68 Neb. 222 | Neb. | 1903
Lead Opinion
On December 6,1900, appellees filed in the district court for Hall county a petition mailing the Grand Island Electric Light, Ice & Cold Storage Company a defendant, alleging that it had, on June 18, previous, mortgaged its plant and other property to appellee Vila for $15,000; that $4,000 of this had been used for other purposes than paying off a prior mortgage as agreed; “that said defend
On the next day the following answer was filed on behalf of the defendant:
“Now comes the above named defendant and for answer to the plaintiff’s petition admits the facts therein stated and consents to the appointment of a receiver in this action as prayed in the plaintiffs’ petition.”
On the same day a receiver was appointed to take charge of the “property, business and assets of the defendant” (part of which is enumerated), “and all other property of every kind or character, belonging to or pertaining to said defendant and its business.” By the terms off this order the receiver is directed, inter alia\} “to operate and carry on the business of the defendant.” The next order ap
Apellants contend that there was no “suit actually commenced and pending” as required by section 267 of the Code before a receiver may be appointed. This requirement is jurisdictional. “The order appointing a receiver was void, for the reason that it was made when there was no suit pending.” Cooley, J., in Merchants’ & Manufacturers’ Nat. Bank of Detroit v. Kent Circuit Judge, 43 Mich. 292, 296.
“No authority is given by the statutes of this state to its courts, Or to judges thereof in vacation, .to make such an appointment, except in a pending suit, nor does it inhere in any of them under their general jurisdiction as courts of equity.” State v. Ross, 122 Mo. 435, 456; Cf. In re Brant, 96 Fed. 257, where the authorities are collated.
Moreover, the suit which must be “actually commenced
“It is not the office of a court of equity to appoint receivers as a mode of granting ultimate relief. They are appointed as a measure ancillary to the enforcement of some recognized equitable right.” Baldwin, J., in Barber v. International Company of Mexico, 73 Conn. 587, 593.
“Unless, possibly, in cases provided for by the statute, the appointment of a receiver can only be made in aid of the main action; although such appointment may be a part of the relief sought by the complaint.” State v. Union Nat. Bank of Muncie, 145 Ind. 537, 550.
“The appointment is not the ultimate end and object of the suit, but is merely a provisional remedy or auxiliary proceeding.” State v. Ross, 122 Mo. 435, 456.
Tested by these authorities, we are unable to say there was “a suit actually commenced and pending” when the receiver in this case was appointed. It is true that a petition had been filed the day previous, but this would not constitute such a suit, unless it set forth grounds instituting an actual controversy and demanding substantial relief beyond the mere appointment of a receiver.
In State v. Ross, 122 Mo. 435, a corporation filed a petition alleging that its plant was heavily incumbered, -and praying for the appointment of a receiver, with a prayer, as here, for general relief. A receiver was appointed, hut upon application to the supreme court a writ of prohibition was granted, and the court said (p. 457) : “The filing of that petition no more instituted an actual controversy between contending suitors in court, than would the filing of a copy of the Lord’s Prayer. It laid no foundation whatever for the exercise of the jurisdiction of the court to appoint a receiver, unless some ground for the exercise of that jurisdiction can be found other than an actual, pending controversy in the court which undertook its exercise.”
The petition in this case contains no prayer for specific
Nor can this petition be upheld as one for the dissolution of the corporate defendant. It contains no prayer that the corporation be dissolved, but, on the contrary, asks that a receiver be appointed, and that he apply the income “for maintaining and operating said businéss.” The idea of a dissolution does not appear to have, been entertained until March 5, — three months after the filing of the petition— Avhen the order Avas made reciting that it was for the best interest's of the parties that the affairs of the corporation be wound up.
“A court of equity has no inherent power as such to appoint a receiver over an insolvent corporation.” Smith, Receivers (3d ed.), sec. 288.
“The general jurisdiction of equity over corporate bodies does not extend to the power of dissolving the corporation, or of winding up its affairs and sequestrating the corporate property and effects, in the absence of express statutory authority. And courts of equity will not, ordinarily, by virtue of their general equitable jurisdiction, or of their visitatorial powers over corporate bodies, sequestrate the effects of the corporation, or take the management of its affairs from the hands of its own officers and entrust it to the control of a receiver of the court, upon the application either of creditors or shareholders.” High, Receivers (3d ed.), sec. 288.
Our legislature has enacted statutes which authorize the appointment of receivers for winding up the affairs of particular corporations, as in the case of banks, but none of these apply to such a corporation as the defendant below. This receivership must be sustained, if at all, by the general statutory provisions relating to the appointment of receivers or by the general rules of equity jurisdiction.
“In the absence of a statutory enlargement of equity jurisdiction, a receiver of a corporation will not be appointed unless the same relief would be given, when claimed in an action against an unincorporated association of natural persons.” Barber v. International Company of Mexico, 73 Conn. 587, 593.
Our statute on this subject is similar to that of Iowa.
In Wallace v. Pierce-Wallace Publishing Co., 101 Ia. 313, 323, it was observed : “We have heretofore held that this section
But if we were permitted to overlook the fact that no main action was pending when this receiver was appointed, we would still be unable to uphold the order of appointment and the subsequent proceedings thereunder, because it resulted in the sequestration of property by the receiver to which, in no view of the case, was he entitled. petition merely prayed that he be authorized to take possession of the “property covered by said mortgage,” and this would have been the limit of his rightful possession even had the petition sought and set forth grounds for a foreclosure. But the order of appointment gave him possession of “all other property of every kind or character, belonging to or pertaining to said defendant and its business.” There never was an application to extend the receivership to other property and this part of the order, at least, was void on its face. Plaintiffs were not entitled in any event to a receivership of property in which they had no definite interest. Smith v. Wells, 20 How. Pr. (N. Y.) 158.
The case at bar strongly resembles State v. Union Nat. Bank of Muncie, 145 Ind. 537, where a similar course was followed by the trial court, and .upon appeal it was observed (p. 551): “In the case before us, the plaintiff had
In the case at bar the trial court distinctly recognized that there was property in the hands of the receiver not included in the mortgage, for it directed a sale of this apart from the other. But upon what possible, theory had plaintiff a right to seek or obtain the appointment of a receiver of this nonmortgaged property?
Moreover, while the court ordered a sale of some of the personalty without subjecting it to the mortgage, the record shows that other property of that class was not sold in this way, for the decree expressly recites, as we have seen, “that all of the property * * * real, personal or mixed * * * save that which is herein specifically found to be personal property, is covered by the said plaintiff’s mortgage.” Hoav much personal property was thus included in the mortgage, we have no means of knowing, for that instrument is exceedingly comprehensive in its terms and purports to include “all and every description of personal and mixed property.”
But the decree plainly shows that some of the personal property Avas treated as covered by the mortgage, and sold subject thereto. And the result of this must necessarily have been to reduce the assets from which interveners might satisfy their claims.
We do not agree with counsel for appellants that the labor claims of interveners constitute a preferential lien on the assets of the corporation. For, as we interpret the rule in Fosdick v. Schall, 99 U. S. 235, 25 L. ed. 339, it
Now, this mortgage, though purporting to cover personalty, was never filed as a chattel mortgage and was, therefore, in respect to chattels, “void as against the creditor of the mortgagor.” Compiled Statutes, ch. 32, sec. 14 (Annotated Statutes 5963). These interveners were judgment creditors, and therefore within the letter of the rule laid down by this court in Farmers’ & Merchants’ Bank of York v. Anthony, 39 Neb. 343, 348. Whether it was necessary that their judgments should have antedated the mortgage, we do not here decide, for the record discloses that in any event the receiver took possssion of and sold, by virtue of the decree complained of, property Avhich confessedly Avas not covered by the mortgage.
We see no escape then from the conclusion that the order appointing this receiver was made Avithout jurisdiction and that the subsequent proceedings thereunder Avere invalid.
We are cited to Commonwealth Mutual Fire Ins. Co. v. Hayden, 60 Neb. 636, and Hawkins v. Glenn, 131 U. S. 319, in support of the contention that appellant Kinkel, as a stockholder, Avas bound by the court’s order as regards the defendant corporation. The cases referred to simply announce the rule that a stockholder is concluded by a decree compelling the enforcement of a corporate duty. But there was certainly no duty on the part of the corporate defendant below to consent to the appointment of a receiver. Nor was it or any other party bound by an order Avhich the, court had no jurisdiction to make. It is a familiar rule that consent never confers jurisdiction over
“Consent of the parties before the court will not avail to secure resort to the remedy in a case otherwise improper, or if the rights of other persons will be affected adversely or put in danger of violation.” Beach, Receivers, sec. 150.
This case has some of the features of Merchants’ & Manufacturers’ Nat. Bank of Detroit v. Kent Circuit Judge, 43 Mich. 292, where Cooley, J., said (p. 298) : “We do not enlarge upon this aspect of tire case, as it is not necessary here; but it must be manifest that the parties were creating a trust by means of the mortgage and of a consent order which could not stand the test of the law. * * * It resembles very closely an attempt by circuitous methods to avoid a legal principle.”
In this case the consent of those now complaining was never sought dr obtained. Although the petition distinctly averred that there were creditors who “are threatening to attach,” and although the statute expressly requires that notice of an application for a receiver shall be given “to all parties to be affected thereby” (Code of Civil Procedure, sec. 267), none of the interveners now holding judgments against the corporate defendant were notified, or given an opportunity to be heard as to the order appointing the receiver.
Under these circumstances, the mere fact that they did not except to the order should not prevent a review of it here. And in any event these objections being jurisdictional, may be raised even in the appellate court for the first time. City of Lansing v. Chicago, M. & St. P. R. Co., 85 Ia. 215; Orcutt v. Hanson, 71 Ia. 514.
There are other questions presented in appellants’ brief, but as their solution is not necessary to a determination of the case, we will not further prolong the limits of this opinion. We recommend that the decree of May 6, and the order of June 22, confirming the sale, be reversed, and that the order appointing the receiver be vacated.
By the Court: For the reasons stated in the foregoing opinion, the decree of May 6, 1901, and the order of confirmation of June 22, 1901, are reversed, and the order appointing the receiver is vacated.
Re v EkSDD.
Code, sec. 2903.
Rehearing
The following opinion on rehearing was filed December 2,1903. Judgment of reversal adhered to:
A rehearing having been granted, this cause has been submitted on oral arguments and printed briefs for further consideration. The opinion heretofore formulated, prepared by one of the commissioners, is found under the title Vila v. Grand Island Electric Light, Ice & Cold Storage Co. and others, as interveners, ante, p. 222. The case is there quite fully stated and a repetition will here be avoided as far asis consistent with a proper discussion of the subject in the present opinion. Gauged by the pleadings, and the proeedings had and done thereunder, the suit appears to have been instituted by a mortgagee of the plant and property of the defendant corporation for the purpose of having its property sequestrated, and, through the aid of a receiver, its affairs wound up by a sale of the property and a division of the assets among those entitled thereto. The suit in its practical workings has many of the .earmarks of a proceeding had under, our statute for the appointment of a receiver and the winding-up of the business of an insolvent banking corporation incorporated under the laws of this state. The plaintiffs, as trustee and cestid que trust, were the owners and holders of certain bonds executed and delivered by the defendant company, and secured by a mortgage on its plant, consisting of both real and personal property. The defendant company at the time of the institution of the suit filed its answer, admitting the truth of the allegations of the petition and consenting to the appointment of a receiver as therein prayed for. The essential averments of the petition which it seems advisable here to state for the purpose of the further discussion of the case are in substance as follows: That it was agreed by the defendant when the loan was made, evidenced by the bonds executed at the
Counsel for appellee devote a portion of their argument to the question of whether these intervening parties can be heard to' complain on appeal after going into court and asking to have their judgments satisfied out of the corporate property, and after, as is claimed, ’the stockholder had assisted in and consented to the appointment of a receiver. This phase-of the case may, we think, be properly disposed of by the suggestion that in our judgment the pivotal point of the whole controversy and the chief inquiry to be made are with relation to the sufficiency of the petition filed in the case, and whether or not it states a cause of action or discloses equitable grounds for the granting of the relief prayed for or granted to the plaintiffs.
It has frequently been held 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, even in the supreme court on an appeal, and is open for consideration in the appellate court at any time until and including the filing of a motion for a rehearing. Kemper v. Renshaw,
An examination of the petition in the case at bar renders it obvious that no cause of action is stated therein disclosing a right to the recovery of a money judgment for the amount called for by the bonds, or any portion thereof, or for a foreclosure of the mortgage in satisfaction of any sum which might be found to be due; in other words, none of the debt secured by the mortgage had at the time matured, and there was no breach nor default in the conditions of the mortgage disclosed by the pleadings warranting a foreclosure of the title to and equity of redemption of the property mortgaged, owned and held by the defendant company. This, manifestly, is the view taken by the parties to the suit and the trial court, since no attempt was made to enforce the obligation secured by the mortgage, or for the sale of the property of the defendant company and the application of its proceeds in satisfac
We are thus brought to a consideration of the proposilión as to whether the plaintiff was Avarranted in asking solely for the appointment of a receiver to take charge of and administer the corporate estate and to sell the same as was done, and Avhether the court Avas authorized to make such appointment and to enter the orders and «decree thereafter made and rendered in the further proceedings, to which exceptions are taken. It is to this proposition that counsel, have devoted most of their arguments and to which our attention will noAV be directed. In the former opinion, it Avas held that a receivership is a purely ancillary remedy and can not be maintained in a proceeding instituted solely for that purpose. The enunciation of this proposition is vigorously challenged by appellees’ counsel, but a full investigation and consideration of the subject has dispelled from our minds all doubts, if any have heretofore existed, as to its being a correct and sound declaration of the principles of equity governing and controlling a suit when applied to a condition of facts such as are presented by the record in the case at bar. Of course, Avhere the statute authorizes it, and in some well-recog
“The law of receiverships is peculiar in its nature in that it belongs to that class of remedies which are wholly ancillary or provisional, and the appointment of a receiver does not affect, either directly or indirectly, the nature of any primary right but is simply a means by which primary rights may be more efficiently preserved, protected and enforced in judicial proceedings. It adjudicates and determines the rights of no party to the proceeding and grants no final relief directly or indirectly.” Smith, Receiverships, sec. 2; Beach, Receivers, sec. 51; Pomeroy, Equity Jurisprudence, secs. 171, 1319, 1330; Miller v. Bowles, 58 N. Y. 253. In support of the rule announced by the text-writers to the effect that generally the appointment of receivers at the instance of private parties is an ancillary remedy administered by the court, provisional in character, and in aid of the primary object of the litigation, may be cited French Bank Case, 53 Cal. 495, 550; Jones v. Bank of Leadville, 10 Colo. 464; Union Mutual Life Ins. Co. v. Union Mills Plaster Co., 37 Fed. 286; Wallace v. Pierce-Wallace Publishing Co., 101 Ia. 313, 38 L. R. A. 122, 63 Am. St. Rep. 389; Barry v. Briggs, 22 Mich. 201; People v. Weigley, 155 Ill. 491.
In Neall v. Hill, 16 Cal. 145, 149, it is said: “We are also of opinion that the court erred in the appointment of a receiver, and in decreeing a sale of the property and a settlement of the affairs of the corporation. This decree, if permitted to stand, must result in the dissolution of the corporation; and in that event the court will have accomplished in an indirect mode that which, in this proceeding,
In Wallace v. Pierce-Wallace Publishing Co., 101 Ia. 313, 322, it is said: “It is certainly true that, in the absence of express statutory authority, jurisdiction of courts of equity does not exist over the corporate bodies to such an extent as to justify them in dissolving corporations, or of winding up their affairs and sequestrating their property. This seems to be so well settled, that there is scarcely a dissenting voice in authority.” See also, Wheeler v. Pullman Iron & Steel Co., 17 L. R. A. (Ill.) 818; Link Belt Machinery Co. v. Hughes, 63 N. E. (Ill.) 186; State v. Second Judicial District Court, 15 Mont. 324.
We have examined with diligence and care the many authorities cited by appellee in support of its contention as to the authority of the court on equitable grounds to appoint a receiver, the regularity of the appointment in' the case at bar, and the subsequent proceedings had, but we find none of them to give substantial support to the doctrine contended for. In each and all of the authorities save the exceptional cases heretofore referred to, the jurisdiction of the court in appointing a receiver was invoked as an exercise of power ancillary and incidental to the principal relief sought by the parties to the litigation. The parties all appear to have been either st.oclihol.ders or creditors who had an actual .and subsisting demand, a present right or claim which it was sought to have enforced, and the appointment of a receiver was in aid of and for the purpose of making effective a prospective judgment or decree to be rendered in the action which, prima facie, they were shown to be entitled to at the time of its commencement and the appointment of such receiver. We find no authority giving unqualified support to the doctrine that a mere mortgage of corporate prop
The petition, Ave are satisfied, states no cause of action, nor warrants the granting of any equitable relief, and therefore the order of sale of the corporate property and the confirmation thereof, as well as the appointment of a receiver, was without authority, unsupported by the pleadings, and for such reasons, the judgment heretofore rendered reversing the orders and decrees so entered should be adhered to, which is accordingly done.
Former decision adhered to.