Observer Co. v. Little

• Decision Date: 12 December 1917
• Docket Number: 450.
• Citation: 94 S.E. 526,174 N.C. 42
• Parties: OBSERVER CO. ET AL. v. LITTLE ET AL.
• Court: North Carolina Supreme Court

94 S.E. 526

174 N.C. 42

OBSERVER CO. ET AL. v. LITTLE ET AL.

No. 450.

Supreme Court of North Carolina

December 12, 1917

Appeal from Superior Court, Mecklenburg County; Cline, Judge.

Action by the Observer Company and another against J. H. Little and another, receivers of the Reid Livery Company. From an adverse judgment, plaintiffs appeal. Affirmed.

On the hearing it was made to appear that in August, 1916, S. J Holland sold to the Reid Livery Company a pair of horses for $390, and no part of same had been paid; that in January 1917, the plaintiff the Charlotte Observer, sold to Reid Livery Company an auto truck for $650, and there had been paid thereon the sum of $136.15, leaving a balance due of $513.85; that the property was passed to the Reid Livery Company by written agreement in which title was retained in the respective vendors till the entire purchase price was paid; that subsequently the Reid Livery Company being insolvent, on proceedings properly instituted, the defendants were appointed receivers of said company for the purpose of converting its assets into cash, paying same to creditors and winding up the affairs of the corporation; that, by order of court, said property had been sold by receivers, and proceeds passed over to the clerk of the court to be held subject to liens and equities of all parties in interest. On these facts it was adjudged by court as follows:

"It is therefore considered, adjudged, and decreed that neither petitioners be allowed a specific and prior lien on the property claimed by them respectively, as against the receivers.

It is further ordered that the claim of the Observer Company for $513.85 be accepted, and the receivers are directed to pay the same pro rata with other creditors.

It is also considered and adjudged that the claim of S. J. Holland for $390 is accepted, and the receivers are directed to pay the same pro rata with other creditors."

From this judgment plaintiffs appealed.

Morrison & Dockery, of Charlotte, for appellants.

McNinch & Justice, of Charlotte, for appellees.

HOKE, J. (after stating the facts as above).

Our statute (Revisal, § 982) provides, in effect, that:

"No deed of trust nor mortgage for real or personal estate shall be valid at law to pass any property as against creditors or purchasers for a valuable consideration from the donor, bargainor or mortgagor, but from the registration of the" same, etc.

And section 983:

"That all conditional sales of personal property in which the title is retained by the bargainor, shall be reduced to writing and registered in the same manner, for the same fees and with the same legal effect as is provided for chattel mortgages," etc.

By the express terms of the law, therefore, and under various decisions construing the same, these conditional sales are to be regarded in this jurisdiction as chattel mortgages, and void as to creditors and purchasers except from registration. Clark v. Hill, 117 N.C. 11, 23 S.E. 91, 53 Am. St. Rep. 574; Butts v. Screws, 95 N.C. 215; Brem v. Lockhart, 93 N.C. 191.

In order for a creditor to avail himself of these registration statutes, it is very generally understood that he must, by some judicial process or method, take steps to fasten his claim upon the property. In one or more of the decisions on the subject it is said that he should be "armed with legal process" for the purpose. Considering the case in recognition of the principle, we are of opinion that the title of defendant is in full compliance with the requirement; they having been duly appointed receivers in a statutory proceeding instituted for the purpose of winding up the affairs of an insolvent corporation and distributing the assets among its creditors, Under this statute (section 1224) it is provided:

"That all the real and personal property of an insolvent corporation, wheresoever situated, and all of its franchises, rights and privileges, shall, upon appointment of a receiver, forthwith vest in him, and the corporation shall be divested of the title thereto."

In section 1207:

"That after payment of all allowances, expenses, costs, and the satisfaction of all special and general liens upon the funds of the corporation, to the extent of their lawful priority, the creditors shall be paid proportionably to the amount of their respective debts," etc.

Under decisions apposite it has been held here and elsewhere that the receivers in such case are to be considered as representing creditors as well as the owner, enabling him in their favor to avoid fraudulent conveyances by the debtor and otherwise insist on their rights (Pender v. Mallett, 123 N.C. 57, 31 S.E. 351; Porter v. Williams, 9 N. Y. 142, 59 Am. Dec. 519)--a position that prevails in this jurisdiction both as to trustees and in assignments for the benefit of creditors (Taylor v. Lauer, 127 N.C. 157, 37 S.E. 197; Bank v. Adrian & Vollers, 116 N.C. 537, 21 S.E. 792). And it is held further with us that, after proceedings instituted and receivers appointed, no general creditor can, on his own account, take any separate or effective steps in furtherance of his claim. Odell Hardware Co. v. Holt-Morgan Mills, 173 N.C. 308, 92 S.E. 8.

Under these conditions it is in accord with right reason that a proceeding of this character and the appointment of receivers thereunder shall...