After the death of the receiver, this case was properly revived
in the name of his executrix.
While, as a general rule, a receiver has no authority, as such,
to continue and carry on the business of which he is appointed
receiver, there is a discretion on the part of the court to permit
this to be done when the interests of the parties seem to require
it, and in such case, his power to incur obligations for supplies
and materials incidental to the business follows as a necessary
incident to the office.
A purchaser of property at a receiver's sale who, under order of
court, in order to get possession of the property, gives an
undertaking, with surety, conditioned for the payment to the
receiver of such amounts as should be found due him on account of
expenditures or indebtedness as well as compensation thereby
becomes liable for such expenditures and indebtedness.
In determining what allowances shall be made to a receiver and
to his counsel, this Court gives great consideration to the
concurring views of the auditor or master and the courts below, and
it is not disposed to disturb the allowance in this case, although,
if the question were an original one, it might have fixed the
receiver's compensation at a less amount.
This was an appeal taken by Horace M. Cake and the
administrators of William B. Moses, surety upon a certain
undertaking of his pay to Francis B. Mohun, appellee's intestate,
such sums as the court should find to be due the latter as receiver
of the furniture, equipments, and other personal property of the
hotel known as "La Normandie," in the City of Washington.
The original bill was filed April 23, 1891, by the appellant
Cake to foreclose a chattel mortgage or deed of trust executed
Page 164 U. S. 312
by one Woodbury to William B. Moses and John C. Heald to secure
an indebtedness of $75,000 to Cake, and covering the furniture and
other personal property in the hotel, a part of which property was
also subject to a prior mortgage or deed of trust to secure the
payment of the rent of the hotel. As it was manifestly for the
interest of all parties that the hotel should not be closed,
shortly after the bill was filed, and on May 5, 1891, Francis B.
Mohun was appointed receiver, with instructions to take possession
of the property, "and to carry on and manage the business of
keeping said hotel in substantially the same manner in which it has
heretofore been carried on," provided that he gave a bond in the
sum of $15,000, conditioned for the faithful performance of his
duties as such receiver.
Upon his appointment, Mohun at once took possession of the hotel
and personal property, as receiver, and carried on the business
until December 4, 1891, when he was directed to surrender the
property to the appellant Cake, who became the purchaser under a
decree of foreclosure, subject to the prior mortgage, as well as
the unexpired term of the lease, which was sold by the marshal on
an execution against Woodbury. Before taking possession, however,
Cake was required to file an undertaking, with surety, conditioned
for the prompt payment to the receiver of such amounts as should be
found to be due him on account of his expenditures or indebtedness,
as well as of his compensation, and also conditioned that a decree
might be pronounced against such surety, as well as against the
principal obligor, for the payment of such amounts. This
undertaking was executed by Cake, with William B. Moses as surety,
and was filed December 4, 1891. The undertaking having proved
satisfactory to the court, possession was surrendered and the cause
referred, by order of the court, to an auditor with directions to
state the account of the receiver, and directing that all questions
as to the payment of expenses incurred by him in the performance of
his duties, or as to the settlement of his unpaid obligations, be
reserved until the coming in of the auditor's report. Before the
accounts were stated, Moses, the surety upon the undertaking, died
intestate,
Page 164 U. S. 313
and the administrators of his estate were brought in and made
parties to the cause.
The auditor proceeded to take proof under the reference and
stated an account, showing an aggregate sum to be paid to the
receiver of $8,332.53. This sum was made up as follows:
Indebtedness of the receiver incurred
in the conduct of the business . . . . . . . $5,038.74
Allowance for compensation for his
services . . . . . . . . . . . . . . . . . . 2,793.79
Allowance to his counsel . . . . . . . . . . . 500.00
---------
Total . . . . . . . . . . . . . . . . . $8,332.53
Exceptions were filed to this report by the appellant Cake, by
the administrators of Moses, as surety upon the undertaking, and by
Mohun, the receiver. Upon the hearing of these exceptions, they
were all overruled, the report ratified and approved, and a final
decree passed for the payment to the receiver of the above amount.
All parties appealed from this decree to the Court of Appeals,
which affirmed the decree of the Supreme Court of the District,
reducing the amount, by a small credit of $7.59, to $8,324.94.
Cake v. Woodbury, 3 App.Cas. D.C. 60. Before this decree
was entered, Mohun having died, his executrix, Martha v. Mohun, was
substituted in his place. From this decree of the Court of Appeals,
Cake and the administrators of Moses, his surety, appealed to this
Court.
Page 164 U. S. 314
MR. JUSTICE BROWN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
1. The first error assigned is to the allowance by the court
below of a revival of the case in the name of the executrix of
Francis B. Mohun. As the original decree in favor of Mohun was
passed March 10, 1893, and as the order making the executrix a
party was made by the Court of Appeals January
Page 164 U. S. 314
4, 1894, it would appear that Mohun died after the case had been
carried to the Court of Appeals, and before it was finally decided.
It will scarcely be claimed that a judgment in his favor lapsed by
his death and that no one could be authorized to make it available
or collect it. As no one had been appointed to succeed him, and the
receivership had in fact terminated by the sale of the property and
the installation of the purchaser, it would seem that from the
necessities of the case, the right to collect this judgment must
have passed to the personal representatives of Mohun. Beyond this,
however, one-third of the decree was for his own services, and to
that extent, at least, his executrix was entitled to represent him
and was properly made a party. While his powers and duties as
receiver would not devolve upon his personal representatives, a
judgment entered in his favor for his own compensation and for an
indebtedness for which he had assumed an individual liability would
pass to such representatives, and might be enforced by them. It is
impossible that the court should be called upon to appoint a
successor for that purpose. That the receiver had in fact assumed a
personal liability for the bills contracted by him in the conduct
of his business is evident from the very fact that he made claim
for the same against the plaintiff Cake and his surety, Moses,
under their undertaking of December 4, 1891. The question whether a
receiver has assumed such personal liability or not is one to be
determined from the facts and circumstances of the case.
Ryan
v. Rand, 20 Abb. N.C. 313;
People v. Universal Life Ins.
Co., 30 Hun. 142;
Ferring v. Myrick, 41 N.Y. 315;
Rogers v. Wendell, 54 Hun. 540;
Schmittler v.
Simon, 114 N.Y. 176.
See also Cowdrey v. Galveston,
Houston &c. Railroad, 93 U. S. 352,
93 U. S. 355.
2. That the receiver exceeded his authority in incurring the
indebtedness mentioned in the auditor's report. Admitting to its
fullest extent the general proposition laid down by this Court in
Cowdrey v. Galveston, Houston &c. Railroad,
93 U. S. 352, that
a receiver has no authority as such to continue and carry on the
business of which he is appointed
Page 164 U. S. 316
receiver, there is a discretion on the part of the court to
permit this to be done temporarily when the interests of the
parties seem to require it. Under such circumstances, the power of
the receiver to incur obligations for supplies and materials
incidental to the business follows as a necessary incident to the
receivership.
Barton v. Barbour, 104 U.
S. 126,
104 U. S. 135;
Thompson v. Phoenix Insurance Co., 136 U.
S. 287,
136 U. S.
293.
In the case under consideration, that receiver was expressly
authorized by the court "to carry on and manage the business of
keeping said hotel in substantially the same manner as it has
heretofore been carried on," and by a subsequent order was
authorized to borrow not to exceed $8,000 for the purpose of paying
the rent and other necessary and urgent debts incurred or to be
incurred on account of the running expenses of the hotel. In view
of the fact that the closing of the hotel, even temporarily, would
have soon become known to its patrons and would probably have been
attended by a serious loss to the goodwill of the business, we
think the court did not exceed its authority in directing the
receiver to keep it open during the pendency of the suit.
Beyond this, however, appellants are in no condition to make
this objection, since in their undertaking of December 4, 1891,
they agreed to pay the receiver such sums of money as the court
should thereafter find to be due him on account of his indebtedness
or expenditures as receiver or on account of his compensation as
such receiver.
3. The assignment that it was error to find that Cake, the
plaintiff in the suit, was personally liable for the expenditures
and indebtedness of the receiver is fully met by the
above-mentioned undertaking, which Cake was obliged to give before
taking possession of the property. Had he refused to give this
undertaking, it would have been perfectly competent for the court
to have required enough of the purchase money to be paid in cash to
discharge the expenses of the receivership and to compensate the
receiver. It is true that Cake might not have been personally
liable in the absence of this undertaking, but as he chose to
assume this responsibility in order
Page 164 U. S. 317
to obtain immediate possession of the property and to avoid the
payment of any part of the purchase money into court, he is in no
condition to set up this defense.
4. The only assignment that strikes us as entitled to any weight
is that wherein complaint is made of the amount allowed to the
receiver for his compensation, which was itemized by the auditor as
follows:
Allowance of ten percent on the
receipts of the business . . . . . . . . . . $2,510.81
Allowance of five percent on the
amount received from trustees, and
paid to George J. Seufferle. . . . . . . . . 31.05
Allowance of five percent or
disbursements of indebtedness. . . . . . . . 251.93
---------
Total . . . . . . . . . . . . . . . . . $2,793.79
Counsel fee . . . . . . . . . . . . . . 500.00
In view of the fact that the receiver had never been in the
hotel business, that he employed a manager at $125, and part of the
time at $150, a month, and required of him a bond for the faithful
performance of his duties, that he was not prevented from giving
his usual attention to his private business, and ordinarily spent
only his evenings at the hotel, we are bound to say that if it had
been an original question, we should have fixed his compensation at
a considerably less amount.
Upon the other hand, however, as it appears that the hotel was
kept open during the summer months at a very considerable loss;
that the receiver was obliged to raise money to pay the rent and
meet a deficiency each month; that the position was attended with
considerable anxiety; that he retained it apparently against his
own inclinations, and in compliance with the wishes of the parties
in interest; that proprietors of other large hotels in Washington
testified that $5,000 a year was a fair compensation, and there was
no evidence to the contrary; that the auditor, upon full
consideration of all the facts of the case, made the allowance;
that it was subsequently approved by the learned judge of the
Supreme Court
Page 164 U. S. 318
of the District, and upon appeal by the three justices of the
Court of Appeals -- we are not disposed to disturb it. Great
consideration will be paid to the concurring views of the auditor
or master and the courts respecting a mere question of amount. High
on Receivers §§ 781-786.
It has been said in a number of cases that an allowance of five
percent upon the receipts and disbursements of the business was a
fair compensation to receivers.
Stretch v. Gowdey, 3
Tenn.Ch. 565. But in view of the facts above stated and the further
fact that no compensation was allowed him for the custody and
responsibility of the large amount of personal property that came
into his possession, we are not prepared to say that the allowance
was so excessive as to justify us in reducing it.
The reasons given by the auditor for the allowance of $500
counsel fee are full and satisfactory. The record shows that the
receiver was frequently called into court, either to answer the
call of other parties in the cause or to ask instructions or
authority from the court to meet emergencies arising in the
business. It is evident that wise and capable advice was needed to
protect him in the proper discharge of his duties, both as
affecting himself and his responsibility and as affecting the
property entrusted to his charge. In view of what is disclosed in
the record and proceedings, I consider the sum so allowed to be
reasonable and fair. High on Receivers § 805.
This disposes of all the errors assigned, and upon the whole we
think the judgment of the court should be
Affirmed.
