Cobb v. Camden Sav. Bank

• Decision Date: 29 November 1909
• Citation: 76 A. 667,106 Me. 178
• Parties: COBB et al. v. CAMDEN SAVINGS BANK.
• Court: Maine Supreme Court

76 A. 667

106 Me. 178

COBB et al.

v. CAMDEN SAVINGS BANK.

Supreme Judicial Court of Maine.

Nov. 29, 1909.

Report from Supreme Judicial Court, Knox County.

Writ of entry by William T. Cobb and another, receivers and trustees of the Mt Battie Manufacturing Company, against the Camden Savings Bank. On report to the law court upon an agreed statement of facts. Judgment for plaintiffs.

Writ of entry by the plaintiffs as receivers and trustees of the Mt. Battie Manufacturing Company for the purpose of determining the title to certain real estate in Camden, formerly the property of said company. The plaintiffs claimed the same as receivers and trustees duly appointed, while the defendant claimed under an execution sale of the same as the property of said company.

Plea, the general issue. When the action came on for trial, an agreed statement of facts was filed, and the case was reported to the law court for determination.

Argued before WHITEHOUSE, SAVAGE, SPEAR, CORNISH, KING, and BIRD, JJ.

Arthur S. Littlefield, for plaintiffs.

Reuel Robinson, for defendant.

SAVAGE, J. Real action. The plaintiffs are the receivers and trustees appointed under the provisions of sections 80 and 81 of chapter 47 of the Revised Statutes of the Mt. Battie Manufacturing Company, which prior to the proceedings hereinafter mentioned was the owner of the demanded premises. The defendant is the purchaser of the same under an execution sale, the validity of which is presented for the determination of the court.

On December 26, 1905, Brown & Adams, of Boston, creditors of the corporation, brought suit against it, and on the same day caused its real estate to be attached on their writ. Questions of law having arisen, they were argued in the law court, and the case was continued on the docket until November 28, 1908, when a certificate of decision was received from the law court. Thereupon, as provided in Rev. St. c. 79, § 49, judgment for the plaintiffs was entered as of the preceding September term of the court. Execution issued December 3, 1908. On this execution the officer returned that he took the lands in question in execution on the same day. After due notice, they were sold in the execution January 4, 1909, to the defendant, and a sheriff's deed thereof was given.

In the meantime, in accordance with a vote of the stockholders of the Mt. Battie Manufacturing Company, a bill in equity was filed prior to November 16, 1908, by its treasurer, under the provisions of Rev. St. c. 47, §§ SO, 81, praying for a dissolution of the corporation and the appointment of trustees.

Notice was ordered returnable January 5, 1909, and was served on the corporation November 16, 1908. Public notice was likewise ordered and given. Notice of the pendency of the bill was also ordered and given to all known creditors of the corporation by mail, postage prepaid. Such notice was mailed to Brown & Adams and the Camden Savings Bank December 2, 1908, the day before the execution in question issued. On January 11, 1909, a decree was entered, by which the corporation was dissolved, and the plaintiffs appointed trustees and receivers. On the same day a deed of the premises to the plaintiffs was executed and delivered in the name of the corporation by its treasurer.

It also appears that prior to the Brown & Adams attachment the lauds had been attached in the suit of S. Rawitzer & Co. against the corporation. That suit was continued on the docket until January 6, 1909, when a special judgment for the plaintiff was rendered, and execution issued January 11, 1909; and it appears that a portion of the surplus of proceeds of the sale on the Brown & Adams execution has been applied by the officer to the Rawitzer execution.

It is contended by the plaintiffs that, inasmuch as the corporation was dissolved, the sale was void because of the nonexistence of a corporation defendant; that the statute, under which the bill in equity was brought (Rev. St. c. 47, §§ 77-81), contemplates and provides for a ratable distribution of assets among all the creditors, and that, because of the dissolution of the corporation, all attachment liens were dissolved. We do not adopt this view. In the first place, the levy and sale in this case took place before the dissolution of the corporation. But further than that we do not think that a proper interpretation of the statute warrants the view that existing liens by attachment are dissolved by statutory proceedings ending in a dissolution of the corporation, although the method of enforcement may be affected, as will be noticed later. The statute (Rev. St. c. 47, § 77) provides that, when the charter of a corporation expires or is terminated otherwise, it shall have a corporate existence for three years for winding up its affairs. Section 78 provides that in such a case a creditor or stockholder may apply to the court which may appoint one or more trustees to take charge of its estate and effects with power to collect its debts, and defend suits at law, and to sell and convey its real estate. The court has jurisdiction in equity of all proceedings therein. Section 79 provides that the debts shall be paid in full when the funds are sufficient; and, when not, ratably to those creditors who prove their debts. By section 80 stockholders may vote to dissolve a corporation, and, when they do so, a bill in equity may be filed against it for dissolution by any officer, stockholder, or creditor. Such notice thereon as is ordered by the court must be given, and then such proceedings may be had according to the usual course in suits in equity, that the corporation shall be dissolved and terminated. Section 81 reads as follows: "Said court has jurisdiction in said cause to appoint receivers, issue injunctions, and pass interlocutory decrees and orders, according to the usual course of proceedings in equity; and shall, moreover, upon dissolving said corporation, or upon terminating its charter, appoint one or more trustees, who shall have all the powers conferred upon similar trustees by sections seventy-seven, seventy-eight, seventy-nine and eighty-nine, or by any other law of the state, with such special powers as may be given them by the court. But notwdthstanding the appointment of such trustees, said court may superintend the collection and distribution of the assets of said corporation, and may retain said bill for that purpose."

It has already been seen that the bill in the present case was brought under the provisions of section 80. But the purpose and effect of the statute must be sought by examining all of the sections which relate to the same subject-matter, and which are interwoven by reference. The statute, we think, contemplates that in winding up a corporation under its provisions the existing rights of priority of all creditors are to be preserved. To be sure, creditors who have proved their claims are to be paid ratably out of the funds, but the funds out of which they are to be paid are those remaining after payment of secured claims, claims having priority by reason of mortgage, attachments, or otherwise. So we conclude that the bill in equity and the proceedings under it did not ipso facto work a dissolution of the Brown & Adams attachment.

The next question is whether, after a bill in equity for dissolution is filed under this statute, and notice is ordered and served, but before the appointment of receivers or trustees, a creditor with notice, having a pre-existing valid attachment, may lawfully levy his execution upon the real estate of the corporation and sell it, or whether such a sale would be illegal and void.

The plaintiffs contend that the property was in custodia legis, both at the time of the seizure by the sheriff and at the time of the sale, although they were not appointed receivers until after the sale. In the very recent case of Chalmers v. Littlefield, 103 Me. 271, 69 Atl. 100, it was held, in accordance with practically universal authority, that property in custodia legis is not subject to seizure and sale on execution, and that such a sale, without leave of the court first obtained, is wholly illegal and void. In view of this rule, the question to be answered in the case is whether this property under the circumstances was in custodia legis.

First. What is the custody which the law intends? The oft-repeated expression is that the custody of the receiver is the custody of the court, and that is custodia legis. But when can it be said that the receiver has custody? Must he take actual, physical possession? Does his title date from the time of his appointment, or does it relate back to the beginning of the proceedings? Or to the time when the court took cognizance of the bill by issuing process? Or to the time when the process was served? Does he take title by the decree of appointment, or is a conveyance to him necessary? All these questions are more or less involved in the present inquiry, and upon all of these there is more or less diversity, and even contrariety, of judicial expression in the reported cases. But we think a careful analysis of the cases will show that some, though not all, of this diversity, is due to the varied kinds of receivership proceedings to which the rules have been applied. In attempting to answer these questions, while due regard must be paid to established rules of equity procedure in general, we must not lose sight of the purpose of the statute, which is judicial sequestration and distribution of the entire corporate estate, nor of the equitable principles applicable to such a statute.

It should be remembered that the proceedings under which these receivers are acting are statutory in their origin and character. It is not a creditor's bill. It is not a proceeding at common law. It is not a supplementary proceeding to a suit, like those in many of the cases in other jurisdictions. And, too, we may in a measure eliminate a line of cases in which receivers ought to Invalidate...