Case ID: barb_57/html/0438-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the Court, Potter, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John A. De Bemer, receiver &c. vs. Daniel Drew.
    Where, in an action against a foreign corporation, the corporation appears, hy its attorney, and thus submits itself to the jurisdiction of the court, and by the result of the action of the court such coporation becomes the judgment debtor of the plaintiff in the action, this gives the court power over its property and rights of action within this State, and brings the corporation as much within the jurisdiction of the court as if it were a corporation under the laws of this State.
    The fact that it is a foreign corporation does not relieve it from the status of being a “judgment debtor,” nor from the provisions contained in the 2d and 3d subdivisions of section 224 of the Code, relating to “ provisional remedies,” which apply, in general terms, to all judgment ‘debtors, when an execution has been returned unsatisfied and the judgment debtor refuses to apply his property in satisfaction of the judgment.
    ■The statute, being general in its terms, embracing all “judgment debtors,” it is hut á fair and reasonable construction to he given to it as a remedial statute, that it includes all persons. Corporations are not excepted, in terms, and ought not to be in practice.
    It is a universal rule with a court of equity never to permit injustice to be done, or a wrong to go unredressed upon mere technical objections, if the court has jurisdiction of the subject matter and of the parties ; especially if such injustice lies in the way of the enforcement by the court of its own judgment.
    When a court of equity obtains jurisdiction of an action for any puipose for which it is authorized to give judgment, it holds such jurisdiction for every other purpose; especially for the purpose of giving effect to its judgment.
    Hence, if the court has obtained jurisdiction of an action against a foreign corporation hy its appearance by attorney, it has power, after judgment rendered in such action and execution returned unsatisfied, to appoint a receiver of the property and effects of the corporation.
    Where a foreign corporation had never filed in the office of the Secretary of State any designation of a person upon whom papers could be served, and there was evidence of its insolvency or refusal to pay its judgment debts; and it had discontinued its organization and the exercise of its franchises; had neglected to hold meetings of its officers; had sold out to another company its property, and its officers had become officers in the new company, its president becoming the president of the new company, and having the avails of the sale of the property of such corporation in his possession; Held that these facts, alone, would justify the appointment of a receiver, even esc parte.
    
    Where a foreign corporation, sued in this court, appears by attorney, a notice of the appointment of a receiver of such corporation, served upon the attorney, is good service.
    
      APPEAL from an order made at a special term, overruling a demurrer to the complaint.
    The complaint alleges that the New Jersey Steam Navigation Company is a corporation organized under the statutes of New Jersey, and were engaged as common carriers between the cities of New York and Troy, in this State; that as such carriers they undertook to carry the baggage of one Christopher Pick from New York to Troy; that they lost his said baggage, and neglected to pay him the value thereof; that he afterwards recovered, a judgment against the said corporation therefor, which judgment was duly entered and perfected in Schenectady county, in this State, in which action the said corporation appeared by its attorney; that the judgment remains in full force. That in November, 1867, an execution was issued upon said judgment, to the sheriff of the city and county of New York, in which county the said company had its place of business, and that the said sheriff duly returned the said writ wholly unsatisfied, being unable to find any property of the company to satisfy the same. That afterwards, in August, 1868, the said Pick caused a notice to be served on the said company, by serving the same on the attorney of the said company, who appeared in the action, and upon the defendant, Daniel Drew, who was the last president of the said company known to said Pick, which notice informed the said company and its attorney and president, of the issuing, and the return unsatisfied, of the said execution; and said notice also contained a demand upon the said company and its president and attorney, that it should forthwith apply its property, or so much thereof as should be.necessary, to the satisfaction of said judgment; that no compliance was made with such demand, and that on the 3d of October, 1868, an order was obtained at a special term of the Supreme Court, held at Schenectady, upon affidavits stating, among other things, the facts above mentioned, and also that the company had never filed any designation of any person upon whom papers or process could be served, in the office of the Secretary of State; that there was at least one other judgment against said Company, upon which execution had been issued and returned wholly unsatisfied; that said company had never continued its organization, or to exercise its franchises; had neglected to hold any meeting of its officers, and that there were no officers left to manage its affairs, except such as might be holding over from a term long expired. That said order to show cause was made returnable at a special term to be held at Schenectady on the 10th day of October, 1868; and the said order also required the said company to show cause why a receiver of its property should not be appointed; that said order and affidavits were, duly served upon the said attorney, pursuant to the directions of said order. That said special term, on the day last mentioned, by its order appointed the plaintiff the receiver of all the property of the said company, both legal and equitable ; that said receiver immedaitely duly qualified and gave security, as required by said order, and now is, and was, and since the 10th day of October, 1868, hath been, such receiver, and was vested with all the title of its property, and was entitled to the possession thereof; and that afterward, and before the 3d of March, 1869, the said order, so appointing him receiver, was duly served on both the said attorney and the defendant in this action, who then was president of said company, as aforesaid, and that no other person has ever since been elected president thereof.
    The plaintiff further alleged, upon information and belief, that for several years prior to December, 1864, the said company owned large amounts of property of divers kinds, and among other things the whole or a large interest in two vessels, one being the Francis Skiddy,- that the said company, through the defendant, then its agent and principal officer, in the fall of 1864, sold to another company such of its property as then remained, and the defendant became and was the president, or one of the principal officers of said new company; and that by means of the sale, the defendant received large amounts of money or property, for the property so sold to the said new company, which, or the avails of which, he now has; and that he is largely indebted to the New Jersey Steam Navigation Company therefor; that he was, also, a large stockholder in said last named company. That the plaintiff, since his appointment as receiver, has caused demand to be made upon the defendant that he deliver to the plaintiff all the property, or the avails thereof, in his hands, or under his control, which was of the first mentioned company; but that he has neglected and refused, and now neglects and refuses, to do so. The plaintiff” demands that the defendant be ordered and required to account to the plaintiff for the property which was of the said New Jersey Steam Navigation Company at the close of the business of 1864, and particularly of that which came into his hands; and that he may be compelled to deliver the same, or the avails thereof, or pay its value to the plaintiff; and that the plaintiff may have judgment for such delivery or for the value thereof
    The defendant demurred to the complaint, specifying two grounds of demurrer: 1st. That the plaintiff has not legal capacity to sue. 2d. That the ■ complaint does not state facts to constitute a cause of action.
    
      J. L. Sill, for the plaintiff".
    
      Charles Jones for the defendant.
   By the Court, Potter, J.

The receiver in this case was appointed in the original action, which was against a foreign corporation, after judgment, and upon proceedings supplemental to execution. By chapter 2, title 9, section 292 of the Code, it is provided that when an execution against the judgment debtor, issued to the sheriff .of the county where he has a place of business, is returned unsatisfied, in whole or in part, the judgment creditor, at any time after such return made, is entitled to an order from a judge of the court, requiring such judgment debtor to appear and answer concerning his property, &c. Such an order was not made. But section 298 of the same chapter has this additional provision: “The judge may, also, by order, appoint a receiver of the property of the judgment debtor in the same manner, and with like authority, as if the appointment was made by the court according to' section 244.” Section 244 is in chapter 5, of title 7, of the Code, which treats of “provisional remedies in civil actions,” and provides, in subdivision 4 of that section, that in cases after judgment, when a foreign corporation has been dissolved, or is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights, a receiver may be appointed. Such are the powers conferred by the provisions as to the appointment of receivers for judgment debtors generally, and in cases of foreign corporations. In this respect the Code is a remedial statute, and is to be carried out so as to advance and secure the object of its enactment. This foreign corporation appeared by its attorney in the original action, and thus submitted itself to the jurisdiction of the court of this State, -and by the result of the action of the court, the corporation became the judgment debtor of the plaintiff in that action, and this gave the court power over its property and rights of action within this State, and brought it as much within the jurisdiction of the court as if it were a corporation under the laws of this State. (Dart v. Farmers’ Bank of Bridgeport, 27 Barb. 337, 343.) The fact that it is .a foreign corporation, does not relieve it from the status of being a “judgment debtor,” nor from the provisions contained in the sec'ond and third subdivisions of section 244, which apply in general terms to all judgment debtors, when, as in this case, an execution has been returned unsatisfied, and the judgment debtor refuses to apply his property in satisfaction of the judgment. The fourth subdivision of section 244 is merely cumulative to the second and third, and includes corporations, domestic and foreign, and the appointment of receivers for them, in the cases provided in the Code, and by the special statutes, either before or after judgment; and being cumulative, does not change the general' powers conferred by the second and third subdivisions of the same section, which apply to all judgment debtors—when the object of the action is only to carry the judgment of the court into effect. It is a universal rule with a court of equity, never to permit injustice to be done, or a wrong to go unredressed upon mere technical objections, if the court have jurisdiction of the subject matter and of the parties; especially if such injustice lies in the way of the enforcement by the court of its own judgment. Ho good reason is perceived why a corporation judgment debtor, domestic or foreign, should he permitted to escape the proper execution of a judgment of this court, more than a private individual. The statute being general in its terms, as to all judgment debtors, it is but a fair and reasonable construction to be given to a remedial statute, that it includes all persons. Corporations are not excepted in terms, and ought not to be in practice.

" Even before the Code, there was a statute provision by which the chancellor (now the Supreme Court) was given jurisdiction over directors, managers, and other trustees and officers of corporations; among other things, to compel ■them to account for their official conduct in the management and disposition of the funds and property committed to their charge, and to decree and compel payment by them to its creditors, of money or property they have acquired to themselves, or transferred to others. (2 R. S. 462, §§ 41, 33; 3 id. 762, 5th ed.) True, the court in this State cannot regulate the internal affairs of a foreign corporation, nor enforce any remedy beyond the bounds of the State; they cannot annul or forfeit their charters, but they can, and it is their duty, to provide for the collection of debts against them, when they, or their property within the State, are brought within the jurisdiction of the courts of the State. (Howell v. Chicago and N. W. Railroad Co., 51 Barb. 383.) I do not, however, with, all my respect for the court whose decision I have cited, concur with them in holding that the provisions of the Code were not intended to extend the power of the court over foreign corporations further than it existed before; but, on the contrary, I think it was expressly intended to give a new and more simple and appropriate method of bringing them in subjection to our laws. Before the Code, foreign corporations could only be proceeded against by attachment against their property for the collection of a debt, or for the redress of a wrong. By the 127th section of the Code, civil actions can now be commenced against them, as against all other persons, by summons, and jurisdiction of them and their property can be obtained by the publication of the summons upon an order of the court, whenever they have property within the State, or when the cause of action arises within the State. (§ 135.) I do not think, as is claimed by the defendant’s counsel, that the only power possessed by the court to appoint a receiver is conferred by the 224th section of the Code. The court had full and perfect jurisdiction over the defendants, by their appearance in the action by their attorney, and as well by the statutes as by an inherent power which the courts possess, to enforce their own judgments. They can compel the payment of the claim by any of the methods known to a court of equity for that purpose. When a court of equity obtains jurisdiction of an action for any purpose for which it is authorized to give judgment, it holds such jurisdiction for every other purpose; hut especially for the purpose of giving effect to its judgment. There is, therefore, no force in the objection that the court had no power or jurisdiction to appoint a receiver. If the court . erred in a question of practice, in appointing a receiver, while possessing jurisdiction in the action, and of the parties, the"appointment is not void; relief can only he obtained in such case, by an appeal, and review directly from the order appointing him; it cannot be taken advantage of collaterally. The cases cited, showing that the better practice in appointing receivers is upon bill filed, are cases before the practice established by the Code, or before the practice, under the Code, was fully established. But if we were at liberty, in this collateral way, to review the order appointing a receiver, the objection that no appointment could be made without notice to the party interested, except in certain extraordinary cases which do not exist in this, is not well taken. First, this comes clearly within the extraordinary class of cases where it is allowed.

The defendant had never filed in the office of the Secretary of State any designation of a person upon whom papers could be served. There was evidence of their insolvency or refusal to pay their judgment debts; they had discontinued their organization and the exercise of their franchises ; they had neglected to hold meetings of their officers; they had sold out to another company their property, and the officers of the defendant had become officers in the new company, and one of them, to wit, the president of the defendant had become the president of the new company, and had the avails of the sale of the defendant’s property then in his possession. This surely ought to be regarded as an extraordinary and exceptional case, and alone, I think, would justify the appointment of a receiver, even ex parte. (Sandford v. Sinclair, 8 Paige, 373. People v. Norton, 1 id. 17. Howe v. Deuel, 43 Barb. 508.)

[Schenectady General Term,

April 5, 1870.

Nor is the objection good, that there was no legal notice of the appointment of receiver given to the party interested. The notice was served upon the attorney of the defendant, who appeared in the action upon which judgment was obtained. In such a case, this was good service. (Flynn v. Bailey, 50 Barb. 77. Pitt v. Davison, 37 N. Y. Rep. 235.)' In the last case cited this question was fully examined, and the rule then laid down covers this case. It is said: “ Where the proceeding is to enforce a civil remedy, the party in default has already had the opportunity of contesting his liability to perform what the proceeding seeks to compel him to perform, and such proceeding, in effect, is but an execution of the judgment against him.” “ His obligation has been established by the judgment, in regard to which he has been heard, and this proceeding is merely to enforce the fulfillment of that obligation ” It is distinguished from a proceeding to punish for criminal contempts, since the statute, and the party should be-allowed to regard the attorney as continuing until the satisfaction of the judgment under such proceedings, unless notice of change to the contrary has been given. This ought more especially to be the rule, when the party is a foreign corporation, and when other service is either impossible or difficult. (See Drury v. Russel, 27 How. 130; and Lush v. Hastings, 1 Hill, 660.) If we are right in these views, the plaintiff" was properly appointed receiver, has legal capacity to sue, and the complaint is sufficient in its statement of a cause of action. The result is, the order of the special term overruling the demurrer, must be affirmed, with costs.

Potter, Sosekrans, James and Boches, Justices,]