Braun v. Pepper

• Decision Date: 06 May 1978
• Docket Number: No. 48638,48638
• Citation: 578 P.2d 695,224 Kan. 56
• Parties: Gerald BRAUN, Appellant, v. Robert PEPPER, Judy Pepper, d/b/a Pepper's I.G.A., Appellees.
• Court: Kansas Supreme Court

Page 695

578 P.2d 695

224 Kan. 56

Gerald BRAUN, Appellant, v. Robert PEPPER, Judy Pepper, d/b/a Pepper's I.G.A., Appellees.

No. 48638.

Supreme Court of Kansas.

May 6, 1978.

Syllabus by the Court

1. The appointment of a receiver, ex parte and without notice, to take over one's property is one of the most drastic actions known to law or equity.

2. The power of a court to appoint a receiver is not properly exercised in any case where there is no fraud or imminent danger of the property sought to be reached being lost, injured, diminished in value, destroyed, wasted, or removed from the jurisdiction.

3. In an action to recover damages for the wrongful ex parte appointment of a receiver, damages are recoverable if the facts, as established at the trial, show that a receivership was not justified. It is not necessary for the debtor to show that the appointment of the receiver was obtained maliciously or without probable cause.

Advice of counsel is not a defense in an action to recover damages for the wrongful ex parte appointment of a receiver.

Ward E. Loyd, of Calihan, Green, Calihan & Loyd, Garden City, argued the cause, and was on the brief, for appellant.

James W. Wallace, of Wallace, Brantley & Shirley, Scott City, was on the brief, for appellees.

PRAGER, Justice:

This is an action brought by the plaintiff, Gerald Braun, to recover the balance due on a note and to foreclose a security agreement which were executed in connection with the sale of a grocery business. At the time the petition was filed, the plaintiff-creditor obtained the ex parte appointment of a receiver. The receiver was in the possession of the grocery business for three days. Then, on application of the defendants, the receivership was dissolved by the district court. The defendants, Robert and Judy Pepper, filed, along with their answer, a counterclaim seeking to recover damages on the theory of wrongful appointment of a receiver. After a trial to the jury, the district court awarded the defendants damages for a wrongful receivership. The plaintiff Braun has appealed.

The essential facts in the case are as follows: In January of 1970, plaintiff Braun contracted to sell a grocery store to defendants Pepper. The purchase price was secured in part by the store's inventory. The contract provided that the Peppers should not permit the inventory of the store to fall below $18,000 for a period as long as two weeks. In the event it did so, the seller Braun could, at his option, declare the agreement null and void, consider the full amount of purchase price due, and take or regain possession of the property. In addition, under the agreement the Peppers agreed to furnish copies of the inventory of merchandise every three months and to furnish copies of weekly sales and purchases. The Peppers took possession and operated the grocery store. For a period of time they purchased grocery items from the Fleming Company. Apparently a dispute arose between the Peppers and the Fleming Company. The Peppers then began to purchase grocery items from other sources. The Peppers supplied to Braun quarterly inventories and statements of weekly sales and purchases. The plaintiff did not know that the defendants were securing merchandise from sources other than the Fleming Company. He assumed that the inventory was declining and became concerned about his security for the Peppers' debt. Plaintiff Braun then consulted counsel and filed this action. The petition requested that a receiver be appointed ex parte. The district court conducted a hearing at which evidence was presented. On April 8, 1971, the court appointed a receiver, requiring the plaintiff to furnish a bond for the receiver pursuant to K.S.A. 60-1302 and also to furnish a bond for himself under K.S.A. 60-1304. Bonds were furnished and the receiver, Paul O. Dart, took possession of the grocery store on April 9, 1971. On April 12, 1971, on motion of the Peppers, the order appointing the receiver was set aside and the defendants Pepper reassumed possession of the store. Thereafter, prior to trial, the grocery store burned. The debt of plaintiff Braun was paid out of the insurance proceeds, except for the sum of $1,000 plus interest which was due under the Peppers' note. The only issue remaining to be tried was the right of the Peppers to recover from Braun on their counterclaim seeking damages for the wrongful appointment of the receiver.

The jury was submitted certain special questions stating issues of fact to be determined. Based upon the jury's findings of fact, the district court entered judgment in favor of the Peppers on their counterclaim. In so doing, the district court found as matters of fact that, on the date of the appointment of the receiver, the inventory of the grocery store exceeded $18,000; that plaintiff did not have information from a reliable source that the defendants were threatening to dispose of the inventory; but that the plaintiff Braun had information available to him upon which he relied which would cause a reasonably prudent man to believe that the inventory of the store was below the contract minimum of $18,000. The district court sustained the jury's award of damages to the Peppers on the theory that a receiver had wrongfully been appointed. The plaintiff Braun has appealed to this court contending that the district court erroneously determined certain questions of law and that the evidence did not support the verdict of the jury and certain findings of fact made by the trial court.

The first issue raised by the plaintiff on appeal is that the trial court erred in failing to hold as a matter of law that there can be no recovery on a theory of wrongful appointment of a receiver unless the appointment of the receiver was obtained with malice and without probable cause. Plaintiff argues that it is not sufficient for the debtor to show that the receivership was ultimately terminated and the property restored to the possession of the debtor. Stated simply, it is the position of the creditor Braun that an action by a debtor to recover damages for the wrongful appointment of a receiver is essentially an action for malicious prosecution and that the same rules which govern liability apply in both actions. A determination of this issue requires us to consider carefully the nature of an action for malicious prosecution and to compare it with an action for the wrongful appointment of a receiver.

An action for malicious prosecution may arise after a person has been charged with a crime and the criminal prosecution is terminated in favor of the defendant. The defendant, at that point, may become a plaintiff and bring an action for malicious prosecution against the person who instigated the criminal prosecution. To maintain successfully an action for malicious prosecution, the plaintiff must prove that the defendant initiated the criminal proceeding of which complaint is made, that the defendant in so doing acted without probable cause and with malice, and that the proceeding terminated in favor of the plaintiff. (Stohr v. Donahue, 215 Kan. 528, 527 P.2d 983 (1974); Thompson v. General Finance Co., Inc., 205 Kan. 76, 468 P.2d 269 (1970); Messinger v. Fulton, 173 Kan. 851, 252 P.2d 904 (1953); Haines v. Railway Co., 108 Kan. 360, 195 P. 592 (1921).) In this state, damages may also be recovered for the malicious prosecution of a civil suit. The basic elements of the cause of action are the same as those in an action for malicious prosecution of a criminal action. (Jackson & Scherer, Inc. v. Washburn, 209 Kan. 321, 496 P.2d 1358 (1972); Ahring v. White, 156 Kan. 60, 131 P.2d 699 (1942).)

The plaintiff Braun maintains that an action for the wrongful appointment of a receiver is, in effect, an action for malicious prosecution of a civil action and that liability can attach only where the person initiating and procuring the receivership acted without probable cause. In taking this position, the plaintiff Braun relies upon the finding of the trial court that Braun had information available to him at the time the receiver was appointed upon which he relied which would cause a reasonably prudent man to believe that the inventory of the store had dropped below the $18,000 minimum.

There are cases in other jurisdictions which hold that an action for wrongful receivership is identical with an action for malicious prosecution of a civil action. The only state which has adopted a pure malicious prosecution approach to an action for wrongful receivership is Wisconsin. (Luby v. Bennett, 111 Wis. 613, 87 N.W. 804 (1901).) Other jurisdictions take this approach where the action is not brought upon the bond which has been provided in the receivership proceeding. A majority of the jurisdictions take what has been described as the "strict liability approach." Under the strict liability approach, once a court has determined that the original order appointing a receiver was wrongful, the person obtaining the receivership is considered a trespasser ab initio and it is not necessary for the injured party to show that the appointment was procured maliciously or without probable cause. (McKinney v. Nayberger, et al., 138 Or. 203, 2 P.2d 1111 reh. den., 138 Or. 216, 6 P.2d 228 (1931); K. C. Oil Co. v. Harvest Oil & Gas Co., 80 Okl. 61, 194 P. 228 (1920); Cecil v. Cecil's Exors. and Trustees, 188 Ky. 700, 223 S.W. 1092 (1920); Strum v. Blair, 182 Ill.App. 413 (1913); Thornton-Thomas Co. v. Bretherton et al., 32 Mont. 80, 80 P. 10 (1905); Haverly v. Elliott, 39 Neb. 201, 57 N.W. 1010 (1894).)

The Kansas cases on the subject do not clearly determine the issue presented here. There is, however, language in the Kansas cases involving receiverships and other provisional remedies which support the conclusion that it is not necessary to prove malice or probable cause in order for an injured party to recover damages for the wrongful appointment of a receiver. Before considering the Kansas...