Mays v. Rose

An application for the appointment of a receiver, is one which is addressed to the sound discretion of the court, to be exercised as- an auxiliary to the attainment of the ends of justice. It is one of the modes in which the preventive justice of a court of equity is administered. The great object is to secure the property or thing in controversy, so that it may be subjected to such order or decree as the court may make in the particular case. It is intended equally for the security of both plaintiff and defendant. The possession of the receiver is not adverse to, or in hostility to the rights of the defendant; that possession is the possession of the court, held equally for the greater safety of all the parties concerned. 1 John. Ch. Rep. 58. A reference to the various decisions upon motions for the appointment of receivers, shows that each case has-been made to depend upon-its own peculiar features, and throws but little light upon any new case, except so far as they establish the general principles, which should govern the court in the exercise of its discretion upon these motions. These principles are: That the plaintiff must show, first, either that he has a clear right to the property itself; or that he lias some lien upon it; or that the property constitutes a special fund to which he has a right to resort, for the satisfaction of his claim. And secondly, that the possession .of the property by the defendant was obtained by fraudor that the property itself, or the income arising from it, is in danger of loss from the neglect, waste, misconduct or insolvéncy of the defendant. These are believed to be the general rules governing all applications of this kind. Orphans Asylum v. McCartee, 1 Hopkins Rep. 429; Hugonin v. Basely, 13 Ves. 105; Loyd v. Passingham, 16 Ves. 69. The question here is, does the plaintiff’s case come within the application of the principles referred to.

The .bill charges that the defendant, F. 0. Rose, was seized of certain town lots in the city of Jackson, with a quantity of merchandise and other property, and that being largely'indebted, and. *719wishing to delay and defraud his creditors, he conveyed to his brother Benjamin Rose, the other defendant, by deed of date the 5th of November, 1839, the whole of said property for the nominal sum of one thousand nine hundred dollars. That in order to inore effectually conceal the fraud intended, said F. C. Rose, a short timé thereafter, took from said Benjamin Rose a power of attorney, authorising him to transact all his business, and to use, sell or dispose of said property at the will and pleasure of said F. C. Rose; who pretending to act under said power of attorney, controuled and enjoyed the proceeds of said property, bought and sold various articles in his line as a merchant, and carried on the whole business for his own benefit, without accounting to his brother therefor.. That Benjamin Rose was a foreigner, a young man just then come to the country, without property, and dependant mainly upon the bounty and kindness of F. C. Rose for his support; that he was wholly unable to pay, and never did. pay .any part of said nominal sum of money. That shortly after the making of said deed, various judgments were obtained against said F. C. Rose, at. the instance of pre-existing creditors, upon which judgments, executions were issued and levied upon said town lots, and after-wards regularly sold, at which sale the complainant became the purchaser. That there are several tenements on said lots, which have been rented but in part by said F. C. Rose, and in part occupied by him. The bill prays for an injunction against the defendants, as to the receipt of rents, for the appointment of a receiver, and for general relief.

I entertain no doubt that a purchaser of real estate at a sheriff's sale, may come into this court for the purpose of setting aside a deed of the property which had been made to defraud the judgment creditor. The purchaser in such case succeeds to all the rights which the judgment creditor had against such fraudulent deed. Feakes v. Brown, 2 Blackf. 295, and the court will extend to him the same remedies and measure of relief, that would have been afforded to the judgment creditor himself.

Upon a creditor’s bill to reach the property of his insolvent debtor, nothing is more usual than to appoint a receiver to collect and preserve the property pending the litigation. Osborn et al. v. Huger, Paige Ch. 342. In Bloodgood v. Clark, 4 Paige Ch. 575, *720Chancellor Walworth says: “ In these cases of creditor’s bills, where the return of execution unsatisfied pre-supposes that the property of the defendant, if any he has, will be misapplied, it seems to be almost a matter of course to appoint a receiver.’” I take it to be clear, that the creditors of Rose, under whose judgments the complainant purchased, could have come into this court, to set aside the deed in question; and that upon allegations like those in the complainant’s bill, they would have teen entitled to ask for the appointment of a receiver; if so, then from the view-I have taken of the authorities, the plaintiff’s right to do so is equally clear. I. think, then, whether we test tins application by its analogy to adjudged cases, or by reference to the general principles to which I have adverted, its claim to success is equally clear. The bill shows the complainant’s right to the lots in question, by his purchase at sheriff’s sale ; that the -possession of them by the defendant, Benjamin Rose, was obtained by fraud; and that the rents and profits of the property are in danger of being lost to the complainant, by reason of the fraud, insolvency, or irresponsibility of the defendants; thus embodying all the elements necessary to the success of the motion.

It is worthy of remark, that none of these allegations are attempted to be met, and denied, by either'answers or affidavits from the defendants, although one of them at least was apprised of the pen-dency of this motion by special notice. It is said by the defendant’s counsel, that the motion should not be entertained, because no notice appears to have been given to Benjamin Rose. It is no doubt the settled practice, not to entertain a motion for the appointment of a receiver, until the defendant has had notice, if it be practicable to give one; and I should have held this objection as fatal, if it wére not expressly stated in the bill that the defendant F. C. Rose, upon whom notice was served, was the authorised agent of Benjamin Rose, managing and controling the very property over which'a receiver is sought to be placed. This notice I think sufficient. Notice to an agent, is notice to the principal.

The motion for an injunction and for a receiver must be sustained.