RECEIVERS.

[Montgomery Circuit Court,

December Term, 1888.]

Stewart, Shauck and Shearer, JJ.

#### LESTER M. CROY, ADM’R, ET AL. v. R. D. MARSHALL, REC’R.

1. No Execution on Property in Receiver’s Hands Without Leave of Court.

Section 3415, Rev. Stat., authorizes suits to be brought against the receiver of railroads, and the same prosecuted'to final judgment without leave of court, but does not authorize the levy upon or sale of property in the possession of such receiver without leave of the court appointing the receiver.

Í. If Improperly Held, Court Must Release.

If a creditor claims that property is improperly in the hands of a receiver, he must apply to the court appointing the receiver to release the same, so that he may levy upon it.

Error to Court of Common Pleas of Montgomery county.

On March 19,1888, R. D. Marshall was appointed receiver of the Dayton, Ft. Wayne & Chicago R. R., by the Court of Common Pleas of Montgomery County, and by the order appointing him was put in possession of all its rights, franchises, ■properties, rights-of-way, lands, tracks, depots and fixtures of whatever kind or nature connected with or belonging to said railroad. Said receiver duly qualified and immediately took charge of and commenced, and still is operating said railroad.

*281The D., F. W. & C. R. R. was formed on May 27,1887, by the consolidation of the Dayton & Ironton R. R. .and the Dayton & Chicago R. R.

On May 27, 1887, Lester Arnold sold and conveyed to the D. & I. R. R. 3.28 acres of land in the city of Xenia, Greene county, Ohio, lying alongside of and joining the right-of-way of the D. & I. R. R. On the same day the said railroad company executed its two notes for deferred payments and a mortgage on the property to secure the same.

Before said Arnold conveyed said tract to said D. & I. R. R., he leased the same to G. & C., who took possession and are still in possession, and their lease does not expire until April 10, 1891. The conveyance by Arnold to the railroad company, and the mortgage of the railroad company to A., were both made subject to said lease, and the interest of said A. in the lease at the time of the conveyance to the railroad was also transferred to the railroad company. The notes and mortgage of the railroad company were sold and transferred by A. to Milton Croy. The first note of the railroad company fell due May 27, 1887, and not being paid, suit upon said note and mortgage was brought by Lester M. Croy, as administrator of M. C. His attorney in that suit .was Charles H. Kyle, Esq., and the suit was commenced, in the Court of Common Pleas of Greene County, Ohio, against A., the D. & I. R. R. Co., M, as receiver, the D., Ft. W. & C. R. R. Co. and G. & C.

All the defendants being in default, a judgment and decree was entered upon the note and mortgage August 28, 1888, and an order of sale issued to the sheriff of Greene county, O., who advertised the land for sale on October 27, 1888.

October 15, 1888, M., the receiver, filed a motion in the court of common pleas of Montgomery county, Ohio, in the case in which he -was appointed receiver, asking for a rule upon Csas administrator and K. as his attorney, to show cause why they should not be punished as and for contempt, and for an injunction against them, restraining them from any further interference with the property of D„ Ft. W>& C. R. R. Co.

Said motion was heard, and upon the hearing, the foregoing facts having been proven to the court, it was ordered that C. as administrator and K. his attorney, be enjoined from proceeding to sell in said foreclosure proceedings, and this action is prosecuted to reverse that order.

Stewart, J.

On March 12,1872 (69 O. L., 31), an act was passed, which, so far as it relates to this action, is found in sec. 3415, Rev. Stat., and it is claimed on behalf of the plaintiff in error that this section authorizes their proceedings, and that therefore the court of common pleas of Montgomery county had no jurisdiction to enjoin them. They also claim that sec. 5032, Rev. Stat., gave to the court of common pleas of Greene county, Ohio, exclusive jurisdiction of the suit.

We think that their claim as to the purpose and effect of sec. 3415, Rev. Stat., is broader than the statute will warrant. This statute only dispenses with the necessity of obtaining leave of court to sue a receiver, in the. cases to -which it applies, and therefore such suits stand upon the same footing, and entitle those bringing them to the same rights and privileges, as if leave had been granted, and no more.

They are entitled to prosecute their suits to judgment, but the possession of the receiver being considered the possession of the court, the property in his hands is looked upon as being *in custodia legis,*and, on that account, it is not to be taken upon any writ of attachment or execution while in his possession. Adams v. Haskell et al., 6 Cal., 113. The owner of a judgment lien upon land in the possession of a receiver, cannot levy execution thereon,'but must apply to the court in chancery, which will protect his interests when making sale, or distributing the proceeds of the land. Wiswall v. Sampson, 14 Wall., 52.

In this case, Mr. Justice Nelson said, p. 66: "It has been argued, that a sale *282of the premises on execution, and purchase, occasioned no interference with the possession of the receiver, and hence no contempt of the authority of the court', and that the sale, in such a case, should be upheld. But, conceding the proceedings did not disturb the possession of the receiver, the argument does not meet the objection. The property is a fund in court, to abide the event of the litigation, and to be applied to the payment of the judgment creditor, who has filed his bill to remove impediments in the way of his execution. If he has succeeded in establishing his light to the application of any portion of the fund, it is the duty of the court to see that such application is made. And, in order to effect this, the court must administer it independently of any rights acquired by third persons, pending the litigation. Otherwise, the whole fund may have passed out of its hands before the final decree, and the litigation became fruitless.

John Little and Chas. H. Kyle, for plaintiff,

Gottschall Brown, for receiver.

“it is true, in administering the fund, the court will take care that the rights of prior liens or encumbrances shall not be destroyed; and will adopt the proper measures by reference ,to the master or otherwise, to ascertain them, and bring them before it. Unless the court be permitted to retain the possession of the fund, thus to administer it, how can it ascertain the interest in the same to which the prosecuting judgment creditor is entitled, and apply it upon his demand? There can be no difficulty in ascertaining the prior liens and encumbrances, as all of them are matters of record.”

See also Beech on Receivers, sec. 713, where the same doctrine is laid down; and Noe v. Gibson, 7 Paige, Ch. 513; Robinson v. Railway, 66 Pa. St., 160. In the case of Meara’s Adm’r v. Holbrook, 20 O. S., 137, which was a suit brought against the receiver of a railroad, after leave properly granted, Day, J., at page 143,' in speaking of the rights and liabilities of a receiver, says: “Whatever he acquires by suit belongs to him officially, and satisfaction of judgments against him can be obtained only from the fund in his hands as receiver as directed by the court appointing him.” To the same effect is the case of Commonwealth v. Runk, 26 Pa. St., 235.

The statute having dispensed with the necessity for obtaining leave of court to sue the receiver of a railroad, it does not follow, nor is it consonant with reason or authority, that the suit having been prosecuted to judgment the judgment creditor should be permitted to interfere with the possession of the receiver without leave of the court. If he eould do so, the natural result would be that the property would be taken piece-meal from the custody of the receiver, and the object for which he was appointed would be entirely defeated.

But it is claimed that the property described herein, having never been actually m the possession of or used by the railroad company, but in the possession of G. & C., under a lease which does not expire until 1891, it is not necessary to and cannot be used by the receiver for the purpose of operating the railroad.

Granting that this is so, it does not seem to us to settle the question here presented. It is admitted that the legal title is in the railroad company; the order appointing the receiver is broad enough to cover this property.

The authorities are clear that if the creditor has good reason to believe that the land should not have gone into the hands of the receiver, it is-his duty to apply to the court appointing the receiver for an order discharging it from his custody, so that he may enforce his claim against it. Beach on Receivers, sec. 713; Robinson v. R. R. Co., 66 Pa. St., 160.

As, therefore, the order of the court below only stayed the sale of the premises, it will be affirmed