Where real estate is in the custody of a receiver appointed by a
court of chancery, a sale of the property under an execution issued
by virtue of a judgment at law is illegal and void.
The proper modes of proceeding pointed out to be pursued by any
person who claims title to the property either by mortgage or
judgment or otherwise.
Page 55 U. S. 53
This was an ejectment for the following lot in the City of
Mobile, bounded south by St. Francis Street and lying between Water
and Commerce and Planters Streets of the said city, having a front
of thirty-five feet on St. Francis Street, and extending to
Planters Street, with the same breadth; bounded east by lands
formerly belonging to M. D. Eslava, and west by a lot of Beach, Ela
& Co.
The declaration contained three count -- two upon a demise from
Edward Hall, a citizen of the State of Maryland, and the third a
demise from Edward S. Dargan.
Although the decision of the court turned upon a single point,
it is necessary to connect it with the other circumstances of the
case which are somewhat complicated.
The following table contains a reference to the principal facts
bearing upon the respective titles of the plaintiff and
defendant.
1840, April 28. Ticknor, being in possession, conveyed the
property to Day
-----
Plaintiff's Title
1840
"Dec. 28. Fowler and others obtained a judgment against Ticknor
for $4,991."
"Dec. 31. Crouch and Sneed obtained a judgment against Ticknor
for $7,176.25."
1842
1843
1845
"Feb. 24. Alias
fi. fa. on Crouch and Sneed's
judgment."
"April 7. Alias
fi. fa. on Fowler's judgment."
"July 7. Lot sold to Dargan under the executions."
"August 13. Marshal executed a deed to Dargan."
1847
1848
"April __. Dargan brought an ejectment against Wiswall."
-----
Defendant's Title
1840
1842
"June 14. Wiswall obtained judgment against Ticknor for
$2,233.17."
"July 1.
Fi. fa. issued on it, returned 'no property
found.'"
1843
"Feb. 7. Bill filed by Wiswall to set aside the deed from
Ticknor to Day as fraudulent."
1845
"April Term. Deed from Ticknor to Day set aside as
fraudulent."
"June 27. Receiver appointed by the chancellor, took
possession."
"Nov. 26. Dargan applied to the chancellor to have the property
delivered over to him, or for leave to bring an ejectment. Both
refused."
1847
"March 1. Lot sold by the master in chancery to Wiswall, and
deed made."
1848
Page 55 U. S.
54
Upon the trial, the following bill of exceptions was taken:
"Be it remembered that on the trial of this cause on this 4th
day of January, 1849, before the Honorable William Crawford, Judge,
the plaintiffs, to show title in their lessors, offered in evidence
a judgment rendered in this court on the 28th December, 1840, in
favor of C. S. Fowler & Co., against John Ticknor, for $4,991,
besides costs; also a judgment rendered in this court on the 31st
December, 1840, in favor of Crouch and Sneed against John Ticknor,
$7,176.25 and costs; upon each of which judgments
fi. fas.
were issued within a year and returned by the marshal 'No property
found;' no other executions or process issued upon either of these
judgments, except the following: upon the judgment of Crouch and
Sneed an alias
fi. fa. was issued on the 24th February,
1845, and levied on the property sued for, upon which the marshal
returned 'levied' --and 'the sale of the property levied on
postponed by Judge E. S. Dargan, until further order.' And on the
17th May, 1845, a pluries
fi. fa. issued on this judgment
and was levied on the same property. Upon the judgment of C. S.
Fowler & Co., an alias
fi. fa. was issued on the 7th
of April, 1845, and levied on the same property, and returned, 'for
want of time to sell.' And on the first day of May, 1845, a
venditioni exponas issued, upon which and the execution on
the Crouch and Sneed judgments, issued the 17th May, the property
was sold by the marshal on the 7th July, 1845, to Edward S. Dargan,
for $7,500 and a deed was made by the marshal to said Dargan
bearing date the thirteenth of August, 1845. The plaintiff further
offered in evidence a deed of release and quitclaim of the same
premises from Edward S. Dargan to Edward Hall, one of the lessors,
bearing date the 3d of April, 1848, a copy of which is hereto
attached, marked X; to the reading of which the defendant, by his
attorney, objected on the ground that it was neither acknowledged
nor recorded, but the objection was overruled by the court and the
deed admitted in evidence upon the proof of the handwriting of
Dargan, and the defendant excepted. The plaintiff further offered
evidence to show that John Ticknor was in possession of the
property sued for from 1838 or 1839, claiming title and that he
remained in possession until about 1845; but whether, after 1840,
Ticknor claimed it as his own or held possession as the tenant of
someone else witness did not know. It further appeared that Ticknor
built the store; that in 1839 or 1840, he became embarrassed, and
that he owed a large sum of money to one James L. Day and from some
time in 1840 carried on business in the store as the agent of said
Day. Day was often there and had the control, but Ticknor managed
all the details. It was further proved that McCoy and Johnson,
Page 55 U. S. 55
the tenants served with the declaration, were in possession of
the premises in April, 1848, and had been in possession since
November, 1847."
The defendant then offered in evidence a judgment obtained in
the Circuit Court of Mobile County on the 14th day of June, 1842,
in favor of Joseph Wiswall against John Ticknor, for the sum of
$2,233.17, besides costs; and a
fi. fa. issued thereon the
1st July, 1842, returnable to the fall term of said court, which
was returned by the sheriff "no property found;" also the
transcripts from the records, duly certified, of a deed, made by
John Ticknor to James L. Day bearing date the 28th of April, 1840,
a copy of which is annexed, marked A; also the exemplification of a
decree and proceedings in a suit in chancery, filed the 7th of
February, 1843, by Joseph Wiswall as a judgment creditor of John
Ticknor, against said Ticknor and James L. Day, a copy of which
bill, answers, and decrees are hereto annexed, marked B; also a
decree and proceedings in the same court of chancery upon a bill
filed March 1, 1845, by the president, directors, and company of
the Bank of Mobile, James Stewart, and Henry Lazarus, several
judgment creditors of said Ticknor, and against said Ticknor and
James S. Day which bill was similar in its form and object to the
bill of Wiswall, and was served on the defendant, Ticknor, on the
1st March, 1845; a copy of the answer of Day and the decree is
annexed, marked C. The defendant then proved that Waring, the
receiver of the court of chancery in the above two suits, went into
the possession of the property sued for on St. Francis Street, as
such receiver on the 27th day of June, 1845, and remained in
possession as such receiver until the same was sold by him on the
first Monday of March, 1847; that notice was given at the marshal's
sale, when the property was bid off by Dargan, of the pendency of
the above-named suits in chancery, and the claims of the
complainants there asserted, and that he was, as receiver
aforesaid, then in possession of said property under the decrees in
chancery in the above suits. The property was duly sold by the
receiver on the 1st day of March, 1847, to K. B. Sewall for six
thousand five hundred dollars, and a deed of the same made to him
by the said receiver and master in chancery, and on the tenth day
of May, 1847, the same was conveyed by said Sewall to the defendant
Joseph Wiswall; it was also shown that the purchaser from the
receiver went into possession, and that the whole amount of the
purchase money was paid and appropriated under the directions of
the court of chancery.
The defendant then offered in evidence the transcript of a
decree and proceedings had in a court of chancery in Mobile
Page 55 U. S. 56
upon the petition of Edward S. Dargan against Moses Waring,
receiver, Joseph Wiswall, John Ticknor, and James L. Day a copy of
which is hereto annexed, marked Exhibit D, which decree had been
affirmed by the supreme court; C. Cuyler, the deputy marshal who
made the sale to Dargan, testified that no money whatever was paid
upon said, sale, but that Dargan gave his note to the marshal for
the costs.
John F. Adams testified that he acted as the attorney of C. S.
Fowler & Co. in recovering their judgment in this Court, and
had ever since represented said judgment, and that E. S. Dargan,
from some time prior to the marshal's sale represented the judgment
of Crouch and Sneed; that it was agreed between said attorneys,
Adams and Dargan, representing said judgments, that the land should
be sold upon them and bid off in the name of Dargan, and that if
the title thus acquired should enable Dargan to recover the
property, the judgment of C. S. Fowler & Co. should be paid out
of it, but that if the property should not be recovered by such
title, then the sale was to be considered a nullity, and no money
to be paid whatever on account of it, and that this was the
understanding of Adams, but that after the sale, he yielded to the
views of Dargan and signed a memorandum to the effect that Dargan
should be a trustee for the parties. It was further in evidence
that with the arrangements between Dargan and Adams there was no
connection on the part of Ticknor, the defendant in the judgment,
and no assent was given by him to them.
Adams also testified that as the representative of the judgment
of C. S. Fowler & Co., he entered a motion in this Court at the
spring term, 1847, to amend the marshal's return made upon the
execution in that case to show that no money was in fact paid on
said bid of Dargan, and said motion was produced and read to the
jury, and is still pending and undetermined
Defendant then offered to read a bill filed in the Chancery
Court of Mobile on the 18th February, 1847, in the name of David A.
Hall, assignee in bankruptcy of C. S. Fowler & Co., against
John Ticknor, James L. Day Moses Waring, receiver, Joseph Wiswall,
Bank of Mobile, James Stewart, and Henry Lazarus, the object of
which bill was to reach and have appropriated to the payment of
said judgment of C. S. Fowler & Co. the proceeds of the sale of
the property to be made in that court upon the bill of said Wiswall
and others; said bill was filed by J. F. Adams, as solicitor of the
parties, and sets forth, among other things, the following:
"That the said premises were sold on the 1st of July, 1845, by
the marshal, to Edward S. Dargan, for the nominal sum of $7,500,
and the marshal executed to said Dargan his formal deed for the
same, and thereupon
Page 55 U. S. 57
made return upon the process that the premises were sold for the
sum above named. And your orator now averreth that in fact neither
the sum of $7,500 nor any other sum was paid by said Dargan to the
plaintiffs in execution or to any person for them, but his said bid
was made upon his stipulation made with the plaintiffs' attorney,
and on the distinct understanding and intent on his part that in
case his title under the said sale should prove to be valid and
effectual in law, he would pay to the said plaintiffs or your
orator so much money upon his said bid as he might thereafter be
able to realize by a sale; but if the said title should not prove
to be available nor enable him to obtain possession, that in that
case he should pay nothing."
Said bill is not sworn to, and is still pending in the court of
chancery; to the introduction of this bill as evidence the
plaintiffs objected on the ground that it was not connected with
the plaintiffs in this suit, and as being the statement of counsel
merely, and not evidence against C. S. Fowler & Co., and the
objection was sustained and the said bill excluded, to which the
defendant by his counsel excepted. This was all the evidence
offered in the case, and thereupon the court charged the jury:
"That the deed from Ticknor to Day of April 28, 1840, was upon
its face, in connection with the answers of Ticknor and Day,
fraudulent as to creditors and void, to which the defendant
excepted."
"The court further charged that the title of Dargan, derived
from the marshal's sale under the judgment of C. S. Fowler &
Co. and of Crouch & Sneed was superior to the title of Wiswall,
derived from the sale under the chancery proceedings, and entitled
the plaintiffs to recover, to which the defendant by his counsel
excepted."
"The court further charged the jury that the proceedings and
decree in the court of chancery upon the petition of Dargan was not
binding or conclusive upon the parties in this suit; that it was
not necessary for Dargan to go into the court of chancery for aid,
that his remedy was at law, and the proceedings there upon his
petition had no effect whatever upon his title, and must be wholly
disregarded in this suit, to which the defendant by his counsel
also excepted and requested the court to give the following charges
to the jury:"
"1. That if the jury believe the deed from the marshal to Dargan
was made without any pecuniary consideration, it could pass no
title, which the court refused, but charged that under the evidence
before them, it was valid if no money was paid by the purchaser, to
which the defendant excepted."
"2. That the filing of Wiswall's bill in chancery and the
proceedings
Page 55 U. S. 58
thereon to a final decree in his favor gave him a specific lien
upon the property of Ticknor from the commencement of his suit
which could not be divested by any subsequent proceedings upon the
older judgments under which the plaintiffs here claim, which was
refused, and the defendant excepted."
"3. That the receiver of the court of chancery in the suits of
Wiswall and others, being in possession of the property under the
order of that court at the time of the marshal's sale and notice
thereof being given at that sale, affected the purchaser and
invalidated his title, which was refused, and the court charged
that such possession and notice in no manner affected the marshal's
sale or the purchaser under it, and the defendant excepted."
"4. That the proceedings in the court of chancery upon the
petition of Dargan, the purchaser at the marshal's sale, was
conclusive upon the parties and his title thus acquired, which was
refused, and the defendant excepted."
"5. That under the statutes and decisions of Alabama, it is not
the oldest judgment, but the judgment lien that has been kept alive
by the oldest execution, regularly issued, without the loss of a
term, that has the priority as between judgment creditors which was
refused and the defendant excepted."
"6. That if neither Dargan nor Edward Hall were in possession of
the property on the 3d of April, 1848, the deed of that date from
Dargan to Hall was void and conveyed no title; this was also
refused, and the court charged that under the evidence judgment,
this deed was valid, to all which the defendant excepted."
"And the defendant tenders the above as his bill of exceptions
in the case, and prays the court to sign and seal the same, which
is done accordingly."
"WILLIAM CRAWFORD [SEAL]"
All the exceptions were argued in this Court, but it is only
necessary to refer to the above charge,
viz., that the
title of Dargan was superior to that of Wiswall and that the decree
in chancery, on the petition of Dargan, was not conclusive upon the
rights of the parties; that he was not bound to go into that court
for relief, as his remedy was at law.
Page 55 U. S. 61
MR. JUSTICE NELSON delivered the opinion of the Court.
The suit in the court below was an action of ejectment against
Wiswall to recover the possession of a lot of land situated in the
City of Mobile.
The lessors of the plaintiff gave in evidence two judgments
against John Ticknorone in favor of Fowler & Co. for $4,491,
rendered 28 December, 1840, the other in favor of Crouch &
Sneed for $7,167.25, rendered 31st December of the same year, each
of them in the circuit court of the United States. Executions were
issued upon each of the judgments within the year, and returned by
the marshal "no property found."
An alias
fi. fa. was issued on the judgment in favor of
Crouch & Sneed on the 24th February, 1845, and the lot in
question levied on; an
alias fi. fa. was also issued on
the judgment in favor of Fowler & Co. on the 7th April, 1845,
and a levy made on the same; and on the 7th July the lot was sold
on both executions and bid off by Dargan, one of the lessors of the
plaintiff, for the sum of $7,500, and a deed executed to him by the
marshal on the 13th August of the same year. Dargan quitclaimed the
premises to Hall, the other lessor. The lessors of the plaintiff
claim title under this sale.
Page 55 U. S. 62
The defendant, Wiswall, gave in evidence a judgment in his favor
against Ticknor in the circuit court of the state for $2,233.17
rendered 14th June, 1842; an execution issued 1st July of the same
year, which was returned by the sheriff "no property found;" also a
deed of the lot in question from Ticknor to one James L. Day
bearing date 28 April, 1840; and the exemplification of a decree
and the proceedings in chancery on a bill filed 7 February, 1843,
by Wiswall against Ticknor and Day setting aside the deed to Day as
fraudulent and void against creditors. The decree was rendered
April term, 1845. Also the appointment of a receiver by the court,
to whom possession of the property was delivered on the 27th June
of the same year. The receiver remained in the possession till the
lot was sold by the master, 1 March, 1847, under the decree in
chancery, and was purchased in for the defendant Wiswall for the
sum of $6,500.
The defendant claims under this title.
Notice was given on the day of sale by the marshal under the two
judgments of the pendency of this suit in chancery and of the
appointment of a receiver and that he was in the possession of the
property.
It appeared also that the lot was bid off by Dargan at the
marshal's sale by an arrangement between the attorneys representing
the two judgments, Dargan being the attorney for the one in favor
of Crouch & Sneed, that if the title thus acquired should
enable him to recover the property, the judgment in favor of Fowler
& Co. should be paid out of it, but if he should fail to
recover it, then the sale was to be considered a nullity and no
money was to be paid.
It further appeared that an application had been made by the
attorney in the judgment in favor of Fowler & Co. to the court
to amend the marshal's return so as to set forth the fact that no
money had been paid and that the motion was then pending in court.
And further that a bill had been filed in chancery by the assignee
in bankruptcy of the judgment of Fowler & Co. against the
defendant and others to have the proceeds of the sale of the
property on the decree applied to the payment of that judgment, and
in which bill it is insisted that the sale under the two judgments
was inoperative on account of the agreement between the attorneys
under whom it was made, and that this suit was then pending.
It further appeared that Dargan applied to the court of chancery
on the 26th November, 1845, by petition, setting out his title
under the two judgments to have the possession of the lot by the
receiver delivered up to him, or if that should not be ordered,
then that he might be at liberty to bring an action of ejectment
against the receiver to recover the same.
Page 55 U. S. 63
That the defendant Wiswall put in his answer setting up the same
matters now relied on to invalidate the sale to Dargan and also
claiming a paramount lien upon the property by virtue of his
judgment, and bill in chancery and decree setting aside the
fraudulent conveyance to Day directing a sale and application of
the proceeds to the payment of his judgment, the appointment of a
receiver, &c.
That the chancellor overruled the application, and dismissed the
petition on the 10th December, 1845. From which order an appeal was
taken to the supreme court, and the decree or order affirmed.
After the evidence was closed, the court charged the jury that
the title of Dargan under the marshal's sale upon the two judgments
was superior to that of the defendant under the sale upon the
decree in chancery, and directed a verdict for the plaintiff. And
further that the decree in chancery on the petition of Dargan was
not conclusive upon the rights of the parties -- that he was not
bound to go into that court for relief, as his remedy was at
law.
The case is now before us on exceptions to this charge.
It was made a question on the argument whether or not the lien
of the judgments, under which the marshal's sale took place, had
not been postponed to that of Wiswall on account of laches in the
enforcement of them by execution. But in the view we have taken of
the case, the validity of the liens at the time of sale will be
conceded, without, however, intending to express any opinion upon
the question.
Wiswall filed his bill in chancery against Ticknor and Day to
set aside the fraudulent conveyance to the latter and have the
property applied to the satisfaction of his judgment on the 7th
February, 1843. In that bill he prayed for a sale of the real
estate and for the appointment of a receiver to take charge of it
with other assets of the judgment debtor, and also for an
injunction. A temporary injunction was granted. On the coming in of
the answers of the defendants, the complainant, on the 11th April
of the same year, moved for the appointment of a receiver, and the
defendants at the same time moved to dissolve the injunction. The
court denied the motion to appoint the receiver and dissolved the
injunction, expressing the opinion that the answers so far
explained the circumstances under which the deed to Day was given,
as to remove the charge of fraud against it. An appeal was taken to
the supreme court, and, on the 10th April, 1844, that court
reversed the order of the court below and remanded the cause for
further proceedings, and on 15 April, 1845, the chancellor made a
decree that the deed was fraudulent and void as against the
complainant and
Page 55 U. S. 64
referred the case to a master to take and state the account
between the parties. He further ordered and decreed that a receiver
should be appointed to take possession of all the property embraced
in the fraudulent conveyance, and particularly that possession
should be delivered to him of the premises in question, and further
that the receiver, under the direction of the master, should sell
the same and apply the proceeds to the payment of the complainant's
judgment, with costs &c.
The receiver was appointed on 27 June, 1845, and on the same day
Ticknor, who was in possession of the premises, attorned to him,
who held possession until the sale was made in pursuance of the
decree. It will be recollected that the execution on the judgment
in favor of Crouch & Sneed was issued and levied on 24
February, 1845, and on that in favor of Fowler & Co. 7 April of
the same year, and that the sale took place under which the lessors
of the plaintiff claim 7 July, 1845.
At the time, therefore, of this sale, the receiver was in the
possession of the premises under the decree of the court of
chancery -- in other words, the possession and custody of them were
in the court of chancery itself, as the court is deemed the
landlord, to abide the final decree to be thereafter rendered in
the suit pending.
The appointment of a receiver is a matter resting in the
discretion of the court, and as a general rule, in making the
appointment on behalf of a complainant seeking to enforce an
equitable claim or a claim which is the subject of equitable
jurisdiction against real estate, it will take care not to
interfere with the rights of a person holding a prior legal
interest in the property. Thus where there is a prior mortgage
having the legal estate, the court will not, by the appointment of
a receiver, deprive him of his right to the possession, but at the
same time it will not permit him to object to the appointment by
any act short of a personal assertion of his legal rights and the
taking of possession himself. 1 J. & W. 648; 2 Swanst. 108,
137; 3
id. 112, n. 115; 3 Daniel's Pr. 1950, 1951.
If the person holding the legal interest is not in possession,
the equitable claimant against the property is entitled to the
interference of the court, not only for the purpose of preserving
it from waste, but for the purpose of obtaining the rents and
profits accruing as a fund in court to abide the result of the
litigation. For until the person holding the legal interest takes
possession or asserts his right to the possession, the accruing
rents and profits present a question simply between the parties to
the litigation. And the court will also appoint a receiver, even
against a party having possession under a legal title, if it
Page 55 U. S. 65
is satisfied such party has wrongfully obtained that interest in
the property. Thus, where fraud can be proved and immediate danger
is likely to result, if possession, pending the litigation, should
not be taken by the court in the meantime. 13 Ves. 105; 16
id. 59; 3 Daniel's Pr. 1955.
The effect of the appointment is not to oust any party of his
right to the possession of the property, but merely to retain it
for the benefit of the party who may ultimately appear to be
entitled to it, and when the party entitled to the estate has been
ascertained, the receiver will be considered his receiver, T. &
R. 345; Daniel's Pr. 1982; and the master will usually be directed
to inquire what encumbrances there are affecting the estate, and
into the priorities respectively. 10 J.R. 521,
Codwise v.
Gelston.
When a receiver has been appointed, his possession is that of
the court, and any attempt to disturb it without the leave of the
court first obtained will be a contempt on the part of the person
making it. This was held in
Angel v. Smith, 9 Ves. 335,
both with respect to receivers and sequestrators. When, therefore,
a party is prejudiced by having a receiver put in his way, the
course has either been to give him leave to bring an ejectment, or
to permit him to be examined
pro interesse suo. 1 J. &
W. 176,
Brooks v. Greathed; 3 Daniel's Pr. 1984. And the
doctrine that a receiver is not to be disturbed extends even to
cases in which he has been appointed expressly, without prejudice
to the rights of persons having prior legal or equitable interests.
And the individuals having such prior interests must, if they
desire to avail themselves of them, apply to the court either for
liberty to bring ejectment or to be examined
pro interesse
suo, and this though their right to the possession is clear.
Cox 422; 6 Ves. 287.
The proper course to be pursued, says Mr. Daniel in his valuable
treatise on Pleading and Practice in Chancery, by any person who
claims title to an estate or other property sequestered, whether by
mortgage or judgment, lease or otherwise, or who has a title
paramount to the sequestration, is to apply to the court to direct
the plaintiff to exhibit interrogatories before one of the masters
in order that the party applying may be examined as to his title to
the estate. An examination of this sort is called an examination
pro interesse suo, and an order for such examination may
be obtained by a party interested as well where the property
consists of goods and chattels or personalty as where it is real
estate.
And the mode of proceeding is the same in the case of the
receiver. 6 Ves. 287; 9
id. 336; 1 J. & W. 178; 3
Daniel's Pr. 1984.
Page 55 U. S. 66
A party, therefore, holding a judgment which is a prior lien
upon the property, the same as a mortgagee, if desirous of
enforcing it against the estate after it has been taken into the
care and custody of the court to abide the final determination of
the litigation and pending that litigation, must first obtain leave
of the court for this purpose. The court will direct a master to
inquire into the circumstances, whether it is an existing
unsatisfied demand, or as to the priority of the lien &c., and
take care that the fund be applied accordingly.
Chancellor Kent in delivering the opinion of the court in
Codwise v. Gelston, as Chief Justice, observed
"That if a fund for the payment of debts be created under an
order or decree in chancery and the creditors come in to avail
themselves of it, the rule of equity then is that they shall be
paid
in pari passu, or upon a footing of equality. But
when the law given a priority, equity will not destroy it, and
especially where legal assets are created by statute, as in case of
a judgment lien they remain so, though the creditors be obliged to
go into equity for assistance. The legal priority will be protected
and preserved in chancery."
The settled rule also appears to be that where the subject
matter of the suit in equity is real estate, and which is taken
into the possession of the court pending the litigation by the
appointment of a receiver or by sequestration, the title is bound
from the filing of the bill, and any purchaser
pendente
lite, even if for a valuable consideration, comes in at his
peril. 3 Swanst. 278 n., 298 n.; 2 Daniel's Pr. 1267; 6 Ves. 287; 9
id. 336; 1 J. & W. 178; 3 Daniel's Pr. 1984.
It has been argued that a sale of the premises on execution and
purchase occasioned no interference with the possession of the
receiver, and hence no contempt of the authority of the court, and
that the sale, therefore, in such a case, should be upheld. But
conceding the proceedings did not disturb the possession of the
receiver, the argument does not meet the objection. The property is
a fund in court, to abide the event of the litigation and to be
applied to the payment of the judgment creditor, who has filed his
bill to remove impediments in the way of his execution. If he has
succeeded in establishing his right to the application of any
portion of the fund, it is the duty of the court to see that such
application is made. And in order to effect this, the court must
administer it independently of any rights acquired by third persons
pending the litigation. Otherwise, the whole fund may have passed
out of its hands before the final decree, and the litigation become
fruitless.
It is true, in administering the fund, the court will take care
that the rights of prior liens or encumbrances shall not be
Page 55 U. S. 67
destroyed, and will adopt the proper measures, by reference to
the master or otherwise, to ascertain them and bring them before
it. Unless the court be permitted to retain the possession of the
fund, thus to administer it, how can it ascertain the interest in
the same to which the prosecuting judgment creditor is entitled,
and apply it upon his demand?
There can be no difficulty in ascertaining the prior liens and
encumbrances, as all of them are matters of record. Several of the
judgment creditors came in in this case and received their share in
the distribution.
These two judgment creditors had notice of the suit before the
sale, and might have made themselves parties to it and claimed
application of the fund according to the priority of their
liens.
They were also before the court, pending the litigation, on the
petition of Dargan, who had purchased for their benefit, to have
the possession of the receiver delivered up to the purchaser. There
is no pretense, therefore, for saying that they have not had notice
of the proceedings in the equity suit. The prayer of the petition
was denied, among other grounds, because their appropriate remedy
was a motion to the court, founded on their judgments to have the
proceeds of the sale under the decree applied to them according to
priority.
We agree that the person holding the prior legal lien or
encumbrance must have notice and an opportunity to come in and
claim his prior right to the property or interest in the fund
before his legal right can be affected, and the proper way is by
summons or notice upon the order or direction of the court.
This notice can be readily given on the report of the master of
the prior liens or encumbrances resting upon the estate.
But it is not necessary to go this length in the case before us,
as it is sufficient to say that the sale under the judgment,
pending the equity suit and while the court was in possession of
the estate without the leave of the court, was illegal and void. We
do not doubt but that it would be competent for the court, in case
the judgment creditor holding the prior lien had not come in and
claimed his interest in the equity suit, to decree a sale in the
final disposition of the fund subject to his judgment. The
purchaser would then be bound to pay it off. But this disposition
of the legal prior encumbrance is a very different matter, and
comes to a very different result from that of permitting the
enforcement of it
pendente lite without the leave of the
court. The rights of the several claimants to the estate or fund is
then settled, and the purchase under the decree can be made with a
full knowledge of the condition of the title, or charges to which
it may be subject.
Page 55 U. S. 68
Neither do we doubt but that it is competent, and might, in some
cases, be fit and proper for the court, where the property in
dispute is ample and the litigation protracted, to permit the
execution to issue, and compel the prosecuting creditor to pay off
the judgment. 3 Beav. 428. But it is manifest that these
proceedings, on behalf of the prior encumbrancer, should be under
the control of the discretion of the court, as the condition of the
title to the property may frequently be so complicated and
embarrassed that unless the sale was withheld until the title was
cleared up by the judgment of the court, great sacrifice must
necessarily ensue to the parties interested.
This case affords an apt illustration of the remark. The
marshal's sale was made under an arrangement that no money was to
be paid by the purchaser unless he succeeded in obtaining a title
to the property under it. It is obvious, therefore, if the purchase
had been unconditional and at the risk of the purchaser, it must
have been bid off for a nominal consideration.
As we have already said, it is sufficient for the disposition of
this case to hold that while the estate is in the custody of the
court as a fund to abide the result of a suit pending, no sale of
the property can take place either on execution or otherwise
without the leave of the court for that purpose. And upon this
ground, we hold that the sale by the marshal on the two judgments
was illegal and void, and passed no title to the purchaser.
We are also inclined to think that the question of title to the
property under the marshal's sale is concluded between these
parties by the judgment of the court in the proceedings on the
petition by the purchaser for the removal of the receiver, and to
be let into the possession. This, we have seen, is the appropriate
remedy on behalf of a person claiming a paramount legal right to an
estate which has been brought into the possession and safekeeping
of the court of chancery pending the litigation in respect to
it.
This proceeding was explained by Lord Eldon in
Angel v.
Smith, 9 Ves. 335, speaking of the rule in respect to
sequestrators, and which he held was equally applicable in the case
of receivers. "Where sequestrators," he observed,
"are in possession under the process of the court, their
possession is not to be disturbed, even by an adverse title,
without leave, upon this principle -- that the possession of the
sequestrators is the possession of the court, and the court being
competent to examine the title, will not permit itself to be made a
suitor in a court of law, but will itself examine the title. And
the mode is by permitting the party to come in to be examined
pro interesse suo, the practice being to go before the
master to state his title, and there is the judgment of the master,
and afterwards, if
Page 55 U. S. 69
necessary, of the court upon it.
See also 10 Beav. 318;
2 Daniel's Pr. 1271; 2 Mad. 21; 1 P.Wms. 308."
An appeal to the House of Lords will lie from the order or
decree of the Chancellor upon exceptions to the master's report in
the matter. 2 Daniel's Pr. 1273; 3
id. 1633, 1634.
In the petition to the Chancellor in the case before us, the
purchaser set out his title at large under the marshal's sale, and
claimed the possession of the property by virtue of his title, that
the receiver might be removed, and the possession delivered to the
petitioners.
The answer of Wiswall set up his right to the property under the
decree in the suit against Ticknor and Day.
The right of the petitioner, therefore, under his title to the
possession of the property as against the right of Wiswall under
the proceedings in equity and the decree in his favor, would seem
to be a question directly involved. The court so understood the
issue and passed upon it, holding, as we hold in this case, that
the sale was illegal and void, having been made while the estate
was in the possession and safekeeping of the court of chancery.
From this decision an appeal was taken to the supreme court, where
the order or decree of the court below was affirmed. 11 Ala. 938,
Dargan v. Waring.
The question is one depending very much upon the local law of
Alabama, and the judgment, therefore, in the matter, by the highest
court of the state, is entitled to the highest respect.
For these reasons, we are of opinion that the judgment of the
court below was erroneous and must be
Reversed and the case remitted for further
proceedings.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Southern
District of Alabama, and was argued by counsel. On consideration
whereof, it is now here ordered and adjudged by this Court that the
judgment of the said circuit court in this cause be and the same is
hereby reversed with costs, and that this cause be and the same is
hereby remanded to the said circuit court for further proceedings
to be had therein in conformity to the opinion of this Court.
