85 F.2d 110 | 2d Cir. | 1936
This appeal is from an order directing Dows Estates Inc., Mabel Schwab, its dummy, and Farrington, a state receiver in foreclosure, to surrender possession of real property and chattels thereon to Virdone, a receiver in bankruptcy, appointed on involuntary petition before adjudication. The facts were as follows: The Nielk Holding Company owned a large building in Coney Island, fitted and used as a Turkish bath; this property it mortgaged to the Title Guarantee & Trust Company for $80,-000, and the title company at once assigned the mortgage to Dows Estates Inc. The mortgage contained a clause, entitling the mortgagee to a receiver, which by virtue of section 254, subd. 10, of the Real Property Law of New York (Consol. Laws, c. 50) was equivalent after default to an assignment of rents and profits, and which gave the mortgagee an unconditional right to a receiver 'in that event. Some time thereafter Nielk Holding Co. leased the building to Nathan Klumock, who assigned the lease to the alleged bankrupt, Standard Baths, which went into occupation and so continued until the events hereinafter described. The mortgagor fell into default as to some $22,000 of taxes, besides the water charges, and Dows Estates Inc. filed a bill of foreclosure in the state court on June 26, 1935, making defendants only the mortgagor and the State of New York, (which was joined because of its lien for franchise taxes). Upon this bill it secured the appointment of Farrington, as receiver, who qualified, and had several interviews with Klumock, the president of Standard Baths, and with one Richman, another officer. He demanded that they pay him the rent, and they replied that it had been paid up to August first, and that they were “through with the Baths” anyway, because they could not operate them at a profit; there was too much competition. They had discontinued the use of the premises, and there was no one in the building but a chiropodist who occupied a very small cranny. As neither the fixtures, furniture, nor books had been taken away, Farrington put a custodian in charge, apparently to protect the property, and did nothing further until Standard Baths defaulted in payment of the quarter’s rent, payable in advance on August first. Then he began a summary ejectment against it as lessee in the municipal court, but never served it or attempted to serve it personally; instead, the marshal merely nailed the process on the door, and mailed a copy to it as defendant addressed to the empty building. No effort was made to learn the whereabouts of Klumock, the president, though he had talked to Farrington eight or nine times in July, and although Liebman, its attorney, had written him two letters on which Liebman’s address appeared. On the return day the judge issued a warrant of ejectment under which Farrington took possession on August fourteenth. On September fourth, the mortgagor, Nielk Holding Company, executed a deed to Mabel Schwab, the dummy of Dows Estates Inc., and Dows Estates Inc. began to make repairs with a view to reopening the building. Farrington apparently assumed to surrender possession
On October eleventh a single judgment creditor, the Consumers Petroleum Company, filed an involuntary petition in bankruptcy against Standard Baths, and on November eleventh procured a rule, directing Dows Estates Inc., Mabel Schwab and Farrington, to show cause why a receiver in bankruptcy should not be appointed, to whom they should surrender possession of the building and' its contents. Upon the return day the judge appointed Virdone receiver, and referred the other issues to a master, who heard the parties at length and reported that Standard Baths had never abandoned the premises; that-Farrington had not accepted the surrender, if there had been one; and that he had not used due diligence to make personal service in the summary ejectment. He declared that the warrant of ejectment was therefore void and that Standard Baths was entitled to possession. The judge confirmed this report and directed the respondents to surrender possession. From this order they appealed.
The respondents’ first objection should alone have been enough for a dismissal of the proceeding; a district court, though vested with formal jurisdiction to make the order, should not disturb the custody of a state court. The lessee, Standard Baths, was not, it is true, a party to the suit in foreclosure, and the order appointing Farrington did not direct him to take possession of the premises and could not rightfully have done so, even if it had been. Holmes v. Gravenhorst, 263 N.Y. 148, 188 N.E. 285, 91 A.L.R. 1230. But the default in rent on August first made the receiver an assignee of the lessor’s rents, and the order appointing him authorized him to prosecute suits for summary ejectment. The exact words were as follows: . “Said Receiver * * * is authorized * * * to institute * * * all legal proceedings * * *. to recover possession of * * * said premises, or to * * * prosecute any necessary action to recover rent * * * and to * * * prosecute summary proceedings for the removal of any tenant.” When therefore Farrington sued Standard Baths to eject it because of the August default, he was acting strictly in accordance with the instructions of the court that had appointed him. His acts were its acts, and although until sale in foreclosure Standard Bath’s right to possession as mortgagor would not have ended, even though a party (Barson v. Mulligan, 191 N.Y. 306, 84 N.E. 75, 16 L.R.A.(N.S.) 151; Herrmann v. Cabinet Land Co., 217 N.Y. 526, 112 N.E. 476; Metropolitan Life Ins. Co. v. Childs Co., 230 N.Y. 285, 289, 130 N.E. 295, 14 A.L.R. 658; Prudence Co. v. 160 West Seventy-Third St. Corporation, 260 N.Y. 205, 211, 183 N.E. 365, 86 A.L.R. 361; Holmes v. Gravenhorst, supra), the court assumed to put him in the position of lessor in the mortgagor’s right. We have no occasion to consider whether the order was right in so doing, or whether it gave him any standing in the municipal court to sue in summary ejectment, or whether the warrant under which he took possession was void because issued without personal service, or whether it was subject to collateral attack. All that matters is that the possession he took, he took under the order; and that his possession was the court’s possession; his title, his right to that possession, were for the court which appointed him and no other court could assume to decide them'. This doctrine goes so far that even though he had taken possession of the wrong property, it was the possession of the court. That was not originally true (Slocum v. Mayberry, 2 Wheat. 1, 4 L.Ed. 169; Cropper v. Coburn, Fed.Cas.No.3,416, 2 Curt. 465; 5 Kent’s Commentaries 410); but, beginning with Freeman v. Howe, 24 How. 450, 16 L.Ed. 749, it has by now become established beyond debate. Krippendorf v. Hyde, 110 U.S. 276, 4 S.Ct. 27, 28 L.Ed. 145; Lammon v. Feusier, 111 U.S. 17, 4 S.Ct. 286, 28 L.Ed. 337; Covell v. Heyman, 111 U.S. 176, 4 S.Ct. 355, 28 L.Ed. 390; Lehman v. Spurway, 58 F.(2d) 227 (C.C.A.5).
The petitioner replies that even though the state court got possession of the property on August fourteenth, it lost it when Farrington assumed to surrender the property to Dows Estates Inc. after Nielk Holding Company had conveyed it to Mabel Schwab on September fourth. In addition, that the foreclosure suit had in substance ended; that the state court had nothing more to do, and that its continuation was a mere sham. As to the first point, Farrington had no power to surrender the court’s possession; he was merely its arm and must have its leave before he gave up anything which he had taken with
Order reversed with costs; proceeding dismissed without prejudice.