Case ID: ad_45/html/0120-01.html
Source: Caselaw Access Project
Author: {"author": "Landon, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Eliza D. Marshall, as Executrix, etc., of John V. Marshall, Deceased, Respondent, v. Harvey Wendell and The Marshall & Wendell Piano Forte Manufacturing Company (Limited), Defendants. Edward N. McKinney, as Receiver of The Marshall & Wendell Piano Forte Manufacturing Company (Limited), Appellant.
    
      Application to amend a complaint and make a receiver of a defendant corporation, a party — denied, where the corporation was insolvent, the cause of action doubtful, the claim stale, and, if valid, provable before the receiver.
    
    The complaint in an action commenced in 1889 alleged that the plaintiff’s testator and the individual defendant were copartners, and. that in 1882, when, as. between themselves the plaintiff’s testator was entitled to the surplus- assets,, they transferred the firm- property to a corporation organized in their ihterest, and received'in payment the capital stock of the corporation; that nearly all. of the stock was returned to the corporation under an arrangement, the terms, or purpose of which were not stated; that subsequently, in order to cheat the-pl'aintiff, the individual defendant caused some of the stock to he issued to persons not entitled thereto, and that the company held many shares to-which the-plaintiff was entitled.
    The complaint demanded, as relief, an accounting of the partnership and the-payment to the plaintiff by the individual defendant of the amount due her,, the issue to her by the corporation of the proper number of shares of its capital stock, and the appointment of a receiver. ■ ’
    No -answer being -served, the case was finally stricken from the calendar (on. which -it had been put with the understanding that an answer would be-served), and in April, 1898, the corporation, which had become insolvent, was dissolved and a receiver appointed. »
    Upon an appeal from an order entered March 29, 1899, making such receiver-a. party to the action, and permitting the plaintiff to amend her complaint by alleging a demand by the plaintiff on the corporation for the stock and its. refusal, it was .
    
      Held, that, in view of the insolvency of the corporation,- the staleness of the plaintiff’s Claim, the insufficiency of its statement as constituting a cause of-action-, and the fact that, if valid, the claim could be proved before the receiver, the-order should be reversed;
    That if it should hereafter appear that the receiver had assets payable to the-stockholders, and that it would be impracticable to ascertain the rights of the-plaintiff and -the individual defendant as between themselves without the presence of the receiver, the plaintiff might renew the motion.
    
      Qumre, whether the complaint stated facts-sufficient to constitute a. cause off action.
    
      Appeal by Edward N. McKinney, as receiver of The Marshall & Wendell Piano Porte Manufacturing' Company (Limited), from an order of the Supreme Court, made at the Ulster Special Term and entered in the office of the clerk of the county of Albany on the 29th day of March, 1899, making him as such receiver a party defendant in the above-entitled action.
    
      Learned Hand, for the appellant.
    
      Edward J. Meegan and George W. Albright, for the respondents.
   Landon, J.:

This action was commenced and the complaint served in 1889. The complaint states that Marshall & Wendell, in May, 1882, were partners in the manufacture and sale of pianos, with firm property and assets worth $30,000 in excess of their liabilities; that as between themselves Marshall was entitled to the whole thereof and Wendell to none; that they then with three others organized the corporation,, the defendant, the Mai'shall & Wendell Piano Forte Manufacturing-Company, (Limited), with a capital stock of $100,000, and the firm sold all their firm property and assets to the company for said capital stock, and received the same in payment; that at some time not stated nearly all of said stock was returned to the company, for what purpose or upon what tei’ms is not stated; and that the defendant Wendell, in order to cheat the plaintiff, caused some of the shares, of • the stock to be issued to persons not entitled thereto ; that the company now holds many shares thereof, to which the plaintiff is. entitled. The complaint asks an accounting of the partnership-business, and of the interests of the- respective partners therein that the defendant Wendell pay the plaintiff whatever shall be found due to her, and that the company issue to her the proper number of .shares of its capital stock,- and for a receiver. No .answer was ever served, but the case was placed upon the trial calendar of the court with the understanding that the answer should be served later; it was stricken therefrom several years ago. The corporation was dissolved in April, 1898, because of its insolvency, in an action brought by the Attorney-General, in the name of the People, and the appellant made receiver. The receiver, as reported by a referee appointed- in the Attorney-General’s action, has realized upon all the known assets of the company the sum of $83,436.39. The liabilities are $128,304.37, leaving a deficit of. $44,867.98.

The complaint charges the company with no wrong. The company was when the action was commenced the custodian in some unstated character — certainly not alleged or shown to be wrongful — of most of the. capital stock. The complaint alleges the plaintiffs right to it, but states no facts constituting the right, or challenging the company’s rightful custody of it. ..Whether the complaint, states facts sufficient to constitute a cause of action against the company may be doubted. (Sheridan v. Jackson, 72 N. Y. 170; Knapp v. City of Brooklyn, 97 id. 520.) If the complaint should be amended as the order appealed from permits, by. alleging plaintiff’s .demand that the company issue to her the stock, and the., company’s: refusal, the. complaint would remain barren of facts showing the. refusal to be wrongful. The stock is now worthless, and even if damages were recoverable for the refusal to issue it to the plaintiff, they would be nominal.

If the plaintiff has any cause of action of practical value, it is against the defendant Wendell. He is not alleged to be insolvent.. The purpose of making the company a party was to obtain through it the shares of stock to which the plaintiff as between her and Wendell was entitled, and thus to obtain satisfaction of her. demand against Wendell. The insolvency of the Company defeats that' method of satisfaction. It is useless to revive a .contest to obtain in specie what time and vicissitude have destroyed. . If the receiver should s.ell this stock and. bring the proceeds into.court to the credit1 of this action,, the nominal six cents would not be realized.

The receiver is an officer of the court charged with the duty of administering upon the estate of the defunct corporation. It is the policy of the law in order to expedite the administration, avoid excessive expense, secure uniformity in remedies, and equality in rights among creditors, to bring all claimants against the estate into the common forum which will be provided, if necessary, in the action itself, in which the™ corporation is dissolved and the receiver appointed. (Code Civ. Proc. § 1806; 2 R. S. 469, § 73; Sands v. Kimbark, 27 N. Y. 147; Rinn v. Astor Fire Ins. Co., 59 id. 143; Austin v. Rawdon, 42 id. 155; Matter of Harmony F. & M. Ins. Co., 45 id. 310; Phœnix Foundry & M. Co. v. North River Const. Co., 33 Hun, 156.) The plaintiff can present her claim to the receiver and prosecute it in such forum. Cases may arise as is suggested in Owen v. Kellogg (56 Hun, 455), in which, under leave of the court, it may be expedient that the rights of the parties be determined in a separate action, and that the receiver be brought in.

It is not perceived that any useful purpose will be promoted by reviving against the receiver this action, the cause whereof is so obscure, and insufficiently stated, which has become stale through age and neglect, whose subject-matter has perished, and for which, if these infirmities be not insuperable, another remedy and forum exist. It will subject the receiver, that is, the creditors of the estate, to expense and will delay the administration.

If it shall hereafter appear that the receiver ...as assets applicable to payment to stockholders, and that it is impracticable for the plaintiff and the defendant Wendell to ascertain their rights as between themselves, without his presence as a party in their action, leave to renew this motion could be asked for.

The order should be reversed, with ten dollars costs ana disbursements and motion denied, with ten dollars costs.

All concurred.

Order reversed, with ten dollars costs and disbursements,• and motion denied, with ten dollars costs.