Walling v. . Miller , 108 N.Y. 173 ( 1888 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This action was brought to recover damages for the wrongful conversion of certain buildings situated upon the land of J.W. Utter in Orange county. In February, 1883, the buildings belonged to John W. Vanderoef who was the tenant of Utter under a lease expiring April 1, 1883. On the 26th of February, 1883, he gave his wife Eliza a chattel mortgage payable one day after date, covering these buildings and all the rest of his personal property. Neither Vanderoef nor his wife removed the buildings during the term of the lease. On the 6th of March, 1883, Utter leased the premises upon which the buildings were situated to Miller the defendant, and to Jacob Price for one year from April 1, 1883, and on April fourth they entered into possession of the premises and of the buildings under their lease. Both Miller and Price were judgment creditors of Vanderoef, and on the 17th of April, 1883, they commenced an action in the name of Miller against Vanderoef and his wife to reach Vanderoef's equitable interest in the buildings. In that action, Vanderoef made default and his wife answered that her chattel mortgage had been satisfied. Thereupon a motion was made for the appointment of a receiver pending the trial of the action, and on May 14, 1883, George W. McElroy was appointed a receiver expressly of these buildings. Upon the same day he filed security and took possession of the property. A final decree was entered in the action September third by which the receiver was directed to sell the buildings, and on the eleventh of September following he sold them, and the purchasers at the sale thereafter took them down and removed them. Afterward this action was brought by the plaintiff against Miller and Price and McElroy, the receiver, and the purchasers of the buildings, claiming that he was the owner of the property and charging the defendants with its conversion. His title was founded upon an alleged sale by virtue of an execution issued upon a judgment against Vanderoef. The judgment was confessed by Vanderoef to his brother James, who assigned it to another brother on the 7th of May, 1883. Thereafter execution was issued on that judgment and it was claimed that a levy was made on the 12th of May, 1883. A sale was had under the execution on the 1st day of June, 1883, at which the property was struck off to the owner of the judgment, who afterward sold the same to this plaintiff.

This action was discontinued as against the receiver and upon the trial the complaint was dismissed as against all the other defendants except Miller, and a verdict was rendered against him.

We will assume, as most favorable to the plaintiff, that these buildings were personal property, and that they did not become a part of the realty upon the termination of Vanderoef's lease. Utter, the landlord, so treated them, and so did Miller and Price, the lessees who succeeded Vanderoef, by seizing and selling them as personal property. The rule of law which would otherwise have attached these buildings to the realty as a part thereof after the expiration of the lease is defeated in its operation by the intention and conduct of the parties interested. We will also assume, without determining it, that there was a valid levy upon these buildings as personal property on the 12th day of May, 1883, under the execution issued upon the judgment recovered against Vanderoef, and yet we reach the conclusion that the judgment ought to be reversed for at least two reasons: First. Two days after the levy, by virtue of the execution issued upon the judgment against the owner of the property, a receiver of the property was appointed. There is no question that the equitable action was regularly commenced, and that the court had jurisdiction to appoint the receiver. On the same day he took possession of the property and thereafter it was in theory of law in the possession and custody of the court; and the sheriff had no right to interfere with it by virtue of his lien under the execution in his hands. The lien of the execution was not destroyed by the appointment of a receiver, but the rights and interests of all parties in the property were thereafter to be adjusted by the court which appointed the receiver, and the property could not be taken out of the possession of the receiver and sold upon the execution without leave of the court. The execution creditor could bring his lien to the attention of the court in the action in which the receiver was appointed, and ask to have the execution satisfied out of the proceeds of the property. But persons having liens upon the property had no right to interfere with its possession by the receiver and, without any application or adjudication of the court, sell and dispose of it, and thus dissipate it and deprive the court of jurisdiction to administer it. (Noe v. Gibson, 7 Paige, 513; Albany City Bank v. Schermerhorn, 10 id. 263;Wiswall v. Sampson, 14 How. [U.S.] 52.) In Albany City Bank v. Schermerhorn the chancellor, speaking of a case where an execution creditor claimed a prior lien, said: "If the plaintiffs in the execution had acquired a legal lien, so as to overreach the lien of the complainants in the creditors' bills, they could not get the property out of the hands of the receiver except by an application to the vice-chancellor for an order upon the receiver to deliver over the proceeds to be applied on the execution." In the case of Noe v. Gibson, it was held that where property is rightfully in the hands of a receiver it is in the custody of the court, and cannot be distrained upon for rent without permission of the court by whom the receiver was appointed, and that any person who takes the property out of the possession of the receiver, without such permission, after he has notice of the character in which such possession is holden, is guilty of contempt; and that the same principles are applicable to any other interference with the possession of a receiver, sequestrator, committee or custodian who holds the property as the officer of the court of chancery, as his possession is in law the possession of the court itself. The chancellor said in that case: "It is well settled that after a receiver has been appointed and has taken the rightful possession of the property, it is a contempt of court for a third person to attempt to deprive him of that possession by force, or even by a suit or other proceeding against him, without the permission of the court by whom the receiver was appointed. Where the receiver is in possession of property upon which a third person has a claim for rent, the proper course for the landlord is to apply to the court, upon notice to the receiver, for an order that the receiver pay the rent or that the landlord be at liberty to proceed by distress or otherwise as he may be advised." InWiswall v. Sampson, it was held that a sale of real estate in the hands of a receiver, under a judgment, pending the equity suit, and while the court was in possession of the estate, without leave of the court, was illegal and void.

Therefore before a legal sale could be made of these buildings upon the execution, application should have been made to the court which appointed the receiver for leave to make the sale. An application might also have been made to the court for payment of the execution out of the proceeds of the sale. But the sale under the execution without leave of the court, while the property was thus in the custody of the court, was wholly illegal and void. Therefore, as the plaintiff's title rests wholly upon the execution sale it fails, and for that reason he should have been non-suited at the trial. Second. The judgment in which the receiver was appointed was regularly obtained. The receiver was regularly appointed and he was directed by the judgment to sell this identical property. Therefore in selling it he was not a trespasser, and all persons aiding and assisting him had the same protection. The defendant did not become a trespasser because he commenced the action and had a receiver appointed; nor did he become a trespasser or wrong-doer by advising the receiver to discharge his duty as such or in aiding him to make the sale which he was bound to make by the judgment. (Day v. Bach, 87 N.Y. 56; Bank of Oswego v.Dunn, 97 id. 157.)

We are, therefore, of opinion that the judgment should be reversed and a new trial granted, costs to abide event.

All concur.

Judgment reversed.