contract by way of answer to the original bill in Ogdenl:Jburg c/; L. O. R.Oo. v. Northern R. 00. of N. H. 5 FED. REP. 880, the plaintiffs in this case are hereby permitted to file their cross-bill, on terms that if they shall succeed in reforming the contract, and thereby prevail in the litigation, they shall take no costs to this time, and shall pay the costs in the original suit up to this time.
BLAIR v. ST.
H. & K. R. Co. and others. t
April 30, 1884.)
(Circuit Court, E. D. Missouri.
LEGAL ADVISERS OF RECEIVERS-WHO ARE INCOMPETENT.
Where, during the pendency of foreclosure proceedings against It railroad company, a receiver is appointed, the attorney of the plaintiff should not 06 authorized to act as the receiver's legal adviser Nor will an attorney be appointed legal adviser of a receiver who is related to him, and has come from abroad and become a member of the bar of the c'rcuit for the purpose of securing the appointment.
In the absence of any special reason for so doing, the court will not go outside of the bar of the circuit in selecting a legal adviser for a receiver.
Semble, that where a railroad company has failed to pay interest on its honds when due, and foreclosure proceedings are commenced against it, a receiver should not he appointed, in the absence of fraud, incompetency, etc., to do what the corporate authorities could do better.
4. HECEIVEUS-WHEN ApPOINTED.
In Equity. Motion by receiver to have order appointing legal advisers rescinded, and to substitute for the attorneys then employed a Chicago attorney, who was already attorney for the bondholders, and the receiver's brother, who had lately come to St. Louis from Wisconsin, and had been admitted to the federal bar of this circuit. Walter O. Larned, for complainant. TREAT, J. A bill on the part of the mortgagee was filed in this case for the foreclosure of a mortgage and the appointment of a receiver pendente lite. The allegations of the bill were that the managers of the road had practically abandoned the control and conduct of the same, whereby the preservation of the property required a receiver pendente Ute. A court should not, on mere default of interest on bonds, take possession of a railway and substitute a receiver of its appointment to do what the corporate authorities, more familiar with its interests, could better do. In the absense of fraud, etc., the court, pending a proceeding for a foreclosure, under ordinary circumstances, will not take possession through its receiver of the corporate property and substitute its officer in the place of the corporate offi.
lReport.d by Benj. F Rex, Esq., of the St. Louis bar.
BLAIR V. ST. LOUIS, H. & K. B. 00.
cers. It may be that the view is creeping into administration of law that when a mortgagee asks for a foreclosure and receiver, if default of interest has occurred, the court must appoint a receiver and operate the road accordingly. Indeed, this view has been carried so far as to permit the receiver to build uufinished roads, supply feeders, etc., of the road which thus comes into his hands. It is true that there should be a more clearly defined view judicially of the rights and duties involved in such cases. It is not needed now that the whole subject should be reviewed, whereby what is an abuse of the forms of law have imposed upon courts the construction of railroads, their extension or operation for an indefinite period of time. Courts are not designed for such railroad operations, through its administrative officers or otherwise. The sole object in ordinary cases of foreclosure, if the corpor,ate authorities in possession are incompetent, is to put the property in a receiver's hands for the interest of all concerned in the litigation, viz., stockholders, mortgagees, other lien creditors, creditors at large, etc. Courts should not interfere with the custody and management of the business of the corporation through its corporate officers pending litigation except for cause shown. In the case under consideration, the court, for what it deemed adequate cause, appointed a receiver under terms stated in his appointment. He was requested to report as to assets, etc. He did so, and in so doing suggested to the court to name a fixed salary for an attorney to aid him in the discharge of his duties. That was not done, because the court was not then prepared to fasten upon the assets a salaried officer, and because it did not then know that legal services would be needed, or if so to what extent. It soon became evident that intervening demands required attention, and that some attorney of this court should represent the rights vested temporarily in the receiver, and that said attorney should be where he could attend to the business. Suggestions came from the receiver in that respect which did not meet approval, and do not now. It is urged that the attorney for the plaintiff should be authorized to act for the receiver, inasmuch as the plaintiff is especially interested in defeating all claims adverse to plaintiff's rights, and securing an economical administration of the estate. To this it must be answered that he represents his own client, and the latter can employ him and pay him accordingly if desired, but cannot fasten his compensation on a fund in which he has not the sole interest, but often only a partial or adverse interest. His appointment might be wholly in"consistent with his duties as plaintiff's counsel. Another name was suggested, and doubtless the attorney is competent; but he was a stranger to the bar of this circuit when suggested, and apparently has come here for the purpose, to some extent, to be placed in the position desired, and has now become a member of this bar. It seems that one who accepts the office of receiver under an appointment from this court ought to find some competent attorllllY
of this court, and responsible to it, to aid him with legal advice if needed. If the bar of this circuit is so poor in ability or integrity as to have no member thereof fit for the desired position, then it might be well to seek elsewhere for needed aid. This court is not prepared to make even impliedly such a reflection on the bar of this circuit, nor will it grant a motion which seeks to make one, however able, but who is not a member of this bar, or has j nst come here with respect to this case mainly, so far as I know, the appointee of this conrt as attorney and counselor of its officers; nor will it sanction by its appointment the introduction from abroad of anyone, especially a kinsman of the l'eceiver, through the latter's svlicitation, under circumstances stated, to fill a position which others long known to the court are, to say the least, equally able to fill. It is unpleasant thus to speak, but the court must guard the administration of this trust, and will do so despite questions of mere delicacy. If the thought obtains that the plaintiff is to control the receivership regardless of other than his own interests, the sooner that error is dispelled the better. If the receiver supposes he is at liberty to do whatever seems to him advisable, he must bear in mind that, while under the terms of his appointment large discretion is granted, his administration is subject to scrutiny and review. The court will not name a legal adviser for him who is not equal to the position, nor would it have named anyone if he had not come to the court with respect thereto. It was then seen, and is now seen, that his wishes in that respect omitted to consider what the court deems essential in such cases. If the needs of his office require legal advice, when the court comes thereafter to pass upon his expenditures, there may be such allowance therefor as the court may consider reasonable and proper. If he prefers to go forward without the immediate aid of the court, under the general instructions given, he is at liberty to do so; but as he asked the intermediate aid of the court, and now knows what its views are, if he did not know before, the court will rescind the order heretofore made, but will not substitute, for reasons here suggested, the names stated in the motion, nor will it appoint anyone not an attorney and counselor of this court, nor consider that the receiver properly performs his duty by seeking foreign counsel to perform local duties. If special matters require aid of foreign counsel let him ask therefor. It is evident that many adverse interests will arise, each representative of which must employ his own attorney. If it is apparent that, inter sese, several other claimants than bondholders and stockholders are respectively adverse to each other, there is no reason in justice that all these conflicting interests should be subject to the attorney of one interested party rather than the attorney of another. The receiver should seek legal advice, if needed, from other than attorneys of parties litigant. His office is one of strict impar. tiality and he must act accordingly. The mortgagee, holders of statutory liens, creditors at large, and stockholders, are equally benefi-
BLAIR V. ST. LOUIS, H. & E. R. CO.
ciaries, and they must respectively employ their own attorneys; and no one class have, through the aid of the court, the means of fastening on a common fund the expense of pursuing his special interests adversely to others who have an equal right to be heard. The order heretofore entered will be rescinded, and the l'eceiver must. act in accordance with the views expressed.
H. & K. R. Co. and another.-
(Circuit Court, E. D. Missouri. !Iay 12, 1884.)
RECEIVERS-COMPENSATION FOR SERVICES OF LEGAL ADVISER, RENDERED BEFORE AND AFTER RECEIVEH'S ApPOIN'fMENT-AG.UNST WHA'f FUNDS CHARGEABLE.
In a suit brought by A. against B. and C., two railroad companies, .K acted as attorney for the defendants. After services had been rendered by E .· but before the 'case was disposed of, .B'. was appointed receiver of C. in a foreclosure suit. O. was appointed F.'s legal adviser, and continued to act in the case brought by A. until it was disposed of, and also rendered other legal services. Upon an application by E. for compensation for said services, held(1) That the fee allowed for services rendered after F. 's appointment was chargeable against F., and should he paid out of the funds in his hands. (2) That the compensation allowed for services rendered in A. 's case before F. was appointed, was a charge against B. and C., and was payable out of whatever surplus might remain in the hauds of the receiver after the lien, demands, and expenses were paid.
Application by Attorneys for a Receiver for compensation for legal services, part of which were rendered before and part after the receiver was appointed. TREAT, J. This is an application by Smith & Harrison for compensation for legal services. When the receiver was appointed there was a case pending of Fogg v. The Defendant et al. The court thought that the receiver should defend said case in the interest of all concerned, and authorized him so to do. For all the services theretofore and subsequently rendered, the amount claimed, to-wit., $1,000, may not be excessive. Shall the whole of said amount be charged against the funds in the hands of the receiver, or only such portion thereof as resulted from the defense by him as authorized by the court? The ordinary course of such proceedings, under the decree as rendered, would be a charge solely against the two corporations, defendants, to abide the final outcome of the estate. It seems, therefore, equitable that the receiver be ordered to pay to the petitioners the sum of $500; the other $500 claimed to be charged against whatever surplUS may come to the hands of the receiver after the lien, demands, and expenses have been discharged. As to the other demands for which services are claimed, the same
by Benj. F. Rex, Esq., of the St. Louis bar.