Cudd v. Hannon
| Decision Date | 29 June 1938 |
| Docket Number | 14710. |
| Citation | 198 S.E. 17,187 S.C. 424 |
| Parties | CUDD et al. v. HANNON et al. DIXON v. CUDD. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Spartanburg County; T. S Sease, Judge.
Creditor's bill by C. H. Dixon, as receiver of the First National Bank of Gaffney, S. C., against J. N Cudd, wherein R. A. Hannon and John L. Lancaster were appointed receivers of J. N. Cudd, and subsequently Dr. A. D Cudd and others filed claims for medical services and funeral expenses for J. N. Cudd. From a decree for claimants, the receivers appeal.
Reversed.
Donald Russell, of Spartanburg, for appellants.
E. W Johnson, of Spartanburg, for respondents.
The sole question raised by this appeal is thus stated by the appellant: Are claims arising many years after the appointment of a receiver in a creditor's suit entitled to payment out of funds and properties passing into the custody of the court through the filing of such creditor's bill?
The appeal is prosecuted by the receivers of J. N. Cudd from the decree of the lower court, wherein certain claims arising out of the last illness and burial of J. N. Cudd were adjudged preferred claims against the funds in the custody of the receivers and entitled to payment out of such funds.
On December 5, 1931, a general creditor's bill was filed by the receiver of the First National Bank of Gaffney, suing on behalf of itself and all other general unsecured creditors of J. N. Cudd, against J. N. Cudd. By this bill the plaintiff sought the appointment of a permanent receiver for the assets and properties of the debtor to the end that such properties and assets might be taken into the custody of the court and distributed among the existing creditors of Mr. Cudd, as their rights might be fixed and determined. It is admitted that at the time of the filing of the bill Mr. Cudd was insolvent.
On the day the bill was filed, receivers were appointed, and a consent decree issued, ordering and directing them, "To take possession and custody of all and singular the assets of the said defendant of any character whatever and all the property belonging to the same, real, personal, or mixed."
The issue before us arose from the following facts, as to which there is no dispute:
Sometime during the year 1937 the debtor J. N. Cudd, died. Following his death, Dr. A. D. Cudd filed a claim in the sum of $115.00, for services rendered by him covering a period of several weeks during the last illness of Mr. J. N. Cudd. Floyd's Mortuary filed a claim for funeral expenses in the sum of $590.45, and West Oakwood Cemetery filed a claim in the sum of $17.50, for a plot for the burial of Mr. Cudd. None of these claims was incurred at the instance or upon the authorization of the receivers of Mr. J. N. Cudd.
Shortly prior to the death of Mr. Cudd, an order had been entered in the receivership proceeding allowing a homestead in his favor, in the amount of $1,000.00, and this homestead had been paid to him.
The claimants, Dr. Cudd, Floyd's Mortuary, and West Oakwood Cemetery, filed their claims with the receivers, and asserted that they were entitled to a preferential status. The receivers refused payment, and, by an appropriate order, the issue was referred to the master of Spartanburg County, who, after taking testimony, recommended that the respective claims be allowed as preferred claims in the distribution of the assets of J. N. Cudd in the hands of the Receiver.
Upon exceptions being taken by the receivers to the circuit court, the report of the master was confirmed, and the receivers were ordered and directed to pay these creditors in accordance with the recommendation of the master.
It appears that when the order was entered, on December 5, 1931, appointing the receivers, Mr. Cudd had certain outstanding policies of life insurance having a paid up value of several hundred dollars, in which his estate was named as beneficiary. None of these policies was turned over to the receivers by Mr. Cudd, but he, instead of so doing, and without the knowledge of the receivers, changed the beneficiary therein from his estate to his son, J. J. Cudd, and thereafter to his daughter-in-law, Mrs. Blanche Hair Cudd. After the death of Mr. Cudd, in 1937, the receivers discovered these facts, and they made demand upon Mrs. Cudd to participate in the funds realized from these policies. Their demand to participate was based upon the fact that since the policies had been maintained in force by reason of the paid up value of the policies existing at the time of the original appointment of the receivers, the creditors of J. N. Cudd interested in said receivership had certain legal rights in and to the proceeds of such insurance. The contention between Mrs. Cudd and the receivers was settled, and she paid to the receivers from the proceeds of the insurance policies an amount in excess of $6,000.00.
It is the contention of the appellant that when a court of equity appoints a receiver for an insolvent estate it takes control of the assets and property of the estate for the benefit of all existing creditors at that time, and that the funds in the hands of the receivers are not liable for the payment of claims incurred by the debtor, or his estate, after such appointment.
When a Court has taken possession of the property and assets of an insolvent debtor for administration and distribution, and has appointed a receiver, the assets of the debtor constitute a trust fund for the payment of his debts. The property of the debtor is deemed to be in the custody of the law, although the title thereto logically remains in the insolvent party, for whose assets the appointment of a receiver is made. Hannon v. Mechanics Building & Loan Ass'n, 177 S.C. 153, 180 S.E. 873, 100 A.L.R. 928; Peurifoy v. Gamble, 145 S.C. 1, 142 S.E. 788, 71 A.L.R. 783; In re American Slicing Machine Co., 125 S.C. 214, 118 S.E. 303.
Coming directly to the point at issue, it may be stated as a general proposition of law, that in order for a claim against the fund or property in the hands of a receiver to be a provable claim, it must be either one which is actionable at the date of the receiver's appointment, or a direct obligation at the date of such appointment, whether then due or to become due. Conversely,...
To continue reading
Request your trial