Hooper v. Winston , 24 Ill. 353 ( 1860 )

Breese, J.

We think it must be conceded that Mr. Hooper was not receiver of this fund until he was appointed such by the court, on the agreement of the parties in interest. He then became an officer of the court, and so denominates himself in his several reports to the court—referring to himself as “ your receiver.” Hence, all doubt is removed as to the power from which he received his appointment, and the only question is, in what mode and to what extent was he accountable to the court ? He was appointed receiver on behalf of all parties, and not of the complainant or of any one of the defendants only, but for the benefit of all parties who may establish rights in the cause; and the money in his hands is in the custody of the law, for whoever can make out a title to it. It is the court itself which has the care of the property in dispute, the receiver being but the creature of the court. As to his powers, he has no other than those conferred upon him by the order appointing him, and the course and practice of the court. Verplanck v. Mercantile Ins. Co., 2 Paige’s Ch. R. 452. As a general rule, he can pay nothing without an order of court, nor can he make a dividend, in ordinary cases, without the special sanction of the court. The plaintiff here, however, contends that for his powers we are to look to the stipulation of the parties, on which he was appointed receiver. We do not doubt, the general powers of a receiver, may be restricted or enlarged by the parties at whose instance he is appointed, but he remains, nevertheless, an officer of the court. By reference to the stipulation in this case, it will be perceived that the plaintiff in error was appointed receiver for the purpose of taking possession of, and selling, the goods and chattels embraced in the several mortgages and deeds of trust then in litigation, the court to pass an order authorizing the sale of these goods and chattels, either together with the leases of the house and appurtenances known as “ the McCardel House,” as a whole, or separately from the leases, and either at public or private sale, as the receiver might deem most advantageous for all the parties concerned, and for cash or on short credit. The proceeds of the sale of the goods and chattels, after the payment of such liens as are undisputed, and such demands and liabilities against the “ McCardel House,” as it has been or may be necessary to incur and pay in order to keep the house in operation, shall be paid into the Cook County Court of Common Pleas, to abide such decision as the court might take in the premises. It was further stipulated, that the receiver be authorized to pay the mortgage debt and costs and expenses incurred, of Henry L. Wilson, the same to be deducted from the proceeds of the sale of said goods and chattels, before the same are paid into court. And it was also provided, that if it was deemed best to sell both the leases'and goods and chattels as a whole, that the mortgage debt held by Ashley Gilbert, secretary of the Commercial Exchange Company, should be paid out of the proceeds of the sale, and not paid into court, if the same are sufficient. After making this stipulation, and agreeing upon a receiver, the complainant, Winston, presented a petition .to the court, stating that the goods and chattels were designed for hotel keeping, and that it was the opinion of the parties interested, that they would sell to better advantage in conjunction with the leases. He states further in his petition, that a controversy had arisen between some of the mortgage creditors as to their respective rights under the mortgages, which it might require much time to adjudicate and settle, and that it would be most advantageous to sell the property at once, the proceeds applicable to such disputed claims to be held subject to the order of the court, and for that purpose it was prayed that a receiver be appointed to take charge and dispose of the property according to the terms of the written stipulation, and under such further restrictions and directions as to the court might seem right and proper.

The order of the court following upon this petition and stipulation, was as follows:

“ It is therefore ordered by the court, that Ezekiel R. Hooper be and he is hereby appointed receiver, to sell and dispose of said property in the proceedings in said cause mentioned, and to dispose of and appropriate the proceeds thereof, in the manner and upon the terms prescribed in the said written stipulation.”

It is contended by the plaintiff in error, that under this stipulation and order of the court, he is not required to bring any of the proceeds of the sales into court, but can apply them, as he has done, in paying off the Wilson and Gilbert mortgages, and in keeping the McCardel House in operation until he sold it, and that he is not obliged to render any account of the expenses of that house, and that he alone was the judge of what was necessary to keep it in operation.

As to the Wilson mortgage, it will be seen that the receiver was allowed to pay it off out of the proceeds of the goods and chattels before they were paid into court. This we understand was on the condition that they were sold separately, and not in conjunction with the leases. If they were all sold together, then Gilbert’s mortgage was to be paid out of the proceeds before they were paid into court. The fact being that they were held conjointly, then Gilbert’s mortgage alone was to be paid out of the proceeds, and all beyond that brought into court. If this is not so, why was this distinction made in the stipulation ? In order to do this, the receiver should have kept a separate account of the sale of the chattels and of the leases, but we see no such account on file. As, however, there are no cross-errors filed in the cause, the allowance of the payment of Wilson’s mortgage cannot now be questioned.

As to these payments then, it was expressly stipulated that they should come out of the proceeds before they were paid into court.

The other claim set up by the receiver, to be allowed such expenses as he has chosen to set down, to keep the house in operation, we are constrained to say, we see no ground upon which to base it.

The receiver claims, that in this matter he was vested with a discretionary power, and therefore the court had no authority to examine into the mode or manner of its exercise; that he was merely the private agent of these parties, that whole subject being left to his own judgment.

We do not deny that he had some discretion in this matter, but it was very limited. We hold, being an officer of the court, he should have applied to the court for leave to make these expenditures, and he is amenable to the court for the exercise of all his powers. As receiver and trustee for parties litigant, it was his manifest duty to have kept regular accounts, item by item, of all the expenses of the house, and of the receipts arising from it, and from all other sources from which money might have come into his possession. He should show an account current of the house, embracing therein, the stock he found on hand, the purchases of every description for the house, and the receipts of the house. That there were large receipts is unquestionable, yet no account has been rendered of any. That a bar furnished with more than fifteen hundred dollars worth of liquors should not, in Chicago, produce any returns, is incomprehensible. Failing to show any account current, every presumption ought to be against him, and for all his charges against the fund entrusted to his keeping, he should show satisfactory vouchers and proofs. He has shown none in the several reports he has made to the court. His judgment was not the limit of the expenditures, but the court, he being one of its officers, has a supervisory power over his acts, and he is amenable to its judgment as to the necessity of these expenditures, in order to keep the house in operation, and he is certainly accountable for the receipts.

The cases referred to by plaintiff’s counsel are all cases of persons acting in a fiduciary character, and not by appointment of any court. With the exercise of the discretionary powers of such, courts will rarely interfere. But with its own officers it would be recreant to its duty, if it did not hold them to the strictest accountability.

So delicate is the position of a receiver appointed by a court, upon the selection of the parties in interest, that so far from being anxious to act, and incur liabilities, he is the reverse, and requires, sometimes, to prompt him to act, the spur of the court.' His office is one of confidence wholly; his great object should be to prove himself worthy of it. His discretionary powers, as a general thing, are quite limited. He cannot bring an ejectment without leave of the court, nor lay out money in repairs at his discretion. If he does, it is referred, before an allowance, to a master, to ascertain if the repairs are reasonable. In the case of The Attorney General v. Vigor, 11 Vesey, 563, Lord Chancellor Eldon observed, that the court was not in the habit of permitting receivers and committees to apply the trust fund in repairs, to any considerable extent, without a previous application. In the case of Waters v. Taylor, 15 Vesey, 25, which arose out of the management of an opera house, the same chancellor said, that the court would not, in the broad discharge of his duty, permit a receiver to lay out more than a very small sum at his discretion.

In the management of the McCardel House, although the receiver was required to keep it in operation until the sale, he had, as an officer of the court, but very little discretion allowed him, and should have applied to the court, by a brief petition, setting out the facts and asking for a reference, whether such and such expenditures would be for the benefit of the interested parties, and necessary to keep the house in operation, or for whatever other purpose the expenditure may have been desired. Ho single act, calculated to diminish seriously the fund, could the receiver do, on his own mere motion, and in the exercise of his discretion. The thing is unheard of, and the claim set up here to do so cannot be allowed. And he should have sold the property at the earliest practicable moment, so that keeping it in operation should not seriously have diminished the fund.

We are satisfied the plaintiff should be charged with interest, as he. received interest on the sale, or might have done so. A receiver is liable to account and pay over the amount of any benefit or interest which he might make of the moneys in his hands. Shaw v. Rhodes, 2 Russel, 539.

The decree of the court below is affirmed.

Decree affirmed.