Moore v. Churchwell

KETCHUM, J. This is a general creditors’ suit in which the assets of the debtor defendants were impounded, liquidated, and the proceeds thereof distributed under the orders of the court, with the result that the claims of all the creditors were paid in full, and a considerable surplus was left in the hands of the clerk and master belonging to the defendants. This is an appeal by the defendants from a decree adjudging that the reasonable compensation of complainants’ solicitors for filing the bill and impounding the assets, and an allowance of $1000 as extra compensation of the clerk and master, should be taxed as costs and paid out of the surplus fund in the hands of the clerk and master belonging to the defendants, and ordering a reference to the master to hear proof and report as to the amount of the fee to be allowed to complainants’ solicitors. This appeal was granted by the Chancellor in his discretion before the reference was had. The complainants did not oppose the granting of the appeal at that stage of the proceeding, did not except to the decreej and did not move to dismiss the appeal in this court as premature. But during the argument here the question was raised by a member of the court whether this was a proper case for the granting of a discretionary appeal under the statute, Code, See. 9038, and therefore whether this court had jurisdiction to consider the appeal before the reference was had and the amount of the counsel’s fee determined by the final decree, and counsel were requested to submit briefs- on this question alsb, ■which has been done. *446 Appeals in equity causes, as a matter of right, lie from final decrees only, Code, See. 9036; Gibson’s Chancery, Sec. 1265; Abbott v. Fagg, 48 Tenn., 742, 748. But in certain cases specified in Code, Sec. 9038 appeals as a matter of favor may be granted by the Chancellor in his discretion from decrees which settle the principles involved, before the entry of the final decree. The instances in which such discretionary appeals may be allowed are the following: (1) decrees ordering an account, or a sale or partition, before the account is taken or the sale or partition is made; (2) decrees overruling a demurrer; and (3) the Chancellor may allow any party to appeal from a decree which settles his right, although the case may not be disposed of as to others. The discretion vested in the Chancellor to grant or refuse an appeal in any of the cases specified in this statute will not be reviewed in the appellate courts except for a clear'and flagrant abuse of his discretion. Mr. Gibson in Section 1302 of his Suits in Chancery lays down the rule that “The appellate courts will not reverse a decree on a question of, the Chancellor’s discretion, unless the exercise of such discretion was not only clearly erroneous, but oppressive.” And our Supreme Couit in construing this same statute in Crawford v. Aetna Life Insurance Co., 59 Tenn., 154, said that ‘ ‘ Even if it were clear that this court might for the' abuse of that discretion, dismiss the appeal, it would require a very gross and palpable case of abuse to call for our interference. This, in our judgment, is not such a case.” Nor will the appellate courts place a narrow and technical construction upon this statute in determining whether the decree appealed from falls within the express terms of the statute. It was so held in Morgan v. Layne, *447 165 Tenn., 513, 518, 56 S. W. (2d), 161, 162, in which an appeal was allowed in the discretion of the Chancellor from a decree overruling a plea to the jurisdiction. The court treated the plea to the jurisdiction “as in effect and substance a demurrer to the jurisdiction”, and the appeal was held to have been proper under that clause of the. statute authorizing discretionary appeals from decrees overruling demurrers. In that case as in this, the authority of the Chancellor to grant the appeal was not challenged upon the ground that it, was premature, and no error was assigned, upon that ground in the Supreme Court; and the court, therefore, treated the appeal as having been properly allowed “without ruling on this question, in view of the circumstances and the state of the pleadings. ’ ’ It is the contention of the appellants that the appeal in the present case is proper under the first clause of the statute, the applicable words of which are that “The chancellor . . . may, in his discretion, allow an appeal from his decree in equity causes determining the principles .involved and ordering an account. ’ ’ The decree appealed from certainly determined the principle, involved, namely, that the extra compensation of $1000 allowed to the Clerk and Master, and the reasonable compensation of complainants’ solicitors for filing the bill and impounding- the assets of the defendants for the benefit of their creditors, should be “taxed up as a part of the costs of the cause, which are adjudged against the defendants, and as such paid out of the funds in the hands of the Clerk and Master.” And the only remaining question for our consideration is whether the reference to the Master to hear proof and report.to the Court as to the reasonable compensation to be allowed to complainants ’ solicitors may be treated as coming within that *448 provision of the statute relating to the taking and stating of an account between the parties. In 1 C. J. S., page 571, it is said that “account” is a generic term, difficult to define, and having various meanings depending somewhat on the surrounding circumstances and connection in which it is used, and among other definitions is the following, approved by the courts of California, Massachusetts, Mississippi, West Virginia and South Dakota: “It implies that one is responsible to another for moneys or other things, either on the score of contract, or of some fiduciary relation, of a public or private nature, created by law, or otherwise.” Under this definition we do not think it is unduly extending the meaning of the term as used in this statute to hold that it embraces the order of reference to ascertain and report as to the amount to be allowed to complainants ’ solicitors as their compensation. In this connection it is significant that in the many cases in which this provision of this statute have been considered by our appellate courts we have been referred to and have found only two'in which the Chancellor’s discretion in granting the appeal was reversed, and those reversals were upon the ground that the decrees did not settle the principles involved. One of these cases is Meadows v. State, 47 Tenn., 416, 420, where the court say: “Although it (the decree) orders an account, yet it determines no principle involved. It does not settle or declare the rights or liabilities of any of the parties. In fact, it settles nothing. ’ ’ And in Terrell v. Ingersoll, 78 Tenn., 77, 82, the court after quoting the language of the statute, say: “A decree which simply orders an account, without settling the rights of the parties, or the principles orí which the ac *449 count should be taken, is not such, a decree as will authorize an appeal under that section”. And in many of the eases in which appeals have been allowed under the accounting clause of the statute, the reference was not for an accounting of mutual debit and credit items shown by book accounts or otherwise, but included general references to the Master to ascertain the amount due one party or the other according to the principles established by the decree; such, for instance, as the amount of advancements made, the value of personal property, etc., for the purpose of settling an estate; Helms v. Mynatt, 46 Tenn., 215; or to ascertain the reasonable hire of slaves, the rents and'profits from real estate, etc.; Allen v. McCullough, 49 Tenn., 174, 5 Am. Rep., 27; the damages allowable for a breach of covenant of title to real estate, including the cost of defending the title, including costs and attorneys’ fees; Williams v. Burg, 77 Tenn., 455, 456; and a general reference embracing all matters involved in the settlement of the estate of President Andrew Johnson, including the question of the compensation of Andrew Johnson, Jr.; Matter of Johnson’s Estate, 77 Tenn., 625; and a reference in a mechanic’s lien case “for an account and report” as to the amount due for work done on a building; Andrews v. Warner, 87 Tenn., 1, 9 S. W., 194. Other cases illustrating the principle are Younger v. Younger, 90 Tenn., 25, 16 S. W., 78; McNairy v. Nashville, 61 Tenn., 251; Clift v. Clift, 87 Tenn., 17, 9 S. W., 198, 360. Under all the cases cited the necessary requisite to the granting of a discretionary appeal under this clause of the statute seems to be the entry of a decree determining the principle involved as the foundation for the reference. We find no case in which the Chancellor’s discretion in this regard was reversed except in the two cases above re *450 ferred to in which there was no decree settling the principles involved and directing the Master as to the matters upon which he was to make his report. This statute is a wholesome one and. the courts will not defeat its purposes by placing a narrow and literal interpretation upon its terms; and we think a reference to hear proof and report as to the reasonable fees of counsel fairly comes within the clause relating to the taking and stating accounts. Coming to the merits of the appeal we are of opinion that the Chancellor erred in decreeing that the extra allowance of compensation and the fees of counsel for filing the bill and impounding the assets, should be taxed as costs against the defendants and paid out of the surplus funds in the hands of the Clerk and Master. The general rule on the subject is stated in 14 Am. Jur., Title “Creditors’ Bills”, Sec. 143, at page 738, as follows: “Allowances are made for the successful maintenance of a creditors’ bill from the fund among the creditors, and not from the surplus available after payment of all debts of the defendant.” And in Corpus Juris Secundum, Vol. 21, Title “Creditors ’-Suits ”, section 83, at page 1143, as follows: “A creditor who collects funds of a debtor for the joint benefit-of himself and other, creditors should be allowed reasonable compensation for the services of his attorney, at least to the extent that they are beneficial. However, counsel are entitled only to théir reasonable and necessary disbursements; and such allowance is not chargeable to any surplus otherwise payable.to the debtor. If an allowance beyond the usual fee for counsel is proper, and it is paid out. of the proceeds, it should be credited ratably on the liens, so as not to tax the debtor with it. ’ ’ *451 The cases on the subject are collected in a note in 49 A. L. R, at page 1183, where the annotator states the rule as follows: “Allowance cannot be made from surplus. Allowance of attorneys’ fees to one who has maintained a successful creditors’ bill for the preservation of a debtor’s estate, or the recovery of property conveyed away in fraud of creditors, must be made from the fund to be distributed among the creditors, and not from the. surplus which may remain after the payment of all debts ’ ’. One of the early cases on the subject in this country is Wagener v. Mars, 27 S. C., 97, 2 S. E., 844, decided in 1887, in which it was held that the attorneys for the plaintiffs in a creditors’ bill to set aside a deed for fraud were entitled to a fee out of the proceeds of the sale of the land, to the extent that they might be applied to the claims of creditors who came in and shared in the results of the suit. But, where the land sold for more than enough to pay the creditors, the balance should not be diminished by any portion of the fee; in other words, that the fee should be deducted from the amount of the proceeds applied to the claims of creditors and not from the surplus belonging to the defendant. One of the ablest and best reasoned cases on the question is Huff v. Bidwell, 5 Cir., 195 F., 430, 432, 115 C. C. A., 332, in which it was held that where the assets of an insolvent debtor were impounded under a creditors’ bill filed by the complainant for his own benefit and for the benefit of all other creditors similarly situated it was proper that the fee of the complainant’s solicitor should be paid out of the assets so that all of the creditors would contribute ratably to the expense of impounding the assets. But it was there pointed out that if no other creditors intervened, and the suit inured to the benefit of the *452 complainant alone there would be no basis for the argument that the fee of complainant’s solicitor should be collected from the defendant. It was also pointed out that there existed no legal right to create at the debtor’s expense a larger fund than was sufficient to pay his debts and costs, and it was said: '‘If it could have been known in advance that the property as advertised would produce a surplus, and it had been capable of a suitable division to avoid that result, only enough of it should have been sold to pay the debts and the costs. There would have been no authority to sell more of it for the purpose of paying the fees of complainants’ solicitors.” And in Peppers v. Cauthen, 143 Ga., 229, 84 S. E., 477, 479, the court said: ‘ ‘ The theory on which attorneys ’ fees for bringing a fund unto court-is allowed is that if the diligence of one creditor secures a fund for the common benefit, and, if others share therein, any expense of securing it should not fall on the diligent creditor alone; that those who participate in the fund should contribute their share to the common expense, so that the fund going to the different creditors may be first taxed with the proper amount of attorneys’ fees before its distribution. But this does not authorize creditors to be paid in full and also to require the debtor to pay attorneys’ fees for bringing- the fund into court. What is here said refers to the award of a fee from the fund for bringing it unto court, and not to the contract fees which may be contained in the notes.” And in Roller v. Paul, 106 Va., 214, at page 219, 55 S. E., 558, at page 560, the court said: “The claims asserted against William I. Paul have been so far satisfied as to leave a balance of the proceeds of his land payable to him or his assignee. The balance that is left to this debtor can hardly be appropriated to the payment of fees *453 to the counsel of those who have sold his land and fought for years over its proceeds. When their claims were satisfied they had secured from their debtor’s property all that they were entitled to . . . ” Other cases to the same effect are German National Insurance Co. v. State Insurance Co., 108 Va. 393, 61 S. E. 870, Citizens National Bank v. Manoni, 76 Va. 802, 808, and Miller v. Kehoe, 107 Cal. 340, 40 P. 485. We find no Tennessee case in which the exact question we have here was passed upon, but the reasoning of our cases for paying the fee of complainant’s solicitor out of the fund in creditors’ suits is in line with the reasoning of the above cases, namely, that the assets of an insolvent debtor having been impounded by one creditor for the benefit of himself and all others similarly situated, it is just that all creditors should contribute ratably to the expense of impounding them. Some of these cases are Whitsett v. City Building Association, 3 Tenn. Ch. 526; Grant v. Lookout Mountain Co., 93 Tenn. 691, 28 S. W. 90, 27 L. R. A. 98; Electric Light Co. v. Bristol Gas Co., 99 Tenn. 371, 388, 42 S. W. 19; and Kelly v. Mountain City Club, 101 Tenn. 286, 47 S. W. 426, The reasoning of the above cases seems to us to be sound and we find nothing in the facts of this case to warrant a different conclusion. There was no charge of fraud or concealment of their assets by the defendants. It was not deemed necessary to appoint a receiver -to administer the assets. The defendants have co-operated in every way in disposing of their assets by private sales and we have no doubt that the fortunate result attained is due largely to their efforts in this regard. If all of the defendants’ property had been administered by a receiver and sold at public sale while the country was just recovering from the greatest financial depression in its *454 history, as complainants’ solicitors insisted should be done, it is most likely that it would have been sold at a sacrifice. The claims filed and allowed against the estate amounted to around $100,000. Of this amount approxi-' mately $75,000 was evidenced by promissory notes which provided on their face for the payment of attorneys’ fees. The fees allowed on these claims amounted to over $7,500’, which have been paid; and of this sum more than $4200 has been paid to the solicitors for the complainants. For the reasons above stated we sustain the assignments of error of the appellants and reverse the decree of the Chancellor in taxing the allowance of the $1000 as extra compensation to the Clerk and Master and the compensation of the complainants’ solicitors for filing the bill and impounding the assets, against the appellants ; and a decree will be entered here in accordance with the views herein expressed. If it is desired to proceed further with the reference for the purpose of ascertaining the amount of compensation to-be allowed to complainants’ solicitors and taxed against the creditors, the order of reference may be amended to that extent, otherwise, the order of reference will be set aside. The costs incident to this appeal including the costs of the transcript, will be adjudged against the complainants and their sureties on the cost bond. Reversed. Anderson, P. J., dissents. Baptist, J., concurs.