Hewitt v. Walters

• Decision Date: 19 December 1911
• Citation: 21 Idaho 1,119 P. 705
• Parties: HENRY HEWITT, Jr., Plaintiff, v. E. A. WALTERS, Judge of the Fourth Judicial District, and O. E. CANNON, Receiver of the Great Western Beet Sugar Co., Defendants
• Court: Idaho Supreme Court

119 P. 705

21 Idaho 1

HENRY HEWITT, Jr., Plaintiff, v. E. A. WALTERS, Judge of the Fourth Judicial District, and O. E. CANNON, Receiver of the Great Western Beet Sugar Co., Defendants

Supreme Court of Idaho

December 19, 1911

RECEIVERSHIP-RECEIVER'S SALE-JURISDICTION OF COURT-PRIORITY OF RECEIVER'S CERTIFICATES-MINIMUM BID TO BE CONSIDERED-INTEREST ON CERTIFICATES-SALE WITHOUT REDEMPTION.

(Syllabus by the court.)

1. A court of equity has the power and authority to appoint a receiver to take charge of the property of a party to an action or proceeding on proper showing, for the purpose of taking care of and preserving and protecting the property and making payment of the claims of creditors out of the same and has the authority and jurisdiction to decree that the charges and expenses of the receiver incurred in the discharge of his duty shall become a prior claim and lien against the property paramount to all existing mortgages or other liens or encumbrances thereon.

2. It is not an excess of the jurisdiction of a court of equity in ordering a sale of property in the hands of the receiver to order and direct that no bid shall be received or accepted which is under a fixed and definite sum determined by the court as the minimum bid that shall be received or accepted for such property.

3. The court has no power or authority to order or direct the payment of interest on receiver's certificates in excess of the maximum rate of interest allowed by the statute on contract or at any rate that would be usurious under the statute, but it is not an excess of jurisdiction for the court to allow a rate of interest in excess of the rate fixed by the statute to be allowed on money judgments and decrees of courts and in cases where no rate is contracted.

4. Where H. held a mortgage against the property of the G. W. B S. Co. and thereafter, at the instance of a creditor of such company, a receiver was appointed to take charge of the property and assets of the company, and H. instituted an action for the foreclosure of his mortgage and brought in parties asserting some lien, claim or encumbrance upon the property covered by H.'s mortgage, and such proceedings were thereafter had that a decree was entered, ordering and adjudging that the property should be sold by the receiver without and free from the right of redemption, and that the costs and expense of the sale should first be paid out of the proceeds and thereafter the receiver's certificates and such liens and claims as had been adjudged prior to H.'s mortgage, and thereafter H.'s mortgage should be paid out of any residue left from such sale, and no appeal was taken from such order and decree and the same was allowed to become final, and H. thereafter joined with all the other parties to the foreclosure suit in filing his judgment and decree with the receiver in the receivership case and petitioned to be admitted as a creditor, and the district court thereafter made an order admitting such creditors and adjudging the same priorities in the receivership case as had been adjudged in the foreclosure case, and ordered a sale of all the property in the hands of the receiver and the payment of costs expense and judgments in the order of their priorities as adjudicated in both the foreclosure case and the receivership proceeding, and directed that such sale be without the right of redemption, held, that H. and all other parties to the foreclosure proceeding will be bound by such order and decree, and that a sale made thereunder will be without the right of redemption to any person who became a party to such proceeding.

Original action praying for a writ of prohibition. Alternative writ issued, and on the return day demurrer was filed to the complaint and answer and return was also filed at the same time. Demurrer sustained, writ quashed and action dismissed.

Demurrer sustained, writ quashed and action dismissed. Costs awarded to defendants.

Richards & Haga, for Plaintiff.

Under a statute identical with section 4491, the California court has held that the right of redemption from a judicial sale is a statutory right, and no decree of the court can take it away. (Phillips v. Hagart, 113 Cal. 552, 54 Am. St. 369, 45 P. 843; Levy v. Burkle (Cal.), 14 P. 564.)

Under similar statutes to those of Idaho, the Illinois supreme court has also held that the right of redemption cannot be taken away by any decree of the court. (Fitch v. Wetherbee, 110 Ill. 475. See, also, Hollingsworth v. Campbell, 28 Minn. 18, 8 N.W. 873; Rhinehart v. Stevenson, 23 Ill. 524; De Wolf v. Haydn, 24 Ill. 526; Hall v. Bond, 74 N.Y.S. 5, 68 A.D. 293; McBee v. McBee, 1 Heisk. (Tenn.) 558.)

The right of redemption provided by the statute cannot be taken away by contract. (Locey Coal Mines v. Chicago W. & V. Coal Co., 131 Ill. 9, 22 N.E. 503, 8 L. R. A. 598; Brown v. Bryan, 6 Idaho 1, 51 P. 995.)

The plaintiff Hewitt held a lien by mortgage against the Great Western Beet Sugar Co., which was foreclosed, and that lien cannot be divested by the receiver, as the receiver's possession is subject to all valid and existing liens upon the property at the time of his appointment, and does not divest a lien previously acquired in good faith. (High, Receivers, 4th ed., sec. 138, and numerous cases cited; Auten v. City Electric St. Ry. Co., 104 F. 395; Reeves v. Pierce, 64 Kan. 502, 67 P. 1108.)

A court has no power to make receiver's certificates a prior lien upon the property where the mortgagee, bondholders or other lienholders do not consent, or bad no notice of the proceedings, or were not made parties to the suit in which the receiver was appointed. (High, Receivers, 4th ed., secs. 192a, 199b; Metropolitan Trust Co. v. Lake City's Elec. Ry. Co., 100 F. 897.)

"Those who take receiver's certificates must be deemed to have taken them subject to the rights of parties who have prior liens upon the property, and who have not, but should have, been brought before the court." (Union Trust Co. v. Ill. M. Ry. Co., 117 U.S. 434, 6 S.Ct. 809, 29 L.Ed. 963; Laughlin v. U. S. R. S. Co., 64 F. 25; Hervey v. Railroad Co., 28 F. 169.)

Receiver's certificates cannot be issued at a higher rate of interest than that allowed by law. (High, Receivers, 4th ed., sec. 498d; 24 Am. & Eng. Ency. of Law, 41; Meyer v. Johnston, 53 Ala. 237.)

Sullivan & Sullivan, Wyman & Wyman, and E. M. Wolfe, for Defendants.

There is no right of redemption from a receiver's sale. (34 Cyc. 333; High on Receivers, sec. 199c; Alderson on Receivers, p. 811, sec. 598; Watkins v. M. T. M. Co., 41 Minn. 150, 42 N.W. 862; Mer. R. Co. v. Stetson, 120 Iowa 324, 94 N.W. 859; Blair v. Ill. Steel Co., 159 Ill. 350, 42 N.E. 895, 31 L. R. A. 269; 17 Am. & Eng. Ency. of Law, 1084.)

Court has power to order the sale of the property in the possession of a receiver without the right of redemption. (Alderson on Receivers, p. 811, sec. 595.)

Where through the appointment of a receiver, and by the sale directed to be made, the appropriation of the entire assets of the insolvent corporation to the payment of its debts are contemplated, the receiver's sale is absolute, and there is no right of redemption. And the general statute as to the redemption of real estate sold upon execution, judgment or decree does not apply to receiver's sales under such circumstances. (Watkins v. M. T. M. Co., supra; Blair v. I. S. Co., 159 Ill. 350, 42 N.E. 895, 31 L. R. A. 269.)

A right to redeem from judicial sales exists only when given by statute. (Rorer on Judicial Sales, sec. 1148.) After sale by a receiver and confirmation thereof, the title to the property rests in the purchaser. (12 Current Law, 1658; Dilley v. Lumber Co. (Tex. Civ. App.), 114 S.W. 878; Koontz v. Northern Bank, 83 U.S. 196, 21 L.Ed. 465.)

AILSHIE, J. Stewart, C. J., and Sullivan, J., concur.

OPINION

AILSHIE, J.

The plaintiff applied to this court for an alternative writ of prohibition against Hon. E. A. Walters, a judge of the fourth judicial district, and O. E. Cannon, a receiver appointed by and acting under the direction of the judge of said court, to prohibit and restrain further proceedings under an order of sale made and entered by the judge of said court. At the suit of a creditor of the Great Western Beet Sugar Co. a receiver was appointed to take charge of the property and business of the corporation, who thereafter qualified and took charge of its property and continued to conduct the business under the direction of the court.

Various phases of that question have been considered by this court in the following cases: Idaho Fruit Land Co. v. Great Western Beet Sugar Co. et al., 17 Idaho 273, 105 P. 562; S. C., 18 Idaho 1, 107 P. 989; Hewitt v. Great Western Beet Sugar Co., 20 Idaho 235, 118 P. 296.

The plaintiff herein held a mortgage on the property of the Great Western Beet Sugar Co., and on about August 4 1908, commenced his action in the district court of the fourth judicial district in and for Elmore county, to foreclose the same, and such proceedings were thereafter had as resulted in the entering of a decree of foreclosure on July 21, 1910, adjudging the plaintiff entitled to recover the sum of $ 109,275 from the Great Western Beet Sugar Co., and giving him a decree of foreclosure for that sum. It appears that the receiver in some way became a party to this foreclosure suit. Whether he was brought in by order of the court or by supplementary proceedings or on petition in intervention does not appear, but that he was taken into consideration and treated as a party to the action by the decree is clear upon the face of the decree itself. Most of the defendants defaulted, but a number appeared and answered and filed cross-complaints. It was adjudged and decreed that some nine of these defendants...