Ritter v. Arizona Cattle Co. , 34 Ariz. 278 ( 1928 )

There are certain principles of law which I think should govern in the decision of this case. I state them as follows:

The receiver appointed by the court takes only the interest of the insolvent in the property. Fourth St. Nat. Bank v. Yardley, 165 U.S. 634, 41 L. Ed. 855, 17 Sup. Ct. Rep. 439; In re Hamilton, 26 Or. 579, 38 P. 1088. Any liens existing are valid against the receiver to the same extent and in the same manner as if the property were still in the possession of the insolvent. Petaluma Savings Bank v. San FranciscoSuperior Court, 111 Cal. 488, 44 P. 177; Com. Pub. Co. v.Beckwith, 167 N.Y. 329, 60 N.E. 642; Fourth St. Nat. Bank v.Yardley, supra.

A lien, except in rare cases not similar to the present one, is superior to any of the expenses of the receivership, except such as may be necessary for the preservation of the property, or beneficial to the lienholder. Louisville, E. St. L.R. Co. v.Wilson, 138 U.S. 501, 34 L. Ed. 1023, 11 Sup. Ct. Rep. 405;Buckwalter v. Whipple, 115 Ga. 484, 41 S.E. 1010; Lane v.Washington Hotel Co., 190 Pa. 230, 42 A. 697; McCormick v.Elsea, 107 Va. 472, 59 S.E. 411; Link Belt Co. v. Hughes,174 Ill. 155, 51 N.E. 179.

Ordinarily a receiver acting under an order of the court is protected in the payment of money, even if such order was erroneous and subsequently reversed. Platt v. N.Y. S.B.R.Co., 170 N.Y. 451, 63 N.E. 532; Coe v. Patterson, 122 A.D. 76,106 N.Y. Supp. 659; Id., 108 N.Y. Supp. 1127; Hovey v.McDonald, 109 U.S. 150, 27 L. Ed. 888, 3 Sup. Ct. Rep. 136. To protect him, however, the order must have been within the jurisdiction of the court, for an order void on its face protects no one. Jowers v. Kirkpatrick Hdw. Co., 21 Ga. App. 751,94 S.E. 1044; Fischer v. Langbein, 103 N.Y. 84, 8 N.E. 251;Jefferson v. Gallagher, 56 Okla. 405, 150 P. 1071; Andrus v. Blazzard, 23 Utah 233, 54 L.R.A. 354, 63 P. 888.

What are the facts to which these principles apply?

Respondent herein was the holder of a valid mortgage on most of the property taken over by the receiver, composed chiefly of cattle and leases on grazing lands. It did not join in the application for a receiver, and made no claim against the estate, relying at all times on its mortgage. When the receiver was appointed it offered to take over the mortgaged property and pay the expenses of its preservation, but the court refused to permit such action and ordered part of it sold by the receiver to pay expenses. This last-mentioned property was of such a nature that its sale would probably have compelled an immediate forced sale of the mortgaged cattle at a great loss. To avoid this respondent agreed to purchase receiver's certificates, the proceeds of which, by the terms of the order of the court authorizing the purchase, were to be used "for the operation of the ranch as a going concern, and for the conservation of the property . . . the money thus obtained to be deemed an expenditure by the Stock Growers' Finance Corporation for the preservation of the property." Some $14,000 worth of such certificates were eventually purchased by respondent. Later it purchased all the assets of the insolvent except a certain town lot. It was expressly stipulated that the purchase price should be held by the receiver subject to a decision as to the validity and scope of respondent's mortgage.

The receiver, during his administration, made a determined effort to defeat respondent's mortgage, most, if not all, of the attorneys' fees, and other items involved herein, except the receiver's fees, being for that purpose. He was unsuccessful in the attempt, the mortgage being held valid by this court. StockGrowers' Finance Corp. v. Hildreth, 30 Ariz. 505, 249 P. 71. He presented various partial reports and secured orders allowing him credit, among other things, for attorneys' fees of $8,500 and receiver's fees of $3,600, besides other expenses not incurred in the preservation of the corpus of the mortgaged property. When his final report was presented he asked for an allowance, including the items approved in the partial accounts as above, of some $26,000 for expenses. The court found that of that amount only some $11,000 was expended for the preservation of the mortgaged property, and that only the amount so expended could be charged against the proceeds of such property until the mortgage was fully satisfied. Since the only money ever realized by the receiver came from the sale of certificates as above set forth, and from the sale of the mortgaged property, this in effect compelled him and his bondsmen to make good everything he had paid out above the $11,000 allowed by the court as above.

From the foregoing statement of facts and legal principles it is obvious that the orders of the court approving the expenditure by the receiver of any money not used in the preservation of the mortgaged property, if such orders be construed as directing the proceeds of such property to be used therefor, were at least erroneous. But an order merely erroneous, as we have seen, protects the receiver who acts in good faith. It is only the void order which affords no protection. Were the orders in question void?

A void order or judgment, as distinguished from one merely erroneous or voidable, is one made without jurisdiction. What, then, is necessary to confer jurisdiction on a court? Three things must concur: (a) Jurisdiction of the persons of the litigants; (b) jurisdiction of the subject matter of the action; and (c) jurisdiction to determine the particular question determined and to render the particular judgment awarded. If any one of these be lacking, a judgment or order is void, and not merely voidable or erroneous. 33 Cyc. 1072, pars. 34-37, and cases cited.

In the case at bar the court unquestionably had jurisdiction of the persons of the litigants, and of the subject matter of the litigation. It was, however, in my opinion, utterly lacking in jurisdiction to make the particular orders relied on by appellant. Since the money used was proceeds of the mortgaged property, or money advanced on receiver's certificates for the sole purpose of preserving the property, and since the amounts surcharged were not used in the preservation of the property, the court had no more jurisdiction to make an order approving their payment from such proceeds than it would have had if the receiver had secured the funds in question by converting the property of a stranger to the record, or robbing a bank. To hold to the contrary would, as is pointed out in the majority opinion, deprive respondents of their property without due process of law. This cannot be done.

I therefore concur in the affirmance of the judgment on the ground that the orders of the court approving the allowance of the items surcharged in the final account, if they are to be construed as authorizing the payment of such items from the proceeds of the mortgaged property, were without jurisdiction and void.