Ivy Hill Ass'n v. Kluckhuhn

⁶⁹⁷ W. ALBERT MENCHINE, Retired, Specially Assigned Judge. Ivy Hill Association, Inc., a successor receiver 1 (Receiver) for Ivy Hill Cemetery Company (Cemetery Company), filed a Bill in Equity against Robert M. Kluckhuhn and Elizabeth R. Kluckhuhn (Kluckhuhns) on December 10, 1979. The Bill alleged inter alia that the Kluckhuhns “have crossed the common boundary between their property and plaintiffs property, . . . have filled in plaintiffs property with fill dirt and rubble; have cut plaintiffs trees, both of which constitute waste and a trespass on plaintiffs property and are causing irreparable injury to plaintiffs land; that defendants have planted shrubs and grass on plaintiffs property without plaintiff’s permission and have failed and refused to refrain from utilizing plaintiff’s property, despite plaintiff’s demand . . .. ” The Bill prayed for injunctive relief; for the fixing of boundary lines; for damages; and for other relief. The Kluckhuhns’ answer alleged that “they have been in actual, notorious, continuous and adverse possession of all lands now maintained and utilized by defendants as lawn in conjunction with their residence for more than twenty-five (25) years prior to the filing of the Bill of Complaint herein and have been in actual, open, notorious and continuous possession of said land under known and visible boundaries and Defendants are therefore the sole and exclusive owners thereof.” ⁶⁹⁸ That bill of complaint, filed on December 10,1979, was the only possessory action ever filed by any of the receivers of the Cemetery Company from the time of the appointment of the initial receiver on April 28, 1953.

The Kluckhuhns and the Cemetery Company are record title holders of adjoining property in Prince George’s County. The area in dispute relates exclusively to the small tract of land lying within the dotted lines marked “Top of Bank” and the title line of division between the Kluckhuhns and the Cemetery Company as shown on plaintiff’s Exhibit 1. This appeal is from a decree passed on a second trial of the subject case. The first trial had resulted in a decree holding “That Defendants Robert M. Kluckhuhn and Elizabeth R. Kluckhuhn, have established title and ownership by adverse possession against any claim of Defendant [sic] to property lying within and east of the line designated ‘top of bank’ on [Plaintiff’s Exhibit 1].” On appeal of that earlier decree, the Court of Special Appeals declared in an unpublished opinion that, “[W]e do not find that the chancellor was clearly erroneous in concluding that [the Kluckhuhns] had established all the elements of adverse possession.” The court then remanded the case for determination by the lower court of the legal effect of the appointment of a receiver for the Cemetery Company.

Ivy Hill Association, Inc. v. Robert M. Kluckhuhn et ux, No. 596, September Term 1981. Upon remand the trial court’s decree after the second trial held that the appointment of a receiver for the Cemetery Company tolled the statute of limitations as a matter of law. The Court of Special Appeals, 55 Md.App. 41 , 461 A.2d 16 , reversed. We granted certiorari to consider the question.

The issues now raised by appellant in this Court are these: I Whether the disputed land area became property in custodii legis by virtue of the appointment of a receiver 2 for the Cemetery Company on April 28, 1953. ⁶⁹⁹ II Whether the appointment of a receiver on April 28, 1953, interrupted the continuity of the Kluckhuhns’ adverse possession and thus tolled the statute of limitations governing adverse possession of land. We shall consider those issues in light of the circumstance that neither the present receiver nor any of its predecessors in office made any effort to dispossess the Kluckhuhns, by legal proceedings or otherwise, until the filing of this bill of complaint on December 10,1979. The Receiver’s contention is that the mere appointment of a receiver on April 28,1953, was sufficient per se to defeat the claim of the Kluckhuhns. I In Custodii Legis Receiver contends that the appointment of a receiver on April 23, 1953, caused the property to be in custodii legis, thereby placing it beyond the claim of the Kluckhuhns, citing Day v. Postal Tel.

Co., 66 Md. 354 , 7 A. 608 (1887); Dampman v. Litzau, 261 Md. 196 , 274 A.2d 347 (1971); and E. Miller, Equity Procedure § 613 at 720-721 (1897). His reliance on the cited authorities is misplaced. In Day and Dampman , both supra, it is clear that the receiver was actually in possession of the disputed property. E. Miller, Equity Procedure in a later section of that classic authority clearly stated the true rule governing inception of property to in custodii legis as follows: “Property is not taken under the protection of the court by the order appointing a receiver and by the bonding of the latter; the summary jurisdiction of the court is not to be interposed until the property is taken charge of by the receiver.

The authorities speak of the appointment and possession by the receivers as necessary in order to place the property in the custody of the court. Thus in a case where receivers were not in possession of property at the time of its seizure under a distress, it was held that their mere appointment did not place the property, as against a stranger, in custodia legis; actual possession was necessary. It is said that the appointment of a receiver of property does not, of itself, divest any one of possession of ⁷⁰⁰ the property; it merely authorizes the receiver to demand, and to accept, the possession when voluntarily delivered, or to take it when held by no one else.” E. Miller, Equity Procedure § 616, at 723 (1897) (footnotes omitted). So, in Farmers Bank of Del. v. Beaston, 7 G. & J. 421, 428 (1836), this Court held that the appointment and bonding of a receiver did not prevent attachment of property until it is taken in charge by the receiver.

The United States Supreme Court affirmed this decision in Beaston v. Farmers Bank of Del., 37 U.S. 102 , 12 Pet. 72 , 9 L.Ed. 1017 (1838). To the same effect is Witbeck v. Electro Nuclear, 243 Md. 563, 572-73 , 221 A.2d 888, 893 (1966). See also 16 Fletcher, Cyclopedia of the Law of Private Corporations § 7787, at 337 (Perm. ed. 1979). In the subject case it was not until the filing of this bill of complaint on December 10, 1979, — more than twenty-three years after the adverse possession of the property by the Kluckhuhns had begun — that any effort was made by the initial receiver or his successors to secure possession of the real property.

The principle of property in custodii legis simply has no application to the facts of this case. II Tolling of the Statute of Limitations The issue raised in this case — whether the mere appointment of a receiver tolls the running of the statute of limitations applicable to the adverse possession of realty — is somewhat unique. Indeed, very few cases have confronted this question with respect to either personalty or realty. Despite the paucity of case law, however, the decisions of those courts which have determined whether the appointment of a receiver tolls the statute of limitations are quite consistent.

Text writers appear equally consistent. The general rule which emerges from a reading of texts and applicable case law is that the appointment of a receiver on behalf of a corporation does not toll the statute of limitations with respect to third party claims against the ⁷⁰¹ realty or personalty of that corporation. See, e.g., Nicholas v. Salisbury Hardware and Furniture Co., 248 N.C. 462, 471 , 103 S.E.2d 837 (1958); Nichols v. Wheeler, 304 S.W.2d 229, 232 (Tex.Civ.App.1957); United States Fidelity & Guar. Co. v. First Nat’l Bank, 93 S.W.2d 562, 565 (Tex.Civ.App.1936); Houston Oil Co. v. Brown, 202 S.W. 102, 109 (Tex.Civ.App. 1917).

The rationale for this principle is based primarily on the fact that a receiver takes possession of corporate property pursuant to court order. See Houston Oil Co. v. Brown, supra. In 2 C.J.S., Adverse Possession it is said in § 192 at 915: “An order appointing a receiver for a corporation puts him in possession only of such property of the corporation as is at the time in its actual or constructive possession and therefore does not interrupt the running of the statute of limitations in favor of an adverse claimant and occupant of land, the legal title to which is in the corporation, or change his status or rights in any way .... ” (Emphasis in original.) In Houston Oil Co. v. Griffin, 166 S.W. 902 (Tex.Civ.App. 1914), as in the subject case, the receivers neglected to file a timely possessory action against adverse possessors of property following the initial appointment. In the course of its holding that the appointment of receivers for appellant company did not have the effect of stopping the running of the statute of limitation in appellee’s favor, the court said: “We know of no rule which would protect the appellant from the result of the failure of the receivers of the company to exercise the power conferred upon them to bring suit to recover possession of the property.” 166 S.W. at 904 .

See also Houston Oil Co. v. Brown, supra, and cases and texts therein cited. The reasons supporting the principle that the mere appointment of a receiver will not toll the statute of limitations were well articulated in Houston Oil Co. v. Dowden, 202 F. 714 (5th Cir.1913): ⁷⁰² “It is contended that the appointment of receivers in the original cause worked an interruption of the possession of appellee’s predecessors to all but the part of the