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Wilson-Hurd Manufacturing Co. v. Karr Machine Corp.
Citations: 256 Wis. 533; 41 N.W.2d 601; 1950 Wisc. LEXIS 354
Court: Wisconsin Supreme Court; March 7, 1950; Wisconsin; State Supreme Court
The proceeding under Chapter 128 of the Wisconsin Statutes involves an appeal regarding the priority of claims between a landlord and a mortgagee following a debtor's receivership. The central issue is whether a landlord retains priority over a mortgagee for rental proceeds accrued after the debtor entered receivership. Past case law indicates that property with a prior lien can only be subjected to receivership expenses in limited circumstances, primarily to protect the interests of subsequent creditors and stockholders, with an exception for public utilities. In this case, the receivership was initiated mainly for the benefit of subsequent creditors, raising concerns about undermining the rights of the mortgagee. The mortgagee’s rights stem from previously pledged assets and are not contingent on the receivership. The only benefit from the proceeding for the mortgagee was the continuation of a chattel-mortgage foreclosure, with attorney fees being the sole priority over the mortgagee's claim. The court noted that the payment of rent from the proceeds of the sale of the mortgaged property negatively impacted the mortgagee's claim, which totaled $2,516.15 against sale proceeds of $2,000. Consequently, the court ordered the reversal of the prior order directing the receiver to pay the landlord accrued rent, mandating that such payments should be withheld until the mortgage is satisfied. The decision allows for the receiver to contest the validity or extent of the mortgage and the secured debt.