Court Opinion

ID: 7278195
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:02:45.498645+00
Date Added: 2024-06-11T16:18:57.345787
License: Public Domain

Mr. Chief Justice Shepard
delivered the opinion of the court:
The foregoing statement of the substance of the pleadings and evidence is sufficient to show the foundation of the errors that have been assigned.
1. The first question arises on the point raised by the demurrer as to the failure to obtain leave to file-the bill against the receiver, and as to the effect of the nunc pro tunc order granting such leave.
It is conceded that the cause of action is not of the character on which action may be brought,- without leave, by the provisions of sec. 3 of the act of March 3, 1887 (24 Stat. at L. 554, chap. 373, U. S. Comp. Stat. 1901, p. 582). The contention is that without leave previously granted the court had no jurisdiction of the suit; and reliance therefor is upon Barton v. Barbour, 104 U. S. 126, 131, 26 L. ed. 672, 675. In that case the railway company, a Virginia corporation, was operated by a receiver appointed by a court of that State.
The plaintiff, for an injury received on said railway in Virginia, brought her action against the receiver in the supreme court of the District to recover damages. The receiver filed a plea to the jurisdiction, alleging the order appointing him receiver in the State of Virginia, which authorized him to de*29fend all actions against him as receiver, by leave of the court, and providing that he should not be liable personally in conducting the business of the railway company, but that the property in his hands should be chargeable with any claim established in any action against him under leave of the court first had and obtained. The court—Mr. Justice Miller alone dissenting—sustained this plea. Mr. Justice Woods, who delivered the opinion of the court, made this statement: “Our decision upon this question will be limited to the facts of this case, which are that the receiver was appointed by a court of the State of Virginia, and the property in course of administration was in that State; the suit was brought in a court of the District of Columbia, a foreign jurisdiction, and the cause of action was an injury received by plaintiff in the State of Virginia, by reason of the negligence of the defendant while carrying on the business of a railroad, under the orders of the court by which he was appointed. No leave was obtained to bring the suit, and it does not appear that any application was made, either to the receiver or to the court by which he was appointed, to allow and pay the demand of the plaintiff.”
Another case cited by the appellant is Comer v. Felton, 10 C. C. A. 28, 22 U. S. App. 313, 61 Fed. 731, 737. This was a controversy between two receivers involving the right of possession of property. One ground of the defense rested upon the judgment of a justice of the peace rendered in an action of unlawful detainer. This action had been brought against one Erwin, an employee of receiver Comer; the latter was not made a party. The judgment for defendant was held not to be conclusive. In the course of the opinion it was said: “Defendant, Comer, had been put in possession of the premises involved by a decree of the circuit court, and a suit instituted in a court of law, without leave of the court appointing him, was a gross contempt. * * * While the justice’s judgment is a general finding for the defendant, yet it is probable that he took this view of his jurisdiction, and therefore found for the defendant. But whether this be so or not is immaterial. Any judgment in another court in a suit affecting the receiver’s right *30of possession should be treated as null and void by the court appointing the receiver thus wrongfully impleaded without leave of the court.”
In the first of those cases' there was a plea to the jurisdiction, showing that the subject-matter of the action was an injury received on a railway in the State of Virginia operated by a receiver appointed by an equity court of that State, the effect of a judgment in which would be to establish a claim against the property in the possession and under the administration of another court. In the second case, an action had been brought in a justice’s court to recover the possession of property in the custody of an equity court. While the judgment was for the defendant, upon what ground it does not appear, a judgment for the plaintiff would have had the effect to devest the title of the property the possession of which was in the equity court through its officer, the receiver.
The facts of the present case are quite different. There was no interference with the property and no claim of possession. The suit was brought in the same court which had appointed the receiver, and, through him, was administering the affairs of the insolvent corporation. The great weight of State authority supports the proposition that the failure to obtain leave to sue the receiver does not affect the jurisdiction of the court, as to subject-matter, and the jurisdiction of the person of the receiver may be waived; save under the exceptional conditions shown in Barton v. Barbour, 104 U. S. 126, 131, 26 L. ed. 672, 675, and Comer v. Felton, 10 C. C. A. 28, 28 U. S. App. 313, 61 Fed. 731, 737. High, Receivers, 4th ed. sec. 254a; Lyman v. Central Vermont R. Co. 59 Vt. 167, 180, 10 Atl. 346; Tobias v. Tobias, 51 Ohio St. 519, 38 N. E. 317; Manker v. Phoenix Loan Asso. 124 Iowa, 341, 343, 100 N. W. 38; Murray v. Etchepare, 132 Cal. 286, 288, 64 Pac. 282; Mulcahey v. Strauss, 151 Ill. 70, 80, 37 N. E. 702; American Steel & Wire Co. v. Bearse, 194 Mass. 596, 600, 80 N. E. 623; Wilson v. Rankin, 129 N. C. 447, 449, 40 S. E. 310; Payson v. Jacobs, 38 Wash. 203, 206, 80 Pac. 429.
Particularly is this the case where the suit is in the same *31court in which the receivership is depending; there being then no reason for the application of the rule requiring leave to sue. Ratcliff v. Adler, 71 Ark. 269, 271, 72 S. W. 896; Jones v. Stewart, — Tenn. —, 61 S. W. 105, 107; Mavor v. Northern Trust Co. 93 Ill. App. 314, 319; Fox River Paper Co. v. Western Envelope Co. 109 Ill. App. 393, 399; See also Minot v. Mastin, 37 C. C. A. 234, 95 Fed. 734.
The same doctrine, substantially, has the sanction of the Supreme Court of the United States, Jerome v. McCarter, 94 U. S. 734, 737, 24 L. ed. 136, 137. It was there said: “A further objection insisted upon is that -while the property was in the charge of a receiver appointed in the suit brought by Sutherland to foreclose the first mortgage, and therefore, as it is said, was in custodia legis, this bill was filed without leave of the court. If there could, under any circumstances, be any force in this objection, there is none now. Both suits were brought in the same court; these appellants appeared, answered, and cross-examined witnesses, and made no allegation that the suit had been brought without leave until about a year and a half afterwards. It was then too late. They must be held to have acquiesced; and, if not, leave of the court to commence and prosecute the suit must be presumed after the orders made to facilitate its progress.”
The fact that the same court having control of the property in the hands of a receiver entertains the suit would seem to be equivalent to leave to bring it. At any rate as the question had been raised by demurrer, the court, after requiring the receiver to answer, undertook to settle all doubt by granting the leave nunc pro tunc. The technical rules relating to such orders, invoked by the appellant, do not apply. The order was not to supply a former one that had been omitted in entering the minutes, but one expressly intended to relate back to the beginning of the suit so as to give sanction thereto, now for then, as the court had the right to do. Hirshfeld v. Kalischer, 81 Hun, 606, 607, 30 N. Y. Supp. 1027.
It may be remarked that a strict application of the doctrine relied on by the receiver would prevent the court taking juris*32diction of Ms appeal because he did not obtain express authority of the court to prosecute it at the expense of the estate in administration.
2. The next point is that the facts alleged are not sufficient to confer jurisdiction in equity. Passing by the question whether this be a suit by one member of a partnership association against others to establish a partnership liability, it might be treated as substantially an intervention in, or a proceeding ancillary to, the original receivership proceeding. Minot v. Mastin, 37 C. C. A. 234, 95 Fed. 734, 739.
The original proceeding was to conserve the assets of the insolvent association and distribute the proceeds among the shareholding members. Section 4 of article IX. gave an express lien upon the assets of the association “before distribution to stockholders,” and this suit was brought to establish a claim of the kind declared entitled to such lien.
The assets were in the custody of the court of equity'for distribution to stockholders, and the same court had jurisdiction of the claim of the holders of the prior lien. Case v. Beauregard (Case v. New Orleans & C. R. Co.) 101 U. S. 688, 691, 25 L. ed. 1004, 1005.
3. The next point arises on the application of the statute of limitations.
Our statute of limitations provides that no action shall be brought upon an obligation of the kind sued on “after three years from the time when the right to maintain any such action shall have accrued.” Code, sec. 1265 [31 Stat. at L. 1389, chap. 854].
The note sued on fell due July 20, 1908; suit was begun July 21, 1911.
In an early case in this District a note was due July 5, 1879, and action thereon was begun July 6, 1882. The statute then in force required action to be brought “within three years ensuing the cause of action, and not after.” Held that the action was brought in time. It was said: “If the day on which the cause of action accrued, which in this case was July 6, 1879, is to be included, the action was begun one day too *33late; if excluded, it was brought in proper time. Authorities differ on this point, but we prefer the rule followed in New York and Pennsylvania, which excludes the day on which the cause of action accrues, as a point of time after which the limitation ensues. The three years of limitation ensuing the 6th of July, 1879, had not expired when this suit was brought.” Baker v. Ramsburg, 4 Mackey, 1. In addition to the States named, the same rule prevails in Texas. Watkins v. Willis, 58 Tex. 521; Hunter v. Lanius, 82 Tex. 677, 18 S. W. 201.
The maker of the note had all the day of July 20th to pay the note, and the right of action did not accrue until July 21. The suit, as in Baker v. Ramsburg, supra, was not brought after three years from the time the right of action accrued. That decision, apparently unquestioned until the argument of this case, laid down a rule for the guidance of litigants in all subsequent cases, and it would be unjust to overrule it, even were we disposed to question its soundness.
The suit not being barred by the statute, there are no conditions in the case making the equitable doctrine of laches applicable.
4. The last proposition argued by the appellant is that the note sued on was executed without authority and therefore is not binding upon the association^ It appears that for a long series of years the managing officers of the association had been accustomed to borrow money from the Farmers & Mechanics’ Bank for the purpose of redeeming stock, which was one of the express objects of the association. When they began to borrow money for this purpose there was no express power to do so'. But reports of the execution and discount of notes for this purpose, in very large amounts, had been made yearly to the meetings of members, and received without a word of objection. More than one year before this note was executed, express power to borrow money, and making the loan a first lien on the assets, was conferred by amendment of the articles.
The note was given to take up other notes, some of which, but how many does not distinctly appear, had been executed before the amendment. *34Under the circumstances recited, the association had the implied power to borrow money to discharge their pressing obligations, and the action of the officers in exercising that power had been approved from year to year. Davis v. West Saratoga Bldg. Union, 82 Md. 285, 295; Booth, v. Robinson, 55 Md. 419, 456. See also Creswell v. Lanahan, 101 U. S. 347, 351, 25 L. ed. 853, 854.
Moreover, the express power conferred by amendment of the constitution^ a year prior to the execution of the note sued on, was an express ratification of the previous loans.
Perceiving no error in the record of the trial, the decree is affirmed, with costs. Affirmed.