Chronowski v. Park-Sproat Corp.

Sharpe, J. This is an appeal by defendant corporation from the allowance of $5,000 to Edward Paulson, a Chicago real estate broker, for services rendered to the receiver of defendant corporation in negotiating a proposed, but unapproved, lease of defendant’s hotel property. This cause originated in a bill of complaint filed in 1933 by a minority stockholder praying for the appointment of a receiver of the Park Avenue Hotel in Detroit, Michigan. Other stockholders intervened and all parties asked that a receiver be appointed. On June 30,1933, Judge V. M. Brennan appointed Julius Berman receiver. The order appointing the receiver provided: “That said receiver shall forthwith enter into the possession, control and management of certain property of the said Park-Sproat Corporation, a Michigan corporation, known as Park Avenue Hotel, and that in connection with the said management of the said hotel said receiver is specifically authorized to employ and discharge all individuals as to him appears necessary for the proper operation of the said hotel, to make necessary purchases and contracts for purchase of produce and hotel supplies, and to make such repairs to the premises ,as to the said receiver shall appear necessary and desirable for the proper maintenance and continuance of the business, and to do each and every thing as in the opinion of said receiver is *679 desirable, proper and necessary ' to the proper continuance of the hotel business and the preservation of the assets of the said Park-Sproat Corporation, a Michigan corporation, and to make the necessary contracts in connection with the mánagement and control of said property, which in no event shall exceed the duration of said receivership,' all subject, however, to the approval and ratification by this court.” At the time of the appointment of a receiver, proceedings were pending to foreclose the mortgage on the hotel property, which amounted to approximately $165,000. By intervention of the receiver, moratorium relief was granted. In December, 1935, the receiver filed a petition for instructions and on July 2, 1936, Judge Brennan entered an order authorizing the receiver to execute a lease with Kilborn Management- Company. The lease required the lessee to pay all taxes, special assessments, interest at five per cent, per annum on the mortgage, insurance premiums, and rent at the rate of $5,000 for each of the first and second years and $10,000 per year for the next six' years. The interest rate for the last four years was to be five and a half per cent, and all rentals were to be paid to the mortgagee for the account of the receiver. The lessee was also required to loan the receiver $17,000 until July 1, 1947, without interest until July 1, 1944, and with interest after said date at the rate of five per cent, per annum. The lessee was required to make all repairs necessary to maintain the premises in the same condition as when taken. The lessor reserved the right to terminate the lease at any time after the first year and during the first four years upon payment to the lessee of $15,000, and during the last four years, upon payment of $10,000 to the lessee. *680 Toward the end of the fourth year of the lease, real estate conditions in Detroit had improved and the receiver sought to interest local people in an attempt to obtain a lease that would be more advantageous to the receivership estate. During the latter part of 1939, the receiver consulted with Edward Paulson who specialized as a consultant in the operation, management, leasing and liquidating of hotels for the purpose of interesting him in the Park Avenue Hotel. Mr. Paulson was a licensed real estate broker of Chicago, but was not licensed in Michigan. Paulson came to Detroit to inspect the premises and thereafter undertook to interest various persons in the hotel.. He brought a number of persons to Detroit and included among them was one Samuel Rautbord who made a proposal to lease the hotel on terms more advantageous to the receivership estate than those of the existing Kilborn lease. In July, 1940, a hearing was had on the Rautbord proposal at which time Kilborn offered to match the Rautbord proposal. During the course.of the hearing, the proceedings were interrupted and stayed through intervention of a Federal court receivership. In January, 1942, the Federal court receivership was dismissed and the receiver again contacted Paulson and requested him to come to Detroit to assist in getting a better lease for the hotel. On February 11, 1942, a Mr. Spare, through the efforts of Paulson, presented a proposal to rent the hotel on terms favorable to the receivership estate. The Spare proposal resulted in Kilborn offering to match it. Eventually, Spare offered to pay a rental of $32,000 per year coupled with an offer to purchase the hotel within two years at a price of $270,000. *681 At this juncture in the affairs of the hotel property, the stockholders advised the circuit judge that they would like to have the property turned back to the corporation. Judge Jayne advised the stockholders that he would terminate the receivership on condition that the stockholders advance sufficient moneys to pay off all receivership claims, including Paulson’s claim. In distributing the money advanced by the stockholders, the court ordered $5,000 to be paid to Edward Paulson for his services and, in his opinion, stated: “We find as a fact that the petitioner’s activities and those of his client materially benefited the estate and'the value of the stock of the corporation which now objects to his compensation. We find further as a fact that the petitioner’s services were secured by the receiver and that his actions in so doing were approved by this court repeatedly and are now again approved as within the proper duty of the receiver. We find further as a fact that the reasonable value of the services ■ rendered is $5,000.” ' Defendant corporation appeals from this order and urges.that claimant’s services were neither necessary nor beneficial. We are in full accord with the finding of facts by the trial judge that “the petitioner’s activities and those of his client materially benefited the estate and the value of the stock of the corporation.” The record amply supports such a conclusion. Nor are we impressed with the objection that claimant’s services were neither authorized nor warranted. The trial court at all times knew that claimant had been employed by the receiver. The order appointing the receiver authorized him “to do each and every thing as in the opinion of said *682 receiver is desirable, proper and necessary to the proper continuance of the hotel business and the preservation of the assets of the said Park-Sproat Corporation.” In 16 (1942 Rev.) Fletcher on Corporations (Perm. Ed.), pp. 362, 363, in connection with the power of the court to ratify a receiver’s contract, it is said: “Moreover, though no previous authorization be granted, there may be a ratification, sufficiently indicated by other proceedings in the case, showing that knowledge was possessed by the court of the making of the contracts, and acquiescence therein.” In 53 C. J. pp. 158, 159, it is said : ‘ ‘ The general rule against such contracts or expenditures without the previous authority of the court should not be rigidly and sternly enforced so as to work wrong and injustice, where the receiver has acted in good faith and under such circumtances as will enable the court to see that if previous authority had been applied for it would have been granted, * * * under the modern practice the court will give Its subsequent approval when the receiver has made a reasonably proper contract * * * in good faith, and what he has done appears to have been for the benefit of the trust. * * * A subsequent ratification of a receiver’s contract by the court makes it as legal, and binding as if the court had expressly authorized it in advance.” It is next urged by defendant company that the claim was barred by the statute of frauds. Claimant submits that the following written memoranda, signed by the receiver, is sufficient to satisfy the statute of frauds: *683 “May 23, 1940. “Mr. Edw. Paulson, “120 S. LaSalle Street, “Chicago, 111. “Dear Sir: “I am in receipt of your proposal of May 20, 1940, to lease the Park Avenue Hotel. “This offer is acceptable to me as receiver of this hotel and you may consider this letter as an acceptance of the proposal subject to the following: That this matter must be submitted to the circuit court for the county of Wayne for approval, which approval of course will be predicated on a hearing to be had, at which hearing all interested parties will be present in order to express their views. “It is my intention to recommend the acceptance of your proposal at this hearing. “Yours very truly, “Julius Berman, “Receiver of Park-Sproat Corp.” “1942 Mar 11 PM 819 * * * “Edward Paulson, “120 So. LaSalle St. Chgo. “Will be home Tuesday seventh you can be sure I will not recommend Kilborn under any circumstances in any event your commission is assured regardless who gets the deal I do not think Kilborn can raise the necessary cash he has only offered ten thousand additional. “Julius Berman.” “March 12, 1942 “Mr. Edward Paulson ‘ ‘ 120 S. LaSalle, Suite 1847, “Chicago, 111. “Re:Park Avenue Hotel. “Dear Mr. Paulson: “ * * * For your information, Judge Brennan has taken the position that in the event the lease is given to Kilborn, you are not to be ignored, and his *684 present thought is because you did create the situation that improved the value of this estate, you should be entitled to get at least one-half of your commission. That was his informal statement to me. What he will do at the hearing, I don’t know, but you may rest assured no matter who gets the lease, you will get some compensation. * * * “Tours very truly, “David I. Htjbar.” It is to be noted that the above memoranda fails to state any specific amount or rate of pay, but in the receiver’s petition of April 2, 1942, for instructions and authority regarding leases and mortgage, we find the following: ‘ ‘ That in the negotiations for the proposed lease, one Edward Paulson, a licensed real-estate broker, has acted as agent, and in the opinion of your petitioner is justly entitled to the payment of a commission in the amount of $5,000 for negotiating said transaction, and that in the event of the approval of the request of your petitioner for leave to enter into said lease, this court likewise approve payment to said Edward Paulson of his commission as aforesaid.” In Bagaeff v. Prokopik, 212 Mich. 265 (17 A. L. R. 1292), plaintiff began a suit on a promissory note given by defendant to pay for past broker’s fees when the original agreement was void under the statute of frauds. We there held that though the original contract was void because of the statute of frauds, the services rendered and the moral obligation to pay was sufficient consideration to support a subsequent promise to pay. In the case at bar, the receiver’s petition disclosed the amount with which the receiver was to be charged. In our opinion the written memoranda together with the acknowledgment as mentioned in *685 the receiver’s petition was sufficient to take the case out of the statute of frauds. It is next urged by defendant corporation that Paulson’s claim is barred by Act No. 306, § 1, Pub. Acts 1919 (2 Comp. Laws 1929, § 9806 [Stat. Ann. § 19.791]), which prohibits persons from acting as real-estate brokers or salesmen within this State without first obtaining a license under the provisions of the act. Section 2 of the above mentioned act (2 Comp. Laws 1929, § 9807, as last amended by Act No. 268, Pub. Acts 1939 [Comp. Laws Supp. 1940, §9807, Stat. Ann. 1942 Cum. Supp. §19.792]) provides in part: “The provisions of this act shall not apply to * * * nor shall it be held to include a receiver, trustee in bankruptcy, administrator or executor, or any person selling or appraising real estate under order of any court.” It is well-settled law in Michigan that when a receiver has taken possession of property, such possession is that of the court itself. See Uhl v. Wexford Company, 275 Mich. 712. It is clear that it was the duty of the court to manage or dispose of the property for the best interests of all concerned. The court had general supervision of the acts of the receiver and at all times had knowledge that Paul-son was acting for and in behalf of the receivership estate. We think that under such circumstances, Paulson was acting under the general supervision of the court and comes within the exceptions mentioned in section 2 of the above act. The order of the trial court is affirmed, with costs to claimant, Chandler, North, Starr, Butzel, and Bushnell, JJ., concurred with Sharpe, J.