61 N.Y.S. 821 | N.Y. App. Div. | 1899
Lead Opinion
An action having been commenced by the-Farmers’ Loan & Trust Company, as trustee, against the Hoffman House, a New Jersey corporation, to foreclose certain mortgages-covering leases and chattels belonging to the defendant therein, and which were in the possession of this defendant, and with and upon-which it was carrying on a hotel and café business in the city of New York, on the 21st of December, 1893, an order was made ap pointing Edward S. Stokes receiver of the property covered by the mortgage, to foreclose which the action was brought. The order provided that the said receiver “be, and he hereby is, authorized and empowered to take possession of and carry on the several hotels and restaurants, the leases of and chattels in which are covered by the said mortgage, with authority to employ and pay such employés, agents, and servants as may be necessary in carrying on said places, and to purchase such supplies as may be necessary for the conduct of said hotels.and restaurants, and. with authority to do any and all other things which may be necessary or proper to, be done in the-general and ordinary conduct of similar places of business.” The said Edward S. Stokes, as receiver, 'entered into possession of the property mentioned in said foreclosure action, and continued to conduct the business theretofore carried on upon and with said property until the 25th of May, 1894. On the 24th of January, 1894, a judgment of foreclosure and sale was entered, appointing a referee to sell. It appears that there were outstanding 425 bonds of $1,000' each, which were secured by the mortgage to foreclose which the action was brought. Three hundred of these bonds were in the possession and under the control of Edward S. Stokes. The other 125 botids were in the possession of one William E. D. Stokes, claiming-to hold them as collateral security for an indebtedness of said Edward S. Stokes; the latter, however, claiming that the said W. E. D. Stokes had converted them to his own use. On or about the 3d of February, 1894, the present corporation was formed by said Edward S. Stokes, James D. Leary, and E. V. Foote, pursuant to tbestatute of New York known as the “Business Corporation Law,” with a capital of $200,000. On the 2d of March, 1894, "that part of the mortgaged property known as the “Hoffman House” was duly sold at auction by the referee, and purchased for the' defendant herein for the sum of $120,000. The terms of sale provided that the-property was to be subject to all liens of every kind and description, and that unpaid .rent, if any, would be allowed to the purchaser. Said terms of sale also provided that the purchaser, upon payment of the sum bid, was to receive the property free arid clear-from unpaid rent then due, or taxes, or counsel fees, or other expenses arising from the receivership. All such claims, if assumed by the purchaser, were to be deducted from the price the property
During all the time that the said receiver was in possession of the leasehold property known as the “Hoffman House,” he paid no rent to the owners of the leases, nor was any application made to him by the landlord, either for the possession of the property or for the payment of rent. The landlord insisted, however, that in the terms of sale under which the said leases were to be sold in the foreclosure action he should be protected so that the purchaser at said fore
It appears from the evidence in this case that experts were employed upon both sides to examine the books of the receiver and of the corporation. These experts agreed as to the exact amounts which the receiver had received from the defendant’s business and had paid out on its behalf for wages and supplies, and also the amounts which the defendant had collected on the receiver’s account. The experts agreed upon all disbursements made by the receiver for which vouchers were produced, and the remaining disbursements were finally conceded to have been made. It will appear, upon an examination of this evidence, that no mention was made by the experts in their report of the check for $9,282.42, that being a payment which was conceded, and not in dispute, and was in no manner the subject of their investigation; the payment not coming under the head of moneys collected '"by the Hoffman House from guests, belonging to the receiver, which were the only items of receipts by the Hoffman House which were in dispute. It therefore appears that the referee was clearly right in holding that this amount was not included in the experts’ report, and that the plaintiff was entitled to credit therefor.
The next question necessary to consider is the claim made by the receiver against the defendant for the $10,000 paid on account of rent, and it would seem that the solution of this contention depends upon the question as to whether there was any liability upon the part of the receiver, at the time of this payment, for the rent which had accrued during the period of his occupation of the premises. It is urged upon the part of the plaintiff that no such liability exists, because he was not a statutory receiver, but simply a custodian of the premises and of the business which was therein conducted, having no title to the leases of such premises. The defendant, however, claims that the receiver, by taking possession of the leased premises, and remaining in possession, elected to accept the
In the case of Woodruff v. Railway Co., supra, by the order appointing the receiver it is apparent that it was contemplated by the court that the receiver should pay the rent under the lease, as he was expressly given authority to continue the operation of the railroad of the company, and to pay any rent then due or thereafter becoming due under the lease. It further appeared that rent was claimed of him by the landlord, and that he refused to pay, or to surrender possession of the premises, and the court held that, under such circumstances, by continuing the use and occupation of the property acquired under the lease, a liability for the payment of rent under the lease was incurred.
The case of Frank v. Bailroad Co., supra, related only to the case of an assignee of a term and not to a mere custodian.
In the case of Wells v. Higgins, supra, executors and trustees were removed, and a receiver appointed of the rents and profits of the real estate, freehold or leasehold, and of the personal property; and he was expressly authorized to pay taxes and assessments and other lawful charges thereon. In pursuance of this authority the receiver paid rent to the landlord for a portion of the time, and he was held liable for the balance of the time he occupied the premises.
In the case of U.S. Trust Co. v. Wabash W. Ry. Co., 150 U. S. 299, 14 Sup. Ct. 86, 37 L. Ed. 1085, the role is laid down that under certain circumstances even a chancery receiver may be liable for rent of premises occupied by him. Before discussing this case, however, it will be necessary to call attention to the case of Railroad Co. v. Humphreys, 145 U. S. 82, 12 Sup. Ct. 787, 36 L. Ed. 632. In the latter case the receivers were appointed to. take charge of and operate railroads composing the Wabash System. They operated the leased line for over a year, and the proceedings were brought by the lessor to compel the receivers to pay the rent. The court unanimously affirmed a denial of the application upon the ground that there was no liability upon the part of the receiver, and used the following language:
“It is not asserted that these receivers became the assignees of the unexpired term of the leasehold estate, with the right to dispose of it, but it is claimed that, because they took possession of the railroad of the Quincy Company, and held and operated it until August 1, 1885, they became liable to the extent of the rental up to that time. But the receivers were not statutory receivers, nor did they occupy identically the same position as assignees in bankruptcy or insolvency, and the like. They were ministerial officers, appointed by the court of chancery to take possession of and preserve pendente lite the fund or property in litigation; mere custodians, coming within the rule stated in Union Bank of Chicago v. Kansas City Bank, 136 U. S. 223, 236, 10 Sup. Ct. 1017, 34 L. Ed. 346, where this court said: ‘A receiver derives his authority from the act of the court appointing him, and not from the act of the parties at whose suggestion or by whose consent he is appointed; and the utmost effect*827 of his appointment is to put the property from that time into his custody as an officer of the court, for the benefit of the party ultimately proved to be entitled, but not to change the title, or even the right of possession, in the property.’ As observed, in relation to such a receiver, by the supreme court of Maryland, in Gaither v. Stockbridge, 67 Md, 222, 224, 9 Atl. 632, and 10 Atl. 309, cited by counsel for appellee: ‘It is manifest that the scope of his duties and powers are very much more restricted than those of an assignee in bankruptcy or insolvency. In the casé of an assignee in bankruptcy the law casts upon such assignee the legal title to the unexpired term of the lease, and he thus becomes assignee of the term by operation of the law, unless, from prudential considerations, he elects to reject the term as being without benefit to the creditors. But not so in the case of receivers, unless it be, as in New York and some of the other states, where, by statute, a certain class of receivers are invested with the insolvent’s estate, and with powers very similar to those vested in an assignee in bankruptcy. Booth v. Clark, 17 How. 331, 15 L. Ed. 164. The ordinary chancery receiver, such as we have in this case, is clothed with no estate in the property, but is a mere custodian of it for the court; and, by especial authority, may become an officer of the court “to effect a sale of the property, if that be deemed necessary for the benefit of the parties concerned. If the order of the court, under which the receiver acts, embraces the leasehold estate, it becomes his duty, of course, to take possession of it. But he does not, by taking such possession, become assignee of the term in any proper sense of the word. He holds that, as he would hold any other personal property involved, for and as the hand of the court, and not as an assignee of the term.’ ”
In the case of U. S. Trust Co. y. Wabash W. Ry. Co., supra, the broad rule laid down in the case last cited is modified by holding that where a chancery receiver, under the express sanction of the court, keeps the landlord out of possession, who is endeavoring to obtain possession, he is equitably liable for the rent during the time in which he has thus kept such landlord out of possession.
From an examination of these authorities it seems to us that the principle which controls in cases of this character is that mere occupation, undisturbed, and with the consent of the landlord, by a chancery receiver, in no manner renders the fund in his hands liable"for rents accruing during such occupation; but that if such receiver remains in possession after a demand for the payment of 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. In other words, a chancery receiver, by merely remaim ing in possession of premises with the consent of the landlord, cannot be held to have adopted the lease, so that there is any privity, either of contract or estate, between himself and the landlord. Applying this rule to the case at bar, we find that no claim for rent was made by the landlord upon the receiver; that he remained in possession, and continued the business, with the consent of the landlord; that the landlord did not look to him for the payment of any rent, but that his solicitude was to be assured that the purchaser upon the foreclosure sale could be compelled to pay that rent; and that, being satisfied with the terms of sale, he made no claim whatever for rent until after the deed in the foreclosure suit had been delivered, .and the purchaser let into possession. The landlord then demanded the rent of the purchaser, and, the purchaser being unable to pay, the receiver (being substantially the cor
“A receiver pendente lite is a person appointed to take charge of the fund or property to which the receivership extends while the case remains undecided. The title to the property is not changed by the appointment. The receiver acquires no title, but only the right of possession as the officer of the court. The title remains in those in whom it was vested when the appointment was made. The object of the appointment is to secure the property pending the litigation, so that it may be appropriated in accordance with the rights of the parties as they may be determined by the judgment in tire action.”
In Davis v. Gray, supra, the following language is used:
“He is required to take possession of property as directed, because it is deemed more for the interests of justice that he should do so than that the property should be in the possession of either of the parties in the litigation. He is not appointed for the benefit of either of the parties, .but of all concerned. Money or property in his hands is in custodia legis. He has only such power and authority as are given him by the court, and must not exceed the prescribed limits.”
So, also, in Decker v. Gardner, 124 N. Y. 338, 26 N. E. 815, 11 L. R. A. 482, it is said:
“Such receivers possessed no legal powers. They were officers of the court merely, and their functions were limited to the care and preservation of the property committed to their charge, and they possessed no authority except such as the orders of the court conferred.”
It may be claimed, however, that under the terms of the order by which the receiver was appointed he was directed by the court to pay this rent as a necessary incidental expense towards the carrying on of the business which he was authorized to conduct. It seems to us that an examination of the language of that order shows that it will not bear any such interpretation. By the order appointing the receiver he was authorized and empowered to take possession of and carry on the several hotels and restaurants, the leases of and chattels in which were covered by the mortgage being foreclosed, with authority to employ and pay such employés, agents,.and servants as may be necessary in carrying on said places. There is not a word said in this order in regard to the payment of any rent, either due or to become due. The receiver was to take possession of and carry on the several hotels and restaurants. Then follows the authority to disburse moneys conferred upon him by the order. It is, “with authority to employ and pay such employés, agents, and servants as may be necessary in carrying on such places, and to purchase supplies,” etc. Under this part of the order it is clear that there was no right to pay rent. It referred entirely to those things which were necessary in the conduct of the hotel business, and not to the furnishing of premises in which such business should be carried on. He was to pay the employés and to purchase sup
In regard to the question of interest, without any lengthy discussion upon the subject, it would seem that it was the ordinary case, not of an unsettled or unliquidated account, but of an account which settled and liquidated itself, and which would naturally bear the interest allowed by the referee.
Concurrence Opinion
(concurring). The difference of opinion in this case is upon the single question whether the defendant is liable for the $10,-000 paid by the plaintiff receiver to the Livingston estate for past rents. The dispute on this head, as it seems to me,-results from the misapplication to custodian receivers (appointed pendente lite) of the rules relating to administrative receivers. The plaintiff here was not a receiver of the defendant corporation. He was the receiver pendente lite of the property which was the subject of the litigation. The title to that property remained in the corporation until it was devested by the sale in the foreclosure action; and the corporation continued liable throughout to its lessor upon the covenants of the lease. The existence of the corporation was not even attacked 'in the foreclosure action. It follows that the plaintiff, as receiver pendente lite in that action, acquired no title to the lease. He was a mere officer of the court, and possessed no authority as custodian save that which its order conferred upon him. How, then, could he be liable for these rents? There was no privity of contract on his part, nor was there privity of estate. A receiver of the corporation would have been vested with the corporate estate for administration, and he could have elected to accept the lease, thus establishing privity of estate. But a receiver pendente lite of the subject of the litigation could not elect to accept the lease without the express sanction of the court. He has -no such independent power or discretion. This distinction between the two classes of receivers is pointed out in an unvarying line of authorities in this state. Keeney v. Insurance Co., 71 N. Y. 401; U. S. Trust Co. v. New York, W. S. & B. R. Co., 101 N. Y. 483, 5 N. E. 316; Decker v. Gardner, 124 N. Y. 334, 26 N. E. 814, 11 L. R. A. 480. It was applied in the case of the committee of a lunatic in Re Otis, 101 N. Y. 585, 5 N. E. 571. The committee was there likened to a bailiff, whose possession is the possession of the court, and who consequently takes no title to the property of the lunatic. The court of appeals held that the occupation by the committee under a lease to the lunatic—as distinguished from a similar occupation by a receiver or an assignee for the benefit of creditors—creates no privity of estate between him and the lessor. The. receiver there spoken of was a receiver who, like an assignee in bankruptcy or for the benefit of creditors, is “vested with the title to the leasehold interest”; while a receiver pendente lite of the subject, of the litigation is simply an authorized custodian, with just such power as the court chooses to confer upon him, neither more nor less. The same distinction has been repeatedly made in the supreme court of the United States, and there is nothing in the report of Dushane v. Beall, 161 U. S. 513, 16 Sup. Ct. 637, 40 L. Ed. 791, to justify the observation made by justice RUMSEY that the rule with regard to election by statutory receivers and its results “is precisely the same with a chancery receiver, as is
The only other question is, did the court direct the plaintiff, while in possession of the premises, to pay the current rent reserved-in
For these reasons, as well as for those assigned by the Presiding Justice, with which I concur, the judgment should be affirmed.
Dissenting Opinion
(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.
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
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
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.