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Brackett v. Sedlacek

OPINION FILED AUGUST 8, 1983.

WILLIAM D. BRACKETT, PLAINTIFF,

v.

F. THOMAS SEDLACEK ET AL., DEFENDANTS — (MID-AMERICA NATIONAL BANK OF CHICAGO, INTERVENOR-APPELLANT; STUART KAISERMAN, RECEIVER-APPELLEE; LAWRENCE SWIBEL, APPELLEE; BUTLER PRODUCTS COMPANY, INTERVENOR-APPELLEE).



Appeal from the Circuit Court of Cook County; the Hon. George A. Higgins, JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

This appeal presents a controversy regarding the payment of expenses resulting from a receivership. The trial court ordered a dissolution of OSLA Communication Services Corporation (Osla) and appointed Stuart Kaiserman as its receiver. Mid-America National Bank of Chicago (Mid-America) appeals from two orders requiring the payment of receivership expenses.

Mid-America was a secured creditor of Osla, having loaned it $350,000. In November 1976, Mid-America perfected a security interest in a van and in certain electronic equipment belonging to Osla. In October 1978, Osla was declared to be in default, and Mid-America instituted a replevin action to recover its collateral from the premises of Butler Products Company (Butler). This action, however, was not pursued to completion.

Osla was in the business of videotaping basketball games for television stations. At the time of the dissolution, there were a number of contracts for services outstanding. The receiver was authorized to carry on the business, and did so for a short time. The receiver attempted to carry out Osla's contract obligations and to sell the business as a going concern. Mid-America did not file any objections to this continued operation of Osla. Mid-America attempted to assist the receiver by providing the names of interested parties as possible purchasers.

No sale materialized. On June 16, 1980, the trial court authorized the receiver to proceed with an auction of Osla's assets. In addition, the trial court ordered that any proceeds derived from the auction were to be deposited with the trial court until all administrative expenses of the receivership were satisfied. On the same day, Mid-America filed a petition to intervene in the action and a complaint for a declaratory judgment to establish its rights as a lien creditor with a perfected security interest in the van and the other equipment. Although Mid-America did not formally intervene until June 16, 1980, it was fully advised of the actions of the receiver from the time of his appointment.

On July 23, 1980, the receiver conducted an auction sale of Osla's property. Twenty-two bidders were present, including Mid-America and RCA, another secured creditor. Mid-America and RCA bid $70,500 and $78,000 respectively, not in cash but as a credit upon their respective liens. As a result, the auction generated only $14,795 in actual cash. The receiver's final report indicates that, if the secured creditors had not bid their liens, an additional $148,000 in cash bids would have been accepted by the receiver. The receiver testified at a hearing on fees that he would not have conducted the auction had he known the secured creditors intended to bid by a credit upon their liens.

On January 20, 1981, the receiver filed his final report and a motion for payment of fees. The receiver's attorney also filed a motion for payment of fees. The receiver's final report listed a balance of $598.27 in the receivership bank account. Both fee motions included detailed time and activity summaries. The receiver requested a total of $13,029 in fees. In addition to his own fees, the receiver requested $44,007.54 in administrative expenses, including $40,000 for a claim for rent filed by Butler. The receiver's attorney requested a $9,006.25 in fees.

In July 1981, RCA entered into a settlement agreement with the receiver. It paid $16,000 for administrative expenses. Of this, $5,000 was applied to Butler's rent claim, $3,000 was applied to the receiver's fee, $3,000 to the receiver's attorney fees, and $1,803.50 was applied to the claim of an insurance company.

Subsequently, on March 8, 1982, both the receiver and his attorney filed amended petitions for fees. The receiver requested $12,000 in his petition, representing a net increase of $1,971. The attorney sought an additional $6,000.

On August 25, 1982, the trial court held a hearing on the petitions for fees filed by the receiver and his attorney. The receiver and his attorney testified, as did David Murphy, attorney for RCA. Mid-America did not offer any evidence to support its objections to the fee petitions. On August 31, 1982, the trial court, having heard the arguments of the parties, and having considered the factual and legal memoranda submitted, entered an order requiring Mid-America to pay the receiver and his attorney $7,500 each and to pay $1,803.50 to an insurance company. On September 14, 1982, after a second hearing, the trial court entered another order requiring Mid-America to pay $20,000 to Butler. Mid-America has appealed from both orders.

Mid-America argues that the trial court erred in requiring it to pay a portion of the fees and expenses requested by the receiver and his attorney. Mid-America also urges that it should not have been required to pay $20,000 to Butler for use and occupation.

I

• 1 Payments of fees and administrative expenses of a receiver and his attorney are usually made from the income generated by the receivership property. (Rosenblatt v. Michigan Avenue National Bank (1979), 70 Ill. App.3d 1039, 1043, 389 N.E.2d 182, 187, appeal denied (1979), 79 Ill.2d 617.) Where this income is insufficient to pay the receiver and his attorney, an appropriate share of these expenses will be borne by a lienholder who consents to the appointment of the receiver. Rosenblatt v. Michigan Avenue National Bank (1979), 70 Ill. App.3d 1039, 1044.

• 2 Here, Mid-America was fully aware of the appointment of the receiver, but made no objection thereto. In fact, Mid-America accepted the services of the receiver. We find, therefore, that the trial court properly charged Mid-America with a portion of the fees and expenses requested by the receiver and his attorney.

Mid-America contends it was charged with an amount greater than its appropriate share. Mid-America was ordered to pay $7,500 each to the receiver and to his attorney. The original petitions for fees filed by the receiver ...


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