Wallace v. Milligan

• Decision Date: 27 April 1887
• Docket Number: 13,676
• Citation: 11 N.E. 599,110 Ind. 498
• Parties: Wallace, Receiver, v. Milligan, Assignee
• Court: Indiana Supreme Court

11 N.E. 599

110 Ind. 498

Wallace, Receiver, v. Milligan, Assignee

No. 13,676

Supreme Court of Indiana

April 27, 1887

From the Marion Circuit Court.

Judgment affirmed, with costs.

J. S Duncan, C. W. Smith and J. R. Wilson, for appellant.

B Harrison, W. H. H. Miller and J. B. Elam, for appellee.

Zollars J. Elliott, C. J.

OPINION

Zollars, J.

Prior to 1884, Stoughton A. Fletcher, Ingram Fletcher, Albert E. Fletcher and Thomas H. Sharpe, had been partners engaged in the business of banking under the firm name of Fletcher & Sharpe. On the 15th day of July, 1884, Stoughton A. Fletcher filed in the superior court of Marion county a complaint against his partners, alleging the insolvency of the banking firm, asking for a dissolution of the firm and an accounting between the partners, and for the appointment of a receiver to take possession of and administer the affairs and assets of the bank and pay its debts pro rata among the several creditors.

Upon that complaint and an answer by the other partners, William Wallace, appellant herein, was appointed receiver of the assets of the firm of Fletcher & Sharpe, and duly qualified as such receiver, and, under the orders of the court, took possession of all the personal and real estate, and all the assets, rights, credits, moneys and effects held and owned by the firm. At that time, Ingram and Albert E. Fletcher were indebted to the firm. Subsequently, they caused to be conveyed to Receiver Wallace, for the benefit of the partnership creditors, all of their separate and individual real estate. Thomas H. Sharpe also, upon an order of the court, conveyed to the receiver for the benefit of the firm creditors, all his separate real estate, except what was set off to his wife as her interest therein as such wife. The banking firm owed to depositors over $ 1,507,801.78. It was ordered and directed by the court, at the December term, 1884, that the receiver should allow all claims of creditors holding certificates of deposit and pass-books of the firm, if shown to be correct by the firm books, and that he should issue to such creditors his certificates, in attestation of the indebtedness of the firm to them. In pursuance of the order, he issued certificates, three thousand four hundred and twenty in number, and for the aggregate sum of $ 1,548,099.80. Upon the issuance of the certificates, all of the creditors to whom they were issued surrendered to the receiver the original evidence of the indebtedness of the bank to them. Many of the certificates thus issued have been assigned to third parties. Thirty per cent. has been paid by the receiver and endorsed upon the certificates.

The partnership assets, and the individual property of Ingram and Albert E. Fletcher and of Sharpe, surrendered to the receiver, will not pay over forty per cent. of the partnership debts. Stoughton A. Fletcher was not indebted to the firm. Shortly after the appointment of appellant as receiver of the firm upon his complaint, he made an assignment to appellee, Harry J. Milligan, under the voluntary assignment law, who has since been in charge of the estate under the orders and directions of the circuit court.

On the 17th day of February, 1887, three of the partnership creditors filed what is styled an intervening petition in the superior court, for and on behalf of themselves and all other creditors of the firm of Fletcher & Sharpe, with whom, as stated, it was impracticable to confer, in which they stated that the creditors of the firm exceed three thousand; that the assets in the hands of the receiver will not pay in full the partnership debts; that appellee, as the assignee of Stoughton A. Fletcher, has proceeded with the management of the estate until he has realized a sum sufficient to pay in full all of the individual creditors of Stoughton A., and that after payment of all such individual creditors, there will be left in the hands of the assignee a large sum of money which should be applied in payment of the firm creditors, after the firm assets shall have been exhausted; that to require each of the creditors of the firm to make new proof of their claims against the assignee of Stoughton A., in order to share in the surplus of his individual estate, would require the delay of months, and the expenditure of a large amount of money, in the way of costs; that in order for a full and proper distribution of the proper and available assets to the payment of the firm creditors, the surplus of the individual estate of Stoughton A., in the hands of the assignee, should come into the hands of the receiver, and thus under the jurisdiction of the superior court.

The prayer of the petition was, that Wallace, the receiver of the partnership, be also appointed receiver for the creditors, of all the surplus of the individual assets in the hands of the assignee, after the payment of the individual debts of Stoughton A., and that he be authorized, for said firm creditors, in his name as such receiver, to prove their claims against the assignee, and to collect from him such surplus assets, and bring them into the superior court for distribution among the firm creditors.

Upon that petition, the superior court made an order appointing appellant, Wallace, receiver for said creditors of all the surplus of the individual estate of Stoughton A., in the hands of the assignee after the payment of the individual debts, and authorizing him for said creditors, and in his name as such receiver, to prove their claims against the assignee, and to collect such surplus from him, and take the same into the superior court to be distributed among the creditors of the firm of Fletcher & Sharpe.

On the 2d day of March, 1887, appellant filed his petition in the circuit court of Marion county, stating therein the facts above stated, and asserting therein also, as a part of the same, the facts stated in the petition of the above creditors, filed in the superior court.

The prayer of appellant's petition, so filed in the circuit court, is, that in order to avoid the delay and expense of the separate proofs against the assignee of Stoughton A., and the estate in his hands, by the many creditors of the firm of Fletcher & Sharpe, he be permitted, as the trustee and receiver for all of said firm creditors, to prove in his name, as against the assignee and the estate he represents, the amount of the claim of the firm creditors in the aggregate; that he be permitted, as the trustee and receiver of said firm creditors, to receive the amount due to all of them in the aggregate, in one sum, and that he be permitted to distribute the same under the orders and directions of the superior court.

Appellee, as the assignee of the estate of Stoughton A. Fletcher, appeared and filed a demurrer to appellant's petition. The circuit court sustained the demurrer. Appellant excepted, and brings the case here for a review of that ruling.

Mr. Wallace, it will be observed, was appointed by the superior court receiver of the firm of Fletcher & Sharpe. That appointment carried into the custody of that court all the property and assets of the firm, of every description.

Mr. Milligan was and is the assignee, under the voluntary assignment law, of Stoughton A. Fletcher. That assignment carried into the custody of the circuit court, all of the individual property and assets of Stoughton A. Fletcher. That was the status of things, and of the parties, at the time the three firm creditors filed their petition in the superior court, asking that Mr. Wallace be authorized to go into the circuit court, file proofs of all the claims in favor of the firm creditors, and receive from the assignee the surplus of the individual estate of Stoughton A. Fletcher.

Whatever power and authority Wallace has, he must have, we think, under and by virtue of his appointment as receiver of the firm of Fletcher & Sharpe and the proper orders of the superior court made in the execution of that trust. The order subsequently made upon the petition of the three firm creditors can not properly be said to be, in any legal sense, a second appointment of Wallace as receiver of any one.

Receivers are not appointed simply to do for creditors what they may do for themselves in the collection of their claims. The prime object of a receiver is to do what creditors can not do, by taking charge of the assets of the debtor and holding, preserving and distributing them in an equitable manner. In other words, the prime object of a receiver is to protect and distribute a fund. He does not act simply as a collecting agent of the creditors.

If there are no assets belonging to the debtor, there is no necessity for a receiver. It can not be said, in the case before us, that Wallace was, in any legal sense, appointed receiver of the three petitioning creditors, or of any other of the creditors, nor can it be said that the order made upon their petition was an appointment of him as a receiver of Stoughton A. Fletcher. His estate, as has been seen, was already in the custody of the circuit court, to be applied first to the payment of his individual debts. There was no pending litigation between the firm creditors and Stoughton A. Fletcher, nor were his assets in jeopardy by way of preferences, an unequal distribution, or otherwise.

It is not claimed, as we understand counsel, that Mr. Wallace is in any sense, the receiver of Stoughton A. Fletcher. The most that can properly be said of the order of the superior court is, that it was a direction to the receiver, Wallace, theretofore appointed by it, to prove the firm debts against the assignee and individual estate of Stoughton A., and to collect the surplus of that estate after the payment of his individual debts by the assignee. Was that order valid...