FLYNN v. LOWRANCE

FLYNN v. LOWRANCE
1924 OK 1130
236 P. 594
110 Okla. 150
Case Number: 15124
Decided: 12/16/1924
Supreme Court of Oklahoma

FLYNN et al.
v.
LOWRANCE et al.

Syllabus

¶0 1. Mortgages--Receivership in Foreclosure--Rights and Liabilities of Tenant.
A receiver appointed in a foreclosure proceeding to take possession of the mortgaged property and collect rents and profits during the pendency of the suit cannot disturb the possession of a tenant of the mortgagor, but the court may require the tenant to pay the rents to the receiver.
2. Receivers--Rights and Title of Receiver.
A receiver holds the property coming into his hands by the same right and title as the person for whose property he is receiver, subject to liens, priorities, and equities existing at the time of his appointment.
3. Same -- Mortgage Foreclosure -- Erroneous Dispossession of Tenants.
In this case the plaintiff and defendant, who are the mortgagors, and mortgagee, after the commencement of the suit and before the appointment of a receiver, entered into a lease contract with two parties whereby they leased the premises for a term of five years, and after a receiver was appointed to take possession of and collect the rents and profits from said property he demanded possession of the property from the tenants, and upon their refusal to surrender possession he instituted contempt proceedings, and the court made an order directing the sheriff to put the tenants out of possession and put the receiver in possession. Held, that the court exceeded its powers in so doing, and for such error the case will be reversed.

George H. Jennings and Thompson & Smith, for plaintiffs in error.
S. S. Lawrence and Hughes, Foster & Ellinghausen, for defendants in error.

MAXEY, C.

¶1 The question involved in this appeal is whether the court had a right to dispossess the interveners, Dola Veteto and Beulah Shilkett, who held a lease executed by the mortgagor and the mortgagee on the 28th day of July, 1923, to Mrs. W. E. Arthur, and by her assigned to the interveners, with the consent of the mortgagor, and who had been in possession of the property under a prior lease and running it as a moving picture show. It appears that in the order appointing H. C. Hughes receiver it directed Hughes to take possession of the property. He construed that to mean that he must take physical possession of it and oust the interveners, and the court seemed to have the same idea. When Hughes, the receiver, went to the interveners, Veteto and Shilkett, they told him they held it under a lease for five years from the 1st day of August, 1923, to the 1st day of August, 1928, and said they had no objection to paying the rent to the receiver, but he was not satisfied with this and insisted on them moving out and giving him possession. This they declined to do, and he reported the fact to the court, and asked they be attached for contempt of court. They were not parties to the suit up to this time, but they appeared in response to the notice to show cause and asked leave to intervene, which was granted, and they filed their petition of intervention and set up their lease showing that same was executed by both the plaintiff and defendant in the pending suit. It will be remembered that this suit was brought on the 6th day of June, 1923, and the lease was entered into on the 28th day of July, 1923, and the receiver was not appointed until January 4, 1924,. The mortgage that was sought to be foreclosed was an ordinary short form mortgage, with appraisement waived and without any of the provisions for appointment of receiver and taking possession in case default was made and the taxes and interest not kept up, and under our statute the mortgaged property cannot be sold until six months after the decree of foreclosure, and possession cannot be disturbed until after sale. We find nothing in our statute governing the disposition of the property in litigation except sections 518 and 523, Comp. Stat. 1921. Section 518 provides when a receiver may be appointed, and section 523 provides:

"When it is admitted, by the pleading or oral examination of a party, that he has in his possession or under his control any money or other thing capable of delivery, which, being the subject of litigation, is held by him as trustee for another party, or which belongs or is due to another party, the court may order the same to be deposited in court or delivered to such party, with or without security, subject to the further direction of the court."

¶2 There is no question made by the interveners, plaintiffs in error herein, about the court's right to appoint a receiver. They are not concerned about that matter so long as they are not disturbed in their possession under their lease. They expressed a willingness to attorn to the receiver, but insisted on holding possession under their lease. Under the provisions of the mortgage and our statute, we are left largely to the general law governing receiverships. Smith on Receivers (2nd Ed.) vol. 1, page 580, sec. 248, provides:

"A person in possession of real property cannot be disturbed in his possession unless he is made party to the action or proceeding. If the person in possession of mortgaged property is a tenant of the mortgagor he can not be disturbed in his possession by a receivership created on foreclosure unless he is made a party and then he may simply be ordered to attorn to the receiver unless it is made to appear that his continued possession is liable to be detrimental to the property as security for the debt."

¶3 This is undoubtedly the general law governing receivers, and it appears that this court has had this question before it in a number of cases, among which is Ardmore National Bank v. Briggs Machinery & Supply Company, 20 Okla. 427, 94 P. 533; Lawson v. Warren, 34 Okla. 94, 124 P. 46; St. Louis & S. F. Ry. Co. v. Ravia Granite Ballast Company, 70 Okla. 273, 174 P. 252. In the case of Ardmore National Bank v. Briggs Machinery & Supply Company, above cited, the second paragraph of the syllabus of the opinion is as follows:

"The receiver's title and right to possession of the property of an insolvent, non-going corporation vests from the date of the original order for the appointment, although the proceedings may not be perfected until a later date. The receiver's title and right to possession during the interval between such original order and the time of perfecting his appointment are superior to those of a judgment creditor who levies upon the property under his judgment during such interval."

¶4 In the case of Lawson v. Warren, the second paragraph of the syllabus is as follows:

"A receiver holds the property coming into his hands by the same right and title as the person for whose property he is receiver, subject to liens, priorities, and equities existing at the time of his appointment."

¶5 And the case of St. Louis & S. F. Ry. Co. v. Ravia Granite Ballast Company is to the same effect. We also find the case of Miller et al. v. Superior Court, 217 P. 817, a California case, the second and third paragraphs of the syllabus of which are as follows:

"Where a sheriff in replevin has taken possession of property, a receiver appointed over all the property of the replevin defendant, who is subsequent in time as to his right or claim, may not attack the sheriff's possession, nor can the court do so by contempt proceedings in the receivership case, but can only authorize the receiver to sue for the possession.

"Where a sheriff in replevin has taken possession of property, a mere showing that a receiver appointed over all the property of the replevin defendant was in fact appointed before the sheriff took possession would not entitle him to possession, where he did not take possession until after the sheriff had acted."

¶6 These citations show that when the property or any part thereof over which the receiver is appointed is in the possession of a person not a party to the suit, or having what he claims to be a prior and superior lien, he cannot be dispossessed by the receiver, but upon proper showing can be required to attorn to the receiver during the pendency of the suit. Nowhere have we been able to find where a receiver with the aid of the court could by a contempt proceeding dispossess the party in possession and who is not party to the suit, but the receiver's remedy to get possession is to apply to the court for an order authorizing him to bring suit for the possession. Certainly where a party, as in this case, is in possession of the property under a lease executed by the plaintiff and defendant in the foreclosure proceeding, such party is entitled to hold possession, and the receiver is entitled to collect the rents pending the litigation, and the court can compel the party in possession to attorn to the receiver, but he can not be dispossessed in a contempt proceeding. The court below seems to have misapprehended the scope of a receiver's authority. The interveners who were in possession of this property had been in possession of it for quite a while prior to this litigation, and had built up a business that was evidently satisfactory, and when they applied to the mortgagor and the mortgagee for renewal of their lease, they did not hesitate to renew the lease for a term of 5 years. This lease provided for a rental of $ 14,100 for the five year term, payable $ 200 a month for a part of the time and $ 300 per month for the remainder of the time until the $ 14,100 was paid. There seems to be no contention but what this lease was executed a short time after this foreclosure proceeding was commenced, and the parties were in the possession, and were in possession in January, 1924, when the receiver was appointed. Counsel for defendant in error takes the position that this lease having been executed after the filing of the original suit, that the doctrine of lis pendens applies, and cite a great many authorities in support of this proposition, but that proposition is not in this case. It is true that the suit was commenced on the 6th day of June and the lease was not made until the 28th day of July following, and the receiver was not appointed until January 4, 1924. Thus it will be seen that although the suit had been filed at the time the lease was executed, we can see no reason why the mortgagor and the mortgagee, who were the parties most interested, could not have made a valid lease at the time this lease was made, and it would not be subject to the doctrine of lis pendens. Defendants in error further contend that the order appointing a receiver to take and keep possession of the property pending litigation is not appealable. This is not an appeal from the order appointing a receiver, and no question is made by plaintiffs in error as to the right of the court to appoint a receiver. The question here is, conceding that the receiver was properly appointed, has he the right to break up their business, turn them out of doors when they held a good and valid lease from the plaintiff and defendant in this suit? It is the order dispossessing them that they are complaining of, and not the appointment of the receiver. So far as these interveners are concerned, they appear to be willing to attorn to the receiver, if they are left in possession, and that is all that they can be required to do. It was error for the court to have directed the sheriff to dispossess the plaintiff in error (interveners) and put the receiver in the physical possession of the property. While the court is allowed a wide discretion in receivership matters, it is not allowed to use its power in an oppressive and illegal manner. We think the court went far beyond its powers in this case, and that the judgment of the trial court should be reversed, with direction to set aside the order directing the sheriff to dispossess the interveners, and holding the interveners guilty of contempt. No further attempt should be made to disturb the possession of the interveners, but that the interveners be required to pay the rents to the receiver pending this litigation.