within a month after his appointment, of a gross sum of money, the further charge of a few items of interest received upon that money, and against this some twenty-five items of disbursements, did not justify the employment of any professional assistance in stating that account. A schoolboy of fair intelligence could have kept the account and stated it. Much more should that have been possible to an experienced business man of the financial adroitness of this receiver. Every step with reference to the account in which is involved difficulty or labor has been due to his own misconduct, and he must not be permitted to impose upon this estate further depletion by reason thereof, especially when his conduct has. imposed on the opposite party such burden of unnecessary labor and expense to discover facts which should have been clearly disclosed by the account itself.
In passing upon the propriety of allowing the various dis
As to the first class of expenses, while there may be some confusion of decision in its application, the controlling general rule is not doubtful. The receiver represents all persons interested in the proceeds to be realized by him. His duty is as high to one as to another, and he must not join as a partisan with one or one class against another. If he does so,— certainly if without express order of the court,— his action will not be approved, nor he be allowed, as against the general funds, expenses thereby incurred. T. T. Haydock C. Co. v. Pier, 78 Wis. 579, 582; In re Donges's Estate, 103 Wis. 497. True, there are many cases in which á receiver has been allowed for disbursements in contests between different classes of claimants to assets, but ih substantially all of them it will be found either that a new fund has been created, or an existing one saved from, depletion, or sought to be, which fund belonged to the class in aid of which the receiver acted; so that the allowance was in fact paid out of the fruits of the receiver’s acts. Fuller v. Abbe, 105 Wis. 235; T. T. Haydock C. Co. v. Pier, supra; Beach, Receivers, § 753; High, Receivers, § 806; Att'y Gen. v. North American L. Ins. Co. 91 N. Y. 57;
As to the proceedings within the second class there can be no serious doubt. The propriety of the court, in exercise of its equitable powers, talcing into its own hands the disposal of this merchandise, is res judicata in this case, under the decisions of this court at 78 Wis. 404, and 89 Wis. 278. The validity of such action does not depend on the result. The court having adjudged advisable possession and sale by a receiver, rather than by the less elastic methods permitted to the sheriff, advisability and benefit are presumed. In this case the probabilities are pretty strong that such step was advisable, and that the receiver’s management produced a price largely in excess of any obtainable at sheriff’s public sale. Whether that be so or not is, however, immaterial. The necessary expenses of the taking, care, and disposition of that merchandise, at least, must come out of its proceeds. Secs. 3217, 3245, Stats. 1898; T. T. Haydock C. Co. v. Pier, 78 Wis. 579, 582; Kneeland v. Am. L. & T. Co. 136 U. S. 89, 98.
In dealing with the third class of expenses the court should, when there are different funds, so marshal them as that general expenses will be paid out of general funds, and nothing out of those affected by special rights or liens, except such as pertain directly to the creation or conservation of such special fund. Here, however, there is no general fund, and the only one in the hands of the receiver is claimed to be burdened with liens to more than its amount. The merchandise from which it was realized, however, was the property of the insolvent corporation. It passed to the re
“ All the property is sequestered, including that in the officer’s hands under attachment or execution. Any less than all the property of the insolvent corporation would be ineffectual to make an equal, just, and fair distribution among all'the creditors in proportion to their claims. It is all sequestered, and all of it must go into the hands of the receiver, to be disposed of by him alone as an officer of the court; and all persons having any of the property must be ordered to deliver it to him.”
This language bears no other construction than that the receiver had both the right and duty to treat all such property as general assets, and need make no distinction between one class and another pending his administration. He was not to be concerned with what the court might do ultimately with the funds resulting from that administration. We think that it would overrule the fair construction of these previous decisions to hold now that it was at all times the duty of the receiver to keep this particular fund distinct and sacred; that he must omit all his ordinary duties as receiver necessitating expense,— even those enjoined upon him by express order of the court,— unless other,means were provided for meeting such expense. We hold, therefore, that in reliance on those decisions the receiver was justified in paying the necessary and reasonable expenses attending the general performance of his duties as an administrative receiver out of the funds in his hands, and should be given credit therefor. Secs. 3217, 3245, Stats. 1898.
Equally excluded are any expenses incurred in the litigation in circuit court and on the second appeal to this court over the rights of various classes of creditors in the funds realized and ready for distribution. There the plaintiffs, representing the general creditors, were seeking for their-own benefit to resist the claim of the attaching creditors.. As to that controversy the receiver was a stakeholder merely, and went outside of his duty in attempting to champion or promote either side of the controversy.
Within the second and third classes of expenditure fall, first, so much of the expenses of the first appeal as pertain to the defense of the receiver’s actual possession of the property confided to him bjr the court. Protection of the trust fund and of his control over it is one of the primary duties of a trustee. This would be obvious if his possession were attacked by replevin, but no distinction, in reason, can be-suggested when some other procedure is followed, equally effective to take from a trustee that which the court has im
From these views results that there should be allowed as credits the disbursements, other than attorneys’ fees, specified by the referee’s eleventh finding, aggregating $1,409.35, and, in addition, the following expenses paid by attorneys:
Fees of Commissioner Byan on examination of Friend. $15 25
Sheriff’s fees on subpoena for same. 2 31
Attorney’s expenses to Madison, first appeal ..'... 11 25
Fees of Commissioner McElroy on examination of Bick. 12 62
Fees of sheriff on subpoena for same. 2 31
Serving summons in suits on assigned accounts.. 2 00
Fees of clerk of court in same suits. 12 00-
$1,467 09
Any other proper disbursements which may have been paid by plaintiff’s attorneys are not established with Sufficient certainty to justify allowance. The value of the general services of the attorneys in the course of the assignment is fixed by both Williams and Miller at $450, and no evidence justified the referee’s finding of a larger amount. That sum, therefore, should be allowed as covering all services, except as further specified. The value of attorneys’ services in the first appeal, so- far as they related to the subject of the receiver’s custody of the merchandise, are not separated, but, as they were rendered in this court, we can judge of them, and fix the value at $400, from which must be deducted the $25 taxed attorneys’ fees collected by Mr. Williams. With some hesitation we affirm the referee’s finding of $200 as the value of attorneys’ services in commencing four suits on the assigned accounts and in conduct
It hardly needs statement that upon the receiver’s appeal we find no assignment of error which can be sustained. No claim of his was denied which ought to have been allowed.
By the Coiurt.— Upon the appeal of Morris Speiser, the order of the superior court is affirmed. Upon the appeal of Merchants’ Exchange Bank and Kalamazoo Knitting Company, that order is reversed, and the cause remanded with