Opinion
Decided February 6, 1933.
Receivership — Discharge releases receiver and property — Later liens not created on property sold on foreclosure, when.
1. Effect of discharge of receiver is to terminate his duties and authority.
2. If receiver is unconditionally discharged and jurisdiction over trust is surrendered without reservation as to existing claims, effect is to release receiver and property from further liability in receivership proceeding, and court's summary jurisdiction over receiver ceases.
3. After receiver was discharged and bond released, common pleas court, which reserved no power over property, could not indirectly create liens on property as against purchaser at foreclosure sale, by designating certain unpaid obligations as "costs."
ERROR: Court of Appeals for Cuyahoga county.
Mr. Philip Schoenberg, for plaintiff in error.
Mr. Joe Feniger, for defendants in error.
Messrs. Pennell Johnson and Messrs. Cannon, Spieth, Taggart, Spring Annat, as amici curiæ.
On May 9, 1930, Louis H. Madorsky, the plaintiff in error, filed a foreclosure action in the common pleas court against the Suburban Homes Company and other defendants. Madorsky was the holder of a second mortgage and note. On July 19, 1930, the Guardian Life Insurance Company of America, as first mortgagee, filed an answer and cross-petition and asked for the appointment of a receiver. Subsequently, to wit, on August 7, 1930, one Joe Feniger was appointed receiver and gave a bond on August 14, 1930.
The record further shows that on December 3, 1930, the receiver filed his final report and on December 13, 1930, the court made the following entry:
"To Court: — The final report of Receiver is approved. Receiver is discharged and his bond released. Receiver allowed compensation in the sum of $150 — payable as follows: $60.98 from funds in his possession and $89.02 to be taxed as costs, payable to the Receiver.
"Journal 261, page 2594."
The next entries shown by the record are as follows:
"February 2, 1932. Supplemental Final report of Receiver filed.
"February 19, 1932. To Court: — Supplemental final report of receiver is approved. It is ordered by the court that there be taxed as additional costs in this case the sum of $118.21 that when paid shall be disbursed by the Clerk as follows: To The City of Cleveland, Division of Health $90.69; The Cleveland Electric Illuminating Company $5.75 and The East Ohio Gas Company $21.77. Receiver is discharged and his bond released.
"Journal 266, page 1323."
On April 20, 1932, appears the following entry:
"To Court: — Motion by defendant, The Guardian Life Insurance Company of America to strike from files the supplemental final report of Receiver and to vacate entry of approval of the supplemental final report is overruled. Exceptions. Bond is fixed in the sum of $100.00.
"Journal 267, page 519."
Louis H. Madorsky, against whom execution was issued, has filed a petition in error in this court.
It is to be noted that the record in this case does not show that the sale was made subject to the payment of any unpaid obligations of the receiver. The record further shows no reservation by the court of any power or control over the property sold, and no assumption by the purchaser of any obligations of the receiver.
The question is squarely presented as to whether or not the court of common pleas, after a receiver is discharged and bond released, can create liens upon the real estate as against the purchaser after the property which has been foreclosed has been conveyed by sheriff's deed.
Numerous authorities have been cited by counsel interested in this proceeding to the effect that this cannot be done, and with that view this court agrees. The rule is well stated in 53 Corpus Juris, page 90, Section 110, where it is said: "The effect of a discharge of a receiver is to terminate his duties and authority, and if the discharge is unconditional and there is a surrender of jurisdiction over the trust, without any reservation as to existing claims, the effect is to release not only the receiver, but also the property, from further liability in the receivership suit or proceeding, and such summary jurisdiction over the receiver as the court has in the receivership proceeding ceases."
The record in this case does not disclose that the final report approved in December, 1930, was false or fraudulent, nor does it disclose any reservation as to existing claims, but on the contrary the final report was approved, the receiver discharged, and the bond released.
If a receiver, after his discharge and release of his bond, can file one supplemental report creating liens upon the property of the purchaser, there is no reason why any number of subsequent supplemental final reports could not be filed. Such conduct violates the principles of sound judicial procedure, and leaves the purchasers at judicial sales without any safeguards.
Clearly, the court erred in approving the supplemental final report, and in overruling the motion to strike from the files and to vacate the entry approving said supplemental final report.
The court, after the receivership terminated, could not create liens upon this property as unpaid obligations or create liens indirectly by designating these unpaid obligations as "costs," under the facts disclosed in this record.
In accordance with these views this case is reversed and remanded, and the court of common pleas is directed to vacate the entry of February 19, 1932, approving the supplemental final report, and the entry of April 20, 1932, overruling the motion to strike from the files, and to vacate the entry approving said supplemental report.
Judgment reversed and cause remanded.
LIEGHLY, J., concurs.
LEVINE, P.J., not participating.