Terminal Freezing & Heating Co. v. Whitelock

Thomas, J., delivered the opinion of the Court. This ajipeal is from an order of Circuit Court No. 2 of Baltimore City overruling exceptions to the allowance by the auditor’s account of a fee of $5,000.00 to the appellees and latifying said account to that extent. The fee was allowed by the auditor, in accordance Avith an order passed by Judge Hablan while presiding in said Court, out of the general fund arising from the sale, under the decree of that Court, of the property of the Baltimore Refrigerating and Heating Company of Baltimore City, and the grounds of the exceptions to said allowance are, first, that it Avas not a proper allowance out of said fund; and, second, that the amount of said allowance is excessive. ⁴¹⁰ It appears from the record in this ease, and the records in previous appeals, that the Baltimore Refrigerating and Heating Company of Baltimore City in 1902 executed to the Continental Trust Company, as trustee, a mortgage to secure an issue of two thousand bonds of the par value of $1,000 each. Receivers were appointed for the Refrigerating Company in 1908 and they were authorized by the Court to conduct the business of the company until the further order of the Court.

After the appointment of receivers, two committees for bondholders of said company were appointed, one called the Homer-Betts Committee, representing a large majority of the bonds, and the other, the Middendorf-Heyward Committee, which represented a minority of the bondholders. The conduct of the business of the company by the receivers resulted in a great deal of litigation, and in December, 1909, certain of the bondholders of the company filed a bill of complaint against the Refrigerating Company and the Trust Company, alleging that the Trust Company had improperly certified and issued a number of bonds of the Refrigerating Company, and that it was not a proper party to act as trustee, and asking for the removal of the Trust Company as trustee for the bondholders. The Trust Company in answer to that bill alleged that all the bonds had been properly issued and that it had faithfully discharged its duties. - That controversy resulted in an order of court restraining the Trust Company, alleging that the Trust Company had improperly close the mortgage. According to the evidence in this case the earnings of the Refrigerating Company as conducted by the receivers were not sufficient to pay the interest on the bonds, and one of the witnesses states that they were ''diminishing” instead of increasing, and that it became apparent to rhe members of the Middendorf-Heyward Committee that iu order to protect the interest of all the bondholders it would be necessary to sell the property of the company.

Accordingly, on the 3rd of November, 1910, a bill was filed by the members of the Middendorf-Heyward Committee and Robert ⁴¹¹ M. Spedden, a bondholder of the Refrigerating Company, ag’ainst the Refrigerating Company, the Continental Trust Company and the members of the Homer-Betts Committee for a sale of the property of the Refrigerating Company. In this bill the plaintiffs sued for themselves as well as for all other holders of the bonds of the Refrigerating Company who would come in and contribute to the expenses of the suit. On the 12th of November, 1910, the plaintiffs in that bill filed a petition for a sale of the property before final decree. The petition was set down for hearing, testimony was taken before the Court and on the 7th of December, 1910, an order was passed directing a sale of the property and appointing the Continental Trust Company trustee to make the sale.

That decree recites that parties representing eleven hundred and eighty-seven of the twelve hundred and seventy-seven outstanding bonds were before the Court consenting to the sale, and it appears that counsel for the Homer-Betts Committee approved the form of the decree passed. One of the appellees says in his testimony in reference to the passage of said decree: “there has been some reference to the attitude of the majority committee. That committee itself, on the 7th day of December, 1910, when this order of sale was passed, made formal application by letter, equivalent to a petition, to Judge Stockbridge asking that the Continental Trust Company, which he had appointed trustee or was about to appoint trustee under that order, should sell this property in this case under the order which he had passed. They united in it, but, as Judge Stockbridge pointed out himself in his testimony here the other day, until he had announced his views at the hearing after the case had gone on several days, they never even gave a qualified consent to the sale of the property under the working out of the rights of the parties in that way.” The conditions and circumstances under which the bill of November 3rd, 1910, was filed-and the decree of December 7th, 1910, was passed, are stated by Judge Stockbridge, who testified ⁴¹² at the hearing of the exceptions to the fee of the appellees, as follows: “That in or about April, 1910, he heard a demurrer to the bill of complaint in a case then pending in the Circuit Court of Baltimore City, entitled Meyer and Stern v. The Continental Trust Company et als., which case involved the financial affairs of the Baltimore Refrigerating and Heating Company, so far as the issuance and trustees’ certification of certain bonds were concerned; that the hearing of that demurrer was the first matter arising out of the insolvency of the Refrigerating Company which had come before him as one of the judges of the Supreme Bench of Baltimore City; that during the year 1910 he was the presiding judge in Circuit Court No. 2 of Baltimore City, in which Court at that timé there was pending a certain case entitled Tome v. The Baltimore Refrigerating and Heating Company, wherein receivers had been appointed for the defendant company at the end of 1908 or during the early part of the year 1909, that the receivers had been authorized to continue the business of that company and were operating same when he was assigned to that Court; that the bill of complaint in the receivership case contained no prayer for sale, and neither did the bill of complaint in the Meyer and Stern case; that one of the important legal questions growing out of the receivership was the power of the Court to authorize the receivers to issue receivers’ certificates as prayed by the receivers, with the sanction of the Ilomer-Betts Committee of bondholders of the company; that the Middendorf-Heyward Committee and Robert M. Spedden opposed the issuance of certificates by the receivers; that he, Judge Stocicbbidge, decided about June, 1910, that the Court had not such power with respect to companies of the character of the defendant company for the purposes prayed; that in or about October, 1910, he heard an application for removal of the receivers and decided to appoint an additional receiver in the place of Fred W. F'eldner, deceased; that from his observation of the receivership and the dis ⁴¹³ asterous results of carrying it on, hie was convinced that an early sale of the property was absolutely imperative; that he had several times suggested this view to the original receivers and also to the counsel of the Homer-Betts Bondholders Committee, but had been unable to get them to take any action; that inasmuch as there could be no sale of the property in either of the pending cases, as neither bill prayed for a sale, in the fall of 1910, he orally directed Messrs.

Whitelock and Wright, counsel for the Middendorf-Heyward Committee and Captain Spedden, to file a new bill for the sale of the property so that the receivership might be closed, and the bill in the case now pending in this Court entitled Middendorf and Heyward et al. v. The Baltimore Refrigerating and Heating Company et al., 117 Md. 443 , (being the case in which Judge Stockbeidge’s testimony was given, and in which the company’s assets were subsequently sold), was accordingly filed by Messrs. Whitelock and Wright as solicitors. That subsequently to the filing of the bill of complaint a petition was likewise filed with his approval by the same counsel for the same plaintiffs, asking for a preliminary order of sale of the property prior to final decree, and after a hearing and argument, he being convinced that a decree for sale must be ordered at final hearing, an order for a sale ‘was passed by him, the witness, on December 7, 1910. That both committees requested the trustee to proceed to make the sale under the Court’s order.” The property of the Refrigerating Company was sold by the trustee under the order or decree of December 7th, 1910, for $503,000.00, but the purchaser having failed to comply with the terms of sale the property was resold under an order of Court, at the risk of the purchaser, for the sum of $261,00'0.00; the sale was finally ratified, and the case was referred to the auditor for a distribution of the proceeds of the sale.

The appellees then filed a petition, setting out the circumstances under which the bill of November 3,' 1910, and the petition for an immediate sale of the property were filed, and praying to be allowed a reasonable fee for their ⁴¹⁴ services as counsel for the plaintiffs and petitioners in said bill and petition. There was attached to this petition a certificate of two members of the Baltimore Bar certifying that a fee of $5,000.00 would be a reasonable and proper allowance for the services mentioned in said petition. The Court passed an order directing the auditor to allow said fee “subject to the usual