
    Jesse N. Bolles, receiver, &c., vs. John A. Duff, receiver, &c.
    Where one is, by a decree of the court, declared to be a mortgagee in possess* ion, and substantially or in effect to be a trustee of-the equity of redemption, he will, by subsequently accepting the office of receiver of the same prop* erty, be deemed to have assumed the duties and responsibilities of such office, unqualified or unmodified by the circumstance that he had previously been declared to be a mortgagee in possession, or by the fact that he claimed the decree to be erroneous, and that he was, and might finally be held to be, the absolute owner'. '
    Having been appointed receiver, and accepted "the appointment, his relations, claims and interests as an individual, must not be permitted to interfere with his duties as receiver, or with the purpose or interests for which he was appointed,
    His duty, as receiver, is to increase the surplus beyond what shall be found due him as mortgagee, by getting as large a rental as he reasonably can for the trust property; and on his applying to the court, as receiver, for authority to have it leased, it.is his duty to lay before the court all the information he has, or can wiih reasonable diligence acquire, as to the situation and value • of the trust property.
    If such receiver applies to the court for an order authorizing him to lease the premises for a term of years, with a motive or purpose inconsistent with his duty and position as receiver, and an order granting such authority is made by the court, inadvertently, without careful scrutiny, and further inquiry, by a reference or otherwise, as to the situation and value of the property, and the propriety of making the order, the order should be reversed.
    If the lease executed by the receiver, under such an order, is declared void, it will be with a reservation to the lessee of the right to occupy the premises for one year from the date of his lease.
    APPEAL by the plaintiff from an order made at a special term, authorizing the defendant, as receiver, to lease certain premises in the city of blew York, known as the Olympic Theater, to James E. Hayes, for the term of three years, from the 1st day of September, 1868.
    
      B. C. Thayer, for the appellant.
    
      A. Oakey Hall, for the respondent.
   Sutherland, J.

Preliminarily to the argument of this appeal, the majority of the court decided that the papers handed or sent to the judge who made the order appealed from, upon due notice to the attorney for the defendant, after the argument and submission of the motion, had been properly printed as a part of the appeal papers, and were to be considered by the general term, in determining the questions presented by the appeal. As to these papers, the majority of the general term substantially held that if the learned judge who made the order appealed from did not consider them, in making the order, as it ■appears from his opinion he did not, he ought, consider-' ing the nature of the order asked for, and the circumstances under which it was made, to have done so.

The decree of Judge Potter declared the defendant, Duff, to be a mortgagee in possession, but it also substantially, or in effect, declared him to be a trustee of the equity of redemption; and he being such mortgagee and trustee, the court appointed him receiver also. By accepting the office or position of receiver, he must be deemed to have assumed the duties and responsibilities of a receiver, -unqualified or unmodified by the fact or circumstance that he had been declared to be a mortgagee in- possession, or by the fact or circumstance that he claimed the decree to be erroneous, and that he was, and finally might be held to be, the absolute owner. His relations, claims and interest, as to -the property, might have been, and probably were, urged against the fitness of hie appointment as receiver; but having been appointed, and having accepted, such relations, claims and interest must- not be permitted to interfere -with his duties as receiver, or with the purpose or interests for which he was appointed. He was declared a trustee, and appointed a receiver, upon the theory that he was sure to receive the amount found due him, as mortgagee, as the result of the accounting, and that there would, or might be, a surplus for distribution among the creditors of Trimble.

The duties and position of the defendant, relative to the trust property, must, for the purposes of this appeal, be iconsidered as fixed by the decree of Judge Potter, and by the defendant’s acceptance of the office or position of receiver. • His duty as receiver clearly was to increase the surplus beyond what should be found due him as mortgagee, by getting as large a rental as he reasonably could fbr the trust property; and on his application to the court, as receiver; for authority to lease, it was his duty to lay before the court all the information he had, or could. with reasonable diligence have acquired, as to the situation and value of the trust property.

In my opinion, the circumstances under which the order appealed from was made, show that, it is highly probable that the defendant did not make his application to the court with the good faith, and impartial and disinterested purpose, called for by his office or position of receiver; and these circumstances, also, in my opinion, show "that the court should have carefully scrutinized the application; and that the order should not have been made without further inquiry, by a reference or otherwise, as to the situation and value of the property, and the propriety of making the order.

I will refer to some of these circumstances, as shown by the papers;

1st. The application was for authority to lease to Hayes, the son-in-law of the receiver, and not an application for authority to lease to whoever might be found willing to take a lease, upon terms and conditions jnosfc advantageous for the trust estate, or those whose interests were represented by the receiver.
2d. The provision in the order of Judge Smith, restraining the receiver from making any new. lease to Hayes, or extending- or renewing the lease to him, &e., without the special leave of the court, granted on due notice to the plaintiff’s attorney, should have led the court to carefully scrutinize the motive or purpose of the application, which was- virtually an application to renew or extend a lease to Hayes, and should have led to further' inquiry as to the condition and value of the trust property, and the propriety of making the order, before making it-.
3d. The circumstance that the application came before the court, supported by verified opinions of certain individuals, as to what would be a fair rent for the property, without. including scenery, properties, &c.; which opinions .were given and verified, in answer to the inquiry of the receiver, carefully put, as to what would be a fair, rent per year, without including scenery, properties, &cl,‘ and which opinions were ex parte, and preliminarily obtained for the purposes of the application, should have induced the same scrutiny of the motive and good faith of the application ; and should have led to further inquiry as to the condition and value of the property, and the propriety of making the lease; and especially as ‘to the propriety of leasing the theater without scenery, &c., the papers showing that. there was a large amount of scenic and other properties belonging to the theatér and to the trust estate, which it would have been most advantageous to have leased with the theater.
4th. The verified opinions of Earle, Hess, Gibson, Bannum, Tamaro and Morris, that $20,000 would be a fair annual rent for the theater, without scenery, &c., and the verified opinions of several of them, that with scenery, &c., $22,000 to $25,000 • would be a fair rent; and that to rent the theater without the scenery, &c., would be a sacrifice to the estate, as the scenery, &e., would be of little use if removed from the theater, certainly should have led to the same scrutiny of the motive and good faith-of the application, and to further inquiry on the part of the court, especially as to whether the scenery, &c., belonging to the theater and the trust estate should not be leased with the theater.
5th. The unverified offer of Barney Williams, by letter, to take a lease for one, two, three, four or five years, at the yearly rent of $21,000, with security, if required, of the theater, scenery, &c., belonging to the trust estate, (which offer appears to me perfeetlyconsistent with the previous verified opinion, which the defendant had obtained from him, as to rent without scenery, &c.,) and his subsequent letter increasing this offer to $25,000 per year; 'and the offers of Mr. Sim and Mr. Hess, by letters, to take a lease ’ for one, two or three years, of the theater and scenery, &c., belonging to the trust estate, the one at a rent of $25,000, with security, and the other at a rent of $22,000, with security, should certainly have induced the same scrutiny as to the motive and good faith of the application, and should have led the court to make further inquiry as to the condition and value of the trust property, by a reference or otherwise, before granting the application and making the order appealed from.

Without referring specially to other circumstances appearing on the face of the papers, I think those which have been mentioned show that the order appealed from was inadvertently made, and that the application for it was made by the receiver with a motive or purpose inconsistent with his duty and position as receiver.

I do not see the force of the circumstance suggested in. support of the order, that Mr. Hayes had, under the first lease, expended a large sum of money for permanent improvements, &c. Mr. Hayes • and the receiver must be presumed to have known the law and. the terms of this prior lease, and that such of these improvements as were fixtures, as between tenant and landlord, increased the value of the property, and called for an increased annual rent.

I will add, that the strenuous efforts of the defendant, as receiver, through eminent counsel, to retain the order as made, without reversal or modification, should lead us to suspect the good faith of his application, as receiver, for the order appealed from; for as receiver he cannot be permitted to say that he had, or has, any interest, other than his representative or official interest as receiver, or indeed any interest, to be,,or which can be, prejudiced, impaired or affected, by a reversal or modification of the order..

Upon the whole, I think the order should be reversed, as made inadvertently; and without sufficient consideration being given to the circumstance that the defendant made the application as receiver, or' to the conceded circumstances under which it was made, tending to show, at least, that the receiver might have made and supported his application with a purpose inconsistent with his duty as receiver.

But I do not think Mr. Hayes, the lessee, should suffer all the probable consequences which would follow from an absolute, unconditional reversal of the order.

I think the order of reversal should have a provision, or condition, inserted in if, that such reversal shall not impair or any way prejudice Mr. Hayes’ possession .or rights under the lease, for and during the residue of the first year of his term ; that is not before, or until the first •day of September next, (1869,) but that from and including the first day of September next, (1869,) the lease shall be void and of no effect, and that he, continuing in possession thereafter, shall be considered as a tenant holding over without the permission of his landlord, after the.expiration of his term, and as in contempt of such order of reversal.

I am not sure that it would be right to break up Mr. Hayes in the height of the current theatrical season, and therefore I think the order of reversal should be conditional, as above-stated.' ‘ '

The «order should also be reversed without costs to either party.

Clerke, P. J., concurred.

Geo. G. Barnard, J.

(dissenting.) The defendant, Duff, is in possession of the property in question, claiming to own the same. By an interlocutory judgment of this court, it has been decided that he is in possession as mortgagee, and not as owner. Pending the final decision of this question, Duff has been appointed receiver. He has a large interest in the property if only mortgagee in possession. The plaintiff is a receiver appointed upon proceedings supplementary to execution in an action where judgment was obtained against John. M. Trimble and William Powler, for $1594.38. Trimble is alleged by the plaintiff to be the owner of the property. The defendant, Duff, applied at chambers for leave to lease the property to James E. Hayes. This was opposed, and the papers show these facts. Hayes had been the lessee for the year ending 31st of August, 1868, at the rent of $15,000. He had expended some $22,000, in addition to his rent, in permanent improvements upon the property; he had established an excellent reputation, for the same. It was a theater property, and its value was largely increased as well by the money outlay in improving the same as by the successful management of the business conducted in it. Ho one other than Hayes applied to lease pror to the application'for leave by Duff to lease to Hayes. Hayes applied for the lease at a reduced rent, in consideration of what he had done to benefit the estate. The affidavits of seven competent judges, of the value of the rental o.f such property, was annexed to the application for leave, fixing such value at from $12,000 to $15,000 per year. The affidavits of six equally skilled persons, attached to the opposing papers, show their opinion of the value to be not less than $20,000. In addition to this, there were five offers to take the lease for $20,000 and upwards. ■ Some of these offers contained these impossible conditions, “ with the understanding that such scenery, properties and fixtures as the court may decree to belong to the estate of the late John M. Trimble shall remain in the building to be used by me.” Nearly all the offers contained this as a similar condition. The court granted leave to lease to Hayes for $15,000 per year, and to keep the same in repair. In view of all the facts, I think the lease to Hayes was the best for all concerned. He had expended much money, and had maintained a good and attractive theater. He ■alone agreed to keep the same in repair during his new lease, at his own cost and expense. He released any claim he had for previous repairs and improvements under the old lease. He agreed to maintain a first class theater, and to do nothing to injure the repute or good will of the same. The undisputed cost of these repairs for the previous year; the consent to continue the same; the punctual payment of the rent; the successful management of the business; must all be taken into the account, and then it is quite clear that the offer of Hayes was better than any made. The order should, I think, be affirmed, with costs.

[New York General Term,

January 4, 1869.

Order reversed.

Clerke, Sutherland and Geo. G. Barnard, Justices.]  