Bradford v. Cooledge
| Decision Date | 24 March 1898 |
| Parties | BRADFORD et al. v. COOLEDGE et al. |
| Court | Georgia Supreme Court |
Syllabus by the Court.
1. Where, under the traders' act, the property of an insolvent debtor, on the petition of unsecured creditors who filed the same for the benefit of themselves and such creditors as might join therein, was placed in the hands of a receiver, a creditor who held a mortgage executed and recorded prior to the filing of the petition, and who between the dates of the appointment of the temporary and the permanent receiver, foreclosed her mortgage, and placed the execution issued thereon in the hands of the sheriff, is not to be charged with any of the expenses of the receivership or with costs, merely because of the fact that, as soon as the permanent receiver was appointed, she filed a petition in which she simply "made known to the court the existence of her mortgage, pointed out the property on which it was a lien, and prayed that said lien be preserved and its priority protected." Especially is this true when subsequently by amendment to the original petition, the validity of the mortgage was attacked by the unsecured creditors, and it was prayed that the mortgagee be made a party defendant, which was done by the formal order of the court.
2. When, on the issue thus made, the mortgage was declared to be free from fraud and valid, and it appeared that the property covered thereby had been sold by the receiver for an amount greater than that due on the mortgage, the mortgagee was entitled to have the amount due on the mortgage paid in full.
3. So much of the fund in the hands of the receiver as was necessary to pay off the amount due on the mortgage was not subject to be diminished by costs and expenses of the receivership; but so much of such costs and expenses as could not be met by the general fund arising from the sale of the property of the debtor in excess of the amount of the mortgage, or not covered by the mortgage lien, should be taxed against the plaintiffs.
4. When it appears that the whole property of the debtor is subject to liens of higher dignity than the mortgage, such as taxes, the court should order payment of such liens to be made from the general fund before other allowances are made; and, as against such general fund, the amount necessary to pay off the mortgage arising from the sale of the mortgaged property is not subject to payment of such higher liens, unless it be shown that the surplus arising from the sale of the property beyond the amount necessary to pay off the mortgage is not sufficient to meet them; and in that case the fund necessary to pay the mortgage can only be diminished to the extent that such general fund is deficient.
Error from superior court, Floyd county; W. M. Henry, Judge.
Suit by F. J. Cooledge and others against Leonora Bradford and another to set aside a mortgage. Defendants had judgment, and bring error from an order charging certain funds covered by the mortgage with the payment of costs and expenses of a receivership. Reversed.
Fouché & Fouché, for plaintiffs in error.
Reece & Denny, J. W. Ewing, C. A. Thornwell, Halstead Smith, C. Rowell, W. T. Turnbull, W. W. Brookes, and Max Meyerhardt, for defendant in error.
F. J. Cooledge & Bro. and other insecured creditors filed a petition in the superior court of Floyd county against William Bradford, doing business under the firm name of the Bradford Drug Company. It was brought under the provisions of section 2716 et seq. of the Civil Code, known as the "Traders' Act." On the presentation of the petition, the court, on June 5, 1893, appointed a temporary receiver, who at once took into his possession, among other things, a stock of drugs, furniture, and fixtures, of the cost value of $11,176.75, and of book accounts and notes to the amount of $1,838.70; also certain real estate, of little value, by reason of incumbrances thereon. It appeared that Leonora Bradford, wife of the defendant, held a mortgage covering the stock of drugs, furniture, fixtures, etc., of which the receiver took possession. This mortgage purported to have been executed on May 29, 1893, and was recorded on the same day. On the 28th of June, which was after the appointment of the temporary receiver, Leonora Bradford foreclosed this mortgage, and placed the execution issued thereon in the hands of the sheriff of Floyd county. On June 30, 1893, the court appointed a permanent receiver, with direction to collect all debts due the defendant, and to sell all his property of every kind. Concurrently with the hearing of the application to appoint a permanent receiver, and simultaneously with such appointment, Leonora Bradford filed her separate petition, in which she "made known to the court the existence of her mortgage, and pointed out the property upon which it was a lien, and prayed that such lien be preserved, and that its priority be protected." On receiving this petition, the court ordered it to be filed, and further ordered that the proceeds of the sale of the mortgaged property be held by the receiver until the further order of the court. At the time of the hearing of the application to appoint a receiver, a large number of creditors came in, and made themselves parties plaintiff to the creditors' petition. Acting under the orders of the court, the receiver, from time to time, sold the property of the debtor, and made his report to the court, from which it appeared that he realized from the sale of the property covered by Mrs. Bradford's mortgage the sum of $5,585.77, and from the collection of debts and the sale of property not covered by the mortgage $296.41, and from other sources $56. On August 7, 1893, the plaintiffs, by leave, amended the original petition, and averred that the debt claimed by Leonora Bradford never in fact existed; that the note and mortgage to her were made for the purpose of hindering, delaying, and defrauding the creditors of William Bradford; that Leonora Bradford was not in fact a creditor of William Bradford, neither before nor after the date of her mortgage; and that she had no separate estate. The amendment prayed that the note and mortgage be declared null and void, that they be delivered up and canceled, and that Leonora Bradford be made a party defendant in the cause; and that process issue against her; and, upon the prayer of this petition, she was, by order of the court, made a party defendant. To this amended petition Leonora Bradford made answer, averring that she was possessed of a separate estate, and in such answer also detailed the facts connected with her debt and mortgage and the bona fides of the same. Subsequently, by leave of the court, the receiver sold to Leonora Bradford certain goods and property covered by her mortgage to the amount of $2,824, and the said mortgagee entered into a bond with good security, payable to the receiver, conditioned that said sum was to be credited on her mortgage if the same should be declared valid, but was to be returned to the receiver if the mortgage was declared invalid. From time to time pending the case, the court ordered payments to be made to the receiver, to plaintiffs' attorneys for filing the bill, and to the receiver's attorney, and made other allowances for expenses, to all of which the mortgagee excepted pendente lite. On the 13th of February 1897, the case came up for trial; and the matters at issue were submitted to a jury, who returned a verdict that the plaintiffs and interveners named in the bill recover of the defendants various amounts named therein, and that "the mortgage in favor of Leonora Bradford, as set out in the pleadings, is free from fraud, and is a good and valid lien upon the articles named therein, and is a valid lien from its date for the amount of principal and interest due thereon." After this verdict was rendered, the receiver's final report was made, and the mortgagee, having credited her mortgage fi. fa. with the sum of $2,824 as of the date of September 1, 1893, and there appearing to be further due on said mortgage the sum of $2,469.42, she moved the court for an order and decree applying the money then in the receiver's hands, to wit, $1,291, to her said fi. fa., and that she have a decree against the plaintiffs for the balance due on her fi. fa.,--$1,178.40. The court refused to so decree, but ordered the entire cost, $43.25, paid out of said fund, and that the residue, $1,247.77 be applied to the mortgage fi. fa., and further decreed: "The costs and expenses of the receivership have been awarded paid out of the total fund, as follows: That portion of the fund which was received from sources outside of the property covered by the mortgage has been all applied to the payment of said costs and expenses, and the balance of costs and expenses, awarded to be paid out of funds covered by the mortgage, and brought into court by the receiver." To this order and decree, Leonora Bradford excepted.
1. The proceeding instituted by the creditors was in equity, and the several provisions of law which govern the rights of creditors, and prescribe the method of procedure in such cases, are laid down by sections 2716, 2717, 2718, 2719, 2720, 2721, and 2722 of the Civil Code. It is provided that in such proceedings any creditor may become a party to said petition under an order of court at any time before the final distribution of the assets. It is not necessarily...
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