Case ID: app-dc_3/html/0060-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Chief Justice Alvey", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CAKE v. WOODBURY.
    Receivers, Allowance for Debts Contracted by; Compensation of; Revivor; Decree.
    1. Where an order appointing a receiver of a hotel provides that he shall “ carry on and manage the business of keeping said hotel, etc.,” he has implied power to contract debts and incur liabilities on account of the business.
    2. Under an order of reference to the auditor to state the accounts of a receiver, a schedule of the debts for which the receiver claims allowance, together with the names of the creditors and bills and accounts of such debts, are sufficient proof of such debts, in the absence of any imputation of bad faith on the part of the receiver.
    3. The amount of compensation 'to, be allowed a .receiver for his services calls for the exercise of a sound discretion on the part of the court appointing him, and an appellate court will ordinarily defer much to the judgment of that court in such a matter.
    4. If pending an appeal from a decree of the equity court ratifying a report of the auditor fixing the amount to be paid a receiver for debts contracted, compensation and counsel fees, the receiver dies, his executrix is his proper representative in the suit, not only to the extent of the allowance by the decree appealed from of compensation to him as receiver, but as to the allowances for debts and counsel fees.
    5. When such a decree directs the administrators of the surety on a bond of a person by whom money was payable to the receiver, to make the payments mentioned in the decree, the decree is not erroneous because it does not direct the administrators to make such payments out of the assets that may remain in their hands as administrators, in the absence of any allegation of plene admimstravit or of a deficiency in the assets.
    No. 208.
    Submitted January 15, 1894.
    Decided April 2, 1894.
    HeariNG on an appeal from a decree of an equity term of the Supreme Court of the District of Columbia, overruling exceptions to and ratifying and confirming a report of the auditor of that court in a cause referred to him to state the accounts of a receiver.
    
      Affirmed.
    
    
      The court in its opinion stated the case as follows:
    The questions in this case are raised by exceptions to an auditor’s report and account as to allowances made to a receiver in the settlement of his final account. In order to a clear understanding of the questions and the rights of the receiver as determined by the court, it is necessary to state some of the proceedings and orders of the court, under whose authority the receiver acted.
    The original bill, and also an amended bill, were filed by the appellant Horace M. Cake, and by the original bill the court was asked to appoint a receiver to take charge of the property, the subject of the bill. This original bill was filed in April, 1891, to foreclose a chattel mortgage or deed of trust, made by one Woodbury, then in possession of the properly, to secure an indebtedness of $75,000. This mortgage or deed of trust was of all the personal property and effects contained in and pertaining to the hotel “La Nor-mandie,” in the city of Washington, a portion of which property was subject to a prior mortgage or deed of trust to secure the payment of rent of the hotel buildings. The property consisted of the furniture and other necessary equipments of a first-class hotel in this city, and it was of great importance to all concerned that the hotel should be kept in operation.
    A receiver, Francis B. Mohun, was appointed, according to the prayer of the bill, by an order of May 2, 1891. By that order the receiver was directed to take charge of the hotel “La Normandie,” “together with the furniture, supplies and equipments thereof, including all the fixtures and personal property of every kind whatsoever, in or about said premises and pertaining to the business thereof, pending the suit, or until the further order of the court, and to carry on and manage the business of keeping said hotel in substantially the same manner in which it had theretofore been carried on.” Under this authority, the receiver entered and took possession, and carried on the hotel, until discharged, some seven months thereafter.
    
      On the 5th of October, 1891, a decree was passed, directing a sale of' the personal property by trustees; ^and under this decree the appellant Cake, the plaintiff, at whose instance the receiver was appointed, became the purchaser, subject to the prior mortgage. He also, about the same time, became the purchaser of the unexpired term of the lease of the hotel, which was sold by the marshal on an execution against Woodbury; and, on the 4th of December, 1891, upon the petition of the appellant Cake, the receiver was directed to surrender possession of the hotel and all the personal property therein and appertaining thereto to the purchaser. But before this order could take effect, or the purchaser could obtain possession thereunder, the latter was required to file in the cause an undertaking, with surety or sureties approved by the court, conditioned for the prompt payment by said appellant Cake, “ to said receiver, of such sum or sums of money as the court should thereafter find to be due said receiver on account of his expenditures or indebtedness as receiver, or on account of his compensation as receiver, and to be payable by the plaintiff Cake; and conditioned also that a decree might be made in the cause against such surety or sureties, as well as against said plaintiff Cake, for the payment of such sum or sums of money.”
    In pursuance of this order, and as a means of obtaining the possession of the property, discharged of the control of the receiver, the appellant Calce, with his surety, William B. Moses, executed the undertaking required, whereby they undertook and agreed “ to pay promptly to Francis B. Mo-hun, receiver in this case, such sum or sums of money as the court should thereafter find to be due said receiver, on account of his indebtedness or expenditures as receiver, or on account of his compensation as receiver, and to be payable by said Cake, or out of the proceeds of any sale made in the case ”; and agreed “ on behalf of themselves and each of them, their and each of their heirs and personal representatives, that the decree for the payment of such sum or sums of money might be pronounced against all of them.” This undertaking was duly approved by the court, and the property was surrendered to the appellant Cake accordingly.
    The cause, by order of court, was referred to the auditor with directions to take and state the proper accounts with the receiver; but before the accounts were stated, William B. Moses, a party to the cause, and the surety in the undertaking, died intestate. Upon petition of the receiver, the administrators of the deceased were brought in and made parties to the cause. In their answer to the petition, there is no allegation or pretense of any insufficiency of assets of the estate of the deceased to discharge any decree that might be made against the administrators.
    Under the reference, the auditor then proceeded to take proof and to state the accounts. The accounts as stated and returned by the auditor, show an aggregate sum to be paid to Mohun, the receiver, of $8,324.94. This sum is made up of allowances ascertained to be payable to the receiver, as follows:
    Indebtedness of receiver for supplies to the business . $5,038.74
    Compensation of receiver as stated. 2,793.79
    Allowance to counsel of receiver. 500.00
    CO 10 05 CO CO 00 60-
    Less balance in hands of receiver ON to ÍN.
    Amount to be paid to the receiver. $8,324.94
    The accounts were excepted to by both the appellant Cake, and the administrators of Moses, the surety in the undertaking. But the exceptions were overruled, and the auditor’s report was finally approved and ratified; and the court thereupon decreed “ that the said Horace M. Cake, and William H. Moses, Harry C. Moses and Arthur C. Moses, administrators of William B. Moses, surety of the said Cake in the undertaking filed herein on the 4th day of December, A. D. 1892, forthwith pay to Francis B. Mohun, the receiver herein, the sum of eight thousand three hundred and thirty-two dollars and fifty-three cents ($8,332.53), being the aggregate amount found by said report to be payable to him for discharge of the indebtedness incurred by him in the conduct of the business; for his compensation as receiver; and as allowance for counsel fees; and further, that the said Francis B. Mohun have execution therefor as at law.” The parties excepting appealed.
    
      Mr. W. W. Flemming and Mr. W. C. Prentiss for the appellant, Cake.
    
      Mr. W. L. Cole for the appellants, the administrators of W. B. Moses.
    
      Mr. J. J. Darlington for the appellee, the administratrix of Francis B. Mohun, receiver.
   Mr. Chief Justice Alvey

delivered the opinion of the Court:

1. On this appeal, the first error assigned is, that the receiver contracted debts without previous authority obtained from the court, and therefore, having exceeded his authority, he should not be allowed for debts so contracted.

There is no doubt of the general proposition, that a receiver is very restricted in his authority in respect to contracting debts. Properly he can exercise only such power and authority as are given him by the court, and if he exceeds the prescribed limits he acts at his peril. But in this case, the order of the court appointing the receiver would appear, by necessary implication, to confer authority to enter into contracts and incur liabilities, such as are usual and customary in carrying on the hotel -business. The order expressly provides, that the receiver should “ carry on and manage the business of keeping said hotel in substantially the same manner in which it had theretofore been carried on.” This could hardly be done without the power of contracting debts and incurring liabilities on account of the business. In the case of Cowdrey v. R. R. Co., 93 U. S., 352, 354, the Supreme Court, by Mr. Justice Field, said: “A receiver is not authorized, without the previous direction of the co'urt, to incur any expenses on account of the property in his hands, beyond what is absohctely essential to its preservation and use as contemplated by his appointmentHere, the hotel was not to be closed, but to be managed and the business conducted in the ordinary way, with a view to profit to those interested in its preservation and use as a hotel, and that was the purpose of appointing the receiver. It must, therefore, have been contemplated by the court in its order that the receiver should have and exercise the power of contracting for the necessary supplies and service to enable him to carry on the business.

The question, however, of the right of the receiver to be allowed for debts contracted by him, and for which he was responsible, is not fairly open to contest in this case. As a condition upon which the hotel establishment was surrendered to the appellant Cake as the purchaser, he was required to' and did engage and obligate himself with surety to make prompt payment to the receiver of such sum or sums of money as the court should thereafter find to be due the receiver on account of his expenditures or indebtedness as receiver; or on account of his compensation. The undertaking was accepted, and all parties have acted on the faith of it; and it is too late now to attempt to make a question as to the right of the receiver to have allowed him for proper expenditures or debts incurred in conducting the business of the hotel.

It has been suggested that there was not sufficient proof furnished to establish the existence of the debts allowed for to the receiver. But that objection is not tenable. The receiver furnished a schedule of the debts, and the names of all the parties to whom the same were due, or with whom they had been contracted, and produced the bills and accounts of such debts, and the receiver being the officer of the court, and acting for all the parties concerned, in the absence of any imputation of bad faith, the auditor and the court below could not be required to insist upon any more formal proof or additional evidence of the debts. Indeed, such question does not appear to have been distinctly raised before the auditor.

With respect to the first error assigned, therefore, we are of opinion that the court below was entirely correct in allowing the receiver for the indebtedness for supplies to the hotel while in his charge.

2. The next error assigned is in regard to the allowance of compensation to the receiver. The exception taken to this allowance is based upon the charge that the allowance is excessive. It is true, this allowance may be very liberal; indeed, in the opinion of many it may be regarded as too liberal to be altogether just. But there is no fixed or well recognized rule upon the subject, and each case depends largely upon its own special circumstances. This fact calls of necessity for the exercise of a sound discretion in determining the amount; and it is supposed that the court making the appointment, and having under its direction the acts and conduct of the receiver, is far more competent of forming a fair and just estimate of what is reasonable compensation, under all the circumstances, than an appellate court can be. Indeed, it has been expressly held, that, in fixing the compensation of a receiver, an appellate court will ordinarily defer much to the judgment of the court below by which the' receiver was appointed, and which supervised and directed his conduct. In this there seems to be great propriety. Hinckley v. R. R. Co., 100 U. S., 153; High on Rec., Sec. 781.

In this case, the nature of the subject-matter placed in charge of the receiver necessarily imposed upon him a heavy responsibility. The evidence in the case would seem to justify the conclusion reached by the auditor and the court below, as to the amount proper to be allowed; and we do not feel justified in dissenting from that conclusion.

3. With respect to the exception taken to the allowance of counsel fees, we do not understand that exception to be seriously pressed. It is such an allowance as is usually made in receiver’s accounts; and when there is a real occasion for the employment, and the amount charged is reasonable, the allowance is generally sanctioned by the courts. High on Rec., Sec. 805.

4. During the pendency of this appeal, Mohun, the late receiver, has died, and, upon application for that purpose, his executrix has become a party in the place of her testator. And it is now objected by the appellants that the executrix of the late receiver can have no standing in this court in her representative character to defend the decree appealed from; or, at most, she can only be allowed to represent the estate of her testator to the extent of the allowance by the decree of compensation to him as receiver. But to this we cannot assent. The decree, as we have seen, is a personal one, and decrees the money to be paid to Francis B. Mohun. The executrix is the only party who could revive the decree, or who is entitled to receive the money from the parties decreed to pay it. A question strictly analogous to the present was decided by the Supreme Court in the case of Cowdrey v. R. R. Co., supra, where it is said, in speaking of a debt incurred by trustees and excepted to: “ The trustees, had they lived, would have been entitled to retain out of the funds received by them, sufficient to meet the claim. They would have had an equitable right not merely to be reimbursed from such funds all reasonable expenses incurred, but also to retain from the funds sufficient to meet all reasonable liability contracted in the execution of their trust!’ And if a trustee or receiver has a right to retain out of trust funds an amount sufficient to cover all liability contracted in the execution of his trust, he certainly has a right to such an allowance in the settlement of his accounts, and to enforce a decree thereon making the allowance; and if the trustee or receiver can enforce such decree in his own right and for his own indemnification, it would be singular, in case of his death, if his personal representative could not revive and enforce such decree. It may be, that if any portion of the debts allowed to the receiver be still unpaid, the creditors would be entitled to require the executrix of the receiver, after receipt of the money, allowed by the decree, to bring the money into court to pay such debts; but the appellants, against whom the decree is made in favor of the receiver, have no right to withhold the money from the executrix.

5. It is also objected to the decree, that it is erroneous, because it has not directed the administrators of William B. Moses to pay the amount of the decree out of the assets that may remain in their hands as administrators. But there is no real foundation for this objection. There is no allegation of pi ene administravit, or of a deficiency of assets; and the direction of the decree is that the administrators pay, which of course means that payment is to be made out of the assets of the personal estate of their intestate.

The amount decreed in favor of the receiver should be lessened or abated by a small credit of $7.59, a balance in the receiver’s hands, according to the report of the auditor. This small sum deducted left the sum of $8,324.94, to be paid to the receiver, instead of the sum of $8,332.53, the amount inserted in the decree, and which was, doubtless, inserted by oversight or inadvertence. With this small correction or modification, we shall affirm the decree, with costs to the executrix of Francis B. Mohun, deceased.

Decree affirmed.