Blum v. Van Vechten

Finney, J. The appellants’ counsel concedes that it would be a contempt of the court appointing him to interfere with a receiver’s possession of property pertaining to his trust and received by him in that capacity, and that an actual levy on property, or attachment of the same, could not be made without leave of the court which appointed him. This ■concession is fatal to the plaintiffs’ contention in support of •the garnishment of the receiver; for, if the process of garnishment should be effectively prosecuted, it would necessarily result in depriving the receiver of the property rightfully in his possession without the leave of the court appointing [382] him, in order to satisfy the plaintiffs’ demand. The claim that the garnishee action is not against the receiver in his official, but* in his personal, capacity, though affecting the title and right of possession of such property, is an evasion-of the difficulty, and cannot be maintained. "Whether the action affects him in his official capacity, and not the mere manner or style in which he is named in the process, is the-true test. The question is not one of mere form, but of substance, and whether the receiver, in his official capacity and rights, is to be affected by the action. High, Receivers, §§ 256, 257. The rule is otherwise where the receiver takes possession or holds property which does not pertain to his office, and where he is a mere trespasser (Beach, Receivers,. § 660); or where he is sued to recover damages as for a tort,, and there is no attempt to interfere with the actual possession of the property which he holds under the order of the-court appointing him (Kinney v. Crocker, 18 Wis. 74; Wood v. Crocker, 18 Wis. 345). The better opinion seems to be that the privilege of the receiver is not personal, but pertains-to his trust, and exists for the protection of the rights of those whom he represents, and that, where the prosecution of the action would affect or interfere with the control of the property rightfully in his custody, he cannot waive it-without the consent of the court. Otherwise, the protection which the court interposes against unwarranted interference with its own officers, and depredations upon the estate" in its charge and custody, would be broken down, and confusing and embarrassing questions in its administration would ensue. Beach, Receivers, § 653. There are, however, authorities which hold that the receiver may waive the objec- ¡ tion. The possession of the receiver is the possession of the-. court appointing him, and the property in his hands as such is not subject to attachment, nor is he subject to garnishment on account of it or funds in his hands or subject to his [383] control in that capacity. Where a receiver has been properly appointed of the property and effects of a partnership, he cannot be garnished in an action brought by a creditor of the firm or upon a judgment recovered therein; as a judgment upon the garnishment, if recognized and enforced,, would divest and defeat the previously acquired jurisdiction, of the court in the equitable action to administer and apply to proper purposes the property and effects of the partnership. The authorities to this effect are too numerous and decisive to admit of question or doubt. High, Eeceivers,. §| 151,164; Beach,Eeceivers, § 228, and cases cited; 8 Am. & Eng. Ency. of Law, 1145, and cases in note; Jackson v. Lahee, 114 Ill. 281; Columbian Book Co. v. De Golyer, 115-Mass. 67; Comm. v. Hide & L. Ins. Co. 119 Mass. 155 Holmes v. McDowell, 15 Hun, 585. In the last case cited, the action was to administer and distribute the assets of an insolvent partnership equally among its creditors, and to adjust its affairs, and a receiver was appointed by stipulation. Subsequently, and during-the pendency of the action, certain creditors of the partnership recovered judgments against the firm upon which supplemental proceedings were instituted, in which the same person was appointed receiver as in the partnership action, .and such creditors applied in the latter action to have the receiver directed to pay their debts in full; but it was held that the judgments they had recovered, and the proceedings, under them, gave them no priority over the other creditors, of the firm, and their application was denied. In that case; the court held that the owners of the partnership property had, by their voluntary act, placed it in the hands of the-court for equal distribution, and that the court had assumed jurisdiction over it for that purpose; that it had not yet made its order of distribution, but, by the appointment of its receiver, it had assured all persons interested that it would make that order in due time and, until it settled the [384] terms thereof, it would hold it for that purpose; and that the property or fund from its sale was in the hands of the .court, and any one interested might quicken its action by proper application, and that the court held the property in trust for the benefit of those who might be entitled to it, and that all might be properly protected; that the property, when once in the hands of the court, was pledged and dedicated to the objects of the proceeding, and in it others became interested, who had a right to invoke the action of the court that had thus assumed control over it;' and that the creditors of the firm were the cestuis que trustent of the •court, and could not be defrauded, unless the court should lend itself to the fraud. This decision was affirmed in 76 N. Y. 596, on the ground stated in the prevailing opinion. This view is supported by Van Alstyne v. Cook, 25 N. Y. 489; Law v. Ford, 2 Paige, 310; Maynard v. Bond, 67 Mo. 315. We think these views are eminently practical and sound, and that they are decisive of this case, which is brought to wind up and administer the affairs of an insolvent partnership ; and it is not necessary here to consider whether they would be strictly applicable to actions brought by one partner for protection and relief against the wrongful or fraudulent conduct of- his copartner, and in which the element of conceded insolvency of the firm does not exist. The equities and rights of partnership creditors against the partnership property are to be worked out through the equity of each of the partners to have the partnership property and effects first applied to the payment of the partnership debts, and there can-be no doubt of the right of any creditor of the partnership to intervene, fro imteresse suo, for the proper assertion, and enforcement of his rights, and to be heard therein in respect to any proceeding in the action to his injury or prejudice, either wrongful or fraudulent. The court, in the partnership action, had jurisdiction of the subject [385] matter and of the parties; and there - is nothing in the case to show that the court, upon the admitted insolvency of the partnership, ought not to have appointed the defendant receiver, in order to wind up and settle, its affairs and apply the firm property equally to the payment of the partnership creditors. Equality is equity, and we fail- to perceive any reason for saying that such a proceeding is either fraudulent or void. The plaintiffs in this action, as creditors at large of the partnership, could have successfully intervened in the partnership action to secure their rights and an equal application of the partnership assets to the payment of their demand with those of other creditors, and there is nothing in the case of Weber v. Weber, 90 Wis. 467, leading to a contrary conclusion. The statute in relation tó voluntary assignments has not taken away the jurisdiction of courts of equity in a case like the present, and it is still competent for either partner to bring such an action; and, if the defendant chooses to admit the equity of the case, there is no reason why the court should not proceed to final adjudication and administration of the partnership, assets. The liability of a receiver to garnishment for money due from him is the subject of a note to Irwin v. MeKechnie (58 Minn. 145) in 26 L.R. A. 218.— Rep. ■ The case of Jacobson v. Landolt, 73 Wis. 142, was, relied on, but the question whether property rightfully in the hands of a receiver is subject to attachment- does not appear to have been there considered or decided.'' The case is wholly devoted to the right of one not a party to the action to intervene to assert a lien upon or right, to property in the hands of a receiver, and to the method of procedure in such cases. For these reasons the order dismissing the action as to the defendant Van Yechien, \ho> receiver, was rightly made. By the Court.— The order of the circuit court is affirmed.