CHAPTER XXI. REPORTS, ACCOUNTS AND DISTRIBUTION. $355. General-Reports and accounts. (a) Must be to court appointing. (c) Objections to master's find- (d) Objections to master's find- (e) Appeal not allowed as a rule. § 357. Order of distribution. § 358. What embraced in order of distribution. (a) Attorney's fees. (b) Notes secured by invalid (c) Debts due contractors. (e) Expenses and advancements. § 355. General-Reports and accounts. It is the duty of the receiver to report to the court from time to time the condition of his accounts, so that at all times all parties in interest may have official information as to the true condition of affairs, and this should be done without an order of court requiring him to do so. Being an officer of court, a great degree of strictness is required of him, and the funds in his possession being trust funds, the utmost care must be exercised in reference to their disposition and his accountability therefor. A proper accounting from time to time, as well as his final report, renders it incumbent on the receiver to carefully inventory the estate, property, goods, and effects of every nature that come to his hands. Nothing but the most general rules in regard to the receiver's reports and accounts can be laid down, owing to the infinite variety of receivership property coming into his hands, and the varied duties pertaining thereto under the direction of the court. Besides, the practice is by no means uniform in the different courts. The disbursements made by a receiver, for which the court will allow him in his accounts, have been fully considered in chapters relating to powers and liabilities of receivers and no good purpose can be served by a recapitulation in this connection.' 1 See chapters III. and VIII.; also claims against receivership funds, ante. $356. Rules applicable to. (a) The receiver is responsible only to the court appointing him, and cannot be required to turn over the receivership property or funds upon the order of another court. He must make his reports to, and his accounts are to be adjusted only by, the court of his appointment.' (b) The usual and appropriate practice is to refer the receiver's accounts to a master to be passed upon, and when passed by the master are confirmed by the court on the presentation of the master's report, unless objections and exceptions are filed by the parties having a right to be heard in opposition thereto. The court may consider the rules and principles adopted by the master in passing the accounts, and if erroneous may refer the matter back to the master for a restatement of the account in accordance with its directions, but cannot be expected to review the account item by item.' (c) It is necessary, if exception is taken to the action of the master concerning the account, to point out specifically the items to which error is assigned, and the objections should be sufficiently specific so that the court may readily see the force of the objection." Mabry v. Harrison, 44 Tex. 286; Musgrove v. Nash, 3 Edw. Ch. 172; Conkling v. Butler, 4 Biss. 22. A receiver as well as the master is an officer of the court, and states his own accounts and submits them to the master for inspection, under the order of the court, the master acting in the place of the court in a judicial rather than in a ministerial capacity. Exceptions to the master's report do not lie in such cases, though if any erroneous principle be adopted in allowing a receiver's account, the court, on petition, will refer the matter back for correction. It is the duty of the court to review the principles and rules adopted by the master in allowing the accounts, rather than to examine the items in detail, or the evidence on which they were founded. Cowdrey v. Galveston, H. & H. R. Co. 1 Woods, 331. Cf. Brower v. Brower, 2 Edw. Ch. 621. Objection to the master's report must be by a party to the suit. People v. Columbia Car Spring Co. 12 Hun, 585; Schenck v. Ingraham, 5 Hun, 397. In New York the account may be sent to a referee for passing. People v. Knickerbocker L. Ins. Co. 31 Hun, 622. 3 Heise v. Starr, 44 Ill. App. 406. The objection must be made at the time of the allowance or within such time as the court may allow for such purpose. Terry v. Dubois, 32 Week. Rep. 415. Cf. Farmers' Loan & T Co. v. Central R. Co. 1 McCrary, 332. Where a receiver files exceptions of fact to the auditor's report on his account, he is entitled to a jury to (d) Fairness to the master and to the receiver requires that objections be filed before the master in order that he may have an opportunity for correction and that additional evidence may be furnished by the receiver if necessary. The hearing before the court is upon exceptions filed. (e) As a rule, an appeal by the receiver will not lie from an order approving a receiver's account and directing him to turn over the receivership funds, except for error as to the amount to be turned over." (f) If the receiver's accounts have been approved and he has been discharged by the court no further inquiry will be permitted as to his management.' $357. Order of distribution. The distribution of the receivership funds, pendente lite or final, presupposes an order of court authorizing it, and also the amount and pro rata share to each party entitled thereto if the indebtedness is not paid in full. The order of course is based upon accurate information of the net amount to be distributed and the amount of indebtedness upon which the distribution is to be applied. The order of distribution, whether interlocutory or final, is subject to modification and correction by the court, and unless for good reason to the contrary, should be to all the creditors alike." pass upon them. Akers v. Veal, 66 Ga. 302. 1 Cowdrey v. Galveston, H. & H. R. Co. 1 Woods, 331. Hinckley v. Gilman, C. & S. R. Co. 94 U. S. 467, 24 L. ed. 166; How v. Jones, 60 Iowa, 70. Of course the decree to be appealable must be final. Rochat v. Gee, 91 Cal. 355; Illinois Trust & Sav. Bank v. Pacific R. Co. 99 Cal. 407. 3 Lehman v. McQuown, 31 Fed. Rep. 138. An interlocutory order directing a receiver to pay out more money than is in his hand will be modified, and the application for its modification may be heard in a summary way on the merits. Ryon v. Thomas, 104 Ind. 59. Where the settlement has been made and order entered requiring the receiver to pay out more money than he has in his hands the order may be modified and the mistake corrected. Ryon v. Thomas, supra. 5 In the absence of good reason to the contrary, proportionate payment should be made to all creditors entitled to share in a fund in the hands of a receiver. Girard L. Ins. A. & T. Co. v. Cooper, 51 Fed. Rep. 332, 4 U. S. App. 631. A receiver appointed in a suit to foreclose a mortgage made by a corporation, under allegations of the The order to a receiver to pay over funds in his hands is based upon notice to the receiver and served upon him, or in his absence upon his attorney,' and may be granted on affidavits.' The order for distribution is usually made upon final hearing,' though if substantial distribution can be made it should not be delayed because of a pending controversy over a small amount,* and when made is final and conclusive as to all claims filed and duly passed upon,' but in all cases before an order for distribution is made the funds must be in court." § 358. What embraced in order of distribution. (a) ATTORNEY'S FEES. In the order of distribution in addition to the ordinary credit latter's insolvency, discontinuance of business, and necessity of the appointment to secure the application of the rents and profits, should not, upon the mortgage being held an illegal preference, be directed to pay in full the judgments of the intervening creditors who attacked the mortgage, but the fund should be distributed among all the corporate creditors. Thompson v. Huron Lumber Co. 4 Wash. 600. A receiver of a bank which had collected notes and drafts of another bank may be compelled to pay the same in full with interest and not pro rata. Thompson v. Gloucester City Sav. Inst. (N. J.) 8 Atl. 97. 1 Notice of an order to a receiver to pay over funds served in his absence on his attorney, Held, sufficient. Jennings v. Simpson, 12 Neb. 558. Ex parte affidavits, whether previously filed in the case or not, may be considered on a motion to dispose of property remaining in the hands of a receiver after the dismissal of the bill. Warren v. Bunch, 80 Ga. 124. A receiver appointed pendente lite cannot be directed to pay claims out of the moneys coming into his hands, before the final hearing, except by consent of all parties. Forsaith Mach. Co. v. Hope Mills Lumber Co. 109 N. C. 576. 4 Where substantial distribution of a fund in a receiver's hands for the settlement of a partnership can be made, such distribution should not be delayed because of a pending controversy concerning an outstanding claim for a small amount. Trayhern v. Mechanics' Nat. Bank, 57 Md. 590. 5 The functions of a receiver in proceedings to enforce statutory liens, to preserve the property and security pendente lite, end with a sale of the property under order of the court, and payment of the full claims of the creditors, reported to the date of sale and duly passed upon; and it is error at the next term of court, to which by stipulation his reports were continued for consideration, to decree that moneys expended by him after the sale shall be a lien on the property, antedating the decree under which it was sold. Bassick Min. Co. v. Schoolfield, 15 Colo. 376. Receivers will not be instructed as to the distribution of funds until they have them in court. Strauss v. Carolina Interstate Bldg. & L. As80. 117 N. C. 308, 30 L. R. A. 693. ors, the receiver may be directed to pay attorney's fees when he is employed by direction of the court, or the necessity of his employment established prior to the granting of the order.' Where the court passes upon the question of the amount to be paid as attorney's fees, and the attorney is heard upon the matter, the order is conclusive and binding upon him and is a bar to a subsequent action by him therefor. But it seems that before fees can be allowed to counsel there must be a contract for his services, express or implied; a mere volunteer in receivership matters is not sufficient. It has also been held that services rendered for a corporation before the appointment of a receiver are not entitled to priority over the mortgage bondholders, though their services were valuable to that company and established the validity of its bonds. But where the attorney is employed at a 1A receiver employing counsel to advise him, without express authority from the court, will not be allowed counsel fees on settlement unless he establishes the necessity therefor. Terry v. Martin (N. M.) 32 Pac. 157. The court should not direct a receiver to pay his attorney more than the attorney himself asks for in his petition, even though there be evidence justifying a larger charge. Richter v. Schroeder, 110 Ill. 112. ? The decision of a court on settlement of a receiver's accounts as to compensation to be paid to an attorney employed by him without special agreement as to the amount to be paid him, where the attorney was notified and appeared, and was heard in respect to the claim, is conclusive against the attorney and a bar to a subsequent action by him against the receiver personally. Walsh v. Raymond, 58 Conn. 251. An order directing the payment by a receiver, out of a fund in his hands, of the solicitor's fees of a party to litigation concerning it, before the right of that party to any portion of the fund has been established, is errone ous. Doane v. Corbin, 44 Ill. App. 468; Coates v. Cunningham, 80 Ill. 467. 3 An allowance out of funds in the hands of a receiver will not be made to one rendering services availed of by counsel for the receivers and useful to the latter in litigation, when such services were not rendered in pursuance of any contract, express or implied, and the receivers made a contract with him when his services were needed by them in other matters. Re Whittemore, 157 Mass. 46. It was also held in this case that counsel was not entitled to compensation by reason of laches. Attorneys who act for a railroad corporation two years before the appointment of a receiver in mortgage foreclosure, and by whose services town bonds voted in aid of the company were declared valid and given a value, are not entitled to have the lien of the mortgage displaced in their fa vor so as to give them priority in the funds in the hands of the receiver, although such services secured the means for constructing the road and added to the value of the property covered by the mortgage. Pennsyl |