Cutter v. Pollock
| Decision Date | 03 June 1898 |
| Docket Number | 6731 |
| Citation | 76 N.W. 235,7 N.D. 631 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Cass County; McConnell, J.
Action by Henry W. K. Cutter and another against James R. Pollock and another. Defendants had judgment, and plaintiffs appeal.
Affirmed.
Newman Spalding & Stambaugh, for appellants.
Pollock & Scott, (Smith Stimmel, of counsel,) for respondents.
On the former appeal we settled the merits of this action. 4 N.D 205, 59 N.W. 1062. On this appeal we have to deal with the fees and expenses of the receiver appointed in the action. There is no controversy touching their amount. The sole inquiry is whether, after the fund on which the defendants held a lien had been depleted by the payment thereout of such fees and expenses, the defendants should be allowed a judgment against the plaintiffs, reimbursing them in part for their loss. The object of the action was to have certain chattel mortgages construed as constituting an assignment for the benefit of creditors, with preferences, and for that reason to have the preferences thereby created adjudged void under the statute, and the property administered as a trust fund for the benefit of all the creditors of the mortgagors. We held that the action would not lie (4 N.D. 205, 59 N.W 1062;) and this holding involved the conclusion that the complaint did not state a cause of action, and that the case was one in which a receivership was improper. Certainly no court should appoint a receiver of a defendant's property, in which the plaintiff claims an interest, when the complaint itself shows that the plaintiff has no interest therein, and that his action is without foundation. The District Court held, on the settlement of the receiver's accounts, that the defendants should recover of the plaintiffs judgment for three-fifths of the fees and expenses allowed the receiver out of the property on which alone the defendants held liens, and in which the plaintiffs had no interest whatever. We discover in this no abuse of discretion. Nor are we able to agree with counsel for plaintiffs that the court had no power to so adjust the burden of the expense of the receivership that a portion of it should ultimately fall on those who, without right, secured the appointment of the receiver, and thereby caused this unnecessary expense. When the protection of the receiver himself is alone involved, the courts will ordinarily pay little heed to the injustice which results to the successful suitor because his own property, which constitutes the fund, is in the first instance charged with the burden of the receiver's fees and expenses. This certainly should be the case when the complaint states a cause of action, and the action is one in which a receiver can be appointed. Neither the court nor the receiver can anticipate that the plaintiff will be defeated upon the merits on the trial of the issues of fact in the case. We intimated when this cause was before us on the merits that we regarded the better rule to be that the receiver should not ordinarily be compelled to run the hazard of the result of the litigation. See page 216 of 4 N. D., and page 1064 of 59 N.W. See, also, Heise v. Starr, 44 Ill.App. 406, 409; Hopfensaek v. Hopfensaek, 61 How. Pr. 498; Beckwith v. Carroll, 56 Ala. 12; Cattle Co. v. Bindle, (Tex. Civ. App.) 32 S.W. 582; Radford v. Folsom, (Iowa,) 55 Iowa 276, 7 N.W. 604, 609. And while there are cases which hold that he must look for pay and reimbursement to the party at whose instance he was appointed, when his appointment is illegal (see Couper v. Shirley, 21 C.C.A. 288, 75 F. 168, 171, and cases cited in 4 N.D. 205, 59 N.W. 1062,) yet even in such a case the defendant should not be allowed to defeat the receiver's right to look to the fund unless such defendant attacks the receivership itself by every remedy which the law affords. If he acquiesces therein, he should not, as against the receiver, be permitted to claim that the fund should be turned back to him undiminished by the receiver's charges, when, after a trial on the merits, he has established his title to such fund as against the plaintiff. But the case is different when the question arises between the parties to the action. The court will take care of its own officers, even when the result is a hardship to one of the parties. But it will not perpetuate this necessary injustice by adjudging that, even between the parties themselves, the one who is innocent, and who has been compelled to pay the receiver's fees and expenses out of his own property, shall not be permitted to recover from the plaintiff in the action itself the moneys he (the defendant) has been so compelled to disburse by reason of the oppressive and illegal action of his adversary. Counsel for plaintiffs in this case concede that when the order appointing the receiver is illegal (as when, for instance, the case is one in which it is improper to appoint a receiver at all) the court may require the defeated suitor to reimburse his antagonist, whose property has been taken to pay the expenses of the receivership. But they contend that the case is different where the plaintiff is defeated on the merits, provided the suit is one in which a receivership is proper, and the complaint states a good cause of action. The decision of the court in Ferguson v. Dent, 46 F. 88, leans quite strongly in favor of this view. But an examination of the opinion discloses the fact that the decision really turned upon the peculiar features of the case, and not upon the general doctrine enunciated in the opinion. The reasoning of the court is shorn of much of its force because of the fact that the court does not seem to discriminate between a case where the receiver is insisting that he shall be protected even at the expense of the innocent suitor, and a case where the defeated litigant is insisting that he also should be protected, to the detriment of the innocent party, upon whose property he has thrown the burden of the expense of a receivership. We do not believe that any case can be found to uphold the palpably unjust rule that one who is shown to have had no right to maintain the action, and no interest whatever in the property which he claims, can require that the defendant, who has paid out of his own pocket the expenses of a receivership, shall not call upon him (the plaintiff in the action) for reimbursement. The case of City of St. Louis v. St. Louis Gas-Light Co., 11 Mo.App. 237, is directly in point in support of our view of the law. See, also, as tending to support it, Lockhart v. Gee, 3 Tenn.Ch. 332; French v. Gifford, 31 Iowa 428. The best reasoned case we have found on the subject is Cattle Co. v. Bindle, (Tex. Civ. App.) 32 S.W. 582, where the court clearly distinguishes between those cases where the right of the receiver himself is involved, and those in which the sole inquiry is how, on equitable principles, the expenses of the receivership should be adjusted as between the parties to the action. The court, after adopting the rule that in the first instance the receiver should ordinarily be allowed his fees and expenses out of the fund, declares:
We regard the cases cited by counsel for plaintiffs as distinguishable from the case at bar. This is readily discernible from an examination of their facts, and the grounds on which such decisions were respectively based. See Radford v. Folsom, 55 Iowa 276, 7 N.W. 604; Jaffray v. Raab, 72 Iowa 335, 33 N.W. 337; Hembree v. Dawson, (Or.) 18 Ore. 474, 23 P 264. In Heise v. Starr, 44 Ill.App. 406, the court merely held that the receiver could look to the fund for his pay, without reference to the question of the ownership thereof, as between the parties to the suit. What would be the respective rights of the parties as between themselves was expressly left undecided, it not being involved. Were there no other facts in this case, the District Court would have been justified in rendering judgment against the plaintiffs for the full amount of the receiver's fees and...
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