Nessler v. Indus. Land Dev. Co.

Full title: NESSLER v. INDUSTRIAL LAND DEVELOPMENT CO.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: Dec 31, 1903

65 N.J. Eq. 491 (Ch. Div. 1903)

65 N.J. Eq. 491

Opinion

12-31-1903

NESSLER v. INDUSTRIAL LAND DEVELOPMENT CO.

Edwin B. Goodell, for Post and others. Mr. Clevender, for Ashmead & Hackney. M. J. Thompson, for Morse and A. G. Stewart. James Parker, pro se. W. D. Snow, for Short. Charles C. Pilgrim and E. B. Williamson, for Schoch, surety on receiver's bond.

EMERY, V. C.

Suit between Charles L. Nessler and the Industrial Land Development Company. On exceptions to master's report on receiver's account. Allowed in part, and overruled in part.

Edwin B. Goodell, for Post and others.

Mr. Clevender, for Ashmead & Hackney.

M. J. Thompson, for Morse and A.

G. Stewart. James Parker, pro se. W. D. Snow, for Short. Charles C.

Pilgrim and E. B. Williamson, for Schoch, surety on receiver's bond.

EMERY, V. C. The evidence taken upon the accounting shows clearly that the entire amount which came to the receivers' hands from all sources was not sufficient to pay the necessary disbursements and expenses of the receivership, including in these proper compensation for the receivers' services, and the debts incurred by the receivers in the surveys, care, and custody of the property while it was in their possession.

The claim of the executors of Post, the mortgagee of the property, and the purchasers at foreclosure sale, to follow into the hands of the receivers the funds received for damages to the property by fire caused by a railroad company, is not well founded. The receivers, who were appointed in insolvency proceedings against the corporation mortgagor and owner, and who therefore represented the owner and mortgagor, received these amounts, not as the result of judgments in suits which would have concluded the mortgagees, but in private settlements, which, so far as appears in the case, left unaffected the mortgagees' rights to recover against the railroad company for the impairment of their security. As to the money received by the receivers from the sale of wood and timber, the right of the mortgagees to follow these into the hands of the receivers is based on the theory that it was a wasting of the estate, for which they are entitled to follow the proceeds, or to compensation. The evidence does not support this claim of waste by the receivers, but, on the contrary, shows, I think, that by the removal of the wood in question the estate, which was a tract of about 30,000 acres, largely woodland, suffered no material injury in the receivers' hands, and that the mortgagees have been benefited, rather than injured, by the custody and protection of the property, under the receivers, pending the foreclosure. It was competent for the mortgagees at any time after the foreclosure proceedings commenced to have made application for a receiver under their mortgage, but, if such application had been granted, the mortgagees would have been put to the expense of the advances for the receivership. The possession by the receivers in this case has continued with the consent, either actual or implied, of the mortgagees; and, as the possession has been rather a benefit than a detriment, any claim which they might have, as mortgagees, to any portion of the funds which came to the receivers' hands, must be equitably subject to all the proper expenses of the receivership. Their claim to any portion of the fund is therefore denied, and their exceptions are overruled.

The claims of the other exceptants stand on a different basis. These are claims, amounting in all to about $4,200, for debts incurred by the receivers themselves in the custody and management of the property, and application is now made for their payment. Such application to this court for the payment of debts incurred by the receiver is proper, and where the debts have been incurred, as here, without the previous express order of the court, the adjustment of the claims will be made upon a basis which is equitable and just. Vanderbilt v. Central R. Co. (Err. & App. 1887) 43 N. J. Eq. 679, 12 Atl. 188. The justness and correctness of these claims is not disputed by the receivers, and is established by the evidence, but the assertion is that there is no money in their hands to pay them. This lack of money to pay them arises largely from the fact that the receivers have from time to time retained for their own services about $3,350, which exhausts the entire funds in their hands, after other disbursements made. This retention for their own services has been made without any order of the court allowing them to retain their salary or compensation as a prior or preferred claim to other expenses of the receivership. In my judgment, such order was necessary for the purpose of entitling them to retain it, by way of preference, as against other claimants, who had also, at the request of the receivers, advanced money or performed services for the trust. Without such order, receivers' services, in themselves, stand on no higher plane than the receivers' debts for the services and advances of other persons for the benefit of the trust; and where, as in this case, the fund in the receivers' hands is not sufficient to pay all the receivers' debts and their compensation, the distribution must be pro rata. They are all and equally debts or claims which should be paid by the trust funds, as expenses of the receivership; and, if the fund is not sufficient to pay all in full, then they must be paid pro rata. If receivers desire or intend to claim a preference in payment for their own compensation, they must apply to the court not only for such order, but also for the authority to incur indebtedness which will be subject to their claim. Upon such application the court can, by proper inquiry into the condition of the estate, makethe orders necessary to control its receivers in the incurring of indebtedness, and also to give notice to persons dealing with the receivers, for services to the trust, that the receivers' personal claims for services are preferred. All claims for services rendered to the trust should be paid in full, if possible, as preferred claims, and as expenses of the trust, and, where the fund in hand is not sufficient to pay in full, the claims should, in the absence of special equities, be paid pro rata.

It is apparent on reading the evidence of these claimants, as well as of the receivers, that the claimants expected to be paid from funds to be realized by the receivers from the property of the company, and not by the receivers personally; but it is also apparent that, when the debts were incurred, none of these claimants understood that funds which were expected to come to the receivers' hands were to be applied by them to their own compensation, in preference. In the absence of any such understanding, and in the absence of any previous order of the court making the receivers' compensation for their services an expense of the receivership, to be preferred over the receivers' indebtedness incurred for the necessary services of others relating to the trust, I think all of these claims must be paid pro rata with the receivers' claims for compensation.

The compensation of the Receiver Parker is fixed at $1,200, and the compensation of Receiver Short at $2,400, and upon these amounts they will be allowed pro rata. The claimant Stewart must be charged on account of his pro rata with the amount retained by him, $389.94, and not paid over or accounted for to the receivers. The exceptions to the master's report on the accounts, so far as it allows the retention in full by the receivers for the services, are allowed. All other exceptions are overruled. Pinal decree upon the exceptions and accounts and for distribution can probably be made without any further reference, and I will settle the decree upon notice.