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Maurer v. International Re-Insurance Corp.

Supreme Court of Delaware

March 27, 1953


Proceedings on petition for allowance of attorney's fees for services rendered in prosecuting certain creditors' claims in receivership. The Court of Chancery of New Castle County, 93 A.2d 919, awarded counsel fees to petitioner to be apportioned among his clients which were members of class benefited, and petitioner appealed from order for reimbursement to clients. The receivers cross-appealed. The Supreme Court, Southerland, C. J., held that counsel fees allowed in such cases are allowed as part of the costs and expenses of a party to the litigation, and not for services of an attorney as an aid to the court, and attorney was not entitled to receive both a fee from his clients and an additional amount from the receivership estate.

Order and judgment reversed, and cause remanded with instructions.

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[33 Del.Ch. 458] Appeal and cross-appeal from an order of the Court of Chancery of New Castle County of January 27, 1953, in the receivership of International Re-Insurance Corporation, awarding counsel fees to appellant, William Prickett, and directing such fees to be apportioned among and paid to his clients. Reversed.

William Prickett, of Wilmington, appellant, pro se.

Arthur G. Logan, of Wilmington, for Receivers of International Re-Insurance Corporation.


SOUTHERLAND, Chief Justice.

These cases concern the propriety of an allowance of counsel fees to appellant for legal services rendered in prosecuting certain creditors' claims in the receivership. The questions which arise are so interwoven with the facts that a succinct preliminary statement of them is difficult. The circumstances are these:

On or about June 16, 1952, appellant filed in the court below a petition for an allowance of counsel fees from the receivership estate. Appellant had rendered valuable services in prosecuting successfully claims against International of certain reinsurance companies that had reinsured risks of International. We shall refer to them as ‘ reinsurance claimants'. These claimants asserted a right to share as ‘ policyholders' in a special trust deposit or fund previously established by International for the benefit of its ‘ policyholders'. The facts relating to the creation of this fund, and the legal questions that arose concerning its distribution, are fully set forth in our opinion on the merits of the case and need not be repeated here. See Del. 86 A.2d 360. It is enough [33 Del.Ch. 459] to say that the Receivers undertook to classify the creditors into two classes, ‘ policyholders' and ‘ nonpolicyholders', and to put into the latter category the reinsurance claimants. Certain of these (but not all) retained appellant to resist this classification. The court below upheld it. On appeal this Court reversed, holding all such claimants entitled to share in the special deposit. The effect was to benefit alike those reinsurance claimants who were clients of appellant and those who were not.

Some time after the filing of appellant's petition the Receivers gave due notice of a hearing thereon. No party in interest appeared in response to the notice. The Chancellor took the matter under advisement and later filed an opinion. See 93 A.2d 919. He determined that the fee requested, $25,000, was reasonable and would be allowed. However, he also determined that the fee should be ratably proportioned among the reinsurance claimants who were clients of appellant. As hereafter shown, he treated the petition as one filed in right of appellant's clients for reimbursement of costs and legal expense.

Both the appellant and the Receivers have appealed from this order. Appellant contends that the allowance to him was correct but the reimbursement ordered to his clients was wrong. The Receivers contend in effect that no allowance whatever

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should have been made and that the petition should have been dismissed.

Appellant has moved to dismiss the Receivers' appeal on the ground that the Receivers' arguments are not within their notice of appeal. We think their arguments bear directly on the part of the order appealed from, viz., the allowance to appellant. The motion is denied, and we take up the merits.

The first question that arises concerns the nature of appellant's petition. Was it a petition filed on behalf of his clients, as the Chancellor evidently regarded it, or was it a petition in his own right seeking compensation in addition to fees already paid or contracted for?

On its face the petition appears to be one filed by appellant in his own right for additional compensation. In the first place, appellant set forth certain of the facts with respect to his fee arrangements [33 Del.Ch. 460] with his clients, but did not allege all the facts. Obviously complete disclosure would have been necessary to the making of any order reimbursing the clients for expenses and counsel fees. In like manner, such disclosure would have been required to support a claim (not in fact made) that appellant's compensation from his clients was insufficient and that the shares of the other reinsurance claimants in the special fund should be taxed for an additional fee. In the second place, petitioner proposed to credit each client, against the fee to be paid by it, a sum equal to the amount by which its dividend would be reduced by any award of fees to appellant. The result would be the payment of a substantial fee to appellant in addition to those paid or to be paid by the clients. In the third place, the prayer of the petition was for an allowance for services ‘ in determining the proper application’ of the general estate or of the special fund.

The Receivers evidently regarded the petition as one filed by appellant in his own right for additional compensation. Thus the notice of October 17, 1952, sent to all creditors, states:

‘ Mr. Prickett's petition is based on the theory that his services were valuable in arriving at a proper decision as to which creditors should share in the fund from which the special dividend was paid.’

The proceedings at the hearing before the Chancellor make it clear that appellant was seeking compensation in his own right for services rendered the receivership estate, in addition to compensation from his clients. One of the Receivers asked the appellant the following question:

‘ You are not appearing on behalf of any of your creditors in connection with-you are just appearing ...

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