Buchanan v. Comstock

57 Barb. 568, 1865 N.Y. App. Div. LEXIS 213

• Court: New York Supreme Court
• Decided: October 3, 1865
• Status: Published

Opinion

By the Court, Bosekbans, J.

If we look solely at the verified allegations of the complaint, in this action, it is difficult to discover upon what principle, or for what purpose, the order for the appointment of a receiver of the property of the firm of S. A. Parks & Co. was granted. The substance of those allegations is as follows : That in 1856 the plaintiff and the defendant Parks composed the firm of S. A. Parks & Co., and the firm had real and personal property with which it conducted the business of manfacturing paper, .until March, 1858, when their factory was destroyed by fire. Bach partner was to have interest on the excess over one half of the capital invested, and they were to share equally the profits and loss. That on the 1st day of April, 1858, the plaintiff’s capital exceeded Parks’ more than $10,000, and the firm had lost $8000, including the loss by fire. Shortly after the loss, the partners agreed that the plaintiff should advance or procure means to rebuild the works, and that as soon as practicable the plaintiff should get a corporation formed for the purpose of taking the property of the firm; that the property should be sold to such corporation; and that out of the proceeds of the sale the plaintiff should have the right to withdraw sufficient to reimburse the amount of his capital and advances, and expenses of rebuilding, and the balance of the liabilities against the firm; and if any assets remained, it should be divided pro rata between the parties, according to their shares of the capital. By this agreement it will be perceived that Parks was to receive no part of his capital until the plaintiff had been reimbursed the whole of his capital, and that out of the balance' of assets, after paying the plaintiff his entire capital and all his advances, and all the liabilities of the firm, Parks was not to be reimbursed his capital .to the extent that such balance of assets would reimburse it, but was only to receive such proportion of said balance of assets as his capital bore to the capital invested by the plaintiff; and the plaintiff was to receive the residue of such balance of assets.

The complaint further alleges that the plaintiff' advanced further capital to rebuild the works of the firm, became indebted for the residue, and the work of rebuilding proceeded while measures were being taken to organize the corporation, and the corporation referred to, called the Pioneer Paper Company, was organized about 1st April, 1859, for manufacturing purposes, with a capital of $30,000. That in March, 1859, the assets of the firm were worth about $20,000; and that by charging the plaintiff with all the former debts as assumed by him, the firm, on the 1st April, 1859, would owe the plaintiff upwards of $20,553.46, and Parks would then owe the firm $1753.46 and upwards. The complaint proceeds to state that about March, 1859, the partners agreed that most of the firm assets should be sold to the corporation as soon as it was organized, and that the firm name should be used to subscribe for stock in the corporation; that with a portion of the proceeds of the assets of the firm, the stock should be paid up; that the plaintiff should have the right to sell said stock to pay the debts of the firm or take the stock for his own benefit at par, and credit the firm with that amount towards the division and winding up of the firm affairs; and that the plaintiff would raise money upon the stock or otherwise, pay the firm debts, and bring the firm matters to a close; and after the payment of the firm debts and refunding to each party his capital and advances, it was agreed that the balance of said stock, if any, should be divided pro rata ’ between the parties, according to their interests in the firm. That in pursuance of this agreement, the plaintiff subscribed for $19,800 of said stock in the name of the firm, and the assets of the firm were sold to the corporation, and $19,800 of the proceeds were appropriated for the payment of said stock.

The complaint proceeds to state that during 1859 the debts remaining against the firm were pressing, and the firm could not meet them without the sale of stock, and that in December, 1859, the firm transferred 113 shares of the stock to the plaintiff, individually, to have and to hold to his individual benefit, and that this transfer was made pursuant to a previous agreement between the parties, that the plaintiff should have the right at any time to take stock at par, as so much toward refunding his share in the capital of said firm.

The complaint alleges that the plaintiff did pay the debts of the firm, in pursuance of said understanding, and has proceeded to wind up and close the business of the firm, and has credited the firm with 198 shares of stock at par, $19,800, and has charged the firm with all the debts paid by him; that he sold five shares of the stock, in 1860, which the defendant Comstock has since bought, and that Parks had full knowledge of the affairs of the firm, and had full and free access to the books of the firm and of said corporation, and knew that the plaintiff* had taken said stock on the division as his own property, as aforesaid, and made no objection thereto,.until about February, 1863, and afterwards looked over the matter, and was satisfied the plaintiff had done right in taking said stock, and so expressed himself, and assented to it, and ratified the transfer, and agreed that the plaintiff should retain the stock to the amount of his interest and capital in the firm, and only claimed sufficient of the stock to pay his interest in the firm, if anything was coming to him upon a final settlement, calling the stock par.

The complaint proceeds to allege that Parks has looked over the firm matters, and concluded that $2000, at least, remains due to the plaintiff, over and above the whole of the 198 shares of stock. It is also alleged that upon a full accounting of the partnership • matters, the said sum of $1753.46 and upwards, before alleged to be due from Parks on the 1st April, 1859, with interest from that date, is due from Parks to the plaintiff. The complaint alleges that about June, 1863, Parks pretended to sell to the der fendant Comstock, and to assign to him conditionally, a portion of his interest in the firm of S'. A. Parks & Co., and that Comstock now claims that there is some interest in said firm owing to him. ", i

These are substantially all the allegations of the complaint ; and they show that the entire property and assets of the firm of S. A. Parks & Co. were invested in the 198 shares of stock of the Pioneer Paper Company; that the debts of the firm have all been paid by the plaintiff, and charged to him on the books of the firm; that the plaintiff has wound up and closed the business of the firm, and that with the consent of Parks, and pursuant to agreement, the plaintiff has taken the 198 shares of stock on the division, and that Parks subsequently looked over the firm matters and ratified the transfer of their 198 shares of stock to the plaintiff, and conceded that a balance of at least $2000 is due the plaintiff. They also show that the only assets of the firm not disposed of or adjusted, is the balance due the firm from the defendant Parks on the 1st of April, 1859, of $1753.46, and interest from that date.

And the plaintiff, without averring that the alleged transfer of the 198 shares of stock which was not perfect to vest in him not only the real, but also the apparent title to the stock, or that any one questions or proposes to question his title to it, asks, as part of the relief to which he is entitled, “that he may be adjudged to hold said stock transferred to him by said S. A. Parks & Co., as his individual property, and that he he only charged with the same at par; and that the defendant be enjoined from voting upon any of said 198 shares of stock originally transferred to the plaintiff, as stated in the complaint, (except the five shares sold to Comstock,) or from transferring any portion of said 198 shares of stock, except said five shares; and that a receiver may be appointed of said joint property of S. A. Parks & Co., including all stock now held by them or by said defendants, or either of them, or by the plaintiff and Comstock jointly, which originally belonged to S. A. Parks & Co. In the light of the allegations of the complaint, and its omissions of allegation, that portion of the prayer for relief above recited, appears absurd. And the prayer for the appointment of a receiver of any portion of the 198 shares of stock, as joint property of the firm of g. A. Parks & Co., which is expressly alleged to have been long since transferred to the plaintiff, by the firm, is also absurd.

There can be no ground for a receiver in the case of joint ownership of property, when the joint owner who 1 applies for the appointment has the property in his own possession and under his control. (Smith v. Lowe, 1 Edw. 33.) The injunction, as prayed for, could not be granted, as there is no allegation in the complaint of threatened or apprehended acts sought to be enjoined, and a receiver of property as joint property of the plaintiff and defendants, which is alleged to be the individual property of the plaintiff, and his right to which, as individual property, is not alleged to be questioned, nor his possession of it alleged to be disturbed, or threatened to be disturbed, was never, so far as my knowledge extends, appointed, or asked to be appointed, by the court. Indeed the 198 shares of stock mentioned in the complaint are not, so far as the allegations of the complaint show, a subject of this action. The plaintiffj taking his statement of his case as true, owned these shares as his individual property before suit, by per-feet transfer, and no one, according to his allegation, seeks to dispute his title.

But the whole equity of the plaintiff’s ease is denied by the answer, and there is nothing in the voluminous papers used upon the motion to maintain the claims made by the plaintiff. The affidavit of Parks, set out in the case, in the matter of the election of trustees of the Pioneer Paper Company, at fol. 165, states that since he assigned his interest he has examined the firm accounts, and that if the plaintiff is charged with the whole 198 shares of stock at par, there was a balance due to the plaintiff* at the date of the assignment, but Parks does not sustain the allegation that the transfer of 113 of the shares of stock to the plaintiff at par was with the consent of Parks, nor does he corroborate the statement of the plaintiff as to his claim of right to charge the 198 shares of stock to himself at par; besides, this claim of the plaintiff was found by the court, in the action of Comstock against the Pioneer Paper Company and Buchanan, not to be correct so far as the transfer of the 113 shares of the stock to the plaintiff was concerned, and it was declared that such transfer was without the authority, consent or approval, of Parks, and that he never ratified, sanctioned or confirmed the same. The judgment in that case also required Buchanan to surrender up the certificates for the 113 shares of stock, to be canceled, and directed the Pioneer Paper Company to cancel the transfer to the plaintiff, and to issue scrip for that stock to the plaintiff* and the defendant Comstock, jointly, and they are declared to be joint owners of said stock, subject to all equities existing at the time of the assignment to Comstock, between Parks and Buchanan as members of the firm of S. A. Parks & Co. It appears that this direction of the judgment has been complied with, and this stock now stands in the name of the plaintiff and Comstock. The remaining 85 shares may be assumed to stand in the name of the firm of S. A. Parks & Co., and by the rule established as to the 113 shares, the plaintiff and the defendant Comstock are joint owners of those shares, subject to the equities mentioned above. The balance of $24,913.07 which the plaintiff claims in this case to be due him from the firm of S. A. Parks & Co., according to his own testimony taken in this case, appears to have been made up without crediting the firm with the dividend received by him upon the stock, amounting to $5444, and the defendant Comstock insists that upon a fair accounting in relation to the affairs of S. A. Parks & Co., nothing will be found due to the plaintiff. It appears, too, that in October 1864 a dividend of fifty per cent was declared on the 198 shares of stock, amounting to $9900, which the defendant Comstock consents that the plaintiff may draw, and this, with one half the stock at par in the plaintiff’s name, charged to him, and the $5444 dividend received by the plaintiff, which he has not charged to himself, would cancel the balance which the plaintiff* claims against the firm. Besides, the defendant Comstock offers and consents that one half of the 198 shares may be transferred to the plaintiff, and the other half to himself, and to give any security that the court shall require to indemnify the plaintiff for any balance he may establish in his favor against the firm of S. A. Parks & Co. Under the circumstances, a denial of the entire equity of the case made by the complaint, an adjudication unreversed that a material statement in the plaintiff’s complaint is unfounded, an absence of any suggestion that the defendant is irresponsible, an offer on the part of the defendant Comstock which, if accepted, would indemnify the plaintiff against any possible loss, I cannot see the propriety of putting the property, of which the plaintiff and defendant are joint owners, into the hands of a receiver. It seems to me to be doing injustice to the defendant, in any case, to decide the whole of the disputed facts in favor of the plaintiff, in advance, without proof to sustain his allegations, and especially unjust when the defendant proffers unquestioned security ■ to the plaintiff against any possible loss.

[St. Lawrence General Term, October 3, 1865.

The irregularities which have heretofore occurred in the election of trustees of the Pioneer Paper Company, arising in part out of the opposite claims to the 198 shares of stock, cannot affect the question whether a receiver should be appointed. Those irregularities have already been corrected by judicial decision, and the rights of the parties .to the stock until the final determination of this action have been established by the judgment of this court, and it is to be presumed that they will be exercised in accordance with the judgment.

I think the order of the special term should be reversed, with costs.

Bosekrans, Boekes and Tames, Justices.]