Sager Manufacturing Co. v. Smith

45 A.D. 358, 60 N.Y.S. 849

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: November 15, 1899
• Status: Published

Opinion

McLennan, J. :

But two questions are presented upon this appeal:

First. Was the defendant authorized, by the order of the court: appointing him receiver, tq make the purchase in' question ?

Second.. If the defendant acted within the scope of the authority-conferred by the order appointing him receiver in making the purchase in question, and fully disclosed the character in which he-assumed to act, did he incur á personal liability ?

A receiver has no power, unless expressly authorized by the court: appointing him, to incur any expense on account of property in liishands, except such as is absolutely necessary for its preservation.. (Vilas v. Page, 106 N. Y. 439.)

The decree appointing the defendant receiver expressly authorized: Mm “ to carry on and continue the business,” so far as necessary tq enable him to collect the accounts and sums due or to become due. This provision clearly authorized the defendant to fill any contracts which the cycle company had entered into, and which were partially performed, to the end that the contract price might become due and collectible. In order that such contract price should become due and payable it was undoubtedly necessary, in certain instances, to furnish additional parts of or even additional bicycles complete, and to do this it was necessary that the business should be continued. Unless the clause in question was intended to, enable the receiver to meet just such a condition of things it is meaningless.

Again, the decree provides : Said receiver is hereby fully authorized to continue to operate and carry on the business of the defendant Cycle Company, in such a manner as the same is now conducted,, or in such manner as will in his judgment produce the most satisfactory results, so far as may be necessary for the preservation from, loss of the outstanding-contracts of said defendant Cycle Company.”'

By this clause, also, we think the court intended to make provision for completing at least the contracts which the cycle company had entered into and which it had partially performed, and intended to authorize the receiver to complete such contracts, in order that he might be in a position to demand and collect the contract price. If the cycle company had entered into a contract by which it had bound itself to furnish, on or before a certain date, 1,000 wheels, at. an agreed price, to become due and payable only upon the delivery of the entire number of wheels, notwithstanding two-thirds of the-bicycles had been delivered at the time the receiver was appointed,, no part of the contract price could be recovered by him until -the other third of the bicycles were delivered. To meet such a contingency he was authorized to carry on the business and in order that he might furnish the remaining bicycles called for by the contract,, and thus be in a position- to demand and enforce payment for the-whole.

By still another clause in the decree the receiver was authorized from time to time, out of the funds coming into his hands from the operation of the property and otherwise, to pay the expenses of operating the same. '■

It would be folly to say that the receiver was given authority to carry on the business -of manufacturing for the purpose of enabling him to collect moneys which were, due to the cycle company, ór which should become due at a future time, without any further act on the part of the cycle company. It would be equally meaningless to authorize the receiver “ to operate and carry on the business * * * - so far as may be necessary for the -preservation from loss -of- the outstanding contracts,” unless there were contracts in such condition that additional work or additional material were required in order-to make such contracts available as an asset in the receiver’s hands. ■ . -

Considering the nature of the property purchased, the character of the business of the insolvent' corporation and the language of the ■decree, the presumption arises that the purchase was made in obedience to the -order of the court, and for .-the purpose-intended- by the court, rather than that, it was. made for a purpose not contemplated by the decree. - - . ‘ .

We conclude that the-defendant was expressly authorized by the decree appointing him- to purchase the saddles! in question; that he, in effect, -informed the plaintiff, by the order for-the saddles itself, that he was receiver of the- Worcester Cycle Manufacturing Company; that it was located in a foreign jurisdiction; that the goods were to be used in such- foreign jurisdiction, and that he desired to purchase them as receiver,of such foreign -corporation. With that information the plaintiff accepted the order and shipped the goods to the-defendant as .receiver, and-'delivered them to- him at the factory of the corporation of which he was- receiver. -

A receiver of a foreign corporation dqmiciled-in a- sister State has the right to. enter into a contract for the purchase of goods in this ■State, and relieve-himself from personal liability, and the plaintiff had the right to sell-its goods to .the receiver of a foreign corporation, incorporated and doing' business under .the laws of a sister State, and to absolve. such- receiver from.-all personal liability on account of such sale. This is precisely what-the parties to the transaction in question did, unless, there is some principle of law ap.plb cable to contracts made by receivers which overturns the rules which ordinarily , .control.-contracts, and- imposes additional or a more strict liability when a receiver -is a purchaser than when the purchase is made by an individual. .

In case an agent makes a purchase of property as such, discloses the name of his principal for whom the purchase is made and for whom he is acting, no personal liability attaches. No matter in what jurisdiction such purchase is made, and no matter where the goods are to be delivered, if the place of delivery is specified in the contract.

If the defendant in this case had said to the plaintiff, “ I am the agent for a corporation doing business in a sister State; 1 wish to purchase goods for it as such agent, and desire you to ship the goods .which I may purchase to such corporation,” in case of a sale personal liability on the part of the agent would not be pretended, provided only the defendant had authority to represent' such corporation.

Instead,- in the case at bar the defendant almost in so many words said: “I represent the Circuit Court of the United States for the district of Massachusetts, as receiver of a corporation over which such court has jurisdiction. I am directed' or authorized by such court to buy goods for the purposes of such corporation, to be used within the State of Massachusetts, and I desire to purchase your goods.” The plaintiff assents and ships the goods to the defendant as receiver, and into the State of Massachusetts.

In the case of Livingston v. Pettigrew (7 Lans. 405) it was sought to hold a receiver personally liable on Ms covenant as receiver that a certain amount was due on a. claim sold by him. The plaintiff was nonsuited and the court said: “ He (the plaintiff) trusted to the receiver in his official capacity, understood that he acted as such, and upon no sound principle can it "be claimed that under such circumstances the receiver should be personally liable.”

In Beach on Receivers (§ 305) it is said: “‘The receiver is the mere officer or instrument of the court in the preservation and operation of the property, and any acts of his not within the scope of the authority conferred by the order appointing him, and not otherwise authorized by the .court, do not bind the court.’ * * * This is the application of the principle which declares and fixes the personal liability of an agent who enters into a contract with a third person without the authority of the principal. * * * "It produces the correlative, that when a receiver acts within the scope of his authority a.s given by the court, he incurs no personal liability. * * * Under no circumstances does a receiver incur any personal liability when lie acts in strict conformity with the directions ■ of the court, where it has jurisdiction to naalce the order.” . (High Receivers, §■272; Smith Receivers,-229:) ■ ■

Cook, in;his work -on Corporations■(§ 878), states:the rule as follows: “ A receiver-is not liable personally on- debts, contracts and: liabilities incurred by him as receiver. A few cases hold to the contrary, but the settled rule is that the receiver, being only an agent of the court, is no more liable than the court itself.”

It is the settled law in-this State that a:-receiver who enters into a contract as such, by the direction or authority of a court having, jurisdiction to confer stich authority or make such direction,, is not personally liable upon, the contract so entered into,

In Cardot v. Barney (63 N. Y. 281) the head note, is as follows: “An assignee or receiver in bankruptcy of an insolvent railroad corporation, who, as such assignee,'is running and operating its road, in the absence of evidence that he assumed to act other than as assignee, or that he held himself out as a. carrier of passengers. other -than as an officer of the .court, .is not liable in an action for negligence causr ing the death of a passenger, where no personal neglect is imputed to him, either in the selection of agents or in the- performance of any duty, but where the negligence charged was that ' of a subordinate whom he necessarily and properly employed in compliance with the order of thejsourt.”

It is equally well settled that if a receiver, although authorized by the court to contract as such, assumes-to contract in his individual capacity, although for the benefit of his trust, or if he assumes to contract as receiver without authority so to do, he will be held per-, sonally liable. The cases cited by respondent’s counsel in no way conflict with these propositions.-

In Ryan v. Rand (20 Abb. N. C. 313) the plaintiff, who was a stenographer; and had been employed by the attorney for a receiver, brought suit against -the receiver personally to recover for services rendered. The receiver was held • personally liable, because “ The receiver, as a rule, cannot involve the estate, in expense without the sanction.of the" court,” and because-11 There was no authority from the court making the plaintiff’s demand- a charge upon the estate, and the-defendant has-no power to make, it a chargp .thereon, except by payment, then charging it in his accounts, and having them sanctioned in the Usual way.”

• Sayles v. Jourdam (19 N. Y. St. Repr. 349 ; affd., 121 N. Y. 685). was an action to recover for merchandise furnished to a hotel which the defendant, who was receiver of a railroad company, assumed to "run in connection with the railroad. The. defendant was held personally liable, because “ there is no evidence that the defendant was "running this hotel-as receiver by direct-inn of the court.”

In Rogers v. Wendell (54 Hun, 540) the receiver of the Carthage Company, as such, authorized one Embury to take possession of the property and to employ such help as was necessary. Embury employed the plaintiff. The receiver was held personally liable, "because there was-no order" of the court directing the receiver to employ the plaintiff or ,otjier person, orto incur .any. expenses in connection with the -trust property. In'that case it is said,-Martin, J. (p. 546): “A receiver cannot of his own motion contract debts chargeable upon the fund in litigation. While a court may allow expenses incurred by a receiver for the preservation of the property, it is, nevertheless, "the order of the court, and not the act of the receiver, which creates the charge, and upon which its validity depends.”

These cases and many others to which attention has been directed but restate the rule • that where a receiver assumes to contract, as such, but without authority to so so, he is personally liable. Such want of authority may arise because of the omission from the order or decree of the ctiuft' of language suitable to- confer the same, or because the court waswithout jurisdiction to confer such "authority.

We think the case of Kain v. Smith (80 N. Y. 458) is within this principle, and is-'distinguishable from the case at bar. In-that case the defendant had been appointed receiver of the Vermont'Central railroad by the Court of Chancery :of the State of' Vermont. By the decree of such court he was authorized, in his -discretion, to lease and operate the Ogdensburg and'Lake Champlain railroad, "which was wholly within the State of. New York. 'The defendant made the léase and assumed to' operate suclrrailroad as receiver. An accident occurred in which an employee’ upon- the" leased' line- was injured, and an action was brought.'ag'ainst the defendant-personally tó recover damages for the injury: - The defendant was-held personally liable. Coneededly, the Vermont "court had-no jurisdiction over the Ogdensbnrg and Lake Champlain railroad, or of its property, i-ights or franchises. It had' no power to control its operation or management, and it could not clothe its agent with such poxver or ■authority.... It could' not make him an official,, pr invest him with any official f miction in the operation of the leased railroad cognizable by the courts of this State. The power of the Vermont court was exhausted when it gave, its receiver permission tp lease ; and such permission could only become useful upon the accounting of the receiver in the court which appointed him, and as a protection to him. ' ' ' 1

Otherwise a receiver, as such, appointed by a court' of a sister State, may operate indefinitely a railroad wholly within "this State,' .and incorporated under its laws. If- such receiver," ás such, may employ one employee he may employ all the" employees necessary for the operation of the road, procure all materials required; make contracts for the' carrying of passengers and freight, and, in short, operate, control and manage the entire railroad, and its property, and with no liability except such as may be' approved by the courts of the sister State. The proposition is absurd. The appointment of the defendant in that case as receiver of the Vermont Central railroad, by the Court of Chancery of Vermont, and the permission given to him by that court to lease the Ogdensburg and Lake Champlain railroad, in no way changed his character as an; individual to that of an official, and all acts done by him in respect to the operation of the New York railroad were individual acts for which he was personally liable. In the opinion the court uses the following language, which cléarly indicates the distinction between that case and the case at bar: “ He (the defendant) was not in possession of the Ogdensburg and Lake Champlain Railroad- as an officer of any court or- by its authority. The court itself never had,possession of or control over it. He went into possession with his associates by-virtue of a contract. . He was permitted, not directed, by the court to.make- it, and this permission will serve him upon his accounting for his management of the'Vermont-Central "road. - So far as the Ogdensbnrg and Lake Champlain Railroad is concerned, the court will not trouble itself, for if the court authorized the contract it will see that by its terms the receipts from that road are to be taken by this defendant and others, not as receivers or officers of the court, but as contracting parties, for running or operating a road, and to be placed, not in the custody.of the' court, nor to be distributed by its directions, but ‘ that all the gross receipts of and from the business and traffic of or upon- the Ogdensburg and-Lake Champlain Railroad shall -belong to- -the' parties of the- seéond -.part, and be- collected by the managers aforesaid, and disposed of as the parties of the second part shall direct.’ They are styled managers, but they are mere associates, combining together to promote a common interest, and in respect to the matters in question subject to the same degree of liability as they would be if they had been associated as copartners, and had - contracted as such to do the things they have undertaken.' ' If the defendant had confined his action to the road over which he was appointed receiver, it may be conceded that the rule applied in Gardot v. Barney (supra) would.serve as a defense.Outside of that State he stands as an individual liable for his own negligence, whether he acts personally or through agents, alone or in company with others. He cannot be shielded, by a description of his office, or a declaration: that he is acting-in -an official character. The court from which he derived it had no jurisdiction over the subject of the contract, or power to enter a decree to be enforced outside of the State by whose laws it was' created, and whose laws, alone could make .these decrees effective. The defendant could do no act virtute officii in this State, and although called manager or receiver, he was as to this plain tiff merely an operator of the railroad.”

If the defendant in the case at bar had assumed as receiver to lease and operate the factory of the plaintiff, and had purchased supplies for its operation from other parties for which recovery was sought, the case would be analogous to the case of Kain v. Smith (supra). In such case the defendant would clearly be liable, because he would not have authority, and could not be clothed with authority by a foreign court, to carry on such business; and, as before said, whenever a receiver assumes to contract without authority he becomes personally liable.

As we have seen, the defendant was directed by the United States Circuit Court for the district of Massachusetts to continue the business of the corporation of which he was appointed receiver, and to do so it was necessary, or at least proper, for him to purchase certain parts of .bicycles. In making such purchases was the defendánt confined to the State of Massachusetts, or, if he purchased from ■dealers outside of the-State, wasdt at the risk or certainty, of being personally liable?

Admittedly, if the defendant purchased from manufacturers within the State of Massachusetts, and disclosed his authority and the capacity in which he assumed to act, no personal liability would attach:. Does a different rule apply because the vendor or his factory, or both, were within a sister State 2

If a receiver of a manufacturing . corporation, appointed, by the ■courts of'-this -State and authorized to continue and carry on the business of; such.'corporation, and to purchase supplies-and materials for that purpose, enters into a contract as-receiver with a.resident •of this State for furnishing such supplies, and discloses the capacity in which lie assumes to act,, he. will, incur no personal liability. In such case the vendor would have a cause of action against him as receiver only. If, perchance, the vendor in such case is a resident ■cf arid has his wares located in-a sister State,- does he thereby acquire greater rights and become entitled, at his option, to maintain an ■action either against the receiver as such or against him personally ? We think there is no such distinction ; that the rule may be stated tribe: Where a receiver of a corporation is duly appointed by a •court of a sister State and given authority to continue the business of such corporation and to make .purchases for that purpose, such receiver may. make-such purchases ■ in-the-State in which he is appointed, or in any other State, without being personally liable therefor, provided only that he discloses- the character in which he assumes to act, and the source of such authority.

It follows that the judgment appealed from should be reversed and a new trial ordered, with costs-to the appellant-to abide the event.

All concurred, except, Smith, J., not voting.

Judgment reversed and a new trial ordered, with costs-to the appellant to abide the event.