Opinion
14285
April 28, 1936.
Before MANN, J., Union, July, 1935. Affirmed.
Proceeding by Spartanburg County against J.D. Arthur and another, individually, and as Receivers of the Bank of Union. From an adverse judgment, the defendants appeal.
The order of Judge Mann follows:
This proceeding in the nature of an accounting instituted to determine the formula to be employed in calculating the commissions due the receivers of the Bank of Union, was, by an appropriate order, referred to W.S. Hall, Esquire, as Special Referee to take the testimony and to report his conclusions of law and fact to this Court. Pursuant to that order, the Special Referee proceeded to take the testimony proffered and has filed his report, in which he finds that the receivers are entitled to commissions in the amount of $582.02. To that report, the receivers filed exceptions, which have been heard by me.
The circumstances out of which this question arises may be briefly summarized. The Bank of Union, a State banking corporation, conducted for many years a general banking business at Union. On September 23, 1931, however, it became hopelessly insolvent and was forced to close. Thereafter, under proceedings had in conformity with Section 7855 of the Civil Code (1932), J.D. Arthur and Luke J. Wilburn became the receivers of the suspended corporation. Following the bank's suspension and the appointment of receivers therefor, various collections were made in the liquidation of its assets. These collections fall in two well-defined classes: First, collections "received" and "handled" by the receivers themselves; and, second, collections "received" and "handled" by secured creditors of the bank. In addition to these collections, another class of transactions must be considered. It consists of offsets made against mutually existing debts between the bank and certain of its debtors-creditors.
The Referee concluded that the receivers were duly entitled to commissions upon the first class of collections and were not entitled to commissions upon collections made by secured creditors or to commissions upon offsets. These two latter conclusions of the Referee constitute the sole matters in the Referee's report to which the receivers have filed exceptions.
At the very beginning of the consideration of the questions thus posed by the exceptions of the receivers, it should be observed that both the receivers and the creditors recognize that Section 7855 constitutes the chart, by which the Court must determine the right of the receivers to commissions in the case of both disputed items. That portion of Section 7855, which deals with the commissions for receivers of closed banks, is in the following language: "All receivers appointed under the provisions of this section shall receive in full for their services in the liquidation of the affairs of this bank the following remuneration: Two (2) per cent. on all moneys received and a like amount on all moneys paid out by them on all sums up to fifty thousand ($50,000.00) dollars; two and one-half (2 1/2) per cent. on all sums received and paid out above fifty thousand ($50,000.00) dollars."
The first question presented by this cause is: Does that statute justify or authorize an allowance of commissions to the receivers upon the second class of collections, as set forth supra, i. e., collections "received" and "handled" by secured creditors of the bank?
The legislative enactment fixes the receivers' commissions by the "moneys received" and by the "moneys paid out" by such receivers. It establishes as the measure of the receivers' compensation, not the trouble or inconvenience incident to the bank's liquidation, but the amount of money "received and paid out." Unless the money has been "received" and "paid out" by the receivers, it specifically inhibits any allowance of commissions to the fiduciaries.
Can it be said, with any show of reason, that moneys which admittedly were received wholly by a secured creditor and applied by such creditor to its indebtedness have ever been "received" or "paid out" by the receivers? For the Court to hold that the fiduciaries in this instance "received" the funds collected by the secured creditors is to disregard the indisputable physical fact, necessarily acknowledged by the receivers themselves, that such fiduciaries had never "received" these collections. With even less color of reason can it be urged that the receivers ever "paid out" such collections. As a matter of fact, these collections were never "paid out" by any one, but were merely credited by the secured creditors upon the debt.
This view is strengthened by a consideration of Section 9017 of the Civil Code (1932), originally enacted in 1745. That statute, which is similar both in language and in purpose with that under review, fixes the commissions of executors and administrators qualifying in this State by a percentage of the sums "which he, she, or they shall receive." Significantly both enactments employ the same definitive word "receive" to fix the measure of the fiduciary's compensation. It would seem only logical that the Legislature, in using in the statute under review the same verbal formula as that used in the earlier statute, intended to give to that formula an identical meaning to that with which the Court had, for two centuries, invested the same formula as used in Section 9017. Especially is this true, in view of the fact that the two statutes are, as it were, in pari materia, and it is a familiar rule of law, "supported by justice and wisdom" ( Richards v. McDaniel, 2 Mill, Const. 18), and resorted to irrespective of any ambiguity in the statute under review ( Gregg Dyeing Co. v. Query, 166 S.C. 117, 123, 164 S.E., 588), that, to aid in the construction of the language of a statute, the Court should look to the construction placed upon similar language in other statutes dealing with the same or a cognate subject-matter ( Tallevast v. Kaminski, 146 S.C. 225, 234, 143 S.E., 796; Columbia Gaslight Co. v. Mobley, 139 S.C. 107, 113, 137 S.E., 211; Fergus Motor Co. v. Sorenson, 73 Mont., 122, 235 P., 422).
In construing Section 9017, our Court has steadfastly adhered to an exact definition of the word "receive" and has denied unto a fiduciary any commissions upon a fund unless it could fairly be said that such fiduciary had himself actually "received" into his possession funds of the estate. This construction first found expression in Rutledge v. Williamson's Ex'r (1789), 1 Desaus., 159, where the chancellor, according to the Reporter's note, held: "In this case, Thompson, the executor (of Williamson), charged the usual commission, on delivering up certain bonds, ordered by this court to be delivered up to Gadsden and Bonsall, as so much money by him paid: But as the law says, an executor shall receive two and a half per cent. for monies received, or paid, the court could not consider the mere delivery of a bond to be a payment — therefore disallowed this charge."
With unbroken continuity, the decisions have followed that construction of the statute. Thus, in Ball v. Brown (1831) Bailey, Eq., 374, it was held that "executors are not entitled to commissions on the proceeds of land sold by the master, under a decree against them, for foreclosure of a mortgage executed by their testator, where the land was bid off by the mortgagee for less than his debt, and the payment was affected by his giving credit for the amount of his bid."
That the executor must actually receive and handle money in order to justify an allowance of the statutory commissions is aptly illustrated by Buerhaus v. DeSaussure (1894), 41 S.C. 457, 497, 19 S.E., 926, 946, 20 S.E., 64. In that case, the Court, speaking through Mr. Justice (afterwards Chief Justice) McIver, said: "The sixteenth exception presents the question whether the executors should be allowed commissions on the whole amount of the price of the premises No. 285 King street, or only on the amount of the cash which passed through the hands of the executors. It seems that the executors sold this property to Mrs. McNulty, the price agreed upon being $16,000; but, the property being at the time incumbered with a mortgage to secure a debt to a third person, amounting to something over $9,000, the arrangement was that Mrs. McNulty should satisfy this mortgage, which she did, and pay the balance of the purchase money, amounting to over $6,000, to the executors. This sum, therefore, was the only amount that passed through the hands of the executors, and upon that sum alone are the executors entitled to commissions. This exception is consequently overruled."
De Loach v. Saratt (1900), 58 S.C. 117, 124, 36 S.E., 532, 533, was a unique case in this connection. There, an intestate died, leaving a valid outstanding policy of insurance payable to his estate in the amount of $10,000.00. The insurance company issued its check in settlement of said policy, payable to the administrators of the estate. Upon receipt of that check, the administrators indorsed the check over to another, who collected the same. The question presented was the right of the administrators to commissions upon the sum represented by that check. In an unanimous opinion, the Court pithily dismissed the administrators' contention for commission with the statement: "We do not think that the administrators are entitled to any commissions on this fund, either for recovering or paying out the same, for the reason that they cannot be said to have either received or paid out the same." Subsequently, in the same opinion, Mr. Chief Justice McIver, in justifying the result reached, used the illustration: "On the contrary, it is more like the case of an administrator, holding a note payable to his order as such, who by indorsement transfers the same to a third person, who collects the money due on the note, and deposits the same in bank to his own credit; and in such case it could not with any sort of propriety be claimed that such administrator had received the amount of money mentioned in the note."
It would seem necessarily to follow, then, both from the language of 7855 itself and from the uniform construction of the similar statute (Section 9017), that the receivers herein are not entitled to any commissions upon collections "received" by secured creditors. The situation easily identifies itself with the illustration put by Mr. Chief Justice McIver in De Loach v. Saratt, supra, of an administrator indorsing over to another a note of the estate and permitting the other to collect the money due on the note and to deposit the same to his credit. If the administrator did not "receive" the money in that instance, how much less did the fiduciaries "receive" it in this instance when they never had in their possession or under their control any of the assets which were translated into money, did not receive at any time the money realized upon such assets. and have never paid out such money.
No amount of argument can uphold the conclusion that the receivers herein ever "received" the moneys collected by the secured creditors. By what token could it be said they "received" such collection, when it is conceded that the secured creditors refused to deliver the collateral unto the receivers, sent their personal representatives out into the field to effect the collections in question and, through such personal representatives, made the collections? Assuredly, too, the receivers did not pay out these collections. Indeed, such collections were not paid out, but, as we have already stated, were merely credited by the secured creditors upon their indebtedness. No valid basis can be premised upon which to predicate an allowance of commissions to the receivers for collections "received" and applied by secured creditors on their indebtedness.
It will no doubt be asserted, however, that, though the statute does not authorize the payment of any commissions upon these collections, this result is unjust and this Court should make some allowance to the receivers apropos these collections. This same argument was early advanced in a case involving a construction of Section 9017, and was conclusively answered by Chancellor DeSaussure thus: "It has always appeared to me that the ground for compensation to executors being made by law to rest solely on the foundation of money received and paid away, was not a perfectly reasonable rule; in as much as there is often great service performed by executors, when only small sums of money are received and paid away. But I do apprehend the law to be clear on that point; and I do not feel myself at liberty to depart from it. I do not sit here to make law, but to administer it; and the judgment of every individual Judge must yield to the public will, distinctly or intelligibly expressed, by existing laws. And I apprehend the act of the legislature, prescribing a particular mode of trial on the application of executors, does ally to all cases which can arise. I feel, therefore, that I am precluded from granting extra compensation." Ruff v. Summers' Ex'rs (1814), 4 Dessaus., 529.
Again, in Ball v. Brown, supra, the Court replied to such contention with the tart observation: "The executors may have had extraordinary trouble, more than in paying away a much larger sum; but if this be so, the law has pointed out a different mode of obtaining compensation."
Apart from these authorities, though, it is clear that in this particular instance the Court has no right to give any compensation other than that fixed by the statute itself. Thus, the statute expresses it that the percentage compensation therein fixed shall be "in full for their services." This language evidences a clearly articulated legislative intent to limit the commissions to be received by the boundaries fixed by the statute and would destroy any right in the Court to increase such commissions beyond those limits. Cf., in this connection, Anderson v. Silcox (1908), 82 S.C. 109, 112, 113, 63 S.E., 128.
Even if the Court were at liberty to disregard the clear mandate of the statute and its patent purpose to reduce the administrative costs incident to the liquidation of State banks still no element of justice could sanction the allowance of commissions sought by the receivers herein. Their argument, if followed, would permit them to receive by way of commissions approximately a third of all moneys collected by them — this, in spite of the fact that if such commissions should be added to other administrative costs, they would consume practically every dollar collected. When they have themselves collected but a little more than $20,000.00 and, out of that, have paid over $7,000.00 by way of administrative costs, what principle of justice can sustain the allowance of $8,000.00 in receivers' commissions out of that fund? By this process of liquidation, only receivers and their employees will benefit and receiverships, as the judicial mechanism for the conservation for creditors of the property of an insolvent, will come to enjoy a just contempt at the hands of the public and will persist only to mock the efforts of the Courts to administer justice.
Further, the greater part of the commissions sought would be chargeable against collections made by creditors — and yet such commissions could not be paid out of the fund or collections against which they were charged but would come out of the general funds of the insolvent. This result cannot appeal to any Court and is at war with the whole idea of commissions generally which contemplates that the commissions paid shall represent a part of the fund against which such commissions are charged. General creditors should not be charged with the expenses incident to the liquidation of a collateral owned by secured creditors in which such general creditors have no interest.
It is clear to me, therefore, that the Special Referee arrived at the correct conclusion in recommending that the receivers were not entitled to an allowance of commissions upon collections made exclusively by secured creditors and applied by those creditors upon their indebtedness.
The second question before this Court is: Are the receivers entitled to commissions upon offsets made? As we have already seen, the receivers' right to commissions is to be measured by the language of the statute, which conditions such right upon the "receiving" and "paying out" of funds by the receivers. It seems difficult, in the light of this yardstick, to say that an offset represents a fund either "received" or "paid out."
That the receivers are not entitled to commissions upon offsets necessarily follows from the conclusion announced in Griffin v. Bonham (1856), 9 Rich. Eq., 71. There, mutual debts existed between an executor and his testator. The executor claimed commissions upon the indebtedness due by him to the estate upon the theory that such indebtedness is esteemed paid immediately upon his qualification. While agreeing in part with this contention, the Court held that to such extent as the mutual debts were subject to offset, no commissions were due the executor, stating (9 Rich. Eq., 71, at pages 78, 79): "The plaintiff contends that it is only the balance due by the testator to the executor on a settlement of their mutual demands, that can be considered as having been received by the executor, and upon which he would be entitled to commissions as upon money received. The principle assumed in this ground is correct. If there be mutually subsisting demands between the testator and his executor at the death of the former, or falling due at the same time, in the course of the administration, these mutual debts satisfy each other, in the way of discount and by operation of law in toto or pro tanto. It is only the balance due the testator on such supposed settlement that the executor can be considered as having received, and it is only on such balance that he would be entitled to charge commissions."
No valid distinction can be made between that case and the instant one. While it is true that the cited authority had to do with executor's commissions, the rule is the same as to receiver's commissions, since the two applicable statutes employ the same verbal formula for fixing the right to commissions.
I am accordingly of the opinion that the Referee was correct in recommending that the receivers were not entitled to commissions upon offsets any more than they were entitled to commissions upon collections made exclusively by secured creditors.
Upon consideration of the entire matter, and after hearing further argument by counsel for all parties in interest.
It is ordered that the report of the Special Referee in this matter be and the same hereby is approved and confirmed.
It is further ordered that the receivers are entitled to commissions upon collections actually made by them upon stockholders' liability and upon general assets in the amount of $29,100.79, to wit, the sum of $582.02, together with commissions in the amount of two per cent. on all legitimate disbursements made out of this fund.
Messrs. Sawyer Sawyer and R.W. Wade, for appellants, cite: Statute should be construed as a whole: 166 S.C. 534; 165 S.E., 340; 133 S.C. 446; 131 S.E., 612. As to ownership remaining in pledgor: 155 S.C. 436; 152 S.E., 658; 21 R.C.L., 649; 72 S.C. 458; 52 S.E., 195; 110 A.S.R., 633; 136 U.S. 223. What constitutes paying away of money: 60 S.C. 272; 38 S.E., 423. Intention of Legislature should govern: 175 S.C. 286; 181 S.E., 30; 107 Conn., 596; 86 S.C. 419; 68 S.E., 561; 171 S.C. 408; 172 S.E., 426; 109 S.C. 30; 96 S.E., 138; 133 S.C. 446; 131 S.E., 612.
Messrs. Sam J. Nicholls, Donald Russell and P.D. Barron, for respondent, cite: Exceptions: Section 6, Sup. Court Rule No. 4; 4 McC., 496; 18 S.C. 222; 42 S.C. 74; 120 S.E., 58; 39 S.E., 427; 17 S.E., 948; 22 S.C. 268; 19 S.C. 958; 20 S.C. 500; 35 S.C. 511; 15 S.E., 243; 36 S.C. 563; 15 S.E., 706; 36 S.C. 569; 15 S.E., 712; 178 S.C. 175; 182 S.E., 442.
April 28, 1936. The opinion of the Court was delivered by
The Bank of Union, a State bank, was situate at Union, S.C. It became insolvent and was closed September 23, 1931. J.D. Arthur and Luke J. Wilburn are the duly appointed and qualified receivers thereof, and are still engaged in the discharge of their duties as such receivers. Prior to the insolvency of the bank, the County of Spartanburg had begun an action against it to recover of it certain moneys received by it from a former treasurer of Spartanburg County, taken by him from the county's funds, in the payment of his individual obligations. Before the case was tried, the bank failed; thereupon the receivers were substituted as defendants in the stead of the bank, and judgment was recovered against them. A proceeding against the same parties was brought by Spartanburg County to have the judgment thus obtained by it declared to be a preferred claim in the distribution of the assets of the insolvent bank, which proceeding resulted in a decree of the Court allowing the claim. See 169 S.C. 456, 169 S.E., 235.
Upon the application of the receivers, an ex parte order of the Court was granted which allowed them to pay to themselves certain commissions from the funds in their hands. Thereupon, on the petition of Spartanburg County, an order was passed vacating the ex parte order which allowed these commissions to the receivers, and referring it to W.S. Hall, Esquire, to take the testimony and report to the Court the commissions to which the receivers were entitled up to the date of the order.
The Special Referee reported that the receivers were entitled only to the commissions of two per cent. on all moneys received by them and a like amount on all moneys paid out by them up to $50,000.00, and 2 1/2 per cent. on all sums received and paid out above that sum, as fixed by Section 7855, Code of Laws 1932.
To this report the receivers filed exceptions, which were heard by his Honor, Judge Mann, whose decree disposing of them is so complete, clear, and thorough as to make it unnecessary for this Court to add anything to it. Let it be reported.
Judgment affirmed.
MR. CHIEF JUSTICE STABLER and MESSRS. JUSTICES CARTER, BAKER and FISHBURNE concur.