Cramer v. Iler

The opinion of the court was delivered by

Johnston, J.:

This was an application for an order directing the receiver of the Bank of Garnett to pay a judgment in favor of James H. Cramer against the bank or for leave to issue an execution thereon. The application was made in an action brought by the attorney-general on October 24,1895, for the purpose of having a receiver appointed to close up the affairs of the insolvent bank. Prior to that time, and on March 15, 1894, Cramer recovered a judgment against the bank for 1685.30, and a proceeding in error was instituted by the bank, which was pending for several years and resulted in an affirmance of the judgment on June 15, 1898. (Bank of Garnett v. Cramer, 7 Kan. App. 461, 53 Pac. 534.) A petition was then filed by the bank, asking the supreme court for an order certifying the case to that court for review, but it was. denied. Immediately afterward the present application for a preferential payment of the judgment or for leave to issue execution against the property on which the judgment was a lien was made, but the district court denied the application. It held that while the judgment was a lien on the real estate of the bank when its property passed into the hands of the receiver, yet, as no supersedeas bond was given in the proceeding in error, Cramer might have caused the issuance and levy of an execution on the lands of the bank at any time before its insolvency and the appointment of a receiver, and that, as no execution was issued on the judgment for more than a year after its rendition, nor at any time until the receiver took possession, the judgment lost its preference as a lien on the property of the bank, and that Cramer must therefore share pro rata with the general creditors of the bank. Of this ruling Cramer complains.

In support of the decision, it is urged that Cramer forfeited his preferential right by negligence and delay in failing to have an execution issued for a period of more than four years after his judgment was rendered. The statute is cited which provides that “no judgment heretofore rendered or which hereafter may be rendered, on which execution shall not have been taken out and levied before the expiration of one year next after its rendition, shall operate as a lien on the estate of any debtor to the prejudice of any other judgment creditor.” (Civil Code, §468; Gen. Stat. 1901, § 4914.) Attention is also called to the fact that the execution of the judgment was not stayed, and that there was no obstacle to the issuance of an execution ; at least, there was none prior to the receivership. It is true that no supersedeas bond was given, and there was nothing to prevent the issuance and levy of an execution until the custody of the property was taken by the receiver, which was more than one year after the rendition of the judgment. It will be noted, however, from the statute quoted, that the failure of the judgment creditor to have an execution issued and levied within a year does not destroy the lien, but only subordinates it to other judgment liens of the same judgment debtor. There were no other judgment creditors when the assets of the bank passed into the custody of the receiver, and at that time Cramer had a valid and subsisting judgment lien on the real estate of the bank which the receiver has since sold for $4615.

The judgment of a court of record becomes a lien on the real estate of the debtor from the first day of the term at which it is rendered, and it does not become dormant or cease to operate as a lien until the expiration of five years after its rendition. (Civil Code, §§419, 445; Gen. Stat. 1901, §§4868, 4895.) Cramer’s judgment was not dormant; it had not been extinguished, and was not barred by any statute of limitations when the receiver was appointed, nor when this proceeding was begun. It was then enforceable and had priority as against the real estate over any other liability of the bank. Have the lien and priority been lost since the property passed into the custody of the court, and while Cramer’s hands were tied so that he could not have an execution issued and enforced against the bank’s property? The appointment of the receiver did not determine any rights nor destroy any liens. His possession was the possession of the law, and he was only the ministerial agent of the court to receive, preserve and manage the property until the rights, liens and interests of all claimants could be adjudicated. His possession was exclusive, but he took it subject to all valid liens existing upon the property at the time' of his appointment. Preferences are not lost nor priorities disturbed by such change of custody, and while the ordinary proceedings at law are not available to those holding liens against the property in the hands of the receiver, a court of equity which appoints the receiver will protect the priorities and order distribution in accordance with the relative rights of lien-holders and other claimants.

After the property had passed into the exclusive jurisdiction and control of the court, Cramer could not have his lien enforced by an execution, nor could he obtain any preferential right in the funds in the hands of the receiver, except as it was allowed by the court appointing the receiver. After the appointment no liens against the property could be obtained nor preferences acquired by any action that claimants might take. It appears that other judgments were obtained against the property of the bank after the receiver was in possession, but these did not become liens against the property, nor did they affect existing liens.

It is argued that the seizure or taking of the property by the receiver is equivalent to a levy of an execution, and that it deprived Cramer of his priority and preference to the same extent as if another judgment had been rendered against the bank more than a year after the rendition of Cramer’s judgment and prior to the appointment of the receiver. The statute gives the custody of the receiver no such effect, and the general rule of law is to the contrary, that is, that liens are not lost or affected by the appointment of a receiver; that he merely holds the property intact until the relative rights of parties can be determined, and that when the property rightfully passes into the custody of the law it is not subject to execution or interference without permission of the court, and any attempt to seize or sell it by a third party without permission would be a contempt of the court having it in custody. (Bates v. Wiggin, 37 Kan. 44, 14 Pac. 442, 1 Am. St. Rep. 234; Savings Bank v. Simpson, 22 id. 414; Railway Co. v. Love, 61 id. 433, 59 Pac. 1072; Walling v. Miller, 108 N. Y. 173, 15 N. E. 65, 2 Am. St. Rep. 400; American Trust etc. Bank v. McGettigan, Rec., 152 Ind. 582, 52 N. E. 793, 71 Am. St. Rep. 345, and note, 352; Pelletier v. Lumber Co., 123 N. C. 596, 31 S. E. 855, 68 Am. St. Rep. 837; Chicago Union Bank v. Kansas City Bank, 136 U. S. 223, 10 Sup. Ct. 1013, 34 L. Ed. 341; Roseboom et al. v. Whittaker, Warner et al., 132 Ill. 80, 23 N. E. 339.)

The Bowles proceeding against the bank, its stockholders, and some of its creditors, as well as the receiver, did not affect Cramer’s rights, for the reason that he was not a party to the proceeding.

The judgment of the district court will be reversed, and the cause remanded with directions to enter judgment sustaining the priority of plaintiff’s judgment, and directing the receiver to pay the same out of the funds derived from the sale of the real estate on which the judgment was a lien.

Smith, Greene, Ellis, JJ., concurring.

Case Details

Case Name: Cramer v. Iler

Court Name: Supreme Court of Kansas

Date Published: Nov 9, 1901

Citation: 63 Kan. 579

Docket Number: No. 12,370

Court Abbreviation: Kan.