Pelletier v. Greenville Lumber Co. , 123 N.C. 596 ( 1898 )

This case comes before us on an appeal from the (599) refusal of the court below to continue an injunction against the sale of real estate of the defendant corporation under a judgment in favor of Mrs. Callie Langston, now Callie Joyner. There is no question that this land is subject to execution under this judgment as held in Langston v. Imp. Co., 120 N.C. 132. That judgment is superior not only to the claims of all the other judgment creditors in this case, but even to the original title of the insolvent corporation itself. The only question is whether the land can be levied upon and sold under that judgment while in the hands of a receiver.

In other words, can land belonging to an insolvent corporation be sold after the appointment and possession of a receiver upon a valid judgment obtained before such appointment. We think that as a matter of right the land cannot be sold without leave of the court. Property in the actual or constructive possession of the receiver is in custodia legis, as the possession of the receiver is that of the court, he being merely the hand of the court. This exclusive possession of the receiver does not interfere with or disturb any preexisting liens, preferences or priorities, but simply prevents their execution by holding the property intact until the relative rights of all parties can be determined. Another essential object sought to be obtained by the appointment of a receiver for an insolvent corporation is to prevent the sacrifice of its assets by a multiplicity of suits and petty executions. Both these objects would be destroyed by permitting any one, no matter what may be his title or claim, to interfere with property in custodia legis without leave of the court by which such custody is held. 1 Freeman on Ex. Sec., 129; Beach on Receivers, secs. 207, 213, 738; High on Receivers, sec. 163; 20 Am. Eng. Enc., 138.

(600) Under the old equity practice when a person holding a prior or paramount claim or title was prejudiced by having a receiver put in his way, the course was either to give him leave to bring an ejectment or to permit him to be examined pro interesse suo. The same result can now be accomplished by a petition and motion in the cause. In the case of Wiswall v. Sampson, 14 How. (55 U.S.), 52, 66, where this question is fully and ably treated, the Court says: "A party, therefore, holding a judgment which is a prior lien upon the property, the same as a mortgagee, if desirous of enforcing it against the estate after it has been taken into the care and custody of the court, to abide the final determination of the litigation, and pending that litigation, must first obtain leave of the court for this purpose."

We cannot assent to the doctrine laid down by Chancellor Walworth inAlbank City Bank v. Schermerhorn, 9 Paige, 372, 378, that real estate in the custody of a receiver can be levied upon and sold under execution, provided only that the actual possession of the receiver is not interfered with. Its practical effect would be either to permit outside parties to stop all further proceedings of a court of equity by disposing of the subject matter in controversy, or else to put that court in the position of holding simply the naked possession of property, and gravely proceeding to determine who would have been entitled to the property if it had not been sold. This doctrine is distinctly denied in Wiswall v.Sampson, supra, where it is said that the court must administer the property "independently of any rights acquired by third persons pending the litigation. Otherwise the whole fund may have passed out of its hands before the final decree, and the litigation become fruitless."

The case of Skinner v. Maxwell, 68 N.C. 400, although (601) dealing with personal property, lays down the same general rule.

As it is well settled that the property cannot be sold under execution without leave of the court, it is equally clear that in proper cases such leave can be given. A court of equity is not required to retain possession of property when it would be inequitable to do so.

It simply remains to be seen whether the judgment creditor has leave of the court, express or implied, to proceed with his execution. Upon the hearing of the matter the court decreed, "That the said injunction to the hearing is hereby refused; that the restraining order heretofore granted is vacated . . . and the said Callie Joyner recover her costs incurred herein." We think that this unqualified refusal of the court to continue the injunction is implied leave to proceed. As his Honor does not base his action upon want of power, we must assume that he acted in his equitable discretion, and we think this discretion was properly exercised under all the circumstances of the case. The judgment of Mrs. Joyner is paramount to the original title of the defendant corporation, and is of course paramount to all claims of its creditors. They are asking to have the land divided up into building lots, and sold by the lot, at the cost of the fund and consequently at the risk of Mrs. Joyner. If they wish the land so sold, they have the privilege of paying off Mrs. Joyner, and then speculating in the land at their own risk and in their own way. The judgment is

Affirmed.