Dalliba v. Winschell

• Citation: 11 Idaho 364,82 P. 107
• Parties: DALLIBA v. WINSCHELL, RECEIVER
• Decision Date: 16 August 1905
• Court: Idaho Supreme Court

82 P. 107

11 Idaho 364

DALLIBA v. WINSCHELL, RECEIVER

Supreme Court of Idaho

August 16, 1905

RECEIVERS-POWERS AND DUTIES OF RECEIVERS-RIGHT TO CARRY ON BUSINESS OF A PRIVATE CORPORATION-PRIOR LIEN FOR DEBTS CONTRACTED BY RECEIVER-AUTHORITY OF COURTS OF EQUITY TO DIRECT WORKING OF PLACER MINES-ATTORNEY FEES PAID BY RECEIVER.

1. A court of equity has no authority to direct its receiver in charge of placer mines to carry on a general mining business and charge the expenses of the business and operations as a prior and preferred lien against the property over that of prior recorded mortgages and encumbrances on the same property.

2. A receiver in charge of the property of a corporation has no authority to carry on the business of the corporation unless he be so authorized and directed by the court.

3. Courts of equity have the power and authority to appoint receivers of property and direct them to care for, protect and preserve the property and decree the charges and expenses therefor as prior and preferred liens to that of all other liens, mortgages or encumbrances, and to direct the property sold for the payment of the same.

4. Where a receiver has failed to keep correct accounts of the business and transactions of the receivership estate, and has failed to take vouchers for numerous and large sums of expenditure and has made large overcharges and false charges for sums claimed to have been expended by him, and has been generally reckless in his expenditures in connection with the trust and in the employment of servants, and has shown a general disregard for the trust he has assumed, a court of equity will refuse to allow him any salary or compensation for services as receiver.

5. A receiver is not entitled to allowance for fees paid attorneys for making his reports, narrating his acts, receipts and expenditures as receiver and prosecuting claims against the estate he represents for his own compensation and for the allowance of such attorney fees.

6. ID.-In such case the service constitutes a part of the duties of the receiver, and the charge is a personal expenditure and should be borne by the receiver individually.

(Syllabus by the court.)

APPEAL from the District Court in and for Bingham County. Honorable Alfred Budge, Judge.

William Winschell, receiver, made his final report and account, to which exceptions were taken. A decree was entered settling the account and ordering the property sold to pay the amount found due the receiver. The American Hydraulic Company and other defendant appealed. Decree ordered modified.

Cause remanded, with instructions. Costs awarded to appellants.

F. S Dietrich, for Appellants.

Smith on Receivers, at paragraph 355, in speaking of reports and accounts of receivers, says: "Being an officer of court a great degree of strictness is required of him, and the funds in his possession being trust funds, the utmost care must be exercised in reference to their disposition and his accountability therefor. A proper accounting from time to time, as well as his final report, renders it incumbent upon the receiver to carefully inventory the estate, property goods and effect of every nature that come into his hands." (McCulloch v. Tomkins, 62 N.J. Eq. 262 49 A. 475; Mintz v. Brock, 193 Pa. 294, 44 A. 417; 2 Perry on Trusts, sec. 821.) "A trustee is bound to keep clear, distinct and accurate accounts. If he does not, all presumptions are against him, and all obscurities are to be taken adversely to him." (Gaston's Trust, 35 N.J. Eq. 60.) If a trustee loses his accounts, he must bear any resulting damage. (Welch v. Brown (1893), 50 N.J. Eq. 387, 26 A. 568; Dufford v. Smith, 46 N.J. Eq. 216, 18 A. 1052; Smith on Receivers, 587; In re Sheets Lumber Co., 52 La. Ann. 1337, 27 So. 809; Beach on Trusts and Trustees, sec. 737; In re Hodges' Estate, 66 Vt. 70, 44 Am. St. Rep. 820, 28 A. 663; In re Thompson's Estate, 101 Cal. 349, 35 P. 991.) A receiver cannot recover attorney's fees paid to his attorneys, who are also attorneys for one of the parties to the action. (Ency. of Law, 1069; Beach on Receivers, 1897 ed., p. 274; Smith on Receivers, par. 129, also par. 350; Vieth v. Ress, 60 Neb. 52, 82 N.W. 116; Adams v. Woods, 8 Cal. 306; Farwell v. Great Western Tel. Co., 161 Ill. 522, 44 N.E. 891; Sowles v. National Union Bank, 82 F. 139; Terry v. Martin, 7 N. Mex. 54, 32 P. 157; Wilkinson v. Washington Trust Co., 102 F. 28, 42 C. C. A. 140. See, also, 23 Ency. of Law, p. 1068; Olson v. State Bank, 72 Minn. 320, 75 N.W. 378.) Section 3318 of the Revised Statutes provides that a receiver may be appointed by a court or judge. Section 4333, prescribing the duties and defining the powers of a receiver, limits control of his conduct to the court, not the judge of the court. (In re Bank of Genessee v. Denning, 5 Idaho 482, 51 P. 406; Gaffney v. Piper, 5 Idaho 490, 51 P. 99.) The rule is not universal that even the expenses of preserving property by a receiver are chargeable against the property. (Ephraim v. Bank, 129 Cal. 589, 62 P. 177; Frick v. Fritz, 124 Iowa 529, 100 N.W. 513; French v. Gifford, 31 Iowa 428.) In appointing a receiver of a corporation not of quasi public character, the court has not the power, without the consent of the owners of prior liens, to authorize the receivers to contract debts in operating the business, which shall have priority over such prior liens. (United States Inv. Co. v. Portland Hospital, 40 Or. 523, 67 P. 194; Hooper v. Central Trust Co., 81 Md. 559, 32 A. 505, 29 L. R. A. 262; Farmers' Loan and Trust Co. v. Grape Creek Coal Co., 50 F. 481, 16 L. R. A. 603; Hanna v. Trust Co., 70 F. 2, 16 C. C. A. 586, 30 L. R. A. 201; Belknap Sav. Bank v. Laconia Land & Canal Co., 28 Colo. 326, 64 P. 212; Metropolitan Trust Co. v. Lake Cities R. R., 100 F. 897; 3 Cook on Corporations, sec. 876.)

Hawley, Puckett & Hawley, for Receiver, etc.

The rule as to the allowance of attorney's fees is well settled in California, and is to this effect: "The circumstances under which the allowance of attorney's fees was made not appearing in the record, therefore the court will presume that they were properly allowed, and error cannot be presumed or conjectured, but, on the contrary, every intendment is in favor of the regularity and correctness of the ruling of the court below, it having jurisdiction of the subject matter and parties." (McLane v. Placerville etc. R. R. Co., 66 Cal. 625, 6 P. 748; Trust Co. v. McClure, 78 F. 209; Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157; Stewart v. Boulware, 133 U.S. 78, 10 S.Ct. 242, 33 L.Ed. 568.)

AILSHIE, J. Stockslager, C. J., and Sullivan, J., concur.

OPINION

AILSHIE, J.

This is an appeal from an order and judgment settling and allowing a receiver's report and account. The record comes to us containing the receiver's amended petition and final report, findings and judgment of the court and a bill of exceptions. The action out of which this litigation arose was commenced in the district court of Bingham county in 1899. In that action a receiver was appointed to take charge of certain placer mining properties situated in the Carriboo mining district, Bingham county. W. H. Holden was appointed receiver of the property and took possession thereof and continued to act until the spring of 1900, when he resigned and William Winschell was appointed and qualified and took possession. The action in which the receiver was originally appointed resulted in a judgment in favor of the plaintiffs, from which judgment the defendants appealed, and the judgment was reversed by this court, in Dalliba v. Riggs, 7 Idaho 779, 67 P. 430. After the remittitur went down some misunderstanding seems to have arisen as to the extent of the judgment rendered on appeal, which resulted in an application to this court for a writ of mandate against the district judge of the fifth district, and in American Hydraulic Placer Co. v. Rich, 8 Idaho 570, 69 P. 280, this court again considered the question and caused a writ to issue directing the district judge to dismiss the action. The case was accordingly dismissed and the receiver thereafter turned the property in his possession back to the defendants. No settlement of the receiver's account was made until the sixteenth day of March, 1905, when a decree was entered from which this appeal is prosecuted. The receiver's report is very voluminous and the findings of the court are somewhat lengthy covering the principal facts put in issue upon the settlement of the account. It appears that the property consisted of eight unpatented placer mining claims upon which it was necessary to have the annual assessment work done and upon which there were flumes and ditches requiring some attention as well as buildings and other fixtures that required care and preservation. During Winschell's receivership he not only cared for the property and did the assessment work, but it seems that he carried on active mining operations upon a large scale, "running a boarding-house" at which he boarded the workmen and a "commissary" from which he sold the miners rubber boots, slickers, clothing, tobacco, whisky and other miscellaneous articles. During this time Winschell was also operating a stage line from Soda Springs to a point near the mines in question; also running a saloon about thirty miles from the mines and a general merchandise store, besides being engaged in the number business. The trial court, among other things, finds that: "Said Winschell only in a few instances took receipts for money paid out; that many of his payments were made by check; that some of the checks produced and tendered as vouchers were signed 'William Winschell, Rec.,' others were signed 'William Winschell, R.,' others were signed 'William Winschell, P.,' and still...