Hickey v. Parrot Silver & Copper Co.

79 P. 698, 32 Mont. 143, 1905 Mont. LEXIS 150

• Court: Montana Supreme Court
• Decided: March 1, 1905
• Docket: No. 1,975
• Status: Published

Opinion

ME. OOMMISSIONEE POOEMAN

prepared tbe opinion for tbe court.

This is an appeal from a final judgment. (State ex rel. Heinze v. District Court, 28 Mont. 227, 72 Pac. 613.) It is alleged in tbe complaint filed in tbe principal action: That tbe owners of an undivided tbirty-one thirty-sixths of tbe Nipper lode claim leased their interest to E. Augustus Heinze, who was also given an option to purchase tbe property. Tbe lessee then sublet tbe premises to Arthur P. Heinze, who entered into tbe possession thereof, and at tbe time tbe action was commenced, in August, 1899, was working tbe same. That tbe Parrot Silver and Copper Mining Company entered tbe Nipper ground through underground workings, and was extracting and carrying away ores from beneath tbe surface of tbe Nipper claim. Tbe complaint asks that tbe title to tbe property be quieted, and that the defendant Parrot company be enjoined from entering upon, mining or extracting any ore from, or breaking any rock within or on, tbe Nipper claim.

Tbe Parrot company, in its answer, admitted that it was extracting ores from a vein beneath tbe surface of tbe Nipper claim, bnt alleged that such vein had 'its apex within the Little Mina lode claim, lying north of the Nipper claim, and which was owned by the defendant company. All of the owners of this thirty-one thirty-sixths undivided interest in the Nipper claim, together with the lessee, P. Augustus Heinze, and the sublessee, Arthur P. Heinze, were plaintiffs in this action.

Afterward, about March 3, 1900, the sublessee, Arthur P. Heinze, filed an application for the appointment of a receiver to take possession of and operate that portion of the Nipper claim in dispute; alleging himself to be especially aggrieved, for the reason that his lease thereon expired in July, 1901, and that he desired to have the property operated during the continuance óf his lease. A receiver was appointed by order of the court dated May 16, 1900. By the order of appointment the receiver was “authorized to operate and mine said portion of the Nipper lode claim, and all veins and bodies of ore therein, together with all extralateral rights pertaining thereto; to take charge of all ores which may be extracted by him from said portion of the Nipper mining claim; and to have the same removed, reduced, and smelted, so as to realize the most money therefrom,” etc. The order of appointment also enjoins the parties, except the cotenants, from interfering with the said receiver in the performance of his duties, and from withholding in any manner the possession of said premises, or any portion thereof, or any of the underground workings thereon or therein, or upon any veins claimed to belong to or within said portion of the said Nipper claim.

The receiver so appointed, it appears, was required to give two bonds — one for $10,000 and one for $25,000. The receiver immediately entered into the possession of the property, and began active mining operations about the 1st of June, 1900. Practically all the mining supplies, machinery, tools, and apparatus of all kinds used by the receiver were purchased by him from the Montana Ore Purchasing Company, and all the ores mined were sold to this company. It appears that this company also advanced money to the receiver when needed to settle his monthly accounts.

The defendant Parrot company in the meantime had appealed to the supreme court from the order appointing the receiver, and such order was reversed by the supreme court in March, 1901. (Hickey et al. v. Parrot Silver and Copper Co., 25 Mont. 164, 64 Pac. 330.)

1 The receiver during his operation of the mine filed his regular monthly statements and reports for all the months except the months of February and March, 1901. To each of these monthly reports the Parrot company filed its objection and protest. The monthly reports of the receiver for the months of February and March, 1901, were not filed until in January, 1902. Objections and protests were filed to these reports by the Parrot company. The receiver had employed an attorney and counselor during his operation of the mine, and had been allowed therefor, but about the time the order appointing the receiver was reversed this counsel ceased to act; and the receiver, after the remittitur was filed, employed as his attorneys and counselors, H. L. Maury and Kirk & Clinton. The plaintiff, Arthur P. Heinze, had filed no objections to these monthly statements.

On May 26, 1902, a stipulation was entered into between the receiver and the Parrot company that the taking of the testimony with reference to his various monthly reports should be referred to a referee. This appellant was not a party to this reference. The order of reference was made on that day, and a hearing was had before a referee, which it is claimed by the receiver occupied his time and attention and that of his attorneys for something over three months. Afterward, during the month of December, 1902, the receiver made his final report to the court, asking that he be allowed $28,000 for his own salary, less $4,569 which he had already received, and that he be allowed as expenses $10,000 for his attorney, H. L. Maury, $10,000 for his attorneys, Kirk & Clinton, and $125 for his bookkeeper, J. B. McGinn.

There is a statement in the final report of the receiver that the referee to whom was referred the matter of taking testimony and making findings respecting the objections and protests filed by defendant to tbe several monthly reports of tbe receiver had made and filed witb tbe clerk “bis findings of fact and conclusions of law, and has recommended that judgment be entered confirming, allowing, and settling as correct each and every of said reports.” [Reference is also made in tbe final report to all of tbe testimony, and to all of tbe exhibits filed by tbe referee, “as if all said testimony and exhibits were in this report set out at length and made a part hereof.” However, tbe testimony taken by tbe referee does not appear in the record, unless it is tbe same as that given before tbe court. No separate action appears to have been taken on tbe report of tbe referee, and no question respecting tbe same is involved here, or witb reference to tbe allowance or rejection of tbe several monthly accounts contained in tbe monthly reports of tbe receiver.

To this final report of tbe receiver objections were filed by all of tbe plaintiffs, acting jointly, except tbe sublessee, Arthur P. Heinze, who filed separate, specific objections thereto. Objections and protests were also filed by defendant Parrot company. Tbe objections made to tbe final report of tbe receiver by tbe plaintiffs who filed objections jointly, and by plaintiff, Arthur P. Heinze, who appeared separately in filing objections, are practically tbe same, and relate to expenses incurred by tbe receiver for counsel fees and other expenses since tbe 25th day of March, 1901, at which date tbe remittitur from tbe supreme court was filed in tbe district court. Objections were also made to tbe compensation claimed by tbe receiver, and it is alleged that tbe sum of $500' per month during tbe ten and one-half months which intervened between tbe appointment of tbe receiver and tbe reversal of tbe order making such appointment is ample compensation for tbe receiver. Tbe objections filed by tbe defendant Parrot company are much more extensive, and cover nearly every phase- of tbe receivership, including practically tbe same objections made by the plaintiffs, and adding thereto specific objections, to wit, to tbe sale of property made by the receiver after tbe reversal of the order appointing him, and tbe filing of tbe remittitur in tbe district court where the order was originally made. The report is further objected to on the ground that the receiver had not properly discharged the duties of his trust, had not fairly accounted for all ores mined, and had not received for such ores their market value when he had disposed of the same, and on many other grounds, making it necessary at the hearing to introduce evidence relating to almost every phase of the work performed during the period the property was in the hands, of the receiver.

The hearing on this final report was had in January, 1903,, and from the evidence then introduced it appears that after the order appointing the receiver had been reversed, and the remittitur in the case filed in the district court, the receiver-had, without any order by the court therefor, sold certain furniture for the sum of $95, and certain miners’ tools and other-implements and supplies, receiving therefor $5,162.28, all of which he had set forth in his final report. It appeared further-that his gross receipts during the period of his receivership-were $392,115.43, plus the amount which he had received from the sale of the furniture, mining machinery, and tools as above stated, after the filing of the remittitur; that his total disbursements for all purposes were $408,280, leaving a deficit of $10,342.29. The propriety of the action of the receiver in selling this furniture, mining implements, supplies, etc., is not questioned by the appellant on this appeal.

On January 11, 1903, the court signed an order overruling-all objections to the final report of the receiver, and allowing-him $16,000 for all services performed by him as such; also-allowing $5,000 for legal services performed by H. L. Maury, $5,000 for legal services performed by Kirk & Clinton, and $125 for services as bookkeeper by J. B. McGinn. That none-of these sums had been paid, except $4,569 retained by the-receiver on account. “That the said report, as tó all matters not herein specifically set forth, is adopted and approved by the court.” Afterward the receiver filed a motion that an order be made requiring Arthur P. Heinze to pay to the receiver the amount found due, to wit, the sum of $21,556. This. motion was contested, but was sustained by the court, and on January 31, 1903, the order was entered from which this appeal is taken. It was determined on a former appeal of this case that this order is in effect a final judgment, and is appealable. (State v. District Court, supra.)

The objections made by appellant are substantially that the court erred in taxing the expense of the receivership remaining unpaid against the plaintiff, Arthur P. Heinze; that the sums allowed were excessive; that no allowance should be made as compensation to the receiver, or for attorney’s fees, or for any services performed after the reversal of the order appointing the receiver.

It will be noticed that the plaintiffs in the principal case did not ask that a receiver be appointed; that subsequent to the commencement of the action this appellant, who is one of the plaintiffs, filed his separate petition asking that a receiver' be appointed; that the order of appointment was based upon this petition; that it was afterward determined that this appointment was wrongful.

Where a receiver is legally appointed, he is entitled to compensation for services actually rendered, though the order of appointment be vacated or reversed. (Beach on Receivers, see. 769.) But to whom should this compensation and expense be assessed? “The compensation of a receiver is taxable costs. (Hutchinson v. Hampton, 1 Mont. 39; Ervin v. Collier, 2 Mont. 605.) The compensation of a legally appointed receiver, while primarily chargeable to and payable out of the property or funds in his hands, as was held in Hutchinson v. Mampton, supra, is nevertheless (in absence of exceptional facts) ultimately taxable to the losing party, whose wrong occasioned the appointment, as was declared in Ervin v. Collier, supra.” (State ex rel. Cornue v. Lindsay, 24 Mont. 352, 61 Pac. 883.) “The fees o'f the receiver may be allowed as costs, and taxed against the losing party upon the entry of final judgment in the action [citing cases]. But this does not preclude the court, upon a discharge of the receiver before the conclusion of the action, as was the case here, from fixing his compensation, and adjudging payment thereof against the party at whose instance he was wrongfully appointed.” (State ex rel. Heinze v. District Court, supra.)

In McAnrow v. Martin, 183 Ill. 467, 56 N. E. 168, the court said: “When a receiver obtains possession of money or property under an order which is afterward reversed on appeal, and he is required to restore the money to the person entitled thereto, he cannot claim compensation out of the funds in his hands, but must look therefor to the party who secured his appointment. (Weston v. Watts, 45 Hun, 219; French v. Gifford, 31 Iowa, 428; Verplanck v. Mercantile Ins. Co., 2 Paige, 438; Radford v. Folsom, 55 Iowa, 276, 7 N. W. 604.)” The same doctrine is announced in Beach on Deceivers, par. 119; Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788, 30 L. Ed. 864; People v. Jones, 33 Mich. 303; Welch v. Renshaw, 14 Colo. App. 526, 59 Pac. 967. As was said in Ogden City v. Bear Lake etc. Irr. Co., 18 Utah, 279, 55 Pac. 385: “The expenses incurred by the receiver that would have been necessary for the appellant to incur, had it remained in the possession of its property, and in the control of its business, were properly paid out of the fund, but such as it would not have been necessary for it to incur should be charged to the party procuring the order. Such expenses should be regarded as incurred in consequence of an error at his instance. (Weston v. Watts, 45 Hun, 219; City of St. Louis v. Gaslight Co., 11 Mo. App. 237; Bank v. Bayne, 140 N. Y. 321, 35 N. E. 630; Moyers v. Coiner, 22 Fla. 422; French v. Gifford, 31 Iowa, 428.)” See, also, Cassidy v. Harrelson, 1 Colo. App. 458, 29 Pac. 525.

The order appointing a receiver is the authority under which he acts. Whenever this is reversed his authority is gone, and it then becomes his duty immediately to render his final report and demand his formal discharge.

The receiver is entitled as a matter of right to the benefit of counsel, when the nature of the trust requires it; and, while he usually selects his own counsel, he cannot make any contract of hiring or agreement for compensation that is binding upon the court, for it is the function of the court to determine both the necessity for counsel, and the compensation to be allowed therefor.

The receiver is entitled to compensation for services performed by him, and the circumstances and environments of the particular receivership are proper to be considered in determining the amount of this compensation. (See, generally, Forrester et al. v. Boston and Montana Cent. etc. Min. Co. et al., 30 Mont. 181, 76 Pac. 2, and cases cited; McLane v. P. & S. V. R. Co., 66 Cal. 606, 6 Pac. 748.)

The receiver in this case was in effect a general superintendent, vested with plenary powers, subordinate only to the will of his master, governed by the rules of law and equity; but the employment came from the court, instead of from the mine owner. Reports were made to the court, not to the owner. The court, not the owner, was the master. The duties and labor performed in such case, whether under an appointment by the court as a receiver, or under an employment by the owner as a superintendent, are the same. The party is required by law in both cases to be loyal to his trust, to exercise the diligence and care of a reasonable person, and to use the skill possessed by him in the conduct of the business with which he is intrusted. If he does all this he has complied with all that is required of him, and he is not personally liable for any resultant loss or damage. The receiver was required to give bonds, but his bondsmen are not liable if he is not. The law does not compel one to accept from the court employment as a receiver, any more than it compels him to accept employment from the owner as a superintendent. If he jeopardizes other interests by accepting the receivership, he does it voluntarily, and is not entitled to be recompensed therefor.

It is well established that the compensation allowed a receiver must be reasonable, but why compensation must be greater, in order to be reasonable, for doing certain work, when the hiring is done by the court, than it would be for the same duties if the hiring were done by an individual, is not apparent. "Where extra duties are enjoined, as giving a bond or otherwise, that are not compensated for in some other manner, additional pay may be allowed; otherwise there is no reason why it should not be the same. And these remarks apply equally to allowances for counsel fees.

The considerations that should be controlling with the court, in fixing compensation are the value of the property in controversy; the practical benefits derived from the receiver’s efforts and attention; time, labor, and skill needed or expended in the proper performance of the duties imposed, and their fair-value, measured by the common business standards; and the degree of activity, integrity, and dispatch with which the work of the receivership is. conducted. The percentage basis is not always the equitable method. As was said in Grant v. Bryant, 101 Mass. 570, “the court does not regulate the compensation of its officers upon the basis of a fixed commission upon the amount of money passing through their hands, but allows them such an amount as would be reasonable for the services required of and rendered by a person of ordinary ability and competent for such duties and services.” (See, also, the following cases: Schwartz v. Keystone Oil Co., 153 Pa. St. 283, 25 Atl. 1018; Boston Safe Deposit etc. Co. v. Chamberlain, 66 Fed. 847, 14 C. C. A. 363; French v. Gifford, 31 Iowa, 428; Jones v. Keen, 115 Mass. 170; Martin v. Martin, 14 Or. 165, 12 Pac. 234; United States v. Church etc., 6 Utah, 43, 21 Pac. 516; Sherley v. Mattingly, 21 Ky. Law Rep. 289, 51 S. W. 189 ; Union National Bank v. Mills, 103 Wis. 39, 79 N. W. 20.)

The order of appointment required the receiver to file his-monthly reports on or about the 21st day of each month. Notwithstanding this order, and although the receivership was-ended by the reversal of the order of appointment, the receiver-delayed filing his reports for the last two months of his operations for more than ten months after the remittitur had been filed, and his final report was not filed for some twenty-one-months after that date. No reason is given for this extraordinary delay. Objections , were made to each monthly report, when filed, and no hearing was had. During all this time an attorney was employed, who was paid monthly for his services. More than one year after the termination of the receivership the receiver and the defendant, without regard to the appellant, entered into a stipulation as follows: “It is hereby stipulated and agreed by and between the attorneys for the defendant (the said defendant being the only party to this suit, objecting to any of the receiver’s reports), and the attorneys for the receiver, Tom McLaughlin, that the hearing of the objections to each and all of the receiver’s reports heretofore filed in this -cause, may be referred by the court to William E. Carrol, Esq., with power in the said William E. Carrol, to hear testimony thereon and to report to the court, findings of fact, conclusions of law, and a judgment on each and every of the said reports, the objections thereto,” etc. This stipulation is signed by the attorneys of the defendant and by the attorneys for the receiver. The order of reference was made in accordance with the terms •of this stipulation, and a hearing had, this appellant not participating. It is claimed by the receiver that it took him some "two or three months to prepare for this hearing. It is the duty •of a receiver to transact his business in such a manner, and to keep his books and vouchers in such shape, that they may be ready for examination at any time. If evidence dehors the receiver’s books and vouchers is necessary to sustain his reports, that evidence certainly would be more easily obtained at the time than after many months of delay. At this hearing the objections made to these reports were not sustained, but the receiver’s reports were sustained by the referee.

Where costs have been caused by the negligence of the receiver, he cannot, in equity, maintain a claim for reimbursement either out of the trust fund, or from the party who caused his wrongful appointment.

Whether the defendant in this case is liable for the attorney’s fees for this hearing before the referee on the ground that the objections were not sustained, or whether the receiver should bear the expense of his own counsel, are questions not involved here, the only question being, is this appellant liable for these attorney’s fees ? and the answer, under the facts presented here, is that he is not.

The receiver is not entitled either to compensation or allowanees for any new business transacted after tbe filing of tbe remittitur, for the receivership had been terminated. After that date the receiver had no authority to employ counsel whose compensation could be charged against the trust fund or against this appellant, and neither could the court direct or approve such employment or sanction such payment. When the remittitur was filed the expense of this receivership terminated, so far as the same could be a charge against the trust fund or against this appellant. '

Rehearing denied April 4, 1905.

The allowance of $125 was “for the services of J. B. McGinn as bookkeeper in the last month, preparing the last two reports,, settling up of the accounts, and straightening up the books, and finally closing out the business and accounts.” We think this item of expense should be allowed.

The judgment of the court fixing the receiver’s compensation and allowing attorney’s fees is general; but, from the evidence, it is apparent that it extended this compensation so as to cover time subsequent to the termination of the receivership; that it also allowed attorney’s fees ’for the hearing before the referee on the monthly accounts which should have been settled prior to the order of reversal. This was error, for which the case should be reversed. Evidence relative to the compensation of the receiver and the allowance for counsel fees may be admitted for the purpose of informing the court as to what is just and reasonable under the circumstances; but, where the court has personal knowledge of all that has been done by the attorneys, it is not always necessary that it should hear evidence respecting the amount which it should allow, for a court is presumed to know the value of attorney’s services, and it is for its own enlightenment that such evidence is heard.

We think this judgment should be reversed.

Per Curiam. — Eor the reasons stated in the foregoing opinion, the judgment is reversed and the cause remanded.

Reversed and remanded.