Consolidated Stanley Mining & Milling Co. v. Loeber

Mr.. Presiding Justice Adams delivered 'the opinion of the court. Appellant’s counsel contend that the appointment of a receiver without notice was error; that Thomas J. Chisholm is a necessary party, and that the facts alleged in the bill do not warrant the appointment of a receiver. The onlv answer of appellee’s counsel to the point that the receiver was appointed without notice is, that subsequently to the appointment of the receiver on the bill before us, the same receiver was appointed for the property in question on a supplemental bill, which is not contained in the transcript of the record in the present case, and which is certified to be a complete transcript. We can only look to the record in the present case. Each case must stand or fall on its own record. There is no emergency shown by the bill, or the verification of it by comnlainant’s affidavit to excuse the want of notice to the defendants. The bill was filed August 9, 1900, and summons was issued the same day, and the sheriff’s return shows that it was served the next day, August 10, 1900, on the Stanley Company, the Salisbury Company, James T. King and Charles A. Gehrmann, evidencing that they were within the jurisdiction, and could easily have been served with notice. If the sheriff could find them, as it appears he easily did, appellee might also have found and served them with notice. Section 3 of the statute in reference to injunctions, provides: “Ho court, judge or master shall grant an injunction without previous notice of the time and place of the application having been given to the defendants to be affected thereby, or such of them as can conveniently be served, unless it shall appear, from the bill or affidavit accompanying the same, that the rights of the complainant will be unduly prejudiced if the injunction is not issued immediately or without such notice.” The appointment of a receiver, without notice, with such powers as are conferred on the receiver by the order appealed from, is a much more serious matter than the granting a temporary injunction. In the latter case action is merely enjoined, while in the former the defendant may be summarily dispossessed of his property. High, in his work on Receivers, says: “ It may be stated as the settled practice, both in England and America, to require the moving party to give due notice of the application to defendant, over whose effects he seeks the appointment of a receiver, in order that he may have an opportunity of being heard in defense, and that liis property may not be summarily wrested from him upon an ex parte application.” High on Receivers, 3d Ed., Sec. 111, citing numerous cases. The same author says : “ The rule of practice thus stated, requiring notice to a defendant before an application for a receiver will be entertained, would seem to be not a matter of discretion with the court, but an inflexible rule, which the courts are not at liberty to disregard.” Ib., Sec. 112. We are of opinion that the appointment of the receiver without notice to the defendants was an error sufficient of itself to warrant. a reversal. The next question is whether Chisholm is a necessary party to the suit. It appears from the bill that Chisholm has paid $50,000 on the contract Exhibit A, which sum of money is in the treasury of the Stanley Company, and also that he has deposited $100,000 in a bank in Denver, Colorado, to the credit of Gehrmann, the former manager and a director and stockholder of the Stanley Company, as security for and to be used in the erection of a concentrating mill on the property, and that, he, Chisholm, has been, since April 1, 1900, and now is in possession of the property, claiming to be the owner, thereof. The-order appointing the receiver authorizes him to take possession of all the mining property, describing it, and all other property of the Stanley Company, and to bring such suits as may be necessary to that end. The bill prays that the receiver be directed to sell all the property and assets of the company, etc. In view of these circumstances, we think it clear that Chisholm is a necessary party to the bill. No final disposition of the property can be made on the hypothesis of complainant that the contract Exhibit A is fraudulent and void, which will not materially affect Chisholm’s rights in the premises. In Whitney et al. v. Mayo, 15 Ill. 251, 254, the rule is thus stated: “ The general rules in equity require all persons materially interested in the subject or object of the suit, however numerous, to be made parties, complainants or defendants, that all may be provided for, and -protected by the decree. Story, Eq. Pl., Sec. 72, et seq.; Hill on Trustees, 519; 2 John. C. R. 239; Greenup v. Porter et al., 3 Scam. 65; Scott v. Moore et al., Ib. 315; Willis et al. v. Henderson, 4 Ib. 20; Spear v. Campbell et al., Ib. 426; Montgomery v. Brown, 2 Gilm. 581; Hoare v. Harris, 11 Ill. 24; Webster v. French, 12 Ill. 302. To these rules there are exceptions, but no suggestion or averment in this bill prel sents a case for dispensing with the other communicant members of this congregation. There is no averment that they are out of the jurisdiction, nor are we prepared to say that an exception to the rule is predicable here upon that ground, under our statute providing for service on nonresidents by publication, or by delivery of copies and notice. Rev. Stat. 1845, p. 94, Secs. 8-12. And the remark may equally apply to 6 unknown persons,’ who may also be sued and served under the statute, and whose interests are equally bound by a decree.” In Baker et al. v. Adm’r of Backus, deceased, 32 Ill. 79, a receiver was appointed the day the bill was filed, and the Crystal Lake Ice Co., whose property the receiver was authorized to take possession of, was not a party to the bill. The-court after citing cases, say : “ The necessary implication from all these is, a suit being necessary, and the receiver appointed for all parties to it, that he whose property is to be taken from him and placed in the power of a receiver, should be a party to the pending suit. We think it indispensable that he should be a party, that he may resist the application, the granting of which may work to him irretrievable injury.” The court further say : “ A receiver is not usually appointed unless fraud is clearly proved by affidavit, or when it is shown that imminent clanger would ensue if the property is not taken under the care of the court before an answer is put in. There must be a strong special ground to induce the court to interfere in this way before an answer. (Id. 10; referring to Middleton v. Dodswell, 13 Vesey, 266; Bloodgood v. Clark, 4 Paige’s Ch. 574.) When a default is entered the rule would doubtless be to require affidavit, before the property shall be taken out of the custody of its true owners. In every view in which we can regard these cases, we are compelled to say that in the first, the company not having been made a party, the decree depriving them of their property and franchises was void and of no effect, and the decree must be reversed and the bill dismissed.” Ib. 115-116. In Spear v. Campbell, 4 Scam. 424, the court say: “ It is a rule universally recognized in courts of equity that all persons are to be made parties to the suit who have any substantial, legal or beneficial interest in the subject-matters of the litigation, and who are to be materially affected by the decree which may be pronounced.” In Prentice v. Kimball, 19 Ill. 320, and Smith v. Rotan, 44 Ib. 506, the court say that the only exception to- the rule is when the parties are very numerous and so widely scattered that their names and residences can not be ascertained without great difficulty. Numerous other cases might be cited in support of the rule. In the present case the bill states that Thomas J. Chisholm resides in Montreal, Quebec, Canada, and he might have been- made a party and served by publication, as prescribed by section 12, or by copy of the bill, as prescribed by section 14 of the chancery act. As has been said, any decree which may finally be rendered on the theory of the bill, that the contract is fraudulent and void, must materially affect Chisholm’s interest. Indeed, wTe can not conceive of any ultimate relief in respect to the mining property which would not affect his interest. Therefore he is a necessary party to the bill, and the- order appointing a receiver, he not being a party, was erroneous. Appellee’s counsel say that the bill is not filed under section 25 of the incorporation law, and it is clear that, on the allegations of the bill, no relief can be had under that section. The question whether the relief sought can be had under the general equity powers of the court, we will not consider in the present case for reasons hereinafter stated. Counsel also say that they do not seek a dissolution of the Stanley Company; this, although the bill specifically prays that the property of the company be sold, the proceeds of the sale distributed and the corporation wound up. What, then, does the complainant want? If the relief sought is the decreeing the contract with Chisholm void and the recovery of possession of the mining property, which, if we understand the argument of appellee’s counsel, they claim, then Chisholm is vitally interested and should be a party, that he may contest the allegation that the contract is void and defend his possession under it. Appellee’s counsel suggest in argument that after the present appeal was perfected a supplemental bill was filed in the cause, and that an order was entered on said supplemental bill appointing the same receiver, from which last mentioned order an appeal is pending in this court, and we, having ascertained from the record of the last mentioned appeal that the supplemental bill alleges facts not alleged in the original bill, which is the only bill in the record now before us, think it inexpedient to decide the question whether the facts in the original bill are sufficient to warrant the appointment of a receiver. For the errors indicated the order of August 9, 1900, appointing a receiver, will be reversed.