Case ID: ad_37/html/0351-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Van Brunt, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Henry Dreyfus & Company and Justin Wertheimber, Respondents, v. Charles Seale & Company, Appellant.
    
      Sequestration of the property of a foreign corporation—not authorized by Code of Civil Procedure, § 1784 — what proof is requisite to authorize the appointment of a permanent receiver.
    
    Section 1784 of the Code of Civil Procedure, authorizing the maintenance, by a judgment creditor of a corporation, of an action for the sequestration and distribution of the corporate property, does not apply to a foreign corporation doing business in the State of New York.
    The Supreme Court of the State of New York will not interfere with the property of such a corporation at the instance of a judgment creditor thereof by the appointment of a permanent receiver of the property and effects of the corporation, in the absence of proof that the corporation has fraudulently disposed of its property in the State of New York (in which case it would seem that the fraudulent transferees would be necessary parties) or that the corporation has property within this State to which the receivership might attach, and that equitable intervention is necessary.
    Appeal by the defendant, Charles Seale & Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the cleric of the county of New Tort on the 12th day of June, 1897, upon the decision of the court rendered after a trial at the New Tort Special Term.
    
      George W. Glaze, for the appellant.
    
      Franklin Bien, for the respondents.
   Van Brunt, P. J.:

The complaint in this action alleges the recovery of judgments against the sole defendant, a foreign corporation ; the issuance of executions upon such judgments and their return unsatisfied; the insolvency of the defendant, and that its property and assets in this-State consisted largely of diamonds and other merchandise, which property passed into the control of the president of the defendant corporation, who was a resident of the city and county of Hew York, and that said defendant corporation, through its said president,, had frauduently disposed of the property of such corporation. The complaint contains the further allegation that, in order to protect the rights of the plaintiffs, it was absolutely necessary that a receiver of the property of the defendant corporation should he appointed, in order to enable him forthwith to institute the necessary proceedings for the recovery of the property so fraudulently taken by the president of the defendant corporation as aforesaid, and judgment is prayed for the sequestration of the property of the defendant corporation, and that the proceeds be justly and fairly distributed amongst the creditors, and that a receiver be appointed.

The answer of the defendant denies all the allegations of the complaint, except that it is a foreign corporation, duly organized and existing under the laws of the State of Hew Jersey.

Upon the case coming on for trial, before the taking of any evidence, the counsel for the defendant moved to dismiss the complaint, upon the ground that it was an action for the sequestration of the property of a foreign corporation alleged to be doing business in this State, and that the action could not he maintained. The court, denied the motion. The plaintiffs’ counsel then proved the incorporation of the defendant, the entry of the judgments referred to ■ in the complaint, the issuance of executions thereon and their return. He produced evidence tending to show that the defendant had a place of business in the city of Hew York, and, upon cross-examination, some evidence was elicited in reference to the judgment, which it is entirely immaterial to refer to in this opinion. The plaintiffs thereupon rested. The defendant then renewed his motion on the ground that neither in the complaint nor in the evidence had the plaintiffs, set forth facts sufficient to constitute a cause of action, and then stated his point to be that the corporation was a foreign one and that. section Í784 of the Code, relating to sequestration proceedings, only applied to domestic corporations. The court ruled that it would consider and determine this question when the case was finally submitted for decision. The defendant then offered further evidence in regard to the judgments and rested, and the case was submitted to the court for decision. The court held that it had no jurisdiction to entertain an action for the appointment of a receiver of the property and effects of a foreign corporation for the purpose of winding up its affairs, nor did it have jurisdiction to sequestrate property of a foreign corporation with a view to a distribution pursuant to section 1784 of the Code, and that although the prayer for judgment indicated that the object of the action was for such sequestration and distribution, an answer having been interposed the court would permit the plaintiff to take any judgment consistent with the case made by the complaint and embraced within the issue, and thereupon appointed a permanent receiver of the property and effects of the defendant corporation and a referee to take an account as to such property. It is from this judgment that the present appeal is taken.

It is urged that there was no ground either as stated in the complaint or as shown in the proofs which justified the interposition of the court by the appointment of a receiver; that there was no allegation or proof of property of the corporation within this State, and that there was no proof of any fraudulent disposition of property of the defendant within this State; that all that was proven was that it was a foreign corporation, that .judgments had been obtained against it, and that it had a place of business within this State.

Our attention has been called to no principle of law which justifies the interposition of the court upon such a case as this against a foreign corporation. While it is undoubtedly true that the court may entertain a creditor’s bill to recover property which has been fraudulently disposed of by a foreign corporation in this State, it is necessary in order that jurisdiction should attach that the fraudulent disposition of the property should be proven. In such a case it would seem that the persons to whom the property has been fraudulently disposed of would be necessary parties before any effective judgment could be entered. While the court may interfere for the purpose of protecting the property of the corporation situated within "this State, and its equitable distribution amongst its creditors, jet in the absence of proof of the existence of such property and of the "necessity for equitable intervention, we do not see where the court •obtains jurisdiction to act. The action seems to have been brought ■upon the theory that section 1784 of the Code applied to a foreign •corporation. As we have already seen, it is manifest that it does not.

But it may be urged that it does not appear upon the record that the objection to absence of proof of property within this State was "taken in the court below. The case was tried and finally submitted •to the court, and to the decision of the court an exception has been 'duly filed. This brings up for review all the infirmities of the record as it was submitted to the court below. It is true that the learned court in its opinion states that upon the close of the plaintiffs’ case there was no proof that the defendant had any property in this State, or that it had made any transfer in fraud of creditors, or that there was anything to sequestrate, or any debt for a receiver to collect, or any asset of defendant’s accessible by creditor’s suit; •and then states that for this defect, if properly pointed out, the complaint might possibly be dismissed, and then proceeds: But the defendant stands expressly and exclusively upon another ground, saying: ‘ The point is the corporation is a foreign one; that the only authority for an action of this kind is under section 1784 of the Oode, which applies to corporations organized and existing under the laws of this State. * * * I move to dismiss upon that ground.’ ” And, further: “ Had the defect of proof in question been called to the plaintiffs’ attention it might have been supplied. * * * The ground assumed being untenable, and no other irreparable insufficiency of evidence apparent, the motion to dismiss should be denied.”

The difficulty with the position óf the learned court below is that the case was finally submitted upon all the points which were embraced in the record; and it does not appear that upon such final submission the appellant limited himself as he had done in his motion to dismiss. We are bound, therefore, to consider every question which is raised by his exception to the decision.

Under these circumstances, the want of proof in regard to the fraud alleged in the complaint, or the existence of property not alleged in the complaint, seem to be available to the appellant.

We think the judgment was erroneous and should be reversed and a new trial ordered, with costs to the appellant to abide event.

Barrett, Rumsey, Ingraham and McLaughlin, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.