Case Name: FREEMAN P. LANE and Another v. WILLIAM D. HALE
Court: Minnesota Supreme Court
Jurisdiction: Minnesota
Decision Date: 1899-12-20
Citations: 78 Minn. 421
Docket Number: Nos. 11,836—(134)
Parties: FREEMAN P. LANE and Another v. WILLIAM D. HALE.
Judges: 
Reporter: Minnesota Reports
Volume: 78
Pages: 421–427

Head Matter:
FREEMAN P. LANE and Another v. WILLIAM D. HALE.
December 20, 1899.
Nos. 11,836—(134).
Insolvent Estate — Compensation of Attorney of Creditor.
To justify the allowance of compensation in insolvency proceedings out of the trust estate to a creditor who, acting alone and independently of the receiver or assignee, conducts proceedings for the purpose of securing and obtaining for the estate property which might otherwise become lost, it must appear that the services of such creditor in that behalf were not only necessary to the protection of such property, and resulted beneficially to the estate, but that property, or some valuable right or benefit, was thereby secured and preserved which would otherwise have been diverted and lost; that solely by reason of the services and exertions of such creditor such property or valuable right or benefit was saved to the estate.
In the matter of the receivership of the American Savings & Loan Association, pending in the district court for Hennepin county, Freeman P. Lane and Matthew Gallagher applied, for an order allowing them $2,500 for services rendered to the shareholders of the association in procuring bidders for its real estate and for services rendered in court. The court, Elliott, J., made an order denying the application, and they made a motion for modification of the order, which was denied. From the order denying the application, as well as from the order denying modification thereof, the applicants appealed.
Affirmed.
C. J. Cahaley, Matthew Gallagher and Freeman P. Lane, for appellants.
May & Van Campen, for respondent.

Opinion:
BROWN, J.
The American Savings & Loan Association, a corporation, became insolvent, and William D. Hale was appointed receiver thereof by the district court of Hennepin county on June 18, 1896. He duly qualified, and has been at all times since, and still is, such receiver. He employed as his attorneys and legal advisers the firm of Hay & Van Campen, who appeared for him in all matters and,, on all occasions when necessary or proper.
On February 3, 1899, said district court made an order authorizing the receiver to advertise for and receive bids for the real estate belonging to the insolvent association, and report the same, if any were received, to the court on March 18, 1899. At the hearing on that day one bid of $85,000 was made. The stock of the association amounted to $1,100,000. The appellants, Lane and Gallagher, representing stockholders owning stock of the value of $1,100, ¿ppeared, and opposed the acceptance of the bid, and procured an adjournment of the matter until April 8. The receiver and his attorneys also opposed the acceptance of the bid. There were several subsequent adjournments, which were applied for and requested by appellants, and the matter came on for final hearing on April 21. At this hearing a bid for the property of something more than $38,000 over and above the first bid was offered by the same persons, and accepted by the court. The appellants appeared at all the hearings upon the subject of the sale of the property, and rendered services in procuring other and more favorable bids than the one first offered, but it does not appear that they had anything to do with obtaining the bid finally accepted.
Appellants made application to the court below for an allowance of compensation out of the trust property, claiming that, as their services, though rendered at the instance and request of shareholders or creditors, inured to the benefit of the trust estate, the value thereof was a proper expense in the administration of the trust. The court denied the application, and subsequently denied appellants' motion for a modification of such order. Both orders are appealed from.
To justify the allowance, out of trust funds, of compensation to a creditor who appears and conducts proceedings, independently of the receiver or assignee, for the purpose of obtaining and saving to the trust estate property which might otherwise become lost, it must appear not only that such services were necessary to the protection of such property, and resulted beneficially to the estate, but that property or some valuable benefit was thereby secured or preserved which would not otherwise have been realized or ob tained. It must appear that the property or benefit so about to be lost to the estate was saved thereto solely by the services of such creditors. It is not sufficient that the services were beneficial, or materially aided in preserving the estate. It must further appear and be shown that property or benefits belonging to the estate were secured solely by such services, which would otherwise have been diverted or lost. This may be shown by evidence that the receiver or assignee was neglecting his. duties, or for any reason was prevented from instituting timely proceedings to protect the estate.
The contention on the part of the appellants is that they were solely instrumental in preventing the acceptance by the court of the first offer made for the property, and in bringing about the last offer, whereby about $38,000 was realized to the estate over and above the first offer. Unless appellants' contention in this respect can be sustained, they are not entitled to compensation, it is the duty of the assignee or receiver in proceedings of this kind to protect the rights of all interested parties, and it must be assumed, in the absence of some showing to the contrary, that he will do so. J3y denying appellants' application for allowance of compensation the court below must be taken to have found that there was no failure of duty on the part of the receive!', and that there was no necessity for the interference of appellants. And, to find the contention of appellants to be true, we must necessarily find that it conclusively appears from the record that the court below was in error; that the receiver was neglecting his duties; that his attorneys were neglecting their duties; and, further, that the court below was about to make an order accepting the bid of $85,000 for the property of the trust in the face of the fact that all parties interested — the appellants in behalf of creditors, and the receiver and his attorneys— were protesting against its acceptance; and that, but for the objections and labors of appellants, such order would have been made.
We have examined the record with care and patience, and are unable to reach any such conclusion. The receiver and his attorneys appeared at all hearings before the court, expressly opposed the acceptance of the first bid for the property, and at all times kept the court fully advised as to the condition and value of the estate. There is no suggestion of fraud or collusion between them and any of the bidders for the trust property, and we are unable to find any neglect of duty on their part. When the action of the receiver and his attorneys with respect to the acceptance of the first offer for the property was identical with that of appellants, it cannot, in reason, be said that the appellants' objections alone prevented the acceptance of the offer. Indeed, the record will not justify the conclusion that the court below intended to accept it at all. At least it does not conclusively so appear. The natural inference would be, in view of the fact that all interested parties objected thereto, that his honor below would have rejected the bid. At any rate, appellants have failed to show that they were the sole cause of its rejection, or that the higher bid was due solely to their actions.
We agree with counsel for appellants that their clients rendered valuable services in this matter, and ought to receive compensation therefor, but we cannot agree with them that such compensation should come out of the trust estate. As already stated, it is the duty of the assignee or receiver in proceedings of this kind to protect the rights of all interested parties, and to justify the allowance of compensation out of the trust funds to third parties who volunteer their services in that behalf it must be shown by them that the assignee or receiver was neglecting his duties, and that, in consequence of such neglect, such services by them were necessary to protect the estate. Any other rule would work disastrously to trust estates. We cannot open the door to claims of this kind. The rule allowing compensation in such cases as heretofore stated must be followed and applied. Appellants have not brought their case within that rule, and we have no alternative but to affirm the orders appealed from.
Orders affirmed.