National Bank v. Dulaney

¹⁶¹ Jones, J., delivered the opinion of the Court. The record about to be examined brings up three appeals which stand upon the docket of the preceding term as Nos. 23, 24 and 25. The expression of views which follows will dispose of the questions which these appeals present here. These questions are so related under the facts and circumstances which give rise to them, and which are set out in the record, that they may be conveniently treated in one and the same opinion.

The record shows that prior to the 18th day of December, 1899, Christian Devries and Minnie A. Devries, his wife, had been as partners under an agreement entered into prior to their marriage, carrying on a business in the city of Baltimore in the firm name of “The Charles A. Vogeler Company.” The business so carried on consisted in the manufacture and sale of patent medicines — principally an article sold under the name of “St. Jacob’s Oil.” Besides being carried on in Baltimore the business was operated also in San Francisco in this country; and in Toronto (Canada), Australia, Paris and London. In the latter place was the principal branch office. On the date just mentioned Christian Devries and his wife made to Henry S. Dulaney, who had been the business manager of the partnership in Baltimore, a deed of trust, for the benefit of creditors, of all the property of the said partners and of “each of them,” in which the trustee was empowered to take possession of all of said property, convert it into money and apply the proceeds to the payment of all the debts of the grantors in said deed after paying all expenses incurred in the execution of the trust created, “including a reasonable commission” to the trustee “for his services in the performance of the duties * * * imposed upon him not exceeding the amount of compensation allowed in cases of insolvency in the insolvent Courts in the State of Maryland for like services.” The property which passed to the trustee under the deed from the partnership was in large part, as expressed in the deed,“patent medicines and trade-marks, formulae and receipts for the manufacture thereof, the value of which largely depends on the ¹⁶² management and.sale of the same." An exact statement of the assets so passing is not given, but they seem to have consisted, approximately, of merchandise $15,000, book debts and cash $14,800, real estate, the saleable value of which proved to be $71,700, machinery $5,000, and the good will and trade-marks of the business, the book value of which was placed at $137,000 — aggregating the sum of $243,800. Henry S. Dulaney, the trustee named in the deed, accepted the trust, filed a bond and immediately applied to the Circuit Court of Baltimore City to assume jurisdiction of the trust.

This the Court did by its order passed on the 28th of December, 1899. Soon thereafter creditors, treating the deed of trust as an act of bankruptcy on the part of the grantors in the deed, filed a petition in the United States District Court of Maryland to have them adjudicated bankrupts and succeeded in securing an adjudication of bankruptcy against them. The parties to this proceeding and counsel who represented them afterwards concluding that it would be more advantageous to the creditors to have the trust administered under the deed of trust upon conditions that were proposed and agreed to, the decree in bankruptcy was by agreement set aside and vacated. One of the conditions of this agreement was that there should be associated with Mr. Dulaney in the administration of the trust two other trustees who should be taken from those more closely identified with the interests of the creditors concerned with such administration.

To give effect to this part of the agreement a petition was filed on the 21st of February, 1900, in the Circuit Court of Baltimore City by Mr. Dulaney asking that, in order that he might perform the duties of the trust devolved upon him “in the most satisfactory manner and to the best interests of the parties concerned therein,” he might have two associates “selected by the creditors, or a great majority of-the creditors, of the trust estate with whom he could 'consult and confer’ and who could 'otherwise aid him him in the performance of said duties’ and indicated Mr. Lawrence B. Kemp and Mr. John B. Ramsay as having been selected by a great majority of the creditors to be so associated with him. ¹⁶³ The Court on the same day, by its order, appointed Mr. Kemp and Mr. Ramsay trustees in accordance with the prayer of the petition. The gentlemen named accepted the trust and united with Mr. Dulaney in the management thereof. Out of this management and certain proceedings in connection therewith have arisen the questions to be determined upon these appeals. These questions are presented by exceptions to an auditor’s account stated between these trustees and the trust estate under their management; and filed in Court on the 4th day of February, 1902 ; and upon which the Court took final action on the 10th day of March following.

These exceptions (as far as they are before this Court) are directed against the allowances made, in the Court’s order, of commissions to the trustees; of compensation to Mr. Francis T. Homer for services rendered the trust estate ; and of counsel fee to the late Col. Charles Marshall for professional services rendered as the legal adviser of the trustees, and in the litigation in the proceedings in bankruptcy against the grantors in the deed of trust. The appeals we are considering were taken from the final action of the Court upon these exceptions. The circumstances in view of which these allowances were made, and the proceedings below in reference thereto appear to be as follows: The late Col.

Charles Marshall had, for many years prior to the making of the deed of trust, in connection with which the litigation, with which we are now dealing, arose, been counsel and professional adviser for the Charles A. Vogeler Company. From the creation of the trust by the deed in question throughout the management of the trust thereunder he occupied the same relation to the trustees. He was their legal adviser in all matters pertaining to their duties and the interests of the estate in their hands; represented them in the bankruptcy proceedings, already alluded to, in the United States District Court of Maryland; and was their adviser in like proceedings, which were instituted against the grantors in the deed of trust in the English Courts, in connection with counsel there employed ; and in which the result was favorable to the contention set up against these proceed ¹⁶⁴ ings, by the trustees here, in accordance with his legal opinion, After the trustees had filed a report and account of the management of the estate in their hands with a view of closing the trust Col. Marshall filed with the Court a petition setting forth the extent and character of services rendered by him to the trustees in the conduct of the trust; alleging that he had received for such services the sum of $1,250 on account; and asking that the Court direct an allowance by the auditor, when the proceedings should be before him to state an account, a fair and reasonable compensation for such services in addition to the amount already received.

This petition was accompanied by the certificate of two, among the leading lawyers of Baltimore, to the effect that $13,750 would be a reasonable allowance to be made in full for the services mentioned in the petition. Upon this petition and certificate the Court passed an order on the 29th of January, 1902, directing the auditor to allow to Col. Marshall “the sum of twelve thousand five hundred dollars being in full for all compensation for all services by him rendered the trust estate of the Charles A. Vogeler Company and the trustees thereof.” This allowance was accordingly made in the account of the auditor; and among other matters in the account, was made the subject of exception by creditors of the estate. The Court by its order of the 10th of March, 1902, sustained the exceptions to this allowance to the extent of reducing it to ten thousand dollars and directed that this last-named amount be “allowed and paid” to Col.

Marshall “as fees and compensation for professional services rendered” to the trustees — the same “to be in addition to the sum of $1,250” already paid him by the trustees. This action of the Court is one of the matters involved in the appeal of the creditors of the Charles A. Vogeler Co., in case No. 23 — the appellants in that case insisting that the amount of the allowance in question ought to have been still urther reduced and that the amount allowed by the last mentioned order of the Court below is more than is reasonable and proper. It is also the subject of appeal in case No. 25, brought up by the administrator c. t. a. of Col. Marshall, he ¹⁶⁵ having died since the passing of the final order of the Court below in the premises ; and in support of this appeal it is contended that the Court below erred in making a reduction in the amount of compensation allowed in its previous order of the 29th of January, 1902.

In addition to, and somewhat in connection with, the professional services of Col. Marshall just alluded to, the trustees engaged also the services of Mr. Francis T. Homer, of the Baltimore Bar. On the 28th of February, 1900, they filed in the Court below a petition setting forth that the Charles A. Vogeler Company had a branch office for business in London, England, where there were important interests to be looked after in connection with the management of their trust; that there were “trade names there and formulas used” in the business of the company of considerable value ; that the agent who had been in charge of the business of the company there had so conducted himself in reference to the business as to excite their fears “as to the safety and security of the assets” of the company; that these fears had been “intensified by the institution in London Courts of proceedings in bankruptcy and the appointment there of a temporary receiver; that the conditions there caused them to believe that the best interests of the trust estate would be subserved by the employment by them of “some person learned in the law to proceed to England after having been duly vested by power of attorney and orders of Court with ample authority to represent” the petitioners and “to take needful and proper steps” * * * “to preserve and protect the assets of the estate located in England” &c ; and therefore they asked that an order be passed authorizing them to employ some member of the Baltimore Bar to go to Europe for the purposes indicated, and to contract with him “to pay all proper and necessary expenses” incident thereto “and such reasonable compensation” as to the Court might “seem right and proper.” On the same day the Court below passed an order on this petition of the trustees in accordance with the prayer thereof, and, authorized them to expend not exceding $1,500 to defray ¹⁶⁶ the expenses of such attorney as they might employ and “ to contract to pay said attorney such fee as ” might “ seem right and reasonable subject to the ratification and approval ” of the Court. The said attorney was to make full report to the Court for its “ ratification and approval ” of “ his services performed and all his expenditures incurred; ” and the Court reserved the, right “ to modify or alter ” the order “ from time to time as to the Court” might “ seem right and proper.” Under the authority conferred by this order the trustees engaged the services of Mr. Homer for the purposes indicated in their petition to the Court; and he proceeded to London and there took charge of, and spent a considerable time in the aggregate, in attending to matters pertaining to the management and settlement of the trust estate in their hands.

He afterwards made a report to the Court giving a detailed statement of services rendered by him, and asked of the Court the allowance of a fair and reasonable compensation therefor. The most important service of a tangible and positive character reported as rendered by him was the sale to a syndicate formed in London of the business, good will and trade-marks of the Charles A. Vogeler Company for the sum, in our currency, of $194,847.92-100. Accompanying this report and petition was a certificate of a member of the bar in Philadelphia, who represented creditors, to a large value, of the trust estate; and who certified to having some special acquaintance with the matters detailed in the report, to the effect that fifteen (15) per cent on the amount realized from this sale, would be a reasonable and proper compensation to Mr. Homer for his services. Two of the most eminent members of the Baltimore bar certified to the same effect.

On this petition and recommendation the Court passed an order that the auditor in stating his account allow to Mr. Homer “ a fee of twenty-five thousand dollars for the services rendered * * * such allowance, however, to be subject to the usual exceptions.” Upon the coming in of the auditor’s account this allowance was excepted to by creditors as being unreasonable; and the Court by its order of the 10th of March, 1902, sustained the exceptions to ¹⁶⁷ the extent of reducing the allowance; and ordering in lieu thereof that “ there be allowed and paid to the said Francis T. Homer as compensation for professional and other services a commission of io per cent on the amount of the said sale, $194,847.92 or the sum of $19,484.79.” This order and direction of the Court is another matter appealed from by the creditors of the trust estate and embraced in appeal No. 23. The remaining matter involved in the appeals here relates to the allowance of commissions to the trustees who entered upon their duties in February, 1900, and on the 16th of December, 1901, filed a report and account of their management of the trust estate; and of all their receipts and disbursements in connection therewith, except certain matters embraced in a supplemental report of the 23rd of January, 1902, relating to the business of the London branch. In this report they craved allowance for all of their expenses ; and asked for compensation by way of commission as should “seem adequate, right and proper having due regard for the extraordinary services by them rendered.” On the day of the filing of the principal report, 16th of December, 19.01, the Court passed an order referring the report and account and all the proceedings in the cause, which the trustees asked' in their report to have done, to the auditor to state an account and directed as to their commissions as follows “ that the said trustees be and they are hereby allowed on all sales of real estate by them made the usual commissions as fixed by the rule of Court in such cases, and that they be allowed on the amount realized from the sale of the good will, trade-marks, formulas, etc., amounting to $194,847.92 commissions at the rate of four per centum and upon all other sums from all other sources by them received commissions at the rate eight per centum as compensation for their services rendered as in said petition set out.” The auditor’s account allowed commissions in accordance with this order and showed that in addition to commissions on sales of real estate and on “ the sale of the good will, trademarks, formulae, etc.,” an allowance of commissions on the sum of $238,453.41 at the rate of 8 per cent. Upon hearing ¹⁶⁸ the exceptions to the auditor’s account, which embraced these allowances, the Court in its order of the ioth March, 1902, sustained the exceptions to them to the extent of reducing the commissions on the sum of $238,453.41 from 8 per cent to 6 per cent and on the sum of $194,847.92 from 4 per cent to two (2) per cent.

The action of the Court in reference to these allowances is involved in the appeal No. 23 where it is insisted by the appellants (creditors) that the allowances, as finally made by the Court, are still in excess of what was reasonable and proper under the circumstances, and is also the subject of appeal by the trustees in appeal No. 24, who insist that the amounts allowed as commissions to them in the final order of the Court below in respect to the two amounts just named are less than they are entitled to receive, and further that the previous order of the Court of the 16th of December, 1901, fixing commissions to be allowed by the auditor, not having expressed that these allowances were to be made subject to exception, the order was final in its character and effect, and after enrolment it was beyond the power of the Court below to disturb it upon exceptions to the auditor’s account. The- last-mentioned ground of appeal applies as well to the order of the Court of the 29th of January, 1902, making allowance for a fee to Col. Marshall, but it was not urged in the oral argument on his appeal, and though referred to in the brief of counsel for his estate it was not there further pressed. The question raised as to the effect of the two orders last mentioned upon the right of the Court to deal with them as it did in its order of the ioth of March, 1902, is the only controverted legal question involved in the appeals brought up in the record, and before proceeding further with a discussion of the cases, that will be settled.

The action of the Court below, as it respects the orders in question, is in accordance with the generally accepted and recognized practice. Orders of the character of these have not been regarded or treated in practice as having any conclusive effect but as being open and subject to rescission or modification when final action is taken ¹⁶⁹ upon the auditor’s account. An order