Mabon v. . Ongley Electric Co.

50 N.E. 805, 156 N.Y. 196, 1898 N.Y. LEXIS 692

• Court: New York Court of Appeals
• Decided: June 7, 1898
• Status: Published

Opinion

Vann, J.

According to the allegations of the complaint, the defendant was incorporated under the laws of the state of New Jersey, where it had a factory and an office, but its principal office was in the city of New York and its principal business, other than manufacturing, was transacted within the state of New York. On the 8th of January, 1895, the plaintiff was appointed receiver of the defendant, as an insolvent corporation, by the decree of a court of competent jurisdiction in the state of New Jersey, “ with full power to demand, sue for, collect and receive and take into his possession all the property, effects and dioses in action of said defendant, and enjoining and restraining the officers and agents of the said defendant from thereafter dealing or interfering with the same.” After duly qualifying, the plaintiff took possession of all the property and assets of the defendant in the state of New Jersey, but he has not been able to obtain certain of its books and papers which are in the possession of its directors in this state, although he does not allege what, if any, efforts he has made in order to obtain them. Among the assets in this state are several promissory notes, amounting to 037,500, covered by an attachment issued against the property of the defendant in an action in the Supreme Court, wherein judgment has lately been recovered for the sum of $13,773.39, upon which execution is liable to be issued; but, as it is alleged, if said notes should be collected in full, “ there will be a surplus therefrom after the satisfaction of said judgment, which will belong to the defendant herein.” The plaintiff states that, as he is advised and believes, “ it will be impracticable for him properly to perform his duties as receiver, and to ascertain, collect and take possession of the property of the defendant unless a receiver shall be appointed within the state of New York in aid of the plaintiff, to collect and receive the property and assets of the defendant within the state of New York, and to hold the same until the rights thereto of all the parties in suit shall be determined, * * * and the disposition thereof directed by order or judgment of” the court.

These are substantially all the facts alleged in the complaint, and the demand for judgment is that the defendant turn over to the plaintiff all its property and assets; that pending the determination of the action a receiver be appointed with the usual powers, and that the customary restraining order be issued against the defendant, its officers, agents and servants.

To this complaint the defendant demurred upon the grounds: 1. That the court has no jurisdiction of the person of the defendant. 2. That the court has no jurisdiction of the subject of the action. 3. That the complaint does not state facts sufficient to constitute a cause of action. The demurrer was sustained by the Special Term, but was overruled, upon a divided vote, by the Appellate Division, which allowed an appeal to this court and certified the following question of law for decision:

“Can a receiver of an insolvent HeW Jersey corporation, appointed by the court of that state and resident therein, having full jurisdiction in a suit for the winding up of the affairs of said corporation, with power, so far as could be conferred by such appointment, to demand, sue for, collect, receive and take into his possession ail the property, effects and dioses in ' action of said corporation, maintain an action in the Supreme Court of this state against said corporation as sole defendant for the purpose of procuring the appointment in this state of an ancillary receiver ? ”

This question, when read in connection with the complaint, means, can such an action be maintained against the corporation, as sole defendant, for the sole purpose of procuring an ancillary receiver. The question involves the sufficiency of the complaint, but unless that pleading shows -some useful purpose to be attained by the exercise of jurisdiction, it is obvious that the court should not entertain jurisdiction. Although the plaintiff alleges that he is advised and believes that he cannot perform his duties as receiver without the aid of an ancillary receiver, he confines himself to the mere assertion of necessity without alleging any fact to support it. He points to nothing that an ancillary receiver could do that he cannot do himself. So far as appears, he has all the power that his auxiliary would have, if appointed. While the laws of a foreign state have no force, as such, in this state, still our courts uphold the title of a foreign assignee or receiver upon the principle of comity. If the title is by virtue of a voluntary conveyance or transfer, it is sustained as against all, including even domestic creditors, but if it depends on a foreign statute or judgment, it is sustained against all except domestic creditors. Subject to their superior rights, the plaintiff can reduce to possession all the property of the defendant in this state, and can bring replevin for that purpose, or trover to recover damages for conversion. Elotes and accounts may be collected by the usual proceedings in our courts, which regard a foreign receiver as representing the original owner, and open their doors to him as they do to a domestic receiver. (Barth v. Backus, 140 N. Y. 230; Vanderpoel v. Gorman, Id. 563; Toronto Gen. Trust Co., as Trustee, v. C., B. & Q. R. R. Co., 123 N. Y. 37; In re Waite, 99 N. Y. 433; Ockerman v. Cross, 54 N. Y. 29; Petersen v. Chem. Bank, 32 N. Y. 21; Willitts v. Waite, 25 N. Y. 577; Hoyt v. Thompson's Executor, 19 N. Y. 207; Hoyt v. Thompson, 5 N. Y. 320; President, etc., v. Thorp, 6 Cow. 47; Runk v. St. John, 29 Barb. 585; Pugh v. Hurtt, 52 How. Pr. 22; Middlebrook v. Mer. Bank, 3 Keyes, 135; Smith v. Tiffany, 16 Hun, 552; Story Conflict of Law's, § 413 ; Gluck and Becker on Receivers, § 52.) Every remedy to gather in the assets is afforded, unless it would interfere with the policy of the state or impair the rights of its own citizens. A state that does not discriminate between its own citizens and those of a foreign state discharges ail the obligations required by the rule of courtesy. We .are now asked to sustain an action which a domestic receiver could not bring here, and a foreign receiver could not bring in his own state. If the plaintiff should succeed, he would have called into being a receiver whose rights would supplant his own in this state with no compensating advantage, but with the disadvantage of reducing the fund going to creditors and stockholders owing to the extra expense of an additional receiver. Why should one receiver ásk to have another receiver appointed for the same property with the same right of possession, the same right to sue and the like ?

This action is against the corporation itself, as sole defendant, and hence no relief can be granted against third persons, such as the directors or others who may be in possession of its books or assets. The plaintiff does not ask for a receiver of specific property involved in a controversy between himself and some one else, but, as receiver, he asks for a receiver of his own corporation, as substantially the only relief that he desires. He bases his right to this relief on the simple fact that the defendant has property within this state that requires administration. As we read the question certified, he seeks to maintain the action merely for the appointment of a receiver, not as an aid to other relief, but as an independent right. As he stands for the corporation he is really suing himself, and is virtually the sole party to both sides of the controversy. He alleges no act of omission or commission on the part of the defendant, no neglect or breach of duty, and nothing to constitute a cause of action. If any cause of action is set forth it is not against the corporation, but against its directors, who are alleged to have possession of its books and papers. A cause of action against third persons, not parties, would not protect the complaint against a demurrer by the defendant. Indeed, the learned counsel for the plaintiff states in his points that the allegation relating to the directors “ was inserted with reference to the use of the complaint as an affidavit in applying for a receiver, and, so far as it concerns the relief prayed for, is wholly in the nature of surplusage.”

Courts do not appoint receivers merely for the asking, 1 but only on facts, alleged and proved, showing that one' is necessary for the preservation of property, or to accomplish some other useful object. A temporary receiver is frequently appointed before judgment, and as incidental to the ultimate relief sought, in order to preserve the property so that it can be distributed pursuant to the final judgment when rendered. A permanent receiver is frequently appointed by the final judgment in order to enforce it, but an action by a for eign receiver for the sole purpose of securing an ancillary receiver is not authorized in this state. A receiver is sometimes appointed in an action brought by a stockholder of a foreign corporation, with its affairs in process of liquidation, upon proof of special facts showing that funds in this state are in jeopardy owing to the insolvency of the custodian (Redmond v. Hoge, 3 Hun, 171); or upon the allegation of facts showing danger of loss, but in such cases the stockholders were powerless without a receiver. (Woerishoffer v. N. River Const. Co., 6 Civ. Pro. Rep. 113; Phœnix Foundry & Machine Co. v. Same, Id. 106.) The jurisdiction, however, is extraordinary and is exercised only when necessary to “ protect some clear right of a suitor which would otherwise be lost or greatly injured and which could not be saved or protected by any other action or mode of proceeding.” (Gluck & Becker on Receivers, § 22.) We have no stockholder or creditor before us as a party. A foreign receiver, without alleging any specific facts, showing that it would benefit him or those whom he represents, asks for an ancillary receiver, not as incidental to final relief but as the sole relief. We think this is opposed to the theory and law of receiverships.

We are also of the opinion that it is opposed to the policy of the state with reference to insolvent corporations, both domestic and foreign. Our statutes provide a complete system for the regulation of actions and remedies relating to corporations. Title second of chapter 15 of the Code of Civil Procedure is devoted to this object. (§§ 1775-1813.) Provision is made by article first for actions by and against corporations, whether foreign or domestic; by article second, for the judicial supervision of corporations and of the officers and members thereof; by article third, for the dissolution of corporations and the enforcement of the individual liability of officers and members; by article fourth, for the annulment of corporations, and article fifth contains miscellaneous provisions relating to injunctions, receivers and the like. Section 713, providing for a receiver as a provisional remedy has no application to the subject before us. Under articles second, third and fourth the actions must he brought by the attorney-general or by a stockholder, creditor or officer of the corporation. By section 1810, in article fifth, it is provided that a receiver can be appointed only in an action brought as prescribed in the second, third or fourth articles, or for a foreclosure of a mortgage in certain cases, or in an action brought by the attorney-general, or by a stockholder to preserve the assets of a corporation, or in a special proceeding for voluntary dissolution. By a subsequent section this is applied to an action or special proceeding against a corporation created by or under the laws of this state or against a corporation created by or under the laws of any other state wheredt does business in this state. (§ 1812.) Thus, the legislature has established the policy of the state with reference to the appointment, at least of permanent receivers, by surrounding the subject with such safeguards as it deemed necessary for the protection of its citizens. It has restricted the right to have receivers appointed, chiefly, to actions brought by the attorney-general, or by his permission, although in certain cases stockholders, creditors and officers of a corporation may initiate the proceeding. 'Ho authority is given to the receiver of a foreign corporation, appointed by a court of another state, to bring an action for the appointment of a receiver in this state, and the comity of states does not warrant an action here that could not be brought there, or one by a foreign receiver that could not be brought by a domestic receiver. . As we have already seen, articles second, third and fourth have no application, and the only part of article fifth that applies is subdivision three of section 1810, relating to an action brought to preserve the assets of a corporation. Such an action resembles the one now before us more nearly than any other described, in the statute, and yet, in order to justify the appointment of a receiver, it must be brought by the attorney-general or by a stockholder, and if by the latter, a receiver can be appointed only on notice to that officer. (E. 1883, ch. 378, § 8.) Even if these provisions relate only to final receivers, an ancillary receiver is a final receiver as to the property of a foreign corporation in this state, and hence, fairly comes within the spirit of the statute. Thus, we see that the policy of the state, as declared by the legislature, does not permit the prosecution of an action by a foreign receiver for the relief demanded in the complaint.

We think that the judgment of the Appellate Division should be reversed, with costs, and that the question certified should be answered in the negative.

All concur, except Gray, J., not voting.

Judgment reversed, etc.