174 N.Y. 373 | NY | 1903
The petitioner prays for leave to issue an execution upon a judgment recovered by him against the Mutual Brewing Company, which is alleged to be a lien upon its real property in Queens county.
The various persons in interest are made parties to this proceeding. *377 The contestant having the most substantial interest is the grantee of the purchaser of the real estate of the Mutual Brewing Company at the receiver's sale — the Karsh Brewing Company. The receiver, Duffy, while a party to this proceeding and appearing by attorney, makes no affidavit and furnishes no explanation as to the amount or condition of the trust funds in his hands, or why he has failed to account for a period, now, of nearly seven years.
The petitioner previously obtained an order of the Special Term allowing him to issue execution, but the Appellate Division set it aside on the ground that no notice had been given to the party who had acquired title under the receiver's sale, with leave to the petitioner to renew the motion upon proper notice, stating in its opinion as follows: "We do not now undertake to determine whether Denis Coleman's judgment was a lien upon the real property in question at the time of the sale by the receiver." (
The Special Term denied the motion and the Appellate Division, with a divided court, held that the receiver's sale of the real estate, as made, was not subject to the lien of the petitioner's judgment.
The sole question presented by this appeal is as to whether the judgment of the petitioner, in view of the somewhat complicated legal proceedings, to which reference is hereafter made, was a lien on the real estate of the Mutual Brewing Company at the time of the receiver's sale.
On the 13th day of June, 1893, the petitioner recovered a judgment against the Mutual Brewing Company in Albany county for $19,456.96, which was on the same day docketed in said county and the county of Queens. About a week later, on the 19th day of June, 1893, an action in the Supreme Court of Queens county was instituted by one Halpin, a stockholder and officer of the Mutual Brewing Company, against that company, certain of its directors and others, including the petitioner. The complaint alleged, among other things, *378 that the judgment in favor of the petitioner was obtained through the wrongful and fraudulent acts of the defendant directors of the corporation, and asked that it be vacated and set aside.
The petitioner appeared and answered in that action. The case was tried and judgment entered therein, July 16th, 1895, which adjudged, among other things, that the said judgment was invalid and void, and "is hereby vacated and set aside, and that the clerk of Albany County be and he is hereby directed to mark said judgment vacated, set aside and canceled of record."
Shortly thereafter, and on the 21st of August, 1895, this petitioner procured an order, in substance, that all proceedings for carrying into effect that part of the judgment entered in the Halpin suit, which directed the vacating, setting aside and canceling of record the judgment in question be stayed pending the appeal which had been taken to the General Term, and the clerk of Albany county was restrained and enjoined from canceling of record and from marking as vacated or set aside said judgment pending said appeal and until the determination thereof. At the time this order was made, the dockets of the judgment in Albany and Queens counties had not been marked vacated, set aside or canceled of record, nor have they ever been so marked.
The appeal from the judgment in the Halpin suit was not decided by the Appellate Division until between two and three years later, on the 26th day of January, 1898. The Appellate Division struck out from the judgment of the trial court the entire provision in regard to the judgment in question and inserted in place thereof the following, being subdivision VIII: "That the agreement entered into between the defendant, The Mutual Brewing Company and Denis Coleman on the 25th day of March, 1893, and the note for the sum of $19,300.00, dated May 1st, 1893, given in pursuance thereof, are both and each invalid and void; but as there has been delivered under said agreement hogsheads, harness and trucks of the maximum value, as found by the trial *379 court, of $5,175.00, the judgment entered upon said note in favor of the defendant, Denis Coleman, against The Mutual Brewing Company, on the 13th day of June, 1893, for the sum of $19,456.96, with the clerk of Albany county, be and the same is hereby reduced to the sum of $5,175.00, and the clerk of Albany county be and he is hereby directed to reduce said judgment to such sum and correct the record thereof accordingly, and said judgment as so reduced be and the same is hereby permitted tostand as a valid judgment against The Mutual Brewing Company for such amount."
After this appeal had been taken by the petitioner from the Halpin judgment, and after the Special Term had permitted the dockets of said judgment to stand pending the determination of the appeal, and on the 21st day of December, 1895, an action by the People was instituted against the Mutual Brewing Company for its dissolution on the ground of insolvency, wherein an order was issued on the same day appointing one Duffy as temporary receiver. This order contained the usual provisions, among others, restraining judgment creditors from issuing executions.
On May 16th, 1896, a final judgment was entered dissolving the corporation and appointing as permanent receiver Duffy the temporary receiver. This final judgment contained a clause stating certain liens subject to which the real estate and other property should be sold by the receiver. These liens were a mortgage for fifty thousand dollars held by one Marshall; also another mortgage upon the real estate for the sum of $28,753.83; also a chattel mortgage and two judgments, described in detail, as liens upon the personal property, executions having been levied.
On June 22d 1896, the receiver's sale took place, subject to a notice of sale then read to the bidders assembled. This notice, except the description of the property to be sold, was, in substance, as follows: That in pursuance of the judgment dissolving the Mutual Brewing Company, the appointment of a permanent receiver thereof and directing that all the property and assets of the company be sold as therein provided, *380 the receiver would sell at public auction on the day mentioned all the property and assets of the Mutual Brewing Company and of Edward Duffy, as receiver of that company appointed in the action of Paul Halpin against the Mutual Brewing Company.
Before the sale took place and in the presence and hearing of the bidders assembled, the petitioner herein read a notice to the effect that he was a judgment creditor of the brewing company to the amount of $27,508.90 and interest from June 13th, 1893, by virtue of two judgments recovered by him that day in the Supreme Court of Albany county; that the transcripts of said judgments were filed in the office of the county clerk of Queens county, June 13th, 1893; and that said judgments were still of record in said county clerk's office and liens upon all the real estate of the Mutual Brewing Company situated in Queens county, and subject only to a lien of a mortgage for fifty thousand dollars held by Cornelia Marshall and covering a portion of the real estate of said company, and a mortgage made by John W. Dobler, as trustee, covering a portion of the real estate of said company.
He also gave notice that he had appealed from the judgment entered July 16th, 1895, in the action brought by Paul Halpin against the Mutual Brewing Company and others, wherein the said judgments in his favor were declared invalid and that said appeal was pending and undetermined; that any person purchasing any real estate of the said the Mutual Brewing Company situated in said county of Queens upon this sale would purchase and take title to the same subject to the liens of said judgments.
It may be stated, by way of explanation, that on the same day the petitioner recovered his judgment for $19,456.96 in Albany county he also recovered another judgment against the brewing company for $8,000.00, which is not involved in this proceeding.
After the reading of this notice by the petitioner the sale took place and the property was bid in by one George Karsh for the sum of $250.00; he afterwards received the receiver's *381 conveyance and transferred the property to the Karsh Brewing Company, the corporation responding to this appeal.
It is very clear that, from the 13th day of June, 1893, when the petitioner recovered his judgment for $19,456.96 against the Mutual Brewing Company, it remained a lien for that amount down to the 26th day of January, 1898, when the judgment was filed, wherein the Appellate Division reduced the amount thereof, as already stated.
The language of the Appellate Division is significant and fully sustains the contention of the appellant that this lien existed as above stated. The Appellate Division decreed that the amount of the judgment in question "is hereby reduced to the sum of $5,175.00, and the clerk of Albany County be and he is hereby directed to reduce said judgment to such amount and correct the record thereof accordingly, and said judgment as so reduced be, and the same hereby is, permitted to stand, as a valid judgment against the Mutual Brewing Company for such amount."
In considering the effect upon the petitioner's rights by the receiver's sale it must, therefore, be assumed that at the time the suit was instituted by the People to dissolve the Mutual Brewing Company on the ground of its insolvency and during all the proceedings in that action, the judgment in question was a lien upon the real estate of said company, a portion of the time for the full amount and later for the reduced amount. (Matter ofWaterbury, 8 Paige, 380; Chautauque County Bank v. Risley,
The position of the respondent is that the statute and the decree of dissolution contemplate that the sale of the realty shall be free and clear of all judgment liens unless specially reserved in the decree and that the receiver shall pay out of the money realized on the sale the judgments existing against the corporation to the extent and value of the real estate on which they are respectively liens.
The general rule is that a receiver in proceedings to dissolve a corporation is not entitled to the rights of a bona fide *382 purchaser, as he gets no better title than the party he represents. (Beach on Receivers, § 223.)
The fact that the final decree orders a sale subject to certain liens does not have the effect of divesting the liens of existing judgments not referred to therein, and, until any particular judgment is satisfied from the moneys in the hands of the receiver, it is the right of the owner of the judgment to proceed to execution and sell subject to the order of the court.
"As in case of other judicial sales, there is no warranty of title, express or implied, and the purchaser takes only the title which the corporation had, and he takes this title subject to any paramount liens or equities subsisting against the property." (5 Thompson's Commentaries on the Law of Corporations, § 7013.)
It has long been the settled law of this state that the jurisdiction of chancery does not extend to the sequestration of the property of the corporation by means of a receiver. (Attorney-General v. Utica Insurance Co., 2 Johns. Ch. 371;Attorney-General v. Bank of Niagara, Hopkins, 354; U.S.Trust Co. v. N.Y., W.S. B. Ry. Co.,
The proceedings to dissolve a corporation, either voluntary or involuntary, rest wholly upon the provisions of the statute. There is no statutory authority permitting a receiver, in an action brought by the People to dissolve a corporation on the ground of insolvency, to sell the real estate subject to certain liens, referred to in the final decree, and disregard others that are valid and existing.
The powers of receivers have been re-enacted in the General Corporation Law, being chapter 35 of the General Laws. This revision of the statutory law of the state on the subject now under consideration did not repeal certain sections of the Revised Statutes, which were continued and made applicable to receivers in dissolution proceedings. These provisions of the General Corporation Law and the old Revised Statutes are as follows: "Such receivers shall be vested with all the estate, real and personal, of such corporation from the time of *383 their having filed the security hereinbefore required, and shall be trustees of such estate for the benefit of the creditors of such corporation and of its stockholders." (Section 115 of the General Corporation Law; Vol. 1, Birdseye's R.S. [3d ed.] p. 758; section 67, 2 R.S. 469.)
"Such receivers shall have all the power and authority conferred by law upon trustees to whom an assignment of the estate of insolvent debtors may be made, pursuant to the provisions of the fifth chapter of the second part of the Revised Statutes." (Section 116 of the General Corporation Law; 2 R.S. 469, § 68.) This fifth chapter has been repealed except article eighth, which is entitled, "Of the powers, duties and obligations of trustees herein under this title," which referred to the trustees, among others, of insolvent debtors.
The powers of trustees and assignees under the above article eighth (2 R.S. 41, § 7) are set forth in a section containing nine subdivisions. Subdivisions four and seven read:
"4. From time to time, to sell at public auction, all the estate, real and personal, vested in them, which shall come to their hands, after giving at least fourteen days' public notice of the time and place of sale, and also publishing the same for two weeks in a newspaper, printed in the county, where the sale shall be made, if there be one."
"7. To redeem all mortgages and conditional contracts and all pledges of personal property, and to satisfy any judgments, which may be an incumbrance on any property so sold by them; or to sell such property subject to such mortgages, contracts, pledges or judgments." (See, also, Birdseye's R.S. [3d ed.] vol. 3, p. 3867, § 48, subds. 4 and 7.)
It thus appears that a receiver is a trustee for the benefit of the creditors of the corporation as well as its stockholders, and that he is to redeem mortgages and pledges and satisfy any judgment which may be an incumbrance upon the property so sold by him, or to sell such property subject to mortgages, contracts, pledges or judgments.
In the case at bar the receiver failed to follow either course marked out by the statute; he sold the real estate of the corporation *384 for the nominal consideration of $250.00, subject to certain liens referred to in the final decree, on June 22d 1896, without mentioning the lien of defendant's judgment, and has failed in this proceeding, although appearing by counsel, to make any affidavit as to the condition of the trust funds in his hands, or to give any reason why he has not accounted for a period, now, of nearly seven years.
The provisions of the Code of Civil Procedure, permitting the sale of lands in partition free of all liens, are not applicable to the dissolution of corporations on the ground of insolvency.
The petitioner is entitled to an order permitting him to issue execution upon the judgment in question, reduced to $5,175.00 and interest, and to sell thereunder the real property of the Mutual Brewing Company, on which it was a lien at the time of the sale thereof. Also to have such other or further relief as prayed for in his petition herein necessary to accomplish this result.
The learned Appellate Division has certified to us three questions: (1) "Did the purchaser at the sale made by the receiver of The Mutual Brewing Company, June 22d 1896, take the title to the real property purchased by him, subject to the lien of the judgment originally for $19,456.96, subsequently reduced to $5,175.00, in favor of Denis Coleman and against The Mutual Brewing Company, filed and docketed in Albany county June 13th, 1893, and docketed in Queens county on the same day?"
We answer this question in the affirmative, and it, therefore, becomes unnecessary to consider the second question.
The third question reads: "Is Denis Coleman entitled to issue execution upon the said judgment recovered by him against The Mutual Brewing Company, June 13th, 1893, and to sell thereunder the real property described in the petition herein?"
We answer this question in the affirmative.
The order appealed from should be reversed, with costs.
PARKER, Ch. J., O'BRIEN, HAIGHT, VANN, CULLEN and WERNER, JJ., concur.
Order reversed. *385