Case Name: Walter Weston et al., Resp'ts, v. James R. Watts In re Alexander Thain, Receiver, App'lt
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1887-06-18
Citations: 9 N.Y. St. Rep. 779
Docket Number: 
Parties: Walter Weston et al., Resp’ts, v. James R. Watts In re Alexander Thain, Receiver, App’lt.
Judges: 
Reporter: New York State Reporter
Volume: 9
Pages: 779–784

Head Matter:
Walter Weston et al., Resp’ts, v. James R. Watts In re Alexander Thain, Receiver, App’lt.
(Supreme Court, General Term, First Department,
Filed June 18, 1887.)
1. Receiver—Op partnership property—What due process op law.
It is provided by the constitution of this state (art. 1, § 6) that no person shall be deprived of life, liberty or property without due process of law, and a legal process by which he may be divested of his property, which is unauthorized and afterwards set aside, is not such due process.
3. Same.
This provision will not sanction the forfeiture of a person’s property to pay the expenses of a proceeding taken against him which is afterwards set aside as unwarranted.
3. Same—Commissions—Who required to pay.
A receiver of the property of a copartnership having been appointed, and the order appointing him as such having been reversed by the general term, upon appeal by an order directing him to turn over t j the defendants all the property held by him as receiver and to render an account before a referee named therein, who should fix the receiver’s compensation, which the plaintiffs were ordered to pay and the receiver having appealed from an order of the special term enforcing that made by the general term: Held, that his appointment having been judicially declared invalid, the defendants could not be required to pay his commissions, and that proper provision was made for them by charging them upon the plaintiffs.
Appeal by Alexander Thain, receiver, from an order directing him within five days- to assign, transfer and deliver to the defendant, all the copartnership property, stock, chattels, books, vouchers, accounts, choses in action and effects, received or held by him, or under his control, by virtue of his appointment as receiver.
Alexander Thain, in person, and James Kearney, for app’lt; Treadwell O leveland, for def’t.

Opinion:
Daniels, J.
The appellant was appointed receiver at the instance and on the application of the plaintiffs in the action, and under such appointment he obtained possession of the property now in controversy. After his appointment an appeal was taken by the defendant from the order making it, and after the hearing of the appeal the order appointing the appellant was reversed, and was directed, as he has been by the order from which he has now appealed, to transfer and deliver the property and effects in his hands to the defendant.
He was further ordered to file an account of his proceedings before a referee appointed to take and state the same, and his fees and compensation as receiver, were directed to be paid by the plaintiffs in the action.
From these facts it became evident that the appointment of the appellant as receiver was upon an application adverse to the defendant, and without the authority of the law. And having been made in that manner, there seems to be no legal ground upon which the receiver can be directed to withhold so much of the property from the defendant, as may be required to pay his commissions and expenses, but these expenses should be paid, as they have been directed to be, by the plaintiffs who obtained the appointment.
So far as the defendant is concerned, the appointment, was an unauthorized one, not made for his benefit in any manner, but through which property was taken from his possession by the receiver and withheld from him without any legal authority justifying the proceeding. It was an invasion of his rights, for which there is no law requiring him, or his property, to pay the expense; but on the contrary, so far as the law provides for the payment of legal expenses, they are to be defrayed by the unsuccessful party, in the litigation.
To take a person's property from him by an unauthorized proceeding and place it in the hands of a receiver, and then subject him to the expenses of the proceeding, would be very transparently unjust, even if the courts had the power to do that.
Oases are not uncommon where the result would be ruinous to the injured individual. All the property a person may have in trade, may upon an unauthorized apphcation, be taken from him and placed in the hands of a receiver, and after vindicating his right to be relieved from the proceeding, if he should be obliged to bear the expenses of it, and compensate the receiver for his commission and disbursements, or m default of doing so, his property should be appropriated to securing that end, he might under the forms of law be financially ruined.
For that there seems to be, and probao.y will nor e, any authority vested in the courts, for their duty is to right the wrong when its existence may be made to appear and to protect the injured party against its consequences. And that can be no otherwise done than by restoring to him the property of which he may have been divested by the unauthorized interference of the court. As little as that, he certainly is entitled to, and the receiver who has acted under the appointment obtained upon the application of the adverse party must look to that party, for his fees and compensation.
If the court could impose upon the defendant, or the property ordered to be restored to him, the obligation first to pay the receiver, it might with the like reason apply the same principle to every case where one man may be deprived of his property through legal proceedings wrongfully instituted against him by another person.
If such a principle is applicable at all it must be a general one, charging the property with the fees of officers where it may have been replevied or taken under an attachment, and the same rule would restrain the discharge of a person in custody under an order of arrest until the fees of the officer should be paid. Such cases would be equally meritorious in the claims presented as the present case, which in principle cannot be distinguished from these others. It is sufficiently injurious for a person to have his property taken from him, or his person subjected to arrest, without right, and upon no legal principle can the wrong be aggravated in such a manner as to order him to pay the expenses of the proceeding. This was considered in the examination of a claim for costs and expenses under an attachment in Bowe v U S. Reflector Co (36 Hun, 407), where it was determined that even the legislature could not in this manner subject the property of one person to the expenses illegally created at the instance of another.
The fundamental law of the state will not permit that to be done, for it has been provided by section 6 of article 1 of the constitution of the state, that no person shall be deprived of life, liberty or property without due process of law And a legal proceeding by which he may be divested of his property which is unauthorized, and afterwards set aside, cannot be such due process. The law cannot sanction the taking of one man's property in this manner and subjecting it to the expenses or obligations of another. Embury v Conner, 3 Com., 511, 517
Due process of law requires something more than an unauthorized legal proceeding set aside by the final action of the courts. This subject was examined, in Stuart v. Palmer (74 N. Y., 183), where it was said that "This provision is the most important guaranty of personal rights to be found in the federal or state constitutions. It is a limitation upon arbitrary power, and is a guaranty against arbitrary legislation. Ho citizen shall arbitrarily be deprived of his life, liberty or property, whether the proceeding be judicial, administrative or executive in its nature . This great guaranty is always and everywhere present to protect the citizen against arbitrary interference with these rights." And it requires a proceeding "which.proceeds upon inquiry and renders judgment only after trial." Id., 190-191 It certainly will not sanction the forfeiture of a person's property to pay the expenses of a proceeding taken against him which is afterwards set aside at his instance as unwarranted.
In Ver Planck v. Mercantile Ins. Co. (2 Paige, 438). the property of a corporation was taken from it and placed in the hands of a receiver, by an order of the vice-chancellor, reversed on appeal, and the chancellor directed the restor ation of the property, without providing for subjecting it, or the party entitled to receive it, to the payment of any fees or expenses to the receiver. A demand of this nature by the receiver was evidently in that case not considered to be worthy of either examination or discussion.
In French v. Gifford (31 Iowa, 428), this subject was discussed, in the opinion of the court, where it was said: "We think it would be an unjust and inequitable rule if in all cases the receiver should be entitled to his compensation from the fund in his hands, without reference to the legality of his appointment. Under the operation of such a rule innocent persons might be made to suffer great loss." It was further added that costs were adjudged against the unsuccessful party "unless there exists some equitable consideration to justify a different disposition, or the case is otherwise provided for by law." Id., 431.
The claim now made in behalf of the receiver has by no law been imposed upon the defendant. Neither is there any equitable principle which should require him to pay, before he can secure a return of his property, the expenses of the unlawful preceding by which it has been taken and withheld from his possession. To require that payment from him, or his property, would be a wrong which the court had neither the power nor the disposition to inflict upon him. It may be a hardship upon the receiver himself, but it is one the risks of which he has voluntarily assumed. He could have' avoided it by declining to accept the appointment or protected himself against the loss of his commissions and expenses by first requiring security from the plaintiffs for their payment. If they cannot now be made to pay, it is more just and equitable that the receiver shall be deprived of his fees and expenses than it would be to require the defendant to defray the expenses of an unauthorized proceeding and the cost of depriving him thereby of the possesion of his property.
The order from which the appeal has been taken should be affirmed with the usual costs and disbursements.
Bartlett, J.
The appellant, Alexander Thain, was appointed receiver of the firm of Weston Brothers and Watts in this action, and the order appointing him was reversed by the general term upon an appeal to which he was not a party. The order of reversal directed him to turn over to the defendant all the co-partnership property which he held and to render an account before a referee named therein, who should fix the receiver's compensation, which the plaintiffs in the action were ordered to pay The receiver did not comply with this order of the general term, whereupon the defendant obtained a special term order requiring him to do so; and from the latter order the receiver now appeals.
By this appeal he practically asks the general term to modify its former order in the action, made without notice to him, so far as it commands him to deliver all the partnership property to the defendant, before his compensation shall have been fixed and its payments definitely^ provided for. He claims to have incurred certain liabilities in the due discharge of his trust, more than equal to the amount he has received, and argued that he ought not to be compelled to turn his receipts over to the successful party to the litigation, and look to the other (who may be irresponsible), for his fees and expenses.
The case of Galster v. Syracuse Savings Bank (29 Hun, 594), is authority for the proposition that an order ought not to be made directing a receiver to pay over the entire fund, Avithout authorizing him to deduct his commissions, or in some way providing for their payment. In the case at bar, however, the payment of all proper commissions and expenses to which the receiver may be entitled, is provided for by charging them against the plaintiffs, who procured his appointment under circumstances which the court has held to have been insufficient to warrant a receivership, and who, so far as appears, are of sufficient pecuniary responsibility to pay the receiver's charges. Indeed, even if the unsuccessful party were unable to pay the receiver, it may well be doubted whether any authority exists to enforce payment of his commissions out of any portion of the property or fund belonging to the party who has succeeded in vacating the receivership. It would be a pretty severe rule, even if constitutional, which would compel a litigant to pay the expense of having his own property illegally taken out of his custody for awhile. There might be cases,, where a receiver was erroneously appointed, but not under such circumstances as to make the appointment absolutely void, which would warrant an order that his disbursements be paid out of the fund; as for example, where the property consisted of a herd of cattle, for which the receiver had to buy fodder. In such a case, it would be faff and just to charge the successful party with the cost of feeding, for he would have had to incur it if the animals had had to remain in his own custody. But commissions, and all disbursements, except such as would have been necessary if the custody of the property had remained unchanged, seem to me to. stand on a different footing.
I do not deem it essential to the determination of the present appeal, however, to lay down any general rule as to the source of the compensation of a receiver whose appointment has been vacated, as erroneously or im provi dently made, but not absolutely void. It is enough to say that the successful party in this proceeding should not be compelled to contribute to the compensation of the receiver, inasmuch as proper provision for his fees and disbursements has been made by charging them against the plaintiffs, at whose instance he was appointed.
For this reason, I think the order appealed from should be affirmed.