Battle v. Davis, 66 N.C. 252 (1872)

Jan. 1872 · Supreme Court of North Carolina

66 N.C. 252

R. H. BATTLE, Receiver, &c. vs. S. W. DAVIS.

1. A Court of Equity has the power to appoint a receiver for the purpose of securing and protecting property which is the subject of litigation. He is an officer .of the Court and his possession of the property is the possession of the Court. He holds such property as a custodian, until the rightful claimant is ascertained by the Court, and then for such claimant.

2. A receiver cannot commence any action for the recovery of property without an order of the Court and when such order is made, the action must be brought in the name of the legal owner, and he will be compelled to allow the use ef his name upon being properly indemnified out of the estate and effects under the control of the Court.

8. The power of a receiver to bring an action is regulated by the rules of a Court of Chancery. An order to sue in his own name cannot be given by our Courts, and the United States Courts cannot confer upon him greater powers or privileges as a suitor in the ntale Courts.

This was a civil action tried at a Special Term, Jan., 1872, of Wake Superior Court, before Watts, Judge.

The complaint alleges: That the North Carolina Mutual Life Insurance Company was a corporation created, organized and existing under the laws of North Carolina.

That the defendant Davis, made his promissory note to.said corporation, by which he promised to pay'the sum of $450.80, in the currency of the United States.

That in a certain suit, in the Circuit Court of the United States, for the District of North Carolina, in which Sansom and others were complainants and the N. C. M. L. I. Co. were defendants, a certain decree was made, and among other things is the following, viz : “It is therefore ordered, adjudged and decreed, that R. H. Battle, Sr., be appointed receiver of the assets of the North Carolina Mutual Life Insurance Company, and that upon his executing bond, &c., &c., the assets of the said Company shall be placed in his possession, and be shall proceed to collect the ohoses in action which may come to his hands, and for such purposes he is authorized to commence and prosecute suits in the Courts of the State of North Carolina.” The complaint further alleges that the- plaintiff complied with the orders of the Court, gave bond, &c., and that as such receiver he is vested with, and possessed, of and entitled to the promisory note made by the defendant as aforesaid. Demands judgment, &c.

To this the defendant demurred :

L That complaint does not state facts sufficient to constitute a causo of action.

II. That the plaintiff, according to the facts stated in his complaint, has no right to bring this action in this Court.

Upon argument the demurrer was sustained and the suit dismissed.

Plaintiff appealed to the Supremo Court.

Fowle & Badger and Battle & Sons, for the plaintiff filed the following brief:

Can a receiver appointed uuder a decree in the Circuit Court of the United States, to collect the assets of a corporation for its creditors, sue in his own name in our Courts?

I. The dccrae of the Circuit Court must vest the title, legal or equitable, in the receiver, and since the distinction between the Courts of Law and Equity was abolished, it can make no difference.

The assignee of an account or a bond not negotiable, now sues in his own name.

Here the receiver alone can receive and give receipts for the agents.

II. A receiver appointed in the Courts of another State, may sue in his own name in New York. Yorhies1 Code, pp. 120 and 480. Jhinh v. St. John, 29 Barb. 585. Hoyt v. Thompson, 1 SeUL-n 820. Porter v. WiVims, 5 Selden. 1+2.

III. Receivers of an insolvent corporation of another Bute, •appointed under the laws of that State, with power to take-possession of the effects of the corporation, and to sell, assign, «fee., its real and personal estate, have power lo sell and assign ¿i debt due from a citizen of New York, in their own name#, so ns to give the purchaser a right of action, @s aguinst the debtor in the Courts of New York. Tloytv. Thompson, ( Tallies ”30,

The above is a well considered case by the highest Court in Now York, and is based upon mihoriiy as well as principle.

IV. That the receivers have power to sue at law bv permission oí the Courts appointing them, as hero, (see Htrong's JCq. Jur. sec. 829, ei seq., Dari l Ch. Prao. 1977 and 1991. Parker v. Browning, 8 Paige 388.

That the Comity of (Yurts permits receivers appointed in one State to sue in another. See fprañey v. Hartford ins. Go., 1 Dillon’s 0. C. Reps. 892.

VI. In our case the receiver is by the terms of the decree appointing him, a trustee for the creditors of the Company, and his trust being determined by the decree, he must be a trustee of an express trust, and to sue in his own name, under C. C. P.., sec 57.

BoAchelor for defendant.

J. The plaintiff is a receiver appointed under the ©Id equity system, which obtained before the adoption of C. C. P.

He is not the the real party in interest referred to in sec. 55, C. C. P., nor is he the trustee of an express trust under sec. 57, 0. C. P.

Nor must he be .confounded with receivers under sections 315 and 270, C. C. P.

The decree of tlie -Court of Equity is not an assignment, nor does it contain an order for assignment of -the note sued on by the plaintiff. If the decree of the United States Circuit Court .could assign fhis bond with .the right of .action on it* without regard to rules of pleading and practice in the látate Courts, why could it not change the title to, and right to recover, real estate without regard to State laws. The only effect the decree can have, is to order the plaintiff to commence and prosecute suits according to laws governing tiro Courts vdiere such suits are instituted.

8. The receiver is the mere agent of the Court, and lias no {flaws except in the Court which appointed him. lie acts under its eider, and can do nothing without it. “ He lias'no powers except such as are conferred on him by the order for his appointment, and the course and practice of the Court/’ 2 Story Pg., 'Turin, sec. 833. 'TevjTlandk, v. Met. Ins. (Jo., 2 Paige 252. Sea. Ins. (Jo. v. SieblA-ns, 8 Paige 565.

4. The suit should have been in the nenie of the Insurance Co , which is not dissolved; or '■2nd, The debt might have been collected by proceedings in the same Court which having gotten jurisdiction will give the party full relief; or 3d, By making the debtors to the Company parties to the suit in Equity and ordering them to pay into Court — issues as to validity and amount being, if necessary, submitted to a jury, &c. Daniels Ch. PI. and Pr. 1991 and 1977, 2 Story's Jilg. ■Tur. sees. 827, 828.

Diggs v. Johnson county, G Wallace, at page 187 and eases cited ; Hamlin v. Hamlin, 8 Jones Eq. 191.

“It is to be observed” * * * * * * “to make use of the name of the party to whom such debt is legally due.” 3 Daniel's Ch. PI. and Pr. 1977 and 1991., Parker v. Browning, 8 Paige, 388.

Dick, J.

A Court of Equity has the power of appointing a receiver for the purpose of protecting and securing property which is the subject of litigation. A receiver is an officer of the Court., and his possession of property is the possession of the Court. The Court has control over the parties to a suit and can order them to deliver property in controversy to its officer, and it they fail or refuse to obey sueb order they may be proceeded against by process of contempt.

If the property in controversy is in the possession of a third person who claims the right of possession, the plaintiff may make him a party to the suit and thus render him subject to an order of the Court in regard to delivering such property to the receiver. Parker v. Browning, 8 Paige; 388.

The order appointing a receiver and giving hitn possession does not in any manner affect the title of the property but he holds it as a mere custodian until the rightful claimant is ascertained by the Court, and then he holds for such claimant. 4 Maryl R., 80 ; 3 Maryl, Ch., 280.

A receiver cannot commence auy action for the recovery of outstanding property without an order of the Court and when such order is made the action must be brought in the name of the legal owner and he will be compelled to allow the use of his name upon being properly indemnified out of the estate and effects, under the control of the Court. 3 Dan'l Ch. Pr., 1977, 1991.

The practice of the Court of Chancery in England on this subject, is well settled by many authorities, has long been the course and practice of our courts, and has not been materially changed by the Code.

Our attention has been called to the practice in New York, in matters of this kind, and we find upon investigation that the common law powers of receivers have been greatly enlarged by Statute, and they may bring an action in their own name for the recovery of property which they have been directed by an order of the Court to reduce into possession. Dan'l Ch. Pr., 1988, note 2. 2 Paige, 452. 4 Paige, 224. 1 Tif. and Smi. Pr., 160. Vorhies Code, 432.

The case of Hoyt v. Thompson, 1 Selden, 320, commented upon by plaintiff’s counsel does not sustain their position. The plaintiff in that case, was the assignee of a receiver appointed by a Court of Chancery in New Jersey, under a Statute of that State expressly authorizing such Court in certain cases to appoint receivers, “ with full power and authority to demand, sue for, collect and recover, &c., and sell, convey and assign all the said real and personal estate, &c.”

The power of a receiver in this State to bring an action, is regulated by the rules in a Court of Chancery, and if the order under which this plain tiff has acted, had been made by one of our Courts, he could not maintain this action; and certainly an order made by the U. S. Circuit Court cannot confer greater powers and privileges upon a suitor in our Courts. It is therefore unnecessary for us to consider the question of comity between the State and Federal Courts, which was urged on the argument.

We take pleasure, however, in saying, that upon all proper occasions such comity will be extended, as in accordance with judicial usage, and the laws of the land. We concur in the-opinion of Ilis Honor, and the judgment must be affirmed.

Pbr Curiam. Judgment affirmed..