Case Name: George Gordon Hastings, as Executor, etc., of Rosalie Tousey Hastings, Deceased, Respondent, v. Sinclair Tousey, Frank Tousey, Publisher, a Corporation, and Others, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1907-11-15
Citations: 121 A.D. 815
Docket Number: 
Parties: George Gordon Hastings, as Executor, etc., of Rosalie Tousey Hastings, Deceased, Respondent, v. Sinclair Tousey, Frank Tousey, Publisher, a Corporation, and Others, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 121
Pages: 815–818

Head Matter:
George Gordon Hastings, as Executor, etc., of Rosalie Tousey Hastings, Deceased, Respondent, v. Sinclair Tousey, Frank Tousey, Publisher, a Corporation, and Others, Appellants.
First Department,
November 15, 1907.
Corporation — receivership pendente lite denied.
A temporary receiver of a defendant corporation should not be appointed in an action by the representative of a deceased stockholder against the directors and officers to compel them to account for and pay over property alleged to have been wasted, when neither the complaint nor the moving affidavit shows that the corporation is insolvent or in danger of becoming so, or that there is danger that the corporate property will be removed from the jurisdiction, or materially injured or destroyed. A receiver will not be appointed merely because the representative of the former owner of one-half of the capital stock is dissatisfied with the management of the corporation.
Appeal-by.the defendants, Sinclair Tousey and others, from an order of the Supreme Court, made at the New York Special Term -and entered in .the office of the clerk of the county of New York on the 24th day of September, 1907,-appointing a temporary receiver of “ all the property, assets and effects; of every description, of the defendant -corporation, Frank Tousey, Publisher,” during the pendency of the action. .. •
James M. Hunt, for the appellants.
J. Aspinwall Hodge, for the respondent.

Opinion:
Lambert, J.:
The' plaintiff, as executor of tiie estate of Rosalie T. Hastings, deceased, a stockholder in the defendant corporation, brings this action in equity to procure a judgment restraining the individual defendants from in any manner interfering with the assets or property of the defendant corporation, or disposing of the same; suspending them from the offices of directors, president, vice-president and secretary and treasurer, respectively ; that a receiver lie appointed of the property and assets of the defendant corporation, giving power and authority to such receiver to conduct the business of the defendant'corporationthat the-individual defendant's account for and pay over to the corporation any funds improperly lost or wasted,, and. that a temporary receiver be appointed. Tlie.pleadings'are very elaborate, and suggest misconduct principally oil the part of Sinclair Tousey,. the president of the corporation, and the order here,under consideration gives to the plaintiff much of .the relief which he seelcs in the action, going to the extent of. investing the receiver with ."all the property, assets and effects, of every description," and authorizing the temporary receiver " to carry on tlie business of said corporation as heretofore carried on , during the pendency of this action, or until the further order of tliis court."
As I .understand-the law, the'main purpose of a receiver is the preservation of the property or thing in controversy pending the litigation concerning it, so that the principal ground for the appoint.ment of a receiver is, generally stated, danger -of..-the -loss of or in jury to such property or thing ip controversy before tile court-can make a disposition thereof by a final decree on-the merits. .(23 Am. & Eng. Ency. of Law [2d ed.], 1007.) This is the'spirit óf oúr own Code of Civil Procedure, which provides in section 713 that,in addition to the cases where tlie.appointment, of a receiver is specially-provided for by law,.a .receiver of property'which' is the subject of an action may he appointed by tlie court before final judgment " on the application-of a party who establishes an apparent right to or interest in the property where it is .in the possession of an adverse party and there is danger'that it will be removed, beyond the juris-, diction of .the court, .or lost, materially injured, or destroyed," This provisión of the Code of Civil Procedure having prescribed' the cases in which a receiver may be appointed and specifying the eases in which a receivership, .may be liad, pending tlie action, and as a' proceeding in'the-action,; has excluded .every other casé-and prohibited'the appointment except as-, authorized, (Fellows v. Heermans, 13 Abb. Pr. [N. S.] 1, 7.) And the;'court in Mabon v. Ongley Electric Co. (156 N. Y. 196, 202, 203) say:. '(Courts do hot appoint--receivers'.meMy for the asking, but only on .facts alleged and proved,-showing that one is necessary for the preservation of property' or to .accomplish some oiher useful object. * • The jurisdiction, however,-is extraordinary and'is exercised Only w.heti necessary to ' protect some clear right of 'a suitor' which would other wise be lost or greatly injured and which could not be saved or protected by any other action or mode of proceeding.' "
The plaintiff pleads voluminously, but he nowhere suggests that either the corporation or any of the various defendants are insolvent or unable for any reason to comply with any judgment which may be entered in the action. 'There is no suggestion that the property is to be taken out of the jurisdiction of the court or that it is going to be lost, materially injured or destroyed. There is a broad allegation that " the affairs of the corporation have been grossly mismanaged and the interests of the plaintiff are unsafe in the hands of Sinclair Tousey," but the' plaintiff's interests are not involved in this action except ás a stockholder of the corporation ; lie brings this action in theory, in behalf of the corporation, and an allegation as to his interests is not to the point. He does not allege that the interests of the corporation are not safe in the hands of the board of. directors, and there is no fact stated from which it can be inferred that the corporation, as such, will suffer any loss from the situation just as it is, pending the determination of this litigation. Sinclair Tousey, the president, is concededly the real owner of one-half of the stock of this corporation ; the business has been successful under his management for four or five years at least, probably for a much longer time, and there is no fact to be found in the pleadings which would tend to show that the management would result in any loss to the corporation, as such, unless it be found in the declaration of the complaintj amounting only to a conclusion, that " such profits as there are and which have accrued to the estate during the past seven months, have been and are being absorbed in excessive- salaries as aforesaid," though it appears that Mr: Tousey is drawing only the same salary that he drew during the lifetime of the plaintiff's testatrix and with her full consent, and the other salaries are not definitely known to the plaintiff. Primarily the directors of a corporation, acting in good faith — and good faith is presumed — determine the question of salaries, and mere recklessness on the part of a pleader in concluding that salaries are excessive ought not to prevail in a court of equity and permit of a receivership where there is nothing to show that the plaintiff's rights may not be fully secured without such, arbitrary inter ferencé with the. exercise of a corporate franchise. To take away the figlit of the defendant Tousey, concededly the owner of one-half of the.stock, in conjunction .with a board of directors lawfully' chosen-, to conduct the business, winch is not, shown to be insolvent, and in which no rights of creditors are involved, and in which there is no suggestion that the defendants are not individually solvent, is to subject him to the liability of great loss in prestige and in. individual credit, arid- is- to impose upon this concededly solvent. corpo: ration the burdens of a receivership for which there is.no occasion shown in the pleadings-.
The order appealed from should he reversed, with costs, and the motion denied. -.
Patterson, P. J., concurred in result.