Hendrie & Bolthoff Mfg. Co. v. Parry

• Decision Date: 04 June 1906
• Citation: 86 P. 113,37 Colo. 359
• Parties: HENDRIE & BOLTHOFF MFG. CO. v. PARRY et al.
• Court: Colorado Supreme Court

86 P. 113

37 Colo. 359

HENDRIE & BOLTHOFF MFG. CO. v. PARRY et al.

Supreme Court of Colorado

June 4, 1906

Appeal from District Court, City and County of Denver; Samuel L Carpenter, Judge.

Action bye the Hendrie & Bolthoff Manufacturing Company against the Crown Point & Virginia Coal Mining Company, in which Samuel Hyman and others intervened. On motion of plaintiff and interveners, S. A. Josephi was appointed receiver, but was subsequently removed, and others were appointed, after which Sarah Parry and others sought to hold plaintiffs personally liable for expenses incurred by such receivers. From an adverse decree on such issue, plaintiff appeals. Reversed.

John M. Waldron and R. D. Thompson, for appellant.

Chase Wishron and Thomas, Bryant & Malburn, for appellees.

CAMPBELL J.

This controversy concerning expenses incurred by a receiver is between a plaintiff who secured his appointment and the assignees of those who furnished supplies to and performed labor for him. In an action brought in the district court of Arapahoe county by appellant, the Hendrie & Bolthoff Company, as a judgment creditor, against the Crown Point & Virginia Gold Mining Company, the judgment debtor, in which Samuel Hyman and Jonas Hiller, as minority stockholders of the defendant company, intervened, the court, upon the request both of the plaintiff and the interveners, appointed S. A. Josephi receiver on August 7, 1897. The action was based upon section 497, 1 Mills' Ann. St. The complaint charged various acts of fraud and mismanagement on the part of the defendant company, and that it had permitted executions upon the judgments of plaintiff and other judgment creditors to be returned nulla bona and to remain unsatisfied for more than 10 days after demand for payment. The cause of action, under this statute, if established, entitled plaintiff, and its object was, to secure a dissolution of the defendant corporation and to apply its property to the payment of its debts. To effectuate this purpose, the plaintiff, as the statute expressly authorized, asked for the appointment of a receiver to take possession of defendant's assets, and to convert the same into money and therefrom pay the indebtedness, and asked that the receiver be clothed with the usual powers. The intervening minority creditors also asked for the appointment of a receiver and requested that he be given the power to operate the defendant's mines under the order of the court, and to apply the proceeds to the payment of the corporate debts. Josephi, as receiver, was specifically given power to operate the mines of defendant, and during his receivership, which continued for about a month, he worked them at a profit. Soon after Josephi's appointment, the defendant and certain of its judgment and mortgage creditors appeared in the action all of whom objected to the appointment of any receiver at all, and in particular asked that Josephi be removed upon the ground that he was not a fit person. Upon a hearing Josephi was removed, but the court, deeming it proper that the receivership be continued, appointed Michael Spangler as receiver September 6, 1897, 'with all the powers usual in receivership cases and to take charge of the affairs and property of the defendant company.' Spangler continued to act as a receiver until he was killed while working in the mine on the 6th of December, 1897. Afterwards A. B. McGaffey was appointed receiver. It appeared in one of McGaffey's reports that during Spangler's receivership an indebtedness of several thousand dollars was incurred in working the mine. It also appeared that for the protection and preservation of the property certain sums of money were needed, and to pay this Spangler indebtedness and preserve the property McGaffey asked the court for an order permitting him to borrow money on receiver's certificates, and to make the same a paramount lien upon the trust estate. The court made the order, from which Standley and other creditors of defendant appealed to this court, where it was held (Standley v. Hendrie & Bolthoff Mfg. Co., 27 Colo. 331, 61 P. 600) that the order was erroneous, and the judgment was reversed. After the remittitur was sent down, Parry and others (appellees here) intervened in the original action, and filed their petitions, in substance detailing the foregoing facts, in which they asked for judgment directly against the plaintiff company for the amount of the Spangler indebtedness, the claims for which petitioners then owned. They based their right to a recovery on the grounds that, as it is conceded, and as appears from the opinion in the Standley Case, the entire property of the defendant was consumed by mortgage and other liens ahead of the claims of the judgment creditors, and as the receiver himself had no funds out of which to pay the same, plaintiff, who improperly secured the appointment of the receiver, should be adjudged to pay the expenses incurred by Spangler in working the mines. The plaintiff, Hendrie & Bolthoff Company, not only objected to the procedure chosen by petitioners for the enforcement of their claims, but denied all liability under the facts of the case. From a judgment in favor of appellees, the intervening petitioners, the Hendrie & Bolthoff Company appealed. Such other facts as are material to the discussion will be found in the appropriate places in the opinion.

1. First we consider appellant's objection to the procedure which appellees selected. The general rule is that allowances to a receiver for the expenses of the receivership should be made to the receiver himself, and not to those who furnish supplies to, or perform labor for, him. Stuart v. Boulware 133 U.S. 78, 10 S.Ct. 242, 33 L.Ed. 568; German Nat. Bank v. Best, 32 Colo. 192, 75 P. 398; Bassick M. Co. v. Schoolfield, 15 Colo. 376, 378, 24 P. 1049; Antlers L. & R. Co. v. Fesler, 14 Colo.App. 201, 59 P. 406. In the last case it was said that it was irregular to enter a judgment in the receiver's favor, because he was not a party to the suit. If that be true, a fortiori is it wrong to render judgment in favor of creditors of the receiver. No provision of our Code of Procedure has been cited which permits creditors of a receiver to intervene in the original action and litigate against a plaintiff the question of his liability for the expenses of the receivership. It is true that there is, or may be, an exception to the general rule; but, as stated in the German Nat. Bank Case, supra, that rule does not sanction the proceeding adopted below. The question of the liability of the plaintiff in the original action for the debts of the receivership was, by consent of the plaintiff, litigated in that case. But the receiver had long before that time been discharged and was not within the jurisdiction of the court, and, in view of these considerations, and that the plaintiff gave its consent, it was held not improper, at least plaintiff could not complain, that the court entered judgment against the plaintiff directly and in favor of those who had furnished labor and material to the receiver, instead of taxing the expenses as costs in the action. The case in hand does not fall within the exception. Here the receiver was still in office, plaintiff objected to the proceeding; and if these claims owned by appellees were just charges as legitimate expenses of the receivership, if not already so taxed, they should have been taxed as costs in the case in favor of the receiver, with a direction to that officer to make proper distribution to the parties entitled thereto. But graver errors were committed which compel us to set aside the judgment in its...