Case ID: ad_17/html/0181-01.html
Source: Caselaw Access Project
Author: {"author": "Herrick, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Walter C. Witherbee and Annie E. Witherbee, his Wife, Respondents, v. Frank S. Witherbee and Others, Defendants; Wallace T. Foote, Jr., and Lewis H. Roe, Appellants.
    
      When a receives' pendente lite of a partnership) should be appointed—power of the receiver to continue the business—general authority in advance to bring suits.
    
    Where, upon the expiration of the term, of a copartnership, the partners do not desire to continue the business, and the representatives of five-sixths .of the interests therein request the appointment of a receiver, and before a motion, is made to that end in one suit another action is commenced by persons having interests in such copartnership as part owners, asking for' an accounting and settlement of the partnership affairs, the Special Term may properly appoint a receiver pending the action.
    The court may properly authorize a receiver so appointed to continue the business for the time being, so as to hold it together and keep its good will until an opportune time arrives for its sale without unnecessary sacrifice.
    It is, however, improper for the court to authorize such receiver in advance to prosecute and defend, without further order, all actions brought or about to be brought by or against the copartners, or any of them, pertaining to the copartnership business and to retain counsel.
    Such authorization amounts to a complete nullification of the rule which requires that leave be first obtained of the court, and which contemplates at least some investigation by the court as to the propriety of the commencement of such suits, before permission is granted.
    Appeal by the defendants, Wallace T. Foote, Jr., and another, from an order of the Supreme Court, made at the Essex Special Term and entered in the office of the clerk of the county of Essex on the 2d day of January, 1897, appointing a receiver ¡pendente lite of the business 'of the firm of Wiitherbee, Sherman & Co. .
    
      T« F. Gonwang, for the appellants,
    
      B'owe' & Van Kirie, for the respondents.
    
      K. ■!)■ JG&ffnagle, for guardian ad Intern.
    
   Herrick, J.:

The appointment of a receiver pendente lite rests very largely in the discretion of the Special Term, and while this court has the right to review the exercise of that discretion it will not interfere with it unless it clearly appears that the Special Term has mistakenly exercised or abused the discretion vested in it.

In this case the term of the copartnership has expired by its own . limitation; the partners manifestly do not desire to .continue business as a copartnership; representatives of five-sixths.of the interests in such copartnership requested the appointment of a receiver, and since the commencement of this action and before the making of the motion wherein the receiver was appointed, another action has been commenced by persons having, interests in such copartnership, . as part owners, asking for ¡an accounting and settlement of the partnership. affairs.

Under these circumstances, and the other facts appearing in the record before us, it seems to me that the -discretion of the Special Term, in appointing a receiver, was properly exercised. It is also within the power of the court to authorize the receiver to continue ‘business for the time being, so as to hold it together and keejo its good will until an opportune time arrives for its sale, without any unnecessary sacrifice. -

' 'And while the terms in which that power is vested in the receiver . in this case are somewhat broad, at the same time it must be¡borne in mind that it is something still entirely within the' controFof' the court,, andfif the receivership is unduly prolonged the court'ihay, at any time, direct' him to close up the business and dispose of the property.

It seems to’nie, howevér, that ¡that ¡portion • of the order which authorizes the receiver to prosecute and defend, without the further order of the court, all actions brought or about to be brought, by or against said copartners, or any of them, 'pertaining to said copartnership business, and to retain the plaintiffs’ attorneys and counsel, or other attorneys and counsel, as he may deem advisable, is improper, and its presence in the order was probably overlooked by the justice holding the Special Term at which the order was máde.

The rule requiring leave to be obtained of the court before the receiver can either sue or be sued, is in order to prevent any unnecessary waste of the assets in the receiver’s hands in unnecessary litigation,, and contemplates at least some investigation by the court as to the propriety of the commencement of such suits before permission is granted; and to authorize in advance the commencement of suits' without any knowledge of what they are for, or of the necessity thereof, is a complete nullification of the rule and exposes the estate to the very thing that "the rule was intended to guard against, and is improper practice. That portion of the order should be stricken out, and the order as so modified "and corrected should be affirmed, without costs to either party of this appeal. :

All concur.

Order modified as per opinion, and as so modified affirmed, without costs to either party.