receiver, namely, the powers of an ordinary equitable receiver, but he cannot sell or dispose of the property unless it is perishable. A sale or other disposal of the property of the bankrupt should ordinarily be accomplished by the trustee. The receiver has no title to the bankrupt's property - is a mere temporary custodian. The trustee in bankruptcy, however, is vested with the property of the bankrupt. Receivers in bankruptcy and trustees in bankruptcy, under both the American and the English acts, take the property of the bankrupt subject to all liens, charges, and equitable interests properly attaching to the same, except such as attach within a definite time preceding the bankruptcy proceedings, and are thereby void or voidable.37 A third party, therefore, who would be entitled to a specific performance of the contract against the alleged bankrupt, had not bankrupt proceedings intervened, would still have what would be, in substance, such a claim against the property in the hands of the bankrupt, provided he had against such property a lien, charge, or equitable interest.38 If such third party attempted to work this out by intervention proceedings, or otherwise, in the bankruptcy court during the interim receiver's administration of the estate under the English act, or a receiver's administration under the American act, and a deed of the property were necessary to complete the transaction, a difficult problem would present itself. The alleged bankrupt has been divested of his property by reason of the proceedings in bankruptcy, the receiver has custody of the same, but the title to the property has not yet vested in the trustee. Whatever order the third party might acquire ordering the receiver to hand over the property or releasing the property from the bankruptcy proceedings, an additional deed or acquittance might in safety be secured later from the trustee in bankruptcy, because the title which the trustee in bankruptcy acquires dates. back to the time of adjudication.39 A summary proceeding may not 37 Ex parte Holthausen, In re Scheibler, L. R. 9 Ch. 722 (1874); Thompson v. Fairbanks, 196 U. S. 516, 526 (1905); Yeatman v. Savings Institution, 95 U. S. 764, 766 (1877). 38 Harris v. Truman & Co., 9 Q. B. D. 264 (1882); Ex parte Holthausen, In re Scheibler, L. R. 9 Ch. 722 (1874); Pearce v. Bastable's Trustee, [1901] 2 Ch. 122; Ex parte Rabbidge, 8 Ch. D. 367, 370 (1878); Thompson v. Fairbanks, 196 U. S. 516, 526 (1905). 39 English Bankrupt Act, ENG. STAT., [1914] 322, § 53; American Act of Bankruptcy, 30 STAT. AT L. 565, § 70 (1898). 41 be sufficient to adjudicate rights of the trustee or an adverse claimant; a plenary suit may be necessary.40 A trustee in bankruptcy is vested with the property and title of the bankrupt's estate by statute, somewhat as a liquidator or receiver after dissolution of a corporation is vested with the title of the corporation. Having the legal title to the property he may be compelled to convey to one who has contracted to purchase from the bankrupt vendor. The courts have held, however, that specific performance cannot be decreed against the trustee of a bankrupt purchaser,42 and correctly we believe, provided it cannot be shown that the vendor had an equitable or legal interest in funds of the purchaser segregated and set apart and earmarked, and that the purchaser had unmistakably divested himself of the whole beneficial interest in said funds.43 V. LIQUIDATORS OR RECEIVERS TO DISSOLVE The distinction between liquidators or receivers to dissolve corporations and ordinary equitable receivers is in the fact that equitable receivers are custodians or caretakers of the property in their hands, whereas liquidators and receivers, after dissolution of corporations, are vested by statute with title to the dissolved corporation and frequently have statutory powers and duties. The same usages and rules of equity which obtain in the case of specific performance being demanded against equitable receivers, or against the property in the hands of equitable receivers, obtain against liquidators or receivers after dissolution of the corporation,44 with the above distinction. If a contract is entered into with a corporation and it is dissolved, the corporation cannot perform this contract, neither can it, strictly speaking, according to the old law, as such, be liable for breach of contract to perform, because no corporation any longer exists. Yet the party not in fault may have a right of action against the statutory survivors of the corporation.45 Proceedings, therefore, should be instituted against the receiver or liquidator having title to this property. Such a receiver could make any deed necessary 40 Dreyer v. Perkins, 217 Fed. 889 (1914). 41 See cases under note 38. Pearce v. Bastable's Trustee in Bankruptcy, [1901] 2 Ch. 122, 125. 43 See note 26. "In re Oak Pits Colliery Co., 21 Ch. D. 322 (1882). ❝See Personal Service Contracts, this article. and at the same time turn over or give possession of the property. The statutes in such cases largely control, because they permit the corporation to continue after dissolution for the purpose of being sued and for winding up their business, or may by statute designate the directors as trustees for winding up the business, in which cases it may be necessary to sue the directors to have them make the proper deed, and it may be necessary to intervene in the receivership, and sue the receiver, and have the court appointing the receiver order the receiver to give possession or hand over the property. VI. SPECIFIC PERFORMANCE OF CONTRACTS ENTERED INTO BY RECEIVERS THEMSELVES Receivers, particularly those appointed to manage or carry on a business, frequently enter into contracts which are independent of the executory contracts which they find existing when the receivers take hold. The English courts hold that receivers, in entering into such contracts, do so as individuals and are personally responsible and liable for such contracts, although, if such contracts are properly and legally entered into, the receivers may be indemnified out of the assets of the trust estate.46 Our American courts, on the other hand, hold generally that receivers, when they enter into such contracts, are officially liable.47 If, under the English rule, a receiver enters into a contract which might ordinarily be specifically performed, it might be enforced against him as well as against another individual, unless such contract involved property which was in custodia legis. In the latter event, no order by any court other than the appointing court could disturb the property in the hands of the receiver. If a third party, however, presents claims which are valid and just and growing out of the receiver's contracts, he must depend upon the court's seeing that such obligations of the receiver are scrupulously carried out, so far as the court has funds in its hands. 48 Such third party, strictly speaking, gets no lien against the property. 46 Burt, Boulton & Hayward v. Bull, [1895] 1 Q. B. 276. If, under the American rule, a receiver enters into a contract under his express or implied power, and such a contract does not involve property in the hands of a receiver, the third party to such a contract can only intervene or sue the receiver officially by permission of the appointing court. If the third party gets judgment in another court, this judgment can only be satisfied out of the property in the hands of the receiver by permission of the appointing court. If such a receiver officially makes a contract involving property in the hands of the receiver, no court can order such property to be specifically handed over to the third party, except the appointing court; therefore the third party's remedy is to intervene or to ask for permission to sue the receiver, and ask for an order authorizing the receiver to turn over the property to such party. The American courts hold that in the case of a contract entered into officially by a receiver, "The Court in a substantial sense makes the contract."49 "Judicial repudiation of obligations is not to be sanctioned under any conditions,' therefore, a party to a contract with a receiver must depend upon the honor of the court to carry out such a contract, but he cannot force the court to do so by a proceeding of specific performance of contract, nor can he secure damages from the court for its or the receiver's failure to carry out the contract. A claim growing out of a receiver's operation of the property is not, strictly speaking and in the full meaning of the word, a lien on the property, but may be a preferential debt.50 If the receiver, either under the English or American rule, enters into a contract without the authorization of the court, either express or implied, then he must do so as an individual and be liable as an individual. If a receiver, by order of court, enters into a contract to sell property to a third party, this third party becomes, by his bid, a party or quasi party to the suit and is amenable to the court's orders.51 If this third party fails to carry out his contract, the receiver may sue him for specific enforcement,52 or proceed summarily 49 Atlantic Trust Co. v. Chapman, 208 U. S. 360, 371 (1908). 50 Bank of Commerce v. Central C. & C. Co., 115 Fed. 878, 880 (1902). 51 Gordon v. Saunders, 2 McCord Ch. (S. C.) 151, 167 (1827); Deaderick v. Smith, 6 Humph. (Tenn.) 138, 146 (1845); Rice v. Ahlman, 70 Wash. 12, 126 Pac. 66 (1912); Majors v. McNeilly, 7 Heisk. (Tenn.) 294 (1872). $2 Bowne v. Ritter, 26 N. J. Eq. 456 (1875). against him for his failure to carry out the contract.53 If, on the other hand, the receiver fails to carry out his contract, what are the third party's rights? In the first place, the sale made by the receiver is subject to confirmation by the court, and the purchaser may make any motion or file any petition necessary to protect his rights; he may also be given the right to appeal or go to a higher court on writ of error.54 When a sale is confirmed, the title to personalty so sold becomes vested in the purchaser without formal decree and without any bill of sale or other conveyance by the receiver. In sales of realty, a confirmation of the sale does not vest the title in the purchaser; it only completes the sale. The title must be completed in the purchaser by a formal deed. If the receiver fails or refuses to make a deed or other proper conveyance, the bidder's remedy is to apply for relief to the court appointing the receiver; such a bidder has no right to sue the receiver for specific performance, unless the appointing court should determine that the rights of the parties could not be adequately presented in a summary proceeding, and therefore authorize a suit for specific performance against the receiver.55 CINCINNATI, OHIO. Ralph E. Clark. 53 Bowne v. Ritter, 26 N. J. Eq. 456 (1875). |