Jones v. Bank of Leadville

10 Colo. 464 | Colo. | 1887

Lead Opinion

Macon, C.

Of the eleven assignments of error, four challenge the judgment of the district court in dissolving the attachment, and seven the validity of the appointment of the receiver. Plaintiff in error contends that such appointment was void, and no control over the property of defendant ever vested in the receiver, and that the court in its action on the motion to dissolve the attachment went solely upon the ground that George W. Trimble was a legal receiver and that through him the property of the defendant bank was in custodia legis; while defendant in error as strenuously claims that the writ of attachment was void for want of sufficient and formal bond, and because the sureties thereon did not justify and the clerk did not approve the bond; and also that the appointment of the receiver was legal and valid and he was entitled to the possession of all property of the bank, and the issuance of the attachment was a contempt of court and void. Whether the attachment, because of the irregularities insisted upon by the defendant in error, was or was not voidable upon motion of the defendant, may be passed for the present, to inquire whether Trimble, in his assumed character of receiver, could be heard to object to the validity of the writ and bond. For if he could not, it was error to dissolve the attachment on his motion. If he was not a legal receiver, then he was a mere stranger to the suit and had no standing in court.

This brings us to the examination of the propriety and ■legality of his appointment as receiver, and requires a construction of the provisions of subdivisions 1 and 3, section 144 and section 145, Code of Civil Procedure. Subdivision 1 provides that a receiver may be appointed “before judgment, provisionally, on application of either party, when he establishes a prima facie right to the property, or to an interest in the property which is the subject of the action, and which is in possession of an adverse party, and the property or its rents and profits are in danger of being lost or materially injured or impaired.”

Subdivision 3, that a receiver may be appointed “ in such other cases as are in accordance with the practice of courts of equity jurisdiction.” Section 145 provides that “the application for the appointment of a receiver shall be made by filing a petition at any time in the action in which a receiver is desired, setting forth the facts upon which the application is based, which petition shall be verified as complaints are required to be by this act. And the party opposing the appointment of a receiver shall do so by filing an answer to the petition verified as answers to complaints are required to be by this act.” * * *

If these provisions are anything more than a codification of the law and practice governing the appointment of receivers 'before this enactment, it is difficult to perceive where the difference lies; and to determine to what facts the court will apply this statute, we are compelled to look to the practice and law as it was heretofore.

Hitherto it has been the universally accepted opinion that courts have no jurisdiction to appoint a receiver except in a suit pending in which the receiver is desired — unless in cases of idiots, lunatics and infants, which, as Lord Hardwicke says in Ex parte Whitfield, 2 Atkins, 315, is “a particular jurisdiction.” The doctrine is applied in Baker v. Backus, Adm’r, 32 Ill. 95; Davis v. Flagstaff Co. 2 Utah, 92; Hardy v. McClellan, 53 Miss. 507; Hugh v. McRea, Chase’s Dec. 466; The French Bank Case, 53 Cal. 550; Kimball v. Goodburn, 32 Mich. 10; The People v. Jones, 33 id. 303; and High on Receivers, sec. 17, and cases cited in note. Our statute certainly contemplates the same thing. Its plain intent is that there shall be a controversy between two or more adverse parties moved in the court, involving some conflicting and hostile claims to property that is, at least in part, the subject-matter of the litigation. It is evident that in the mind of the legislature it was necessary to this jurisdiction that there should be some party in all these proceedings who was adverse to the defendant, and whose rights to certain property were to be protected and adjudicated. It is impossible by any process of reasoning to construe the statute so as to make it apply to any case in which an action (in the ordinary definition of the term) is not pending. To hold that courts of equity can entertain jurisdiction to appoint a receiver of property as the substantive ground and ultimate object and purpose of the suit, on the petition of the owner of the property to be controlled and protected, would be to make them the administrators of every estate where the owners thereof were incapable or unwilling to administer them themselves.

When Trimble was named by the court as receiver of defendant in error, no suit was pending against the bank; no one claimed to own or have any interest in the specific property of the bank except the bank itself; no one was before the court claiming the right to have the assets of the bank protected and preserved until he could establish a right thereto, adverse to that claimed by the bank; so far as is disclosed by the record, every one admitted the full and complete ownership of all the property claimed by the defendant in error to be in it. But apparently fearing suits and attachments, defendant asked the court to become the custodian of its effects and property, in fact its assignee for creditors. The court accepted the trust through Trimble as receiver. This it could not do. Such jurisdiction is not found in either the general powers of a court of equity, nor in the statute referred to. If, therefore, there is no other warrant for this action of the court, the appointment of Trimble as receiver was void, and he had no authority in the premises, and no right to be heard to object to the attachment proceedings in this case.

Defendant in error, however, claims that section 258 of the incorporation act is warrant for the appointment of this supposed receiver. This section is as follows: “If any corporation, or its authorized agent, shall do any act which shall subject it to a forfeiture of its charter or corporate powers, or shall allow any execution or decree of any court of record for a payment of money, after demand made by the officer, to be returned no property found, or to remain unsatisfied for ten days after such demand, or shall dissolve or cease doing business, leaving debts unpaid, suits in equity may be brought against all persons who were stockholders at the time or liable in any way for the debts of the corporation, by joining the corporation in such suit, and each stockholder may be required to pay such debts or liabilities to the extent of the unpaid portion of his stock; and courts of equity shall have full power, on good cause shown, to dissolve or close up the business of any corporation; to appoint a receiver therefor, who shall have authority, by the name of the receiver of such corporation (giving the name), to sue in all courts, and to do all the things necessary to close up its affairs as commanded by the decree of the court.”

We are unable to see how this statute can be made to authorize this action. In it is found an extension of the ordinary jurisdiction of courts of equity, which it is well known have no inherent power to dissolve corporations, and never exercise such jurisdiction unless it has been conferred by statute. The first part of the section provides a remedy for creditors and specifies the contingencies upon which the remedies may be enforced, and then proceeds to give the jurisdiction alluded to. But this enlarged jurisdiction to dissolve corporations is to be exercised only for “good cause,” and upon such dissolution a receiver may be appointed, if there is any good cause for one.

But what is good cause for dissolving a corporation? The statute is silent on this subject, and we must go to some other source of information for an answer to this inquiry. We do not find in our statute on corporations any specific grounds enumerated for a dissolution of a corporation. But it is unnecessary to go into that question here, for the district court did not dissolve, nor attempt to dissolve, the defendant corporation. The decree leaves the existence of the corporation untouched and intact, and makes the appointment of the supposed receiver the end and sole purpose of its decree. The position attempted to be maintained by defendant in error, that the appointment of a receiver is ipso facto and de jure a dissolution of the corporation, is utterly unsound. The appointment of a receiver does not dissolve a corporation either in law or fact. Taylor v. Columbian Ins. Co. 14 Allen, 353. Nor does the mere insolvency of a corporation, or placing it in insolvency under the statutes for that purpose, dissolve it. A. & A. Corp. sec. 770; Cohen v. B. P. N. M. Co. 10 Gray, 243.

If even it should be granted that the appointment of a receiver was a virtual dissolution of the corporation, we are brought back to the original proposition that such appointment must be made in a suit pending, and unless so made is without jurisdiction and void.

The case is not affected by the fact that defendant in error applied to the court for a decree for its own dissolution. It is seen that the court did not so decree, nor can the petition of defendant be treated as a surrender of its franchises and extinguishment of its corporate existence; because, from the facts as shown in the case, no one attempted to make the surrender except Geo. B. Fisher in his official capacity in the company as cashier.

The surrender of the franchises of a corporation .is not an official act, but to be effectual must be the act of the stockholders as such. A. & A. Corp. sec. 772; Smith v. Smith, 3 Desaus. 575. In this case it is said:

“Among the methods by which corporations may be dissolved, that of a surrender is enumerated in the law books, and doubtless when the whole body of the corporation choose to surrender its rights, it is at liberty to do so, and it will be valid; but a majority must concur who. have an interest or right; and officers of a corporation, or an integral portion of it, as we have before stated, are not the corporation; they have no right to make the surrender; and if they make the attempt by an act or declarations, it is an inefficient act; it is not obligatory on the corporation, which retains its full rights, existence and legal character.”

The same doctrine is affirmed in N. O. & Jack. R’y Co. v. Harris, 27 Miss. 517, and Keen v. Johnson et al. 9 R. J. Eq. 401.

It nowhere appears in the record that any other member of the corporation- than Fisher proposed a dissolution of this corporation. If, however, every member of the defendant company had joined in the petition to the district judge in this case, he could not have granted the prayer thereof, for the obvious reason that neither has the chancellor nor a court of equity in this state any jurisdiction to accept the surrender of corporate franchises, and administer on the estate of such decedents. Such a jurisdiction would leave the courts of the country no time to attend to the other business for which they were created.

If there was any defect in the proceeding for the writ of attachment, such defect made the writ voidable only, and the order of the court should have allowed such amendments as would have cured the defects. The bond is, in our opinion, sufficient, and the failure to take the justification of the sureties was at most but a misprision of the clerk, which by rule upon him could .have been corrected. We do not think the omission of the clerk to indorse on the bond his approval was fatal. Civil Code, sec. 121.

The judgment should be reversed and the cause remanded, with directions to proceed in the case according to law.

Rising, 0., concurs; Stallcup, C., dissents.

Reversed.

For the reasons assigned in ihe opinion of Commissioner Macon the judgment is reversed and the cause remanded.

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Rehearing

PETITION FOE EEHEAEING.

Per Curiam.

In support of the jurisdiction of the district court to appoint a receiver for the. defendant in error, it is earnestly argued that in the opinion filed the court mistook both the facts and the law.

One of the errors of fact pointed out is the assumption that no one acted for the corporation, in the matter of the application for a receiver, “except George R. Fisher, in his official capacity in the company as cashier,” whereas the petition filed was the petition of the corporation, being only verified by its cashier. Another objection is that the opinion assumes a final decree was rendered in the equity proceeding, which did not dissolve or attempt to dissolve the corporation, whereas no final decree was rendered in that proceeding, but an interlocutory or provisional order merely, appointing the receive!’, so far as disclosed by the records before this court.

The language of the opinion may be liable to criticism in the instances referred to, but if the district court was without jurisdiction to either appoint a receiver for the bank upon its petition, or to dissolve the corporation and close up its affairs, no ground exists for a rehearing.

Conceding, then, as we think the opinion in fact does, that the petition' filed was the petition of the corporation, an essential prerequisite to the jurisdiction of the court or judge to appoint a receiver was that there should be an action pending. We think this prerequisite was lacking. The authorities agree that the general jurisdiction of courts of equity does not extend to the dissolution of corporations and the administration of their affairs, but that such powers, where they exist, are statutory. Accepting this as the correct doctrine, the question is, Do our own statutes sustain the jurisdiction assumed in the present instance?

The corporation act (sec. 258, Gen. St.) confers power upon the state courts to dissolve or close up the affairs of corporations; to appoint receivers for them, and to do all things necessary to closing up their affairs. But this section, construed by the ordinary rules of interpretation, indicates plainly that an adversary, and not an ex parte, proceeding is contemplated by the legislature in its enactment.

The only other statutory authority for the appointment of a receiver is found in section 144 of the Code of Civil Procedure, which authorizes the appointment to be made, in the cases specified therein, “ by the court in ivhich the action is pending, or by a judge thereof.”

It is not claimed that there was an adversary proceeding in the present case, but it is claimed that there was an action pending when the appointment was made.

“The vital idea of an action,” says Mr. Bouvier, “isa proceeding on the part of one person as actor against another, for the infringement of some right of the first, before a court of justice in the manner prescribed by the court or the law.” We think this definition is in accord with the general understanding of the meaning of the term, and that, to constitute an action in court, there must be not only a petitioner or complainant, but a respondent or defendant.

There being but one party to the proceeding in this case, it follows that the statutory jurisdiction could not be invoked.

Another objection to the jurisdiction in this case, mentioned by Commissioner Macon in his opinion, is that an insolvent party cannot come into a court of equity, and upon its own motion authorize the court to assume the administration of his estate. An attempt has been made to answer this objection in the petition for rehearing, and briefs filed in support thereof, but in our judgment without success. The authorities cited are not directly in point, while very respectable authorit3r is adverse to the jurisdiction. Says Justice Campbell in Kimball v. Goodburn, 32 Mich. 10: “It is also claimed that the assets were in the hands of a receiver who had never been discharged. * * * The evidence of confirmation is wanting. But the order appears to have been made in a proceeding wherein the Bush wick Company itself appears to, be complainant, and we are aware of no case where a corporation in its corporate capacity and name can apply tobe put in the custody of a receiver.”

A similar application to the one made in the present case, except as to parties, was presented to Chief Justice Chase, when sitting at the circuit in South Carolina, in 1869. The State Bank of South Carolina filed a bill setting up that it was insolvent; that certain judgment creditors, who were made parties to the bill, were about to procure an inequitable preference over its other creditors by means of executions which they were enforcing, and praying an injunction that receivers be appointed, etc. The chief justice dismissed the bill, saying, among other things: “ The court is not aware of any case which will warrant its assuming the administration of the estate of a debtor simply on the ground of insolvency. * * * A creditor in a proper case might come into a court of equity for the appointment of a receiver, but a debtor could not; this, therefore, is not such a case as calls for the interposition of the court, and the prayer of fcthe bill cannot be granted.” Hugh v. McRae, Chase’s Dec. 466.

The further point is made in the petition for rehearing, that the motion to dissolve the writ of attachment sued out against the bank by plaintiff in error, and levied upon the property in possession of Trimble, was not based alone upon the receivership of Trimble, but upon his appointment as assignee of the bank as well, which latter right to the custody of the property was ignored in the opinion filed. While the above statement is correct, as shown by the record, it does not appear that the deed of assignment was introduced in evidence on the hearing of the motion to dissolve the attachment and to discharge the bank property. This claim of Trimble to the possession of the property was treated, therefore, as not being properly before the court, since the court was not able to judge of its validity, the deed of assignment not being introduced in evidence. The point decided in this connection was that the order appointing the receiver was without jurisdiction and void.

Another doctrine urged in the original arguments, and which is strongly contended for upon the application for a rehearing, is that the assets and funds of an insolvent corporation constitute a trust fund for pro rata distribution among all its creditors, and that an equitable lien thereon exists in favor of all the creditors superior to any liens which can be acquired by attachment proceedings in favor of individuals. After careful examination of the numerous authorities cited to the proposition, including ,as well the provisions of our own statute bearing upon the question, we are unanimously of the opinion that no such superior lien exists until the jurisdiction of a court ■of equity has been properly invoked and lawfully exerted for the protection of such assets and the administration ■of the affairs of the insolvent. The writ of the plaintiff in error in this case having been sued out and levied upon the property of the bank before the equitable jurisdiction •of the court lawfully attached thereto, he must be held to have acquired a prior and superior lien, so far as the judicial proceedings had for the appointment of a receiver .are concerned. Whether Trimble was entitled to the possession of the property by virtue of an assignment to him for the benefit of the creditors generally is not decided.

The petition for rehearing is denied.

Petition denied.