28 N.Y.S. 431 | N.Y. Sup. Ct. | 1894
This action was commenced by the plaintiff, Daniel B. Wesson, in behalf of himself as the owner and holder of receiver’s certificates, and others like situated, to obtain a judgment declaring their claim a first lien upon the said railroad property and franchises, and for the sale thereof, etc. The action was referred to James M. Townsend, Jr., as sole referee, to hear, try, and determine the issues in said action, and to ascertain the amount of the outstanding indebtedness of the receiver, George D. Chapman, together with the names of the holders of said indebtedness and the amounts due to each, and the validity and priority of said claims as liens upon the property and franchises of the Lackawanna & Pittsburgh Railroad Company. The referee found as facts: That the Lackawanna & Pittsburgh Railroad Company is a domestic corporation created and existing under the laws of the state of Hew York. That it was formed by the consolidation of two other railroads, which constituent railroad companies had theretofore mortgaged their respective properties to secure their bonds, and that the new company had also mortgaged its property to secure its bonds) and that thereafter, and on the 8th day of December, 1884, an action was commenced in the name of the people of the state of Hew York for the purpose of dissolving said corporation, and distributing its assets. That at a special term of the supreme court, held in the city of Buffalo, George D. Chapman was duly appointed receiver of said company, and thereafter, on the application of said receiver, an order was granted, authorizing and directing him to issue receiver’s certificates
The case came here upon exceptions only. Ho evidence is contained in the record, so that questions of law, only, are presented. It is the contention of the appellants that, having advanced money to the receiver appointed by the court upon the strength of notes purporting to be issued by him as such receiver, they are entitled, to share pro rata with the holders of genuine certificates and notes in the assets of-the company, if not to the full amount of their notes, to at least in the sum of $6,000, which the receiver had not obtained from the sales of the notes of $50,000 issued by the order o'f the court, there being, the appellants contend, an actual overissue of only $4,000. Without the order of the court, the receiver had no power to issue notes or certificates which would be binding upon the trust estate. Newbold v. Railroad Co., 5 Ill. App. 367. He had no authority to issue the notes purchased by the appellants, and, had the appellants examined the notes and the accompanying papers before purchasing them, they would have discovered that they did not purport to be issued by authority of the court. While it would not be incumbent upon the holders of notes or certificates issued by the receiver pursuant to the order of the court to show that the proceeds of the sales were devoted by him for the benefit of the road, the same rule cannot be held to apply to the holders of notes issued without authority. The holder of such notes must at least show that his money was used for the benefit of the éstate before he can make a claim for equitable relief. The receiver had exhausted Ms power when he issued the amount of notes provided for in the order, and when he assumed to issue the notes purchased by the appellants he was acting outside of the power conferred upon him; and to permit the holders of such notes to participate in the assets of the company upon an equality with those holding genuine notes would destroy the market value of genuine certificates or notes issued by receivers under the order of a court; to allow such instruments to take precedence of existing mortgages would destroy the market value of such securities. In the cases to which we are referred, where courts have given relief to the holders of stock and instruments improperly issued by directors of corporations, the corporations were held liable for the reason that the improper conduct was that of their agents or" representatives. ■ The receiver here was not the representative, in that sense, of the corporation. He was simply the instrument employed by the- court to take charge of the corpus of the estate pending the litigation. We know of no principle upon which plaintiff’s notes can be reformed so as to make them appear to have been issued by order of the court. The only remedy open to the appellants is against the receiver personally. The judgment appealed from should be affirmed, with costs. All concur.