Battery Park Bank v. Western Carolina Bank ( 1900 )

On 11 October, 1897, the defendant bank became insolvent, closed its doors, and executed an assignment for the benefit of all its creditors. On the morning of 12 October, the plaintiffs sued out a summons in a creditors' bill to wind up its affairs, and filed an affidavit for the appointment of a receiver. On said 12 October a temporary receiver was appointed by Judge Ewart, of the Circuit Court of Buncombe, etc., who was by him made permanent receiver on the next day. At night on 13 October the same person was appointed a temporary receiver by Judge Norwood, the Judge of the Superior Court, holding the courts of that district. On 12 and 13 October, after the summons in this creditors' bill was sued out, and after the order of Judge Ewart appointing a temporary receiver, each of the petitioning creditors sued the defendant bank before a Justice of the Peace, obtained judgments aggregating $5,000, and had transcripts docketed in the Superior Court of Buncombe before any action was taken by Judge Norwood upon the application for appointment of a receiver. These judgment creditors, at March Term, 1898, filed petitions in this cause, (434) claiming liens on the real estate of defendant bank in Buncombe County, superior to the rights of the general creditors. They have not become parties to this action otherwise than by filing said petition asking for payment in full of their judgments.

The deed of assignment is void as to petitioners by virtue of Code, sec. 685; Duke v. Markham, 105 N.C. 138; Langston v.Improvement Co., 120 N.C. 133; Cotton Mills v. Cotton Mills,115 N.C. 485. The appointment of receiver by Judge Ewart was a nullity. Rhyne v. Lipscombe, 122 N.C. 660. The title of the receiver appointed by Judge Norwood relates only to the time of his appointment (Worth v. Bank, 122 N.C. 397; Pelletierv. Lumber Co., 123 N.C. 596), and valid liens existing at the time of his appointment are not divested thereby (CottonMills v. Cotton Mills, 116 N.C. 648). This narrows the controversy to the single inquiry, does the issuance of summons in a proceeding in the nature of a creditors' bill, and filing an affidavit for a receiver therein, confer any lien upon the property of the defendant? The law, we think, is correctly stated as follows: The lien obtained by the commencement of an action in the nature of a creditors' bill creates a lien upon the choses in action and equitable assets of the debtor, but not upon his tangible personal property. If the latter is levied upon by execution or attachment prior to the appointment of a receiver, at which time the property first passes in custodia legis, it passes to the receiver subject to the lien of the levy. Davenport v. Kelly,42 N.Y. 193; Knower v. Bank, 124 N.Y. 552. The docketing of the petitioners' judgments conferred the same lien upon the realty as a levy upon the personalty would; hence the realty of defendant passed to the receiver subject thereto. There are authorities cited in Smith Eq. Rem. Cred., sec. 222, that the lien by virtue of the commencement of the creditors' bill (435) does not extend to choses in action, but only to equitable assets. Upon the reasoning, we are inclined to think the other authorities above cited are correct, and that no liens are acquired as against a receiver, except by levy upon personalty and upon realty (in this State), by docketing a judgment. But that question (which seems to be the only conflict in the authorities) whether a lien is acquired as to the choses in action from the commencement of the creditors' bill it is not necessary for us to decide in this instance. The judgment of the Court below directing the payment of the petitioners' judgments out of the proceeds of the realty as preferred liens thereon is affirmed. But we fail to see why the receiver appealed from the judgment. He is in no wise concerned, nor is the interest of the defendant bank affected, as the indebtedness is admittedly valid. The method of application of this fund concerned only the plaintiffs, and an appeal should have been taken by such of them as are dissatisfied; and at their own costs, not at the cost of the fund. The receiver is the agent of the Court. Its judgment is full protection to him, and it is a rare case that he can be justified in appealing, and certainly he is not when, as in this instance, the question is merely between two sets of creditors as to the distribution of the fund.

No error.

Cited: Fisher v. Bank, 132 N.C. 776.

(436)