Chapin v. Stuckey, 85-15

• Decision Date: 01 July 1985
• Docket Number: No. 85-15,85-15
• Citation: 692 S.W.2d 609,286 Ark. 359
• Parties: Esther Hill CHAPIN, Individually and as Executrix of the Estate of Samuel C. Chapin, Deceased, Appellant, v. J.C. STUCKEY, Successor Trustee Under the Will of Samuel C. Chapin, Jane Lee Chapin Riddle, Samuel Caryl Chapin, Judd Valmore Chapin, Jr. and Ernestine Chapin, Appellees.
• Court: Arkansas Supreme Court

Page 609

692 S.W.2d 609

286 Ark. 359

Esther Hill CHAPIN, Individually and as Executrix of the Estate of Samuel C. Chapin, Deceased, Appellant, v. J.C. STUCKEY, Successor Trustee Under the Will of Samuel C.

Chapin, Jane Lee Chapin Riddle, Samuel Caryl

Chapin, Judd Valmore Chapin, Jr. and

Ernestine Chapin, Appellees.

No. 85-15.

Supreme Court of Arkansas.

July 1, 1985.

Oscar Fendler, Michael L. Gibson, Blytheville, for appellant.

E.L. Schieffler, West Helena, Noyl Houston, Trumann, Keith Blackman, Jonesboro, Larry Jennings, Harrisburg, for appellees.

HAYS, Justice.

This appeal concerns the appointment of a receiver to manage Judd Hill Plantation, 4,761 acres of farm land in Poinsett County, Arkansas.

In 1933 Judd Hill gave the plantation bearing his name to his daughter, Esther Hill Chapin and to her husband, Samuel C. Chapin. Thereafter, the Chapins farmed the lands until 1976 when Samuel Chapin died, survived by Esther and three children of a deceased son. The will of Samuel Chapin purported to leave one-half of his estate to Esther and the other half in trust for the support, education and maintenance of his grandchildren and their mother. The trustee was directed to retain the farm intact and operate it in conjunction with Esther Hill Chapin until the trust vested on the youngest grandchild reaching age thirty.

Mrs. Chapin promptly petitioned for her appointment as executrix of the will, which was ordered, and later for an order of partial distribution of one-fourth of the plantation to the trustee, Mercantile Bank of Jonesboro. Her petition asked that upon completion of farming operations for the current year, 1980, the remaining distributive share of the plantation under the will be paid to the trustee, which included one-fourth of the farming equipment and machinery. The partial distribution was ordered and in September, 1980, Mrs. Chapin gave an executrix's deed to the trustee conveying an undivided one-fourth of the farm lands to the trustee.

In June of 1981, Mercantile Bank, alleging that it had been unsuccessful in funding the trust by rental arrangement for the one-fourth interest in the plantation, asked the Poinsett Chancery Court to relieve it as trustee, its petition noting there were no assets available for distribution and that the beneficiaries of the trust were demanding distribution. The petition was granted and J.C. Stuckey was named successor trustee.

In May, 1984, the successor trustee filed a petition in the chancery suit naming Esther Hill Chapin as defendant, claiming ownership by the trust of one-fourth of the lands and farm machinery and equipment, and alleging irreparable injury to the trust because of waste and mismanagement of the farm by Mrs. Chapin. The trustee alleged that he was unable to discharge his fiduciary obligations because of the defendant's refusal to permit him to come upon the lands. Other allegations included specific instances of loss to the trust because of neglect and mismanagement, refusal to account, to permit the trustee to examine records, or to discuss farming operations with the trustee. The trustee asked that a receiver be appointed to take charge of the lands, equipment, bank account and records. The appointment of a receiver was supported by the Chapin grandchildren, who moved to intervene.

After a hearing the Chancellor found that Esther Hill Chapin owned an undivided three-fourths of the plantation, with the trust owning an undivided one-fourth of the land and one-fourth of the personal property, subject to the termination of the probate proceedings. The Chancellor also found that Mrs. Chapin was not capable of prudent management of the plantation, that continued efforts by her would result in material and irreparable injury to the trust, and that a receiver should be appointed over the lands and farming equipment. James O. Campbell was appointed.

I

Esther Hill Chapin has appealed from the decree, urging the Chancery Court was without jurisdiction to entertain an action brought solely for the appointment of a receiver. She argues the appointment of a receiver was the only relief sought by the successor trustee and beneficiaries of the trust, and was not ancillary to any other proceeding then pending against the estate or against Mrs. Chapin. In that connection, we need not decide whether the proceeding involving the Chapin estate still pending in Poinsett Probate Court, or the proceeding pending in the Poinsett Chancery Court over the affairs of the trust, from which this appeal springs, are sufficient in themselves to meet that requirement, because we disagree with appellant's contention that the Chancellor lacked jurisdiction to appoint a receiver. We believe the decision was within his discretion under the law and that that discretion was not abused.

Appellant's brief cites numerous cases and articles stating the rule to be that the appointment of a receiver is allowable only in connection with an action pending for some other purpose, to which the appointment of a receiver will be an aid. 65 Am.Jur.2d, Receivers, § 25, p. 878. We take no exception to the basic principle that receivership is not an end unto itself, but is ancillary to some proceeding over which the court has jurisdiction. We believe it is a broad statement of the law which is generally true, but is neither categorically nor invariably so. It is not, as appellant insists, a characteristic to be rigidly applied. Appellant contends the principle rises to the level of a jurisdictional requirement, to the end that unless the objective of the litigation which the receivership accompanies can be sharply distinguished from the receivership itself, the power of the court to appoint a receiver is so lacking that jurisdiction itself fails. We do not find the rule to be so absolute.

Examples are readily found. In Gross v. Missouri & Arkansas Railway Co., 74 F.Supp. 242 (W.D.Ark.1947), cited by appellant, Judge John E. Miller, while hinting that grounds for the appointment of a receiver were lacking, justified the appointment because the litigants were in agreement that a receiver would be beneficial. The opinion notes the appointment of receivers comes within the extraordinary powers of a court of equity, Judge Miller's only concern being whether the appointment constituted an abuse of discretion. Since the parties were not objecting, he declined to inquire into that issue on his own. Nothing in the opinion casts any doubt on jurisdiction, which even the consent of the parties cannot create. California v. LaRue, 409 U.S. 109, 93 S.Ct. 390, 34 L.Ed.2d 342 (1972).

Of course, these parties are sharply divided over the appointment of a receiver, and in that respect this case differs from Gross. But the usefulness of a receiver in the unusual situation presented here was obviously apparent to the Chancellor, and is equally evident to us, as an efficient antidote for the problem, i.e. managing a diverse and complex farming operation which the common owners were unable to accomplish for themselves. It would be difficult to conceive of a more expeditious solution under the law to what can only be seen as a stalemate between Mrs. Chapin and the trustee, to the serious detriment of the beneficiaries.

A broad review of the discussions on the subject leads to the conclusion that the appointment of receivers rests within the discretion of courts of equity, to be exercised with restraint and caution, to be sure, and ordinarily only in conjunction with a pending proceeding, and rarely as a means in itself, but whenever unusual circumstances warrant. Among the situations warranting receivers are: when necessary to the best interests of both parties, Heinze v. Butte, (1903 CCA 9th) 126 Fed. 1, or where waste is occurring, 65 Am.Jur.2d, § 35, p. 884, or where a cotenant wrongfully assumes exclusive possession of common property, or mismanages common property so as to cause its loss, or where the preservation of the subject matter of the suit requires it, id. § 57. The authors of Am.Jur.2d state, "There is no doubt of the power of a court of equity to appoint a receiver in a suit between cotenants." And, "[m]any of the cases imply, or in some other manner give support to the proposition, that the act of one cotenant in wrongfully assuming exclusive possession of the common property may, in a proper action, be in itself sufficient grounds for the appointment of a receiver." Id., § 57. (Our italics).

An ALR article dealing with the appointment of receivers in disputes between owners of undivided interests states:

In so far as concerns "power," in the strict sense, the cases leave no doubt that in a suit in equity between cotenants or persons claiming successive interests in real or personal property the court has inherent power to appoint a receiver to preserve, pendente lite, the subject matter of the litigation. Furthermore, trial courts are ordinarily permitted to exercise that power with considerable discretion in determining whether, under particular circumstances, a receivership is reasonably required. The power to appoint a receiver is, of course, a harsh and dangerous one, and should be exercised with great circumspection. Kory v. Less, 180 Ark. 342, 22 S.W.2d 25 (1929). 'The cases in which receivers ordinarily will be appointed are confined to those in which it can be established to the satisfaction of a court that the appointment of a receiver is necessary to save the property from injury or threatened loss or destruction, or that the claimants in possession are excluding another party from rights which the latter has in the land. Saylor v. Hilton, 190 Ky. 200, 226 S.W. 1067 (1921). (Our italics).

We believe our own statutes on receivership are consistent with this interpretation, that is, that the power of equity courts to appoint receivers is not as narrowly restricted as appellant insists, that some elasticity is intended. ARCP Rule 66, provides that courts of equity ...