Interurban Const. Co. v. Central State Bank of Kiefer

JOHNSON, J. On September 21, 1910, the Oklahoma Union Traction Company gave a note and mortgage on its property to the First National Bank of Tulsa, Okla., for $6,918. On December 9, 1911, the First Natioual Bank commenced this action in the district court of Tulsa county against the Oklahoma Union Traction ‘Company to recover the amount due on this note and to foreclose its mortgage. The bank asked for the appointment of a receiver, and the court ordered: “That Percival E. Magee, oí the county of Tulsa, and the state of Oklahoma, be appointed temporary receiver in said cause; that the amount of his bond as receiver be fixed at the sum of $5,000; and that, upon his qualification, such receiver take charge of all the property, goods, moneys, and effects of said defendant and preserve the same until the further order of the court or the judge thereof.” This was the only order made appointing a receiver. The receiver did take charge of all the property of the Oklahoma Union Traction Company. On December 12, 1911, the Colonial Trust Company was permitted by the court to file its petition of intervention asking judgment against the Oklahoma Union Traction Company for $31,931, and also praying for the foreclosure of its.mortgage against the property of the mortgagor. On April 27, 1914, the Central State Bank of Kiefer, defendant in error, filed its petition of intervention in said suit asking a judgment against the Oklahoma Union Traction Company for $6,025, and for the foreclosure of its mortgage against the property of the Oklahoma Union Traction Oonipany. On June CL, 1914, the plaintiffs in error filed their petition of intervention in said cause asking judgment of $11,484, and alleging that in the year 1911 they furnished labor and material to the Oklahoma Union Traction Company to the amount of Slil',484, alleging that this was due on June 1, 1911, and that they were entitled to a lien on the property of the Oklahoma Union Traction Company for that amount, -and also asking that all other parties he barred from any right or interest in the property of the company. Plaintiff in error A. A. Small in his petition of intervention asserts a claim of $1,896 on account of work and labor performed by ■him for the street railway company during the months of September, October, November, and December, 1911, in the equipment and operation of said railway company. The plaintiff in error G. B. Small in his petition of intervention asserts a claim in the sum of $700 for work and labor performed by him for said railway company during the months of April, May, June, July, August, September, October, and November, 1911, in the equipment and to facilitate the operation of said ■street railway. There is no dispute as to- the amounts of these various claims, as will appear from the report of the referee. The cause was afterwards referred to W. T. Tucker, referee, to try said cause and make a report to the court. He made his report on April 21. 19-16, finding that the nVi in-tiffs in error were not entitled to a lien on the property of the Oklahoma Union Traction Company. *283 Exceptions were duly saved to this report and presented to the referee and to the court in proper motions; but the report of the referee was, over the objections and exceptions of these plaintiffs in error, approved and confirmed by the court. Motions for new trial were overruled, and the judgment complained of herein was rendered, in pursuance of said report under date of June 30, 1916. Super-sedeas bonds were given by these plaintiffs in error, and this appeal taken and lodged herein. The plaintiffs assign error: (1) The trial court and referee erred in overruling the motions for new trial. (2) Trial c'ourt erred in. .approving, adopting, and confirming report of the referee. (3) The referee and trial court erred in overruling exceptions and objections of plaintiffs in error to the report, findings, recommendations, and conclusions of the referee. (4) Trial court erred in rendering judgment against the Oklahoma Union Traction Company and in favor of the defendant Colonial Trust Company, and the Central State Bank of Kiefer. (5) The court erred in_ ordering the receiver to satisfy the judgments in favor of the Central State Bank and Colonial Trust Company out of the funds in the hands of said receiver derived from the sale of the property of the traction company, to the exclusion of the claims of plaintiffs in error. (6) The court erred in approving findings of fact Nos. 8, 9, 13, 18, 19, and 31, and conclusions of law Nos. 1 to 16 of the referee. (7) Referee and court erred in refusing to render judgment in favor of plaintiffs in error that they participate in the distribution and receive the payment of their s’'id respective claims out of the funds in the hands of the receiver, arising from the sale of the property of the traction company. (81 The referee and court erred in finding and adjudging that there had been no diversion of the current earnings while in the hands of the receiver. (91 Referee and the court erred in not finding and adjudging claims and liens of plaintiffs in error against the property of the traction company and the proceeds derived from the sale thereof to be prior and superior under the statutes and 'laws of the state of Oklahoma to the lien and claim of the mortgage bondholders, the Central State Bank of Kiefer, and the Colonial Trust Company. (10) That the findings of the referee and the approval thereof by the court and the judgment of the court based thoveou are not sustained by the evidence and are contrary to the evidence. (11) The judgment of the trial court and conclusions of law of the referee are contrary to law. The plaintiffs in error discuss the foregoing assignments of error under three propositions : First. Because the claims of the plaintiffs in error are entitled to priority of payment to the mortgage lienors, from the funds m the hands of the receiver from the sale of the mortgaged property under the provisions of sections 3868 to 3871 of the Rev. Laws of Oklahoma 1910. Second. Because the claims of the plaintiffs in error are entitled to priority of payment to the mortgage lienors, from the funds in the hands of the receiver as equitable liens arising by reason of plaintiffs in error having furnished labor, materials, and sup-plies necessary to the maintenance, operation and improvement of the railroad, a reasonable length of time, to wit: within six months prior to the receivership. Third. Because the claims of the plaintiffs in error are entitled to priority of payment to the mortgage lienors from the funds in the hands of the receiver from the sale of the mortgaged property, since said claims having accrued within six months prior to the appointment of a receiver, and since the income of said property during the receivership was expended for betterments and improvements of the property covered by the mortgage under which mortgage lienors hold. The sections of the statutes referred to are as follows: “Sec. 3868. Every mechanic, builder, artisan. workman, laborer or other person, who shall do or perform any work or labor upon, or furnish any materials, machinery, fixtures or other thing toward the equipment, or to facilitate the operation of any railroad, shall have a lien therefor upon the road-bed, building, equipment, income, franchise, and other appurtenances of said railroad, superior and paramount, whether prior in time or not, to that of all persons interested in said railroad as managers, lessees, mortgagees, trustees, beneficiaries under trust or owners. “See. 3869. The lien mentioned in the preceding section shall pot be effectual unless suit shall be brought upon the claim within one year after it accrued. “Sec. 3870. The said lien shall be mentioned in the judgment rendered for the claimant in an ordinary suit for the claim, and may be enforced by ordinary levy and sale under final or other process of law of equity. “Sec. 3871. A notice of ten days shall be given to the railroad of the existence of a claim or the intended lien which is contemplated under this article.” It is conceded by the plaintiffs in error that no suit was filed by them to enforce their claims and liens against said Oklahoma Union Traction Company, other than their participation in this receivership action. It is also admitted that the several petitions of intervention of the plaintiffs in error were not filed within one year after the several *284 claims accrued. It is contended, however, that inasmuch as the court, by its officer, had taken charge of all of the properties and franchises of said street railroad within the one-year period (in fact, within six months of the creation of the indebtedness for which the claims of plaintiffs in error are asserted) the suit and notice mentioned by sections 3869 to 3871, supra, were unnecessary. In other words, that section 3869 of the act, being in the nature of a statute of limitation, is stayed during the period of receivership. and that, since the court had taken possession of all the property and franchise of said railroad, the plaintiffs in error could not bring the suit mentioned in section 3869, supra. So that all that was necessary, in order that plaintiffs ‘in error have the benefit of section 3868 of the statute, was for them to intervene herein before the final determination of this cause. That if they could not bring a separate independent action, then why serve the notice? That the law does not require the doing of a vain act. That section 3868 gives the lien, fixes the right, and the following sections of the act simply go to the remedy. Under the contentions ^of the plaintiffs in error one thing is clear — had not the receiver been appointed, the plaintiffs in this case would not have been entitled to a lien under the sections of the statutes quoted supra, because no suit was commenced by any of them within one year from the accrual of their claims, and such default would have been a complete bar to the assertion of such a lien. But it is asserted that the appointment of a receiver in this suit within a year operated to suspend the running of the statute. So the question thus presented is: Did the appointment of a receiver toll the statute? On this question, we find that in High on Receivers (4th Ed.) sec. 184, it is said: “The appointment of a receiver over the estate or property does not alter or affect the rights of the parties as regards the operation of the statute of limitations.” In 25 Cyc. 1282, it is said: “As a general 'rule, the mere appointment of a receiver does not in any way affect the running of the statute of limitations. But where the receiver is appointed to take charge of an estate for the purpose of administering it, as for instance the settlement of affairs of a partnership and the pavment of firm debts, the statute being substantially for the benefit of all the creditors, in analogy to an ordinary creditor’s bill, the running of the statute of limitations is suspended ih equity against the claims by firm creditors for the payment of partnership debts oui of the assets in the receiver’s hands.” Tn support thereof the following cases were cited: Cain v. Seaboard Air Line, 138 Ga. 96, 74 S. E. 764; Taylor v. Vossburg Mineral Springs, 128 La. 364, 54 South. 907; Williams v. Taylor, 99 Md. 306, 57 Atl. 641. The authorities quoted announce the general rule as above stated. In this case, the action was commenced in the district court of Tulsa county, by the First National Bank of Tulsa, for the foreclosure of its mortgage upon the property of the Oklahoma Union Traction Company, and in its petition it alleged the insolvency of the defendant and asked for the appointment of a receiver. A receiver was appointed, who took charge of the street railway, and operated the same for about three years, after which time he sold the same by order of the court, and in the meantime defendants in error Central State Bank of Kiefer and Colonial Trust Company intervened and filed actions respectively for foreclosure of mortgages upon the property of the defendant, then in the hands of the receiver. More than two years thereafter, the plaintiffs respectively presented their claims, claiming prior lien upon the property of the defendant by reason of the provisions of the statute quoted, supra ; and (2) since such claims having accrued within six months prior to the appointment of a receivei;, that the same were a lien in equity upon the income of said property during the receivership, which lien was prior to that of the mortgage lienors. A referee was appointed by the court on December 14, 1914, the property having been previously sold by the receiver and such sale confirmed by the court. The referee made findings, which were approved by the court, denying the claims of plaintiffs in error for liens upon both grounds, holding as to the first ground contended for by plaintiffs in error that by reason of their failure to bring suits to establish their statutory liens within one year from the accrual thereof as provided by the statute, or to present their claims in the court in this cause within said period, and their failure to give notice as required by the provisions of the statutes, they were barred; and as to plaintiffs in error’s second contention, that the lien in equity for materials and labor furnished to railroad within* six months prior to the appointment of a receiver could exist only as to surplus income in the hands of the receiver after the payment by him of claims for operating and expenses incurred for such operation and taxes upon the property in his hands; and the referee made further findings, which were approved by the court, that no such surplus existed, and therefore plaintiffs in error were not entitled to a prior lien upon the mortgaged property or moneys, in the hands of the receiver derived from the sale of such prop *285 erty under an order of the court, and such finding on the latter contention is fully sustained by the decision of the Supreme Court of the United States in the case of Gregg v. Metropolitan Trust Co., 197 U. S. 183, 25 Sup. Ct. 415, 49 L. Ed. 717; also by the Circuit Court in Kan. Loan & Trust Co. v. Electric Light Co., 108 Fed. 702, and Chicago & A. R. v. United States & Mex. T. R. Co., 225 Fed. 940, 141 C. C. A. 64. Plaintiffs in error’s contention that this action being brought by the First National Bank of Tulsa to foreclose its mortgage and the appointment of a receiver, as was done in this ease, precluded them from bringing suit mentioned in section 3869, supra, cannot be maintained. The action was instituted by the holder of a mortgage lien to forelose the same, and upon its motion a receiver was appointed and directed to take charge of all the property, goods, money, and effects or the said defendant, and preserve the same until further order of the court. The action was in no character one that would of necessity result in the distribution of the property of the defendant among its creditors. The appointment of a receiver did not in any manner prevent the claimants from making their inchoate lien effectual by instituting their actions at law, or otherwise, against the Oklahoma Union Traction Company, and should such an action have been filed by the claimants the judgment could not have been obtained to the same extent as if a receiver had never been appointed. The action provided for in the statute is simply an action on the. claims and does not render it necessary to senuester the property. Hence there was nothing to prevent the preservation of plaintiffs in error’s liens in the manner provided by the laws of their creation, and there was not the slightest impediment to the claimants instituting their actions against the Oklahoma Union Traction Company within the year, nor was there anything to prevent the plaintiffs in error from intervening in this case within the year. Tarbell v. Parker, 106 Mass. 347; Doe v. Erwin, 134 Mass. 90; Parsons v. Clark, 59 Mich. 414, 26 N. W. 656. The plaintiffs in error insisted, and so argued, in their briefs, that this action as originally brought was in the nature of a creditors’ bill. Mr. Black in his Law Dictionary, on page 300, defines a creditors’ bill as follows : “A creditors’ bill, strictly, is a bill by which a creditor seeks to satisfy his debt out of some equitable estate of the defendant which is not liable to levy or sale under an execution at law.” The Supreme Court of the territory of Oklahoma, in the case of Miller v. Melone, 11 Okla. 241, 67 Pac. 479, 56 L. R. A. 620, approved the foregoing definition of Judge Black. The record in this case discloses, as here-inbefore stated, that the plaintiff the First National Bank of Tulsa filed its action to foreclose a mortgage upon the property of the defendant the Oklahoma Union Traction Company, and upon its application a temporary receiver was appointed who took charge of the street railway and operated the same for a period of about three years, before the plaintiffs in error intervened in the action and asked that they be adjudged to have a priority lien upon the property or the proceeds thereof, the property having been sold by reason of order of the court, and the proceeds of the sale being in the hands of the receiver, claiming priority by reason of the statute quoted, which statute by its terms required that the suit to establish the lien mentioned should be brought by claimants within one year from the accrual of their cause of action or claim, and that a prior notice of their intention to assert such a lien should be served upon the defendant for a period of ten days before the bringing of their action, neither of which wa s done. It was not until December 14, 1914, if at all. that this suit was treated by the court as a suit in the nature of a creditors’ bill, for it was on that date that a referee was appointed and directed to notify the creditors and the defendants to file claims, and it was thereafter that such referee had hearings in support of claims of creditors and made findings as to priority of liens and his conclusions of law in respect to the same. Hence, this suit not having been originally an action in the nature of a creditors’ bill, and not becoming such until the court undertook to administer the affairs of the defendant in the interest of all its creditors, under the rule announced by the Supreme Court of the territory of Oklahoma, in the case of Miller v. Melone, supra, there was no suspension or tolling of the statutes of limitations of one year as claimed by the plaintiffs in error, and by reason thereof their rights to liens under the statute had long since been barred, and the holdings of the referee to that effect should be sustained. Miller v. Melone, supra; Tube Works Co. v. Ballou, 146 U. S. 523. 13 Sup. Ct. 165, 36 L. Ed. 1072; Ross v. Duval, 13 Pet. 45, 10 L. Ed. 51: McAleer v. Clay Co. (C. C.) 42 Fed. 667; Glenn v. Dorscheimer (C. C.) 23 Fed. 695: Bank v. Braithwaite. 7 N. D. 358. 75 N. W. 244, 66 Am. St. Rep. 653. The rule of construction of lien statutes which create a right and provide a remedy is: That in all such cases the requirements of the statutes and conditions prescribed in *286 the statutes are the measure of the right, and the court cannot declare purposeless and useless that which the Legislature has made a condition of the lien. This is the rule announced by the Supreme. Court of Tennessee in the case of Norman & Co. v. Edington, Groner & Griffiths, 115 Tenn. 309, 89 S. W. 744; Supreme Court of California, in Duncan v. Hawn, 104 Cal. 10, 37 Pac. 626; Supreme Court of Colorado, in Greeley, S. L. & P. R. Co. v. Harris, 12 Colo. 226, 20 Pac. 764; Cleveland, C. & S. R. Co. v. Knickerbacker Trust Co. (C. C.) 86 Fed. 73; Tod et al. v. Union R. Co., 52 Fed. 241, 3 C. C. A. 60, 18 L. R. A. 305. In Elliott on Railroads, secs. 1071 and 1074, it is said: “Where a lien is wholly statutory, the statutory mode must be pursued in order to obtain it.” Johnson v. Garner (D. C.) 233 Fed. 756; Moore et al. v. Southern States Land & Timber Co. (C. C.) 83 Fed. 399; Hazard v. Board of Education (N. J. Ch.) 75 Atl. 237. The record discloses that the referee found that there had been no diversion by the receiver of the income derived from the operation of the property of the defendant, and that there was no surplus net income from such source, and, in fact, that a deficit had been created on account of such operation and on account of taxes, and that such deficit ha's been paid from the proceeds of the sale of the property covered by the mortgages. Such findings of the referee were reasonably supported by the evidence and were in all things approved by the court. We find, and so hold, that this appeal presents no reversible error, and the judgment of the trial court is affirmed. All the Justices concur.