Vila v. Grand Island Electric Light, Ice & Cold Storage Company

• Decision Date: 18 March 1903
• Docket Number: 12,342
• Parties: WALTER K. F. VILA ET AL., APPELLEES, v. GRAND ISLAND ELECTRIC LIGHT, ICE & COLD STORAGE COMPANY, IMPLEADED WITH REXFORD E. HULETT ET AL., INTERVENERS, APPELLANTS. [*]
• Court: Nebraska Supreme Court

94 N.W. 136

68 Neb. 222

WALTER K. F. VILA ET AL., APPELLEES, v. GRAND ISLAND ELECTRIC LIGHT, ICE & COLD STORAGE COMPANY, IMPLEADED WITH REXFORD E. HULETT ET AL., INTERVENERS, APPELLANTS. ^[*]

No. 12,342

Supreme Court of Nebraska

March 18, 1903

APPEAL from the district court for Hall county: JOHN R. THOMPSON DISTRICT JUDGE. Reversed.

Decree reversed, and order appointing the receiver vacated.

Charles G. Ryan and Richard C. Glanville (Leo Cleary, on motion for rehearing), for appellants.

William H. Thompson and Virgil O. Strickler, contra.

LOBINGIER C. HASTINGS and KIRKPATRICK, CC., concur.

OPINION

LOBINGIER, C.

On December 6, 1900, appellees filed in the district court for Hall county a petition making the Grand Island Electric Light, Ice & Cold Storage Company a defendant, alleging that it had, on June 18, previous, mortgaged its plant and other property to appellee Vila for $ 15,000; that $ 4,000 of this had been used for other purposes than paying off a prior mortgage as agreed; "that said defendant is now and will be wholly unable to pay the interest or any part thereof to become due on its said mortgage indebtedness on January 1, 1901; that defendant is also wholly without ability or means to pay any part of its floating indebtedness amounting to about the sum of eighty-six hundred and sixty-two dollars ($ 8,662) and its creditors are threatening to attach the mortgaged property hereinbefore described"; that defendant had failed to keep its plant in repair as required by the mortgage; and that by the terms of the mortgage the noncompliance with its covenants entitled plaintiff to an appointment of a receiver. Another clause of the mortgage quoted in the petition authorizes such appointment "upon the commencement of suit to foreclose," and the petition contained the following prayer: "Wherefore the plaintiffs pray that a receiver be appointed for defendant and the said receiver be given authority to do each and all of the things mentioned in said mortgage, to wit: To take possession of all the defendant's property covered by said mortgage and to manage and operate the business and to collect its income and profits and to apply the same upon the expenses and charges for maintaining and operating said business and paying the obligations secured by plaintiffs' mortgage and for such other and further relief as to the court may seem meet and proper."

On the next day the following answer was filed on behalf of the defendant:

"Now comes the above named defendant and for answer to the plaintiff's petition admits the facts therein stated and consents to the appointment of a receiver in this action as prayed in the plaintiffs' petition."

On the same day a receiver was appointed to take charge of the "property, business and assets of the defendant" (part of which is enumerated), "and all other property of every kind or character, belonging to or pertaining to said defendant and its business." By the terms of this order the receiver is directed, inter alia, "to operate and carry on the business of the defendant." The next order appearing in the record is dated March 5, 1901, and recites "that it is for the best interest of the parties hereto, of the said trust and all persons interested therein that the business of the said defendant, the Grand Island Electric Light, Ice & Cold Storage Company be speedily closed and the affairs thereof wound up as soon as possible." In this order also the receiver is directed to notify all creditors of the defendant to file their claims. It does not appear in the record upon what this order is based or at whose instance it was obtained. On March 25, the several appellants filed individual petitions of intervention, alleging the recovery of judgments before a justice of the peace on claims for labor performed in defendant's behalf. The aggregate amount of these claims was about $ 700, and each petitioner prayed that his claim should be given preference, and alleged that the property in the hands of the receiver included about $ 9,000 worth of personalty which was not covered by plaintiffs' mortgage, and each prayed that he might share in the fund arising from the sale thereof. An order granting leave to intervene as prayed, was entered on the same day that these petitions were filed, and on the following day the receiver filed a report as to the condition of the business, in which he recommended a speedy sale of the entire property in his hands. Objections to this application to sell were filed by the interveners, and also by appellee Kinkel, a stockholder in the defendant corporation. These were overruled, and an order made requiring an inventory and appraisement of the property, in pursuance of which the appraisers fixed the valuation of the plant in the aggregate at $ 25,000. On May 6, a decree was rendered, in which demurrers to the several petitions of intervention were sustained, but the claims of the interveners, among others, were allowed, less the court costs of placing them in judgment. By this decree, the court also found that certain of the property in the receiver's hands was personalty and was not covered by plaintiff's mortgage, but it also found "that all of the property, goods and franchises, real, personal or mixed, coming into the hands of the said receiver, save that which is herein specifically found to be personal property, is covered by the said plaintiff's mortgage." The decree directed a sale, subject to the mortgage, of all property covered thereby, and a separate sale of the remaining personalty, and on June 8 the entire property was sold to G. H. Payne, trustee, president of appellee Payne-Knox Company, for $ 2,800 for the mortgaged property and $ 150 for the balance. This is about one-third of the floating debt alleged, as we have seen, to exist at the beginning of the suit. Objections to confirmation of the sale were filed by interveners, they having previously objected to the appraisement, but these were overruled and the sale confirmed on June 22. Interveners bring the cause here by appeal, attacking both the decree of May 6, directing a sale, and also the order of June 22, confirming the same. These orders are both made a part of the transcript which was filed here October 11, and a review of them brings before us also the question as to the validity of the order appointing the receiver (Seeds Dry-Plate Co. v. Heyn Photo-Supply Co., 57 Neb. 214, 216, 77 N.W. 660), for if this was invalid the subsequent proceedings, being based thereon, are necessarily so.

Appellants contend that there was no "suit actually commenced and pending" as required by section 267 of the Code before a receiver may be appointed. This requirement is jurisdictional. "The order appointing a receiver was void, for the reason that it was made when there was no suit pending." Cooley, J., in Merchants' & Manufacturers' Nat. Bank of Detroit v. Kent Circuit Judge, 43 Mich. 292, 296, 5 N.W. 627.

"No authority is given by the statutes of this state to its courts, or to judges thereof in vacation, to make such an appointment, except in a pending suit, nor does it inhere in any of them under their general jurisdiction as courts of equity." State v. Ross, 122 Mo. 435, 456, 25 S.W. 947; Cf. In re Brant, 96 F. 257, where the authorities are collated.

Moreover, the suit which must be "actually commenced and pending" as a condition precedent to an appointment of a receiver, must be one in which the main relief sought is independent of the receivership. The latter is a purely ancillary remedy.

"It is not the office of a court of equity to appoint receivers as a mode of granting ultimate relief. They are appointed as a measure ancillary to the enforcement of some recognized equitable right." Baldwin, J., in Barber v. International Company of Mexico, 73 Conn. 587, 593, 48 A. 758.

"Unless, possibly, in cases provided for by the statute, the appointment of a receiver can only be made in aid of the main action; although such appointment may be a part of the relief sought by the complaint." State v. Union Nat. Bank of Muncie, 145 Ind. 537, 550, 44 N.E. 585.

"The appointment is not the ultimate end and object of the suit, but is merely a provisional remedy or auxiliary proceeding." State v. Ross, 122 Mo. 435, 456, 25 S.W. 947.

Tested by these authorities, we are unable to say there was "a suit actually commenced and pending" when the receiver in this case was appointed. It is true that a petition had been filed the day previous, but this would not constitute such a suit, unless it set forth grounds instituting an actual controversy and demanding substantial relief beyond the mere appointment of a receiver.

In State v. Ross, 122 Mo. 435, 25 S.W. 947, a corporation filed a petition alleging that its plant was heavily incumbered, and praying for the appointment of a receiver, with a prayer, as here, for general relief. A receiver was appointed, but upon application to the supreme court a writ of prohibition was granted, and the court said (p. 457): "The filing of that petition no more instituted an actual controversy between contending suitors in court, than would the filing of a copy of the Lord's Prayer. It laid no foundation whatever for the exercise of the jurisdiction of the court to appoint a receiver, unless some ground for the exercise of that jurisdiction can be found other than an actual, pending controversy in the court which undertook its exercise."

The petition in this case contains no prayer for specific relief other than the appointment of a receiver. Some of its allegations, indeed, resemble those of an ordinary petition to foreclose a mortgage. But no such relief is asked, and, waiving the question whether a decree of foreclosure may be rendered under a prayer for...