Bell v. American Protective League , 163 Mass. 558 ( 1895 )

Lathrop, J.

It does not clearly appear whether the Superior Court took jurisdiction of the bill in equity of Bell and others against the American Protective League by virtue of the general equity jurisdiction conferred upon it by the St. of 1883, c. 223, or by virtue of the St. 1892, c. 435, which gives to the Supreme Judicial Court and to the Superior Court “ exclusive and concurrent jurisdiction in cases of insolvency, of the settlement of the affairs of corporations which are authorized to transact insurance upon the assessment plan, or of any fraternal beneficiary corporations which are so authorized,” and which pro-' vides that, “ to that end,” the court “ may appoint agents or receivers to take possession of the property and effects of the corporations, subject to such rules and orders as may from time to time be prescribed by said courts, or any justice thereof.” The language of this statute follows the form of the decree long ago prescribed by this court appointing a receiver of an insolvent corporation, which form was adopted by the Superior Court when equity jurisdiction was conferred upon it. It makes no difference, therefore, whether the receiver was appointed under the general equity jurisdiction of the Superior Court or under the statute above referred to.

The question presented in this case is as to the correctness of the ruling of the Superior Court that the receiver, by reason of the facts reported, became liable, by privity of estate, upon the covenants of the lease, and continued so liable until the receiver assigned the lease to one Clancy.

It is a familiar doctrine of the common law, that while there is no privity of contract between the lessor and the assignee of a term, there is a privity of estate, which renders the assignee liable upon the covenants of the lease, so long as he holds the term. This applies not only to private individuals, but to assignees in bankruptcy and insolvency, as the title to the leasehold estate vests in them, provided they take possession.

But an assignee of a term or an assignee in bankruptcy may by assigning the term free himself from all further responsibility. And this assignment may be made to any one, however irresponsible he may be, provided the assignor does not retain any interest in the thing assigned. See 2 Platt, Leases, 400-452. The rights and duties of an assignee of an insolvent debtor are now regulated in this Commonwealth by the St. of 1879, c. 245, re-enacted in the Pub. Sts. c. 157, § 26. See Abbott v. Stearns, 139 Mass. 168.

The decree in the court below, that the petitioner was entitled to recover, apparently proceeded upon the ground that the same rule applied to a receiver as to an assignee in bankruptcy; and this seems to have been assumed to be the law in Commonwealth v. Franklin Ins. Co. 115 Mass. 278, 281. It is to be observed, however, that that case was submitted on briefs, as appears by the reporter’s docket, and the question now before us was not taken by the counsel for the receivers, whose brief we have examined, nor was it discussed by the court. There were two petitions in the case, each relating to a separate parcel of land. One petition was dismissed, and the other was granted. In relation to the latter, the facts were that at the time the receivers were appointed the insurance company was lessee of a room in a building which it had prior to that time sublet. By the terms of the lease to the insurance company, when the receivers were appointed, two quarterly payments of rent would become due in the future. When the first became due, the lessors demanded the rent and threatened to eject the sublessee if the rent was not paid. Certain negotiations were had between the lessors and the receivers, which the court found amounted to an agreement by the receivers to pay to the lessors the rent in full for the first quarterly payment, and a dividend on the last payment. The first payment was made, and the controversy was as to the last payment under the lease, the lessors contending that they were entitled to the entire rent, and the receivers that, as they had not taken possession of the land, they were not liable at all. The decision of the court was that the agreement should be carried out; and the lessors “ are therefore entitled to such dividend on the amount of rent and taxes so due as is paid to other creditors.” It will be seen, therefore, that the case did not turn upon the effect of a receiver taking possession of a leasehold estate, but upon the effect of a contract made by receivers with the lessors of a leasehold estate, in relation to the rent.

It is difficult to see upon what principle a receiver, in the absence of a statute vesting the title of the insolvent in him, can, in any legal sense, be said to be the assignee of a term. In Ellis v. Boston, Hartford, & Erie Railroad, 107 Mass. 1, 28, it was said by Mr. Justice Wells, speaking of a decree of this court appointing receivers of a railroad company: “ It had no effect to change the title, or create any lien upon the property. Its purpose, like that of an injunction pendente lite, was merely to preserve the property until the rights of all parties could be adjudged. The receivers are officers of the court for this purpose, and act under its direction and control.”

A receiver is merely a ministerial officer of the court, or, as he is sometimes called, the hand of the court. The title to the property does not change; and if he is required to take property into his custody, such custody is that of the court. Union Bank of Chicago v. Kansas City Bank, 136 U. S. 223, 236. Thompson v. Phenix Ins. Co. 136 U. S. 287, 297.

The question now before the court was carefully considered in Gaither v. Stockbridge, 67 Md. 222; and it was held, as a necessary deduction from the principles which we have stated, that a receiver by taking possession of a leasehold estate did not become the assignee of the term. This case was cited with approval by Chief Justice Fuller, in the case of Quincy, Missouri, & Pacific Railroad v. Humphreys, 145 U. S. 82, 97, 98. It is true that the authority of the case as a precedent is somewhat weakened by the fact that the learned chief justice proceeded to show that the receivers in that case were not responsible on the covenants of the lease, even if they were regarded as assignees ; and by the fact that in the subsequent case of United States Trust Co. v. Wabash Western Railway, 150 U. S. 287, Mr. Justice Brown, in delivering the opinion of the court, overlooks or disregards the language of Chief Justice Fuller, and considers a receiver to stand in the same position as an assignee. It was held, however, that the mere act of taking possession of leasehold property did not render the receiver liable on the covenants of the lease, but that he was entitled to a reasonable time after taking possession to determine whether to affirm the lease and retain the premises, or to give them up.

There are many cases in New York in which it is asserted that there is no difference between an assignee and a receiver who takes possession of leasehold premises. We understand, however, that in New York a receiver of an insolvent corporation has vested in him by statute the title of the insolvent. See Attorney General v. Life & Fire Ins. Co. 4 Paige, 224; Booth v. Clark, 17 How. 322, 331.

We regard the question presented in the case at bar as an open one in this Commonwealth, and, on principle, it seems to us that, if a receiver of an insolvent corporation takes possession of its leasehold estate, he is liable only for a reasonable rent during the time that he retains possession ; that he does not become an assignee of the term, and is not liable on the covenants of the lease.

As the receiver paid rent to the satisfaction of the lessor, while in possession, we are of opinion that he is not liable for any further rent. It follows, therefore, that the decree of the Superior Court was erroneous, and must be reversed.

Decree accordingly.