Court Opinion

ID: 6640690
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:45:03.604982+00
Date Added: 2024-06-11T15:59:13.733150
License: Public Domain

ANDERSON, Circuit Judge
(dissenting). The court below seems to me to have correctly interpreted and applied the former opinion and mandate of this court. 295 P. 23.
While the former record was, as there pointed out, “inadequate for us to determine in exact detail the rights of the parties,” it was carefully guarded, and did not, as I think, hold that the appellant’s priority right “was to be determined as of the date of the beginning of the receivership.” The date when such right took effect was left open, as is shown by the following (295 F. 27):
“It is now suggested by counsel that, since the entry of the decree complained of, the receivership property has been sold. Whether, if such sale took place, the personal property here in question was set up and sold separately, in whole or in part, we cannot know. But, as indicated above, this decision is without prejudice to the right of any of the parties in interest to show any facts — resulting from any such sale or otherwise — as may enable the court below to make an order of distribution in accordance with this opinion.”
The present record shows the fact to be as we then suspected and intimated, viz. the liened property had been by public sale *888transmuted into money and the appellant’s rights transferred to the proceeds.
It also now appears that this receivership was liquidated as a hopelessly insolvent enterprise, and that most of the assets were subject to liens. It follows that, during the receivership, the receiver was using, and possibly impairing by use, personal property subject to liens, out of which, under some circumstances, priority rights might have accrued. The appellant was in that particular in the same position as other secured creditors. The appellant’s statutory lien (a sort of continuing vendor’s lien) could not, in that regard, be superior to a mortgage. The appellant at no time sought to enforce its lien against the liened property; it sought to obtain out of the general estate priority over other creditors, not to have the specific property returned or sold for its benefit.
When it sought review of our adverse 'decision by the Supreme Court on certio-rari, it contended that the value of its security should be determined by public sale. It was so determined. But the appellant stood by at the sale, and made no attempt to bid up the property beyond the amount of $2,907.95, the amount allowed by the court below. This was a conclusive determination of its rights. It follows that the appellant’s right as lienholder took effect as of the date of the sale, and not before. It was a proceeding analogous to foreelos-sure of a mortgage. A mortgagee, foreclosing property which has been used during a receivership, has no right to priority in excess of the value determined by the sale of the mortgaged property. Such excess, if allowed, amounts to holding general creditors liable as if for waste. As the sale of the property subject to the appellant’s lien has put into the hands of the receiver only $2,907.95, and as the decision of the majority awards the appellant $11,321, the difference, $8,413.05, is assessed upon the general creditors for use or waste of the liened property, from the date of the receivership to the date' of the sale. There is nothing in this record warranting a finding that the liened property was to any ascertained or ascertainable extent impaired in market value, or that the general creditors reaped any profit from the use of this liened property. The inference is that the operation by the receiver resulted in loss to all creditors, secured and unsecured. There was, therefore, on this record, no damage to the appellant, nor profit to the other creditors, growing out of the use of this liened' property.
There is another objection. There is nothing before the court, except merely the opinion, which is not really evidence, of the receiver, that the liened property was ever worth $11,321. If we assume for the moment that the appellant’s right accrued as of the date of the receivership, as I think it did not, then the other creditors, whose money the court is really disposing of, are entitled to try out the value as of the date • of the receivership. They are not bound by the receiver’s ex parte opinion as to that value. The record shows, inferentially, that there never was a hearing on that question. The receiver’s report is. treated in the majority opinion as though it were the report of a master, confirmed by the court after a full hearing of all parties in interest.
There is still another objection. The appeal should be dismissed for lack of proper parties, for it appears that in the proceedings in the court below, L. W. & P. Armstrong, an unsecured creditor to the extent of $83,884.16, and the National City Bank of New York, an unsecured creditor to the amount of $243,841.73, were made parties, and filed objections to the claim now made by the appellant. They were not merely creditors, whose claims were filed and allowed; these formal parties to the record' hold claims of over one-third of the total amount proved of about $975,000. They have received thereon a dividend of only IQ per cent., and only a small further dividend is in sight. The majority hold these inter-veners sufficiently represented by the receiver. I cannot agree. Doubtless a receiver appointed in such equity proceedings is, for some purposes, an actor, and not merely a stakeholder. Bosworth v. Terminal Co., 174 U. S. 182, 188, 19 S. Ct. 625, 43 L. Ed. 941. Even if we assume that creditors of an insolvent estate, whose claims are duly filed and allowed, axe not necessary parties-on such an appeal, it does not, I think, follow that creditors who are admitted as formal parties, plaintiff or defendant, can be ignored'on appeal proceedings, involving a disposition of such creditors’ property rights. Bosworth v. Terminal Association, 174 U. S. 182, 187, 19 S. Ct. 625, 43 L. Ed. 941. No case is cited, in the opinion of the majority or in the brief of counsel, which holds that under such circumstances such interveners are not indispensable parties. Manifestly, if the receiver legally represents these creditors, he has a right, without their assent, to dispose of the present *889litigation; he might concede in this court that the court below erred, and that this court should now enter judgment for the appellant for the full amount claimed. It is to my mind inconceivable that a receiver has such right to dispose of the property of the formal parties to the record below. The appeal record I think fatally defective for lack of parties. Kidder v. Fidelity Ins. Co., 105 F. 821, 823, 44 C. C. A. 593; Gray v. Havemeyer, 53 F. 174, 3 C. C. A. 497, and cases cited.
There is clearly nothing in Bosworth v. Terminal Association, 174 U. S. 182, 19 S. Ct. 625, 43 L. Ed. 941, or in Coffey, Receiver, v. Gay, 191 Ala. 137, 67 So. 681, L. R. A. 1915D, 802, or in High on Receivers (4th Ed.) § 314, lending support to the proposition that, under such circumstances as obtain here, intervening parties, whose rights in the distribution of the insolvent estate are to be cut down, are not indispensable parties.