Thompsen v. Diffenderfer

| New York Court of Chancery | Dec 15, 1849

The Chancellor:

This case is brought before the court upon the motion to dissolve the injunction, in connection with which the application for the appointment of a receiver has been argued; and it is quite manifest, and has not been controverted, that if the injunction should be continued, it would be proper and necessary to put a receiver upon the property — and if, on the contrary, it should be thought proper, under the circumstances, to refuse the application for a receiver, the .injunction should be dissolved, as in that event its continuance would only embarrass and injure the defendants in the prosecution of their business without benefit to any one.

The question to be considered, therefore, is, whether under the circumstances of this case, a receiver should or should not be appointed?

In the case of Williamson vs. Wilson, 1 Bland, 418, the late Chancellor laid down with precision, and, as I think, in entire conformity with the authorities, the principles which should govern the court upon applications similar to the present. It was there said, that “the court reluctantly interfered against the legal title only in the case of fraud clearly proved, and of imminent danger; and a receiver will not be appointed when the matter depends upon the legal title, unless strong grounds are shown, and the rents and profits are in imminent danger.” In Lloyd vs. Passingham, 16 Ves., 69, 70, Lord Eldon said, “the court interposes by appointing a receiver against the legal title with reluctance, compelled by judicial necessity, the effect of fraud clearly proved, and imminent danger, if the intermediate possession should not be taken under the care of the court.” In the case of The Orphans' Asylum vs. Mc Cartee, 1 Hopkins, 435, it .was said, “the fund must be shown to be in danger before a receiver will be appointed.” “The court never appoints a receiver merely because the measure can do no harm.” “This principle reconciles the cases found in the books.”

The bill in this case alleges a variety of facts, which do show the fund to be in danger, and if proved to be true, or admitted, would be sufficient to overcome the reluctance of the court to interpose against the legal title, and take the possession of the property under its care, as a measure of safety. It alleges, that the defendants, the Diffenderfers, are insolvent, and wasting and misapplying the property from which the creditors could only expect to be paid; and there would seem to be no doubt of the power, and the duty of the court to interpose in such a case, even against the opposition of the mortgagees, Cariss and Catharine R. Diffenderfer; for though in the case of a prior mort/gagee, having the legal title, the court will not, by the appointment of a receiver, deprive him of his right of possession, it will not permit him to object to such appointment by any act short of a personal assertion of his legal right, and taking possession himself. Silan vs. The Bishop of Norwich, 3 Swans., 1112—115.

And as the defendants, the mortgagees in this case, do not propose exerting their legal rights by taking possession ; but, on the contrary, express their willingness and consent that the mortgagors shall continue in possession of the property, and employ and dispose thereof in their business, it follows that the mere existence of the mortgages executed for their security, would not induce the court to forbear from appointing a receiver, if, independently of such mortgages, it would be proper to do so.

The question, therefore, is, have the complainants made out by clear proofs, or admissions, such a case as, according to the established principles regulating this branch of the jurisdiction of this court, entitles them to its interposition in their behalf, by appointing a receiver ?

It is conceded that the power is a delicate one, and to be exercised with prudence and circumspection ; and there can be no doubt that in the case of a commercial firm actually engaged in trade, the power of the court, as invoked upon the present occasion, could only be vindicated by an unusual and pressing emergency, which would leave it no alternative. The absolute necessity of putting its hand at once upon the property, to save it from destruction or loss, must be clearly shown, or in the language of Lord Eldon, “fraud or imminent danger, if the intermediate possession should not be taken by the court, must be clearly proved.”

In this case, as before observed, there can be no doubt that the facts charged in the bill do present an aspect of imminent danger, and contemplated, if not actual fraud, which would constitute the judicial necessity that would justify the court in putting forth its power to preserve the property, by the strong measure of taking possession of it; though by so doing the business of the defendants, as .merchants, would be broken up.

But the facts charged in the bill are denied by the answer of the Diffenderfers, and though a strong effort has been made to break down the answer, by exhibiting supposed inconsistencies and contradictions in its several statements, and dwelling with emphasis upon the improbability of some of the facts averred in it, I cannot, after a careful examination, bring myself to the conclusion, that it is not entitled to the weight usually allowed to answers in chancery.

I do not find in it any statements which may not reasonably be reconciled with other statements contained in it; and with regard to the argument founded upon the assumed improbability of its truth, it may be observed, that the defendants have spoken under the solemn responsibility of an oath, and with all the penalties, temporal and eternal, of perjury, full before them. Under the weight of these heavy sanctions, they have denied each and all of the allegations of the bill, upon the admission or proof of which, the right of the court to appoint a receiver depended.

It has been urged, that with respect to some of the statements of the answer, though responsive to the bill, the defendant should be required to offer proof in their support; because such proof was within their reach, whilst it was inaccessible to the complainants. But I apprehend, the rule that the answer, ¡when responsive to the averments of the bill, shall be taken as / true, unless discredited by two witnesses, or one witness with i pregnant circumstances, is not subject to the modification which / the introduction of such a principle would involve. The rule rests upon a principle which protects it from the modification ' insisted upon, and that is, that the complainant, by addressing himself to the conscience of the defendant, makes him a witness, and must take his answer as true, unless he can overcome it in the way suggested.

Finding, then, that the allegations of the bill were denied by the answer, I looked carefully into the evidence taken under the order of the court, to see how far the complainants had been successful in proving their case ; and without here analyzing the evidence, or going into a detailed examination of it, I deem it sufficient to say, that I do not think it sufficient to overcome the denials of the answer. Several of the witnesses, it is admitted, are incompetent, and their depositions are excluded from the inquiry. My attention has been directed to the competent proof, and that, I think, is insufficient. The motion for a receiver must be refused, and the injunction dissolved.

[No appeal was taken from this order.]