Anderson & Anderson v. Fidelity & Deposit Co.

Simmons, Chief Justice. In March, 1891, the Macon Construction Company was ¡ placed in the hands of a receiver. This company seems to - have owned all the stock -in the Georgia, Southern tic Florida Railroad Company and in the Macon & Birmingham. Railroad Company. These two railroads were also placed. in the hands of the same receiver. On the 18th of February, 1892, the hoard of directors of the Macon Construction. Company employed Anderson & Anderson as general counsel to represent the construction company in the pending; litigation, hut no order of the court was obtained authoriz- ■ ing this employment. In pursuance of ‘this employment, Anderson tic Anderson represented the construction company in -the litigation. The two railroad companies had. issued a large number of bonds, and to secure them had. given a mortgage to a certain trust company. The Macon. Construction Company claimed that the bonds issued and. the mortgages given by the railroad companies were invalid for reasons set out in its pleas, which -are not here necessary to mention; and also filed pleas of usury. These pleas were • filed by Anderson tic Anderson; trial was bad thereon in the ■ lower court, and the pleas were not sustained. The case was brought 'to this court, and 'the judgment of the lower - court was affirmed. Anderson & Anderson also represented the construction company in resisting an effort on the part • of the 'bondholders to discharge Sparks, the receiver, and to substitute another in his place. These services were-rendered with the knowledge and consent of the officers of ’ the two railroad companies, one of the officers of the Geor- ■ gia, Southern tic Florida Railroad Co. swearing to the pleas ■ filed in its behalf and in behalf of 'the Macon Construction Company by Anderson & Anderson. Other services were-rendered by -these counsel in the course of their employment to the construction company and to the railroad companies. It appears from the evidence, however, that the services of " these counsel did not bring a dollar into the fund, nor pre [741] vent a dollar from, being paid out by the receiver which' should nioit have been paid. After several years of Btógati'on, tbe court ordered itbe properties of tbe -two railroad companies sold by commissioners. This was done and the pro- ■ needs of the sale brought into court. Anderson & Anderson filed their petition 'with the court, asking that counsel fees be paid them out of ’the general fund for services rendered by them in the litigation. The court entertained ■the petition, heard the evidence, and denied their prayer. ' They excepted and brought the case here for review. 1. In our opinion the court did not err in refusing to (grant fees for the services rendered as above indicated. '.Treating the employment of these counsel as having been made by the two railroad companies (which the evidence ■does not authorize), the -court was right in refusing to pay the counsel out of the general fund in court. If these rail:road companies had in good faith resisted the appointment ■of a receiver when the -appointment of one was first applied ■for by the creditors and had applied -to- the court for permission to employ counsel for that purpose, tbe court would doubtless have granted their request, as it would have been :in his disenelbion whether he would have paid counsel fees or .not. It would be a great hardship upon persons or corporations for the courts to seize -all of their assets and deprive :the-m of the means of employing counsel when they in good faith resist the appointment of a receiver and deny the neces- . sity -therefor, and in such a case we think it would be proper ■for a court to allow -a person, or corporation, counsel to aid in the defense of their -rights and, indeed, in the case of a •corporation, of its very existence. But where the -appointment of the receiver was not resisted hut was for more than .a year acquiesced in, and counsel were then -employed for ■the purpose of resisting creditors who had honest and bona ■fide claims against the corporations, and the services of these •counsel availed nothing either in saving or in increasing the ;assets, we think 'that they were not 'entitled to any compen [742] satdon. The companies proved to be insolvent and the debts', which these counsel sought to defeat proved to be bona fide • and valid; and it would be inequitable and unjust to- require ■ the creditors to pay counsel for an attempt to defeat them.. Treating the employment of tire counsel as having been made by the Macon Construction Company, as the evidence - clearly shows was the case, they would still be entitled to ■ no compensation. The construction company being sole-stockholder of the railroad corporations, if it could have-defeated the foreclosure of the mortgages and the payment. of the bonds, this would redound to its interest alone. We ■ think it would be neither right nor proper to allow one cred- ■ itor to employ counsel for the purpose of defeating another' creditor, and when his effort fails, to charge the expenses-of his counsel upon the prevailing creditor. DSTo case we’ have found has allowed counsel, other than those employed. by the receiver with permission of 'the court, compensation. for any services rendered'in litigation, unless those services • increased the fund to be distributed. H counsel employed by creditors, by-their services, bluing imito court property or funds which -the court has not seized, and thereby increase the-fund for distribution, it is right and proper to allow them. reasonable fees for so doing, but unless their vigilance or-skill aids the court in securing a fun-d which would otherwise not have been secured, they are mioit emltifcled to com- ■ pensation auit o-f the fund, but must look to their own clients - for fees. 2. The fact that the counsel employed by the construe- - tion company aided counsel for the receiver in resisting the * attempt to remove him, does not entitle them to compensa- • tion out -of the fund belonging to creditors. The receiver ■himself cannot employ counsel without leave or sanction of ' the court which [appointed him; fand certainly such counsel cannot be employed by a creditor without leave or sanction of the court, -and Ms compensation charged upon the general fund in the hands of the receiver. [743] Eor further discussion of <tihis question see Beach, on Receivers, Aldersom’s edition, §754, and the cases there cited; also Gluck & Becker on Receivers of Corporations, second edition, p. 355 et seq., and the authorities cited. Judgment affirmed. All the Justices concurring.