Kentucky Racing & Breeding Ass'n v. Galbreaith

117 Ky. 66 | Ky. Ct. App. | 1903

Opinion of the cotjet by

CHIEF JUSTICE BURNAM

Affieming.

This is an appeal from a judgment of the Kenton circuit court appointing a. receiver for the Kentucky Racing '& Breeding Association, a corporation! organized under the laws of West Virginia, and the Queen City Jockey Club, a corporation organized under the laws of the State of Kentucky, at the instance of the appellee Leslie Gal-breath, a creditor of the racing association. The plaintiff alleges in his petition that he is a creditor of the Kentucky Racing & Breeding Association; that the company is hopelessly insolvent; that it owns a majority of the stock of the Queen City Jockey Club; that Clem Creveling, the president of the association, had, with the knowledge and consent of the officers of the jockey club, instituted a suit for the recovery of $2,330 alleged to be due to him for services as president, and had sued out an attachment, which had been levied upon the interest of the racing association in the jockey club for the purpose of securing to Creveling a fraudulent preference over the other creditors of the racing association, as operator of the jockey club. He also alleges that the racing association was, in violation of law, selling pools upon the result of races, and was thereby subjecting itself to fines and the forfeiture of its charter under the laws of the Commonwealth ; that its indebtedness was daily increasing; that it was indebted to numerous other persons, and that its property would be entirely consumed if not taken in charge by the court; and that he and they would lose their debts. Upon the averments of the petition, the circuit judge of the Kenton circuit court appointed George M. Keefer, receiver, and directed that he should take possession of the books, accounts, and other assets of the company, and hold them subject to the future orders of the court. George M. Keefer and West B. Wilson filed †heir petition to be made parties to this proceeding, and alleged that the Queen ■ City Jockey. Club was also insolvent; that there had been no meeting of its stockholders or election of directors for more than a year; that the directors last elected had failed and refused to qualify or meet for the purpose of electing officers of the company; that there was a judgment against the jockey club for $30,000, and that an attachment had been issued against its property; that it had disposed oí a part of its personal property, and its assets were ini danger of being dissipated — and asked that a receiver should also be appointed to take charge of the assets and property of the jockey club for the benefit of the creditors. Keefer was also appointed receiver of the jockey club,, and executed bond as required by law. The defendant, the,' racing association, filed an answer, in which they deny that the plaintiff was a creditor of the association, or that the officers of the jockey club had consented to the suing out of the attachment of Creveling, or that the association had sold pools in violation of law. They alleged that the only assets of the racing association was a small amount of furniture in Newport, Ky., not exceeding in value $200, and the stock in the Queen City Jockey Club, which they alleged is of no value, as it is hopelessly insolvent. A number of other creditors filed their petitions to be made parties to the proceeding, and united in plaintiff’s prayer for the appointment of a receiver. The defendants excepted to the orders appointing a receiver, and have prosecuted an appeal to this court and ask a reversal on the ground that a general creditor of a corporation is not entitled to obtain a receiver of the corporate property' until he has reduced his claim to judgment, and had execution issued, and return of nulla bona thereon.

As a general rule, a creditor of a corporation is not entitled to have its property and assets put in the hands of a receiver until he has reduced his claim to judgment, and procured a return of nulla bona. But there are exceptions to this rule, as where the assets of an insolvent corporation, which a creditor is entitled to have applied in satisfaction of his demands, will probably be lost or fraudulently disposed of by improvident or corrupt officials unless a' receiver is appointed, and the creditor has no adequate remedy at law. When this is made to appear, the courts will take charge of the assets of the insolvent company, and apportion them among the,creditors entitled thereto. 8 Clark & Marshall on Private Corporations, section 785; Beach on Private Corporations, section 715; 3 Cook on Corporations, (4th Ed.), section 863; 2 Morawetz on Private Corporations, section 860; Smith on Receiverships, section 227, and authorities there cited.

We are of the opinion that the allegations of the original and cross petitions in this case presented such a state of fact as made out a prima facie case for the appointment of .receivers for the defendant corporations. Defendants ■have made no showing by motion to set aside the order appointingthe receiver, or otherwise to negative the averments of the original and amended petitions. We therefore conclude that the trial .court did not err in the appointment of a receiver.

Judgment affirmed.