Case Name: Nason Manufacturing Company, Appellant, v. Hugh R. Garden, Individually and as Receiver of the Durham House Drainage Company, Respondent, Impleaded with Others
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1900-06
Citations: 52 A.D. 363
Docket Number: 
Parties: Nason Manufacturing Company, Appellant, v. Hugh R. Garden, Individually and as Receiver of the Durham House Drainage Company, Respondent, Impleaded with Others.
Judges: 
Reporter: Appellate Division Reports
Volume: 52
Pages: 363–367

Head Matter:
Nason Manufacturing Company, Appellant, v. Hugh R. Garden, Individually and as Receiver of the Durham House Drainage Company, Respondent, Impleaded with Others.
Temporary receiver of a corporation—-he may be authorized, to “finish and complete the outstanding, contracts” —:when not individually liable for material furnished to him for that purpose-.
A temporary receiver appointed under section 2423 of the Code of Civil Procedure relating to proceedings for the 'voluntary dissolution of a corporation, and invested by section 1788 of that Code with power to preserve the property of the corporation and the proceeds of debts and demands collected, may, as auxiliary to such power, he authorized hy the court to “finish and complete the outstanding contracts of said company.”
Such receiver is not individually liable for material purchased by him in order to complete contracts made by the corporation, where it appears that the .material was purchased upon the understanding that it was a liability of the receivership; that it was billed and charged to the receiver in his representative capacity, and that all payments therefor were made by checks signed by him as receiver.
Appeal by the plaintiff, the Nason Manufacturing Company, from so much of a judgment of the Supreme Court in favor of the defendant, Hugh R. Garden, as receiver of the Durham House Drainage Company, entered in the office of the clerk of the county of New York on the 14th day of February, 1899, upon the report of a referee, as dismisses its claim against Hugh R. Garden, as receiver of the Durham House Drainage Company, and directs judgment against it and in favor of Hugh R. Garden individually, dismissing its claim.
Charles De Hart Brower, for the appellant.
John R. Abney, for the respondent.

Opinion:
Patterson, J.:
This action was brought to foreclose a lien upon real property in 'the city of New York, belonging to one Rothschild, who, as ownér, had made a contract with the Durham House Drainage Company for the plumbing work of a building being erected by him and known- as the Hotel Majestic. -The plaintiff had furnished to the drainage company material used by it in the performance of its contract with Rothschild. Early in 1894 a proceeding for the voluntary dissolution of the drainage company was begun in the Supreme Court, and one Durham was appointed temporary receiver of that company. On the 5th of March, 1894, an order was made by the Supreme Court removing Durham as receiver and appointing in his place the defendant. Garden, who, by the order of his appointment, was invested with all the powers and duties of a temporary receiver, as provided by section. 1788 of the Code of Civil Procedure. In the same order Garden, as receiver, was directed to take possession of all the property of every kind of the drainage company, and "to collect, receive, hold, protect and preserve the same and the proceeds thereof, and to conduct the affairs and carry on the original business of the said Durham House Drainage Company of New York in the usual course thereof, and to finish and complete the outstandmg contracts of said company until the further order of this Court in the premises." After Garden had entered upon his duties as receiver and in compliance with the requirement of the order above mentioned, he, as receiver, proceeded with the work to be done under the drainage company's contract with Rothschild. In order to complete that work he purchased additional material from the plaintiff, and used it in that work, and it is for the balance of an indebtedness arising from the sale by the plaintiff of that additional material to Garden while thus acting as receiver that the lien sought to be foreclosed herein was filed.
The complaint, besides the facts relating to the establishment of a lien, contains allegations upon which a demand is based for judgment against Garden, both individually and as receiver, for any deficiency that may remain after the foreclosure of the lien. This action and other lienors' actions appear to have been consolidated, but the various claims involved in those actions were tried independently by a referee. On the trial of this plaintiff's claim it appeared that the plaintiff " abandoned its claim against Garden as such receiver, and proceeded against him individually," as the referee states in his report. The right to a lien and to resort to the real property was not established. As the case comes before us, therefore, the only subject for consideration is, whether the plaintiff has a claim enforcible against the defendant Garden individually.
The learned referee has determined, and upon the evidence properly so, that there was no contract obligation entered into between Garden and the plaintiff which would bind Garden individually. On the contrary, the. evidence is convincing that immediately after the appointment of Garden as receiver, and from the first interview he had with the representative of the plaintiff, all negotiations for the purchase of material to be used by Garden under, the Rothschild contract were had and all such purchases were made upon the distinct understanding that the goods purchased were to be paid for out of the proceeds of the contract or out of the assets of the receivership. Every item of merchandise that was bought by Gar den was billed to him as receiver, all the. entries in the plaintiff's books were made ágainst Garden as receiver, and all the payments, made by Garden were by his checks as receiver. The referee, on the evidence, would not have been justified in finding that there-was a personal liability of the receiver arising out of any express or implied contract relations established between the plaintiff and Garden individually.
But it is claimed by the plaintiff that there exists a legal liability of Garden individually quite irrespective of ordinary contract relations, and this notwithstanding the fact that the referee has found on the evidence that credit was given by the plaintiff to Garden in-his capacity as receiver. The theory of the plaintiff upon this point seems to be that .the provision of the order by which Garden was: appointed receiver and which-authorized him to carry on the business of the Durham House Drainage Company and to. complete its-contracts was a nullity; that- the court had no power to confer such authority upon one who was only a statutory receiver. With the-provision of the order which directed the receiver to continue the business as it had been theretofore conducted by the corporation and. until the further order of the court the plaintiff has nothing to do. If it can assail the order at all, its attack. must relate to that provision which authorizes the receiver to complete the unperformed outstanding contracts of the corporation, for that is the only subject in which it is interested. It is well settled that a statutory receiver-has no power beyond that which is derived from and authorized by statute. . If a receiver, without authority, contracts an indebtedness-he may be held personally liable for that indebtedness. (Meyer v. Lexow, 1 App. Div. 116.) But in this case -the statute gave the-power to the court to make the provision in the order which, directed the receiver to go on and perform the uncompleted coin-tracts of the drainage company. Section 2423 of the Code of Civil Procedure, relating to proceedings for the voluntary dissolution of" a corporation, provides that the court may confer upon the temporary receiver the powers and authority of a permanent receiver,, except that he shall not make- any final distribution among creditors and- stockholders unless he is specially directed by the court so to-do. Among the powers of a temporary receiver, as they are defined by section 1188 of the Code of Civil Procedure, is the power to- preserve the property and the proceeds of debts and demands collected. That power to preserve property is general. It includes-the preservation of all that comes within the denomination of property belonging to the corporation. Contracts for work entered into by the corporation, in which its moneys are invested for material and out of the performance of which reimbursement of those moneys is to be made, or out of which profits are to be derived, are-just as much property of the corporation as merchandise or other tangible or portable articles ; and it was to preserve property and property rights that the authority was given to this receiver to complete the contracts of the drainage company.
The judgment appealed from must be affirmed, with costs.
Rumsey, Ingraham, McLaughlin and Hatch, JJ., concurred.
Judgment affirmed, with costs.