Opinion
No. 35080.
October 26, 1942.
1. APPEAL AND ERROR.
Where Board of Levee Commissioners and town failed to appeal from finding and decree that funds arising out of liability of bank stockholders be distributed pro rata among depositors without preference, decree could not be disturbed on appeal of other parties by reason of failure to give preference to such board and town.
2. BANKS AND BANKING.
Where special master and auditors were appointed in suit against bank undergoing liquidation and fees of auditor and special master were taxed against bank, such fees were a part of costs of liquidation and were entitled to preference on distribution of bank's assets (Code 1930, secs. 445, 3815, 3817).
3. BANKS AND BANKING.
In suit against bank undergoing liquidation which required appointment of auditors and special master, the outcome of the suit is not to be considered in determining preference to be given fees of auditors and special master on distribution of assets of bank, as auditors and special master were "servants of court" in the litigation and their fees were taxable in costs, and when taxed against bank were entitled to priority of payment (Code 1930, secs. 445, 3815, 3817).
APPEAL from the chancery court of Leflore county, HON. R.E. JACKSON, Chancellor.
Alfred Stoner, of Greenwood, for appellant, Taylor, Powell Wilson.
Court costs, representing fees of special masters, which accrued against the assets of an insolvent banking corporation during the course of its liquidation, are preferred over the claims of general creditors which accrued prior to the time that the bank was adjudged insolvent.
Code of 1930, Secs. 443, 445.
Court costs, representing fees of special masters, which accrued against the assets of a banking corporation, during the course of its liquidation, are preferred over the claims of depositors insofar as money realized from stockholders' double liability is concerned and are preferred over unsecured portions of deposits owned by a municipality, and by the Yazoo-Mississippi Delta Levee Board.
Anderson v. Baskin Wilbourn, 114 Miss. 81, 74 So. 682; Schmelzel v. Ada County, 16 Idaho 32, 133 Am. St. Rep. 89, 21 L.R.A. (N.S.) 199; Hale v. State, 55 Ohio St. 210, 48 N.E. 199, 60 Am. St. Rep. 691; Code of 1930, Sec. 3817, p. 1699; Griffith's Mississippi Chancery Practice, Sec. 631; R.C.L., title "Courts," Sec. 62; R.C.L., title "Receivers," Sec. 116.
O.L. Kimbrough, of Greenwood, and Brewer Sisson, of Clarksdale, for Town of Itta Bena and Board of Levee Commissioners for Yazoo-Mississippi Delta.
The town of Itta Bena and the Board of Levee Commissioners for the Yazoo-Mississippi Delta are compelled to resist the claims of appellants that the fund in the amount of $1111.86, awarded to the town and levee board by the lower court, be taken in whole or in part for the payment of fees claimed to be due master and auditors selected by him. This fund amounting to $1111.86, and which the court allowed to the town and levee board, was collected by R.V. Pollard, receiver of the First National Bank of Itta Bena, and was paid over by him to H.V. Parker, receiver of the First Savings Bank Trust Company on May 9, 1940, almost eight years after the final decree in the Williams suit, which decree is dated September 5, 1932.
The Williams suit, on account of which appellants, master and auditors, claim large amounts of money for services rendered, was not instigated by either of the banks involved or by the receiver of the First National Bank or by J.S. Love, Superintendent of Banks of the State of Mississippi, or by anyone representing either of the banks in liquidation. It was a private suit for the benefit of complainant and to the detriment and disadvantage of the banks in liquidation, and to the rights of the town and levee board. The chancery court, in our opinion, was lacking in authority to employ an auditor or firm of auditors for the benefit of private litigants and assess the expense thereof against public funds due and owing to the town of Itta Bena and board of levee commissions for the Yazoo-Mississippi Delta. The trial court had full authority to order those in charge of the receivership or liquidation to permit the representatives of the complainants to examine and inspect all books and records of the banks in the preparation and presentation of complainant's case, but was without authority, we submit, to employ "helpers" as auditors or otherwise, for the benefit of the complainants, and then say that public moneys should be taken and used in payment for alleged services rendered. And it is respectfully submitted that the chancellor did not attempt to exercise any such authority. He did over protest of defendants in the Williams suit, appoint a master and permit him to employ a firm of auditors to examine into the books, records and accounts of the banks, but never did he say or has he said that the fees of the master and auditors should be paid from funds which belong to the town of Itta Bena and board of levee commissioners; to the contrary, when the matter of fees was first called to his attention, he expressly refused to order them paid from the public funds.
It is argued by appellants that the chancery court has the inherent power, independent of the statute, to allow the payment of fees and expenses of masters and auditors. Conceding, for the sake of argument, that the court has authority in certain cases to allow fees and expenses, it cannot be successfully contended that the court has ever allowed, as preference claims, the fees here being claimed by the master and auditors.
It is contended by appellants that they should not be expected to work without pay. As we read the record in this case, it was some five or six years after the rendition of the decree in the Williams case before the master and auditors appeared before the court making contention that they were entitled to preference claims in the aggregate amount of $1100. If the master and auditors had called the matter of their compensation to the attention of the court prior to the signing of the decree in the Williams case, the court might have made a provision in the decree as would have assured the collection by them of some reasonable amount for their services. Costs are not always necessarily assessed against the losing parties.
Miss. Code of 1930, Sec. 670.
It is said by appellants that special masters and auditors are on equal footing, or practically so, relative to compensation to be paid them as receivers, and Section 443 of the Mississippi Code of 1930 is cited. This section provides that receivers shall be entitled to such compensation for their services as the court shall allow, and shall have a lien upon the property in their hands for the payment thereof as other necessary expenses, and the court shall make such order to compel the payment thereof as may be just and necessary, and may decree payment thereof by any of the parties as a portion of the costs of the suit. No effort was made by the master and auditors to have their fees made a lien against the property involved in the litigation, and although they were appointed at the request of those to whom the property was awarded, they now say to the court that an order should be entered awarding to them public moneys and trust funds in payment of their claims. There is no authority in the law, we submit, for the granting of any such request.
It was contended in the lower court by the town of Itta Bena and the board of levee commissioners that the moneys collected from stockholders on account of double liability were subject to the preference claims of the town and levee board, but the court held to the contrary, and from this ruling no appeal has been taken. The chancellor, however, feeling that trust funds should be held intact, ordered the receiver of the First Savings Bank Trust Company to pay the proper and necessary expenses of his receivership from funds collected from stockholders of the defunct bank.
Again saying that appellants are not entitled to preference claims, and that the decree of the chancery court to the effect that the claims are those of a general creditor is correct, it is most respectfully submitted that if this court should hold that the claims of the special master and auditors are entitled to preference, they should be paid from the funds in the hands of the present receiver, H.V. Parker, which were collected by him from the stockholders.
Pollard Hamner, of Greenwood, for appellee.
The general assets in the hands of the receiver are subject to the preference claims when such preference claims ar established, and the assets in the hands of the receiver arising from stockholders' liability collections constituted a special trust fund for the benefit of all the depositors and this fund is not subject to preferences or priorities.
Board of Levee Commissioners v. Parker, 187 Miss. 621, 193 So. 346.
Parties litigating their right to share with others in the assets of a bank, in an action against the Superintendent of Banks, have no right to an award of costs and attorney's fees out of the funds in the hands of the court, and the court has no power to make such award.
9 C.J.S., Banks Banking, Sec. 464.
The above statement expresses the position of the receiver.
If it be held that the costs and fees should be paid out of the "general assets" in the hands of the receiver, we submit that by no species of reasoning can the money collected under the stockholders' double liability statute be subjected to the payment of any costs or fees, except those incident to the collection and disbursement of the double liability fund. The manifest reason is as pointed out by the court in its former opinion, this money is a special trust fund.
Board of Levee Commissioners v. Parker, 187 Miss. 621, 193 So. 346.
Appellee is receiver of the First Savings Bank Trust Company of Itta Bena. This bank had purchased all the assets it was legally authorized to acquire from the First National Bank of the said town and assumed its obligations. On May 22, 1930, the savings bank went into liquidation. On June 4, 1930, suit was brought against said banks and others including the state superintendent of banks, by M.G. Williams and others to set aside certain conveyances acquired by the banks and for other relief, involving approximately the sum of $250,000. Upon motion by complainants, the appellant Alfred Stoner was appointed a special master to state the accounts between the parties and in such capacity was authorized to employ suitable auditors to this end. Appellants Taylor, Powell Wilson were so employed and upon completion of their duties and the filing of the master's report, the court set aside these conveyances and decreed other relief by way of mesne profits and the like. It was further decreed that the defendants be "taxed with all the costs which have accrued in this case including . . . master's fees . . . and auditors' fees, which are to be ascertained by the Clerk of this Court." A cost bill filed with the record included $100 as fees of the master and $1,000 as auditors' fees. The fact of such allowances and their reasonableness is attested by the decree of the court in the Williams suit and in the final decree herein appealed from.
The appellee, as receiver, has on hand the sum of $1,111.86 as general assets and the sum of $3,537.11 which had been collected from stockholders pursuant to their liability under Code 1930, sec. 3815. The question here presented is whether the fees due appellants are prior claims chargeable against the receiver in the liquidation. The decree of the court was (1) that the funds arising out of the liability of stockholders are to be distributed pro rata among all depositors without preference. Insofar as such holding affects the claimants, Board of Levee Commissioners for the Yazoo-Mississippi Delta, and the Town of Itta Bena, we cannot disturb this finding, for two reasons. First no appeal is taken by either from this finding; and second, the situation is found to be the same with respect to the said board as was presented in Board of Levee Commissioners v. Parker, 187 Miss. 621, 193 So. 346, in which our inability in the absence of factual data, to decide its rights was explained. The trial court further held (2) that the sum of $1,111.86 was liable to the preference claims of the above two claimants; and (3) that the costs in the Williams case, including the fees of appellants "are not costs accrued in the liquidation of the First Savings Bank Trust Company," and that such claimants are merely general creditors.
It is evident that it was necessary for the trial court to deny the status of appellants' claim as costs in the receivership in order to avoid the effect of its further finding that "before payment of any claims the receiver of the First Trust Savings Bank shall pay the necessary and proper expenses of the conduct of his receivership in liquidation of this bank . . . said funds to be paid from the funds collected by said Receiver from stockholders' liability claims . . ." It was also necessary, in order to avoid the effect of Code 1930, Sec. 445, which provides that fees of masters shall be "taxed in the costs and collected in the same manner as the fees of the clerk," and of Section 3817 which provides that "when the compensation for the various parties aiding in the liquidation is fixed and approved the same shall be paid out of the funds of such bank in the hands of the superintendent and shall be a prior charge and lien on such assets."
We are of the opinion that the fees of appellants are properly a part of the costs involving the liquidation. The Williams suit involved approximately a quarter of a million dollars. Upon its issue hung the substantial welfare of depositors and creditors of the bank. The liability of the stockholders was put in hazard. The necessity for the instant proceeding is undoubtedly a result of the outcome of that litigation, whereby numerous conveyances to the liquidating banks were set aside. We can see no distinction, justified by either reason or principle, between a suit against the bank to acquire and a suit by the receiver to retain, valuable assets when under either view there was at stake substantial assets for its depositors and creditors. The outcome of the suit is not, and for legal and ethical reasons should not be, a factor in adjudging the rights of appellants. The costs of court of which appellants' fees are a part are not as to them, contingent upon the outcome of the litigation. Nor is there involved any consideration as to who was the successful or unsuccessful party, or whether in view of the outcome the fees are reasonable and proper, since the court has approved the several allowances. Appellants are not parties, they are servants of the court and part of its administrative machinery. The results of their findings may have inured to the benefit of appellee and it was as much to his interest as to that of complainants that the facts be disclosed by careful audit.
In deciding this cause solely with respect to the assignments of error filed by appellants, we are compelled to reverse the holding of the learned chancellor as to the status of appellants' claims for fees. The cause will be remanded with directions to the appellee to pay the claims of appellants first out of any amounts now in his hands as general assets. Such fees being properly taxable as costs in the liquidation are to be dealt with as such, to the payment of which any other funds in the hands of appellee are next made liable. Other findings of the learned chancellor are not affected since they do not involve the interest of appellants and are not questioned by this appeal.
Reversed and remanded.