First Union Savings & Loan, Inc. v. Bottom

Prescott, J., delivered the opinion of the Court. The question involved herein is a narrow one: the appellant challenges the propriety of the court’s having appointed a receiver for it. In May of 1962, the Director of the Maryland State Department of Assessments and Taxation, acting pursuant to the pro ²⁹⁴ visions of the Code (1961 Cum. Supp.), Article 23, §§ 160K and 160L, 1 filed a suit in equity praying that a receiver be appointed for the appellant, that its charter be declared forfeited and that it be dissolved.

In June, appellant filed a demurrer and answer in which it denied insolvency, all of the other accusatory allegations of the bill or that “there was any existing grave emergency or abuse or misuse of corporate powers and franchises.” At that time, the court refused to appoint a receiver ex parte, but, on July 24, 1962, it appointed a conservator “with full power and authority to take charge and possession of all its property,” and to manage the same under the direction of the court. The conservator was directed to engage a firm of certified public accountants to make a full audit of the books and accounts of the appellant. On December 11, 1962, the conservator filed a petition alleging that he had filed the report of the certified public accountants, which “indicated” that appellant was hopelessly insolvent, and praying the passage of an order that a receiver be appointed unless, within thirty days, the appellant submit a plan for reorganization of the company. The order was passed on the day that it was presented.

The appellant filed, on January 10, 1963, a proposed plan for reorganization. The conservator, on January 29th, filed a peti ²⁹⁵ tion requesting that said plan be dismissed, and the court so ordered on the same day. 2 On February 18, 1963, the conservator requested his discharge and the appointment of a receiver in his stead. On the same day, the court discharged the conservator and appointed the appellee the receiver for appellant. On March 12th, appellant filed its answer to the petition of February 18th, and, on the following day, noted this appeal.

Upon this statement of facts, the appellee moves to dismiss the appeal, alleging that the record fails to disclose that appellant has “any interest or right of property” in the matter upon which the judgment appealed from was rendered. He cites (among other cases — all of which have been carefully considered) Pattison v. Corby, 226 Md. 97, 101 , 172 A. 2d 490 (a zoning case); Patterson v. Gelston, 23 Md. 432 (a land patent case) ; Manufacturers & Merchants Co. v. Pyles, 125 Md. 317 , 93 A. 917 (a receivership case); and Preston v. Poe, 116 Md. 1 , 81 A. 178 (also a receivership case). We think these cases are easily distinguishable from the case at bar. The appellant herein is a party of record to the suit.

Code (1957), Article 5, Section 6, provides that, “any party may appeal * * * from any final decree * * * entered by a court of equity.” Under a previous statute that permitted appeals by “persons parties to the suit,” this Court held that said language permitted appeals by parties of record and also persons who were directly interested in the subject matter of the suit. Karr v. Shirk, 142 Md. 118 , 120 A. 248 . It is true that a conservator had been appointed, who had taken over the custody of appellant’s property and the management of its affairs, but the appellant had filed an answer denying the material allegations of the original complaint, and it insists that it thought, at all times, that it would be afforded a hearing before a receiver would be appointed. ²⁹⁶ The appeal was noted “on behalf of First Union Savings and Loan, Inc.,” from the order of February 18, 1963, by two members of the bar in good standing, and we cannot assume that this action was taken without proper authority. Cf.

Waltsinger v. Birsner, 212 Md. 107 , 128 A. 2d 617 . First Union was, we think, a party of record and that it had an interest or right of property in the matter upon which the judgment appealed from was rendered, and therefore, had a right to take the appeal herein. It would, indeed, be strange and unusual if the trial court could take away the property and the right to manage the affairs of a corporation from the officials thereof, without a hearing, and the corporation not permitted the right to an appeal; hence, the motion to dismiss will be overruled. Cf.

So. Md. Agri. Ass’n v. Magruder, 198 Md. 274 , 81 A. 2d 592 , and cases cited therein. We turn now to the question relative to the appointment of the receiver.

This Court and Courts elsewhere have universally recognized that the appointment of a receiver, ex parte, is an extraordinary remedy, which should be granted with great care. When a court orders that a corporation’s property and the management of its affairs be taken from its officials, without a hearing, and placed in the hands of an officer of the court, it exercises a delicate and drastic power, one that should only be put into play with great caution and circumspection. So. Md. Agri.

Ass’n v. Magruder, supra; Miller, Equity Procedure § 630; High, Receivers § 346. Ordinarily when a pleading is filed praying for the appointment of a receiver, there should be an order nisi or some opportunity afforded for a hearing by the adverse party. So. Md. Agri.

Ass’n v. Magruder, supra. If there be no traverse to the allegations of facts in a pleading seeking a receiver, the court acts on its averments and exhibits, and accepts as true all facts properly alleged in the bill and exhibits. First Continental v. Director, 229 Md. 293 , 183 A. 2d 347 . But if an answer under oath be filed before the hearing and the application for a receiver be heard upon bill and answer, the averments of the latter are to be accepted as true.

Miller, op. cit., § 623; Voshell v. Hynson, 26 Md. 83 ; Carrington v. Basshor Co., 121 Md. 71 , ²⁹⁷ 88 A. 52 . And in the absence of statutory authority, the courts should not