Tibbals v. Graham ( 1936 )

ON PETITION FOR REHEARING A petition for rehearing has been filed herein. We shall not again go over the grounds fully covered in the opinion on the original hearing, but shall mention what seem to be the main new points of contention now made, and not specifically heretofore mentioned, and hope, if we can, to convince counsel that the trial court, after having evidently given the matter its most scrutinizing consideration, was not in error.

1. On September 1, 1932, the receiver sold the mining property in controversy, of which he had possession, and this sale was confirmed by the court. It is contended that we overlooked this, and should have considered it. Counsel's theory apparently is that thereby the receiver's power over the property ceased, and that the latter was not, thereafter, in custodia legis. We did not, it is true, mention this matter in the original opinion, deeming it immaterial. The sale was held merely to cut off the interests of the Midwest Mines Corporation. The property was bid in by the receiver himself. He, as purchaser, is called a trustee. But the name is immaterial. He bid in the property in his official capacity, and, to quote from the order of confirmation, "for the benefit of all parties holding claims, liens and charges and expenses of administration of whatsoever nature, in the receivership proceedings." In other words, he continued to hold the property as receiver, and merely cut off the rights of one party interested in the receivership proceeding. The latter continued thereafter. In fact, the plaintiffs in the instant action, by bringing it against the receiver, recognized the fact that it was in the possession of the receiver. We are unable to see how that sale can affect the questions involved herein.

Counsel again and again stresses the fact that the lien or right of the plaintiffs is paramount to any of the rights of the receiver. Among other things, he complains that we overlooked Section 89-825, Rev. St. 1931, providing that during the pendency of an action no "interest can be acquired by third persons in the subject matter thereof, as against plaintiff's title." But the materiality of that provision is not perceived. That Tibbals acquired a lien or right prior to that of the receiver is not herein contested by the receiver, and the trial court in the instant suit fully protected it. Counsel draws the conclusion that the paramount right cannot in any manner be affected by the receivership proceeding. Here, perhaps, lies one of the fundamental errors into which counsel has fallen. The receiver's right arose out of a lease made to the Midwest Mines Corporation by the Federal Gold Mining Company in 1928, subsequent to the time when Tibbals' right accrued. The Midwest Mines Corporation became insolvent in 1930 and a receiver was appointed for it in November of that year, so that the creditors of the lessee might be protected. The receiver was appointed long before the plaintiffs herein sought to enforce the right which Tibbals had. The mere fact that Tibbals had a prior right could not, before that right was fully enforced and ownership of the property was acquired by the plaintiffs, prevent the accrual of rights subsequent and inferior to the rights of plaintiff, nor is any just reason apparent why such inferior right could not or should not, as far as possible, be protected along with that of Tibbals. Counsel seemingly is unwilling to recognize the rule of law stated quite at length in our original opinion that a creditor cannot interfere with the rights of property placed by the court into the hands of a receiver and taken possession of by the latter, although he has made no attempt to point out why the authorities cited by us should not be followed in the case at bar, nor has he attempted, at least directly, to point out why these authorities do not state good law. Merely because plaintiff's lien may be superior to the rights of the receiver cannot brush aside the force and effect of these authorities. In the leading case cited by us, namely, Wiswall v. Sampson, 14 How. 52, 14 L. Ed. 322, wherein the judicial sale was held void, the lien of the execution creditor accrued prior to the time of the appointment of a receiver, but the sale was held subsequent to the time of the appointment, so that the case is seemingly squarely in point herein. The case is followed and cited with approval in Dugger v. Collins, 69 Ala. 324; Pelletier v. Lumber Co., 123 N.C. 596, 31 S.E. 855, 68 A.S.R. 837; Ellis v. Water Co., 86 Tex. 109, 23 S.W. 858; Walling v. Miller, 108 N.Y. 173 and other cases. It is stated in 53 C.J. 111-112 that the rule against interference with the receiver's possession applies even though a claimant's lien is paramount to the right of the receiver. In 53 C.J. 131, 132, the general rule is stated that when property has passed into the hands of a receiver, it is not subject to execution. Cases are cited from about twenty different jurisdictions. It is true that there are a few discordant notes among the authorities. 53 C.J. 134. The early New York cases on this point seem to have been overruled by Walling v. Miller, supra; at least the court deciding Ellis v. Water Co., supra, thought so. All the authorities, without exception, seem to be agreed that no holder of a lien, paramount or otherwise, can, without the court's authority, disturb the receiver's possession. If we should hold herein that the plaintiffs had the right to sell the property without such authority, and then bring an action in ejectment, without such authority, and thus oust the receiver from possession, we should merely permit the rule thus unanimously held to be circumvented by an indirect method. The proper remedy, as stated by High on Receivers, (2nd Ed.) Sec. 141, "for a judgment creditor, who desires to question the receiver's right to the property, is to apply to the court appointing him to have the property released from the receiver's custody, in order that he may proceed against it under judgment." See also 53 C.J. 134.

Counsel contends that the receiver was bound by the judgment in Case No. 4623 — Federal Gold Mining Company v. Tibbals — because he was once in the case, and the order dismissing him from the case was void. The court made the order of dismissal in that case as against all parties except Tibbals on May 17, 1932. All the parties were before it. No exception to the order was taken, and we think that plaintiffs herein are bound by it. We are unable to see upon what principle we could declare the order void. We have not been cited to any case holding it so. Counsel, however, further contends that the judgment in that case, presumably particularly that part which directed the sale of the property, was binding upon the receiver even though he was not a party to the suit when the judgment was rendered, upon the theory that he is a privy of the lessor, that his rights are based merely on a lease given to the Midwest Mines Corporation, and that being merely a lessee, he is bound by any judgment against the lessor. That would, perhaps, be true, if the leasehold interest had been acquired during the pendency of the action. But it was acquired long prior thereto. The receiver had an interest separate from that of the Federal Gold Mining Company, though derived through the latter. He was entitled to defend his right as receiver, and could not be bound in an action in which he was not a party. The lease was in force and effect, and was, as late as June 2, 1933, declared by the court to be in force and effect and that it had not been forfeited.

4. Counsel for plaintiffs argues that the statement in the original opinion that the receiver was in possession of the property is erroneous. In fact he states that "it was legally impossible for the property to be in the hands of the receiver." We do not know what counsel means. The trial court found that the receiver was in possession from the time when he was appointed, and the record seems to bear out that finding. Plaintiffs conceded that he had possession when they brought this action in ejectment. Counsel state again and again that the receiver merely held under a lease. True. But surely a lessee, and a party acquiring the lessee's right, can have physical possession of property just as effectually as a lessor, and a receiver can be appointed to take charge of the rights of a lessee, or assigns, just as effectually as one who is to take charge of the rights of the lessor. Counsel seems to argue, if we understand him correctly, that since the receivership could merely effect the rights which the lessee had, it would not affect the rights of plaintiff which were acquired directly from or in connection with the lessor. But we cannot see the force of that. The property involved — aside, perhaps, from personal property belonging to the lessee and assigns — is the same in either case; the lease covers the physical property — the mine — the same as the lien of Tibbals; both rights touch the identical property; the only difference is that the lien of Tibbals — both plaintiffs — may be superior to the rights of the receiver. The rights of the latter could not, it is true, be greater than that acquired under the lease, but the right would, nevertheless, be in the property itself, in so far as the lease gave it.

5. Counsel further argues that the property in controversy was in custodia legis by reason of the fact that Tibbals was given a prior lien thereon. Counsel have cited us to no authority, and we think that he is in error.

We have given the petition for rehearing and the accompanying brief the most painstaking consideration, but we see no reason why the judgment of the trial court herein should be reversed. The petition for rehearing is accordingly denied.

Rehearing Denied.