Court Opinion

ID: 6673766
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:14:17.413261+00
Date Added: 2024-06-11T16:00:37.846844
License: Public Domain

The opinion of the Court was delivered by
Willard, C. J.
The complaint is in the nature of a bill filed by a creditor and stockholder of the insolvent corporation to wind *322up its affairs and apply its property as assets for the payment of its debts.
April 24, 1876, the order enjoining creditors from suing the corporation was made, and also one appointing a Receiver, which should, as far as the designation of the person to hold such Receivership was concerned, depend upon a written consent to such appointment given by stockholders having a majority of the stock of the company, to be filed with the proceedings in the case, to be executed to the Clerk of the Court. This consent was filed April 26,1876.
H. B. Claflin and others, styling themselves H. B. Claflin & Co., have intervened by petition, seeking to participate in the distribution of assets as creditors, and exhibiting a judgment recovered in the United States Court for the District of South Carolina on the 27th day of April, and claiming that such judgment is entitled to priority of payment out of such assets, having regard to an alleged lien of such judgment on the real estate of such corporation. It appears that the action in which such judgment was recovered was pending in the United States District Court at the time the present complaint was filed, but that judgment was recovered after the issuing of the injunction order and after the appointment of the Receiver was complete, though before the Receiver had perfected his official bond.
The present question does not depend on the right of the Circuit Court to enjoin creditors as it regards suits pending in the United States Courts, as alleged by the first ground of objection urged by the petitioners, who are appellants here. The petitioners have not brought themselves into the action as parties by order and proper amendment, so they cannot question the propriety of the orders of injunction and Receivership. They come in as petitioning creditors, claiming either in hostility to the title of the Receiver or as entitled to the benefit of the equities of the complaint. They do not show any lien on the property of the defendants acquired prior to that which arises under the order for the appointmentof a Receiver, and, therefore, they are not in a position to claim in hostility to the Receiver unless they can show that the order appointing a Receiver did not affect the title to the assets of the insolvent corporation until either due qualification on the part of the Receiver or their actual reduction to possession by the Receiver.
It admits of no doubt that in an action of the present nature the order appointing a Receiver in itself places the assets of the *323insolvent corporation in the hands of the Court. The case differs, in this respect, from those to which reference has been made by counsel, where there was a Receivership pendente lite. In that case the sole object of the Receivership is to preserve the property, to answer the purposes of a decree, as between the parties to the suit, without affecting the interest of third persons not parties; while the object of the present Receivership is the administration of the assets, considered as a trust fund in equity, not only as against parties but all making claim thereto. It also differs from any familiar form of Receivership under a bill filed by a judgment creditor who has exhausted his remedy at law and comes into equity to make assets through the instrumentality of its power of enforcing discovery; and also from the statute Receivership created by the Code in the case of supplementary proceedings to enforce a judgment and assimilated to a Receivership under a creditor’s bill inter vivos. In cases of this class, equity does not find assets already imposed with a trust, but intervenes to compel the application of both legal and equitable assets to the satisfaction of the judgment, on the ground of the inadequacy of the legal execution to reach and apply such assets. Having obtained assets by these means, it looks to all legal priorities and equitable demands appropriating them. — Ens. vs. Calder, MS., 1868; Thompson vs. Brown, 4 Johns. Ch., 619.
The practice in application to Courts of equity by those who claim to have priorities affecting a fund in the hands of these Courts is stated very clearly in Wisill vs. Sampson, (14 How., 52,) when it is said that the person making such claim should come in by petition and may be examined pro interresse suo.
It is also held in that case that a judgment recovered in the Courts of the United States after the property had passed into the possession of a Receiver cannot create priority of lien as affecting such assets.
The company being insolvent, its property was held by its officers as a trust fund for creditors and stockholders.— Curran vs. Arkansas, 15 How., 304; 2 Kent’s Com., 307. As such the Court of Equity had authority to lay hold of such trust fund and distribute it upon the principle of equity, respecting all legal liens that had attached to it before it came into the hands of the Court.— Garvin vs. Garvin, 1 S. C., 55. A proper foundation for the exercise of such jurisdiction was laid down in the complaint, and the Court in making the order appointing the Receiver assumed control of the *324assets of the corporation, in pursuance of its right and duty to support such assets to equitable sales of distribution. Its injunction, order preventing interference with these assets was a proper assertion of the right of exclusive control over them lodged in the Court and was in accord with the fact that the Court was in actual and rightful control of them. Actual possession was not necessary to complete the right of the Court to control them; it was enough that the Court had assumed control of them and had entered upon their administration, protected them from waste, and devoted them by anticipation to certain uses, and they were, therefore, a fund in Court as completely as if in the hands of a Receiver, as was said in State vs. Bank, 1 S. C., 71.
A judgment acquired after the order appointing a Receiver cannot obtain a lien on the assets, for the judgment only acts upon the property of the judgment debtor in the hands at the time it was obtained or subsequently acquired, while the control of the property had gone into the hands of the Court and out of those of the judgment debtor at that time. It is true that title to the lands upon which it is claimed that the judgment became a lien stood apparently in the name of the judgment debtor, but the Court had already obtained a power of disposition that, when fully exercised, would relate back to the time when control was assumed over the assets. It was not essential to the validity of that power that actual possession, or its equivalent paper title, should appear to stand in the name of the Court or its officer; such possession is not necessary to uphold powers created by the acts of parties, much less that which results from the right of exercising jurisdiction.
The petitioners cannot, therefore, claim to act in hostility to the right of the Receiver, and must be deemed to have come in to obtain the benefit of the equities set forth in the complaint. Occupying this position, they can take no advantage of anything done contrary to the order of injunction; for, seeking equity, they must do equity, and it is inequitable to seek priority at law against proceedings pending for equitable distribution, the rule of equity being in such cases equality.— Codwise vs. Gelston, 10 Johns. R., 507.
It is clear, therefore, that the petitioners are not entitled to set" up their judgment as a prior lien, but that they must come in with all other creditors on terms of equality.
The appeal must be dismissed.
McIver, A. J., and Haskell, A. J., concurred.