Polk v. Johnson

• Decision Date: 19 March 1903
• Docket Number: 20,071
• Citation: 66 N.E. 752,160 Ind. 292
• Parties: Polk v. Johnson
• Court: Indiana Supreme Court

66 N.E. 752

160 Ind. 292

Polk v. Johnson

No. 20,071

Supreme Court of Indiana

March 19, 1903

From Johnson Circuit Court; Vinson Carter, Special Judge.

Grafton Johnson filed his final report as receiver of the property of James T. Polk and the latter filed exceptions thereto. From an order of court sustaining a motion to strike out the exceptions, James T. Polk appeals. Appealed from Appellate Court, under clause 3, § 1337j Burns 1901.

Reversed.

L. J Hackney, C. F. Coffin, Wm. Eldridge and E. F. Barker, for appellant.

G. M Overstreet, E. L. Branigin, E. A. McAlpin, R. M. Miller and H. C. Barnett, for appellee.

OPINION

Hadley, C. J.

Appellant James T. Polk conducted a large canning and dairy business at the town of Greenwood. His affairs became greatly involved and he probably insolvent. Tingle, a creditor for a small amount, brought an action in the Johnson Circuit Court for judgment on an account, and for the appointment of a receiver. Polk answered, admitting the averments of the complaint, and confessing that a receiver ought to be appointed. Whereupon the court appointed appellee Grafton Johnson as such receiver, who qualified and entered upon the discharge of his duties. In his amended final report as such receiver, Johnson claimed an allowance for his services in the trust in the sum of $ 20,000.

Appellant Polk filed exceptions to said report; subdivision one of exception two being as follows: "It is shown to the court that the property and business of the estate of said receivership have at all times been located at the town of Greenwood, whose population was, when the receiver herein was appointed, about 1,000, and was, to a considerable degree, supported by said business; that said Johnson and his family, when this proceeding was instituted, owned vast properties in and about said town, consisting of business houses and rental dwellings and farming lands, the rental value and rentals of which depended, in a great measure, upon the continued operation of said business,--the said business employing the principal part of the labor of said community; that, in addition to said interest of said Johnson in the prosecution of said Polk's business, he was conducting a banking business which was patronized by said Polk, and said Johnson at said time was a creditor of said Polk in a large sum, the success of which credit, in a measure, depended upon the value of the plant and business of said Polk, and said value depended almost wholly upon the continued prosecution of said business. In view of the foregoing facts, the said Johnson, well knowing that the court, or the judge thereof, would probably not appoint a receiver of said property and business who was objectionable to said Polk, sought said Polk, and importuned him to make no objection to his [said Johnson's] appointment as receiver, and to consent to and to request the court to appoint him such receiver; that to induce and persuade said Polk so to withhold objection and so to consent and request, the said Johnson urged that his above-named interest in the business of said Polk, and its successful operation, and his personal friendship for said Polk were such that he could and would, if appointed receiver, discharge the duties of the trust with diligence and fidelity, and without allowance or compensation other than he would receive from the advantages to the said properties, to the said banking business, and to the amount so owing to him; that by reason of the said interests of said Johnson in the success of said business, and by reason of this said promise to discharge the duties of receiver without allowance as aforesaid, the said Polk did not object to said Johnson's appointment as receiver, but consented to such appointment, and requested the court and the judge thereof that said Johnson, by reason of said promises, be appointed receiver of said property and business; that in addition to his said consent and request for the appointment of said Johnson, other persons interested, personally and as creditors of said Polk, requested the court and judge thereof so to appoint said Johnson, because of the economy to said estate in conducting the receivership without salary, fees, or allowances; that in view of the facts aforesaid, and of the further facts that the said Johnson was well qualified for the duties, he was appointed and acted as receiver of said estate. And of each and all of the foregoing facts the said Polk offers to make proof."

The receiver's motion to strike out the above exception, because the same did not contain facts sufficient to constitute a valid objection to the report, was sustained, and the receiver allowed $ 9,500 for his services. This action of the court presents the controlling question in the case.

1. We assume at the outset that there is no reasonable ground for discussion upon the first proposition advanced by appellee, viz., that the litigants have no power to select a receiver for the court by private agreement, even though such agreement is based upon their views of the fitness of the one chosen, and economy to the trust in his appointment. We also take it to be generally acknowledged that the appointment of the receiver, and the fixing of his compensation, are judicial acts that can not be abdicated by the court to one or both the parties to the suit. But while it must be conceded that the ultimate appointment rests solely with the court, to be determined by the exercise of his discretion, we find no principle recognized by the authorities, or supported by sound reason, that forbids the judge the freest access to the counsels and opinions of those interested in the trust, with respect to the most proper selection. Indeed there are many reasons why the cautious judge would seek the advice of others, in cases where he has imperfect knowledge of the fitness of available men, even outside of the parties in interest. There is nothing peculiar in the appointment of a receiver, that his selection must be evolved wholly from the personal knowledge and observations of the judge. The usual course of practice in the English court of chancery in such matters was to refer the selection to a master. Then interested parties were at liberty to appear before the master and nominate suitable persons, from among whom the master would choose the one whose qualifications and fitness his judgment most approved, and report his selection to the court. A similar practice also prevailed in New York prior to their adoption of the present code of procedure. High, Receivers (3d ed.), §§ 63, 64.

The same considerations that induced the reference to a master under the old practice are now applicable to the judge, who is called upon to act without a reference, and who will usually give favorable consideration to one that has been agreed upon by the parties. High, Receivers (3d ed.), § 65; Beach, Receivers (2d ed.), §§ 30, 31; Smith, Receivers, 62.

2. But it is argued that the agreement entered into for the purpose of influencing the appointment was an unwarrantable interference with the freedom of judicial action, and invalid for public impolicy. It will be borne in mind that in the appointment of a receiver, or other such administrative officer, the chief ends to be attained are efficiency and economy in the...