Lead Opinion
This cause is brought to this court upon appeal from a judgment of the district court for Dakota county. In order to obtain a correct understanding of the questions presented, it will be necessary to state briefly the history of the proceedings leading up to the judgment presented for review. Prior to December 23, 1903, the Sioux Beet Syrup Company was a duly incorporated company, having its place of business in Dakota county.- On that date, one C. D. Smiley, a stockholder of the corporation, on behalf of himself and all the other stockholders, filed a petition in the district court, asking the appointment of Andrew J. Cramper as receiver of the corporation. A waiver of notice of the application and a certified copy of
It is contended on the part of appellant: First,- that the petition for the appointment of a receiver did not state facts authorizing the court to make such appointment and, therefore, the appointment was void; secón d, that the holders of the bonds of the corporation were not made parties to the proceedings, and had no notice oí the application for the appointment of a receiver, and, therefore, their interests could not be affected by such pxoceedings; third, that in no event could the rights of th>. bondholders be made subject to the receiver’s certificates, even though the receiver had been regularly and lawfully appointed, These
Touching the first contention, the petition shows that plaintiff is a stockholder; that the manufacturing plant-belonging to the corporation is worth $65,000; that there is on hand belonging to the corporation something like $10,000 worth of merchandise; that a mortgage for $35,000 had been executed, and $17,000 worth of the bonds had been disposed of; that the proceeds of the bonds sold had been applied to the satisfaction of the debts of the corporation; that the corporation was indebted to some further amount, the exact amount not being disclosed; that the plant was insured for $45,000, and that to keep the insurance valid, the plant must he either operated or cared for; that the corporation had under contract a large amount of beets, and a large amount of syrup on hand that would perish unless taken care of; that some of the officers had abandoned the corporation, and the stockholders did not seem to be able to get any one to conduct the business, and at the meeting of the stockholders it was determined to be for the best interest of the corporation to apply for a receiver. It clearly appeared that the corporation was not insolvent, and that there was no disagreement of any kind among the stockholders. About all that did appear from the face of the petition was an apparent want of capacity on the part of the stockholders and officers to manage the business of the corporation. This does not present such a condition of affairs as would authorize a court of equity to appoint a receiver. There were no adversary proceedings pending. The stockholders, at their meeting, seem to have unanimously agreed that it would be a good thing to appoint a receiver, and they selected appellee Smiley as a proper person to make the application. The courts of the state are,not constituted and maintained at public expense for the purpose of conducting the business of private corporations, and mere incapacity of stockholders or officers of a corporation to manage its business in a successful manner is not enough to authorize the courts to take charge of such business,
It is very clear, therefore, that the petition failed to slate fads sufficient to entitle plaintiff to the appointment of a receiver. But that question is not presented for review in this casi», and appellant was not a party to such proceeding's. Whether the action of the court in the appointment of a receiver was absolutely void and subject to collateral attack, such as that made in this case, is altogether another question, and one which we think is not necessary to a correct determination of the question presented by the record.
The. second contention is that the bondholders were not made parties to the proceedings for the appointment of a receiver, and that, for this reason, their rights can not be prejudiced by anything the receiver did. This proposition seems to be sustained upon authority. Section 273 of the code provides: “Every receiver shall be considered the receiver of any party to the suit, and no others.” The bondholders represented by appellant in this case were not parties to this suit, and, clearly, under the statute quoted, the receiver appointed by the court was not their receiver. Tf he was not the receiver for the bondholders, it is difficult to see how their rights can be affected by what he did. They were in no way responsible for his appointment. They could not procure orders from the court directing the manner in which he should perform his duties, and it is clear their mortgage lien can not be made subject to his expenditures, not made at their instance and not incurred in any case in which they were parties. No notice was served upon them as required by the provisions of section 274 of the code, and we are of opinion that the order ap
Having reached a conclusion which disposes of the case, the question presented by the third contention of appellant need not be considered. It is therefore recommended that the judgment of the district court, allowing the report of the receiver and making his certificates a lien upon the property of the corporation superior to that of appellant as trastee of the bondholders, be reversed and set aside, and the cause remanded for further proceedings according to law.
By the Court: For the reasons stated in the foregoing-opinion, the judgment of the district court, allowing the report of the receiver and making his certificates liens superior to the mortgage, is reversed, and the cause remanded for further proceedings in accordance with law,
REVERSED.
Rehearing
The following opinion on rehearing was filed November 2, 1904. Judgment of reversal adhered, to:
The facts in this case are set forth in the former opinion by Mr. Commissioner Kirkpatrick, ante, p. 581. The
Second. That the management of the company has been under the charge of Henry Haubens and William Peterson ; that neither the plaintiff nor any of the stockholders have been able to obtain any correct statement of the affairs of the company from said managers; that, in December, 1902, a stockholders’ meeting was held, and the officers of defendant were authorized to issue bonds to the amount of $35,000, for the purpose of paying off existing indebtedness and furnishing the company with sufficient capital to place its product upon the market; and it was
Third. That, about the 17th day of December, 19Q2, Henry Haubens, as president of the defendant company, resigned, and that William Peterson, who has been in active management for defendant company, has abandoned said company and is giving the same no attention. That a large number of creditors are threatening to commence attachment proceedings and other litigation and, by rea
Fourth. At a meeting held on December 22, 1902, by the stockholders, it was resolved that a receiver of defendant company should be applied for.
Prayer. Petitioners pray that Andrew J. (hamper he appointed receiver of defendant company and its property with authority, under direction of the court, to take charge of all'said property; operate said plant, if deemed advisable and found possible so to do; to employ expert accountants for the purpose1 of ascertaining the financial condition of said company; to employ counsel to do each and every act necessary in the proper management and preservation of said defendant company’s property and its affairs; and to have all the powers and authority usually vested in a receiver, and for such other and further relief as may lx1 deemed equitable in the premises.
It was urged upon the argument that, where the directors of a corporation have been guilty of fraud and mismanagement, a court of equity had the power, at the instance of a stockholder, to appoint a receiver for the affairs of the corporation but this argument was entirely foreign to the cast1 made by the petition. The petition charges no fraud or mismanagement on the. part, of any directors of the corporation. It states that the president has resigned; that the manager has abandoned the plant; and that the treasurer paid certain debts of tin1 corporation to a banking institution of which he was president with part of the company’s assets; hut it nowhere, charges or asserts that the governing body of the corporation is not in possession of the property nor able to carry an its business. It is true it alleges the corporation is short of funds, and perhaps tin1 true reason why the plaintiff desired the appointment of a receiver is to be found in the allegation that a large number of creditors are threatening to commence attachment proceedings and oilier litigation, etc.; but this
A court of equity has no power to appoint a receiver for a. solvent concern, for the purpose of preventing its creditors from maintaining actions against it for the recovery of their debts; and, under the facts alleged as to assets, the value of the property largely exceeded the debts. Further than this, the petition seeks no relief beyond the mere appointment of a receiver to care for, manage and control the property and business of the company. Proceedings for the appointment of a receiver in a court of equity are usually ancillary in nature, and the. appointment is only granted as an incident to the relief sought in the petition. It is analogous to an attachment proceeding in an action at law, in so far as being dependent upon the main action. In a recent case in this court, Vila v. Grand Inland Electric Light, Ice & Cold Storage Co., 68 Neb. 233, this question has been fully discussed by Holcomb, J., and the principles fully and clearly slated. Rut in the petition it is not alleged that the directors of the corporation are not entirely able and willing to carry on its business, nor that any dissension or trouble exists among them. The relief sought amounts, practically, to a removal by the court of the officers of the corporation and the installation by tin* court itself of its officer, the receiver, as the manager of the corporate affairs. We know of no such power residing in the court under the facts recited in the petition.
A receiver was appointed under this petition and, on the 3d of January, 1903, Abel Anderson, trustee,v was served with a notice that the receiver would apply to the district court for orders authorizing him to issue receiver’s certificates, as first liens upon the-property of the defendant company, for 'the necessary expenses of preserving the property and placing its product upon the market. Pursuant to 111 is notice, Anderson appeared specially and ob
It is contended that Anderson appeared at the time that the. order allowing the receiver to issue certificates was made; that he did not appeal from fhe same and, therefore, the order allmving them to be issued was final as to
It is further argued that the order appointing the receiver is not subject to collateral attack, but the attack made by Anderson in his intervention is not a collateral attack. He had an interest in the subject matter, and came into court as a party to the action when he intervened and filed his objections seeking to challenge the jurisdiction of the court. The rule is settled in this state that the question of the sufficiency of a petition and whether it states a cause of action may be raised at any step of the proceedings, hence, Anderson was not too late, the trial court was entitled to consider and pass upon the question of jurisdiction, and this court, also, is entitled to pass upon the same question upon appeal. The petition being clearly insufficient, the appointment of the receiver by the lower court was erroneous and, as against the in-tervener and the bondholders whom he represents, the; charges of the receivership do not constitute prior liens upon the property of the defendant corporation.
E'er these reasons, the judgment heretofore rendered, reversing the action of the district court, should be adhered to.
By the Court: For the reasons stated in the foregoing opinion, the former judgment of reversal entered in this court is adhered to
Reversed.