CLARK v. BINNINGER

CLARK v. BINNINGER. N. Y. Superior Court; Special Term, December, 1876. Attorney’s Bees.—Assignee in Bankruptcy. Where, after receiver appointed in a State court, an assignee in bankruptcy of the parties takes control of the action, the court will nevertheless protect the right of the original attorney and counsel to compensation out of the fund. Motion for payment of counsel fees, &c., out of fund. Abraham B. Clark brought this action in 1869, against Abraham Binninger, his partner, for a dissolution of the partnership and' an accounting; and had receivers appointed by this court. Creditors of the firm, then took proceedings in bankruptcy against them, on which an assignee' was appointed under the IT. S. bankrupt law. The history of this litigation appears in 3 Bank. Reg. 385, 481, 487, 489, 491, 518, 524. The bankrupt court authorized the assignee to appear in the action in this court, in the name and stead of Clark (Id. 491, 524). He accordingly applied in April, 1870, to Monell, J., for an order that the action be discontinued and the assets be delivered by the receivers to him, the assignee in bankruptcy. The learned justice held that assignee’s title was subject to the liens previously acquired in the State court, which could not surrender the property until, under direction of the court, it should be applied to payment of the firm debts ; when that should have been accomplished, and suitable provision made for the costs, expenses and fees of the parties and of the receiver, any balance remaining would be payable to the assignee in bankruptcy. In the mean time the assignee might take upon himself the conduct of the action. This case now came before the court for hearing upon the petition of George M. Titus, who originally acted as counsel, and subsequently as attorney and counsel, for the defendant, praying for an order of the court directing the payment to him by the receiver— heretofore appointed herein—or by the assignee in bankruptcy of the parties to this action, upon whom are devolved its conduct and control, of his reasonable costs and counsel fees incurred in the defense thereof. G. N. Titus, for defendant. F. N. Bangs, for assignee. Samuel Jones, for receiver. [MAJORITY — Sanford, J.—[After stating facts.]] Sanford, J.—[After stating facts.] After a careful examination of the various orders and proceedings affecting the petitioner’s claim, I feel constrained to overrule the exceptions to the referee’s report, filed on behalf of the assignee in bankruptcy; and to hold that the petitioner is entitled to the relief for which he asks. The application seems to have been opposed by the receiver, mainly upon the ground of an insufficiency of funds ; and by the assignee, on the ground that the court has no jurisdiction or authority to direct such payment. I tbtnk the receiver must be held responsible, notwithstanding the facts asserted in his opposing affida vit, for a sum sufficient to discharge the petitioner’s claim ; and I cannot regard the question of the authority of the court to make the order applied for as an open one, in view of the express provisions of the order of reference, and the opinion of the late Chief Justice Monell, on the motion, decided June 8, 1870. The court has repeatedly refused applications on behalf of the assignee, tending to subject the cause and the fund in court to his control, without making suitable provision for the payment of the fees of the attorneys and counsel of the respective parties, and of the receiver. The power thus exercised is not derived from the provisions of the Code, with respect to allowances, but is inherent in the court as an element of its equitable jurisdiction. I have the less hesitation in granting the petitioner’s application, inasmuch as there can be no doubt that an appeal will lie at the instance of either the receiver or of the assignee ; while if the application were denied, it is at least doubtful whether the claimant may not be remediless. The referee’s fees should be paid from the fund. The amount reported in favor of the claimant, less the sum of $100 already paid to him by defendant, should then be paid; the order should direct the receiver to make such payment; but, if for any reason the claimant should not succeed in thus realizing the amount due him, the assignee should be directed to make good any deficiency. The form of the order may be settled upon notice. Proceedings on the part of the claimant to enforce payment under the order to be entered, may be stayed pending an appeal to the general term, if such an appeal be duly taken. See Downing v. Marshall, 37 N. Y. 380 ; Atty. Gen. v. Moore, 19 N. J. Eq. 503.