Girand Ins. and Trust Co. v. Cooper
162 U.S. 529 (1896)

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U.S. Supreme Court

Girand Ins. and Trust Co. v. Cooper, 162 U.S. 529 (1896)

Girand Insurance and Trust Company v. Cooper

No. 164

Argued March 28, 1896

Decided April 20, 1896

162 U.S. 529

Syllabus

A coal and railway company contracted with C. to construct a building for it in the Indian Territory. After the work was begun a receiver of the property of the company was appointed under foreclosure proceedings. This building was not covered by the mortgage. C. was settled with for work up to that time, and all further work was stopped except such as might be necessary for the protection of the building, which was to be done under order of court. An order was issued for roofing, which C. did, and then continued work on the building without further authority from the court. The receiver, on learning this, notified him to stop and make out his bill to date of notice, said that he would furnish designs for further work to be done, and asked C. to name a gross sum for doing it. C. stopped as directed, the designs were furnished, and C. named the desired gross sum. No further order of court was named nor was any contract signed by the receiver, but the architect employed by the receiver drew up a contract and specification, and the work was done by C. in accordance therewith with the knowledge and approval of the receiver. The receiver having declined to sign the contract, or to make payments thereunder, C. filed a petition in the foreclosure proceedings for payment of the amount due him. Thereupon a reference was made to a master, who reported in favor of C. The court adjudged the claim to be a valid one, entitled to preference, and the receiver was ordered to pay the amount reported due, which decree was, on appeal, affirmed by the circuit court of appeals. Held that there was no error in the court's ordering C.'s bill to be paid as a preferred claim, as the work had been commenced before the receivership and was done in good faith for the benefit of the company and the receivers, and as the building must either have been finished or the work already done become a total loss to the company; that it appeared to have been constructed for the accommodation of the officers of the road, and in other respects in furtherance of the interests of the road, and was an asset in the hands of the receivers which might be sold, and the money realized therefrom applied to the payment of the claim, and that the fact that it was not covered by the mortgage rendered it the more equitable that the proceeds of the sale should be applied to the payment of the cost of its construction.

This was a petition by the firm of W. H. Cooper & Son, originally filed in the United States court for the Indian

Page 162 U. S. 530

Territory, against Edwin D. Chadick and Francis I. Gowen, receivers of the Choctaw Coal and Railway Company, a corporation created under the laws of the State of Minnesota, with a right, among other things, to build and operate railways and to own and develop coal mines, and which had been authorized, by Acts of Congress approved February 18, 1888, and February 13, 1889, to construct a railway within the Indian Territory.

The company having become embarrassed, Chadick and Gowen were, on January 8, 1891, appointed co-receivers, and continued to act as such until August 28, 1891, when an order was made giving said Chadick a leave of absence for one year, and in the meantime vesting all the power of both receivers in Gowen for the period named. In connection with the building and operation of its railway, and the development of its mining industries, the company in May, 1890, undertook the erection at South McAlester, in the Indian Territory, of a building to be used as an hotel and offices for the company, and on May 23, 1890, Chadick entered into a contract with Cooper & Son for the furnishing of the greater part of the work and material needed in the erection of the building, which was called the "Kali-Inla Hotel." This contract was signed by W. H. Cooper & Son, and by H. W. Cox, architect, for E.D. Chadick.

It seems that Chadick, at the instance of the board of directors, had gone before the Judiciary Committee in Congress and said that, if Congress would locate a United States court at South McAlester, the company would provide accommodations for the court and its officers free of cost to the United States, and that Congress, accepting the proposition thus made, designated South McAlester as one of the points for holding court in the territory.

At the beginning of the receivership (January 8th), Cooper & Son were settled with in full, and all work was to be stopped except such as was necessary to protect the building, which work was to be carried on under the order of the court. Shortly thereafter, a petition was presented to the court for permission to enter into a contract for the roofing of the

Page 162 U. S. 531

building, to protect it from the weather, and an order to that effect was obtained from the court before the work was begun. This appears to have been the only order obtained for any further work upon the building, but, after this job had been finished, Cooper & Son continued their work without further authority from the court.

In June, 1891, Mr. Gowen, learning that Cooper & Son had continued working upon the building, wrote Mr. Cooper the following letter, addressed to Cooper & Son, and signed by both receivers:

"South McAlester, Ind. Ter., June 3, 1891"

"Messrs. W. H. Copper and Son"

"South McAlester, I.T."

"Gentlemen: Under direction of the court, we notify you to stop all work on the Kali-Inla Hotel from this date, and make out your bill for the work done up to and including today."

"We will then furnish you with designs and directions as to the work to be done, and you will name a gross sum for the performance of the same, which we will submit to the court for their approval or disapproval."

"Edwin D. Chadick"

"Francis I. Gowen"

"Receivers Choctaw Coal and Railway Co."

Upon receipt of this letter, Cooper & Son ceased work upon the building and made out a bill or statement of the sum then due them, which was approved by the auditor of the receivers.

On or about June 7, H. W. Cox, who acted for the receivers as supervising architect, furnished Cooper & Son with details and specifications of the work required to be done to fit the building for occupancy by the court and officers of the company, which Cooper & Son agreed to do, by letter written to Mr. Chadick June 24, 1891, for the sum of $10,250, allowing the company $2,500 for the value of material on hand. Their proposition was not formally accepted by the receivers, and

Page 162 U. S. 532

no order of court was obtained authorizing it, but, on July 7, 1891, a contract was prepared by Cox, to which were attached certain plans and specifications. The contract was not signed by anyone, but the plans and specifications were signed by W. H. Cooper & Son, and by "H. W. Cox, Supervising Architect," and the contractors proceeded with the work therein called for, with the knowledge and approval of Chadick, the receiver who then had immediate charge of the work being done on the railway line.

At the hearing, the master, who was also clerk of the court, stated that the plans and specifications were submitted to him and to the judge of the court to see if the court apartments suited them and whether they had any suggestions as to the arrangement of the rooms, but no order was made by the court as to the price to be paid for the work or as to the manner of payment, and that neither he nor the court knew anything as to what the price of the work was. The contract of July 7th was not signed, accepted, or approved by either receiver, and was not submitted to Mr. Gowen until the 29th day of August, 1891, which was the first knowledge he had that any such contract was in existence. Cooper then presented his contract to Mr. Gowen as a prerequisite to his permitting the marshal to take possession of the rooms which had been fitted up for the clerk and marshal's offices. At this time, Cooper did not ask for any pay, and was not promised any payment, and all that he insisted upon was that his contract should be signed. Mr. Gowen refused to sign the contract, because the work had not been authorized by the court and because he was not satisfied that the price named in the contract was proper and reasonable, but promised Mr. Cooper that he would undertake to ascertain whether the price named was a proper one, and to this end he secured the services of an architect, and had him make a thorough examination of the building with a view of determining the value of the work done and materials furnished.

Cooper & Son made out their bills for the amount claimed to be due them for work done since June 3, which was certified as correct by the architect having supervision of the work

Page 162 U. S. 533

done in remodeling the building. For the purpose of securing payment of the sums claimed to be due them, the contractors filed a petition in the foreclosure proceedings setting forth the facts and praying for an order upon the receivers directing them to make payment of the sums claimed to be due, and further praying that a lien in their favor be put upon the building, and for other relief. To this petition, Gowen, as receiver, and the Girard Life Insurance, Annuity and Trust Company, as trustee, filed answers, and thereupon the court, on October 13, 1891, entered an order, which was drawn and consented to by the receiver and the trustee of the bondholders,

"that the claim of W. H. Cooper & Son be referred to the master to take testimony thereon, and to ascertain the amount justly and equitably due, as the true value of the work done and the materials furnished by them upon and for the Kali-Inla Hotel building at South McAlester, and that receiver's certificates, bearing seven percent interest, be issued and delivered to them for one-third of the amount so found to be due, and to send and deliver, in settlement thereof, lumber at the market price thereof, for one-third of said amount, and the balance in cash, to be borrowed on certificates, as hereinafter authorized."

Upon a hearing by the master in pursuance of this order, he made a report, finding a balance due Cooper & Son of $14,919.37, and also made certain findings of fact and law, printed in the margin, * to which report appellants filed exceptions.

Page 162 U. S. 534

Cooper & Son thereupon moved the court to strike out these exceptions upon the ground that the report of the special master was conclusive upon the facts involved and binding upon the receiver, and also because the Girard Life Insurance, Annuity and Trust Company was not a party to the proceeding, and had no interest therein.

Upon the hearing of this motion to strike the exceptions

Page 162 U. S. 535

from the files, the court held that the order of October 13, 1891, was conclusive as to the validity of the claim of Cooper & Son, and the court, having referred the claim to a special master with instructions to find the amount due, and having further ordered that the receiver should pay the amount so found to be due, granted the motion and entered a final decree in favor of Cooper & Son against the receivers in the sum of $14,749.45, costs, and interest.

A rehearing having been demanded by the receivers, and also by the Girard Life Insurance, Annuity and Trust Company, and denied, they appealed to the Circuit Court of Appeals for the Eighth Circuit, by which court the case was heard and the decree of the court below affirmed with costs insofar as it awarded judgment for the sum therein named, and the case was remanded with directions

"to enter an order directing the mode and time of payment such as the court may be advised is required by the equities of the case, in conformity with the opinion of this Court."

51 F. 332.

Whereupon the life insurance company and the acting receiver appealed to this Court.

Page 162 U. S. 537

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