Madigan v. Dollar Building & Loan Co.

The above-entitled cause is here being determined on proceedings in error from the judgment of the Court of Common Pleas of Franklin county, appointing a receiver to take charge of certain real estate, rent the same, if not rented, collect the rentals, make the necessary repairs on said property, and to perform such other duties pertaining to the management of the premises as may be ordered by the court.

The parties appeared in reverse order in the court below, and for convenience will be so referred to in this opinion.

Very full and exhaustive briefs were filed by attorneys representing the respective parties, and these were followed by supplemental briefs, answers thereto and letters. The discussion in the briefs has gone far afield so that many of the questions raised and discussed are not necessary to be considered in the determination of the cause.

In the court below the plaintiff, The Dollar Building Loan Company, on the twenty-fifth day of January, 1933, filed its petition setting out two causes of action and praying for personal judgment against the defendants, James R. and Bessie G. Madigan, and for foreclosure of the mortgage set out in the second cause of action.

The only reference in the petition to the defendant, Andrew J. Nigl, assignee, is found in the last paragraph of the second cause of action:

"On or about October 26, 1932, the defendant Bessie G. Madigan conveyed said real estate to Andrew J. Nigl, as assignee, for the benefit of creditors of the said Bessie G. Madigan."

The last paragraph of the prayer reads as follows:

"That a receiver may be appointed to take charge of said premises and collect the rentals that may become due thereon, and that the plaintiff may have such other relief as may be proper."

At the same time that plaintiff's petition was filed it also filed the following motion:

"Now comes the plaintiff and moves the court for the appointment of a receiver to take charge of the premises described in plaintiff's petition for the purpose of renting same, if not rented; to make the necessary repairs thereon and to collect the rentals and otherwise care for said property."

On the same day, without notice, the court made the following order, as shown by original entry and also by certified copy of the transcript of docket and journal entries:

"This day this cause came on to be heard on the motion of the plaintiff for the appointment of a receiver to take charge of the premises described in plaintiff's petition, and the court, upon due consideration thereof and being duly advised in the premises, hereby appoints Harold C. Gockenbach receiver to take charge of the premises described in plaintiff's petition, to rent the same, if not rented, to collect the rentals, to make the necessary repairs on said property and perform such other duties pertaining to the management of the premises as ordered by the court. Said receiver shall, before entering upon his duties as such receiver, give bond in the sum of $200.00."

The defendant Andrew J. Nigl, assignee, on February 16, 1933, filed a motion raising the issue that the trial court was without jurisdiction, and asking that the receiver be discharged and the foreclosure suit dismissed. There appears with the papers, under date of April 5, 1933, an opinion of the trial court overruling the motion, but so far as is disclosed from the transcript of the docket and journal entries this determination has not been journalized.

Counsel for plaintiff, The Dollar Building Loan Company, seem to be laboring under the impression that the proceedings in error are directed to the motion of the defendant Nigl, assignee, to discharge the suit, whereas defendant Nigl, assignee, insists that the order complained of is the appointment of a receiver in the Common Pleas Court.

There should be no difficulty in accepting the theory of the defendant Nigl, assignee.

In the first place there is a very serious question whether the overruling of a motion to discharge a receiver is a final order from which error may be prosecuted. Neighbors v. Thistle DownCo., 26 Ohio App. 324, 159 N.E. 111.

Secondly, the transcript of docket and journal entries shows no ruling on the motion to discharge.

Thirdly, the opinion of the court upon which an entry might be predicated was apparently rendered after the petition in error was filed.

The petition in error was filed within the statutory time after the appointment of the receiver, and therefore we find that the defendant assignee is prosecuting error from the appointment and not from his motion to discharge.

"An order appointing a receiver is an order affecting a substantial right made in a special proceeding and is a ``final order' within the meaning of Section 12258, General Code." ForestCity Investment Co. v. Haas, 110 Ohio St. 188, 143 N.E. 549.

In the supplemental answer brief of The Dollar Building Loan Company, counsel make the following statement:

"Plaintiff in error is correct in his statement that a receiver was appointed upon the grounds set forth in Section 11894 of the General Code in Subsection 2 thereof, and specifically upon the grounds that the condition of the mortgage had not been performed, and the property is probably insufficient to discharge the mortgage debt."

So much of Section 11894, General Code, as is pertinent to the question here involved, is herewith set out in full:

"A receiver may be appointed by the supreme court or a judge thereof, the court of appeals, or a judge thereof in his district, the common pleas court or a judge thereof in his district, or the probate court, in causes pending in such courts respectively, in the following cases: * * *

"2. In an action by a mortgagee, for the foreclosure of his mortgage and sale of the mortgaged property, when it appears that the mortgaged property is in danger of being lost, removed or materially injured, or that the condition of the mortgage has not been performed, and the property is probably insufficient to discharge the mortgage debt; * * *

"6. In all other cases in which receivers heretofore have been appointed by the usages of equity."

The only purpose of quoting paragraph 6 in full is to present comprehensively the viewpoint that the authority to appoint receivers may extend beyond the specific provisions of the General Code if and when the case presents facts where, under the usages of equity, appointments of receivers could be made under the broad equity powers without the aid of any statutory enactment.

In the instant case it was not claimed, nor could it be claimed, that under the facts the provisions of paragraph 6 could be invoked.

So far as this case is concerned the appointment is controlled entirely by statute, and must be maintained or fall by virtue of paragraph 2, quoted above in full.

Neither the motion nor the petition sets forth the necessary facts for the appointment of a receiver, and this is fatal. No showing is made that the mortgaged property is in danger of being lost, removed or materially injured, but being real estate it is very rarely that such a claim could be made, and counsel for the building and loan company directly say that they are relying on the latter portion of paragraph 2, that is "that the condition of the mortgage has not been performed, and the property is probably insufficient to discharge the mortgage debt. The petition itself sets forth that the condition of the mortgage has not been performed, but there is a total absence of showing that the property is probably insufficient to discharge the mortgage debt. If the corpus of the property is sufficient to pay the mortgage debt, the mortgagee could have no possible interest in the collection of rents and so forth. The petition does not even set out in the usual form that the mortgage covered rents and profits, and this is likewise a necessary allegation as a predicate for the appointment of a receiver under the claim that the property is probably insufficient to discharge the mortgage debt.

Counsel for The Dollar Building Loan Company advance the theory that there is no showing made on the proceedings in error that the necessary facts were not presented to the trial court. In answer to this contention, we would say that regardless of what may have been stated to the court informally, or even by sworn statement, it would not suffice in the absence of statements contained in the petition or motion.

The appointment of a receiver is a final order affecting a substantial right, and the necessary pleading or motion is a prerequisite to invoke the jurisdiction of the court.

Another error fatal to the attempted appointment of the receiver was the failure to give notice to the defendants, fixing the time for the hearing of said motion. As heretofore stated, the pretended appointment of the receiver was made at the same time that the petition and motion were filed. No showing is made, nor is any claim made, that any of the defendants were served with notice before the pretended appointment was made. The case of Cleveland, C., C. I. Ry. Co. v. Jewett, 37 Ohio St. 649, is the leading Ohio authority on the question of notice. The second paragraph of the syllabus reads:

"The appointment of a receiver to take from the defendant the possession of his property, cannot be lawfully made without notice, unless the delay required to give such notice will result in irreparable loss."

In the instant case no showing is made that the delay required to give notice would result in an irreparable loss. Counsel for the building and loan company attempt to distinguish the instant case from the Jewett case in that there was a general receivership in the reported case, whereas it is claimed that we are here dealing with a special receivership. We find no authority for this contention, nor is it supported in reason. The appointment of a receiver is the taking of property; and, whether it is only a part or all, there can be no difference in principle.

Under the state of the pleadings in the instant case there is a further jurisdictional ground why the receiver could not be appointed, and this is due to the following allegation in the petition:

"On or about October 26, 1932, the defendant Bessie G. Madigan conveyed said real estate to Andrew J. Nigl, as assignee, for the benefit of creditors of the said Bessie G. Madigan."

From the above it appears that the appointment of the assignee preceded the filing of the petition in foreclosure.

In the case of Havens v. Herton, Jr., 53 Ohio St. 342,41 N.E. 253, the syllabus reads as follows:

"1. Where a deed of assignment has been filed in the probate court in accordance with section 6335, Rev. Stat., [Sections 11092 and 11093, General Code] and the assignee has qualified, that court is clothed with jurisdiction to fully execute the trust. And where such deed conveys land encumbered by mortgage the court has power, as an incident of jurisdiction, to order the land sold and the mortgage satisfied.

"2. Jurisdiction thus acquired is not ousted by the subsequent commencement of an action by the mortgagee in the court of common pleas of the county, to foreclose the mortgage."

Also see the second paragraph of the syllabus in the case ofWilson, Assignee, v. Swigart, 1 O.D. (N.P.), 418, 31 W.L.B., 353:

"A mortgagee cannot maintain an action of foreclosure on his mortgage claim in the court of common pleas, after the debtor and owner of the lands has made an assignment for the benefit of creditors."

The only exceptions to the above rules are where the sale by the assignee under proper proceedings would not furnish full and adequate relief to the mortgagee. A number of cases are cited in the briefs announcing the above exception to the rule. This exception to the general rule can not avail for the reason that plaintiff in its petition does not by any allegation bring this within the exception.

Counsel for the building and loan company contend that they are within the exception for the reason that the question of dower of the defendant James R. Madigan is involved, and that proceedings to sell by the assignee of Bessie G. Madigan could not divest the dower right of her husband in the absence of a waiver.

From the petition it appears that both Bessie G. Madigan and James R. Madigan executed the note, and that both signed the mortgage securing the same, and it is contended that Section 11124, General Code, takes care of this situation so far as dower of the husband is concerned.

Whether or not it does, we are not concerned with that problem at this time, for the reason that we are dealing with no other question than the appointment of a receiver, and there is nothing in the pleadings to invoke exception to the rule on this single question.

The question of foreclosure is not involved in this hearing. That question will have to be determined in the trial court, if the issues are properly made up.

It is our contention that under the state of the pleadings the trial court was without jurisdiction to appoint a receiver, and therefore the order will be reversed in this particular. Entry may be drawn accordingly.

Judgment accordingly.

HORNBECK, P.J., and KUNKLE, J., concur.