62 N.Y. 133 | NY | 1875
Lead Opinion
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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *140 The appointment of the receiver in this action, and the subsequent proceedings had in regard to the same, was an invasion of the rights of the parties, calculated to waste and deplete the alleged fund, and not demanded by the nature of the action or the circumstances of the case. The reasons for such a conclusion are entirely apparent. The action was in reality for money had and received by the defendants, and if any liability existed, it arose from the purchase of bills of exchange of the defendants which had been delivered, and it is claimed were lost. It was not a legal claim for any specific property or fund which belonged to the plaintiff, but in reality an ordinary action to recover money. There is no principle which sanctions the appointment of a receiver in such a case, and it is entirely without a precedent to uphold it.
If it might in any sense be considered as a case coming within the law applicable to a receivership, then the money was entirely safe in the hands of the defendants. No question is made as to their pecuniary responsibility, nor did it appear in any way that the money was in jeopardy or liable to be lost while in their possession. Without some fact to establish that the alleged fund was in danger, there is no principle of law or any established practice which authorizes a party to invoke the aid of a court to apply this provisional remedy (see § 244, Code), and thus to transfer money from one person, with whom it is entirely safe, to a receiver.
Where such a right exists it is usually called in exercise upon the application of one or more of the parties in interest. While the court may upon its own motion nominate a receiver *143 where the case requires it, such a proceeding cannot according to the regular practice be inaugurated and conducted by outside parties, who have no connection with the case, or interest in the subject-matter of the litigation. A person not having any interest cannot propose a receiver, and it is contrary to the orderly and regular proceedings of a court of justice to allow a stranger to participate in a motion for such an appointment. (Attorney-General v. Day, 2 Mad., 246; Edwards on Receivers, 22.) The attorney for the receiver had no interest whatever in the controversy and was an entire stranger to the suit, and the parties. Nor had the receiver any connection with the attorneys in the case. Both of these persons, the receiver and his attorney, undertook to obtain control of the money in a most unaccountable and unjustifiable manner. The attorney who was employed by the receiver appeared without any authority whatever from the parties, participated in the proceedings without any solicitation or request of either of the parties; and against their remonstrance, resistance and determined opposition, the receiver was thrust into the office. Nor was this all. A fraud was perpetrated in procuring the order. While the motion had been suspended to enable the plaintiff to serve additional affidavits, and before counter affidavits could be procured, and in violation of an express stipulation, the order was entered and the receiver appointed. Such a transaction could not stand the test of a judicial scrutiny, and this with the other proceedings of the receiver was very properly reversed upon appeal.
The counsel for the receiver insists that the counsel for the plaintiff and the attorney were in conflict with each other, as to the course to be pursued in regard to the appointment of a receiver, the attorney really urging the appointment, and the counsel opposing it. There is no sufficient evidence to warrant such a conclusion, and if it can be upheld, it must be upon the ground that the attorney was acting deceitfully and in direct opposition to his client's interest. This is not to be assumed, and is contradicted by the acts of the attorney and his letter, after the appointment was made, expressing his *144 regret at the occurrence as well as the seeming want of professional courtesy, and stating facts showing that the order was made in opposition to the stipulations of the parties, and that nothing should be omitted to reinstate the defendants' attorneys in the case according to the stipulations and understanding. The receiver does not swear positively, but thinks the attorney spoke to him, and asked him to go and make the demand of the defendant Lucke, and one of the counsel testifies that the attorney stated in the receiver's presence that the money must not be paid over. The attorney was not called as a witness, and it may be fairly assumed, I think, that he would have been if he could have proved the fact claimed, as it was vital to the receiver. But even if there was any ground whatever for supposing that the attorney sanctioned the proceedings, I think there was no sufficient excuse for the action of the receiver. He was himself an attorney, had counsel from the beginning, and must have known that the manner in which the proceeding was conducted was entirely unauthorized, and would not be upheld upon appeal. He knew or should have known that the question would be fully tested, and when there was no emergency which demanded it, persisted in his efforts to obtain the money from the defendant Lucke, and compelled him to pay or abide the consequences of a failure to do so, upon pain of arrest and imprisonment.
The other facts connected with the receiver's appointment, and his subsequent proceedings, are satisfactorily discussed in the opinions of the court at Special and General Term, and it is not necessary to refer to them at length. It is sufficiently apparent that the entry of the order under the circumstances, by the attorney employed by and with the concurrence of the receiver, was an abuse of the proceedings which cannot be disregarded, and for which he should be held responsible. It constituted him an intruder, and a trespasser upon the rights of the parties. As he assented to and participated in the transaction, there is no sufficient reason why he should not be held accountable for *145 his acts. He had full notice that the order of appointment was not to be entered until the defendants had an opportunity to be heard at a subsequent day, agreed upon by the attorneys, and the conclusion is irresistible, that it was done before the time stipulated, with his knowledge and approval. He also knew that the parties to the suit did not desire that a receiver should be appointed, and in view of this fact, against their protest and active opposition he struggled to procure, and voluntarily consented to take the position. Instead of applying to those interested for counsel, he chose to rely upon an entire stranger to the proceedings. It would be an unusual precedent to hold that a receiver thus appointed without the intervention of the parties, with his own connivance, and under the peculiar circumstances disclosed in this case, had any special right to ask the protection of the court, in sustaining and giving countenance to his proceedings the same as if they were regularly and properly conducted, and were legal and valid. Such a practice would lead to the most serious results, and as in the case before us the moneys belonging to the parties might be lost, frittered away, and misappropriated, by the payment of large fees and legal expenses which were entirely unauthorized, to the detriment of individuals and the fund.
Fraud vitiates all contracts, and a judgment or order thus obtained binds neither the court nor the parties. It avoids even all judicial acts. (Kerr on Fraud and Mistake, 293, 294.) The receiver having obtained control of the moneys, when it was entirely unnecessary to protect them, and in opposition to the wishes of the parties in interest, and by means which cannot be justified or excused thus subjected them to large charges and expenses, there is no reason why he should not be held to a strict accountability, or that he should be allowed for any of the expenses incurred.
The charges presented on the accounting before the referee are fully considered in the opinions before referred to, and concurring mainly in the views expressed as to most of them, I think do not require any remarks. The only one which *146 demands any particular comment, is the sum of $2,500, alleged to have been paid to the plaintiff's attorney by an order of the court made on the twentieth of July, and entered upon the twenty-ninth of the same month. The money was paid on the day when the order was entered, as the receipt shows, and the notice of appeal from the order is dated June twenty-first, probably intended for July twenty-first, the day after the order was granted. The court reversed the order, and although there is no proof that the notice of appeal was served upon the receiver, or when it was served if served at all, it is at least a reasonable inference that the receiver had knowledge, in view of what had already transpired, that an appeal would be taken, and was at liberty to apply to the court for instructions as to his duty. (Curtis v. Leavitt, 10 How., 481; Matter of Van Allen, 37 Barb., 225.) He should have done so, if there was any doubt as to the proper course to pursue, and would have been justified in awaiting further action instead of paying the money on the very same day upon which the order was entered. He could have refused payment, and if an attempt was made to enforce it, he could have resisted such an attempt upon the ground that the order was appealed from, and might perhaps be reversed. This he failed to do, and thus did not take the proper measures to protect himself and the fund against such an order. It is also a sufficient answer to this claim, that the fund was subjected to the operation of the order in question by the original wrongful act of the receiver and his counsel, so far as the defendants are concerned. But for this, no order would have been made, directing payment in the preliminary stages of the suit, before the litigation was fairly under way, of a large and exorbitant amount to the plaintiff's attorney, and the money received would not have been subjected to the illegal charges of the party who was unsuccessful, and therefore not entitled to any costs or counsel fees.
There is no ground for claiming that the application of the attorney for the plaintiff, for the amount paid to him, was a ratification of the entry of the order of appointment. Even *147 if the order was wrong of itself, and against the attorney's wishes, I think the attorney had a right to accept the condition of the case as it actually was. The same remarks are applicable to the sum paid to the defendants' attorneys, with the qualification, however, that the money belonged to the defendants, whom they represented.
The position that the receiver cannot be called to account if the order is void, is not well taken; it is enough to say that the receiver claimed to act, and did act, as such; he was a receiver de facto, for the time being, and cannot avail himself of an irregular or void appointment under which he has acted, procured by his own instrumentality, and thus escape an accounting for the moneys which came into his hands. The other points which are urged by the receiver do not require especial consideration. This case presents the peculiar aspect of a party intruding himself into a position without the concurrence or assent of those who had a right to be heard and consulted, and by his own wrongful act obtaining possession of and controlling moneys belonging to others. Courts of justice cannot give countenance to such proceedings, or protect the party from its consequences. He must also be held responsible for the conduct of those who co-operated with him in producing the result.
The order of the General Term affirming the order of the Special Term was right, and must be affirmed with costs.
All concur.
Order affirmed.
Opinion on appeal from order affirming order directing receiver to pay over moneys.
Concurrence Opinion
By the order of the court, the receiver who had rendered an account of the moneys received by him in this action was directed to pay over the same to the defendant Lucke, from whom they were received, and also to pay the referee's fees upon the accounting. As the action has been dismissed, and the plaintiff has failed to maintain it, there would, under ordinary circumstances, appear to be no *148 question as to the propriety of refunding the money to the party from whom it was received. The right, however, of the receiver to retain possession of the money is sought to be maintained on several grounds, and it is insisted that he should not be compelled to pay it over because he holds it as receiver in the case of Dwyer v. O'Mahoney, Belmont and Lucke, being appointed such receiver in the last named action subsequent to his appointment as receiver in the case at bar. The action last mentioned was commenced in the Supreme Court for the purpose, among other things, of obtaining control of moneys which it was alleged the defendant O'Mahoney had in the hands of Belmont Co., or within their control and that of the said O'Mahoney. The injunction order provided for the appointment of a receiver of money deposited, or lately on deposit, in the hands of the defendants Belmont and Lucke, to the credit of the defendant John O'Mahoney. It is quite apparent that the description of the money does not embrace the funds in controversy. None of the money was then on deposit, nor had Belmont and Lucke ever received any money whatever on deposit from O'Mahoney. Belmont had received money in payment of bills of exchange, which were delivered to O'Mahoney's agent, and the money paid by Lucke to the receiver was the money of Belmont Co., and did not belong to O'Mahoney. It was forced from Lucke under the pressure of imprisonment for an alleged contempt, by virtue of an order which was reversed, and which the circumstances show never should have been granted. Nor did it become the money of O'Mahoney because it was thus paid, or in any way liable to the control of a receiver in another action. The court has so decided, and held that the money was the money of Belmont Co., and came from their funds. It is quite clear that the order in question did not sufficiently describe the fund, or show that it was the fund held by the receiver in this case. The rule is well settled that the order should describe with sufficient particularity the property which the receiver is to take, and unless this is done he cannot hold it. (Crow v. Wood, 13 Beav., 270.) The *149 decision of the court and the want of a proper description of the money claimed should be conclusive upon the question, and preclude the receiver from asserting any claim.
There is another answer, however, to the objection urged and that is, that the funds were in the possession of a receiver appointed in an action pending in the Superior Court, and it was under the jurisdiction of that court, and by it alone could all claims to it be determined. (Peale v. Phipps, 14 How. [U.S.], 374; Milwaukee R.R. Co. v.
The claim of the defendants' counsel, that a subsequently appointed receiver after a prior receiver becomes functusofficio, and takes from said prior one the fund, or any remaining portion of it, and the authority cited to support it (Bailey v. O'Mahoney, 10 Abb. [N.S.], 270), must be considered with the limitation that the subsequent receiver only takes what is undisposed of by the court in the litigation, which in this case could be no part of it, as, by the judgment of the court, the moneys belonged to the defendants. The proper course for parties in any other action, after a receiver is once appointed and has taken rightful possession, is to make an application to the court, and it is a contempt for a third person to interfere, or even by a suit or other proceeding at law to obtain possession, without the permission of the court by whom the receiver was appointed. (Noe v. Gibson, 7 Paige, 513.) Even if the powers of a receiver may be extended in one case to another, there is no reason why the receiver last appointed should be vested with any authority over the fund, after it has been disposed of by the determination of the previous action. If the Supreme Court *150 had the right to appoint a receiver over the fund in controversy, it by no means follows that the order which was made without notice to the defendants is binding upon them. They would have a right to be heard upon that question, and without such an opportunity I am at a loss to see how their rights could be judicially determined.
In the case of Talmadge v. Belmont and others, which was commenced in the New York Common Pleas, the order, under which the receiver also claims to hold the money, restrained the defendants from receiving the moneys and funds in the receiver's possession, and the receiver from paying them to the defendants. This order is liable to some of the objections already stated in the case of Dwyer, and for that reason was inoperative in preventing the court from controlling the funds. But were it otherwise, the consent of the plaintiff in writing, that the stay or order be waived so that the receiver may restore to the defendant Lucke the moneys in his hands, and subject to the order of the court, is a full answer to any claim of the receiver by virtue of this action. The objection that the waiver is not sufficient, because it is subject to a condition which the respondent has not accepted, appears to be without any foundation.
It is further urged that the receiver should only be required to pay such sums as he has received from the Bowling Green Savings Bank, with whom the money was deposited. The receiver swears that the bank at the time was solvent, and he had then, and continued to have at the time of its failure, a large amount of his own money deposited in it, and that he had no intimation, suspicion or reason to suspect that the bank at the time was in an embarrassed condition. There is no other evidence that the institution was a safe or proper one for such a deposit, or in good credit or standing. It is exceedingly questionable whether the evidence referred to is sufficient to exonerate the receiver from liability, without some proof of the standing of the bank in question. This class of moneyed institutions are not ordinarily designated by the courts as depositaries for *151 trust funds under their control. It was not certainly one of the institutions where trust funds were usually deposited for safe keeping, and it would appear, from the absence of evidence to that effect, that it was not recognized generally as a suitable and secure place for such a deposit. But without deciding the question, this court has held that the receiver thrust himself into the position he holds wrongfully, against the wishes of the attorneys of both parties, and where the defendants were entirely responsible, and any amount which might have been recovered would have been paid. (See opinion on appeal from order affirming order of General Term sustaining exceptions to referee's report on receiver's accounts.)
Under such circumstances the receiver does not commend himself to the protection which the court extends to officers of this character, when lawfully and properly appointed. He made himself the custodian of the fund when it was useless, pressing his claims with great vigor, and I think he must abide the consequences of the position which he was thus voluntarily assumed.
The order of the General Term was right, and should be affirmed with costs.
All concur.
Order affirmed.
