
    AS TO RECOVERY OF FEES BY COUNSEL FOR A RECEIVER.
    Common Pleas Court of Montgomery County.
    James H. Friend v. The Friend Paper Co.
    Decided, October Term, 1912.
    
      Receiverships — ■Procedure for Recovering Compensation by Counsel— Leave to Fie a Separate Action Denied.
    
    A court having charge of a receivership will grant leave to file an intervening petition to counsel seeking to recover compensation for services rendered to the receiver, but will refuse leave to file a separate action at law against the receiver.
    
      Goitschall & Turner, for the receiver.
    
      Mat tern & Brumbaugh and Matthews, James & Matthews, contra.
   Brown, J.

This matter comes before the court upon the application of Williamson & Smith, a partnership engaged in the practice of law in the city of New York, for leave to file a petition against the receiver on a claim for advice and services rendered from October 19th, 1909, to September 1st, 1912, in connection with the receivership and reorganization of the Friend Paper Company, which with disbursements amounts to $25,846.55, less cash credits $750, balance due $25,096.55.

The applicants state that their services were rendered the receiver in the administration of his duties as such receiver, and for services of value in disposing- of the assets of said company, and in bringing into this court funds to be distributed through the receiver, which would not have otherwise been brought into court.

The applicants ask permission to file a separate suit at law against the receiver. This has been argued orally by counsel and submitted with written memoranda furnished by counsel for the applicants and by counsel for the receiver. It is contended on behalf of the applicants that the question to be determined ultimately is whether or not the applicants were ever employed by the receiver, and that it is not a question of fixing the amount, but whether by contract the applicants are entitled to anything-. It is admitted by them that this leave is addressed to the discretion of the court, but that it is a legal discretion to be exercised by established rules. Appellants counsel cites: 84 Fed. Rep., p. 917; 34 Cyc., p. 419; 32 N. J. Eq., p. 302; 111 Mass. Rep., p. 508; and contend that the case of Olds v. Tucker et al, 35 O. S., p. 581, and Webb, Receiver, v. Stasel, Receiver, 80 O. S., p. 122, are in harmony with the principle that the applicants should be permitted to have a trial by jury in a separate.action.

Counsel for the receiver contend that the case of Olds v. Tucker et al, 35 O. S., 583, by the Supreme Court of Ohio, gives the law which must control the court in this ease.

I have carefully considered all the cases cited, together with others, in determining the questions involved fairly and in accordance with the law and precedents. The citations from the Cyc. text are important only when the case cited sustained the same. The 34 Cyc., page 419, cites the case of Palys v. Jewett, Receiver of the Erie Railway. This was an action for damages for personal injuries by reason of the negligence of the train employes of the receiver, and Chief Justice Beasley renders a very interesting and exhaustive opinion, reviewing the English and American law upon this subject. The syllabus is:

"The application for leave to sue a receiver should be made to the court which appointed him, and the petition should, on its face, show that the petitioner has a case. The court should not allow its receiver to be harassed by a suit where, according to his own showing, the petitioner has no cause of action. The application is in effect a motion in the cause, and it has been held can not be granted in any other cause than that in which the receivership is pending. But the rule-requiring leave is practically complied with, when leave is granted by a judge in vacation and the suit is afterward tried by him in term time. Such a subsequent entertainment and trial of the suit is equivalent to a direct authorization for its institution. In a proper case the court may, after the action is brought, grant leave nunc pro tunc, and mere delay in entering the order, which has been regularly granted, until after the action is commenced will not require the setting aside of the summons and process, but the order when entered will take effect as of the day it was granted.
‘' It was not according to the course of the court of chancery to refuse liberty to try a right claimed against its receiver, unless it was perfectly clear that there was no foundation for the claim, and while it has been held that the court can not. properly refuse leave to bring an action at law upon a purely legal right, when the applicant comes in asking for a trial at law and by' jury, it is otherwise when the petitioner voluntarily comes into court in the receivership proceedings, asking that court to determine his rights, and generally it is considered to be a matter within the discretion of such court whether it will determine for itself all claims of or against the receiver, or will allow them to be litigated elsewhere, and the latter is usually done when the issues can be mo.re conveniently tried in the place where the facts rise and the venue belongs. But it is held that the court should not permit its receiver to be made a party to proceedings in another court, where the result may be the dismemberment of the property which is being administered for the benefit of creditors and lienors, and that the court is not precluded by the granting of leave on an ex parte application from subsequently dismissing the suit upon a hearing, if the proceeding involves the disposition of the property, and remitting the party to his remedy in the receivership suit. In most cases of claims against a receiver, or the fund or property in his hands, the remedy by application in the cause is adequate. Any person having such a claim may resort to his summary remedy. The fund or property being held by the Court, by its receiver, in trust for those entitled to it, or to be paid out of it, the court may administer justice to claimants without suit, upon special'application, and relief may be awarded to a petitioner in this court, although the cause of action is within the jurisdiction of a court of law. ’ ’

The case was originally submitted to the vice-chancellor after trial, who decided against the plaintiff upon appeal to the court of errors and appeals by the above opinion, which recited that the- parties had voluntarily accepted the equity jurisdiction, therefore the upper courts would review the facts. It was held that in such cases the proper procedure would have been by a suit at law. Tliis is the practice also iu Ohio in all such cases sounding in tort.

The case of American Loan & Trust Co. v. Central Vermont R. Co. et al., 84 Fed. Rep., 917, was an independent suit to foreclose a mortgage on the property in the hands of the receiver. This was brought as an independent suit without leave of court. This ease was dismissed, but leave was granted to file an intervening petition in the receivership case, and in the syllabus the courts say “such independent suit can not be maintained except by leave of court, which will not be denied arbitrarily but only for legal unfitness for the process, when or where sought.”

In Olds v. Tucker et al, 35 O. S., p. 581, decided in 1880 and not since overruled or modified, the syllabus is as follows:

“■Where the compensation of an attorney for professional services in securing the funds in the hands of a receiver for distribution is, by the rules governing the courts of* equity, a proper charge upon the funds, application for such compensation out of the funds should be made in the action in which the receiver was appointed.”

In this ease the plaintiffs brought a separate suit for attorneys fees for conserving a sum of money for the benefit of the estate. The Supreme Court held that no application for a separate suit had been filed in the receivership case and the court held that this ought to have been done and permission obtained either by an independent action or upon leave of court, and cites a number of English and American cases. Judge Johnson, dissenting, agrees to the proposition, but excepts for the reason that no objection was made to the separate proceeding until after judgment had been obtained. The law is very clear that every allowance made to an attorney must be predicated upon the contract of employment.

This is an application for an allowance of attorneys fees in the matter of the administration of this trust. Counsel fees for the necessary counsel to the receiver are always part of the costs and such are to be passed upon by the judge having the case in charge, Under all the facts and law, I am of the opinion, therefore, that leave should be granted to the claimants to file an intervening petition in* this case, but deny the authority to bring a separate action for the reasons above stated.  