Case ID: dc_10/html/0220-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Quin MacArthur, J. Wylie, J.-", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PHŒNIX MUTUAL LIFE INSURANCE COMPANY v. ALBERT GRANT ET AL.
    Equity. —
    No. 4291.
    I. When a motion is certified to the general term to be heard in the first instance, the same order will be made as, upon tlie whole case, ought to have been made by tlie justice holding the special term.
    U. When a mortgage or deed of trust loes not in express terms create a lien upon tlie rents and profits of the mortgaged property, a receiver thereof ought not to be appointed for the benefit of those interested, simply upon an averment in tlie bill that the mortgaged estate is an inadequate security, and that the grantor is insolvent. [Oi.tn. J., Humphreys, J.]
    III. When a receiver is appointed before the coming in of the. answer, tlie defendant will be allowed to move to discharge the receiver after tlie answer is interposed. And if tlie billand answer taken together show that a receiver ought not to have been appointed, the receiver will be discharged.
    IV. The defendant consented to the appointment, of a receiver upon certain terms, but such terms were not observed in making the ■ appointment, and afterwards the answer came in ; upon which and upon affidavit, a motion was made to discharge the receiver and to restore the property to the possession of the defendant; and it appearing that tlie receivership was inexpedient and unfit to be longer continued, the court allowed tlie motion, although no blame was attached to tlie receiver.
    STATEMENT OE THE CASE.
    This was a motion to discharge a receiver who had been appointed before tlie defendant auswered the bill.
    
      The allegations in the bill tending to lay a foundation for a receiver are the following:
    “ That the amount 'due the plaintiff, secured as aforesaid on said property, largely exceeds its value, and is more than it will sell for under the most advantageous circumstances.
    “ That the said Grant is insolvent, and said property is very much deteriorating for the want of necessary repairs, wdiich said Grant is unable and unwilling to make.”
    A receiver was appointed May 7, 1875, to rent several of the houses, and he has been in possession of the premises since that time. The defendant Grant, in his answer to the application for a receiver, consented that the appointment might be made, and a direction given to the receiver to complete the houses which were then in an unfinished condition, and to employ him in the work; and soon afterwards he fied in the cause a proposal to complete the buildings at the estimated prices on which the receiver had based a report on that subject. The receiver was appointed to receive the rents and profits without regard to the terms proposed by the defendant Grant. November 27,1875, Grant filed his answer, denying a great part of the indebtedness and pleading a want of jurisdiction, a non-joinder of numerous parties, usury, and that the alleged indebtedness was paid and satisfied before the bringing of this suit. At the same time he filed a cross-bill for affirmative relief. Other proceedings followed which are unnecessary to state in this connection, and finally the motion to dissolve the receivership was made, and has been certified here to be heard in the first instance. The briefs of counsel are too lengthy for insertion in this report, and they are so compact as to preclude an abstract of their contents.
    
      R. T. Merrick and William F. Mattingly, for complainant.
    
      B. F. Butler, Durant Hornor, O. D. Barrett, and William A. Meloy, for defendant Grant.
   Mr. Justice Quin

delivered the opinion of the court :

It is unnecessary to enter into any lengthy detail of facts in reference to this prolonged and extraordinary controversy. If it shall be continued in the future as long as it has been in the past, it is quite obvious that the result will be that out of a property of the value of nearly half a million of dollars, neither the plaintiff nor defendant will derive any benefit.

The question before us arises on a motion to discharge the receiver appointed in this case in May, 1875.

That motion would ordinarily be heard before the judge holding the special term, or in his discretion might be certified to and heard at the general term in the first instance, which was done in this case; and this court is now to make the same order as, we think, on the whole, ought to be made by the justice holding the special term.

The order appointing a receiver, which was prayed for in the bill of complaint, seems to have been made principally in pursuance of the answer of the defendant Grant to the rule to show cause why a receiver should not be appointed. In that answer the defendant Grant says, in view of these facts, the defendant desires that ten of the houses, (giving their numbers,) be completed under authority of this court, and be rented for a period not exceeding three years, and that the rents be paid into the court; and the defendant prays that K. J. Meigs, clerk of the Supreme Court of the District, or some disinterested person', be appointed a receiver, and be directed to have the unfinished buildings numbered from 1 to 14, with the exception of number 13, completed under the superintendence of the defendant Grant, and apply the rents, as far as may be necessary, to the payment of the expense for completing these buildings, and if necessary, to make a temporary loan for the purposes aforesaid, the same to be reimbursed from the rents of said buildings; that all the rents not expended in the completion of said buildings may be paid into court, to abide the order and judgment of the court. Upon Grant’s answer to the rule to show cause, an order was made by the court at special term appointing Phillips and ‘Wilson receivers, wholly ignoring the conditions upon which Grant assented to the appointment of a receiver. This proceeding for the appointment of a receiver was had before Grant filed his answer to the bill of complaint. Upon filing his answer, a motion is made to the court to discharge the receivers, and that is this question now before us.

When a receiver is appointed before the coming in of the answer of the defendant after answer is interposed, the defendant is allowed to move to discharge the receiver; and if the bill and answer, taken together, show that a receiver ought not to have been appointed, the receiver should be discharged.

It will be observed that the mortgage or deed of trust, as it is called, did not mortgage or create any lien upon the rents and profits of this property; and while it is averred in the bill that the property mortgaged is an inadequate security for the amount of money loaned to the mortgagor, and that he is insolvent, that affords no grounds whatever for seizing upon the rents and profits before foreclosure or sale of the mortgaged premises. Indeed, the grocer or merchant who supplied the necessaries of life for Grant and family has a much higher equity on the rents and profits than the mortgagee. The latter loaned Grant money and took security for the repayment of it, but the former sold him goods on his personal credit.

What justice or equity is there in allowing a mortgagee to' claim any rights in reference to something not mortgaged to him, over and above the rights of any other contract creditor ?

No well adjudicated case can be found, I think, that allows the appointment of a receiver of rents and profits, when these rents and profits were not mortgaged, except, perhaps, in the State of New York, in which these decisions depend mainty upon the statute laws of that State; and these decisions may be laid out of the' question so far as this case is concerned.

The question is so much better stated in the brief of the defendant’s counsel, that I take the liberty to quote from it. In reference to a mortgaged security he says:

“ What security does a man take ? He takes such as he agrees to take. Has the court any right to give him any more than he agreed to take? I mortgage my house, and my creditor chooses to take that mortgage: am I to give him any more than I agreed to give him? He has a right, under the law, to take possession, and then he gets all; but until he does, it is mine.
“ I mortgage the rent of my honse without the house: would he take anythiug more? He has just the security he agreed to take. If it was more or less, it was the contract between the parties, and the court has no right to make a new contract for the parties, and never does make a contract for them.”

And the counsel might further have added, that among parties competent to contract, in the absence of any allegations of fraud, imposition, or mistake, a court of equity has no more power to set aside, modify, or alter the contract of the parties than has a court of law. To this extent has the length of the chancellor’s foot been shortened in these modern times. But waiving the question as to the power of the court of equity to appoint a receiver to take the rents and profits of mortgaged premises, when such rents and profits are not mortgaged, and supposing such power was vested in a court of equity, that power, exercised in this case, has proved a signal failure.

Property to the value of half a million dollars, nearly, has been in the hands of a receiver appointed by this court for nearly four years, and is evidently going to destruction, and without yielding a revenue sufficient to pay the ordinary taxes. For this condition of things this court is mainly responsible. I impute no fault to Mr. Wilson, the receiver. He has done as well, probably, as would any other man uuder like circumstances.

The consequences which have ensued are but the inevitable results of such a proceeding. The worst mode of administering law or equity is by granting injunctions or appointing receivers. The thing enjoined generally dies of inanition before the close of the litigation, and the thing to be received seldom pays the amount of expense incurred in receiving it. We think the receiver in this case should be discharged.

The question of the gravest importance in this case has been argued at great length, and that is, whether upon the dismissal of the creditor’s bill filed by Carter, in which the plaintiff in this suit was made defendant, and appeared, is conclusive as to his further litigation of the claim set up in the present bill.

Upon that question we express no opinion, not deeming it necessary to the proper solution of the question now before the court.

Humphreys, J., concurred.

MacArthur, J.

— I will simply say that, in concurring in the judgment of the court, I restrict my view of the case simply to the fact that a receivership is entirely within the discretion of the court, and that when it fails to accomplish the purpose of a genuine receivership, the court should no longer continue it. It is quite impossible for me to regard the history of this receivership, other than establishing the fact as expressed in the written opinion, that it has signally failed in its main purpose, and it is for that reason that I concur in the discharge of the receivership, and without any imputation upon anybody who has acted in that capacity.

In regard to whether a trust deed or mortgage upon real property covers the rents and profits in case the security should prove inadequate, that is a question upon which I desire to hold myself open.

Wylie, J.-

I have been requested by the chief justice to say that he dissents in this decision, and for myself I concur in his dissent.

We all agree that the receiver has performed faithfully his duty in this case.

It is a matter entirely for the discretion of the couft. It may discharge or appoint a receiver. A majority of the court in this case seem to think that experience has shown that this property has not yielded much for the benefit of the creditor, and the remedy is to take it out of the hands of the receiver, who has been doing something in that way, and put it in the hands of the debtor, from whom nothing would be received for the creditor.

There is one circumstance, I may say, that would seem — I do not know whether sufficient to authorize the discharge of this receiver — -hut, at any rate, to reconcile me to the decree or order, and that is, the unaccountable delays of the creditor in bringing the cause to final hearing. Here is a cause standing upon a plea which may be set down for hearing at any time, and there seems to have been unnecessary delay in this respect. Undoubtedly there are good reasons for it, but they are not apparent to me.