Livingston v. Southern Surety Co. , 262 Mich. 438 ( 1933 )

On March 25, 1932, Bertha B. Cleavenger filed a judgment creditor's bill in the Wayne circuit court against the Southern Surety Company of New York, in which she alleged that the company was insolvent, and that, on application of the superintendent of insurance in the State of New York, a receiver had been appointed in that State to take over and administer its assets. She also alleged that the company had assets and property within the State of Michigan, and for the benefit of herself and other creditors prayed for the appointment of a receiver to take over such property and assets, to sell the same and apply the proceeds in satisfaction of her judgment. There was no service of process on the company, though it had maintained an agent in the city of Detroit for that purpose. On March 25, 1932, an ex parte order was entered in the Wayne circuit court appointing Charles F. Becker receiver. On March 26, 1932, Charles D. Livingston, insurance commissioner for the State of Michigan, filed a petition to intervene, and moved to vacate the order appointing Mr. Becker receiver. Before final action was had on his petition, Mr. Livingston filed a bill in the Ingham county circuit court for the appointment of a receiver, and in compliance therewith an order was entered appointing Ralph M. Wade receiver to take possession of the business and assets of the insolvent company within the State of Michigan for the purpose of administering and liquidating the same under direction of the commissioner of insurance. Mr. Wade is a deputy commissioner. He qualified as receiver on the 29th day of March, 1932, and is in possession of the property and assets of the company. On the same day, but subsequent to the appointment and qualification of Mr. Wade, the Wayne circuit court in the suit of Bertha B. Cleavenger appointed the Equitable Trust Company of Detroit receiver in the place of Mr. Becker. The Equitable Trust Company promptly qualified, and thereupon filed a petition in the Ingham circuit court to vacate the appointment of Mr. Wade. From an order denying the prayer of its petition, the Equitable Trust Company is prosecuting this appeal.

The question is whether, in view of the proceedings in the Wayne circuit court, the circuit court of Ingham county had jurisdiction to appoint a receiver.

It is first claimed by the plaintiff that the action of the Wayne circuit court appointing a receiver was an absolute nullity because there was no service of process upon the surety company. This claim has no merit. The surety company was a foreign corporation, and there was no one upon whom service could be made. It is true that the company had maintained an agent in the city of Detroit for that purpose, but when the bill was filed in the Wayne circuit the company was not in existence. It had been dissolved by the New York court. With its dissolution passed the agency of its Detroit representative. U.S. Truck Co. v. Pennsylvania Surety Corp.,259 Mich. 422.

But the right of a court of equity to appoint a receiverex parte is an inherent part of its equity powers. It is entirely a matter of judicial discretion. Tuller v. WayneCircuit Judge, 243 Mich. 239.

The right to appoint was not questioned in the Wayne circuit court suit. The day following the appointment, the insurance commissioner of Michigan filed a petition to intervene. Intervention was granted. The statute (3 Comp. Laws 1929, § 14019), requires that the intervention "shall be in subordination to, and in recognition of, the propriety of the main proceedings." As was said by this court in Michigan Trust Co. v. National Bank of Ionia, 241 Mich. 146, "The intervener takes the case as he finds it." Having submitted himself by intervention to the jurisdiction of the court, he cannot question the validity of the appointment.

The Wayne circuit court had jurisdiction of the action. The bill presented a case for the appointment of a receiver. It alleged that the plaintiff was a judgment creditor, that the surety company was insolvent and in the hands of a receiver in New York State, and that it had property and assets within the State of Michigan. When the receiver was appointed, a lien was created in favor of the judgment creditor on the debtor's property in this State. Saginaw County Savings Bank v.Duffield, 157 Mich. 522 (133 Am. St. Rep. 354); German AmericanSeminary v. Saenger, 66 Mich. 249; Beith v. Porter, 119 Mich. 365 (75 Am. St. Rep. 402).

The appointment of Mr. Becker, on March 25, 1932, by the Wayne circuit court, was valid. On March 29, 1932, the court vacated this order of appointment and appointed the Equitable Trust Company of Detroit. Mr. Becker was an officer of the court. From the moment of his appointment the property of the insolvent debtor in the State of Michigan was in custodialegis, and the court had the power to preserve it to satisfy the plaintiff's judgment.

So that when the circuit court of Ingham county subsequently appointed a receiver, the property involved was in the custody of another court of competent jurisdiction, and was subject to the lien of the judgment creditor. The Ingham county circuit court was without jurisdiction, and its order appointing a receiver must be held to be invalid.

If the Michigan insurance commissioner has interests which he desires to protect, he may do so in the Wayne circuit court suit according to the practice indicated in Michigan Trust Co. v. National Bank of Ionia, supra.

A decree will be entered vacating the order of the Ingham county circuit court.

CLARK, POTTER, SHARPE, NORTH, FEAD, WIEST, and BUTZEL, JJ., concurred.