Opinion
34197.
DECIDED NOVEMBER 8, 1952.
Complaint; from DeKalb Superior Court — Judge Vaughn. June 13, 1952.
Jack F. Broyles, Winfield P. Jones, for plaintiff in error.
Morris W. Macey, Noah J. Stone, Roger H. Bell, Andrew A. Baumstark, contra.
Where suit was brought in DeKalb Superior Court, by an attorney of the moving creditor in a receivership proceeding in Fulton Superior Court, to recover from the receiver appointed, as damages for a breach of an alleged agreement or contract to "remain as receiver until the final disposition of the case," an amount which might have been allowed as an attorney's fee out of the assets of an insolvent corporation held by the receiver, but later transferred by him to the bankruptcy court without authorization by Fulton Superior Court, but where the petition failed to show whether an attorney's fee had been awarded out of the assets remaining in the receivership proceeding, or whether the receiver had accounted to the court appointing him for the assets transferred without authority — the petition failed to set out a cause of action; for the plaintiff is not entitled, under the facts alleged, to obtain a collateral determination, by a jury in an action at law in another court upon the contract as alleged, of what the equity court appointing the receiver might have awarded the plaintiff as a reasonable attorney's fee for his services in the receivership proceedings. The Superior Court of DeKalb County did not err in sustaining the general demurrer to the petition and in dismissing the action.
DECIDED NOVEMBER 8, 1952.
Jack F. Broyles sued Andrew A. Baumstark in DeKalb Superior Court for $1500 as damages for an alleged breach of contract, and in his petition, as amended, alleged in substance the following: In March, 1950, Broyles as attorney for one T. W. Cremen obtained a judgment for $3500 in Fulton Superior Court against Isadore Bernstein for a wilful and malicious injury to Cremen. Such a judgment is not dischargeable in bankruptcy, and, on December 15, 1950, $1250 was paid on the judgment. Before the judgment was rendered against him, Bernstein transferred and assigned all of his assets except his home to a corporation, Georgia Home Equipment Company, such transfers being without consideration and fraudulent as to Cremen's judgment. In May of 1951, Broyles learned that both Bernstein and the company were insolvent, and, to protect his client's interest, Broyles filed a bill in Fulton Superior Court on May 14, 1951, setting forth the fraudulent assignments from Bernstein to the corporation, and praying that a receiver be appointed for the assets of both Bernstein and the corporation, and that such receiver should take possession of all the assets of both insolvents until further order of the court. On or about May 23, 1951, Broyles contacted Baumstark and asked him if he would like to serve as receiver under the bill. Broyles explained to Baumstark the purpose of the bill for a receiver: anticipating a quick bankruptcy by the corporation, and in view of the fact that Cremen's judgment was more than four months old, had a prior lien on the assets of both insolvents, and was not dischargeable in bankruptcy, Broyles intended first to obtain jurisdiction in Fulton Superior Court and then to hold all the assets of both insolvents in that court until final disposition of the case. Broyles asked Baumstark if he would serve as the receiver in Fulton Superior Court under the conditions stated and remain as such receiver until the final disposition of the case if appointed; Baumstark replied that, if appointed, he would be glad to serve, would serve as receiver until the final disposition of the case, and would promptly qualify and take possession, as receiver, of all the assets of both insolvents. On May 24, 1951, the court appointed Baumstark, upon Broyles' request, as its receiver to take possession of and to hold all the assets of both Bernstein and the corporation until further order of court. On May 25, 1951, Baumstark qualified by giving bond, and took possession of all the assets of both insolvents on this same day. Bernstein's assets apparently consisted only of his home, worth $12,800, upon which were loans of $16,000. The corporation's assets were worth $12,000.
Georgia Home Equipment Company filed its voluntary petition in bankruptcy a few days after the appointment by Fulton Superior Court of Baumstark as receiver, and Baumstark applied for and was appointed as receiver in bankruptcy for the corporation on May 29, 1951, in violation of his agreement with Broyles. On or about this same day, without application to or order of Fulton Superior Court and without notice to Broyles, Baumstark transferred the entire assets of the corporation from himself, as receiver of the State court, to himself as bankruptcy receiver, thereby placing the assets of the corporation beyond the jurisdiction of Fulton Superior Court. On August 16 and December 7, 1951, a judge of the Superior Court of Fulton County, upon the insistence of Baumstark, ruled that a transfer as alleged above had in fact been made by Baumstark, and that there were no assets of the corporation in his court to be administered. On November 5, 1951, a loan deed of $7000 against Bernstein's home was waived and canceled by its holder, and Cremen's judgment was paid in full out of the proceeds of the sale of this property. Cremen's judgment having been paid out of the assets of Bernstein, individually, and the assets of the corporation having been transferred by Baumstark beyond the jurisdiction of the superior court, the entire litigation in the superior court became moot.
If the defendant Baumstark had applied to the superior court in a proper manner, giving Broyles notice, and praying that an order be passed by the court releasing the corporate assets to the bankruptcy court, and if the court upon the hearing had ruled that the bankruptcy court was entitled to the possession of said assets, then Broyles would have had an opportunity to protect and would have protected, before an order was signed releasing the assets, his equitable right to a reasonable attorney's fee out of the corporate funds for filing his bill for the receivership and bringing the funds into court. However, the defendant wilfully violated his agreement with Broyles by accepting the bankruptcy receivership and by secretly transferring the corporate assets to the bankruptcy court, in which Broyles had no rights to an attorney's fee. The corporate assets were worth $12,000 and were separate and distinct from and never mixed with Bernstein's assets; and $750 is a reasonable attorney's fee for filing the original bill and bringing the corporate assets into court. Broyles also claimed an additional $750 as attorney's fees and expenses of suit because of Baumstark's bad faith in accepting the receivership without intending to remain and act as receiver, and Baumstark later sought to have the petition under which he was appointed receiver dismissed because, as he erroneously claimed, Broyles had no right to request his appointment. Two months after Baumstark's appointment as receiver in the superior court, Bernstein also filed a voluntary petition in bankruptcy, and Baumstark sought to have himself elected as trustee in bankruptcy for Bernstein's individual estate, but Broyles prevented this election.
The defendant's (Baumstark's) general demurrer to the petition was sustained, and the plaintiff excepts to that judgment.
By agreeing to accept the appointment if he should be named as receiver by the court, Baumstark undertook certain obligations which are fixed by law and not by the alleged contract between the parties. Broyles contends that Baumstark violated his official duties, and so breached his contract, by transferring property of Georgia Home Equipment Company, worth $12,000, to himself in his capacity as receiver in bankruptcy for the corporation, without obtaining authorization from Fulton Superior Court for such action and without giving notice to Cremen or to his counsel, Broyles, and thereby defeated Broyles' right to a fee for his services rendered in filing the petition for the moving creditor in the receivership, under Code §§ 55-314 and 55-315.
Code § 55-314 provides: "In all cases where a receiver shall be appointed under the laws of this State to take charge of the assets of any person, firm, or corporation, and a fund shall be brought into court for distribution, the court having jurisdiction thereof shall award to counsel filing the petition and representing the moving creditor or creditors, out of the fund, no greater sum as fees for services rendered in filing such petition and bringing the fund into court than such services shall be actually worth, taking as a basis therefor the amount represented by such counsel in the original petition, and the assets brought into the hands of the receiver by the services of such counsel, not including the assets turned over to the receiver by defendants under order of the court." The final proviso of Code § 55-315 is as follows: "Provided further, that in all cases the presiding judge, or other competent tribunal, shall allow show such compensation to the attorney or attorneys filing the original petition, and the receiver or receivers appointed thereunder, as their services are reasonably worth."
Broyles contends that he was deprived of his right to an attorney's fee for bringing the corporate assets into court, or at least was deprived of the amount of the corporate assets as a basis for the fee which should have been awarded to him under the Code sections quoted above. But he does not allege what fees, if any, were actually allowed to him out of the proceeds of the sale of Bernstein's home, which was alleged to have been worth $3800 more than the amount of the loans secured by it, after one loan deed of $7000 was canceled on November 5, 1951. Cremen's judgment, upon which $2250 with interest remained due, was paid out of this fund, leaving an amount more than sufficient to pay the attorney's fee of $750 claimed in the present suit, if the house sold for what it is alleged to have been worth. Whether or not Broyles claimed or was awarded an attorney's fee out of this fund is not alleged.
Baumstark as a receiver was primarily accountable to the court appointing him. "The receiver is an officer and servant of the court appointing him, is responsible to no other tribunal than said court, and must in all things obey its direction." Code, § 55-309. "The receivers so appointed shall discharge their trust according to the orders or decrees of the courts appointing them, and are at all times subject to their orders, and may be brought to account and removed at their pleasure." § 55-307. A receiver cannot, as here alleged, place the property in his possession beyond the jurisdiction of the court with no authority for doing so and thereby free himself from accounting to the court appointing him for the funds entrusted to him, at least to the extent of claims outstanding against the fund, such as Broyles' claim to counsel fees for bringing the fund into court. Tindall v. Nisbet, 113 Ga. 1114 ( 39 S.E. 450, 55 L.R.A. 225). Baumstark is alleged to have been under bond as receiver in the superior court, and it is not alleged that he has been discharged or has finally accounted to the court appointing him, or that the case has been finally disposed of, or that Broyles was not awarded a counsel fee in the case, or that the judge of the superior court failed to take into consideration the amount of the corporate assets brought into court in awarding a counsel fee, if such fee has been awarded to Broyles. While official misconduct of the defendant receiver is alleged, the alleged contract sued upon was not a bond for the proper performance of the receiver's duties.
Furthermore, the award of an attorney's fee is a matter in the discretion of the court in which the receivership is obtained. Price v. Cutts, 29 Ga. 142 (3) (74 Am. Dec. 52); Greyling Realty Corp. v. Lawson, 179 Ga. 188 ( 175 S.E. 453). The plaintiff is not entitled, under the facts alleged in this case, to obtain a collateral determination, by a jury in an action at law in another court upon a contract "to remain as receiver until the final disposition of the case," of what the equity court appointing the receiver might have awarded the plaintiff as a reasonable attorney's fee for his services rendered in the receivership proceeding. The Superior Court of DeKalb County did not err in sustaining the general demurrer to the petition and in dismissing the action.
Judgment affirmed. Felton and Worrill, JJ., concur.