Opinion ID: 1764507
Heading Depth: 1
Heading Rank: 3

Heading: did the trial court have subject matter jurisdiction?

Text: In her reply brief Stella seeks a dismissal of the entire action, based on her contention that the trial court did not have subject matter jurisdiction over the proceedings. The receivership proceedings were before Judge Norbert J. Muggli, district judge of the District Court of Stark County; and this appeal is from the civil action tried in the same court before Judge Lyle G. Stuart. Stella essentially contends that the appellees, as a result of their contract with the receiver, became parties to the receivership proceedings insofar as such contract and rights thereunder are concerned, citing Currier v. Stauffer, 168 Okl. 334, 32 P.2d 871 (1934); Security Trust Co. of Austin v. Lipscomb County, 142 Tex. 572, 180 S.W.2d 151 (1944). She further cites Elkins v. Davis Colliery Co., 113 W.Va. 279, 167 S.E. 698 (1933), for the proposition that creditors of a receiver must look to the property in the custody of the court, and they have no claim whatsoever on any of the parties to the litigation. They support their argument with the rule stated in Riehle v. Margolies, 279 U.S. 218, 49 S.Ct. 310, 73 L.Ed. 669; Chicago Title and Trust Co. v. Fox Theatres Corporation, 69 F.2d 60, 91 A.L.R. 991, that the court, once it appoints a receiver of the property of a debtor corporation, has jurisdiction of the assets of the receivership and all questions incident to the preservation, collection, and distribution thereof. In the instant case the appellees did not petition Judge Muggli of the District Court of Stark County, who appointed the receiver, to reopen the receivership to determine the claims being made by them. Hoff filed criminal charges against Stella which were unsuccessful and subsequently sued Stella and the Bank in the District Court of Stark County. We believe, however, that the above facts do not deny the jurisdiction of the district court in the instant case against Stella. While it is true that the appellees became a party to the receivership proceedings insofar as their contract and rights under it are concerned, this does not mean that an action pursued outside of their contract has to be pursued within the receivership proceedings. The appellees in the instant case make no claim against Stella based upon contract. Theirs is a tort claim against her personally. The Second Circuit Court of Appeals, in Chicago Title and Trust Company v. Fox Theatres Corporation, 69 F.2d 60, 61 (2d Cir. 1934), explains that: Distribution of the assets necessarily involves a prior determination of the existence and amount, that is, a liquidation, of the claim of each creditor who is to participate in the distribution. The Court further explains in Chicago Title and Trust Company, supra 69 F.2d at 61: Liquidation of a claim is strictly a proceeding in personam; it does not directly deal with receivership assets, and there is no inherent reason why adjudication of the liability of the debtor might not be had in a court other than that which controls their distribution. Riehle v. Margolies, 279 U.S. 218, 224, 49 S.Ct. 310, 312, 73 L.Ed. 669; Hatch v. Morosco Holding Co., 19 F.2d 766. Riehle v. Margolies, supra 279 U.S. at 224, 49 S.Ct. at 312, points out: That an order which results in the distribution of assets among creditors has ordinarily a twofold aspect. In so far as it directs distribution, and fixes the time and manner of distribution, it deals directly with the property. In so far as it determines, or recognizes a prior determination of the existence and amount of the indebtedness of the defendant to the several creditors seeking to participate, it does not deal directly with any of the property. The latter function, which is spoken of as the liquidation of a claim, is strictly a proceeding in personam. Of course, no one can obtain any part of the assets, or enforce a right to specific property in the possession of a receiver, except upon application to the court which appointed him. Lion Bonding & Surety Co. v. Karatz, 262 U.S. 77, 88-9 [43 S.Ct. 480, 484, 67 L.Ed. 871.] ... There is no inherent reason why the adjudication of the liability of the debtor in personam may not be had in some court other than that which has control of the res. It is only necessary that in the receivership proof of the claim be made in an orderly way, so that it may be established who the creditors are and the amounts due them. In the instant case we have a claim against Stella which has arisen after the property in question was distributed by the receiver Bank on May 23, 1978. In the terms of the cases cited above, what we have is a liquidation of a claim after the assets of the receivership have been distributed and the funds disbursed. The appellees' claim is not an action for specific property in the receivership but rather it is for conversion and for damages to their property, and this court has recognized a difference between the two causes of action. It is stated in More v. Western Grain Co., 31 N.D. 369, 153 N.W. 976, 979 (1915), that an action to recover damages for conversion is entirely different from an action to recover possession of property. We note that the instant case does not involve a receivership for the purpose of liquidating creditors' claims and establishing their priority to dwindling assets as would be the case in a bankruptcy receivership or the liquidation of a corporation. The purpose of the receiver in the Rummels' divorce was to sell this property in order to change the form of the assets from tangible property to cash, in order to make a property division. See Rummel v. Rummel, 265 N.W.2d 230, 236 (N.D.1978). At the hearing on May 23, 1978, when the court approved the final account of the receiver and discharge of receiver the Bank was ordered by the court to distribute all of the funds in its possession to the parties and Stella was given a check representing her share of the assets. We believe, therefore, that the appellees were not creditors of the receivership entitled to participate in the distribution of assets, as envisioned by the cases cited by Stella, because the claim arose and was liquidated after distribution of the proceeds from the sale by the court and the money was in the hands of Stella and Gilbert Rummel. For the reasons stated in this opinion, we believe that the appellees' claim is not against the assets of the receivership but, rather, is against Stella personally for conversion and, consequently, that the trial court had subject matter jurisdiction over the appellees' claim against Stella Rummel. However, our conclusion with respect to Stella does not necessarily apply to the appellees' claim against the Bank because the appellees' claim against the Bank is pursuant to their contract with the Bank, as receiver. We will discuss the appeal by the Bank in the second part of this opinion. At this point we will begin our review of the remaining issues raised by Stella. Stella's issues, Nos. 2 and 3, raise various objections to the jury instructions. With respect to jury instructions, it is stated in Welken v. Conley, 252 N.W.2d 311, 317 (N.D.1977) We have repeatedly held that even if an error in the instructions is committed by the court, if the effect of the entire instructions, when read as a whole, is to outline the issues in the case fairly and correctly, the improper instruction will not be considered prejudicial error. See, for example, Haider v. Finken, 239 N.W.2d 508 (N.D.1976). In Welken, supra 252 N.W.2d at 318, this court discussed Rule 51(c) of the North Dakota Rules of Civil Procedure, which involves exceptions to jury instructions, as follows: In Rau v. Kirschenman, 208 N.W.2d 1 (N.D.1973), we indicated that Rule 51(c) is not an absolute rule, and should not be applied inflexibly where manifest injustice would be a likely result. While acknowledging that relief from the Rule should be provided for in exceptional circumstances, we carefully limited such relief to those instances where the error in the instruction is so plain, fundamental, and highly prejudicial that our failure to consider the error would result in a miscarriage of justice. See also, Nokota Feeds, Inc. v. State Bank of Lakota, 210 N.W.2d 182 (N.D.1973).