State ex inf. Hadley v. People's United States Bank

95 S.W. 867, 197 Mo. 605, 1906 Mo. LEXIS 53

• Court: Supreme Court of Missouri
• Decided: June 20, 1906
• Docket: No. 2
• Status: Published

Opinion

VALLIANT, J.

The Attorney-General at the instance of the Secretary of State on July 10, 1905, filed in the circuit court of St. Louis county, as if under the authority of section 1305, Revised Statutes 1899, a suit against the People’s United States Bank, a banking concern doing business in St. Louis county, alleging in the petition that the hank was doing business in an unsafe and unauthorized manner, that a peculiar feature of its business was that its intercourse between it and its stockholders and depositors was conducted largely through the United States mails and that the Post Office Department had issued a fraud order against it which virtually put an end to its operations. The petition prayed the court “to appoint a receiver to forthwith take charge of said People’s United States Bank of St. Louis, Missouri, to wind up its affairs and business for the benefit of its depositors, creditors and stockholders, and to do and perform all necessary acts for the purpose of taking possession of the property and assets of said bank, and for the winding up of its affairs and collection of its outstanding accounts, and such other acts as in the opinion of the court may, from time to'time, be necessary.”

Immediately on the filing of that petition and without notice to the bank the court appointed a receiver and authorized him to take possession of the bank and all its assets and hold the same subject to the order of the court. The receiver gave bond and took immediate possession of the bank and its assts which amounted, according to his report, to $2,679,244.79.

Within two days thereafter the bank filed a motion to set aside the order appointing the receiver, which coming on to be heard on July 17, 1905, was by the court sustained and the receiver was ordered to return to the bank all its assets in his hands.

In sustaining the motion the court in a written opinion filed, after summarizing the statements in the petition and showing that there was no averment or evidence of insolvency, said: “The application was presented as one coming under this mandatory requirement of the second part of the section. But upon more careful consideration of the statute and the petition, after argument of counsel, the court is satisfied that such is not the case and that the appointment summarily made without notice was without authority or jurisdiction. The alleged ‘fraud order’ may he a serious hindrance to the business of the bank, and may necessitate a change in its business methods, but does not render the bank insolvent or seriously jeopardize the safety of its depositors or other indebtedness.”

In obedience to the order of the court the receiver returned to the bank all of its assets except the money that he had disbursed under orders of the court and except the sum of $12,100, which he asked to retain to cover the costs of his receivership and compensation for his services. The court refused that request and the receiver returned the $12,100 also to the bank. There was no appeal from the order of the court revoking its order appointing the receiver.

On the next day after his appointment the receiver reported to the court that, the total deposits in the bank did not exceed the sum of $225,000, and that he had in his hands upwards of $1,000,000, and asked authority to pay the depositors, which was granted and he immediately began paying them and had up to the time of his discharge paid $24,511.05, under that order, to depositors; the bank afterwards ratified and approved those payments.

On October 21, 1905, the motion of the receiver for an allowance for his costs and compensation came on for hearing, and the court made an order allowing him $2,500 for his compensation for seven days’ service, $500 for his attorney’s fees, and $150 for legal advice from another attorney, and ordered that the total amount, $3,150, “be taxed as costs incurred by the plaintiff in this action subject to the future order of the court in respect to the costs herein.” From that order the receiver has prosecuted this appeal.

There are two points urged by appellant, first, that the sum allowed is inadequate, second, that he should have been allowed to retain the sum out of funds that had come into his hands as receiver without the hazard of having it taxed as costs to abide the result of the suit.

I. The first point presents a question of fact and like all questions of fact it is one with which an appellate court has little to do. In such case unless the amount is so unquestionably inadequate or so manifestly excessive that the appellate court is convinced that it was the result of some other cause than deliberate judgment, deference will he given to the conclusion of the triers of the fact. In this instance the trial judge himself had personal knowledge' of everything the receiver had done and was in better position than we are to put a valuation on the services. No unfriendly motion could have swayed the deliberate judgment of the trial judge, his selection of the receiver was proof of his appreciation of him, and his discharge of him was without reflection on his conduct, and was based solely on the law that the appointment was “without authority or jurisdiction. ’ ’

In the brief we are told that more than two and a half million dollars had passed through the receiver’s hands, that to qualify himself to handle so large a sum he had given a large bond and had paid a large price for it.

It is also said in the argument that responsible business firms handling so large an amount, even if it should take but a day, would expect to he paid many times more than is asked in this case. We have no judicial cognizance of what responsible financial concerns charge for their services, and there is no evidence on that point, hence we cannot measure the services of the receiver by that standard. But even if there was evidence showing the estimate in the market of such services, we are not sure that it would aid us in this inquiry, because there might he other considerations than the mere handling of the money to he taken into account. A large business transaction might by passing .through the hands of a concern of great repute, gain credit, and the concern might charge for the use of its name, but it does not follow that the assets of a bank or other business concern are appreciated in value by having been taken possession of by a receiver.

But however that may be, all the facts bearing on the question of the value of the receiver’s services were before the court whose.agent the receiver was; that court has weighed them and rendered its judgment and with that this court must be satisfied.

II. The main grievance on which appellant insists is that he was not allowed to retain the sum out of the assets of the bank in his hands.

The question of whether or not a receiver should be paid out of the funds in his hands regardless of the final judgment depends on the circumstances of the case. Sometimes property of a character liable' to waste or destruction becomes involved in a lawsuit between parties with conflicting claims to it, and to preserve it while the litigation is going on a receiver becomes necessary, and the services that he renders is for the benefit of the defendant, even though the judgment in the end on the matters in litigation should be entirely in his favor. Therefore, in some such cases, justice would charge the property preserved with the cost of preserving it; but even in such case, when'the defendant recovered judgment for his costs, the judgment usually includes the cost of the receivership which he has paid, and he is entitled to execution for it against his adversary. But in such case the receivership is only an incident to the litigation, and is authorized only when the property is of such a character as, in consequence of the effect of the litigation, the defendant is unable while the suit is pending to utilize it. That is not the case at bar. Here the only purpose of the plaintiff is, as expressed in the prayer of the petition, to take the assets of the bank out of its hands and wind np its affairs; there is no other litigation; if the plaintiff is not entitled to what it asks, then there was no legal ground for the receivership.

Reference is made in the brief of appellant to the fact that a fraud order had been issued by the United States Post Office Department against defendant, and in the petition that fact is averred and the conclusion drawn that that would prevent the bank continuing business, and in the order appointing the receiver that fact is mentioned as if it was a ground for such action. It is not claimed that the appointment of the receiver was made to protect the bank from the injury it received at the hands of the Post Office Department, but on the contrary the theory seemed to be that because it had received a heavy blow from that source its vitality as a banking concern had ceased and there was nothing left to do but to administer on its estate. But we have nothing to do with-the fraud order; this is a proceeding founded on section 1305 of our- statute, without which the Secretary of State has no authority to institute such a suit, and the court should have looked to that statute alone for its jurisdiction; it could derive no authority eminating from the head of an executive bureau; that order affords no reason for the appointment of a receiver. We must therefore proceed to the consideration of the question before us with the conclusion that the learned trial judge after due deliberation and second thought was right when he said that his act appointing the receiver was “without authority or jurisdiction.” It was absolutely wrong and a violation of the defendant’s rights.

We are referred to authorities which hold that as a general rule the receiver is entitled to his pay out of the funds in his hand regardless of what the final judgment on the merits of the case may be, and we are prepared to accept that as a general rule, with the qualification we have herein above mentioned. But we have not been pointed to any authority which holds that, where there was absolutely no justification in the act appointing a receiver and the act was in its nature to the injury of the defendant, he should nevertheless pay for the injury that was done him, and if there are .such authorities we do not care to see them.

In Alderson on Receivers, section 633, the author quotes the following from the Supreme Court of Iowa which we think correctly states the law: “It is insisted by plaintiff’s counsel that the compensation of the.receiver should be paid out of the fund of which he had the custody and charge, and that he should be permitted to retain the same therefrom. Numerous cases have been cited to show that such is the uniform practice. Upon examination of these cases, it will he found that in every case there was no question made as to the legality or propriety of the appointment of the receiver, and that in each case the receiver closed up the business and settled his accounts in pursuance of his appointment. The receivership in each case was for the benefit of those interested in the fund, and he was paid therefrom, which is only another method of apportioning the costs upon those entitled to the fund. . . . We think it would be an unjust and inequitable rule if in all cases the receiver should be entitled to his compensation out of the funds in his hands without reference to the legality of his appointment. Under the operation of such a rule innocent persons might he made to suffer great loss.”

That language from the Iowa Court was quoted and approved in St. Louis v. St. Louis Gas Light Co., 11 Mo. App. 237, the opinion in which case by Jhdge Thompson was expressly adopted as the opinion of this court when the same case came here on appeal. [St. Louis v. Gas Light Co., 87 Mo. 224.]

The very question we now have before us was the sole question in that case. The city of St. Louis had in a previous suit against the Gras Light Company caused a receiver to be appointed, who dispossessed the company of all its property and carried on the business during the years of the litigation; in the end it was adjudged that the city had no right to the property and that the taking of it out of the hands of the defendant company by means of a receiver was wrongful'. The receiver’s compensation was assessed at $45,043.50, and ordered to be taxed as costs, which meant that the same was to be paid by the city, the losing party. In, that case the receiver had managed the property well and had made large profit for the corporation and it was insisted by the city that the receiver should be paid out of the funds which his own industry and skill had accumulated, but the court held that the city must pay the costs.

In the brief for appellant it is said that the payment by him of a large amount of money to the depositors was ratified and approved by the defendant bank, and it now should not be heard to deny the propriety of at least that much of the receiver’s acts. But that ratification or approval is in legal effect like that of a man bound with cords and despoiled of his property, and who while in the toils consents that his keeper may use a portion of his funds for a lawful purpose. There was nothing in that to indicate an acquiescence in the act of the court appointing the receiver. When those payments-were being made the defendant’s motion to revoke the order appointing the receiver was on file and the defendant was pressing it to judgment with all its power.

The fact that the State of Missouri is the plaintiff and that no judgment for costs can be rendered against the State cannot alter the result. If the defendant is not otherwise liable it cannot be rendered liable by the fact that there is no one else against whom the judgment can go.

The learned trial judge decided this point correctly. The judgment is affirmed.

Gantt, Burgess, Fox and Graves, JJ., concur; Brace, G. J., not sitting; Lamm, J., dissents.