Court Opinion

ID: 6994787
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:31:19.879431+00
Date Added: 2024-06-11T16:09:44.152842
License: Public Domain

Mr. Justice Waterman, opinion on rehearing. On a petition for rehearing filed in this case, there is set forth a summary of proceedings had in the court from whose order the appeal in this cause was taken, and action had, not only by appellant, but by various creditors of the mortgagor, which proceedings and action are said to have taken place subsequent to the injunction ordered by the Circuit Court, and before the judgment of this court. It is said that the judgment of this court has left these proceedings and the rights of the parties thereto “ in inextricable confusion.” We have no knowledge as to any of the matters thus described, save what we have learned from the summary of counsel given in the petition for a rehearing. What the rights and remedies of the parties thereto are, we can not now say. It sometimes happens that out of litigation itself arises such conditions as warrant the interposition of a court of equity; and it may be that it is or will become necessary that a bill be filed and the chancellor be called upon to remove the confusion said by counsel to exist. See Pomeroy’s Eq. J., Secs. 174 and 175, This court did not hold that a bill to foreclose a chattel mortgage can not be maintained. The court did hold “ that the bill in this cause presents no case for the interposition of a court of equity.” What; the character of the bill would have been, had all the persons whose interests were aimed at been, under proper allegations, parties to it, it is unnecessary to discuss. The bill shows that October 20th, the defendants gave their promissory note to the complainant; that on the following day the defendants executed to the complainant a chattel mortgage upon a large stock of goods, and that the complainant immediately took possession of the same and remained in exclusive possession and control of the same until the 25 th of October, four days, when sundry parties took from him by replevin certain of said property and still hold the same, and that near midnight certain other parties took possession without right of the remainder of the property and still hold the same, and that other persons are threatening and intending without right to take possession of portions of the property, and deprive complainant of the security of his mortgage which is due and unpaid. The notes to secure which the mortgage was given were each dated October 20th, and were payable on demand. The only parties to the bill were the mortgagee and the mortgagors. Upon the day the bill was filed the defendants appeared by counsel, and having had notice of the application for the appointment of a receiver, made no opposition thereto. The bill does contain a prayer for the foreclosure of the mortgage, but it shows no proper ground for the aid of a court of equity to effect such foreclosure; on the contrary it shows that as soon as the mortgage was made, the mortgagee took complete possession, and that he has, by virtue of the mortgage, power to sell the mortgaged property at public or private sale. It fails to show that there is anything in dispute between the parties or anything which the complainant is entitled to from the defendants which they have withheld or withhold. It is not against the defendants that the bill seeks relief, but against persons not parties thereto. While bills to foreclose chattel mortgages may, under a proper showing, be maintained, it is not the case that every pledgee of personal property, in possession of and having-power to sell the same, can at any time, his debt being due, call upon a court of equity to take possession of and sell the pledge for the purpose of, by foreclosure, satisfying the lien thereon. Ho complaint is made of anything done or refused by the defendants; the entire proceeding is evidently collusive between the parties thereto. By the appointment of a receiver, persons evidently well known, but whose names wer-e not mentioned, were deprived of plain legal rights. Had the persons whose right to proceed at law against the mortgaged goods was by the receivership cut off, been made parties to the bill, they might not only have objected to the appointing of a receiver, but might have appealed from the order of appointment. By, without their knowledge, obtaining a receiver, the complainant obviated the danger of objection and appeal. The persons against whom the bill was aimed were deprived of an opportunity to be heard, placed at a disadvantage, their rights foreclosed by a proceeding of which they had no notice. The first maxim in the administration of the law is “ audl alteram partem” Courts do not favor proceedings wherein an attempt is made to affect the rights of persons not made parties. According to the allegations of the bill the mortgaged property, after coming into the possession of the complainant, had all been taken from him, some of it by legal process, and the remainder in other ways. From the possession thus acquired by persons not parties to" the bill, the receiver was given “full power to take” the mortgaged property and sell the same for the best price he could obtain. Walker v. Gibson, 35 Ill. App. 49, contains an account of a proceeding like this, to affect the rights of persons not parties to the bill, by the appointment of a receiver, and there, as here, the order of appointment was declared to be unwarranted. We are not aware of any case in which an order appointing a receiver to take possession and sell property in the hands of persons not parties to the bill has been sustained. The appointment of a receiver is one of the most difficult and embarrassing duties which a court of equity is called upon to perform. It is a peremptory measure, whose effect, temporarily at least, is to deprive of his property a defendant in possession, before a final decree is reached by the court, determining the rights of the parties. Bank v. Gage, 99 Ill. 207-209; High on Receivers, Sec. 3. The same author in section 11 says: “ To warrant the interposition of a court of equity by the aid of a receiver * * * it must appear that possession of the property was obtained by the defendant through fraud, or that the income from it is in danger of loss from the neglect, waste or misconduct of the defendant; ” and in section 7: “ But in appointing a receiver the court goes still further, since it wrests the possession from the defendant. Receivers are appointed to take property out of the possession of defendants, not to seize goods or lands in the keeping of strangers to the proceeding. “ The bill in this case did not ask to have a receiver appointed of anything‘which the defendants, or any agent of theirs, had possession of; on the contrary the bill shows that the defendants had parted with all possession of the mortgaged property; the order appointing a receiver was therefore unwarranted.” High on Receivers, Sec. 660; 2 Jones on Morts., Sec. 1558; Whiteworth v. Whydon, 2 MacGordon 52; Sea Ins. Co. v. Stebbins, 8 Paige (N. Y.) 565. Courts of equity are exceedingly averse to the appointment of receivers upon ex parte application, and it is the settled rule to require notice of the application to be given the defendant. Devoe v. Ithaca Ry. Co., 5 Paige 521; Arnold v. Bright, 41 Mich. 210; High on Receivers, Secs. 111 and 112; Beach on Receivers, Sec. 134. ' Notice was in this case given to the defendants, from Avhom nothing Avas to be taken, but no notice Avas given to the persons who were to be dispossessed. Manifestly, the parties in possession Avere not made parties lest they might object to what the complainant Avished to have done. Counsel ask if the complainant is not entitled to cut off by foreclosure the rights of the “ sundry ” parties who have levied upon or taken possession of the mortgaged goods, or to foreclose subject to such rights. Surely the distinguished counsel would not have attempted to cut off the rights of “ sundry ” parties, Avithout making them defendants to the proceeding; AAdiile if the foreclosure is to be subject to their rights, neither their actual possession or right to proceed at haw, can be interfered Avith. ' It is the case, as is stated in section 614 of High on Receivers, that a receiver has been allowed in behalf of the mortgage of chattels which have been seized under Avrits of attachment which were subordinate to the mortgage; but in the case in which this was done, Crow v. Red River Co. Bank, 52 Tex. 362, the court said: “ The bank (the mortgagee) could not intervene in the attachim.^ writs for Avant of jurisdiction in the County Court OATer its claim, and was virtually remediless unless the jurisdiction of the District Court could be invoked, and other creditors restrained from further proceedings under their attachments, until the respective rights of all the parties could be ascertained.” The complainant was not, in the case at bar, remediless, unless he was permitted to resort to a court of equity. A decree against the defendants to his bill would have been of no practical benefit to him. The answer of the defendants, filed sixteen days after the receiver was appointed, admitting, as it does, the allegations of the bill, and as a kind of cross-bill, asking that the complainant account for the proceeds of accounts assigned to him, does not establish that the bill presents a case shoAving that there is set forth in it a cause for the interposition of a court of equity, or the order appointing the receiver. The petition for a receiver Avill be denied. Mb. Justice Gaby. Extraordinary remedies are losing, in their indiscriminate application, their title. Block, the receiver, has no interest in the simulated controversy appearing on this record, and no right to apply for the injunction from which this appeal is prosecuted. Beach, Receivers, S. 258; High, Receivers, S. 181; 20 Am. & Eng. Ency. of Law, 228. He was not applying for protection in a possession he had obtained, but for the interposition of the jealous and sensitive dignity of a court of chancery, as a bar to a resort by-strangers to process of law in the enforcement of their alleged legal rights, that thereby he might obtain possession. This incapacity of a receiver has been often overlooked. We did it in Sercomb v. Catlin, 30 Ill. App. 258, and United States Ex. v. Smith, 35 Ill. App. 99, and the Supreme Court followed us in the same cases, 128 Ill. 556, and 135 Ill. 279. Humerous cases can also be found, where the United States Circuit Courts, especially in operating insolvent railways, have exercised a paternal authority at the instance of receivers, but no calmly considered case, where the point has been made, justifies a receiver appointed only to take possession of and sell property—unless acting under some statute—in originating proceedings to make more effectual the remedy of one of the parties. If the party neglects his interests it is no business of the receiver.