Opinion
06-07-1811
Gibson v. Randolph. [*]
Botts, for the appellant. Samuel Taylor, for the appellee, Botts, in reply.
The chancellor for the Richmond district having pronounced in this case an interlocutory decree, on the 28th of February, 1811, a petition for the allowance of an appeal was presented here, but overruled on the ground of want of jurisdiction in this court to grant appeals from any but final decrees. Application was afterwards made to the chancellor, and the appeal allowed by him.
The object of the suit (which was originally instituted by William Randolph, a creditor of Thomas Gibson, against Thomas and Robert Gibsons, in the county court of Cumberland, and removed by certiorari to the superior court of chancery) was to set aside as fraudulent, two deeds from Thomas to Robert Gibson, both dated October 26th, 1803; by one of which a tract of land, and by the other certain personal property, was conveyed. The bill was filed in February, 1804.
The answer of Robert Gibson (sworn to in open court, June, 1804) denied all fraud; averring the deeds to be founded on full and valuable considerations, bona fide paid; and mentioning that the deed for the land was then lodged in the clerk's office of Prince Edward district court. That of Thomas Gibson (sworn to, before a justice of peace, in October, 1809) plainly and positively admitted the fraud, as well as the debt charged in the bill.
Copies of the deeds are inserted in the transcript of the record, without any certificate of their being recorded.
Several depositions were also filed and copied, but do not appear to have been considered by the chancellor; the transcript stating that " the cause was heard on the bill, answers and exhibits, and was argued by counsel; on consideration whereof," the court, without deciding, at this time, upon the validity of the deed for the personal estate, and being of opinion that the other deed is void as to creditors, " as it was not recorded in the time prescribed by the act of assembly," adjudged and decreed the deed, last mentioned, to be null and void; that the defendant Thomas pay to the plaintiff the amount of his claim, and that the other defendant, Robert Gibson, render an account, before a commissioner, of the sums of money paid to or for the defendant Thomas, on account of the property contained in the said deeds, or on any other account.
The record in this appeal being brought up, the cause was heard by this court on Thursday, the 27th of June, in pursuance of the act, " to amend the several laws concerning the court of appeals," passed February 13th, 1811.
Acts of 1810, c. 5, s. 3.
Decree reversed, and cause remanded.
Botts, for the appellant. The decree invalidating the deed on the supposition that it had not been recorded, went out of the facts put in issue; the only point in controversy being whether the deeds were fraudulent. It did not appear whether, in fact, the deed for the land was recorded in due time, or not. And as the bill was filed within eight months after it was executed, the law of recording deeds could not be brought any way to act upon the case.
Samuel Taylor, for the appellee, relied on the decision in Moore's Executor v. The Auditor, 3 Hen. & M. 232, as being in point to show that the court may take notice of a deed's not being recorded, although the fact be not put in issue. If Robert Gibson has a recorded deed, his interest will not be affected by the decree now in question.
Botts, in reply. A case determining a deed void upon an objection not put in issue, could hardly have passed the ordeal of this court, but through inadvertence; and, if it did, it is not law. The chancellor having declared the deed not to have been recorded; if this court affirm his decree, it will be binding, however plain the fact may be to the contrary.
OPINION
Judge Roane reported the following opinion.
It being represented that a speedy decision of this case was very important; both parties claiming to be in possession of the land, which was taken in execution by an elegit; (there being no appeal from so much of the decree as was against Thomas Gibson; ) the judges (Roane, Cabell and Coalter) immediately retired to consult; and, after some time, returning into court, Judge Roane reported the following opinion:
" The court is of opinion that the said decree is erroneous in declaring that the deed of the 26th day of October, 1803, is void in consequence of its not being duly recorded according to the provision of the act in such case made and provided; both because the appellee appears, by his bill, to have had that notice of the existence of the deed aforesaid which it was the object of the act to afford, and because the construction upon this subject must have reference to the time of the exhibition of the bill, at which time, in the present case, the limitation provided by the said act had not expired. On this ground, the court is of opinion to reverse the said decree, and remand the cause for further proceedings, both as to the validity of the deed of the personal estate, and as to that of the said deed of the 26th day of October, 1803, on grounds other than that on which the said decree was founded, neither of which last-mentioned grounds were within the contemplation of the decree in the present case, nor, as to them, was the testimony taken in the cause read or considered; and although, if that testimony were now fully matured, this court might probably enter such decree thereupon as the said court of chancery ought to have rendered, yet it would be improper so to do, as the said decree was made in anticipation of the final trial upon the merits, and confined to the single point before mentioned."
Decree reversed, and cause remanded, to be finally proceeded in, pursuant to the principles above stated.
RECEIVERS.
I. Definition.
II. Nature and Object of Receiverships.
III. Jurisdiction to Appoint.
1. In Vacation.
2. On Appeal.
IV. Application and Notice.
V. Who May Be Receiver.
VI. Appointment of Receiver.
1. Requisite Showing to Obtain.
2. A Matter of Discretion.
3. Grounds for Appointment.
a. Title to Property in Dispute.
b. Fraud.
c. To Preserve Rents and Profits of Real Estate.
d. To Preserve Trust Property.
e. To Preserve Partnership Property.
f. To Preserve Property of Railroads and Other Corporations.
g. To Preserve Decedent's Estates.
VII. Effect of Appointment.
VIII. Powers, Duties, and Liabilities of Receivers.
IX. Bond and Security.
X. Compensation and Expenses.
XI. Bond in Lieu of Receiver.
XII. Receiver's Certificates.
XIII. Removal of Receiver.
XIV. Actions by and against Receivers.
XV. Appeal and Review.
I. DEFINITION.
A receiver is an officer of the court through whom the court, by virtue of its jurisdiction, equitable or statutory, takes possession of property which is the subject of a suit, preserves it from waste or destruction, secures and collects the proceeds, and ultimately disposes of them according to the rights of those entitled thereto, whether they are regular parties in the cause or only come before the court in a seasonable time and in the due course of proceeding to assert and establish their pretensions. 22 Am. & Eng. Enc. Law (2d Ed.) 1001; Beverley v. Brooke, 4 Gratt. 187.
II. NATURE AND OBJECT OF RECEIVERSHIPS.
By means of the appointment of a receiver, a court of equity takes possession of the property which is the subject of the suit, preserves it from waste or destruction, secures and collects the proceeds or profits, and ultimately disposes of them according to the rights and priorities of those entitled, whether regular parties in the cause, or only parties in interest coming before the court in a seasonable time, and due course of proceeding, to assert and establish their pretensions. The receiver appointed is the officer and representative of the court, subject to its orders, accountable in such manner and to such persons as the court may direct, and having in his character of receiver no personal interest, but that arising out of his responsibility for the correct and faithful discharge of his duties. It is no consequence to him how, or when, or to whom, the court may dispose of the funds in his hands, provided the order, or decree, of the court furnishes to him sufficient protection. The order of appointment is in the nature, not of an attachment, but a sequestration; it gives, in itself, no advantage to the party applying for it over other claimants; and operates prospectively upon rents and profits which may come to the hands of the receiver, as a lien in favor of those interested, according to their rights and priorities in or to the principal subject, out of which those rents and profits issue. In the exercise of this summary jurisdiction, a court of equity reserves, in a great measure, its ordinary course of administering justice; beginning at the end, and levying upon the property a kind of equitable execution, by which it makes a general, instead of a specific, appropriation of the issues and profits, and afterwards determining who is entitled to the benefit of its quasi process. But acting, as it often must of necessity, before the merits of the cause have been fully developed, and not infrequently when the proper parties in interest are not all before the court, it proceeds with much caution and circumspection, in order to avoid disturbing unnecessarily or injuriously, legal rights and equitable priorities. Beverley v. Brooke, 4 Gratt. 187.
The authority of the court over the property sequestrated may at all times be enforced and its surrender compelled by process of attachment or writ of possession, though as a general rule the court will not so readily interfere as against the possession of a stranger to the action claiming by paramount title, but will leave the question of title to be tried in a proper action instituted for that purpose. Thornton v. Washington Sav. Bk., 76 Va. 432.
III. JURISDICTION TO APPOINT.
1. IN VACATION.
May Generally Be Appointed in Vacation.--The power to appoint a receiver, when one is necessary for the collection, preservation or sale of property pending an injunction suit, is incident to the power to grant an injunction, and the latter power being expressly conferred by law on a judge in vacation, the former is conferred on him by implication. Penn v. Whiteheads, 12 Gratt. 74; Smith v. Butcher, 28 Gratt. 144.
In a suit in equity, brought for the purpose of having a receiver appointed, the court, or the judge in vacation, may, upon a proper representation of the facts, appoint a receiver. But while the case is still at rules, and not matured for hearing, the court cannot proceed to enter a decree settling the principles of the cause and distributing the money. Krohn v. Weinberger, 47 W.Va. 127, 34 S.E. 746.
West Virginia Statute in Respect to Rents, Issues and Profits of Real Estate. --Section 28, ch. 133, West Virginia Code, provides that, " No receiver shall be appointed of any real estate, or of the rents, issues or profits thereof until reasonable notice of the application therefor has been given to the owner or tenant thereof. A judge of such court in vacation, may appoint such receiver of any such property, except real estate and the rents, issues and profits thereof." Under this section it has been held error for the court to appoint a receiver of real estate, or of the rents, issues and profits thereof, in vacation. But it was further held in the same case that the error could be corrected by making an order when the court is in session requiring such improperly appointed receiver to pay or pass over to the general receiver or to a special receiver appointed during the session of the court, all money or property in his hands. Kerr v. Hill, 27 W.Va. 576.
2. ON APPEAL. --Where an injunction is awarded by the lower court, and is subsequently dissolved upon the merits, neither the appellate court nor any judge thereof can award an injunction or appoint a receiver in the case, though the action of the lower court, in dissolving the injunction, is, of course, reviewable. Fredenheim v. Rohr, 87 Va. 764, 13 S.E. 193.
In Virginia, etc., Steel & Iron Co. v. Wilder, 88 Va. 942, 14 S.E. 806, it was held, that even conceding that an appellate judge has the right, as auxiliary to the power to grant an injunction given him by § 3438 of the Code, to appoint a receiver, yet where the claims are unascertained, and are small in comparison with the property sought to be sequestrated, and no notice of the application has been given to the defendants, and an offer has been made to secure these claims should they be established by giving any bond that may be required, it was error to appoint a receiver.
IV. APPLICATION AND NOTICE.
General Rule Requiring Notice.--It is of the very essence of a motion for the appointment of a receiver, even by the court below, that notice shall be given to the defendants of the time and place of the application; and it is only in an extreme case, such that the exigency of the danger would be fatal, that a receiver can be justly appointed, even in and by the court in which the cause is pending, without reasonable notice to the defendants. Fredenheim v. Rohr, 87 Va. 764, 13 S.E. 193-266; Ruffner v. Mairs, 33 W.Va. 655, 11 S.E. 5.
When Notice Is Not Necessary.--Where a motion for the appointment of a receiver, is made in term time in a pending suit, no notice to the debtor is necessary. Ogden v. Chalfant, 32 W.Va. 559, 9 S.E. 879.
Although notice should be given to the adverse party of an application for an injunction and the appointment of receiver, except in cases of obvious necessity, to prevent a failure of justice, yet, if upon a motion to dissolve the injunction and discharge the receiver, the court sustains its original order, this is equivalent to holding that, upon full notice and argument, the injunction ought to have been granted, and, on appeal, the decree awarding such injunction and appointing a receiver will not be reversed for the want of such notice in the first instance. Bristow v. Home Building Co., 91 Va. 18, 20 S.E. 947.
In interpleader, ordinarily, a special receiver should not be appointed to take possession of the property without notice, still there are exceptions to the rule, as where immediate action is necessary to prevent great loss or inquiry, and especially where it is not sought to dispossess a party of his own property. Oil Run Petroleum Co. v. Gale, 6 W.Va. 525.
In Case of Rents and Profits of Real Estate.--No receiver of real estate or of the rents and profits thereof can be appointed until reasonable notice of the application therefor has been given to the owner or tenants of the land. Hutton v. Lockridge, 27 W.Va. 428.
When the equities of the bill are fully and fairly denied by answer, unless the plaintiff overcome such denial by other testimony, the question should no longer be regarded as one addressed to the discretion of the court; but it is error to appoint a receiver when the charges of the bill are so denied. Wilson v. Maddox, 46 W.Va. 641, 33 S.E. 775.
On Interlocutory Applications.--Interlocutory applications for a receiver before answer are usually supported by affidavits of the grounds relied on. It would ordinarily seem to be sufficient that the facts upon which the application is based are verified by the affidavit of the plaintiff alone. Krohn v. Weinberger, 47 W.Va. 127, 34 S.E. 746.
Receiver May Be Appointed on Rule to Show Cause.--Where a rule is made against an insurance company in a chancery suit to which it is a party to show cause why a receiver shall not be appointed to collect its policy, which is the subject of the suit, and the company appears by counsel and declines to answer the rule, and makes no objection to the appointment of a receiver, it will not be thereafter heard to object to the appointment of such receiver. New York Life Ins. Co. v. Davis, 94 Va. 427, 26 S.E. 941.
V. WHO MAY BE RECEIVER.
The general rule is that the receiver ought to be an indifferent person between the parties. But the selection of a proper person is very much a matter within the discretion of the court and hence will very rarely be interfered with on appeal. It has been held that this discretion is not abused in simply appointing as receiver the attorneys of respective parties to the suit. Shannon v. Hanks, 88 Va. 338, 13 S.E. 437.
VI. APPOINTMENT OF RECEIVER.
1. REQUISITE SHOWING TO OBTAIN. --In order to obtain the appointment of a receiver, the plaintiff must show--First, either that he has a clear right to the property itself, or that he has some lien upon it, or that the property constitutes a special fund, to which he has a right to resort for the satisfaction of his claim; and, secondly, that the possession of the property by the defendant was obtained by fraud, or that the property itself, or the income arising from it, is in danger of loss from the neglect, waste, misconduct, or insolvency of the defendant. Kanawha Coal Co. v. Ballard, etc., Coal Co., 43 W.Va. 721, 29 S.E. 514.
2. A MATTER OF DISCRETION. --The appointment of a receiver is not a matter of right, but of discretion, to be governed by the circumstances of the case, one of which circumstances is the probability of the plaintiff's being ultimately entitled to a decree. It is, moreover, a power always to be exercised with caution, and never except in a strong case. The general rule is to refuse an interlocutory application for a receiver, unless the plaintiff presents at least a prima facie case, and the court is satisfied that there is imminent danger of loss. Norris v. Lake, 89 Va. 513, 16 S.E. 663; Wagner v. Coen, 41 W.Va. 351, 23 S.E. 735; Lyle v. Commercial Nat. Bk., 93 Va. 487, 25 S.E. 547; Grantham v. Lucas, 15 W.Va. 425.
In West Virginia courts are possessed of discretionary power, with certain statutory restrictions, of appointing receivers or refusing application for such appointment; the exercise of this discretion will not be interfered with on appeal, except in cases where it has been manifestly abused. Smith v. Brown, 44 W.Va. 342, 30 S.E. 160.
3. GROUNDS FOR APPOINTMENT.
a. Disputed Title to Property. --Where there are adverse claimants to real estate, and those out of possession file a bill, supported by affidavits, showing that those in possession are cultivating the land in a wasteful and destructive manner, the court should appoint a special receiver to take charge of the land, to rent and preserve the same until the conflicting claims are adjusted. Dunlap v. Hedges, 35 W.Va. 287, 13 S.E. 656.
b. Fraud. --Where a husband was conducting a mercantile business as the agent of his wife, and property had accumulated from the profits of the business, and a creditor of the husband, who had received a judgment, and issued an execution which had been returned " No effects unencumbered," filed a bill to subject the property, charging that the agency was a fraud, and that the property was the husband's, or at least that he had an interest in it on account of his services, and asking for an injunction to restrain the collection of the debts, it was held proper to grant the injunction, and, on a motion to dissolve it, to appoint a receiver to sell the property and collect the debts. Penn v. Whiteheads, 12 Gratt. 74.
c. To Preserve Rents and Profits of Real Estate.
In General.--A creditor having a lien on real estate of an insolvent debtor has the right, after his debt has become due, to have a receiver appointed to hold the rents of such real estate to supply any deficiency which may exist after sale is made, and thus obtain a specific lien on the rents to pay the deficiency. Bristow v. Home Building Co., 91 Va. 18, 20 S.E. 947; Ogden v. Chalfant, 32 W.Va. 559, 9 S.E. 879; Moran v. Johnston, 26 Gratt. 108; Pulliam v. Winston, 5 Leigh 324; Adkins v. Edwards, 83 Va. 300S.E. 435.
In a suit by a judgment creditor to subject the real estate of his debtor to pay his debt, where there are deeds of trust on the property and numerous judgments against the debtor, which are to be ascertained and their priorities fixed, and the real estate is not sufficient to pay all the debts, the court may appoint a receiver to take possession of the property and rent it out. Smith v. Butcher, 28 Gratt. 144.
Where Personal Property Is Insufficient to Pay Debt.--Where a bill to subject property of a debtor alleges that the debtor has no personal property, and that fact is not controverted by the answer, and the cause has been referred to a commissioner to report the liens upon the real estate of the debtor and their priorities, and to ascertain what real estate the debtor owns, and the value thereof, and a report is made in the cause showing the value of the real estate and the amount of liens thereon, and no exception is made to the report as to the value of the real estate as therein ascertained, and the report is excepted to, because further credits are claimed by the debtor, not allowed by the commissioner, and it appears from the report that, if the credits were allowed, the liens would still exceed the value of the property, and it appears that the debtor has no sufficient personal property to cover the deficiency, although the report is not confirmed, the court may properly appoint a receiver to take charge of the estate, to receive the rents and profits, and if the debtor is in possession of any part of the land, to rent the same and receive the rents and profits thereof. Grantham v. Lucas, 15 W.Va. 425.
Where Land Is Worth More Than Liens against It Receiver Should Not Be Appointed.--But in a suit by judgment creditors to subject lands of the judgment debtor to the payment of their claims, it is error to appoint a receiver to rent out the lands pending the rendition of a decree in a separate suit to determine the interest of the judgment debtor in the land, where it does not appear that the judgment debtor is insolvent, and it appears that the land is worth more than the amount of the liens proven against it. Banner v. DingusVa. Dec. 648.
Where Case Is in Appellate Court.--In a suit to subject real estate to the lien of the judgment, where a decree for the sale of land is rendered, and an appeal and supersedeas to such decree granted, the court may appoint a receiver to preserve the rents and profits, notwithstanding the pendency of the case in the appellate court on the supersedeas. Hutton v. Lockridge, 27 W.Va. 428; Beard v. Arbuckle, 19 W.Va. 145.
Receiver May Be Appointed to Collect Accrued Rents.--A receiver may be directed to collect from tenants of the real estate rents due, as well as such as may become due. Smith v. Butcher, 28 Gratt. 144.
d. To Preserve Trust Property.
Where There Is Danger of Misapplication of Trust Funds.--When an assignment or conveyance is made by an insolvent firm to a trustee of the assets of the firm for the payment of the claims of creditors, and it is made to appear in a proper suit in equity that there is danger of the loss or misappropriation of the same, or of a material part thereof, the court may appoint a special receiver of the property to administer the assets under its directions. Wagner v. Coen, 41 W.Va. 351, 23 S.E. 735.
But where the whole scheme of a bill is to set aside trust deeds executed by a corporation on ground not recognized in law, and to distribute the proceeds of the property among the creditors pro rata, and there is also a charge in the bill that the trustees have unreasonably delayed executing the trusts, and the property is waiting, and no charge that plaintiff ever demanded a sale of the property, and the bill alleging the property will not pay the several creditors under the trust, this charge, under the circumstances, is not sufficient to justify taking the property out of the hands of the trustees, and putting it into the hands of a receiver. Pyles v. Riverside Furniture Co., 30 W.Va. 123S.E. 909.
Where Trust Is Denied and Proved on Bill to Have Trust Declared.--After a party has denied the express trust, in a suit to have the trust declared, and after the trust and the terms thereof are proved in writing to the satisfaction of the court, it is proper to put the property in the hands of a receiver. McCandless v. Warner, 26 W.Va. 754.
e. To Preserve Partnership Property.
Receiver Is Appointed to Wind Up Partnership.--The principle upon which a court of equity interferes between partners by appointing a receiver is merely with a view to relief by winding up and disposing of the concern and dividing the profits, and not for the purpose of carrying on the partnership; and, therefore, a receiver will not generally be appointed unless it appears that the plaintiff will be entitled to a dissolution at the hearing. Satterlee v. Cameron, 1 Va. Dec. 517; McMahon v. McClernan, 10 W.Va. 419.
When Appointed--Loss on Misappropriation of Property.--In a suit to dissolve a partnership and settle its accounts, where the defendant in possession denies the partnership, a receiver should not be appointed unless the fact of partnership is clearly proven in the cause and there is danger of the loss or misappropriation of the property of the firm, or a material part thereof. Wood v. Wood, 50 W.Va. 570, 40 S.E. 416.
After Account Has Been Taken.--Where an account has been taken showing the different debts of a partnership, the amount of each and to whom they are due, and showing how much each partner is to pay, the court may appoint a receiver with authority to collect from each partner the amount he is to pay and apply the fund to pay the creditors. Jordan v. Miller, 75 Va. 442.
Question as to Existence of Partnership or Share of Profits--Issue.--In cases of partnership, where there is an application for a receiver, and upon the evidence there is doubt whether there was a partnership between the parties, or as to the share of the profits to which the plaintiff is entitled, or as to the dissolution of the partnership by mutual consent at a particular time, the court should direct an issue to determine these questions. Satterlee v. Cameron, 1 Va. Dec. 517.
Question as to Existence of Partnership or Share of Profits--Business Successful. --In a suit between partners for the purpose of establishing a partnership, and having the same dissolved and the accounts settled, an amended and supplemental bill praying for a receiver having been filed, where the defendant is in possession, and conducting a successful and prosperous business, who denies the partnership, and is solvent, and able to respond in damages, the court will not appoint a receiver. Wood v. Wood, 50 W.Va. 570, 40 S.E. 416.
f. To Preserve Property of Railroad and Other Corporations.
Receiver to Manage Railroad.--Though a court of chancery will be reluctant to appoint a receiver to take charge of and manage a railroad, it is competent to do so when such a course is indispensable to secure the rights of legitimate stockholders and to prevent a failure of justice. Stevens v. Davison, 18 Gratt. 819.
Distribution of Funds of Railroad by Receiver.--The funds in the hands of a receiver of a railroad, appointed in a suit to foreclose a mortgage executed by the company, must be applied to the satisfaction of the lien of the mortgage creditors and not to the payment of debts due to the general creditors. But this rule is subject to the modification that the net earning while the road is in the hands of a receiver, may be applied to the payment of such claims for outstanding debts for labor, supplies, equipment, or permanent improvements of the mortgaged property, as may, under the circumstances of the particular case seem just and reasonable. Such claims are regarded as having superior equities to those of the bondholders. Addison v. Lewis, 75 Va. 701.
When the current earnings of a railroad, which ought, in equity, to have been employed to pay current debts, contracted before the receiver's appointment, for labor, supplies, and the like, have been applied by the company to the payment of interest due mortgage creditors, to pay for additional equipment for the road, or for valuable and lasting improvements, it is competent for the court to restore what has been thus improperly diverted, and to direct such current debts to be paid out of the income in the receiver's hands before anything derived from that source goes to the mortgage creditors. Addison v. Lewis, 75 Va. 701.
Where Title to Equipments Is Reserved.--When there is a mortgage on a railway, and the corporation makes a conditional purchase of locomotives and cars, and the vendor reserves the title as security for the payment of the purchase price, he has a right, if the railway goes into the hands of a receiver, to the possession of such engines and cars, and compensation for their use, but the balance of the purchase price due him is not such a debt as in equity and good conscience ought to be accorded priority over the mortgage creditors. Fidelity Ins., etc., Co. v. Railroad Co., 86 Va. 1, 9 S.E. 759, 19 Am. St. Rep. 858.
Equity May Do Anything Reasonable to Preserve Property.--A court of equity having in charge the mortgaged property of a railroad company, is authorized to do all acts that may be necessary--within its corporate power--to preserve the property and give it additional value, not only for the benefit of the lien creditors, but also for the benefit of the company, whose possession the court has displaced by the appointment of a receiver, and by taking into its own hands the property, rights, works and franchises of the company. Any act, it would seem, necessary for the protection and preservation of the property, is a legitimate and proper act, and whatever is manifestly appropriate to such preservation, or to the enhancement of the value of the property, not in excess of the powers of the corporation, will always be upheld and enforced by the courts. In such a case the court may authorize the receiver to take a lease of another railroad where it is manifestly for the interest of the creditors and the company. And so on like conditions the court may authorize its receiver to contribute out of the accrued revenues in his hands, to the building of another railroad. Gibert v. Washington, etc., R. Co., 33 Gratt. 586.
Receivers of a Mining Corporation.--Where a corporation is insolvent, and is the lessee of a coal mine, and the said insolvent lessee is largely indebted to its lessor for royalty reserved in the lease, which is secured by a lien on the lease and personal property and appliances in use about the mine by the lessee, and several of the creditors of such lessee have proceeded by way of attachment, and are proceeding, to seize and scatter the personal property belonging to said lessee, and to remove the rails from the tracks and wire ropes from the drums, a court of equity, on proper application made by such lessor, will appoint a receiver to take charge of said property. Kanawha Coal Co. v. Ballard, etc., Coal Co., 43 W.Va. 721, 29 S.E. 514.
g. To Preserve Decedent's Estates.
Generally.--A court of equity has authority to call in the assets of an estate from the personal representative and place them in the hands of a receiver. Davis v. Chapman, 83 Va. 67, 1 S.E. 472; Farmer v. Yates, 23 Gratt. 145.
The appointment of a receiver for a decedent's estate is the proper remedy, where it appears that the administrator has been removed, and the sheriff appointed administrator de bonis non that the administered assets will not pay the debts of estate; and that the remaining assets will have to be drawn upon, which, being once administered, the administrator de bonis non could not receive and hold. Harman v. McMullin, 85 Va. 187, 7 S.E. 349.
Court Cannot Appoint Receiver on Bill to Establish or Impeach Will.--Upon a bill filed under Code 1873, ch. 118, to impeach or establish a will, the court can exercise only the special and limited powers conferred upon it by the statute; it can only ascertain by a jury trial whether the paper in question is or is not the will of the decedent; it can go no further, and cannot make any order respecting his estate; and a decree appointing a receiver to take charge of the estate pendente lite, is ultra vires and void. Coalter v. Bryan, 1 Gratt. 18; Hartman v. Strickler, 82 Va. 225; Kirby. v. Kirby, 84 Va. 627, 5 S.E. 539.
VII. EFFECT OF APPOINTMENT.
In General.--An order appointing a receiver is in the nature of an injunction or writ of sequestration, preventing any alienation of, or interference with, the property without the consent of the court. Any meddling with the control or possession of the receiver, whether forcibly or by legal proceedings, without the permission of the court, is contempt of court and punishable. Thornton v. Washington Sav. Bk., 76 Va. 432.
Does Not Affect Title.--The appointment of a receiver being for the preservation of the property and the protection of the litigants pending the suit, such appointment gives no advantage to the person at whose instance it is made, nor does it change any title or create any lien. Krohn v. Weinberger, 47 W.Va. 127, 34 S.E. 746.
The appointment of a receiver does not affect the title to the fund; it is still regarded as in custodia legis. Harman v. McMullin, 85 Va. 187, 7 S.E. 349.
Amounts to a Sequestration of Property, and Defeats Power of Original Owner to Lease.--A lease of lands in the hands of a receiver, made to a third party by a party to a pending suit, however valid between the parties, confers no rights upon the lessee. Thornton v. Washington Sav. Bank, 76 Va. 432.
Effect Where Title to Fund Is in Dispute.--Where there are conflicting claimants of a trust fund who are prosecuting separate suits in the same court to subject the fund, the appointment of a receiver in one of the suits, on the motion of the plaintiff in that suit, enures to the benefit of the plaintiff in the other suit, upon the establishment of his superior right to the funds. Where the parties are substantially the same in both suits, the successful plaintiff may have an order in his suit for the settlement of the receiver's accounts, and a decree against him for the amount found to be in his hands. Beverley v. Brooke, 4 Gratt. 187.
In Case of Mortgages.--If a mortgagee, having the right of possession, fails to exercise such privilege, the appointment of a receiver is in the nature of an injunction which defeats the mortgagee's power of election. The court takes possession of the property by its receiver, and preserves the security for the mortgage until his right of priority is established. Beverley v. Brooke, 4 Gratt. 187 at 208.
Prevents Levy on Property.--Personalty in the hands of a receiver cannot be levied on, but the fi. fa. creates a lien thereon. Davis v. Bonney, 89 Va. 755, 17 S.E. 229.
Decree Appointing Not Subject to Collateral Attack.--A decree approving the action of a receiver of the court in a case where the court had jurisdiction of the subject-matter and of the parties, cannot be attacked in a collateral proceeding, but must remain in force until reversed on appeal, or by proper proceedings in that case. Turnbull v. Mann, 99 Va. 41, 37 S.E. 288.
Receiver to Collect Money Not a Creditor within Statute, Code 1873, ch. 143, § § 4 and 5.--One appointed by a court of equity in a pending cause as receiver to collect the purchase money of land sold by him as commissioner under a previous decree in the cause, and for which he had a bond with surety to himself as commissioner, is not a creditor within-the meaning of the statute (Code 1873, ch. 143, § § 4 and 5), to whom a surety on the bond may give the notice to bring suit upon it. If the receiver was such a creditor he could only have authority to suit after giving the security required of him in the decree appointing him; and in the absence of clear and satisfactory proof that he had given the security required, a notice to him was not sufficient to release the surety. Davis' v. Snead, 33 Gratt. 705.
VIII. POWERS, DUTIES AND LIABILITIES OF RECEIVERS.
Active and Passive Receivers Distinguished.--The powers of active receivers of going concerns are very much broader than those of passive receivers who are charged with the mere preservation of property. State Bank of Virginia v. Domestic S. M. Co., 99 Va. 411, 39 S.E. 141.
Power to Contract.--Where a receiver has express or implied power to make contracts they cannot be annulled at the pleasure of the court. State Bank of Virginia v. Domestic S. M. Co., 99 Va. 411, 39 S.E. 141.
Power to Abrogate Contract.--A receiver, under the direction of the court, may adopt an executory contract, and require compliance therewith, and if such contract is afterwards found to be unfair and burdensome, and is abandoned and abrogated by order of the court, the contracting party is not entitled to damages as for a breach of such contract, but is only entitled to a just compensation for the actual expenditure of labor and money by him in fulfillment of his contract, subject to a deduction of all sums paid him thereunder; which compensation is entitled to a preference of payment out of the corporate assets in the hands of the receiver in equal priority with the other obligations of the receivership. Griffith v. Blackwater B. & L. Co., 46 W.Va. 56, 33 S.E. 125.
Power of Foreign Receiver.--A foreign receiver cannot assert title to property within the state, as against the attachment of a resident creditor, especially when the sole purpose of the receivership is to enable the debtor to hinder, delay, and defraud resident creditors. Grogan v. Egbert, 44 W.Va. 75, 28 S.E. 714, 67 Am. St. Rep. 763.
A foreign receiver of a dissolved foreign partnership has no right to remove the funds of such firm out of the state, to the detriment of resident creditors thereof, or of separate creditors of the firm members, until he shows that the firm is insolvent and that such funds are necessary to satisfy partnership debts, regardless of any claim thereto by the debtor partner. Grogan v. Egbert, 44 W.Va. 75, 28 S.E. 714, 67 Am. St. Rep. 763.
Duty to Protect Estate.--It is the duty of a receiver to ascertain when a judgment owned by the estate will become barred by the statute of limitations, and if he fails in this duty, by reason of which the judgment becomes barred and is lost, he is liable. Rush v. Steele, 93 Va. 526, 25 S.E. 604.
Liability in Making Loans or Investments. --In Carr v. Morris, 85 Va. 21, 6 S.E. 613, a receiver was ordered by the court to lend a trust fund at six per cent. interest on a bond secured by a deed of trust on real estate, payable to himself, with interest, recoverable by suit upon default, the entire debt to become payable upon two successive defaults of interest. The receiver lent the money at eight per cent. interest on notes payable to another, secured by deed of trust on real estate, and neglected to enforce the debt upon default. The trust fund was subsequently lost. The receiver was held chargeable with the loss, though no bad faith was shown.
Where a receiver lent money belonging to the estate to a firm of which he was a member, and died leaving the debt still owing from the firm to the estate, it was held that he and his sureties were chargeable only with simple interest upon the sums loaned to the receiver's firm, to be computed from the time it became his duty to invest those sums respectively. Walton v. Williams, 1 Va. Dec. 579.
Liability for Negligence.--A receiver of a railroad may be held responsible for damage sustained by a shipper of freight through the negligence of the receiver's agents and employees, in any case in which the company could be so held. Melendy v. Barbour, 78 Va. 544.
IX. BOND AND SECURITY.
Bond and Security Necessary before Receiver Can Act.--A receiver appointed by a court to collect money after giving certain security, cannot sue until he has given such security. Reynolds' v. Pettyjohn, 79 Va. 327; Crumlish v. Shen., etc., R. Co., 40 W.Va. 627, 22 S.E. 90.
A special receiver to whom money is directed to be paid by a decree in a cause, should be required to give bond with approved personal security, with proper conditions, in a penalty fixed by the court, before he is authorized to receive such money or any part of it. Carper v. Hawkins, 8 W.Va. 291.
Effect of Failure to Give Bond.--Where receiver collects the money from a purchaser at a judicial sale before giving the required bond, and fails to account, though he may afterwards give the bond, the purchaser may be compelled to pay the money a second time. Woods v. Ellis, 85 Va. 471, 7 S.E. 852.
Where Sheriff or Sergeant Is Receiver No Bond or Security Is Required.--If the sheriff of the county or the sergeant of a city in which the property is located is appointed receiver, it is not necessary to require him to give security for the faithful performance of his duty, as it is covered by his official bond. Grantham v. Lucas, 15 W.Va. 425; Moran v. Johnston, 26 Gratt. 108.
Liability of Surety on Bond Is Only for Receiver's Defaults When Acting as Receiver.--The doctrine that a surety of a public officer is bound for funds collected by his principal by color of his office has no application to the surety on the bond of a commissioner or receiver of a court appointed to collect and disburse a particular fund, and the condition of whose bond is for the faithful discharge of that duty only. Ayers v. Hite, 97 Va. 466, 34 S.E. 44.
X. COMPENSATION AND EXPENSES.
No Fixed Rule as to Compensation.--There is no fixed rule in this state as to the mode of allowing compensation to a special receiver, whether by way of commission or a fixed sum. Usually, when the fund is large, a lump sum is proper. The amount and mode of allowance are within the sound discretion of the court, under the circumstances of the particular case, subject to review on appeal. Crumlish v. Shenandoah Val. R. Co., 40 W.Va. 627, 22 S.E. 90.
Must Be Reasonable.--In the absence of authority previously given, expenditures to be allowed a special receiver must be reasonable, and such as are proper, essential, and necessary in the due and ordinary execution of his office, and such as were contemplated in his appointment and according to the nature of his business. In extraordinary cases, involving a large outlay of money, the receiver should always apply to the court in advance for authority to make it. Crumlish v. Shenandoah Val. R. Co., 40 W.Va. 627, 22 S.E. 90.
Extra Allowances.--Extra allowances to trustees and receivers should not be made in the absence of evidence of extraordinary services rendering such allowances just and reasonable. Weigand v. Alliance Supply Co., 44 W.Va. 133, 28 S.E. 803; Crumlish v. Shenandoah, etc., R. Co., 40 W.Va. 627, 22 S.E. 90; Overholt v. Old Dominion Mfg. Co., 98 Va. 654, 37 S.E. 307.
Counsel Fees.--A special receiver may be allowed fair and reasonable fees paid to counsel necessary in the execution of his receivership. Courts ought to authorize employment of counsel where it is intended to give such power, and they are indisposed to allow such fees without previous authority to incur them given the receiver. Crumlish v. Shenandoah Val. R. Co., 40 W.Va. 627, 22 S.E. 90.
Where Master Reports Compensation Reasonable, Appellate Court Will Not Interfere.--Where the master reports a compensation for receiver as fair and reasonable, and the same is supported by competent evidence, the appellate court will not interfere. Karn v. Rorer Iron Co., 86 Va. 754, 11 S.E. 431.
XI. BOND IN LIEU OF RECEIVER.
The appointment of a receiver in a suit to subject property may be dispensed with, if the debtor gives security to account for the rents and profits in case there should be a deficiency upon a scale of the premises under the decree; but if the debtor does not ask for permission to give such bond, it is no error to decree the appointment of a receiver. Grantham v. Lucas, 15 W.Va. 425.
XII. RECEIVER'S CERTIFICATES.
Power to Issue.--Courts of chancery may, in a proper case, issue receiver's certificates, which shall constitute a paramount charge upon the franchises, earnings and property of a corporation under their control, but it is a power which should be exercised with the utmost caution, prudence and reserve, and never without giving those, whose interests are to be affected, the opportunity to be heard in opposition to it. Osborne v. Big Stone Gap Colliery Co., 96 Va. 58, 30 S.E. 446; Karn v. Rorer Iron Co., 86 Va. 754, 11 S.E. 431.
" As to the receiver's certificates, we do not doubt that it was competent for the court to authorize their issue and to make them a lien paramount to the deeds of trust. It was necessary to raise money in some way to preserve the property from destruction or serious injury, and to put it in salable condition, and the only practicable mode of accomplishing that object was by issuing receiver's certificates. * * * It is now well settled that a court of equity has the power in this class of cases to authorize its receiver to issue certificates upon which to raise money when the necessities of the particular case require it, and to make them a first lien on the property in its hands, and the authority, when properly exercised, is highly beneficial to the mortgage bondholders, yet it ought to be cautiously and sparingly exercised." Karn v. Rorer Iron Co., 86 Va. 754, 11 S.E. 431.
Position of a Bona Fide Holder.--The bona fide holder of a receiver's certificate, duly issued to him under the orders of the court of chancery for debts incurred by the receiver, which certificate has been reported to the court, and, without objection, allowed, acquires a vested right for the payment of his debt in a certain order of which he cannot be deprived except by his own act, or by due process of law. The subsequent issue of other certificates of which he has no notice does not affect him. Osborne v. Big Stone Gap Colliery Co., 96 Va. 58, 30 S.E. 446.
Certificates Issued without Notice Do Not Affect Lien of Deed of Trust.--It has been held that the lien of the deed of trust cannot be displaced by the subsequent issue by a court of chancery of receiver's certificates without notice to the creditors secured. Osborne v. Big Stone Gap Colliery Co., 96 Va. 58, 30 S.E. 446.
XIII. REMOVAL OF RECEIVER.
Removal for Failure to Give Required Bond.--Where a receiver gives a bond which is insufficient and a rule is entered against him to show cause why he should not give a new bond, the court, upon the failure of the receiver to show cause, may remove him and appoint another in his stead. And it must very plainly appear that the lower court erred in such removal and substitution before the appellate court will reverse its action. Shackelford v. Shackelford, 32 Gratt. 481.
Extent of Power of Court on Removal.--Where a court has removed trustees appointed by will to manage an estate, for mismanagement, and, pending the appointment of their successors, placed the property in the hands of a receiver, it may remove such receiver in its discretion, and appoint proper persons to take charge of and manage the property as trustees under the terms and conditions of the will; but it cannot declare void a lease of a portion of the property made by such receiver in good faith, in accordance with the provisions of the will, and in the interest of the beneficiaries therein named. Bayly v. Gaines, 1 Va. Dec. 618.
Where a decree appointing a special receiver is wholly reversed, without any reservation, his office ceases with the reversal. Crumlish v. Shenandoah, etc., R. Co., 40 W.Va. 627, 22 S.E. 90.
XIV. ACTIONS BY AND AGAINST RECEIVERS.
Right to Sue.--Mere authority to the receiver of a court to collect bonds given for the purchase price of real estate does not authorize him to institute suits in other courts against the obligors in said bonds, and others, to set aside alleged voluntary and fraudulent conveyances of real estate made by them. McAllister v. Harman, 97 Va. 543, 34 S.E. 474.
One appointed receiver of chattels does not, simply by virtue of his appointment, acquire a right of property; but if he bring detinue for the chattels describing himself as receiver, and as upon his own property, and on a bailment thereof to the defendant, the count is good, the description as receiver being surplusage. Boyle v. Townes, 9 Leigh 158.
Where a receiver has been appointed to collect an insurance policy, with directions to institute, in his own name, such proceedings thereon as he may be advised is proper, the insurance company has a right to expect that an independent suit will be instituted thereon in the name of the receiver, and it is error to force the company into a trial on the merits against its will, in the suit in which the receiver was appointed, where the order directing suit by the receiver in his own name remains unrevoked, and it appears that such a proceeding is a surprise to the company, and will probably deprive it of making a bona fide defense on the merits. New York Life Insurance Co. v. Davis, 94 Va. 427, 26 S.E. 941.
Necessity for Leave of Court Before Suit Can Bo Brought against.--There is no better settled proposition than that a receiver. as such, cannot be sued elsewhere than in the court by which he was appointed, without leave of such court first had and obtained; and whether leave to sue will be granted, rests in the discretion of the court. This rule is not altered by the constitutional right to sue in federal courts in certain cases. Reed v. Axtell, 84 Va. 231, 4 S.E. 587; Melendy v. Barbour, 78 Va. 544; Jones v. Browse, 32 W.Va. 444, 9 S.E. 873.
Where the court appointed a receiver in a pending cause and directed a debtor to pay his debt to the receiver, and the debtor failed to do so, it was held that, upon sufficient notice having been given the debtor and his sureties, the circuit court could enter up a judgment in the receiver's favor, under § 40, ch. 49, Code of 1860. Goss v. Southall, 23 Gratt. 825.
XV. APPEAL AND REVIEW.
Appealability of Order Appointing Receiver.--Under § 3454, of the Virginia Code of 1887, which enacts that an appeal may be allowed in any case in chancery wherein there is a decree or order requiring the possession of property to be changed, an appeal lies from an order appointing a receiver where such order requires the possession or the control of the property to be changed. Shannon v. Hanks, 88 Va. 338, 13 S.E. 437; Hutton v. Lockridge, 27 W.Va. 428.
Where property has never been in the possession of the appellant his appeal from an order, appointing a receiver for the property, will be dismissed, since, as to him, such order does not require the title or possession of property to be changed. Harris v. Hauser, 26 W.Va. 595.
One aggrieved by a decree of the court which appointed a receiver for or against whom the decree is rendered may have an appeal in a proper case, even if the receiver cannot question the decree of the court appointing him. Melendy v. Barbour, 78 Va. 544; Gage v. Crockett, 27 Gratt. 735.
From an order of the circuit court improperly appointing a receiver of lands and thus requiring a change of its possession the owner of the land so dispossessed may appeal, though the principles of the cause are not adjudicated. Hutton v. Lockridge, 27 W.Va. 428.
An Order Refusing to Appoint a Receiver Is Not Appealable.--An order or decree refusing to appoint a receiver is not appealable. Robrecht v. Robrecht, 46 W.Va. 738, 34 S.E. 801.
Necessity of Prejudice.--On appeal from an order appointing a receiver, if it does not appear that the appellant was injured or prejudiced by the order, it will not be reversed. Clark v. Johnston, 15 W.Va. 804. Thus, in cases to subject real estate to a debt, where the liens far exceed the value of the property, an order appointing a receiver will not be reversed on appeal. Shannon v. Hanks, 88 Va. 338, 13 S.E. 437.
Where in a suit for a specific performance of an alleged contract to convey lands, the decision of the lower court that the plaintiff has no title or right that can be enforced in equity is affirmed on appeal, the appellant cannot object to the action of the lower court in placing the property in the hands of a receiver pending the appeal, since such action could not have been prejudicial to the appellant. Henley v. HefferronVa. Dec. 303 at 306.
Order Appointing Receiver Is Appealable Where Principles of Cause Are Adjudicated.--Where, in a suit for the appointment of a receiver, the court, by the appointment of the receiver, adjudicates the principles of the cause, the decree is appealable, though the possession and administration of the personal property only is involved. Wagner v. Coen, 41 W.Va. 351, 23 S.E. 735. And it has been held that an order refusing to dissolve an injunction and discharge a receiver decides, in effect, that the property held by the receiver is, for the present at least, in proper hands, and to this extent is an adjudication of the principles of the cause, and is therefore appealable. Bristow v. Home Building Co., 91 Va. 18, 20 S.E. 947.
Award of Supersedeas Does Not Remove Receiver.--If a receiver is in possession of property at the time a supersedeas is awarded, he is not thereby removed, since the supersedeas is only intended to stay further proceedings, and to leave the matters in the condition it finds them until the appellate court can hear the case and pass on the questions involved in the opinion. Bristow v. Home Building Co., 91 Va. 18, 20 S.E. 947.
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