Scarritt Estate Company v. Johnson , 303 Mo. 664 ( 1924 )

This is an original proceeding in prohibition against defendant as Judge of the Circuit Court of Jackson County to prohibit him from enforcing certain orders in a case pending before him.

The plaintiff is a Missouri corporation and owns the fee to Lots, 76, 77, 78 and 79, Ross Scarritt's Addition, to Kansas City, Missouri. A brick building, adapted to theater and business purposes and known as Grand Theater, occupies said lots. On July 25, 1922, plaintiff, as lessor, and Elliott Theatre Enterprises Corporation, as lessee, entered into a lease for ninety-nine years from July 1, 1922, whereby the lessee agreed to pay certain rentals, taxes and insurance premiums and to make certain alterations and improvements upon the leased premises, with provision for forfeiture of the lease for failure of lessee to perform the terms and conditions thereof.

On December 24, 1922, there was filed in the Circuit Court of Jackson County a suit wherein J.C. Hartman and F.P. McClure were plaintiffs and Elliott Theatre Enterprises Corporation was defendant. Hartman and McClure were each holders of one share of preferred stock and one bond of said corporation under a trust agreement, and were also creditors of the lessee corporation. They alleged the existence of their own and other claims against the corporation, mismanagement of the corporate business, and danger of irreparable loss if creditors were permitted to sue for and collect their demands against the corporation by sale of its assets under execution, and prayed for the appointment of a receiver and for an injunction. On December 8, 1922, W.F. Zumbrunn was appointed receiver of said corporation and an injunction was granted as prayed. The receiver was ordered to continue the business of the Elliott Theatre Enterprises Corporation. He gave the required bond, took possession of the property of the corporation, including the leased premises, and operated the same.

On June 2, 1923, default was made in the terms and provisions of the lease, which the Elliott Theatre Enterprises corporation was required to perform, and on that day plaintiff in this case gave notice of such default and that forfeiture would be declared in thirty days unless the terms of the lease were complied with. On July 5, 1923, plaintiff gave notice of forfeiture to Elliott Theatre Enterprises Corporation, W.F. Zumbrunn, receiver, and Home Deposit Company. The latter was trustee for the bondholders of the lessee.

On July 5, 1923, plaintiff herein filed in the case of Hartman et al. v. Elliott Theatre Enterprises Corporation, its intervening petition for the order of the court for the receiver to deliver to plaintiff possession of the leased premises or to authorize plaintiff to bring action in unlawful detainer or other proper action against said receiver to obtain possession of the leased premises. Plaintiff stated that it limited its appearance in said case to the purposes of its intervening petition only. It is unnecessary to recite all of the allegations of said intervening petition. In substance, it alleged certain defaults in performance of the terms of said lease, including failure to pay rents, taxes, insurance premiums, to keep the leased premises in repair and to make certain alterations in and improvements upon the buildings, as required by the terms of the lease.

On July 10, 1923, all parties appeared and trial was had of the issues made by plaintiff's intervening petition. No pleadings were filed in opposition to said intervening petition. The evidence adduced at the hearing was transcribed, and is attached to plaintiff's petition in this court as an appendix thereto. On said date defendant, sitting as judge of said Jackson County Circuit Court, made the following order:

"Now on this 10th day of July, 1923, it being the forty-seventh day of the May term, the hearing of this cause was continued, evidence offered by various parties and the arguments made by counsel for the Scarritt Estate Company, the receiver herein, and holders of notes or bonds and other claimants, by leave of court the list of holders of bonds was amended by adding the claims of R.K. Doolittle and George Sandz for two hundred dollars each, and it appearing from the evidence that Ambrose K. Elliott was during the time that he was receiver of the Kansas City Amusement Company in this court, and still is the owner of all the capital stock of that company, he filed herein a voluntary entry of appearance individually and as trustee for said Kansas City Amusement Company.

"It is therefore ordered, considered and adjudged by the court that the claims of the holders of bonds and other claims filed herein not already passed upon be continued by the court for further consideration, classification, approval or rejection; that the application of the Scarritt Estate Company, herein filed be taken under advisement by the court, and that W.F. Zumbrunn, receiver herein, be and is hereby appointed receiver for the Kansas City Amusement Company, and A.E. Elliott as trustee for the Kansas City Amusement Company, and he is hereby ordered and directed to take possession and have charge of all the property of said Kansas City Amusement Company, and said A.E. Elliott as trustee of the Kansas City Amusement Company under the terms and provisions of the orders heretofore made appointing him receiver for the Elliott Theatre Enterprises Corporation, and that said property and all other matters involved in this case be subject to further orders herein as the court may find necessary and advisable for the protection of the rights and interests of all parties."

On July 18, 1923, defendant, sitting as judge of said court, made the following order:

"And now the petition of the Scarritt Estate Company for possession of property having heretofore been submitted and argued to the court, and by the court taken under advisement and the court being now fully advised in the premises, denies said petition.

"It is therefore ordered by the court that the petition of the Scarritt Estate Company, for the possession of property be and the same is hereby denied and that said petition be and the same is hereby dismissed."

On July 18, 1923, plaintiff here, as intervening petitioner in that court, filed its motion for new trial. No disposition of the motion for new trial has been made.

On August 14, 1923, plaintiff filed in this court its petition for our writ to prohibit defendant as such judge from retaining custody and control of the leased property and from further exercising jurisdiction thereover through said receiver and from continuing the receiver appointed by said court in the possession of said property and from further denying to plaintiff the relief prayed for in its intervening petition.

We will here state that on January 19, 1899, Edward L. Scarritt and others (then owners of the property here involved) and Kansas City Amusement Company, a corporation, entered into a lease covering said premises for a term ending May 31, 1910. On June 1, 1909, the Scarritt Estate Company (the plaintiff here and grantee of lessors named in the lease of January 19, 1899) and Kansas City Amusement Company entered into an agreement continuing in force the lease of January 19, 1899, for a period of five years. On May 10, 1915, the same parties entered into another agreement further extending said lease until May 31, 1921. Thereafter, and on March 27, 1918, said lease was further extended for a period ending fifteen years from May 31, 1921. Under the terms of the last agreement, the lease to the Kansas City Amusement Company would not have expired until May 31, 1936.

On January 5, 1922, in the case of Ambrose E. Elliott v. Dubinsky, Kansas City Amusement Company and others, said Elliott was by the Jackson County Circuit Court appointed as receiver of the Kansas City Amusement Company. He thereafter gave bond and took charge of the assets of said Amusement Company, including the unexpired term of said lease.

On December 8, 1922, after the execution of the ninety-nine-year lease from plaintiff here to Elliott Theatre Enterprises Corporation and after publication of notice to creditors and after previous orders reciting that necessity for a receiver for Kansas City Amusement Company no longer existed and that the receiver was the owner of all the capital stock of said Kansas City Amusement Company and after making the usual orders attending the winding up of a receivership, said court finally discharged said Elliott as receiver of said Kansas City Amusement Company and directed him as such receiver to turn over to said Kansas City Amusement Company all its property, money and the effects in his hands.

The foregoing facts are either taken from plaintiff's petition in this court or from records introduced at the hearing upon the intervening petition of plaintiff in the circuit court. None of said facts is controverted by defendant's answer to our preliminary rule. Other facts developed by the testimony on said hearing appear in the appendix to plaintiff's petition for our writ. Such other facts as appear pertinent will be referred to later.

On October 6, 1923, we issued our preliminary rule commanding defendant to appear and show cause why he should not be prohibited "from retaining custody and control of Lots 76, 77, 78 and 79 in Ross Scarritt's Addition in Kansas City, Missouri, and from further exercising jurisdiction thereover through W.F. Zumbrunn, appointed by you as receiver of Elliott Theatre Enterprises Corporation, and from continuing your said receiver in the possession of said property and from further denying to said The Scarritt Estate Company the relief prayed for by it in its petition filed in the action aforesaid, entitled J.C. Hartman et al. versus Elliott Theatre Enterprises Corporation, and now pending before you."

To such preliminary rule, and on October 16, 1923, defendant filed his answer and return. Such answer controverted no allegations contained in plaintiff's petition for our preliminary rule. It alleges that notice and declaration of forfeiture of the lease covering the premises in possession of defendant's receiver were in defiance of defendant's order appointing such receiver.

Said answer then alleged the prior appointment of a receiver in the case of Elliott v. Dubinsky and Kansas City Amusement Company, and that the principal asset of said receivership was the unexpired term of the fifteen-year lease which was of great value; that without the knowledge of and in fraud upon defendant and with the knowledge and consent of E.L. Scarritt, president of plaintiff, said receiver used the assets of such receivership in incorporating Elliott Theatre Enterprises Corporation and sought to cancel said fifteen-year lease and execute the ninety-nine-year lease; that the fifteen-year lease was more valuable than the ninety-nine-year lease, because of onerous building requirements of the latter; that the receivership in the Kansas City Amusement Company case was still pending when the fifteen-year lease was attempted to be canceled; that the issuance of bonds by Elliott Theatre Enterprises Corporation while the prior receivership was pending is alleged. Defendant alleged that the motion of plaintiff for new trial is still pending and undisposed of; that plaintiff's remedy is by appeal; that plaintiff is not in this court with clean hands; that the application for our writ of prohibition is premature and without warrant at law or in equity.

Said answer further alleged that said Elliott was the owner of all the stock of Kansas City Amusement Company when Elliott Theatre Enterprises Corporation was organized and has voluntarily entered his appearance in the case of Hartman v. Elliott Theatre Enterprises Corporation, as sole remaining director and trustee of said Kansas City Amusement Company, as well as personally; that W.F. Zumbrunn, receiver, in this case (Hartman Case), has given bond as such and that plaintiff is threatening to bring suit against said receiver on his bond. Said answer then alleged:

"Many creditors of the Kansas City Amusement Company have filed claims in this case and contend that they have a right to recover from the assets of the Kansas City Amusement Company wrongfully used by said Elliott as his individual property in incorporating the defendant in this case, and that their claims are prior and superior to the claims of plaintiff herein under the so-called ninety-nine-year lease. The parties are all before the court in this receivership case, and no party's rights can be precluded without full and ample opportunity for review by a court of last resort if so desired.

"The attorney representing the holders of bonds of the defendant in this case asserts that the fifteen-year lease was illegally canceled and is in full force and effect, and that the so-called ninety-nine-year lease is fraudulent and void, and that plaintiff herein has no rights thereunder. The holders of these bonds claim the right to contest plaintiff's right to possession of this property or any of the proceeds therefrom under said ninety-nine-year lease, which is the sole basis of plaintiff's application for the writ of prohibition herein."

Said answer then asks denial of our rule in prohibition and suggests the appointment of a commissioner to take testimony and in effect asks that this court take over the case of Hartman v. Elliott Theatre Enterprises Corporation and finally dispose of it.

To said answer and return and on October 25, 1923, plaintiff filed its reply, which is in effect a demurrer to said answer, although it is not so denominated. Such reply denies the necessity for the appointment of a commissioner. The answer does not deny the facts set out in the petition and contained in the appendix thereto. The answer sets out no new facts, except such as are admitted by the reply in so far as it partakes of the nature of a demurrer to the answer. There is clearly no occasion for us to appoint a commissioner.

From the testimony of Ambrose E. Elliott at the hearing upon plaintiff's intervening petition, it appears that there are no records of any kind showing any meeting of the board of directors of the Kansas City Amusement Company, approving any sale or transfer of its assets to Elliott Theatre Enterprises Corporation or any cancellation of the fifteen-year lease. Such matters were not even discussed in any meeting of the board of directors of the Kansas City Amusement Company. It is not contended that the same defaults as to payment of rents, taxes, insurance premiums and making of repairs have not occurred under the fifteen-year lease as under the ninety nine-year lease.

In its order of October 21, 1922, finally discharging Elliott as receiver of the Kansas City Amusement Company, the Jackson County Circuit Court found (and defendant so alleges in his answer) that Elliott was the owner of all the capital stock of the Kansas City Amusement Company. Said order also recited that due notice to all creditors of the Kansas City Amusement Company had been given. The assets of said Amusement Company in the hands of its receiver were ordered turned over to the company on December 8, 1922. It does not appear that any objection was made to any of the above orders. The final order in that case was made at the November, 1922, term. It was at the May, 1923, term of the Jackson County Circuit Court, or the third term of court after the final discharge of Elliott as receiver in the case of Elliott v. Dubinsky and Kansas City Amusement Company, that plaintiff here filed its intervening petition in the case of Hartman et al. v. Elliott Theatre Enterprises Corporation. There is no proof in the record that the court retained further jurisdiction for any purpose in the case of Elliott v. Dubinsky and Kansas City Amusement Company after the November term, 1922, of said court. Nor does any reason suggest itself why jurisdiction should have been retained. That case then became a closed incident.

Elliott testified at the hearing on plaintiff's intervening petition that he discussed with Judge Scarritt, representing plaintiff, the cancellation of the fifteen-year lease to Kansas City Amusement Company and issuance of bonds upon the ninety-nine-year lease and that he made no objection to such bond issue; that Judge Scarritt knew that he was still receiver for Kansas City Amusement Company; that he did not inform the court of the execution of the ninety-nine-year lease to Elliott Theatre Enterprises Corporation or the issuance of bonds by said corporation while he was still receiver of the Kansas City Amusement Company.

We have stated sufficient facts, we think, to indicate that the affairs of the Kansas City Amusement Company and Elliott Theatre Enterprises Corporation were in a serious, if not well-nigh hopeless tangle. We are not called upon to untangle such affairs in this proceeding, and refuse to be drawn into a consideration of the question of the validity of the ninety-nine-year lease to Elliott Theatre Enterprises Corporation. For whatever it is worth, it is an asset of that corporation. If it is invalid and the fifteen-year lease is in full force and effect because not cancelled, said fifteen-year lease did not become an asset of the corporation and cannot be reached by the creditors of said corporation as such. There is no pretense that the fifteen-year lease was assigned to the corporation or even attempted to be so assigned or that it claimed possession of the premises under it. Plaintiff and Elliott treated it as having been cancelled. If there is an unexpired term of such lease, such term is the property of the Kansas City Amusement Company. The creditors of the Kansas City Amusement Company as such may look to the fifteen-year lease as an asset, if said lease still has life. When, if they did, the creditors of Kansas City Amusement Company became creditors of the Elliott Theatre Enterprises Corporation because of assumption of the payment of their accounts by such corporation, as such creditors they could only look to the assets of that corporation to satisfy their claims. They could only look to the assets of the corporation as they found them. In that capacity they cannot claim that the fifteen-year lease is an asset of the corporation and at the same time contend that said lease is still valid and the property of the Amusement Company. The Theatre Enterprises Corporation is only claiming under the ninety-nine-year lease. Claims of validity for the fifteen-year lease must be made by the Kansas City Amusement Company or by its creditors as such.

We do not say that the creditors of the Amusement Company cannot look to the property of that company to satisfy their claims, notwithstanding such claims had been assumed by the Elliott Theatre Enterprises Corporation. But they must do this in an appropriate proceeding and under adequate pleading. There was pending before defendant no case involving the affairs of the Kansas City Amusement Company when he made his order appointing Mr. Zumbrunn receiver for that company. The receiver in the Kansas City Amusement Company case had been finally discharged at the preceding term. The case had been finally closed. It is not pretended here that any order was made in the Kansas City Amusement Company case appointing Zumbrunn as receiver. His appointment was made in the case of Hartman v. Elliott Theatre Enterprises Corporation. The only pleading fixing the issues to be determined by defendant on that hearing was the intervening petition of the Scarritt Estate Company to recover possession of the property under the ninety-nine-year lease. There was no pleading asking or authorizing the Kansas City Amusement Company or Ambrose E. Elliott to be brought into the case as a party or asking for the appointment of a receiver for Kansas City Amusement Company or Elliott as trustee for it. The order appointing Zumbrunn as such receiver was void because the court had then no jurisdiction of the affairs of the Kansas City Amusement Company. The order was not justified by any pleading in the case. Such order was coram non judice. Jurisdiction to make such an order could not be conferred upon defendant by the mere entry of appearance in Hartman v. Elliott Theatre Enterprises Corporation by Elliott as sole owner of the capital stock of the Kansas City Amusement Company or as trustee for it.

The case of State ex rel. v. Muench, 217 Mo. 124, is, we think, sufficient authority upon the foregoing proposition. In an appropriate proceeding Judge Muench of the Circuit Court of the City of St. Louis appointed a trustee to succeed a deceased trustee appointed by will. He then made an order retaining jurisdiction of the trust estate for the purpose of further administration. Such order was not appealed from. He thereafter made an order for the sale of a part of the trust estate. This court prohibited such action. Quoting from Andrews' Stephen's Pleading (2 Ed.) p. 34, LAMM, J., said:

"``The judicial power can be set in motion in civil matters only by some person — using the word in its broadest sense — in a case against another person. The courts cannot, ex mero motu, set themselves in motion, nor have they power to decide questions except such as are presented by the parties in their pleadings. The parties, by their attorneys, make the record, and what is decided within the issue is res adjudicata; anything beyond iscoram non judice and void.'"

In that case the order was sought to be justified because the original decree was by consent and unappealed from. Discussing this contention, Judge LAMM said:

"But if the chancellor, as we have held, reached out his arm too far and grasped a jurisdiction not within the issues, then that part of the decree outside the issues became coram nonjudice and void. In that view of the case no appeal was necessary, and the void part of the judgment is subject to collateral attack."

The cases cited by defendant to the effect that where a court of equity has jurisdiction of the res and of the parties, it will not relax its grasp upon the res until it has done full, adequate and complete justice between the parties, have no application to the situation here. Before that rule may be applied, the court must not only have the res before it, but the pleadings must authorize the court to act in respect thereto.

There can be no question that prohibition is the appropriate remedy to prevent a court from making an order it has no jurisdiction to make. The cases cited by defendant only go to the unquestioned rule that prohibition is not the remedy for an erroneous order or judgment when the court is exercising its proper judicial power. Plaintiff could have appealed, but it is readily apparent that such remedy is wholly inadequate where plaintiff is wrongfully kept out of possession of property to which it is entitled by an unauthorized appointment of a receiver to take charge of such property with the long delay usually incident to an appeal and where there is present the likelihood, if not certainty, of further loss of rentals, etc.

Plaintiff filed an intervening petition in the circuit court and submitted itself to the jurisdiction of that court for all purposes so far as the issues involved in such petition were concerned. The judge of the circuit court had full power to decide such issues, including the right to decide such issues incorrectly, as well as correctly. Deciding a case incorrectly is no ground for the interference of this court by prohibition. In other words, an inferior court cannot be prevented by the order of a court exercising superintending control over it from deciding incorrectly issues properly before it. Nor can this court impose upon the trial court its judgment as to how that court should decide any case wherein that court has full right to exercise its judicial power. It is only when the trial court undertakes to do some act it has no jurisdiction to do or acts in excess of its appropriate jurisdiction that this court may interfere and prohibit such acts. The act of defendant in denying plaintiff's petition for restoration to it of the leased premises held by the receiver as the property of Elliott Theatre Enterprises Corporation or for permission to proceed against the receiver of the court to recover such possession is a judicial act which this court is without power to control or to set aside by prohibition. If defendant erred in his decision in that respect and hereafter refuses to set his order aside, plaintiff's remedy is by appeal. It, therefore, is unnecessary for us to discuss the right of plaintiff to forfeit the ninety-nine-year lease as against the receiver of the assets and business of Elliott Theatre Enterprises Corporation.

The appointment of a receiver for the Kansas City Amusement Company and the order for him to take possession of the leased property under the fifteen-year lease to Kansas City Amusement Company were acts entirely outside of and in excess of the jurisdiction conferred upon defendant by the pleadings in the case of Hartman v. Elliott Theatre Enterprises Corporation and plaintiff's intervening petition therein and the hand of defendant can and should be stayed by our absolute rule from enforcing or continuing in effect either of such orders. As to such acts, our preliminary rule should be made absolute and it is ordered that it issue accordingly.

We have no power to control the defendant's judicial action upon the issues involved in plaintiff's intervening petition and as to such act our preliminary rule will be discharged. All concur; Graves, J., in the result.