Sims v. Homeseekers Fire Ins. Co., (No. 8783)

Citation120 W.Va. 459
Decision Date04 October 1938
Docket Number(No. 8783)
CourtSupreme Court of West Virginia
PartiesEdgar B. Sims, Auditor, v. Homeseekers FireInsurance Company

Attorneys

Attorney's fees and expenses incurred in resisting, on the part of a corporation, an application for the appointment of a special receiver therefor, or in seeking his discharge, may be paid out of funds in the hands of the receiver only where contracted for in the interest of the stockholders or creditors of the corporation affected, and in good faith on the part of those who employ counsel for the purposes mentioned. The payment of such fees and expenses in a particular case rests in the sound discretion of the trial court, upon the entire record of the cause in which payment is sought, and its ruling will not be disturbed unless there is a clear showing that such discretion has been abused.

Appeal from Circuit Court, Ohio County.

Suit by Edgar B. Sims, Auditor, against the Homeseekers Fire Insurance Company to secure the appointment of a special receiver for the insurance company, wherein E. L. Hogsett, an attorney, filed a petition for the allowance of attorney's fees and expenses out of the funds in hands of the special receiver. From an order denying the petition, the attorney appeals.

Affirmed.

Hogsett & Smith, for appellant.

William J. Gompers and Austin V. Wood, for appellee. Fox, Judge:

In December, 1934, the insurance commissioner of this state caused an audit to be made of the affairs of the Homeseekers Fire Insurance Company, whose principal place of business was in Ohio County, and found a condition of affairs which, in his judgment, called for certain corrections. Joseph H. Reass was a director of and active in the management of the insurance company, as well as the Wheeling Savings & Loan Association and the Real Estate Finance Company, whose affairs were inextricably mixed with those of the insurance company, in that there were deposited with the loan association funds of the insurance company to the amount of approximately $116,000.00; and real estate loans were held by the finance company for the insurance company to a face amount of approximately $111,000.00, neither of which investments were liquid, and by reason whereof the insurance company did not, in the opinion of the insurance commissioner, have sufficient cash or liquid assets available to make certain the payment of its ex- pected outstanding policy losses as they matured. In this situation certain demands were made by the insurance commissioner with respect to creating a liquid fund of $25,000.00 and the re-insurance of all new business and certain outstanding policies; promises to comply with these demands were made by the company and not kept. Upon this development, meetings of interested parties were held in which the situation was fully discussed. The insurance commissioner demanded the resignation of Joseph H. Reass from the positions held by him in the three companies mentioned above, and Reass indicated his intention to resign, and it is contended that he did resign about February, 1935. The final meeting of the directors of the insurance company, so far as the insurance commissioner was involved, occurred on the night of April 5, 1935, and while the record is not entirely clear on the point, it seems reasonably certain that all directors except Joseph H. Reass were present. At this meeting, an informal motion, not reduced to writing nor entered on the minutes, was unanimously adopted, requesting the insurance commissioner to take steps to secure the appointment of a special receiver for the insurance company. On the next day this suit was instituted in the circuit court of Ohio County and, upon the bill filed, a special receiver for the insurance company was applied for and named, who promptly qualified, took possession of its assets and made a report thereon June 22, 1935. On July 23, the insurance company, represented by E. L. Hogsett, attorney, the appellant herein, filed its demurrer and answer to the plaintiff's bill, the attorney acting under the alleged authority of his informal employment as counsel by some of the directors on July 17, 1935. On July 27th following, at a directors' meeting at which five directors, namely, Joseph H. Reass, Joseph L. Reass, C. J. Bertschy, Alec Bolton and W. J. Gompers, were present, and three directors, R. B. Naylor, T. F. Bayha and W. H. Klieves, absent, a resolution was adopted over the protest of Gompers, by which the secretary, who was Joseph L. Reass, a son of Joseph H. Reass, was "empowered and directed to employ counsel and to take such action, in the interest of the Company, as by counsel advice in the suit now pending in the Circuit Court of the Ohio County, and the action of Director in signing all papers, is approved." The suit referred to is the suit at bar. Under this resolution the appellant was employed and rendered the services and incurred the expenses for which he claims compensation and reimbursement. These services consisted of preparing the demurrer and answer above mentioned and representing the insurance company at a hearing on same; resisting a motion of the plaintiff to strike such papers from the record on grounds of lack of authority to file the same; and in...

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