Court Opinion

ID: 7337215
Source: CourtListenerOpinion
Date Created: 2022-07-25 23:16:08.145389+00
Date Added: 2024-06-11T16:20:13.589174
License: Public Domain

RUMSEY, J.
(dissenting). I agree with the Presiding Justice in the conclusions which he has reached in this case, except as to so much of the judgment as provides that the defendant shall repay to the plaintiff, as receiver, the sum of §10,000, which he, on the 4th day of June, 1894, paid to the Livingston estate upon the back rents. So far as that allowance is concerned, I think the referee was in error, and the receiver was not entitled to have it repaid to him. The facts bearing upon this question are not disputed. The Hoffman House of Hew Jersey had mortgaged to trustees all its property to secure its bonds to the amount of §425,000: The payments upon those bonds being in default, an action was .begun by the trustees to foreclose the mortgage. In that action Edward S. *833Stokes was appointed receiver, and qualified and entered upon his duties as such on the 21st day oí December, 1893. On that day he took possession of all the mortgaged property. That property consisted of the furniture in the buildings which, together, had been occupied as the Hoffman House for hotel purposes, with wines, liquors, and everything of that kind which were upon the premises, and of the premises which were so occupied. The Hoffman House corporation occupied these premises solely as lessees from various owners, and the leases constituted all its interest in the premises, and it had no further right to occupy them than such as it had acquired as tenant. One of the leases had been made by the Livingston estate, which was the owner of that portion of the premises. At the time Stokes took possession under the order, the rent from the 1st of December, 1893, was unpaid. The rent due upon the Livingston lease was $74,000 a year. It does not clearly appear just how that rent was payable, but I think it is fairly to be inferred from the evidence that it was payable either weekly or monthly. The rent would be something over $6,166 a month. By the terms of the order, which will be referred to more at length later, Stokes was required to take possession of this property, and carry on the hotel and restaurants. He continued to occupy the property as receiver until it was taken possession of by the defendant, who purchased it at the foreclosure sale. The property was bid off by the defendant on the 2d of March, 1894. The sale was confirmed on the 15th of May, 1894, and the referee was on that day directed to deliver possession of the property to the purchaser. The deed to the property was executed to the purchaser on the 25th of May, 1894, and on that day the property was delivered to it. Up to that time no rent had been paid to the Livingston estate. By the terms of sale it was provided that the unpaid rent, if any, would be allowed to the purchaser; and it was further provided that the unpaid rent, if assumed by the purchaser, would be deducted from the price the property brought. The bid upon which the property was struck off to the Hoffman House was $130,000. Ten thousand dollars of that amount was paid in cash, and the referee, by direction of the court, received as a final payment upon the bid $300,000 in the bonds of the old Hoffman House, to secure which the mortgage had been given, and a bond in the penal sum of $35,000, conditioned to pay to the referee the cash value of the remaining mortgage bonds, being about 12-5 in number, and any further sum or sums which might be necessary to be paid under the decree in the action. Upon compliance with this direction of the court, the deed was given by the referee. Neither in that deed nor by the terms of sale did the purchaser assume any of the rent, nor did it in any way become bound to pay it. Before the sale the agent of the Livingston estate applied to the receiver for the payment of the rent, evidently seeking to be assured that it would be paid before the property was sold. No promise or agreement was made by the receiver, as such, that the rent should be paid, but it is evident from the testimony that the agent was given to understand that after the sale there would be a payment of the rent. At *834any rate, it is clear that he received such assurances as satisfied Mm, and induced him to be quiet. The articles of incorporation ©f the defendant were filed in February, 1894. Three directors were named in those articles of incorporation, of whom Edward S. Stokes was one. Each of the directors were owners of five shares of the stock at that time, and no other further issue of stock was made, so far as appears. Nothing further by way of organization was done until the 12th day of May, 1894, some months after the sale. No officers of the board of directors had been selected, nor had any by-laws been adopted. It is quite evident, therefore, that any conversation which might have taken place between Harris, the agent of the estate, and Stokes, as to the payment of this rent, was not binding on the defendant, even had it amounted to an express agreement that the purchaser would pay the rent. But there was no such agreement, nor was there any pretense of one until long after the sale had been made, and the rights of the parties had accrued. On the 4th day of June, 1894, there was due to the Livingston estate over $40,000 for rent since December 1, 1898, of which about $15,000 had become due while the receiver was in possession of the property, and on that day $10,000 was paid by the receiver to apply on the rent. He credited himself in his accounts as receiver with that sum, so that it is fair to assume, unless we are to infer that he intentionally made a wrongful payment, that he proposed to pay that amount out of the funds in his hands as receiver, to apply on rent which had accrued while he was in possession of the premises as such. I do not agree with the Presiding Justice that, if the payment was wrongful, it follows that the defendant was bound to make it good, in face of the agreement that the unpaid rents were to be deducted from the purchase price, and of the fact that the purchaser did not assume it. There is nothing in the case from which it can be inferred, it seems to me, that the defendant, the purchaser, bound itself to be responsible for the rents which had accrued and becomé payable before it came into ■possession; and therefore, even if the receiver wrongfully paid it, there is no reason why the amount of such payment should be charged upon this defendant, who had not become in any way liable for it. Stokes confessedly made the payment as receiver, although, when so made, it was for the benefit of the defendant; but the defendant was not bound to pay it, and I can conceive of no rule which warrants a judgment against the defendant for this payment. To be sure, Stokes was president of the defendant, as well as receiver, but, as he says he paid this money from funds belonging to the receivership, he credited himself as receiver with it, and lie did it because the defendant had no money with which to do it. He had no authority to charge the defendant with this payment, and therefore there is no reason why it should be charged with it here.
But, passing that point, I agree with the learned Presiding Justice that, if the receiver, as such, had become liable for the payment of this rent, then the defendant can be adjudged to repay it to him, and the question is, therefore, whether, upon all the facts, the re*835ceiver had become chargeable. He was, an ordinary chancery receiver, and the rule in such cases is well settled, that he does not become liable by the mere fact of taking possession of the property. He is entitled to a reasonable time to elect whether to adopt or repudiate such contracts. If he elect to adopt a lease, the receiver becomes vested with the title to the leasehold interest, and a privity of estate is thereby created between the lessor and the receiver, by which the latter becomes liable upon the covenant to pay rent. U. S. Trust Co. v. Wabash W. Ry. Co., 150 U. S. 287-299, 14 Sup. Ct. 86, 37 L. Ed. 1085; In re Otis, 101 N. Y. 585, 5 N. E. 571 (Andrews, J.). The principle as laid down by the Presiding Justice is that a mere occupation, undisturbed, and with the consent of the landlord, by the chancery receiver, in no manner renders the funds in his hands liable for rent accruing during such occupation, but that, if such receiver remains in possession after a demand for the payment of the rent by the landlord, or keeps the landlord out of possession of the premises with the sanction of the court, the funds in his hands become equitably chargeable with the rent accruing during such occupation. I am not disposed to quarrel with so much of this statement of the rule as charges the receiver with the rent if he keeps the landlord out of possession with the sanction of the court, and, if it be adopted, there arises a question as to the evidence, and that is whether, upon all the facts made to appear in this case, it can fairly be said that the receiver did so keep the landlord out of possession of the premises. If the receiver was bound to hold the possession, or if, after taking possession, it can be inferred that he had retained it after a reasonable time to elect either to carry on the business or to sell it at a profit, the landlord might infer that liability for the rent had been assumed, and might repose upon that inference without making any hostile claim against the receiver. It seems to me that this is a fair inference from all the cases. In Oil Co. v. Wilson, 142 U. S. 313, 12 Sup. Ct. 235, 35 L. Ed. 1025, it is said that the receiver, upon taking possession of the premises, is entitled to a reasonable time to elect whether he shall adopt a contract, and make it his own, or whether he shall insist upon the inability of the company to pay, and return the property in good condition,, paying, of course, the stipulated rental for it as long as he used it. The rule in England, which seems to be well settled, is that, if the liquidator has retained possession for the purpose of winding up, or if he has used the property for carrying on the business of the corporation, or has kept it in order to sell it, or to do the best he can with it, the property in his hands becomes liable for the rent. In re Oaks Pits Colliery Co., 21 Ch. Div. 322-330; In re Lundy Granite Co., 6 Ch. App. 462. The same rule is laid down substantially by the courts of this state. Frank v. Railroad Co., 1.22 N. Y. 197, 25 N. E. 332; Woodruff v. Railway Co., 93 N, Y. 609; In re Otis, 101 N. Y. 585, 5 N. E. 571, per Andrews, J. It is quite true that these cases just cited, except the last one, are cases where the title passed to the .liquidator or assignee if he chose to take it, but he was not obliged to do so unless it was for the interest of the company which he represented, and he had a reason*836able time given him in which to elect. As to his election, and the results following the election, the rule is precisely the same with a chancery receiver, as is said by the supreme court of the United States in Dushane v. Beall, 161 U. S. 513-515, 16 Sup. Ct. 637, 40 L: Ed. 791. In none of the cases is it suggested that a demand of rent by the landlord is necessary to put the receiver to his election, but the only question in each case is whether the thing which the assignee or receiver has done amounts to an election, and that, as I look at it, is the only question presented here. In that regard the facts are very simple. The conceded fact that a mere chancery receiver, such as this one is, does not take any title to the property, is beside the question, which is whether there are any circumstances in which such a receiver will be charged with the payment of rent. The Wabash Railway Cases, 145 U. S. 82, 12 Sup. Ct. 787, 36 L. Ed. 632, and 150 U. S. 287, 14 Sup. Ct. 86, 37 L. Ed. 1085, were those •of that kind of a receiver, and the rule there laid down can be relied upon as applying to this case.
The entire value of the property consisted of the leases. The receiver was required, by the order, to take possession, and carry on the hotels and restaurants which were situated on the leasehold premises. The requirement to carry on the hotels and restaurants bound him to keep the possession for that purpose. He could not have surrendered that possession if he had wished to so long as that part of the order was in force. He was not there solely to preserve the property, but to carry on the business of the company, so that the leaseholds would sell to better advantage. The case was, therefore, precisely within the rule of the cases above cited. He was also given authority, not only to employ agents and servants, and to purchase supplies, but to do any and all further things which might be proper to be done in the general and ordinary conduct of similar places of business. That order necessarily required him, not only to take possession of the property, but to carry on the business, and he was bound, in so doing, to do whatever was necessary to be done in the general and ordinary conduct of that business. The extent of this particular portion of the order cannot be limited, I think, as is done by the Presiding Justice. It certainly was not intended to limit this to other things in respect to the hiring of employés, nor to buying supplies, for those were expressly provided for. It must have been intended to include all things other than those which were necessary to keep that business as a going business, so that the value of it should be preserved during the continuance of the suit; and if it had that construction it clearly authorized and permitted whatever the receiver might become liable for as the result of his retaining possession of the premises as receiver of the company. There is no doubt that, even if, under this order, it had become apparent to the receiver that the business could not be continued but at a loss, the court, this fact having been made clear, would have permitted him to give up the leases. There is no doubt either -that, if the business were profitable, it was his duty, under the order, to remain in possession, and, if he saw fit to remain in possession for the purpose of carrying on the business, he
*837must have been deemed to have elected to remain for the term, and, if he" did, he became liable for the rent while he retained the possession. Oil Co. v. Wilson, 142 U. S. 313, 12 Sup. Ct. 235, 35 L. Ed. 1025; Martin v. Black, 9 Paige, 641; Com. v. Franklin Ins. Co., 115 Mass. 278. In what was done subsequently it was quite clear that the receiver had elected to take possession of the term. ÍTot only did he remain in possession, and carry on the business, for the benefit of the insolvent corporation and of the mortgages, but the leasehold, which could only retain its vitality because of the possession of the receiver, was decreed to be sold, and was sold, and before it was sold the receiver gave to the landlord assurances that the rent would be paid. It is impossible, as it seems to me, in considering all the facts of this case, to come to any conclusion except that it is precisely within the rule which has been laid down that the receiver must make his election within a reasonable time, and, as he retained possession of the premises for the benefit of those who were interested in keeping alive the leasehold interest, he is bound to pay the rent. It may be that the receiver ought to have applied to the court for leave to pay this rent before the payment was made, but there can be no doubt that upon such an application he would have been directed to pay it, and, that' being so, it is of no importance here whether it was made or not. The case, in this aspect, must stand upon the proposition that the receiver had become liable for the rent, and the court would have compelled him to pay it had an application been made.
The fact that the defendant cannot recover upon its counterclaim the money it paid to the landlords on account of rent falling due while the receiver was in possession, is not irreconcilable with the conclusion which I have reached. It does not follow that, because the receiver cannot recover from the defendant, the defendant can recover from the receiver. The reason why the receiver cannot recover from the defendant is that there is no contract, express or implied, between them, and the same reason exists why the defendant cannot compel the payment by the receiver of what it paid for rent. When it bought this property, the defendant made no contract with the receiver. Its dealings were only with the referee. Whether the rent which it paid for the time that the receiver was in possession was deducted from the purchase price, as the contract said it should be, does not appear, but there is no doubt that the defendant was entitled to have it so deducted, and its remedy to get back the rent is to be sought by procuring that deduction, and not by recovering it from the receiver, who entered into no contract relation with it, and therefore incurred no liability towards it. For the reasons thus stated, I cannot agree with so much of the judgment of the court as permits the recovery by the receiver of this sum of $10,000.