Assets Realization Co. v. Defrees, Brace & Ritter

Mr. Justice Carter delivered the opinion of the court: The main contention of appellant is, that the court was without authority to allow the fees and expenses of appellees on the facts shown by the record, the main points of which are set out in the foregoing statement of the case. It is urged that after the appointment of a receiver by the circuit court on August 13, 1897, which time the court ruled, as a part of its order, that all of the directors and officers and shareholders, their agents and attorneys, were to be restrained and enjoined from in any manner transacting or conducting any business of the association or doing anything by which its assets might, directly or indirectly, be affected, the said association and its board of directors were deprived of all power to enter into a contract or employ attorneys. If this be the law, then the appointment of a temporary receiver, under the act referred to, would deprive an association such as this of all power to incur any liability, even for the purpose of testing the legality of the appointment of the receiver. If the Auditor of Public Accounts, under this law, can arbitrarily, without any supervisory power of the courts, appoint a custodian of a homestead and loan association, he could thereby, if he should so desire, deprive such association of the authority to employ counsel for its own defense and protection. The property of such associations would then be held by very precarious tenure. The Auditor must necessarily exercise this power subject to the control of the courts. Any other construction of this statute would render it liable to great abuse. Appellees were employed by the board of directors, representing more than a majority of the stock and representing practically all of the stockholders that were enough interested to take part in the proceedings, either directly or by proxy. The litigation in which the fees were claimed to have been earned and the disbursements claimed to have been made was over the question as to the legality of the appointment of a receiver by the circuit court, and whether or not, under the act in question and under the facts, a majority of the shareholders could not re-organize instead of two-thirds being required, as held by the trial court and afterwards by the Appellate Court. When the Appellate Court decided this contention,—that a majority, only, was required,—to be incorrect, all further litigation on behalf of said corporation by appellees ceased. We do not think there is any good ground for contending that the appellees represented a faction, only, ,of the shareholders. Prom this record we are of the opinion that they represented the old and new board of directors, and substantially all of the shareholders who took any active interest in the association. No general rule can be laid down that will apply to the allowance of fees in cases of this kind. The facts and circumstances of each case must be especially looked into and examined to render a just and equitable decision. We are fully aware if factions of the shareholders or of the board of directors can feel that they can bring contests over assets in litigation of this character without incurring any pecuniary hazards, that litigation without merit will be greatly encouraged; still, the representatives of corporations whose very existence is attacked should be afforded reasonable means for resisting such attack, if the facts appear to justify such resistance. “Public policy requires that they should be protected to this extent, but no farther, and a premium should not be held out for captious and vexatious contests at the expense of the fund which the court is under the highest obligation to preserve, as far as possible, to meet the just debts and liabilities of the corporation.” Barnes v. Newcomb, 89 N. Y. 108. No question is raised as to the amount of the fees or the amount of expenses. The whole controversy turns on the right of the court to allow for any fees or any expenses, on the facts as set forth.- At the time the services were rendered and the expenses incurred appellant had no interest in the proceedings or the assets of the association. The liability, if any, to appellees had been incurred at that time. Under its bid appellant agreed “to pay in full the general creditors of the estate such claims against the estate as may be allowed by the court.” On the record before us, in the light of the authorities, we find no reversible error. The judgment of the Appellate Court will accordingly be affirmed. Judgment affirmed.