Hall v. Shippers Express, Inc.

65 S.E.2d 333 (1951) 234 N.C. 38

HALL et al.
v.
SHIPPERS EXPRESS, Inc. et al.

No. 599.

Supreme Court of North Carolina.

June 7, 1951.

Isaac C. Wright, Wilmington, for plaintiff.

John H. Small, Charlotte, for defendants.

DENNY, Justice.

The plaintiff does not allege that the complaint in the action of J. S. Gaul v. Shippers Express, Inc., filed in the Superior Court of Mecklenburg County, 13 December, 1950, or the answer thereto contains any allegation that is not true or that the pleadings filed therein were insufficient to justify the court in granting the relief sought.

The proceeding in the Superior Court of Mecklenburg County appears to be regular on its face, and the court being one of competent jurisdiction in receivership proceedings, and having acquired jurisdiction of the parties and the subject matter in controversy, it may not be interfered with by any other court of co-ordinate authority. 14 Am.Jur., Courts, Sec. 243, p. 435 et seq. "That court which first takes cognizance of the controversy is entitled to retain jurisdiction until the end of the litigation, to the exclusion of all interference by other courts of concurrent jurisdiction," Gluck & Becker on Rec., Sec. 430 and quoted with approval by Clark, J. (later Chief Justice) in the case of Worth v. Piedmont Bank, 121 N.C. 343, 28 S.E. 488.

The mere fact that in a proceeding for the appointment of a Receiver for a debtor, the debtor admits the allegations of the complaint and joins in the prayer for the appointment of a Receiver, if done in good faith, such admissions are insufficient to show fraud or collusion, nor does it deprive the proceeding of its adversary character, or the court of its jurisdiction. In many instances the owner of property for which a Receiver is sought cannot in good faith deny the allegations of the complaint, and the best interests of such defendant may require acquiescence in the request for a Receiver. In re Reisenberg, 208 U.S. 90, 28 S. Ct. 219, 52 L. Ed. 403; First Nat. Bank v. U. S. Encaustic Tile Co., 105 Ind. 227, 4 N.E. 846; 45 Am.Jur., Receivers, Sec. 119, p. 101.

The appointment of a Receiver under a consent decree does not render his authority subject to collateral attack. 45 Am. Jur., Receivers, Sec. 117, p. 99.

In the case of Rousseau v. Call, 169 N.C. 173, 85 S.E. 414, 416, where the Receiver instituted an action and the legality of his appointment was challenged, Hoke, J., in speaking for the Court, said: "the court, in the exercise of its jurisdiction, having entered judgment appointing plaintiff receiver, its judgment is not open to collateral attack, and, even if the order was improvidently made, its propriety is not open to question on this suit."

Where there is just ground for it, a Receiver can always be removed upon application to the proper judge. Mitchell v. Aulander Realty Co., 169 N.C. 516, 86 S.E. 358; Fisher v. Southern Loan & Trust Co., 138 N.C. 90, 50 S.E. 592.

This Court, in National Surety Corp. v. Sharpe, 232 N.C. 98, 59 S.E.2d 593, 595, speaking through Ervin, J., said: "The law contemplates the settlement of all claims against the insolvent debtor in the original action in which the receiver is appointed, except in the infrequent instances where the appointing court, for good cause shown, grants leave to a claimant to bring an independent action against the receiver", citing Black v. Consolidated & Power Co., 158 N.C. 468, 74 S.E. 468.

It is well settled, however, in this jurisdiction, that "the law does not tolerate that the same counsel may appear on both sides of an adversary proceeding, even colorably; and in general will not permit a judgment or decree so affected to stand if made the subject of exception in due time by parties injured thereby." Moore v. Gidney, 75 N.C. 34; Molyneux v. Huey, 81 N.C. 106; Arrington v. Arrington, 116 N.C. 170, 21 S.E. 181; Marcom v. Wyatt, 117 N.C. 129, 23 S.E. 169; Patrick v. Bryan, 202 N.C. 62, 162 S.E. 207.

In each of the last cited cases, except Marcom v. Wyatt, the injured party or parties filed a motion in the cause to set aside the judgment theretofore entered in said cause, on the ground that counsel represented conflicting interests. In Marcom v. Wyatt, supra, the guardian ad litem interposed an objection to the confirmation of the sale of real estate, in which the infant was interested, on the ground that the attorney for the administrator who instituted the proceeding was also the legal adviser of the defendant guardian ad litem and prepared the answer.

The rule which forbids the same attorney from representing both parties in an adversary proceeding is based upon the broad principle of public policy, which precludes persons occupying fiduciary relations from representing conflicting interests. Arrington v. Arrington, supra. See also Cotton Mills v. C. C. Randleman, Cotton Mills, 116 N.C. 647, 21 S.E. 431, and cf. Moseley v. Deans, 222 N.C. 731, 24 S.E.2d 630.

And while there is nothing to indicate that the able counsel who brought the original action against his corporate client, and prepared the answer for it, intended to do anything prejudicial to either party, if it can be shown that in the proceeding, adversary in form, there were conflicting or antagonistic interests to be litigated between the parties, and that the plaintiff has been injured thereby, it would seem that upon such showing he would be entitled to have the judgment vacated. This, however, would not prevent the court from making such further orders as might be necessary in order to protect the interests of the respective parties. Marcom v. Wyatt, supra.

The ruling of the court below to the effect that plaintiff's remedy, if any, is a motion in the cause in the Superior Court of Mecklenburg County, where the original action is pending, will be upheld.

The judgment of the court below is affirmed.