Cusack v. Prudential Ins. Co. of America

• Court: Oklahoma Supreme Court
• Writing for the Court: DAVISON, Justice.
• Citation: Cusack v. Prudential Ins. Co. of America, 134 P.2d 984, 192 Okla. 218, 1943 OK 52 (Okla. 1943)
• Decision Date: 23 February 1943
• Docket Number: 29321.
• Parties: CUSACK v. PRUDENTIAL INS. CO. OF AMERICA et al.

134 P.2d 984

192 Okla. 218, 1943 OK 52

CUSACK v. PRUDENTIAL INS. CO. OF AMERICA et al.

No. 29321.

Supreme Court of Oklahoma

February 23, 1943

Rehearing Denied March 16, 1943.

Syllabus by the Court.

1. A substitute receiver may summarily proceed before the appointing court against the administrator of a deceased prior receiver to recover money or property which was previously in the hands of said prior receiver and thus under the control of the appointing court for the reason that the administrator's retention of such property constitutes an interference with the possession and control of the appointing court.

2. Adequate notice is sufficient to support a summary proceeding by a receiver though the requisites of the law respecting the form and manner bringing new parties before the court in an independent civil action are not strictly adhered to.

3. Prior authority of the appointing court is not a jurisdictional prerequisite to a summary proceeding by a receiver instituted before the appointing court.

4. Generally, by reason of the stay contemplated by Section 75 of the Bankruptcy Act, 11 U.S.C.A. § 203, a bankruptcy proceeding operates as an automatic statutory ouster of the jurisdiction of a state court in a mortgage foreclosure action.

5. The doctrine of trade fixtures does not apply to fixtures installed by the owner of the real estate on premises used and occupied by himself.

Appeal from District Court, Okmulgee County; S. L. O'Bannon Judge.

Action by E. R. Bryant, receiver, having charge of real estate in connection with mortgage foreclosure actions instituted by the Prudential Insurance Company of America against F. E Cusack, administrator of the estate of Perry K. Morton deceased, to recover products of and receipts from products of the mortgaged land. From an adverse judgment, defendant appeals.

Affirmed in part and reversed in part and cause remanded with directions.

E. F Maley, of Okmulgee, for plaintiff in error.

Earl Bohannon, of Parsons, Kan., and Cochran & Noble and John L. Norman, all of Okmulgee, for defendants in error.

DAVISON Justice.

This is a proceeding by E. R. Bryant, a receiver having charge of real estate in connection with mortgage foreclosure actions, to recover products of and receipts from products of the land from F. E. Cusack, as administrator of the estate of Perry K. Morton, deceased, and others.

The cause was tried to the court without the intervention of a jury and resulted in a judgment in favor of the receiver. F. E. Cusack, administrator, has appealed, appearing herein as plaintiff in error. The Prudential Insurance Company of America and E. R. Bryant, receiver are defendants in error.

The particular litigation here involved is incident to and connected with other litigation previously instituted. A resume of that litigation is an essential part of our statement.

On December 2, 1936, the Prudential Insurance Company of America recovered a judgment against Perry K. Morton in a mortgage foreclosure action docketed in the District Court of Okmulgee County as cause No. 20,345. On July 7, 1937, the same company as plaintiff recovered another judgment against Morton in the same court but in another action. That action was docketed as No. 20,742.

In cause No. 20,345 Perry K. Morton, defendant therein, was appointed receiver on May 21, 1936 and on February 26, 1937, he was also appointed receiver of the property involved in cause No. 20,742, except the homestead of the said defendant. Morton qualified as receiver but did not file any report.

On July 10, 1937, Morton filed a petition in bankruptcy in the United States District Court for the Eastern District of Oklahoma. The proceeding was instituted under section 75 of the Bankruptcy Act, 11 U.S.C.A. § 203 (Frazier-Lemke Act). The petition was "approved as properly filed" and the matter was referred to a Conciliation Commissioner sitting at Okmulgee. On November 1, 1937, Morton was adjudged a bankrupt. Neither of the orders contained any specific inhibition against further proceedings in the foreclosure actions.

On September 19, 1938, the bankruptcy proceeding was dismissed on motion of the Prudential Insurance Company. The life of the proceeding was slightly in excess of 14 months. On September 30, 1938, Morton died. On October 6, 1938, F. E. Cusack was appointed administrator of his estate. On November 2, 1938, E. R. Bryant was appointed substitute receiver in cause No. 20,345 and a separate order of the same purport was entered in cause No. 20,742.

On November 26, both actions (Nos. 20,345 and 20,742) were revived in the name of the administrator by separate proceedings.

On November 14, 1938, the substitute receiver filed in each of the actions a petition charging in substance that the administrator F. E. Cusack had collected various sums of money as rents from the lands involved in said foreclosure proceedings and that the administrator had also taken charge of some corn, hay, posts and other personal property which were not assets of the estate but which should go to the receiver. He likewise alleged that other persons were indebted to him as receiver. He sought recovery of such moneys and articles of personal property.

To each of the petitions the administrator filed a response denying in substance that the receiver was entitled to the property and moneys, asserting certain legal objections to the manner in which the receiver was proceeding, and further asserting that the power of the receiver to receive and collect proceeds from the property was nonexistent during the pendency of the bankruptcy proceedings and that moneys and properties passing into the hands of Perry K. Morton during that time were his personal property even though he would have been accountable for them as receiver if the bankruptcy proceeding had not been pending.

The two proceedings were consolidated and tried as one. Findings of fact and conclusions of law were made by the trial court. Based thereon judgment in favor of the substitute receiver was rendered.

In this appeal plaintiff in error presents 39 assignments of error which have been grouped under seven propositions which are:

"I. The state District Court was divested of jurisdiction from the date of the filing of bankruptcy proceedings.

II. Failure of the trial court to make a finding on a material issue is reversible error.

III. An administrator is entitled to the exclusive possession of personalty from the date of the death of the deceased until it is disposed of in the course of administration.

IV. The findings are not supported by any evidence whatsoever.

V. E. R. Bryant, receiver, had no right or authority to institute these proceedings against the administrator for possession of the property involved.

VI. No legal process was served on the plaintiff in error.

VII. Wagon or platform scales is personalty and not included in real estate mortgage."

The fifth and sixth propositions which relate primarily to the propriety of the remedy pursued by the receiver will be considered first.

The remedy chosen was summary in character. At its institution a notice was prepared and served on the parties sought to be charged in each of the proceedings, including in each instance plaintiff in error.

Each notice ran in the name of the state and was accompanied by a copy of the receiver's petition, thus advising the nature of the claims which were being asserted. However, in many respects the notices did not satisfy the requirements of formal summonses. They were sufficient to satisfy the requirements of the law in a summary proceeding but insufficient to meet legal standards in connection with the commencement of a civil action. This for the reason that in the former it is unnecessary to pursue with exactitude the requirements of the law as normally observed in a civil action between litigants. Clark on Receivers, 2nd Ed., p. 796.

The administrator challenged the sufficiency of the notice by motion to quash on the theory that he could not be subjected to the jurisdiction of the court by such notices or in an informal and summary proceeding, and thereafter throughout the proceeding he continued to preserve and assert his objection to the manner of proceeding. Thus the determining question on this phase of the case is whether a summary proceeding is an appropriate method for substitute receiver to recover assets of the receivership which have passed into the hands of the administrator of a deceased former receiver.

There is no question that the more formal remedy of an independent civil action was available. Clark on Receivers, 2nd Ed., p. 824; Preston v. American Surety Co. of New York, 104 Md. 40, 64 A. 292. While the question of whether a summary proceeding is appropriate and available is debatable, we have concluded that it may be approved in this case.

Neither of the parties have called our attention to any case precisely in point. The plaintiff in error in support of his objection to the form of proceeding relies upon: Nellis v. Justices' Court of Los Angeles, 20 Cal.App. 394, 129 P. 472; Ford v. Smead, 109 Vt. 129, 194 A. 369; Webb Packing Co. v. Harmon, 39 Del. 22, 9 W.W.Harr. 22, 196 A. 158; Hamilton et al. v. Browder, 176 Okl. 229, 54 P.2d 1025 and In re Gentry's Estate, 158 Okl. 196, 13 P.2d 156; none of which bear directly on the question.

The defendant in error relies upon Tardy's Smith on Receivers, 2nd Ed., sec. 54; Bien v. Robinson 208 U.S. 423, 28 S.Ct. 379, 52 L.Ed. 556; James T. Shields, Jr., Rec., v. Coleman, 157 U.S. 168, 15 S.Ct. 570, 39 L.Ed. 660; Price v. Horrigan Contracting Co., 11 Del.Ch. 54, 95 A. 345.

It is the general rule that a receiver has no right through summary proceedings to obtain the possession of property found in the...