Iddings v. Bruen — 4 Sarat. Ch. Sent. 417

Majority

p. 417

Iddings v. Bruen and others.

Dec. 9 ;

Dec. 21, 1846.

Headnote

A receiver, vested with the title to property, real and personal, under a decree of the court, in a suit to reach the effects of a judgment debtor in the hands of third parties, which decree directs that the defendants deliver such property to the receiver, under the direction of a master, that he be put in possession of the real estates, that the tenants attorn to him ; that he receive the rents and income, pay taxes and assessments, redeem from sales for taxes, &e., and account and pay into court half yearly ; is entitled to bring the decree into the master’s office, and proceed to possess himself of such property under its provisions.

A receiver represents the interests of all the parties in the property, which interests are often various and conflicting, and sometimes involved in doubt. It is his duty to protect the property intrusted to him, to the best of his ability, for all those interests, without being controlled by the representatives of any one of them.

Appeal from the decision of a master. The decree entered upon the hearing of the cause, as reported ante, pages 223 to 281; referred it to a master, to take and state a variety of accounts between the different parties; and among other provisions, was one that the master should take and state an account between the firm of Thomas H. Smith <fc Son, and the surviving partner thereof, on the one side, and the defendant, Herman Bruen, on the other side, in case the complainant should so elect, by notice in writing to H. Bruen’s solicitor, within sixty days after the decree should be brought into the master’s office..

p. 418

The decree enjoined and restrained all the defendants who were in the possession or control of any of the property embraced in its provisions, from collecting, receiving, selling, transferring, disposing of, or interfering with, in any manner, any part or parts of such property; and from demanding, collecting, or receiving any of the rents, issues and profits, of any of the real estate.

The decree then proceeded in these words, vik.

“ And it is further ordered, adjudged, and decreed, that Thomas Sarjeant, of the city of New York, be, and he is hereby appointed receiver of the whole of the said estates of Thomas H. Smith, and Thomas H. Smith & Son, in the hands or under the control of the said Matthias Bruen, Alexander M. Bruen, Herman Bruen, George W. Bruen, individually, and as executor of Thomas H. Smith, and Richard S. Williams, including, as aforesaid,” (referring to the real estate assigned by T. H. Smith to M. Bruen,) “ on the said receiver’s filing the requisite security, in such form and penalty as shall be approved by the vice-chancellor, being not less than the value of the personal property and of two years rents, issues and profits of the real estate to be received by him. And that upon the appointment of such receiver being completed, by filing such security, the said several defendants last mentioned do, under the direction of said master, execute sufficient transfers and conveyances of all said estates and property, including as aforesaid, to said receiver, to have and to hold as such receiver, subject to the order of this court in the premises, and deliver to such receiver, the actual possession of the same, and every part thereof, except such parts of the real estate as are now in the lawful possession of tenants thereof; and that such tenants do attorn to such receiver and pay to him the rents unpaid at the entry of this decree, or subsequently accruing. And it is further ordered, that the said George W. Bruen do, under the direction of the said master, deliver to the said receiver, all books, papers, vouchers and other documents relating to, or connected with, the affairs of Thomas H. Smith, and Thomas H. Smith & Son, which are in the custody or under the control of said George W. Bruen. And it is further ordered, that the said receiver, out of any funds that

p. 419

may come to his hands as such receiver, may pay any taxes or assessments, which may be a lien upon any part of the real estate so transferred to him, and may redeem any part or parts thereof from any sales for taxes or assessments which have been, or may hereafter be made; and may pay and keep down the interest upon the mortgages or any of them, which are liens upon such estate, or any part thereof, including any arrears of interest now due.”

The decree further required the receiver to pass his accounts every six months, and bring into court the net amount then remaining in his hands as such receiver, and pay the same into court, to be deposited in The New York Life Insurance and Trust Company.

In consequence of the death of Matthias Bruen, the principal defendant, on the 29th day of June, 1846, the decree pronounced in September following, was entered as of the 17th day of June, 1846» After the decree was settled and entered, there was necessarily a considerable delay in procuring the suit to be properly revived against the executors, heirs, and devisees of Matthias Bruen. In the mean time, the large real estates vested in the receiver, were left without the care of any responsible party; the complainant was prevented from moving in the suit, because it was abated ; and the receiver’s solicitor, thereupon, brought the decree into the master’s office, and took out a summons to proceed with the delivery to him of the property with which he was vested, and the evidences and muniments thereof. On the return of the summons, several of the parties appeared, and objected to the receiver’s right to proceed ; insisting that the parties exclusively were entitled to the carriage of the order. The master sustained the objection, and the receiver appealed.

Nelson Chase, for the receiver.

First. The receiver is appointed on behalf of all the parties, not of the plaintiff, or of the defendant only. (Hutchinson v. Lord Massareene, 2 Ball & Beatty, 55 ; Davis v. The Duke of Marlborough, 2 Swanston, 125.) He is appointed for the benefit of all parties who may establish rights in the cause; and the P roperty in his hands, is in custodia legis, for whoever may

p. 420

make title to it. (Delany v. Mansfield, 1 Hogan, 234.) In fact, he is but the mere depositary of the court itself. (Angel v. Smith, 9 Vesey, 335.) The counsel also cited 1 B. & B. 74; Pr. Reg. 355 ; 1 Cox Ch. Ca. 422; 1 S. & S. 98.

Second. The receiver being an officer who receives a compensation for his services, is bound to use all due diligence in the discharge of his duties.

1st. One of the first duties is, if the defendant has any property in his possession, to forthwith apply to the court, for an order on the defendant to deliver it to the receiver. (Smith on Receivers, 164, and see 174, 175 ; also, 169,170.)

2d. In our case, the decree provides that we should apply to the master in the first instance, to have the property delivered to the receiver; or which is the same thing, the decree orders the defendants to deliver possession to us, under the direction of the master.

Third. The decree, although peremptory in its terms in this respect, is sought to be reversed or nullified, by the objection of the complainant’s solicitor, and the decision of the master sustaining that objection.

Fourth. It was the duty of the receiver to possess himself of the property entrusted to his care ; (Smith on Receivers, 26;) and the decree having provided the mode in which possession was to be obtained, the receiver was bound to apply to the master to obtain that possession.

Fifth. It would have been contrary to the duty of the receiver, to have applied to the complainant’s solicitor, to procure a delivery of the possession of the property to him. (Ryckman v. Parkins, 5 Paige, 543 ; Smith on Receivers, 25 and 26; In the Matter of Ainslie, 1 Edwards Ch. Rep. 576 ; Ray v. Marcomb, 2 ibid. 165.)

Sixth. The complainant’s solicitor could not act as solicitor of the receiver, it being of the highest advantage that such solicitor should operate as a salutary check, and watchful guardian, over the conduct of the receiver, which duties he cannot so impartially discharge, if acting in the double capacity of solicitor of the party and the receiver. (Smith on Receivers, 26 ; 2 Ves. Jr. 137 ; 15 ibid. 585.)

p. 421

' Seventh. After the appointment of the receiver was completed by his giving the requisite security, he became totally independent of all parties, and was alone primarily responsible for any default or neglect, and for all acts done in his name ; and all applications for lettings, and all other incidental proceedings, whether against tenants for the non-payment of rent, or for any other purpose connected with his office, or management of the estate, are properly made by and on his behalf; and for that purpose, he may retain any solicitor he pleases. (Smith on Receivers, 26.)

Eighth. The moment the receiver was appointed, he became responsible, and it was his duty to give complete effect to that appointment, as he alone can be considered primarily responsible for any loss, delay, or neglect. As a natural consequence of this liability, he becomes entitled to the carriage of the order, and he should procure, and act on the master's report. Were it otherwise, an anomalous responsibility, divided between the receiver and the plaintiff’s solicitor, would exist, the latter of whom might not complete the appointment for months, to the prejudice of other parties interested. (Smith on Receivers, page 39, note 2.)

Ninth. It was not only the duty, but the right of the receiver, to take out the summons, which he did, from the master before whom the reference is pending. (Edwards on Receivers, 87.)

Alex. S. Johnson, for the complainant.

The decree requires the complainant to elect as to taking certain accounts, within sixty days after the decree is carried into the master’s office ; and if it be rightly there by the receiver’s proceeding, the sixty days may expire before the proper parties are brought in on whom to serve notice of such election. It is known to the court, that there must be a revivor of the suit, to bring in such parties. This circumstance shows the great practical difficulties in the way of the course pursued by the receiver.

We do not dispute his rights or duties, but we insist the complainant’s solicitor has the right to the carriage of the decree and to bring it into the master’s office; and before it can be taken

p. 422

from him, the master must decide that he has been guilty of some neglect or default in its execution. (Holly v. Glover, 9 Paige, 9.)

Smith on Receivers, cited on the other side, is contrary to our law and to our books of practice, as well as to Daniell. (Daniell’s Ch. Pr. 1982, 1988, 1990, chap. 38, § 3, 5; Boston ed.)

The interests of the parties are not likely to suffer from the practice for which we contend. If the complainant neglect to proceed, other parties may apply for the carriage of the decree, There is always a watchful and vigilant power behind.

The receiver’s liability depends on what comes to his hands, or which, by reasonable diligence, might have cometo his hands. If, for want of legal authority, he cannot obtain possession or control, he is not liable. To that effect, is Griffith v. Griffith, 2 Ves. Sen.

The passage cited from Edwards on Receivers, may be founded on the rule of the chancellor, extending the powers of receivers in judgment creditors suits ; and the fact of such extension being made by a rule of court, is almost conclusive that no such general law as that contended for, was in existence.

W. M. Evarts, for the defendants, Herman and Alexander M. Bruen.

The objection to the receiver’s proceeding, arising from the provision for the complainant’s election in respect of taking an account between Thomas H. Smith & Son, and Herman Bruen, is not valid. The decree has not been brought into the master’s office, within the meaning of that provision. This can only he done by the complain^ ant himself, or by some party interested in the accounts directed to be taken by the decree, to whom on his default the carriage of the decree has been committed.

My impression on hearing the motion, was decidedly adverse to the course of proceeding adopted by the receiver, and the modern practice in the English court of chancery, unquestionably condemns that course.

Mr. Daniell says that the person to enforce the delivery of

p. 423

the possession of real estate to the receiver, which is done by a motion to the court, is the party obtaining the order, and not the receiver himself. So of the proceeding to compel the tenants to attorn. If the receiver be unable to obtain possession he must report the refusal to the solicitor of the party on whose application the order was made, in order that he may take the necessary steps to put the receiver into possession, or to procure the attornment of the tenants. (3 Dan. Ch. Pr. 435,436,441.) The same course is to be pursued, where the parties in possession refuse to deliver up papers or securities. (Ibid. 444.)

In a very late case, Ireland v. Eade, 7 Beavan, 55, Lord Langdale, (M. R.) said “ a receiver ought not to present a petition, or originate any proceeding in a cause; any necessary application should be made by the parties to the suit. This is the general rule, but there is some difficulty in adhering to it, and many exceptions to it have been allowed,” In that case, the receiver after a long delay, and after applying to the parties to move, presented a petition for the payment of his extraordinary expenses and charges, and the master of the rolls granted his petition.

Mr. Smith says, all orders required for the management of the estate, should be obtained on petition, to be presented by the parties, and not by the receiver. (1 Smith’s Ch. Pr. 641.)

At the same time he says, that the receiver, and not the solicitor for the party, takes from the master and files the report nominating him as receiver, and also the report appointing him after his recognizance is approved. (1 ibid. 634, 5.)

And when a receiver desires to sue, in the name of a third person, the demands transferred to him, he, and not the party, applies to the court for an order to that effect. (3 Daniell, 444; and see Pitt v. Snowden, 3 Atk. 750.)

In Evelyn v. Lewis, 3 Hare’s, R. 472, where tenants had been ordered to attorn to a receiver in a suit, appointed by legatees, a lord of a manor seized certain copyhold lands, embraced in the order, and ejected the terre-tenant. The receiver thereupon moved for an injunction against the lord, and it was granted.

These illustrations show the difficulty of adhering to the modern rule in England, and that it is quite as difficult to define it.

It seems that the ancient practice, which was transmitted to

p. 424

us, was different. Thus it is laid down by Mr. Cox in his note c, to Sharp v. Carter, 3 P. Will. 379, that the court will proceed to put a receiver in possession in a summary way, and will order the tenants to attorn to him, and will grant him, a writ of assistance; citing as his authority a decision of Lord Chancellor Parker, made in 1718.

The practice in the Irish court of chancery, sustains the receiver’s course in this case to the fullest extent.

The receiver is to move the court to compel the parties to deliver to him the rentals of an estate committed to his charge, if on application they refuse or omit to deliver them. In regard to personal property, he is to apply to the court to have the same delivered up to him. And on his appointment being completed, he becomes entitled to the carriage of the order, and should procure and act on the master’s report. (Smith on Receivers, 26,39, note e, 164.)

I will now recur to the practice established in this state. But first, I will remark, that most of our notions of a receiver at this day, are derived from the course and practice in judgment creditors suits, where they are principally used, and in which many things have concurred to render them the mere puppets of the complainant in the particular suit. One cause of this has been the difliculty of procuring persons to accept the appointment, and give the security requisite, where the prospect of assets, and of corresponding compensation, was often doubtful, if not desperate. And another cause was the practice of limiting the assets to be han ded over, to the amount of the complainant’s debt and probable costs, where he had the good fortune to discover more than his own debt required.

The receiver in this suit, is to be regarded in a wholly different light, as I will hereafter state more at large.

A receiver with us is, by force of the decree, vested with the whole property which is directed to be put into his hands, and in equity he has the whole title, without an assignment. (Mann v. Pentz, 2 Sand. Ch. R. 257; Albany City Bank v. Schermerhorn, 1 Clarke’s Ch. R. 300.) This entitles him to the possession.

He may sue in his own name, without any leave of the court

p. 425

or of the parties, incurring no risk except as to costs. (Green v Bostwick, 1 Sand. Ch. R. 185.)

In the more important receiverships, growing out of the bankruptcy or dissolution of corporations, the right of the receiver to proceed, suo motu, in obtaining the possession of the books, papers, securities and property, both real and personal, of the estate over which he is appointed, has never been doubted or questioned, so far as I have known or heard. The statutory powers- conferred on such receivers, do not enable them to obtain posession against persons resisting their authority, without the aid and intervention of the court; and the authority of the statute “to take into their hands all the estate,” <fcc.. is not any more cogent or comprehensive than the direction in the decree before me, that the defendant shall execute suitable transfers, and deliver to the receiver the actual possession of the property described in the decree

In Parker v. Browning, 8 Paige, 388, 390, the chancellor recognizes the right of a receiver to call upon the master to direct the delivery of possession of the property. Indeed, he says expressly, that it has been repeatedly decided to be the proper course for the receiver or the party to call upon the master for that purpose.

In The Albany City Bank v. Schermerhorn, before cited, which was a judgment creditor’s suit, and was severely contested in all its phases, Vice-Chancellor Whittlesey entertained a motion made by the receiver, to compel the sheriffs of Monroe and Orleans to deliver up personal property on which they had levied, and which he claimed. The receiver proceeded by an order to show cause, and then by an attachment; and on the sheriffs appeal, he alone appeared and argued against them. The vice-chancellor said, “ the receiver may require an assignment to exercise his rights, but the order gives him the rights.” He also recognizes the propriety of the receiver’s serving the order appointing him, on the tenants, to enable him to bring them into contempt if they do not obey it.

The chancellor, when the case was before him, declared the receiver’s right to file a bill against the sheriffs to protect his rights, in the event of the debtor’s refusing to transfer the legal

p. 426

title to him, or of the tenants refusing to attorn. He also said the receiver could not enforce, by proceedings as for a contempt, the delivery to him by the sheriffs, of property which had not been in his possession. This was necessarily so; the sheriffs not being parties to the suit, their possession was not divested by the receivership.

In Noe v. Gibson, 7 Paige, 513, a receiver in a creditor’s suit, applied for an attachment, and appealed to the chancellor.

In Wardell v. Leavenworth, 3 Edw. Ch. R. 244, the receiver alone appeared and contested the defendant’s motion to stay a sale of the property which the receiver had advertised.

The 192d rule of the court, enables receivers in judgment creditor’s suits, to apply to the court to compel attornments. And Mr. Edwards, in his work on Receivers, which is a respectable authority, says the solicitor for the receiver, may take a summons to examine the party and obtain a delivery of the property intended to be placed in his hands. He should serve the order, or a notice, on the tenants, and if they refuse to attorn, he must apply to the court for an order compelling them ; and on their disobedience, proceed to punish them for the contempt; for which latter positions, he cites Brown’s Praxis Almas, a book published more than a century ago. (Edw. on Rec. 88, 109, 110.)

Our practice manifestly corresponds with the ancient practice in England, and with that of the Irish courts of equity. And, on the reason of the thing, I am satisfied upon reflection, that it ought to be so. The receiver in this case, represents a great variety of interests. Speaking from the decree, as well as a knowledge of the cause, acquired while sitting in another branch of the court, it is impossible now to tell, or to foresee, all the interests which are or may become entitled under its provisions. The complainant is indubitably a principal party interested, and his views and advice are entitled to corresponding weight. But he is not the sole party; nor do all the parties to the suit, repre-, sent all the interests which are vested in this receiver.

The fund which he is to hold under the decree, is one for the benefit of all the creditors of George W. Bruen, of Thomas H. Smith, and of Thomas H. Smith & Son ; as well as for the ben-.

p. 427

efit of M. Bruen himself, and of the heirs, devisees and legatees of Mr. Smith. It is the duty of the receiver to protect the property to the best of his ability, for all these interests. He is responsible for so doing, and has been required to find sureties for his faithful discharge of the trust. If the suit be abated or suspended, or if for any cause the complainant cannot, or will not, proceed; is the receiver to fold his arms, and suffer the rents to be squandered and the personal effects dissipated ? I am satisfied that he will not be exonerated from the loss which may ensue from such supineness, and that he has pursued the proper course in proceeding under the decree, to obtain the actual possession and control of the property and effects, the title of which it vests in him.

An order will be entered directing the master to proceed accordingly. The costs of the parties may be paid by the receiver out of the fund, the question being one which U was reasonable to have brought before the court.