Kelly v. . McLamb , 182 N.C. 158 ( 1921 )

After stating the material facts: This, it seems to us, was a typical case for the appointment of a receiver and the order of Judge Connor was eminently proper, and there appears to have been no serious objection to it, if any at all. We have held that a receiver will be appointed before judgment where plaintiff shows imminent danger of loss by defendant's insolvency (163) (Bank v. Bridgers, 114 N.C. 381; Mahoney v. Stewart, 123 N.C. 106), or where there is reason to apprehend that the subject of the controversy will be destroyed, or removed, or otherwise disposed of by defendant pending the action (Ellett v. Norman,92 N.C. 519; Thompson v. Silverthorne, 142 N.C. 12); or where defendant is insolvent and all property must be sold to pay debts (Machine Co. v. Lumber Co., 109 N.C. 576); or where it is alleged that defendant is attempting to defraud plaintiff (Stern v. Austern,120 N.C. 107; Pearce v. Elwell, 116 N.C. 595). There are, of course, other cases where a receiver may, and will be, appointed by the court, as in the case of a trust, to completely execute or to facilitate its execution (Rosseau v. Call, 169 N.C. 173), or where a foreign corporation is insolvent, the court may appoint a receiver to protect resident creditors and for other purposes (Holshouser v. Copper Co.,138 N.C. 248; Silk Co. v. Spinning Co., 154 N.C. 442), and there are still other instances where the power will be exercised, but those above enumerated will suffice here. The statute provides: A receiver may be appointed:

"1. Before judgment, on the application of either party, when he establishes an apparent right to property which is the subject of the action and in the possession of an adverse party, and the property or its rents and profits are in danger of being lost, or materially injured or impaired; except in cases where judgment upon failure to answer may be had on application to the court.

"2. After judgment, to carry the judgment into effect.

"3. After judgment, to dispose of the property according to the judgment, or to preserve it during the pendency of an appeal, or when an execution has been returned unsatisfied, and the judgment debtor refuses to apply his property in satisfaction of the judgment.

"4. In cases provided in chapter entitled `Corporations' in the article `Receivers'; and in like cases, of the property within this State of foreign corporations. The article `Receivers,' in the chapter entitled `Corporations,' is applicable, as far as may be, to receivers appointed hereunder." (C.S., vol. 1, sec. 860), and the cases applicable will be found well arranged in the notes to that section. In certain cases the court, in its discretion, may allow a bond to be given by any party who deems that he may be prejudiced by the appointment of a receiver, in lieu of such appointment. C.S. 861.

The very ground upon which this appointment was made was the danger of the loss or destruction of the property, and all of the parties were surely interested in its preservation, and equally, or at least proportionately, benefited by it. Can it be that in either law, or surely in equity, the party who reaps the benefit should not bear his just share of the burden? We clearly think not. The general subject of costs and expenses allowable to a receiver by court of chancery is fully discussed in High on Receivers (164) (1 Ed. of 1894), secs. 796 to 810. It is said there, in sec. 796: "The appropriate method of procedure is to have his compensation fixed by the court, to be allowed out of the assets in his hands, and the amount thus determined to be due him may be taxed as costs in the action." And again, in the same section, at p. 729: "If, however, the appointment of the receiver was proper in the first instance, even though plaintiffs do not ultimately prevail in the suit, it is within the discretion of the court to allow the receiver payment for his services and expenses out of the proceeds of the litigation, and an appellate court will not interfere with the exercise of such discretion when it has not been abused." In French v.Gifford, 31 Iowa 428, Judge Miller states the rule in such cases very lucidly, as follows: "It is insisted by plaintiff's counsel that the compensation of the receiver should be paid out of the fund of which he had the custody and charge, and that he should be permitted to retain the same therefrom. Numerous cases have been cited to show that such is the uniform practice. Upon an examination of these cases it will be found that in every case there was no question made as to the legality or propriety of the appointment of the receiver; that, in each case, the receiver closed up the business and settled his accounts in pursuance of his appointment. The receivership, in each case, was for the benefit of those interested in the fund, and he was paid therefrom, which is only another method of apportioning the costs upon those entitled to the fund. The only case which has been brought to our attention, in which the order appointing the receiver was set aside, is the case of Verplanck v.The Mercantile Ins. Co., 2 Paige 438, and in that case the chancellor ordered the receiver to turn over all the property, without allowing him any commissions therefrom. We think it would be an unjust and inequitable rule if, in all cases, the receiver should be entitled to his compensation from the fund in his hands, without reference to the legality of his appointment. Under the operation of such a rule, innocent persons might be made to suffer a great loss. The general rule as to costs, both at law and in equity, is that they shall be adjudged to the successful, and against the unsuccessful party. Rev. 3449. And they will be so adjudged, unless there exists some equitable consideration to justify a different disposition, or the case is otherwise provided for by law. In cases like the one under consideration, we may adjudge the costs to one or either of the parties, or apportion them." The Court accordingly directed that the fund be charged with one-third of the receiver's compensation, and the plaintiff with the remaining two-thirds. And this accords with our law. The appellant Hyman Supply Company unfortunately misunderstands, or misconstrues, the nature of the essential facts which clearly impose upon it the duty of supplying its share to (165) the general fund for the payment or satisfaction of the costs and expenses. It has received a clear benefit by having the property protected to which it looked for the payment of its claims. The receiver insured the same, or kept a watchman to guard it, so as to prevent its destruction by fire, or depredations upon it by evil-minded persons. The receiver has, besides, sold the property by agreement of the parties, and the proceeds have been applied to the payment of the debts, the plaintiff receiving the major part, having a prior lien. The receiver was required to give bond for the faithful discharge of his official duties, and to keep his accounts, making proper entries from time to time. There is no suggestion that he has not been energetic in the performance of his trust and faithful in all things, and there is not the slightest impeachment of him in respect to his dealings and transactions as receiver. Why, then, should he not be compensated by the parties? Is is certainly just and equitable that he should be, and the law usually follows equity in this respect and adjudges that the laborer is worthy of his hire. There is no objection to the amount of the costs and expenses or to any item of the account. The objection goes entirely to the right to recover anything of the appellant. We conclude that it is not only liable to contribute to paying the receiver, but that Judge Bond (acting in furtherance and final execution of Judge Connor's order, to which no exception was taken) has properly and equitably apportioned the total amount of costs and expenses to be paid, among the respective parties, and appellant should be content therewith.

The case of Humphrey v. Lumber Co., 174 N.C. 514, is not applicable to this case, where the facts are different. The receiver here was appointed with the consent of the Hyman Supply Company and for the protection of its property, if he was not appointed at its request, and for its benefit, which benefit it received, and of which the supply company availed itself as appears in the record. If it voluntarily receives the benefit, it must bear the burden. In this respect, if not in others, our case essentially differs from the Humphrey case, supra. Not only should the supply company pay its fair proportion of the costs and expenses because it consented to the receivership and took benefit therefrom, but because the property on which it had a lien was exposed to great danger, E. C. McLamb having taken refuge in flight, leaving the property without any keeper, and in the throes of hotly contested litigation, thereby enhancing the danger of destruction by fire and idle intruders, and increasing the temptation to injure or destroy it. A receivership was needed more by the supply company, and it derived greater advantage therefrom, than any one else.

There being no error, we decline to reverse or modify the judgment.

Affirmed. Cited: Ellington v. Currie, 193 N.C. 612; Bank v. Country Club,208 N.C. 240; Wood v. Woodbury Pace, Inc., 217 N.C. 361; Finance Corp. v.Lane, 221 N.C. 194.

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