The Lowry Banking Co. et al. v. Abbott & Smith

Supreme Court of Georgia1891-04-20

87 Ga. 134

Summary · law.co

Holding. The judgment of the trial court was affirmed. When a mortgagee voluntarily joins a creditor's receivership proceeding as a party plaintiff, it becomes chargeable with its proportional share of the expenses and counsel fees incurred in bringing the fund into court, which may be determined by a jury from the collected assets.

Creditors of an insolvent company filed a petition in equity seeking a receiver to manage assets. The Lowry Banking Company later joined the proceeding as a party plaintiff, claiming it held mortgages covering all assets. A receiver collected $30,000 and the attorneys who initiated the petition sought to recover counsel fees from this fund. Lowry Banking Company resisted, arguing the court lacked authority to take funds covered by its mortgages without a jury verdict and that Georgia law did not permit such fees. A jury initially awarded $150 in fees, but the trial court granted a new trial.

The court held that when Lowry Banking Company voluntarily became a party plaintiff to the receivership proceeding, it ratified the necessity of that proceeding and became liable for its proportional share of the expenses, including counsel fees. The fact that the company claimed its mortgages were sufficient to cover all assets did not relieve it of this obligation, since it failed to object earlier and prevent the receiver's appointment. The trial court properly allowed the matter to go to a jury to determine reasonable counsel fees from the fund.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a mortgagee who voluntarily joins a receivership proceeding becomes liable for counsel fees
Authority of courts to award counsel fees from estate funds without jury verdict
Effect of a party's voluntary participation in ratifying the necessity of a legal proceeding

Procedural posture

The case came before the court on exceptions to the trial court's grant of a new trial in the fee dispute, after a jury had initially awarded $150 in counsel fees to the attorneys.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Simmons, Justice.

Certain creditors of Wyly & Greene, through their counsel, Abbott & Smith, filed their petition in equity in the nature of a creditor’s bill, under §§3149(a) et seq., of the code, alleging the insolvency of Wyly & Greene, and praying for an injunction and for a receiver to take charge of their assets. The injunction was granted and a receiver appointed, who took charge of the assets and administered them, and brought a fund of $30,000 into court to be distributed to the creditors. After the petition was filed and the receiver appointed, the Lowry Banking Company made itself a party complainant, alleging that it had two mortgages, given it by Wyly & Greene, which were sufficient to cover the whole amount of the assets. The other creditors disputed the validity of these mortgages, but they were declared to be valid and binding upon the assets by the verdict of a jury on a trial where this issue was made. Before the fund was distributed, Abbott & Smith filed their application to the court, wherein they stated that they were the solicitors of the complainants who filed the petition against Wyly & Greene and obtained the order appointing the receiver, etc., that the receiver had collected the sum of $30,000, and that they represented the receiver and advised him in many matters touching his receivership. They prayed the court to tax as costs against the fund the sum of $1,500 as counsel’s fees for bringing the fund into court; they alleged that they had been paid $250 on account of such service, by order of the court, and thatthere was still due them the sum of $1,250. They asked a rule nisi requiring the Lowry Banking Company and the receiver to show cause why said sum should not be allowed them. To this rule the Lowry Banking Company demurred upon the grounds, (1) “that the court had no authority, without the verdict of a jury, to take a part of the fund in the hands of the receiver, covered by the mortgages to this respondent, and apply the same to the payment of fees of counsel ” ; and (2) “ that there was no law of Georgia authorizing fees to be paid out of a fund like this and upon a petition like this.” The Lowry Banking Company also answered the rule, setting up various reasons why the movants were not entitled to fees out of the fund. The court sustained the first ground of demurrer and referred the matter to a jury, and upon a trial of the issue the jury returned a verdict for $150 counsel fees. Abbott & Smith moved for a new trial, and it was granted by the court, and the Lowry Banking Company excepted.

It was insisted by counsel for the plaintifi in error that the court erred in granting a new trial in the case, because the law does not authorize counsel fees to Abbott & Smith under the facts of the ease; that the facts show that the Lowry Banking Company had mortgages which covered the entire assets of the estate; that there was really no necessity for a receiver; that the petition was filed as much to get rid of the mortgages of the Lowry Banking Company as for anything else, and that the whole contest was made by the other creditors upon the claim of the Lowry Banking Company ; and it would therefore be- inequitable and unjust to compel the Lowry Banking Company to pay the opposing counsel their fees, although the fund was brought into court under the petition which the latter had filed in behalf of the creditors. We would agree with counsel for the plaintiff in error in this view of the law were it- not for one fact in the record. That fact is, that after the petition was filed and the receiver appointed, the Lowry Banking Company, upon its own application, was made a party plaintiff. This action on the part of the Lowry Banking Company recognized the necessity for the petition, and ratified the filing of it. The 3d section of the act of 1880, code, §2149(c), under which this proceeding was instituted, provides that “any creditor may become a party to said bill, under an order of the court, at any time before the final distribution of the assets,he becoming chargeable with his proportion of the expenses of the previous proceedings.” When therefore, the banking company was made a party plaintiff to the petition upon its own motion, under this section of the code it became chargeable with its proportion of the expenses, whatever that proportion might be. If its mortgages were sufficient in amount to cover the whole assets of Wyly & Greene, there was no necessity for the petition or for the appointment of a receiver, as has been held frequently by this court; and if the banking company had objected to the appointment of a receiver, and had shown to the court that its mortgages were sufficient to cover the entire assets, the receiver would not have been appointed. Instead of doing this, however, it joined in the proceeding, and thereby became chargeable with its proportion of the expenses up to the time it was made a party, and a like proportion up to the end of the litigation. In case it recovered the whole fund, it would be for the court or the jury to determine, under all the facts of the case, what amount of fees Abbott & Smith should receive out of the fund before it was paid over to the Lowry Banking Company.

The court did not err in granting a first new trial, as he could well conclude that the jury found contrary to the evidence.

Both parties filed exceptions pendente lite during the trial and assigned error on them here, but as the case is still pending in the court below, we cannot consider them now. Code, §4250. Judgment affirmed.