140 N.Y.S. 357 | N.Y. App. Div. | 1913
Lead Opinion
Briefly, the facts in this case are that the Thomas McNally Company is a Pennsylvania corporation, organized for the purpose of performing public contracts; that it has, as its chief asset, a contract with the city of New York for the construction of a part of the Catskill aqueduct, at an agreed price of something like $4,000,000; that the said corporation became financially embarrassed and entered into negotiation with William E. Paine, president of the Yellow Pine Company, for a loan for the purpose of carrying on the contract above mentioned; that this negotiation resulted in a contract between the Georgia-Florida Lumber Company, by the terms of which said company is to have one-half of the profits growing out of the performance of the Catskill aqueduct contract in consideration of certain advancements made to the Thomas McNally Company in financing the work. , The Yellow Pine Company is the owner of all of the stock of the Georgia-Florida Company, the latter apparently being made use of for the purposes of this contract
Early in February, 1909, the Pennsylvania receivership was vacated and set aside, upon the ground that the plaintiff in that action was not a judgment creditor, and thereupon a motion was made in this State to set aside the order appointing ancillary receivers. This motion was denied, the learned court writing an opinion in which it was pointed out that to revoke the order might operate to let in all of the attaching creditors and result in a dissipation of the property of the Thomas McNally Company, preventing the performance of the aqueduct contract, and thus depriving creditors and stockholders of the opportunity of realizing upon their equities, at the same time pointing out that all parties conceded the advisability of a receivership, though questioning the right to retain the ancillary receivers in the action of Moe, who was not a judgment creditor. Later, by agreement among all the parties in interest, it was arranged that Chauncey S. Horton and others should bring an action against the Thomas McNally Company on certain promissory notes, and such steps were taken, as resulted in the entry of judgment upon such notes, and execution was issued and returned wholly unsatisfied, when an action was brought upon such judgment, asking for the appointment of a receiver, and for the carrying on of the contract for the construction of the aqueduct, and the final distribution
The first question naturally to present itself is the right of the Georgia-Florida Company to be heard upon this motion or the appeal. It is a well-established principle that that to which a person assents is not esteemed in law an injury (Broom Leg. Max. [8th Am. ed.] 267), and it seems reasonably certain that the Georgia-Florida Company not only assented to the appointment of the receiver in this case, but made it the condition of its surrender of any rights which it might have had under the attachment proceedings, and that it has had the benefit of the performance of the contract with the city of New York, under which it not only hoped to secure a return of its • advancement, but to share in the profits which might accrue. Mr. Paine had no right to expect an appointment as receiver in a judgment creditor’s action against the Thomas McNally
This view óf the case makes it unnecessary, perhaps, to go into the question of the jurisdiction of the court to grant the motion for a receivership in the first instance, but it may not be out of place to observe that while it may be that the complaint does not ask for the proper relief, we do not see any good reason why the court should not have taken possession of the property of the Thomas McNally Company within the State of New York under the circumstances presented by this record. It is undoubtedly true, as suggested, that the court could not wind up the affairs of the corporation created by and under the laws of the State of Pennsylvania, but it could take charge of the property, legal and equitable, within the State of New York for the purpose of protecting the rights of domestic creditors, and upon a final adjustment of its affairs within this ‘ State, it could direct the payment of local creditors, and the turning over of any surplus which might result to the corporation itself, and this is especially true where, as in the case now before us, it appears that all of the parties in interest have consented to the receivership and have acted under it for several years without complaining. The objection now urged is not that the Supreme Court has not general jurisdiction of actions by judgment creditors, but that it has no jurisdiction of the subject-matter of this action because, the corporation being created under the laws of the State of Pennsylvania, it is not competent for our courts to take jurisdiction of an action which has for its object the dissolution of the corporation and the winding up of its affairs. But it unquestionably has juris
In the case now before us it is urged that as this is a judgment creditor’s action the court is without jurisdiction because section 100 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28) provides only for such an action as against a corporation created by or under the laws of the State, but we apprehend that the parties to the action and those interested may consent to waive the fact that the Thomas McNally Company is a foreign corporation, and , that, having once done so and the court having acted upon that! waiver, it is not for a third party, who has likewise consented, j to interfere with the administration of the property which has ! thus been confided to the care of the court through its receivers. If the Thomas McNally Company had entered into an agreement with its principal creditor, the Georgia-Florida Company, that the affairs of the corporation should be conducted by Messrs. Paine and Odell, and the latter-named gentlemen had entered upon the discharge of the duties, and had arranged to satisfy the other creditors with the notes or other obligations of the Thomas McNally Company, to the advantage of the Georgia-Morida Company, can there be any doubt that such an agreement would be enforced and continued as against the demand of the latter company that it should be abrogated ? This is practically what has been done, only it has been accomplished through the forms of law; it has been mutually agreed that these men should administer the property of the Thomas McNally Company in the form and manner provided for the conduct of receivers under the laws of New York, and this agreement has been ratified by the parties thereto, and it cannot be set aside for the purpose of permitting one of the parties to such agreement to get an unfair advantage of other creditors, or those who have expended time and money relying upon the good faith of the parties to the agreement.
We think this court is committed to the doctrine that a
As hereinbefore stated, it may be that the prayer for relief in the Horton suit is broader than the relief to which the plaintiffs therein are entitled; but the facts pleaded, which the defendant admitted, were sufficient to invoke the jurisdiction of the court to preserve the property of the corporation in New York through the agency of a temporary receivership, and the receivership order is riot open to collateral attack except upon the ground that it is void.
While the action of the court in removing Mr. Paine as one of the receivers was somewhat summary, and ought not to be regarded as a general precedent, the statute (Gen. Corp. Law, § 273) provides that “ Such receivers may be removed by the court,” this language being substituted for that of the Revised Statutes, which provided that “ they may be removed by the court.” (R. S. pt. 3, chap. 8, tit. 4, art. 3 [2 R. S. 472], § 85; Laws of 1852, chap. 71, as amd. by Laws of 1860, chap. 403.) It was held in Hoyt v. Continental Insurance Co. (21 Wkly. Dig. 145) that the power of the Supreme Court to remove its own receiver of a corporation, and appoint another in his place, does not depend on any notice to stockholders who have appeared; that the court can act on its own motion. (1 Rumsey Pr. 747.) Sections 235 and 236 of the General Corporation Law provide for the authority which shall vest in a single receiver and in cases where there are more than one receiver, and section 237 provides that the “ survivor or survivors of any receivers shall have all the powers and rights given to receivers,” and that “All property in the hands of any receiver at the time of his death, removal or incapacity, shall be delivered,to the remaining receiver or receivers, if there be any.” While the power is given to appoint to “Any vacancy created by removal, death or otherwise” (Gen. Corp.
As to the appeal from the order denying the motion of the Georgia-Florida Lumber Company to reinstate its attachment, we think any further discussion unnecessary, and it should be affirmed.
The orders appealed from are affirmed, with costs.
In Horton v. McNally Company, Jenks, P. J., Hirschberg and Rich, JJ., concurred; Burr, J., concurred in result, in separate opinion, so far as the order appealed from denies the motion to remove the receivers, and dissented so far as the order removes William E. Paine, one of said receivers. In Georgia-Florida Company, Jenks, P. J., Hirschberg and Rich, JJ., concurred.
Dissenting Opinion
I am of the opinion that so much of the order appealed from as denies the motion of the Georgia-Florida Lumber Company to vacate the order made in the action of Chauncey S. Horton and others against the Thomas McNally Company on March 3, 1909, and which order appointed William E. Paine and Benjamin B. Odell, Jr., as receivers of the property of said defendant, should be affirmed. I am constrained to rest my decision upon grounds somewhat differing from those expressed in the opinion of my brother Woodward, which grounds I will briefly state.
As preliminary thereto, it may not be improper to observe that the position now taken by the moving party under the circumstances here disclosed does not commend itself upon ethical grounds, and the wisdom of the creditors of the McNally Company in rejecting the proposition made by the Georgia-Florida
It may be urged that if this proposition is sound, it must also follow that the Supreme Court in this State, under its general equity powers, may decree the dissolution of a foreign corporation. There is a clear distinction. The power of the Supreme Court in the former case is derived from the fact that the “ res,” the subject-matter, is property located here. In the latter the “ res ” is corporate life. This did not acquire existence here, nor derive its powers of continuance from any laws of this State. Its corporate death must be in the place of its birth.
The question then remains, may the action in which the receivers are appointed be treated as an action to preserve the assets of the McNally Company within this State \ The complaint states that the defendant named therein has property within this State, which it specifically describes, to wit, a contract with the city of New York through its board of water supply for the construction of a portion of the Catskill aqueduct, and a valuable plant used in such construction work. There is no reference to property of the corporation within the jurisdiction of its creation, nor of any assets elsewhere situated. The complaint sets forth not only the judgment recovered by plaintiff and the return of an execution unsatisfied, but the pendency of various other actions, in some of which attachments have been issued, and also the filing of certain notices of lien in the office of the comptroller of the city of New York, the insolvency of defendant, and the necessity of preserving its property for the benefit of its creditors from the sacrifice resulting from a forced sale thereof, and the possible danger of a forfeiture of said contract. The prayer for relief is that a.
The' conclusion which I have reached as to this portion of the order appealed from makes it unnecessary to consider the appeal in the action of the Georgia-Florida Lumber Company against the Thomas McNally Company from the order denying its motion to reinstate its attachment. I dissent from the affirmance of so much of the order in the action of Horton against the McNally Company as removes William E. Paine as one of the receivers of said company. Removal upon the grounds specified in the order should not be made except upon notice to the receiver and the persons interested in the subject-
To summarize: In the action of Chauncey S. Horton and others against the McNally Company, I concur in the result so far as the affirmance of so much of the order appealed from as denies the motion to remove the receivers is concerned. I dissent from the affirmance of so much of said order as removes William E. Paine as one of such receivers. In the case of the Georgia-Florida Lumber Company against the Thomas McNally Company, I concur in the affirmance of the order denying the motion to reinstate the attachment of the Georgia-Florida Lumber Company.
Order in Horton v. McNally Company affirmed, with ten dollars costs and disbursements. Order in Georgia-Florida Company v. McNally Company affirmed, with ten dollars costs and disbursements.