Court Opinion

ID: 6967940
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:57:15.413163+00
Date Added: 2024-06-11T16:08:41.237445
License: Public Domain

Mr. Justice Magruder delivered the opinion of the court: The question in this case relates to the right of a party, furnishing supplies to a receiver, to enforce payment for such supplies against the fund or property in the hands of the receiver. The material facts are set forth in full in the decree itself. The record in the case contains no certificate of evidence. It must, therefore, be assumed that the findings of the decree were sustained by sufficient evidence upon the hearing below. “Where the evidence is not preserved in the record, either by a bill of'exceptions or by a certificate of evidence, the facts recited in the decree must be taken to have been found upon sufficient evidence.” (Schuler v. Hogan, 168 Ill. 369). Among the facts recited in the decree are the following: Before Gore filed the bill in this case against Heffron for an accounting, and to dissolve their partnership, Gore and Heffron had executed a trust deed to secure a large indebtedness of more than $100,000.00 upon said hotel and the furniture and fixtures therein. Under proceedings to foreclose said trust deed a decree of foreclosure was entered, and thereunder on March 15, 1894, said hotel building' was sold to appellants for $95,000.00, and said furniture and fixtures were sold to appellants for $9250.00. This sale was afterwards confirmed. Prior thereto, the first receiver, appointed in the suit between the partners, was appointed by agreement of both parties. The second receiver appointed in the cause was appointed upon the motion of the complainant, Gore. The receiver, thus appointed on the motion of complainant, acted as such from about October 1, 1891, until January 1, 1895, and was acting as such when appellees furnished the supplies in question. On March 28, 1894, after the sale to the appellants under the foreclosure of the trust deed, an order was entered, directing the receiver to turn the furniture and fixtures over to the complainants. From this order thus entered on March 28, 1894, Heffron appealed to the Appellate Court, where the order was affirmed, but not until January 28,1895. While this appeal of Heffron was pending, the furniture and fixtures were left in the possession of the receiver, and by the consent of the appellants and of Heffron the receiver continued to operate and conduct the hotel. It was while the receiver was thus, with the consent of the appellants, operating and conducting the hotel, and while the furniture and, fixtures were in his possession, as receiver, that the appellees furnished to said receiver the supplies in question. The appellee, the McKindley Coal and Mining Company, furnished coal to said receiver between November 6 and December 3, 1894. The appellee, the Steele-Wedeles Company, furnished groceries to said receiver between November 5 and December 3, 1894. The receiver did not cease to operate the hotel until December 6,1894. The decree finds, that the coal and groceries, furnished by the appellees, were necessary to enable the receiver to conduct the hotel, and were so used by.liim, and that the purchase thereof was proper, and was authorized by, and was in pursuance of, an order appointing the receiver. Under the facts thus stated and thus found in the decree, we are of the opinion, that the court below decided correctly in ordering the claims of the appellees to be paid by the sale of the furniture and fixtures, in default of the payment thereof by the appellants. It is contended by the appellants, that, by the sale of the furniture and fixtures to them in March, 1894, the property was placed beyond the reach of any charge for the receiver’s expenses. Appellees did not become creditors of the receiver before the sale to the appellants, but after such sale. The purchasers of the property at the sale made in March, 1894, were not third persons, but wTere the executors of Gore, who was a party to the present suit. The indebtedness secured by the trust deed, under which the sale ivas made, was the indebtedness of Gore and Hefiron. The receiver appointed in the case was appointed by agreement between Gore and Heffron. The question then is not whether the court has the power to make the expenses'of the receivership a charge, superior to prior liens owned by persons not parties to the suit, in which the receiver was appointed. Gore was responsible for the creation of the indebtedness secured by the trust deed, and for expenses of the receiver. Therefore, the purchase at the foreclosure sale by the appellants, who stand in the place and stead of Gore, amounted merely to a payment, and left the property in the hands of the appellants, subject to the charge of the receivership expenses, if there was any charge for such expenses at that time. Where the owner of the equity of redemption of property purchases the same at a judicial sale under a mortgage created by himself, he does not thereby acquire a new title, divested of liens prior to the lien under which he purchases. His purchase is nothing more than a payment of the debt, and merely relieves the property from the encumbrance thereon. “The payment by a judgment debtor of the judgment, after a sheriff’s sale, extinguishes the lien; .and the fact that he takes a transfer of the certificate and the sheriff’s deed, instead of a certificate of redemption, cannot divest the lien of a subsequent judgment.” (McCarthy v. Christie, 13 Cal. 80). “If the redemption is made by the judgment debtor, who continues to hold the 'estate, of course it is subject to a subsequent judgment.” (McLagan v. Brown, 11 Ill. 519). When Gore, whom appellants represent, procured the appointment of a receiver over the property, he created a charge thereon for the expenses of. the receivership. Hence, the appellants cannot relieve the property of that charge by purchasing it at a foreclosure sale under an encumbrance created by Gore, and for the payment of which he and his representatives are liable. But, independently of these considerations, it must be remembered that the claims of these appellees accrued after the sale to appellants in March, 1894. It is true that, at that sale, the appellants purchased the furniture and fixtures for $9250.00 and that on March 28, 1894, an order was entered, directing the receiver to turn the same over to appellants. But, pending an appeal from this order, the appellants themselves consented that the furniture and fixtures should remain in the possession pf the receiver, and that the receiver should continue to operate and conduct the hotel. Not only so, but the appellants, on the 7th or 8th of November, themselves filed a petition before the court for an order, directing the receiver to include the said furniture and fixtures in a lease to be thereafter made, which lease was to take effect on December 6, 1894. This was a recognition of the right of the receiver at that time to dispose of the furniture and the fixtures by a lease. The appellants are estopped from saying, that appellees should not be paid for the coal and groceries, furnished by them to the receiver, when the receiver was running the hotel with their consent and with their furniture and fixtures. It is impossible to conceive how a hotel can be operated properly without coal and without groceries. Such being the facts, what is the law applicable to them? “When it becomes the duty of a court of equity to take property under its own charge, through a receiver, the property becomes chargeable with the necessary expenses incurred in taking care of and saving it, including the allowance to the receiver for his services. He is the officer and agent of the court, and not of the parties; and it is a right of the court, essential to its own efficiency in the protection of things so situated, to keep them under its control, until such expenses and allowances are paid or secured to be paid.” (Beckwith v. Carroll, 56 Ala. 12; Beach on Receivers, sec. 771; High on Receivers, sec. 796). Mr. High, in his work on Receivers, at section 796, after stating the doctrine that, when a court of equity takes property under its charge by appointing a receiver, the property itself is chargeable with the necessary expenses of the receivership, says: “And, in such case, the person, who, under the final decree of the court, acquires the property, or its proceeds, acquires it cum onere and chargeable with the amounts due to the receiver for services and advances.” The object of appointing a receiver is to preserve the property for the benefit of all parties interested. Sometimes this object is best attained by continuing a business. When this is done, the court has the right, although it should exercise such right with great caution, to make the expenses of such business chargeable upon the corpus of the property, if the income is not sufficient to pay the same. Of course, such expenses must be charged first upon the net income, but, when that is not sufficient, they may be charged upon the property itself, or upon its proceeds after sale. It has been held that, although this authority, of a receiver to incur indebtedness, in order to keep the business a tgoing concern” until the rights of the parties are adjusted and a sale is effected, ordinarily arises only in cases of railroad companies; yet the same rules may be applied in other cases under like circumstances. (Hopfensack v. Hopfensack, 61 How. Pr. 498; Ellis v. Vernon Ice, Light and Water Co. 86 Tex. 109; Espuella Land and Cattle Co. v. Bindle, 11 Tex. Civ. App. 262). In Thornton v. Highland Avenue and Belt Railroad Co. 94 Ala. 353, a receiver was appointed, who was authorized to conduct and run a hotel, and, while he was operating the hotel, he became indebted for groceries; and it was there held, that such debt constituted a proper charge, first on the income of the property, and then upon the corpus. It was there said: “The party contracting with the receiver looks to the rem, the fund or property in gremio legis, backed by a pledge of the coui't that it shall be liable for all costs and expenses legitimately incurred in pursuance of its orders and decrees. * * * Under such conditions, the court should never surrender its custody of the property, or discharge the receiver, until all obligations incurred by him in the proper discharge of his duties have been adjusted and provided for. * * * The order of the court, made in pursuance of an agreement made between the original parties, as averred in the petition, by which the property was placed in the hands of the complainant, did not deprive the court of authority to resume possession and control of it, for the purpose of enforcing all claims to or liens upon it, the’ result of its own orders or decrees.” (Highland Avenue and Belt Railroad Co. v. Thornton, 105 Ala. 225). The judgment of the Appellate Court and the decree of the Superior Court are affirmed. Judgment affirmed.