Reichert v. Metro. Trust Co. (In re Stevens), 81.

• Decision Date: 06 March 1934
• Docket Number: No. 81.,81.
• Parties: REICHERT, State Banking Commissioner, v. METROPOLITAN TRUST CO. In re STEVENS.
• Court: Michigan Supreme Court

266 Mich. 322

253 N.W. 313

REICHERT, State Banking Commissioner,

v. METROPOLITAN TRUST CO.In re STEVENS.

No. 81.

Supreme Court of Michigan.

March 6, 1934.

Appeal from Circuit Court, Wayne County, in Chancery; Vincent M. Brennan, Judge.

Proceedings by Rudolph E. Reichert, State Banking Commissioner, against the Metropolitan Trust Company, for which Scott E. Lamb and another were appointed receivers. From an order denying in part the petition of Kenneth M. Stevens for additional compensation as attorney for the receivers, petitioner appeals.

Order amended by increasing compensation awarded.

See, also, 262 Mich. 123, 247 N. W. 128; 264 Mich. 182, 249 N. W. 625.

Argued before the Entire Bench.Richard F. Molyneaux, of Detroit (Wilber M. Brucker, of Detroit, of counsel), for appellant.

Patrick H. O'Brien, Atty. Gen., and Byron Geller and Frank H. Watson, Asst. Attys. Gen., for appellee Reichert.

Lyle G. Younglove, of Detroit, for receivers of appellee Metropolitan Trust Co.

BUTZEL, Justice.

By order of the court on July 20, 1931, Kenneth M. Stevens, petitioner, was appointed attorney for Scott E. Lamb and Charles A. Smith, receivers of the Metropolitan Trust Company. The trust company, which had been organized under laws of the state of Michigan, suspended business on June 18, 1931, and the permanent receivers were appointed in proceedings brought by the state banking commissioner. At this time the books of the company showed assets of $2,126,501.29, and liabilities of approximately $2,000,000. According to the appraisal filed a few months later, the assets were found to be worth $968,246.39, but subsequently, on June 30, 1933, he receivers estimated their true worth to be only $655,459.25, owing to further shrinkage in values. The liabilities, however, had also been reduced during this period to the sum of $1,331,556.84, of which only $1,268.58 represented preferred claims. The receivers estimate that eventually creditors will receive dividends aggregating between 40 per cent. and 45 per cent. of the face of their claims.

The receivers were confronted with many difficult legal problems, the solution of which took up a large amount of petitioner's time both in and out of court. He was called upon to advise as to the following: The legal limitations within which the receivers might act; the establishment of general methods of handling credits and creditors, debts and debtors; policies with reference to the foreclosure of mortgages, payment of franchise fees to the state, collection of credits from depository banks, payment of obligations and recovery of collateral; general policies in regard to agencies and safe-keeping accounts, administrative and executory estates, living trusts, and trusteed accounts; problems involving certificates of deposit and travelers checks, extension of notes, necessity and manner of a general appraisal, acceptance or refusal of set-off or credits against debts, liability upon tax anticipation notes, disposition of estates in which the trust company had acted as fiduciary; the determination of whether receivers could and should deposit bonds held by them with bondholders' committees; the method of liquidation, and general policies relating thereto; the classifying, allowing, or disallowing of claims against the estate, etc. Petitioner testified that upon his advice, followed by litigation, 81 claims, aggregating $981,236.53, were disallowed. Unquestionably, the large reduction in the amount of liabilities through disallowance of claims was a direct result of the extraordinary services of petitioner as hereinafter referred to, and for which he seeks extra compensation.

At the time of Stevens' appointment as attorney for the receivers, a firm of attorneys was also retained as ‘counsel,’ the latter receiving the same compensation as petitioner for what is termed the ordinary legal services performed. The attorney who personally handled all the work thus assined to his firm, makes no claim for any further compensation for extraordinary services, but insists that petitioner is entitled to a large award for such services, particularly stressing his industry, persistence, skill, and ingenuity in the performance thereof.

On December 7, 1931, the court ordered that the sum of $2,500 be paid to petitioner, and a like sum to counsel, as a ‘present allowance * * * to be applied upon their fees for services.’ Subsequently, on January 28, 1932, the court entered an order providing that the sum of $750 per month be divided between petitioner and counsel for services from and after December 5, 1931. We italicize the latter part of this order, inasmuch as it is the basis of petitioner's claim: ‘* * * Said sum to cover the fees of both attorney and counsel for all ordinary matters in connection with the receivership estate and to be in full for such matters unless a further showing be made to this court for special allowance because of extraordinary services performed, such as are not anticipated at the time of the entry of this order.’

On April 5, 1933, the court substituted other attorneys for petitioner and his associate counsel. There was not the slightest criticism of their work, but the substitution was made to enable other attorneys of ability and standing an opportunity to recoup their personal losses incurred by the failure of the trust company. Two weeks later Stevens filed a petition asking additional compensation amounting to $20,360. This request was denied, the trial court granting him the sum of $6,000, in full for the extraordinary services performed, and all other claims. He thereupon appealed to this court.

We pass by petitioner's complaint that he should not have been discharged at a time when the work was tapering down, and consequently it would have been very profitable for him to continue under the same arrangement as to fees. We also pass by petitioner's claim that an appraiser was allowed a fee proportionately much higher than that awarded to petitioner for his services. The testimony in regard to such fee is not before us, and we, therefore, cannot hold that it was excessive. Even if it were, this would not justify a repetition of error. The ordinary services for which petitioner received the sum of $2,500, to be applied upon his fees, extended from the time of his appointment to December 5, 1931, a period during which he devoted 58 ‘working days,’ of 5 hours each, exclusively to the receivership. It is claimed by petitioner that he spent many additional hours during this period in the general study and legal research necessitated by the problems that arose, and that his partner also devoted 200 hours to the receivership, for all of which no additional charge was made. For the ordinary services performed in the 69 weeks following December 5, 1931, petitioner received the sum of $6,000, at the rate of $375 per month, in accordance with the order of the court. He is bound by this order. If he considered the compensation inadequate, he should have made his protest sooner or tendered his resignation.

However, it is admitted, and the trial court recognized the fact, that petitioner did perform extraordinary services during this latter period. In full payment for such services, and all other claims, the trial court allowed the additional sum of $6,000. The petitioner contends that this is wholly inadequate, and on appeal has asked us to review the order of compensation and rectify any error made. We have exercised supervisory power in modifying an order or judgment for fees made by the trial court. Fannon v. Le Beau, 245 Mich. 162, 222 N. W. 115. We, however, recognize that the attorneys for a receiver act under the direction of the chancellor, who is cognizant of the work done by them, and is, therefore, in a position to properly evaluate such services. Nevertheless, in the present instance a large part of the extraordinary services performed by petitioner has come to our direct attention, and we are impelled to consider his claim of error. His extraordinary services may be classified into three major items: The state claim, the liquidation plan, and the certified questions.

A. The State Claim. The state highway department, which had deposited funds of the state without bonds in the trust company, filed with the receivers a preferred claim for $304,305, the total amount of such deposits, with interest, and later petitioned for a return of this amount, asserting its right thereto by virtue of the ‘Sovereign Prerogative.’ Had the state been successful in its demands, the assets of the receivership estate would have been largely depleted. However, the receivers, through petitioner, contested the claim. Both the Attorney General's office and petitioner filed exhaustive briefs in the circuit court, where the trial judge denied the state's request for preference. We are familiar with the litigation, having upheld the decision of the trial court in Reichert v. Metropolitan Trust Co. (In re Dillman, State Highway...