Case Name: Guillaume Reusens, Respondent, v. The Manufacturing and Selling Company of America, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1904
Citations: 99 A.D. 214
Docket Number: 
Parties: Guillaume Reusens, Respondent, v. The Manufacturing and Selling Company of America, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 99
Pages: 214–218

Head Matter:
Guillaume Reusens, Respondent, v. The Manufacturing and Selling Company of America, Appellant.
Foreign corporation — an appointment may Toe made in the State of New York of a receiver of its assets as distinguished, from, the corporation itself.
The complaint in an action averred that the defendant was a foreign corporation, organized and existing under the laws of the State of Hew Jersey, and that the plaintiff was a stockholder thereof; that the defendant’s hoard of directors had abdicated their functions and handed over the entire control of the. corporation to Ernest C. Mueller, one oí the directors of the defendant, and that he was engaged in dissolving, liquidating, disposing of and winding up the business of the defendant without the authority of the stockholders or the directors, and in violation of the laws of the State of New Jersey and of this State; that the proceedings which had been taken in New Jersey to this end were unlawful; that its principal place of business was within this State, as were also all of its assets and books; that various persons were indebted to the defendant in various amounts; that said Mueller had unlawfully paid from the proceeds of the assets of the corporation $7,500 to the firm of Strobel, Wilkin & Co.; that the debts and liabilities of the defendant were upwards of $10,000 over and above all of its assets; that in order to preserve the property of the corporation from being unlawfully distributed and wasted it was necessary that a receiver in this State should be appointed of defendant’s property and assets. It demanded judgment for the appointment of a receiver and an injunction restraining any interference with such receiver or the property of the corporation until the final termination of the action.
Held, that the complaint stated a cause of action of which the court had jurisdiction;
That the courts of the State of New York have jurisdiction to appoint a receiver of the property and assets of a foreign corporation in order to preserve them from unlawful disposition and waste, although they have not jurisdiction to appoint a receiver of the foreign corporation itself.
Appeal by the defendant, The Manufacturing and Selling Company of America, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 13th day of May, 1904, upon the decision of the court, rendered after a trial at the New York Special Term, overruling the defendant’s demurrer to the amended complaint.
Charles B. Blair, for the appellant.
Alfred H. Holbrook, for the respondent.

Opinion:
Hatch, J.:
The complaint avers that the defendant is a foreign corporation, organized and existing under the laws of the State of New Jersey, and that the plaintiff is a stockholder thereof. It further avers in substance that the defendant's board of directors have abdicated their functions and handed over the entire control of the corporation to Ernest C. Mueller, one of the directors of the defendant, and that he is engaged in dissolving, liquidating, disposing of and winding up the business of the defendant without the authority of the stockholders or the directors, and in violation of the laws of the State of New Jersey and of this State; that the proceedings which have been had and taken in New Jersey to this end are unlawful; that its principal place of business is within this State, as is also all of its assets and books; that various persons are indebted to the defendant in various amounts; that said Mueller has unlawfully paid from the proceeds of the assets of the corporation $7,500 to the firm of Strobel, Wilkin & Co.; that the debts and liabilities of the defendant are upwards of $10,000 over and above all of its assets; that in order to preserve the property of the corporation from being unlawfully distributed and wasted it is necessary that a receiver in this State should he appointed of defendant's property and assets, and it demands judgment for the appointment of a' receiver and an injunction restraining any interference with such receiver or the property of the corporation until the final termination of the action. The demurrer interposed to the complaint is based upon two grounds, (1) that the court has not jurisdiction of the subject of the action, and (2) that the complaint does not state facts sufficient to constitute a cause of action. From the interlocutory judgment overruling the demurrer an appeal is taken to this court.
We are of opinion that the complaint states a good cause of action. There is a radical distinction between an action which seeks to have a receiver appointed of the property and assets of a corporation in order that they may be preserved from unlawful disposition and waste, and an action for the appointment of a receiver of the corporation. In the former ease it is settled by an abundance of authority that the action will lie. (Woerishoffer v. North River Construction Co., 6 Civ. Proc. Rep. 113; Popper v. Supreme Council, 61 App. Div. 405.) The exercise of such equitable jurisdiction has been recognized and applied by 'the General Term in this department (Redmond v. Hoge, 3 Hun, 171), and by this court (Hallenborg v. Greene, 66 App. Div. 590, 599). In an action for the appointment of a receiver of a corporation at the instance of a stockholder, or of a receiver appointed in a foreign jurisdiction, brought in this State to secure the appointment of an ancillary receiver, where the corporation is the sole defendant, it has been held that it will not lie. Such was the case of Mabon v. Ongley Electric Co. (156 N. Y. 196). Defendant's demurrer to the jurisdiction of the court is based mainly upon this case. It is evident, however, that it has but little, if any, application, for therein the relief sought was a receivership of the corporation itself, and the court held that such action could not be maintained, for the reason that the plaintiff therein already possessed all of the power and authority which the ancillary receiver would have obtained if one were appointed, and for the further reason that as the receiver-plaintiff therein virtually represented the corporation, he was in legal effect maintaining an action against himself, and that it could in no sense be said to be for the benefit of the corporation. In the present case the stockholder does not represent the corporation, but its creditors and the action asks for the appointment of a receiver in order that the assets may be preserved for their benefit. As the defendant is obligated to pay its debts and is benefited when they are discharged, the action may also be said to be for the benefit of the corporation. The right to maintain such an action is recognized in the case last cited. Therein the court, speaking through Judge Vann, said: "A receiver is sometimes appointed in an action brought by a stockholder of a foreign corporation, with its affairs in process of liquidation, upon proof of special facts showing that funds in this State are in jeopardy owing to the insolvency of the custodian ; - or upon the allegation of facts showing danger of loss, but in such cases the stockholders were powerless without a receiver." That language precisely fits this case, and the court cites as authority to sustain its text most of the authorities to which we have called attention. It is true that the court adds that such jurisdiction will be exercised only when necessary to protect rights which would otherwise be lost or injured were the exercise of jurisdiction denied.
It is unnecessary that we give any intimation as to whether the relief asked for will be granted. That will necessarily be determined upon the trial of the action after all the facts are developed. We are now only concerned with the question of jurisdiction and not with the relief to be granted or refused upon a trial. That the court has jurisdiction is established by indubitable authority, and having jurisdiction, the complaint states a cause of action.
It follows that the interlocutory judgment should be affirmed, with costs, and the defendant be permitted to plead over within twenty days on the payment of costs in this court and in the court below.
Van Brunt, P. J., Patterson, Ingraham and Laughlin, JJ., concurred.
Judgment affirmed, with costs, with leave to defendant to plead over on payment of costs in this court and in the court below.