Opinion
No. 35631.
May 22, 1944.
1. RECEIVERS.
Where receiver was merely custodian for distribution to beneficiaries of proceeds of a lawsuit which had been compromised and settled, it was within discretion of trial court to permit a beneficiary to intervene and file claim for portion of fund after expiration of time allowed by order of court for that purpose (Code 1942, sec. 5254).
2. RECEIVERS.
Generally, where an order is given for publication of notice of limitation of time to file claims with receiver and notice is duly published, claims not filed within time specified are precluded in that proceeding from sharing in assets if there has been a final distribution of funds in hands of receiver based upon claims proven, unless injustice would otherwise be done (Code 1942, sec. 5254).
3. RECEIVERS.
Where an order is given for publication of notice of limitation of time to file claims with receiver and notice is duly published, upon showing of a reasonable excuse for delay, court has discretion to permit a creditor to prove claim at any time before actual distribution or after partial payment if there is a surplus (Code 1942, sec. 5254).
4. RECEIVERS.
Where claimant had no actual notice of limitation of time for proving claim to participate in dividend from proceeds of compromise of litigation, claimant, after expiration of such time but when receiver had sufficient funds on hand to pay claimant dividend without interfering with other payments, was entitled to participate in first dividend (Code 1942, sec. 5254).
SMITH, C.J., dissenting in part.
APPEAL from the chancery court of Lauderdale county, HON. D.M. ANDERSON, Chancellor.
O.B. Triplett, Jr., of Forest, for appellant.
The decree of December 23, 1943, directed notice by mail and was not complied with.
Code of 1942, Sec. 5254.
Failure to file a claim within time limitations fixed by the court is excusable for valid reasons. Where receiver has sufficient assets in his hands, he will be required to pay the same dividend on an unpaid claim as he has paid on other claims, although such claim was not proved against the estate within the time required.
Grinnell v. Merchants' Ins. Co., 16 N.J. Eq. 283; Odell Hardware Co. v. Holt-Morgan Mills, 173 N.C. 304, 92 S.E. 6; Albright v. Sunset Motors, 148 Wn. 348, 268 P. 1036; People v. Remington, 59 Hun. 282, 12 N.Y.S. 824, 14 N.Y.S. 98, aff. 126 N.Y. 654, 27 N.E. 853; McDonald v. Aetna Indemnity Co., 93 Conn. 165, 105 A. 470; Washington Bank v. Creditors, 80 N.C. 9; First National Bank v. Gregg, 91 Ind. App. 405, 169 N.E. 691; United States v. Whisenant (Tex. Civ. App.), 75 S.W.2d 958; 45 Am. Jur. 192, Sec. 247; 53 C.J. 237, Sec. 394; Annotation in 109 A.L.R. 1411, 1413.
S.M. Graham, of Meridian, for appellee.
The appellee was simply appointed as custodian of funds resulting from litigation by the beneficiaries for the purpose of distributing said funds, and it is incorrect to say that the custodian failed to comply with the decree fixing the notice to be given when the decree itself limited the duty of the custodian to mailing such notices only to addresses appearing on the bank's list of depositors, and there being no addresses thereon the requirement was complied with.
Counsel cites Section 5254 of the Mississippi Code of 1942, which we submit has nothing whatever to do with the power of the chancery court or the duties of its custodian in this case, and while that section provides for notice to claimants by mailing, it deals with receiverships of insolvent banks where the receiver has possession of the bank records. The court limited the notice by mailing to such addresses as appeared on the bank's list of depositors, whereas the statute just cited requires notice to addresses appearing on the bank's records. A bank receiver has the bank records but the custodian in this case had no bank records except a list of depositors and had no right to the other bank records.
Counsel cites 45 Am. Jur. 192, Section 247, in part only, and we wish to cite the conclusion of the same section as being applicable and controlling here: "Where the limitation is statutory and is framed in such terms as to state or imply an absolute prohibition against the filing of claims after its expiration, it is generally held, with few exceptions, that filing before the expiration of the required time is a condition precedent to the right of recovery, and therefore, no excuse, however meritorious, will justify the delay or evade the prohibition. On the other hand, where the limitation originated with the court order or with an order of the official in charge of the administration of the insolvent estate, and its terms do not state or imply an absolute prohibition against the filing or allowance of claims after the expiration of the time fixed in such order, a meritorious excuse will justify the delay, and the claim will be allowed, although not filed within the time so fixed." So there appears to be finality somewhere, and there must be finality in court orders for notice to prove claims by the beneficiaries of trust funds, for a trust estate to ever be closed, and the court order in this case used the most impelling word "must" wherein it said: "Notice that all certificate holders must prove all claims before the Chancery Court of Lauderdale County . . . before the fourth Monday of February, 1943." When the court order is as imperative as this, it has the same force and effect as would a statutory requirement and since no statutory requirement of notice to a beneficiary applies in this case, then there must be given such effect to the court order in limiting the time in which claims are to be proved or there will never be any end to the distribution of the trust fund by the court.
See also 53 C.J. 237, Sec. 394.
In this case there are literally hundreds of depositors that have never proven and never will, as they are scattered all over this country and over many foreign countries. Appellant has received her dividends since her claim was proven and if she is allowed to go back now and get the first dividend, declared before she proved, it will completely upset the applecart, for if the first decree for notice was not binding, the second decree for notice will not be binding or any other decree fixing a time for dividends and providing for the giving of notice, will be binding. In effect, the complaint challenges the power and jurisdiction of the chancery court to act effectively in such matter.
After his appointment by the court below to receive and distribute to certificate holders the proceeds of the suit of the First National Bank of Meridian v. Pearson et al. (Miss.), 10 So.2d 178, and which litigation was compromised and settled by the parties upon reversal and remand, the appellee, E.B. Williams, Receiver, was authorized and directed by the chancellor to publish notice in the Meridian Star, a local newspaper, requiring all who were entitled to participate as certificate holders in the trust estate of the old First National Bank of Meridian, which suspended operation because of insolvency on January 13, 1931, to prove their claims before the chancery clerk, on forms provided therefor, before the fourth Monday of February 1943, and he was also ordered to give further notice by mail to each of such persons at his or her last known address "as shown by list of certificate holders now held by the First National Bank in Meridian." Thereupon, notice was accordingly published in the newspaper, but the list of certificate holders referred to contained only the names of those entitled to participate in the funds in the hands of such receiver and the amounts represented by their certificates, respectively, but not their last known address; hence no notice was mailed to the appellant, Mrs. M.E. Edwards, who resided at Morton, Mississippi, and who neither knew of the appointment of the appellee nor of the fact that a fund was to be distributed to the certificate holders until she was informed by a local acquaintance at Morton on March 13, 1943, that such was the case. She had neither seen nor heard of the notice in the Meridian paper. Upon learning of the proposed distribution of a first dividend, she went to Meridian on that same day and probated her claim in regular form in the sum of $1,157, the correct amount due.
It further appears that upon the expiration of the time allowed by the newspaper publication for probate of such claims, the court below declared a 7 1/2% dividend payable to those who had complied with the terms of such notice, and caused all funds then on hand to be distributed accordingly.
However when appellant later presented her claim as aforesaid and asked to be allowed to share in the first dividend of 7 1/2% as well as those subsequently to be made, the receiver had on hand additional funds, amounting to $49,000, which had not been distributed, and sufficient to pay not only the 7 1/2% dividend then due to appellant; but also to every other certificate holder who had filed late because of such want of notice. Having been denied the right to participate so far as this first dividend is concerned, she has prosecuted this appeal.
Section 5254, Code of 1942, provides that notice to depositors to prove their claims must be made by the receiver (1) by newspaper publication; and (2) by mailing a copy of the notice "to all depositors and creditors as shown by the books of the bank, at their last known post-office address." However, the claim of the appellant here was not denied because of failure to comply with a notice given pursuant to the statute in a general receivership matter, but rather on account of the failure of the claimant to prove her claim pursuant to an order of the court in a purely administrative proceeding. The appellee is merely the custodian of a fund for distribution to the beneficiaries of the proceeds of a lawsuit which had been compromised and settled, and it was therefore clearly within the sound judicial discretion of the trial court to permit the appellant to intervene and file her claim to a portion of the fund after the expiration of the time allowed by the order of the court for that purpose. "This conclusion holds true particularly in cases where, in addition to the claimants excuse for not earlier filing his claim there were circumstances calling for the application of equitable principles, regardless of the delay, and where no particular harm would result to anyone from the allowance of the delayed claim, or where the estate is undistributed at the time of the actual filing." 45 Am. Jur. 192, Section 247. The rule is also stated in 53 C.J. 237, Section 394, as follows: "In general, where an order is given for the publication of a notice of a limitation of the time to file claims, and such notice is duly published, claims not filed within the time specified in the notice are precluded in that proceeding from sharing in the assets. This result is held to follow, however, only where there has been, in the meantime, a final distribution of the funds in the hands of the receiver, based upon claims proven, unless injustice would otherwise be done. . . . If a reasonable excuse for delaying to make an earlier claim is shown, the court may, in its discretion, permit a creditor to come in and prove his claim at any time before actual distribution, or even after partial payments, if there is a surplus in the hands of the receiver, so as not to interfere with payments already made." See also Grinnell v. Merchants' Ins. Co., 16 N.J. Eq. 283; Odell Hardware Co. v. Holt-Morgan Mills, 173 N.C. 304, 92 S.E. 6; Albright v. Sunset Motors, 148 Wn. 348, 268 P. 1036. Where receiver has sufficient assets in his hands, he will be required to pay the same dividend on an unpaid claim as he has paid on other claims, although such claim was not proved against the estate within the time required. People v. Remington, 59 Hun. 282, 12 N.Y.S. 824, 14 N.Y.S. 98 (affirmed 126 N.Y. 654, 27 N.E. 853).
A claim should be admitted at any time before the actual distribution, or even after partial distribution, if there be a surplus in the hands of the receiver so as not to interfere with the payments already made. First National Bank v. Gregg, 1930, 91 Ind. App. 405, 169 N.E. 691. We are therefore of the opinion that the action of the trial court herein complained of was not taken in the proper exercise of judicial discretion, but rather upon the theory that said Section 5254, Code of 1942, supra, had been complied with by the receiver or custodian of the funds as to giving notice, and that the failure of the claimant to file the claim within the time allowed by the notice would as a matter of law defeat her right to participate in the first dividend which had been previously paid. We think that equity requires that the claims which were filed late in proper form should have been paid out of the additional funds received by the custodian, which should have been retained undistributed pending the outcome of this case.
The decree of the court below will therefore be reversed and a decree rendered here in favor of the appellant for the amount of the dividend in controversy. Reversed and judgment here for the appellant.
PARTIALLY DISSENTING OPINION.
I am of the opinion that the case should be remanded to the court below for the rendition of a decree in accordance with the facts as they may then appear. For aught we know, something may have occurred since the rendition of the decree appealed from that would affect the appellant's right to a decree against the appellee.