First National Bank of Laramie v. Cook

• Decision Date: 25 April 1904
• Parties: FIRST NATIONAL BANK OF LARAMIE ET AL. v. COOK, AS RECEIVER, ET AL
• Court: Wyoming Supreme Court

76 P. 674

12 Wyo. 492

FIRST NATIONAL BANK OF LARAMIE ET AL. v. COOK, AS RECEIVER, ET AL

Supreme Court of Wyoming

April 25, 1904

Rehearing Denied December 31, 1904, Reported at: 12 Wyo. 492 at 522.

ERROR to the District Court, Albany County, HON. RICHARD H. SCOTT Judge of First Judicial District, presiding.

The facts are stated in the opinions.

Reversed and remanded.

N. E Corthell, for plaintiffs in error.

The proceedings taken by the judgment creditor in the District Court and permitted by that court show a radical misconception of the office and nature of receiverships. It is not a device by which rights are created or destroyed, or conflicting claims determined, but an ancillary and provisional remedy rendered necessary by the existence of property or a fund which cannot be otherwise taken care of. A suit pending in a proper court in which there is a petition or application by one or more parties for relief against others, showing a lawful cause of complaint and a lawful right to recover something is essential. The statutory power to appoint a receiver is strictly construed, and the power of appointment is reluctantly exercised and only after the exhaustion of other and less summary remedies. It must appear that there is property to be cared for, and that it can be cared for by a receiver more advantageously and justly than by any of the parties interested. (23 Ency Law, 1001-1092 Beach on Rec., Secs. 1, 2, 137, 139, 162, 163, 612, 621, 808, 810; High on Rec., Secs. 1-3, 9, 11; Smith on Rec., Secs. 1-3, 10-13; Pomeroy's Eq. Jur., 171, 1319, 1330; Sellers v. Stoffel (Ind.), 39 N. E., 52; Hutchinson v. Rice (La.), 33 So. 57; Schaack v. McKay, 100 Ill.App. 294; R. R. Co. v. Soutter, 69 U.S. 510; State v. Ross, 122 Mo. 435; Minkler v. Sheep Co. (N. D.), 62 N. W., 494.)

A court of equity must act upon established principles and through established channels. (Rees v. Watertown, 86 U.S. 107; Beach on Rec., 609, 615; High on Rec., 403, 439; Tornances v. Melsing, 106 F. 775; Pearce v. Jennings, 10 So. 511; Smith on Rec., 146; Williams v. Sexton, 19 Wis. 42; Thompson v. Allen County, 115 U.S. 550.) All the proceedings in the case at bar rest upon the motion and affidavit of the judgment creditor for the examination of Thomas Bird with the incidental request for the appointment of a receiver if the court should so determine. The papers were prepared to secure an examination and disclosure of assets by the managing partner of the judgment debtor. The showing of the affidavit, while probably sufficient for an examination of the debtor, is insufficient to secure the appointment of a receiver, had there been a direct suit for that purpose. Instead of pursuing the statutory remedy and obtaining an order under Section 3951 for the application of particular property toward the satisfaction of the judgment, the creditor asked and obtained an order showing a general appointment of a receiver of all the property of the debtors, under cover of which the receiver seized upon and began to conduct and administer the entire business and all the tangible property of the firm. All of that property could have been seized under execution. The fact that by so doing the Sheriff might have become seriously responsible to third parties is not a sufficient excuse for authorizing him to take possession as receiver in the proceeding instituted by the creditor.

The statutes provide the ordinary legal remedies for enforcing judgments which take precedence over the extraordinary remedies of equity. (R. S., Secs. 3814, 3828, 3852, 3853, 3879-3893; Laws 1901, p. 101; R. S., Secs. 3901-3914, 3915-3924.) The proceedings authorized by statute for reaching property not obtainable under execution are not intended as a substitute for execution, nor to dispense with the usual or orderly proceedings heretofore practiced by courts of law or equity. The object of the proceeding is to compel the application of property concealed by the debtor, or which from its character cannot be levied upon by execution. (Edgerton v. Hanna, 11 O. St., 323; Schloredt v. Boyden, 9 Wyo., 392; High on Rec., 401; Smith on Rec., 146, 148, 150.) Proof by affidavit or otherwise that the debtor has property which he refuses to apply to the judgment simply authorizes the court to begin and conduct an inquiry for the purpose of disclosing such property, and this is the foundation for such further proceedings as are to be found in the ordinary processes and usages of courts. The mode of applying the property which may be discovered is not expressly provided, but it must be in analogy as to claims against third parties to the remedies to which the debtor himself might resort. Disputes between the debtor and third persons cannot be settled nor the collection of claims enforced by an order of payment and attachment. (Edgerton v. Hanna, supra; Schloredt v. Boyden, supra.)

The chief end of these proceedings may be said to be the accomplishment, by a sort of legal assignment, of a transfer of property from a judgment debtor to the creditor, which cannot be had otherwise than by the intervention of the court. To authorize the court to appoint a receiver in such a proceeding there should be, (1) a verified application showing where and what the property is and why it cannot be taken upon a writ; (2) the court should make an order describing the property and directing its application to the judgment and the manner of such application, and (3) as incidental to and consequent upon these proceedings, in an appropriate case and upon a proper and sufficient application where a custodian seems necessary, to appoint a receiver of that property and direct its delivery to him and perhaps the manner of its disposition. None of these requirements were observed in the case at bar. Section 3954, Revised Statutes, clearly limits the powers of the court and a receiver in summary proceedings to the disposition of interests concerning which there is no controversy and which can be ascertained without litigation. There is no power in such proceedings to solve all controversies over property, to dispense with litigation, or to justify interference in this form with property of other persons which would be illegal if resorted to by other and better known remedies. (Rodman v. Henry, 17 N.Y. 482; McCoombs v. Merryhew, 40 Mich. 721; Arnold v. Bright, 41 Mich. 207; R. Co. v. Cir. Judge, 31 Mich. 456; Schaack v. McKey, 100 Ill.App. 294; Hutchinson v. Rice (La.), 33 So. 57; Silverman v. Kuhn, 53 Ia. 436; 5 N. W., 523, 535; Rees v. Watertown, 86 U.S. 107; Thompson v. Allen Co., 115 U.S. 550; R. R. Co. v. Soutter, 69 U.S. 510.)

If the receiver's appointment had been avowedly made for the purpose of administering and disposing of the property or interests of the plaintiffs in error or other third persons sui juris, either for their express benefit or otherwise, in invitum, it would have been clearly illegal and void, though there were express statutory authority therefor. (Appeal of Ervine, 16 Pa. St., 256; Gossom v. McFerran, 79 Ky. 236; Gilpin v. Williams, 25 O. St., 283, 298; Burke v. Mechanics' Sav. Bk., 12 R. I., 513; Johnson v. Branch, 9 S. D., 116; 68 N. W., 173; Ames v. Port Huron Co., 11 Mich. 139; Johnson v. Hudson, 96 Tenn. 630; 36 S. W., 380.) There was nothing in the order of the court appointing the receiver from which any such purpose or intent can be gathered.

A first mortgagee is entitled through a receiver appointed at his suit pending litigation to the custody of the property. (Anderson v. Matthews, 8 Wyo., 513.) Can it be that a junior mortgagee, much less a judgment creditor, with no specific lien and without any suit pending for the marshaling of liens or the appropriation of the property by lawful remedies to the satisfaction of his debt, can suspend the right of foreclosure by advertisement and sale, the right to issue execution and sell under a judgment establishing a mortgage lien, the right to the possession of the property and its income so far as it may be necessary to pay prior contract liens, and by a receivership charge the expenses thereof upon the property or fund, so that the proceeding may be set on foot and maintained not only in defiance of the rights of the owners and lienors, but at their expense?

The order appointing the receiver was without jurisdiction because there was no sufficient application nor a finding by the court that the judgment debtors had property applicable to the judgment, describing the same, and there was no designation by the court in its order of the duty of the receiver. It was the plain duty of the court to give the plaintiffs in error a hearing upon their petition and permission to enforce their claims. The application of plaintiffs in error is the usual method adopted to the orderly enforcement of such rights. (17 Ency. Pl. & Pr., 786 791-3; Minot v. Mastin, 95 F. 739; Cohen v. Min. Co., id., 583; Riggs v. Whitney, 15 Abb. Pr., 388; Wheeler v. Walton, 64 F. 664; Winchester v. Davis Co., 67 F. 45; Beach on Rec., 229; High on Rec., 39, 685.) The contract right of foreclosure of a mortgage cannot be altered, burdened, suspended or stayed even by a statute subsequent to the contract. The essential qualities of the remedy contracted for are a part of the application of the contract itself. (Phinney v. Phinney, 81 Me. 450; Boice v. Boice, 27 Minn. 371; O'Brien v. Kreutz, 36 Minn. 136; Baldwin v. Flagg, 43 N. J. L., 495; Assn. v. Hardy, 86 Tex. 610.) And that which cannot be done by law directly cannot be done without law or against law by any court or board pretending to exercise the authority of law. (Com'rs v. Burns, 3 Wyo., 691.) The effect of the denial of the application of the plaintiff in error, bank, was to supercede the previous judgment of foreclosure against...