Court Opinion

ID: 8177808
Source: CourtListenerOpinion
Date Created: 2022-09-09 22:23:34.222817+00
Date Added: 2024-06-11T16:40:03.154824
License: Public Domain

Williams, Judge:
John A. Howard, receiver for the First Citizens Bank of Cameron, an insolvent corporation, has appealed from a decree entered hy the circuit court of Marion county, on March 18, 1914, allowing to T. S. Riley and to the law firm of Caldwell & Caldwell certain attorney fees, and holding that said fees constituted a lien upon funds, realized from assets in his control as such receiver. The funds were collected in two suits, brought in Marion county circuit court by said bank, against W. J. Bryan and others, in October, 1903, shortly before the receiver was appointed. Appellant was appointed receiver, in December 1903, by the circuit court of Marshall county, in a suit brought by Michael Benedum against the First Citizens Bank and others, for the purpose of winding up the bank’s affairs, and was authorized, by the oi’der appointing him, to prosecute such suits as were deemed necessary to collect the bank’s assets. No contract appears to have been made between the receiver and said attorneys, but they continued to prosecute said suits for a number of *483years, and until their successful termination. They were attachment suits in equity, to collect a number of notes held by said bank against W. J. Bryan, and attacking, as fraudulent, a conveyance made by him to his daughter, of valuable coal property, then being operated by the Fairmont Coal Company under a lease for a long term of years. Those suits were consolidated with others, brought for a similar purpose, by other suitors. They were bitterly contested and long continued, and were decided adversely to the bank, by the circuit court, and then appealed to this court, resulting in a reversal of the decree. The amount finally recovered by the receiver was something over $42,000. These are proper matters for consideration by the court in determining the value of the attorneys’ services. But, in our view of the case, we are not now called upon to review the reasonableness of the fees. Appellant was not the receiver of the court that allowed the fees, and the question presented by this appeal is: did the circuit court of Marion county have jurisdiction to determine the amount of compensation to be paid to attorneys for services rendered in that court for the receiver of another court, and direct it to be retained out of the funds collected? Respect for the overwhelming weight of judicial authority compels us to give a negative answer to the question.
A receiver is the officer of the court that appoints him, and derives all his authority from its decrees and orders, and is accountable to it alone for the faithful administration of his office. Immediately upon his appointment and qualification he is vested with the right to the possession and management of the assets to be administered. This is especially so in the case of an insolvent corporation. The property of which a receiver has charge is in custodia legis. His appointment and qualification is a sequestration of the property by the court, for the purpose of administering it for the best interests and protection of the rights of all persons interested in the estate. His possession is the court possession, and he is subject only to its orders. His appointment, however, does not destroy existing rights or priorities of creditors, but prevents the acquisition of priorities thereafter. Says Judge Baldwin, in Beverly v. Brooke et al., 4 Grat. 206: “The receiver appointed is the officer and representative of the Court, subject to its *484orders, accountable in such manner and to such persons as the Court may direct, and having in his character of receiver no personal interest, but that arising out of his responsibility for the correct and faithful discharge of his duties.” See also High on Receivers, Sec. 1; and 34 Cyc. 237. A receiver has no authority to employ counsel, unless authorized by the court; and, being the officer of the court that appointed him, he is required to report to, and settle his accounts in, that court, not in some other, for no other court has any jurisdiction over his official conduct. The bringing of the suits in the circuit court of Marón county did not give that court jurisdiction or control of the funds belonging to the insolvent bank. The circuit court of Marshall county had acquired jurisdiction of all its assets, no matter what their character or where situated, by the appointment of the receiver. High on Rec’rs., See. 48; and 34 Cyc. 199. The prosecution of the suit in Marion county was pursued by the receiver as a necessary step, authorized by the court that appointed him, to collect the assets to be administered. He had a right to sue in any court having jurisdiction of the subject matter; and the suit was brought in that county because the property was there which he sought to subject to the payment of the debts due the bank, but that did not give the court of that couny jurisdiction to administer the fund collected by means of the suit, or to adjudicate what liens, if any, existed upon it. Having obtained control of all the bank’s assets, of whatever kind or character, by the appointment of its receiver, the circuit court of Marshall county was entitled to retain such control until the end of litigation, to the exclusion of interference by anj'- other courts of concurrent jurisdiction. High on Rec’rs., Sees. 139-142; Railway Co. v. Love, 61 Kan. 433; Savings Bank v. Simpson, 22 Kan. 414; Porter v. Kingman, 126 Mass. 141; Pelletier v. Lumber Co., 123 N. C. 596; Pacific Railway Co. v. Wade, 91 Cal. 449; and Smith v. Effingham, 2 Vevan. 232. So jealously does the law guard the jurisdiction of the court whose officer the receiver is, that it does not allow the property to be taken out of its control to satjsfy the lien of a pre-existing execution, or to Be sold for taxes, but that court itself, in administering the assets, will protect such prior rights. Walling v. Miller, 108 N. Y. 163; In re *485Tyler, 149 U. S. 164; American Trust etc. Bank v. McGettigan, Rec’r., 152 Ind. 582; and High on Ree’rs., Secs. 140 (a) and 141. The determination of all questions relating to priorities and liens upon the fund, including the lien of the attorneys for their fees, if they had any, a question which we deem it unnecessary now to decide, were questions properly to be determined by the circuit court of Marshall county. By performing services for its receiver, in the prosecution of the suits, the attorneys were in reality serving the court that appointed' him; and, no agreement having been previously made as to the amount of their fees, it had the right to determine what was a just and reasonable compensation for their services, and direct the receiver to pay it out of any funds in his hands, as a part of his administration expenses. Reasonable attorney .fees, like other proper expenses incurred by the receiver, are preferred claims and take precedence over pre-existing liens. This court held in Crumlish’s Adm’r. v. Railroad Co., 40 W. Va. 625, that: “The amount of such counsel fees is within the sound discretion of the court, subject to review on appeal. Such fees are allowed to the receiver, not the counsel.” Attorney’s fees for services rendered to a receiver of court are never allowed directly to the attorney, but to the receiver as a part of his expenses. Stuart v. Boulware, 133 U. S. 78; High on Rec’rs., Sec. 805; 34 Cyc. 465; Matter of Commonwealth Fire Ins. Co., 32 Hun. 78; State v. Railroad Co., 4 Braxt. (Tenn.), 92; Olson v. State Bank, 72 Minn. 320; and Joost v. Bennett, 123 Cal. 424. In the case last cited the court held that the attorney had no right of action for his services, but that, if he was entitled to fees, they should be allowed by the court to the receiver as a part of his expenses. The rule seems to us a wholesome one. It avoids confusion in the settlement of the receiver’s accounts, and conflict of jurisdiction between courts concerning what claims and the amounts thereof, that are properly allowable as receiver’s expenses. But the court, having the right to determine counsel fees, can not do so arbitrarily. It must decide the matter upon proper proof concerning the value of the services, for the court’s discretion in that regard is a proper subject of review upon appeal.
The suits in Marion county were brought in October, 1903, *486and the receiver was appointed in the December following. Hence, a very small part of the services must have been performed when the receiver took charge, and whatever contract the attorneys may have had with the bank terminated upon his appointment. Griffith v. Boom & Lumber Co., 46 W. Va. 56. But if he expressly retained them, or permitted them, without objection, to continue the prosecution of the suits, which resulted so beneficially to the estate, they are surely entitled to a just and reasonable compensation. Weig and v. Supply Co., 44 W. Va. 133.
It matters not that the circuit court of Marion county was more familiar with the ’proceedings in the suits, and was, therefore, in a better position to judge of the value of the attorneys’ services than the circuit court of Marshall county. That could not confer jurisdiction. Evidence was taken to prove the reasonableness of the fees, but the court below not having jurisdiction, its decree was void; and it is not proper for us to review it as to the reasonableness of the fees allowed. The point is, that, evidence being necessary, in any event, to enable any court to decide upon the reasonableness of attorneys’ fees, it could as well be produced before the court of Marshall as before the court of Marion county. Hence it is no argument in favor of jurisdiction in the last named court to say that it was better prepared to decide the matter because the services of the attorneys had been therein rendered.
If the court could have properly entertained the attorneys’ petition, it was not proper to'pass upon the allowance of their fees without giving the -parties interested in the fund notice and an opportunity to be heard. High on Rec’rs., Sec. 805. This is. another reason for holding that only the court that appoints a receiver has any- right to decide upon the reasonableness of fees proper to -be allowed to his attorneys. Such questions usually arise in the settlement of the receiver’s accounts, which are invariably made in the court of his appointment.
That portion of the decree of March 18, 1914, appealed from, which finds-that T. S. Riley,is entitled to an attorney’s fee of $6,000 and the firm of Caldwell & Caldwell a fee of $4,000. and directs - the Fairmont Coal Company, garnishee, *487to pay to them said sums out of the $42,869.95 in its hands, decreed to the First Citizens Bank, and the decree of April 28,1914, are reversed, and a decree will be entered here directing the aforesaid sums to be paid by said garnishee to John A. Howard, special receiver.

Reversed and rendered.