
    James C. Matthews, Resp’t v. Mervelle W. Cooper et al., Def’ts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed November 18, 1892.)
    
    Receiver—'Title .
    A receiver appointed to take charge of an hotel and its property and to conduct the business, hut given no power to sell any of such property, except in the ordinary course of the business, is not vested with the title to such property, and it does not become assets in his hands to pay the receivership expenses.
    Appeal by defendant, Albert P. Sturtevant, from order-confirming the report of a referee to pass the accounts of Joel B. Erhardt, receiver.
    
      Elihu Root, and S. B. Clarke, for app’lt; Durnin & Hendrick, for resp’t; A. H. Holmes, for rec’r.
   Van Brunt, P. J.

Prior to the 10th of March, 1886, the appellant Sturtevant and one John D. Sturtevant were copartners in the hotel business in the city of New York, and, as such firm, were the owners of the property known as the “ Sturtevant House," which premises, in March or April, 1886, they leased to the plaintiff, Matthews, and one Pearson. The lease contained a ■covenant that the lessees would pay the Croton water rents imposed upon the demised premises, and that, if default should be made in any covenant, the lessors might re-enter. Matthews and Pearson entered upon said property, and conducted the hotel business therein after the execution of said lease, and continued the occupation thereof until March, 1891, when the business connection between Matthews and Pearson was dissolved by the withdrawal of Pearson, and, thereafter, Matthews continued to carry on such business in said premises until the time hereinafter mentioned. In July, 1889," John D. Sturtevant died, leaving the appellant his surviving partner. Prior to October, 1891, Matthews made and executed a chattel mortgage- upon the furniture, etc., contained in said hotel to one Janvrin, to secure the sum of $5,000; and in October, 1891, said Matthews also executed to the appellant, as surviving partner of the firm of A. P. & J. D. Sturtevant, two chattel mortgages upon the same goods and chattels, which mortgages contained a provision that, m case of default, the party of the second part might enter any dwelling-house and other premises, and such other place or places as said goods might be placed, and take and carry away said goods and chattels, and sell and dispose of the same for the best prices he could obtain, and out of the moneys arising therefrom to retain and pay the sum and interest due upon the mortgages, and all charges touching the same. The said chattel mortgages also contained a provision that, in case the party of the second part should elect that it was for his best interest to take possession of the property in any event, it should be lawful for him to immediately take and retain possession thereof, as if default had been made in payment of the sum of money secured to be paid by the mortgage. In October, 1891, Matthews made and executed to the defendants Cooper and Waddell a deed of trust, whereupon said trustees entered upon said property, and continued in possession thereof until the receiver appointed in this action took possession thereof about the last of December, 1891; said Matthews having in November, 1891, commenced this action to reform the said chattel mortgages and the trust deed, and having obtained an injunction, and the appointment of a receiver of said property and business, and to manage and conduct the same pendente lite.

In February, 1892, this injunction was vacated as to the appellant, Sturtevant, unless the plaintiff in ten days gave a bond in $10,000, which condition was not complied with. In May, Janvrin, the holder of the first chattel mortgage above mentioned, applied to the court for the payment of his mortgage by the receiver, or that he be put in possession of the mortgaged property, with leave to foreclose the mortgage. At the same time the appellant applied by petition, as owner and lessor of the Sturtevant House, and as second mortgagee of the furniture, chattels, etc., first, to re-enter under the lease; second, that the receiver put him in possession of the furniture and chattels covered by the mortgage; and, third, that the receiver be relieved from so much of the order appointing him as required him to conduct and carry on such hotel business. These applications of Janvrin and Sturtevant were heard and decided together and granted, and the extraordinary order was thereupon entered that, upon the appellant making an arrangement with the receiver satisfactory to him for his protection against any liability for his acts in the performance of his duties as receiver pursuant to his order of appointment, and upon one day’s notice, the said receiver suffer and permit said Sturtevant into and upon the premises in said lease mentioned wholly to re-enter, and the same to have again, repossess and enjoy as in his first and former estate; and that the receiver suffer and permit said Sturtevant to take and retain possession of the goods and chattels covered by said two chattel mortgages then in the Sturtevant House, and in the possession of said receiver; thus granting judgment upon a covenant in the lease without even the semblance of an action or legal proceeding to enforce the breach of the covenant Therepon the appellant Sturtevant entered into a stipulation with the receiver as follows:

“Memorandum of stipulation between Albert P. Sturtevant and Joel B. Erhardt, the receiver in the above-entitled action. Whereas, a motion made in this action by the defendant Sturtevant for an order that the said receiver permit said Sturtevant to re-enter under the lease mentioned in the complaint, and to take possession of the furniture covered by the chattel mortgages mentioned in the complaint, has been granted upon condition that the defendant Sturtevant make an arrangement w'ith said receiver satisfactory to said receiver for the protection of said receiver against any liability for his acts in the performance of his duties as such receiver; and whereas said receiver has incurred indebtedness for supplies and operating expenses of the business and other expenses of his receivership, and has in his possession as such receiver certain property, including supplies, which would necessarily be disposed of at a great loss for any other purpose than for use in the operation of the said business. It is hereby agreed: First. That said Sturtevant will take from the said receiver all supplies which the said receiver has on hand in the hotel known as the Sturtevant House,’ and mentioned in the complaint, and pay said receiver full cost price thereof and as of the time when said premises are taken possession of by said Sturtevant; second, that if at the time of such taking possession there shall remain any assets of said receivership, and any unpaid debts or expenses of said receivership, after the application thereto of all moneys then in said receiver’s hands, and all moneys paid to said receiver by said Sturtevant under the foregoing provisions, then the said Sturtevant agrees, upon any sale of the then remaining assets of the said receivership, to bid therefor a sum which shall be at least sufficient to pay all the remaining debts and expenses of such receivership, together with the expenses of such sale ; third, that, 'in any event, in case any lawful obligation of said receiver, incurred in the performance of his duties as such, shall remain unpaid after the application of all the property in said receiver’s hands applicable thereto, said Sturtevant shall indemnify and save harmless the said receiver from and against all liability thereupon.”

In June, 1892, the receiver gave notice that on his petition, account and schedules he would apply for a reference to- pass his accounts and for his discharge, and for other relief; and thereupon an order of reference was made, directing the receiver to ascertain and report to the court what, if any, property or assets vested in said receiver in this action remained undisposed of. The referee thereupon proceeded with the reference, and reported that the only property or assets vested in said receiver which remained undisposed of is the cash on hand with which said receiver is chargeable, and the amount due upon the obligation of the appellant Sturtevant to said receiver under the stipulation.

The appellant filed exceptions to said report, to the effect “ that the referee should have reported that the right, title, and equity of plaintiff, Matthews, in the furniture and chattels described in the mortgages and trust deed mentionéd in the complaint ought to be charged with the payment of the receiver’s debts, expenses and compensation, and sold for that purpose.” And also “that the referee should have reported that defendant Sturtevant is under no liability upon the stipulation with the receiver, referred to in the report, except contingently for any deficit there may be after a sale of plaintiff’s (Matthews) right, title, and equity in the said furniture and chattels, and the application of the proceeds of such sale to the payment of the debts, expenses, and compensation of the receiver.” Also to so much “ of said report as states, in effect, that the only property or assets vested in said receiver which remain undisposed of is the cash on hand, and the amount due upon the obligation of defendant Sturtevant upon his stipulation with the receiver.” And also to so much of the report as states that the receiver is entitled to commissions upon the amount of the obligation of the appellant Sturtevant above mentioned. The other exceptions are substantially embraced in those which have been mentioned. These exceptions being overruled by the court, and an order entered confirming the report, this appeal is taken from that order.

' The question presented arises principally upon the construction to be placed upon the stipulation entered into by the appellant Sturtevant and the receiver, and whether the equity of redemption of the plaintiff, Matthews, in the furniture, etc., described in the mortgages and trust deed, were property or assets vested in the receiver which remained undisposed of at the time of the application of the receiver for a passing of his accounts. In the consideration of this question it is to be borne in mind that the sole duty of the receiver was to act as stakeholder of the property which had been used by Matthews and his trustees in the conduct of the hotel business in the Sturtevant House, and to use such property in the continuing of such business. He had not authority to dispose of or sell any of such property, except such as might be sold in the ordinary conduct of said business. No such property was vested in him, except so far as necessary for the conduct of the business. It was entirely different from the case of a receiver appointed for the purpose of taking possession of property, selling it, reducing it to cash, and dividing it among the parties entitled thereto. The theory upon which his appointment was made was that it was necessary for the protection of the rights of the plaintiff that this property should be placed in the hands of a stakeholder, to be held by him until the rights of the parties might be determined, and then that the receiver should be required to deliver the property to the parties adjudged to be entitled thereto; and this was all the authority which was conferred upon the receiver by his appointment under the circumstances developed in this action.

Row, the applicant having applied to the court for the possession of this property, and not only for the possession, but that he might re-enter under his lease because of a breach of a covenant in the lease, without going through the forms of law which would entitle him to re enter for a breach of the covenant, and instead of removing the property from the demised premises, which was all he could do under the mortgages, he is granted this extraordinary and remarkable relief upon certain conditions, namely, that he save the receiver harmless; and he gave this stipulation, and now claims that, having obtained the advantages which he desired, the receiver should do that which his appointment never contemplated, i. e., sell out Matthews’ interest in this property for the payment, of the debts and of the expenses of the receivership and the compensation to the receiver. It seems to us that it would be going entirely beyond the contemplation of the order appointing the receiver, to allow him to dispose of any of the property, except, as already stated, so far as was necessary in the conduct of the business. Being a mere stakeholder, all that he could do would be to preserve the property of which he was appointed receiver, and not to sell the same. It was not necessary for the purposes of the action in which he was appointed, and, not being so necessary, no such power was conferred upon him. We think, therefore, that the referee was entirely right in holding that no title to this mortgaged property was vested in the receiver, and that he had no power to sell, and that it was not assets in his hands. As to the commissions of the receiver, he is clearly entitled to his commissions upon that which he receives and disburses, and the appellant having, for purposes of his own, in order to get possession of the leased property in this extraordinary manner, agreed to indemnify the receiver, he is as much bound to pay the commissions of the receiver upon the sums he is entitled to receive and disburse as any other debt or obligation connected with the receivership. We think, therefore, that the order should be affirmed, with ten dollars costs and disbursements to each of the respondents appearing.

O’Brien, J., concurs.

Lawrence, J.

I think that the order should be wholly affirmed for the reasons stated in my opinion on the appeal taken by Matthews. _  