Moritz & Weil v. Miller, Schram & Co. , 87 Ala. 331 ( 1888 )

CLOPTON, J.

As receivers are ordinarily appointed withqut requiring of the applicant bond indemnifying the otheif party against damages which may be caused by a wrongful appointment, the utmost care and circumspection should be observed in administering this extraordinary remedy. The court should ever be reluctant to summarily take' property from the possession of a defendant claiming righjt or title thereto, and putting it into the control and management of an appointee of the court, without affording the claimant and possessor opportunity to be heard in opposition. When the most provident care is used, it not infrequently happens that great injustice, and sometimes irreparable injury, is occasioned. In view of these probable evils, and for the purpose of avoiding, as far as practicable, an improper and injudicious exercise of this jurisdiction, the statute provides: “Receivers may be appointed by the chancellor in term time or vacation, and by the register in vacation, upon application in writing; and when the application is made in vacation, reasonable notice of the time of such application, and the person to whom it will be submitted, must be given, or a good reason shown to the chancellor or register for the failure to give the same.” — Code, 1886, §3534.

The complainants, who are simple-contract creditors of the firm of Moritz & Weil, seek by the bill to set aside a transfer of their books, notes, accounts and other dioses in action, to the other defendants, on the alleged ground, that the transfer was made upon a simulated and fictitious consideration, with intent to hinder, delay or defraud complainants and the other creditors of the firm. The equity of the bill may be’ conceded. The question on this appeal is not, solely, whether the bill makes a prima facie case for the appointment of a receiver — a case in which it does not seem reasonable that the assets should be left in the possession of the defendants pending the litigation. A decision as to the propriety and necessity of appointing a receiver would be premature, in advance of a showing by defendants against it, or an opportunity to make such a showing. The receiver being appointed without notice, and before service of process, the material question is, whether a good reason is shown for the failure to give notice.

By the established practice, independent of statute, courts of equity, being averse to interference ex parte, will entertain, in ordinary cases, an application for the appointment of a receiver, only after notice, or rule to show cause. The exceptional cases are, when the defendant is beyond the jurisdiction of the court, or can not be found, or when some urgent emergency is shown rendering interference, before there is time to give notice, necessary to prtjront waste, destruction or loss; or when notice itself will jeopjardize the delivery of the property, over which the receivership is extended, in obedience to the order of the court. The statute being silent as to what will constitute a good reason, precedents and adjudged cases under the general practice, in the absence of statutory regulations, will afford a sufficient guide. The bill alleges that the defendants, to whom the books, notes and accounts were transferred, are rapidly collecting the indebtedness, and placing the money beyond the reach of the creditors. If, in connection with this averment, the insolvency of these defendants, or their inability to respond to any decree which may be rendered against them if the transfer be declared fraudulent, had been alleged, it may be that a good reason would have appeared for the failure to give notice. —Sims v. Adams, 78 Ala. 395; Ashurst v. Lehman, 86 Ala. 370; 5 So. Rep. 731; Micou v. Moses, 72 Ala. 439. But the bill contains no such allegation; and the averment made is verified on information and belief, without stating the source of the information, its character, or when obtained. The reason for failure to give notice, deducible from the mere allegations of the bill, is a mere suspicion, opinion or belief, that defendants may spirit away the effects, and place them beyond the power of the court to compel their delivery.

The only other reason is found in the affidavit of one of the complainants, made for the appointment of the receiver, which states, upon information and belief, that to give notice of the application for a receiver would cause delay, which would probably defeat the receiver, and prevent him from taking possession of, and preserving the books, accounts and ehoses in action. In Verplanck v. Mercantile Ins. Co., 2 Paige, 438, Chancellor Walworth says: “In every case, when the court is asked to deprive the defendant of the possession of his property without a hearing, or an opportunity to oppose the application, the particular facts and circumstances, which render such a summary proceeding proper, should be set forth in the bill or petition on which such application is founded. Oglevie’s affidavit in this case, that he was satisfied of the necessity of such a proceeding, was not sufficient. He should have stated the facts on which his opinion was founded, to enable the court to judge of its correctness.” This ruling was approved and followed in French v. Gifford, 30 Iowa, 148. The affidavit in the present case is not as strong as those in the cases cited. It merely states, that in the belief of the witness, based on information, notice of application would probably defeat the receiver. He should have stated the facts, of which he had been informed, on which he founded his belief. The receiver was appointed on the same day on which the bill was filed, and process was not served nntil next day. It appears from the bill tbat all the defendants reside in tlie city of Montgomery, where the order was made. They could have been speedily served with notice, without causing any unusual or probable injurious delay.

On the foregoing principles, we are forced to the conclusion, that the allegations of the bill, and the affidavit for the appointment of a receiver, do not justify such appointment without notice. To hold otherwise, would render the statute nugatory. —Friehert v. Burgess, 11 Md. 452; High on Receivers, §§ 111-112.

The order appointing the receiver must be reversed, and the cause remanded. Complainants can make another application, if so advised.

Reversed and remanded.