Bangs v. McIntosh

23 Barb. 591, 1857 N.Y. App. Div. LEXIS 24

• Court: New York Supreme Court
• Decided: March 2, 1857
• Status: Published

Opinion

By the Court, E. Darwin Smith, J.

A receiver or other party commencing a suit in this court under any special authority, must duly allege his authority in his complaint, and in a traversable form; (Gillet, receiver, v. Fairchild, 4 Denio, 80; White, receiver, v. Joy, 3 Kern. 83 ;) and if issue be taken upon such allegation, it must be proved on the trial, as much as any other traversable fact. It was necessary therefore for the plaintiff in this action, to state in his complaint that he had been been duly appointed receiver, and as the proceedings on the trial assumed that such fact had been duly put in issue, he was bound to make due proof thereof.

I. The first point made by the defendant’s counsel is, that the plaintiff did not prove his own appointment as such receiver. It is a fundamental principle that all courts and judicial officers must acquire jurisdiction before they can make any binding decision, or do any valid act. The principle is no less applicable to this court than it is to all inferior courts or magistrates. And the question of jurisdiction is at all times open to inquiry and investigation whenever and wherever any judicial act or determination is set up or sought to be enforced. (Borden v. Fitch, 15 John. 121. Mills v. Martin, 19 id. 33. Elliot et al. v. Piersol et al., 1 Peters, 328, 340.) The question whether this court ever acquired jurisdiction to appoint the plaintiff receiver of the property and assets of the Grenesee Mutual Insurance Companyis distinctly raised and presented for our decision, and we cannot decline passing upon it. The jurisdiction is claimed and was exercised under section 36 of chapter 8, title 4, part 3, page 463 of vol. 2 of the revised statutes, which is as follows: “ Whenever a judgment at law or a decree in equity shall be obtained against any corporation incorporated under the laws of this state, and an execution issued thereon shall have been returned unsatisfied in part or in whole, upon the petition of the person obtaining such judgment or decree or his representatives, the court of chancery may sequestrate the stock, property, things in. action and effects of such corporation, and may appoint a receiver of the same.” This statute conferred a new power upon the court of chancery. Jurisdiction over corporations was expressly disclaimed by Chancellor Sanford in the case of The Attorney General v. The Bank of Niagara, (Hopkins Rep. 354,) following the case of The Attorney General v. The Utica Insurance Co. (2 John. Ch. R. 371.) This decision in Hopkins was pronounced in March, 1825, and was followed in the ensuing month, April 24th, by the act “ to prevent fraudulent bankruptcies of incorporated companies and to facilitate proceedings against them. (Sess. Laws of 1825, chap. 325, p. 448.) The fifth section of this act was the same in substance as the above 36th section. This section 36 contains a special delegation of power over insolvent corporations, to be exercised in a prescribed manner or form and upon a particular state of facts. Like all cases of authority delegated by statute affecting liberty or property, the prescribed form, for obtaining jurisdiction of the person and subject matter must be strictly pursued.

In Blooms. Burdick, (1 Hill, 141,) Judge Bronson says: “ In every form in which the question has arisen, it has been held that a statute authority by which a man may be deprived of his estate must be strictly pursued;” and in Thatcher v. Powell, (6 Wheat. 119,) Chief Justice Marshall says, “ that a person or public officer with power to divest another of his property, must pursue with precision the course prescribed by law, or his acts will be invalidand in 7 Wend. 148 ; 13 id. 465; 20 id. 241; 2 Coms. 464, the same doctrine is asserted. The remedy under this section, 36, is summary and of serious consequences. It involves the virtual dissolution of the corporation proceeded against, and the loss of its franchises. It is not like a creditor's bill, a proceeding in behalf of the creditor, for the creditor instituting the proceedings obtains no preference, and is only to be paid ratably with the othercreditors. (Sections 37, 79. Morgan v. New York and Albany R. R. Co., 10 Paige, 290.) The proceeding is not the continuation of the original suit. It must be based upon a judgment at law, or a decree in equity, and the courts of law and equity were distinct when this statute was passed. It is an original proceeding in this court as a court of equity. The presentation of the petition is the first step in the proceeding. It is like the service of process to bring a party into court. It is like the presentation, with the petition for the sale of real estate to the surrogate, of an account of the personal estate—held indispensable in 1 Hill, 130 ; or tbé publication of notice to unknown owners in partition, the omission of which was held fatal, in 11 Wend. 647 ; or the service, in the form prescribed by statute, of the attachment against foreign corporations, as was the case in 3 Barb. 536 ; S. C., Wright v. Douglass, (10 id. 110,) or the obtaining and service of an allowance of appeal, as in the case of Seymour v. Judd, (2 Comst. 464.) The presentation of the petition stating the prescribed facts confers the jurisdiction. The statute does not require any service upon or notice to the corporation, but the court would not act discreetly to proceed upon it without notice. In Devoe v. Ithaca and Owego R. R. Co. (5 Paige, 521,) on filing the petition duly verified, the chancellor granted an injunction and made an order for the corporation to show cause why the sequestration and receivership should not be granted. But the court might have proceeded without the notice, and had complete jurisdiction to order the sequestration and appoint the receiver upon the simple presentation of the petition, and error in doing so could only be corrected on motion or by appeal. Before the court could lawfully do this, however, it must have a petition from the creditor in the judgment, or his legal representatives, setting forth the due recovery of a judgment in a court of law or a decree in equity, with the due return of an execution thereon issued, unsatisfied in whole or in part. This is essential to confer upon the court the slightest power or authority to proceed in the case.

Ho one else, under section 36, can lawfully invoke the power of the court to deprive the officers of the corporation of their legitimate control over its property and affairs, and divest it of its franchises. The petition in this case clearly was not such a petition. It is the petition of Harry Wilbur, who describes himself, it is true, as the attorney of William Lafferty, the judgment creditor. But it is none the less the petition of Wilbur. The appellation of attorney for Lafferty, is mere description of the person. (4 Denio, 258. 7 Hill, 177. 11 Howard, 11, 36, and S. C. 3 Kern. 83.) The presentation of this petition to the court clearly conferred no jurisdiction for the appointment of a receiver under the statute, no more so than if Wilbur had been an entire stranger to Lafferty. The original order therefore, made by Judge Taylor, for the sequestration of the property and effects of the Grenesee Mutual Insurance Company, and for the appointment of a receiver of such property and effects, was entirely unauthorized and void.

The subsequent application in the same matter, and the order of Judge Selden of the 30th of May, 1853, to amend such petition, does not cure the defect. It is merely adding another nullity to the prior nullity. (9 John. 241) 190. 15 Wend. 310. 4 Cowen, 504.) When this court has acquired jurisdiction, it may amend any process or proceeding, to retain it and carry out and effectuate its object in furtherance of justice. But it cannot make a void proceeding valid by an amendment in the same proceeding or matter, and I take it to be a fundamental rule that where there is an absence of jurisdiction, the defect ■ cannot be supplied by amendment or supplemental proceedings, so as to make the void proceedings valid from the beginning. (18 Wend. 675. 4 John. 309. 2 id. 190. 13 How. 353.) This court is a court of general jurisdiction, and every intendment is in favor of its jurisdiction. (9 John. 437. Foot v. Stevens, 17 Wend. 483.) Yet it must proceed according to the forms of law, as much as any other court or officer, and can exercise no power over life, liberty, or property, except by due process. When it has acquired jurisdiction of the person and subject matter, all its errors must be corrected by appeal or other legitimate mode of review, and no allegation in respect to any such errors as affecting its jurisdiction, can be sustained. (4 Denio, 120. 7 Wend. 200. Stanton v. Schell, 3 Law Rep. 329.) The only difference between courts of general and courts of limited jurisdiction is, that the jurisdiction is presumed in the former case and must be shown in the latter. (17 Wend. 483. 21 id. 41,) Want of jurisdiction is equally fatal to the proceedings in both cases. (Bloom v. Burdick, 1 Hill, 139. Douglass v. Stewart, 10 Barb. 110. The Chemung Canal Bank v. Judson, 4 Seld. 254.)

II. But assuming that the appointment of the plaintiff was valid, and was duly proved, it is next objected that the assessment was irregular in various particulars. These objections to the assessment, I think untenable. It was made under the sanction of the court, and if there was any injustice, inequality or irregularity in respect to it, the remedy of the parties affected thereby, was by motion to amend, rectify or modify the assessment. This class of objections, I think cannot be raised on the trial, more than can be irregularities in the ordinary proceedings of a cause before issue or trial. (2 Hill, 267.) But this does not apply to the notice required to be given by the 10th section of the act, before the commencement of a suit against any defaulting member. By this section the directors are to settle and determine “ the sums to be paid by the several members thereof, as their respective proportions of any loss, and publish the same in such manner as they shall see fit, or as by their bylaws shall have been prescribed.” The act thus makes a notice necessary before the corporation can sue, but leaves it discretionary with the directors to prescribe the manner of the notice. The directors, by their by-laws, prescribed that notice of assessments should be given by the secretary, by publication in two newspapers printed in the county of Genesee, for three weeks successively, the last publication to be thirty days before the day fixed for assessment. This by-law merely fixes the place and time of publication, but does not prescribe the form of the notice. This is left, therefore, to be determined by a construetion of section' 10 of the act in respect to the character, office and occasion for the notice.

It seems to me that the notice published, as set forth in the case, does not answer the object, intent and spirit of the requirement respecting it in the charter. I think it defective in two particulars. First, it was premature. It was first published on the 16th of June, 1852. At this time no assessment had been made. The assessment was not completed till several months after that time. All that had been done at that date was the simple ascertainment of the rate per cent for making the assessment. The assessment was not complete and consummated till it was ascertained, fixed and determined by carrying out upon the extension book the amount which each member was to pay. The notice, to be of any practical use whatever; tobe anything else than a mere mockery; should state the amount which each member is to pay. That is clearly what is intended in the charter by requiring notice to be given before suit. The section should have a rational construction—one beneficial to the members—not one that makes it entirely nugatory. The notice published in this case is entirely insufficient and defective. It gives no .sort of information to the members. No one could tell from it what sum he.was required to pay. To hold the members bound to pay upon such a notice, or be subject to a suit and to-judgment upon the whole premium note, would, I think, be highly unjust, as well as a gross perversion of the section in question. The objection, too, that the plaintiff was not entitled to recover interest on the amount of the premium note, I think, was well taken. The amount of the premium note was not money due. The right to recover for the whole amount of the note is based upon a default to pay an assessment of $6.10. To allow a recovery of interest in such cases would create an inequality of payment among the members. Those who paid their assessments without suit could not be compelled to pay interest on their deposit notes, and none of the members are liable to pay more than their deposit notes until the liability for a re-assessment arises under section 11 of the act, under which all liable to contribute to a common loss are bound to com tribute ratably to an extent not to exceed $1 on the $100 of their respective premium notes. In The Rensselaer Glass Factory v. Reid, (5 Cowen, 587,) Senator Spencer says “ that the allowance of interest, as incident to a debt, is founded on the agreement of the parties, and that such agreement may be express or implied.” Here is no express agreement to pay interest, and none can be implied except when the principal sum is justly due. (Robinson v. Bland, 2 Barr, 1086.) Here nothing is justly due but the assessment of $6.10. The recovery for the whole amount of the note is in the nature of a penalty, and interest is not recoverable upon a penalty. (1 John. 843. 3 Cowen, 155.)

[Monroe General Term, March 2, 1857.

T. R Strong, J., and Welles, J., reserved their opinions on the first point, and concurred with Justice Smith in all the residue of the above opinion.

Hew trial 'granted; costs to abide the event.

T. R. Strong, Welles and Smith, Justices.]