Gaither v. Stockbridge

Alvey, C. J., delivered the opinion of the Court. There are two questions presented on this appeal: 1st, Whether the receiver became assignee of the term created by the lease from the appellant to The Duffy Malt Whiskey Company of the warehouse and premises occupied by that -Company at the time of the appointment of the receiver, so as to make him liable for the rent that became due and payable on the 1st of Dec., 1886; and, 2d, If the receiver has not become such assignee or tenant, and as such liable for the rent, whether the appellant had any such preferred lien or charge, for the accruing rent, upon the goods and •chattels of the lessee upon the premises at the time ofthe ²²⁴ appointment of the receiver, and which went into his hands, and were sold under an order of Court and taken from the premises, before the rent became due, as will entitle the appellant to be paid in full out of the proceeds of the sale of such goods and chattels? 1. The Duffy Malt Whiskey Company was alleged to be utterly insolvent and unable to pay its debts; and, upon a creditors’ bill filed, the appellee on this appeal was appointed receiver, on the 12th of Nov., 1886. By the order of the Court, appointing the receiver, the latter was ordered to “take charge and possession of the goods, wares and merchandise, books, papers and effects” of the Company, so alleged to be insolvent.

In pursuance of this order, the receiver did take possession of such goods and chattels found on the premises, and retained the same, until the 22d of Nov., 1886, when, under an order of Court, he sold such goods and chattels, at auction, on the demised premises, where they had remained from the time the receiver took possession thereof. After making sale of the goods and chattels, and the same had been removed from the premises by the purchasers, the receiver, on the 29th of Nov., 1886, tendered the key of the warehouse to the attorneys of the appellant, who refused to receive the same ; and afterwards, by the direction of the Court, he deposited the key with the clerk of the Court for the appellant. The ordinary receiver of a Court of chancery is supposed to be an indifferent person as between the parties to the cause, whose function or office it is to receive and preserve the property or fund in litigation pendente lite, when it is made apparent to the Court that the rights of the parties concerned require such protection. He is an officer of the Court, and the fund or property entrusted to his care is regarded as being in custodia legis, to await the ultimate disposal thereof by the Court, according to the rights and priorities of the parties concerned.

The Court itself has ²²⁵ the cafe of the property, by its receiver, and that officer, being the mere creature of the Court, has no powers other than those conferred upon him by the Court, or derived from its established practice. His appointment does not -change the title to the property, or create any lien upon the same, in favor of any of the parties interested ; his holding being for the benefit of the party who may be ultimately determined to be entitled. Booth vs Clark, 17 How., 322, 331 ; Ellicott vs. Ins. Co., 7 Gill, 320 ; Ellicott vs. Warfield, 4 Md., 85 .

Such, then, being tbe nature of the office and duty of a receiver, and his relation to the Court, 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 case of an assignee in bankruptcy, the law ■casts upon such assignee the legal title to the unexpired term of a lease, and he thus becomes, assignee of the term by operation of 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 a 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 vs Clark, 17 How., 331, 335 .

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 special 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 ²²⁶ other personal property involved, for and as the hand of the Court, and not as assignee of the term.

In those cases where the goods of the lessee are remaining on the demised'premises at or after the time when the rent becomes due, and the landlord seeks to exercise his-right to distrain, and the only impediment to the exercise of that right is the possession of the Court, by its receiver, it seems to be a settled rule of practice to order the re•ceiver to pay the arrears of rent out of the proceeds of the property, or to permit the landlord to proceed with his distress, notwithstanding the possession of the receiver. Martin vs. Black, 9 Paige, 641 ; Ex parte Plummer, 1 Atk., 103, 104. But here there is no such question presented ; and we do not understand that it is contended that the receiver has become the assignee of the entire residue of the unexpired term of the leasehold estate, with the right to dispose of it. What seems to be contended for is that the receiver has, by entering upon the demised premises, to take possession and to sell and dispose of the goods and effects of the lessee, under the¡ order of the Court, made himself liable as assignee or tenant of the premises, to the extent of the quarter’s rent falling due on the 1st of Dec., 1886,, But this, we think, manifestly, cannot be maintained.

No such liability should be imposed upon the receiver for simply performing his duty under the direction of the Court. The Court has given no direction that the leasehold interest should be- sold ; and, indeed, the lease, by its terms, is non-assignable, except it be by the express written assent of the lessor, and it is restrictive in respect to the use of the demised premises. We are clearly of opinion, that the receiver is neither assignee in fact nor by operation of law, and therefore could not be held liable as tenant for use and occupation of the premises. This case is quite unlike that of Horwitz vs. Davis, 16 Md., 313 .

There Horwitz was assignee under a deed of ²²⁷ trust which, embraced the tenant’s interest in the unexpired term of the demised premises, and the assignee accepted the assignment, and entered upon and used the premises in selling the goods thereon; and it was held, that he was liable to the landlord as tenant for use and occupation. The case was assimilated to that of an assignee in bankruptcy, who has the right to elect whether he will take or reject a term under a lease, as it may be for or against the interest of the creditors. And if the receiver here had claimed and entered upon the premises, not only,as receiver, but as assignee of all the property of the tenant, as appears to have been the case in Martin vs. Black, 9 Paige, 641 , then there would have been some ground for the contention of the appellant, under the decision of Horwitz vs. Davis. But, as we have seen, that is not the case here. 2.

Whether the.appellant had any such lien or claim upon the goods and chattels sold from the-demised premises by the receiver, before the rent became due,, as entitles him toBa preference over other creditors, as 'against the proceeds of the sale .of such.goods and chattels, is the second question; and in regard to which we perceive no difficulty whatever. As we have already stated, the sale of the goods and effects took place on the premises on the 22nd of November, 1886, and such goods and effects were removed from the preipises before .the 29th of the same month, on which day the key of the warehouse was offered to be surrendered; and the quarter’s rent did not become due and payable until the 1st day of December following. As by the common law the right, ¿f distress for rent in arrear must be exercised upon the demised premises, such right terminates with the removal of the goods from the premises, unless the landlord is aided by some statute upon the subject. Here it is supposed that the landlord is entitled to an equitable application of that provision of ²²⁸ the Code, Art. 53, sec. 18, which provides, that whenever any property is removed from the demised premises within sixty days prior or subsequent to tbe time when the rent has or will become due, the landlord may follow and seize such property under distress for rent due, at any time within sixty days after the time when the rent becomes due ; provided, such property has not been sold to a bona fide purchaser without notice, or taken in execution.

But this right to pursue property removed only exists for rent actually due, and as against property that belonged to the tenant at the time of removal from the premises. If the property was removed as the property bona fide belonging to another party, clearly, the landlord could have no right to pursue it and seize it for rent subsequently becoming due. Statutes upon this subject, made to protect the landlord, have never been so construed as to allow such privilege. Buckey vs. Snouffer, 10 Md. 149, 156 ; Alex.

Brit. Sts., 745; Martin vs. Black, 9 Paige, 643 ; Hastings vs. Belknap, 1 Denio, 190 ; Hadden vs. Knickerbocker, 10 Ills., 677. Nor can any equitable construction of the statute of VIII Anne, ch. 14, sec. 1, aid the appellant in his contention. That statute -has reference to seizure under execution, and, upon due notice given, -requires that, before the goods are removed from the demised premises, the party suing out the execution shall pay the arrearage of rent due, not exceeding one year’s rent that may he due at the time of the seizure of the-goods.

Before any quasi lien could exist, the rent must he due; and the goods remain subject to distress by the landlord. No-such state of things existed in this case ; and therefore the cases of Thompson vs. The Balto. and Susq. Steam Co., 33 Md., 312 , and Longstreth vs. Pennock, 20 Wall., 575 , are not authorities that afford any support to the claim of the appellant. It follows that the appellant has no such claim against the proceeds of sale of the goods and chattels sold by the ²²⁹ receiver as entitles him to a preference over other creditors of the tenant, and that he can only occupy the position of general creditor; or he may pursue his remedy on the covenant in the lease against the lessee.

The order appealed from will therefore he affirmed. (Decided 22nd April, 1887.) Order' affirmed, and cause remanded. Bryan, J., filed the following dissenting opinion : I shall consider the questions which are discussed in the opinion of the majority of the Court. My meaning will he made clearer by a statement of the- material facts of the case.

The Bank of Monroe filed a general creditors’ bill against the Duffy Malt Whiskey Company of Baltimore City, a body politic and corporate. The bill alleged that the defendant was utterly insolvent, and prayed that a receiver might be appointed to take charge of its assets, and wind up its business and make distribution among its creditors, under the order and direction of the Court. It also prayed for an injunction,.and also that the affairs of the corporation might be closed up under the direction of the Court. On the twelfth of November, 1886, the Court appointed Henry Stockbridge, Esq., receiver, “with the power and authority to take charge and possession of the goods, wares and merchandise, books, papers and effects of or belonging to the defendant, and to collect the outstanding debts due to the defendant,” and the defendant was required to yield up and deliver to the receiver its goods, wares, merchandise, books, papers and effects.

The Court also ordered an injunction, according to the prayer of the bill, which was to this effect: that the officers, agents, employees and' attorneys of said body corporate, and each of them, should by the order of the Court .be enjoined and restrained from the further prosecution or conduct of the ²³⁰ business of tbe Duffy Malt Whiskey Company or interference in any form therein. The defendant had leased from Thomas H. Gaither a warehouse in the City of Baltimore, for the term of five years, commencing on the first day of December, 1885, and was possessed of the unexpired portion of this term at the time the receiver was appointed. By leave of the Court Gaither became a party complainant in the cause. There were certain proceedings in reference to this lease, which do not concern the present question, and need not therefore be stated; it being my purpose to mention only the matters which bear on this controversy. ■ On the twentieth of November, 1886, the receiver filed a petition, in whieh he stated that there was in his hands a considerable quantity of goods in the warehouse • which had been the place of business of the Duffy Malt Whiskey Company, and that their preservation and protection in said place was attended with great inconvenience and expense, and that he had advertised them for sale on the premises on the twenty-second day of November, and he prayed for an order authorizing the sale according to the advertisement.

The Court passed the order and the sale was made. On the first dajr of December, Gaither filed a petition praying that the quarterly instalment of rent which fell due on that day, should be paid to him out of the proceeds of the sale of the goods. On the same day the receiver filed a petition,.in which he stated, that after his appointment, the defendant delivered to him the keys and possession of the warehouse, and that he had disposed of the assets of the defendant contained in said warehouse, and that after the sale, to wit, on the twenty-ninth day of November, and again on the thirtieth of the month, he had tendered to the solicitor of the lessor the keys and possession of the warehouse; but that he declined to receive them. He therefore prayed the Court to pass an order authorizing him to deposit the keys in Court, sub ²³¹ ject to the order of the lessor, or to the direction of the Court.

The order was passed by the Court. The possession of the receiver spoken of in his petition is shown hy the evidence to have been of this kind: he received from the defendant a key of the warehouse and placed a watchman in charge of the goods, who remained on thepremises until the sale, and with the assistance of another person, who was also employed by the receiver, arranged them for sale. The sale was made on the twentieth day ■of November in the warehouse, where the goods had remained ever since the appointment of the receiver. The keys of the warehouse and the control of it were retained by the receiver until the twenty-ninth day of the month; on that day the keys and possession of the warehouse were, -as stated in the receiver’s petition, tendered to the solicitor of the landlord, and were by him refused.

The Court refused to order the payment of the lent, and dismissed the landlord’s petition. ’This appeal is from the Court’s order. It will be seen that the Court ousted the defendant from the possession and control of all its property, and assumed the administration of it for the benefit of the creditors of the insolvent corporation. The receiver was the chosen officer •of the Court to execute its orders. By these orders the goods,and chattels of the defendant were sold, and the leasehold property was occupied for the purpose of keeping and preserving the goods and chattels, and was used ■as a place of sale.

This use and occupation of the premises continued from the twelfth of November until the twenty-ninth of the same month. The same entire and ■absolute dominion was exerted over both species of property ; and the amotion of the defendant’s possession and the deprivation of his title was complete in both instances. All the property was in the control and custody ■of the Court to