Court Opinion

ID: 6655779
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:57:38.767253+00
Date Added: 2024-06-11T15:59:54.550232
License: Public Domain

The following opinion on rehearing was filed November 2, 1904. Judgment of reversal adhered, to:
Letton, C.
The facts in this case are set forth in the former opinion by Mr. Commissioner Kirkpatrick, ante, p. 581. The *587principal point argued upon the rehearing was that the original petition in this action, asking for the appointment of a receiver, stated facts sufficient to justify the court in the appointment of the receiver. The substance of the petition is set forth in the former opinion, but, in the reexamination of this question, we believe it proper to set forth more fully the substance of the petition, with the view of ascertaining whether it sets forth sufficient facts to justify the appointment of the receiver. It is alleged that the defendant is a corporation, doing business in South Sioux City, Nebraska; that the plaintiffs, with many others, subscribed for stock in said corporation to the amount of $14,000; that Henry Haubens, William Peterson and Frank Burness became stockholders in said corporation and were instrumental in its organization, and did undertake to and did construct a building and machinery for said company that cost about $65,000; that the plant was placed in operation in the early fall of 1902 and operated until about the 14th day of December, 3902, when the same was closed; that it has on hand merchandise to the value of $3,000 or $4,000, and several thousand dollars’ worth of beets, and, unless the beets are manufactured into syrup within the next 90 days, the same will be lost; that it has been demonstrated that the enterprise is a successful one and, if properly managed, the property is of great value, but,. unless properly managed, all of the money expended by the plaintiffs will be lost and the property of the company be of no value.
Second. That the management of the company has been under the charge of Henry Haubens and William Peterson ; that neither the plaintiff nor any of the stockholders have been able to obtain any correct statement of the affairs of the company from said managers; that, in December, 1902, a stockholders’ meeting was held, and the officers of defendant were authorized to issue bonds to the amount of $35,000, for the purpose of paying off existing indebtedness and furnishing the company with sufficient capital to place its product upon the market; and it was *588agreed by the stockholders and officers that, of the proceeds of the bonds, f12,000 were to be applied to the payment of the mortgage of $15,000 on the property, held by Abel Anderson or the Northwestern National Bank of Sioux City, Iowa; that open accounts to the amount of $8,000 were to be paid from the proceeds, and the balance was to be placed in the treasury for operating expenses; that the bonds and mortgage were executed and placed in the hands of Abel Anderson, who was made trustee in the trust deed, and who was also the treasurer of the defendant company; that one Bradshaw paid $5,000 to Abel Anderson and received 5 of the bonds; that, by agreement with Anderson, the $5,000 were to remain to the credit of the company for the purpose of paying laborers and other pressing demands; that, in violation of the agreement, Anderson applied the same to the satisfaction of balances due Anderson or the Northwestern National Bank of which he is president, and did thereby deprive the company of all its funds and ability to continue its business, and did so embarrass the company that it has been .unable to make further sale of its bonds or, in any other way, raise sufficient funds to continue its business; and that, by reason thereof, the company and these plaintiffs, as stockholders, are threatened with the loss of all their merchandise, property and money, and that the machinery in said plant is threatened with destruction by freezing of pipes; and thát the insurance requires the operation of the plant, to the extent of keeping fires in cold weather so the pipes may be filled with water at all times, and that, unless the company can purchase coal and keep the fires going, the insurance will be canceled.
Third. That, about the 17th day of December, 19Q2, Henry Haubens, as president of the defendant company, resigned, and that William Peterson, who has been in active management for defendant company, has abandoned said company and is giving the same no attention. That a large number of creditors are threatening to commence attachment proceedings and other litigation and, by rea*589son thereof, all the property of the company is threatened with destruction and loss, and. unless a receiver is appointed to take charge of said company, these plaintiffs and other stockholders will lose the said property.
Fourth. At a meeting held on December 22, 1902, by the stockholders, it was resolved that a receiver of defendant company should be applied for.
Prayer. Petitioners pray that Andrew J. (hamper he appointed receiver of defendant company and its property with authority, under direction of the court, to take charge of all'said property; operate said plant, if deemed advisable and found possible so to do; to employ expert accountants for the purpose1 of ascertaining the financial condition of said company; to employ counsel to do each and every act necessary in the proper management and preservation of said defendant company’s property and its affairs; and to have all the powers and authority usually vested in a receiver, and for such other and further relief as may lx1 deemed equitable in the premises.
It was urged upon the argument that, where the directors of a corporation have been guilty of fraud and mismanagement, a court of equity had the power, at the instance of a stockholder, to appoint a receiver for the affairs of the corporation but this argument was entirely foreign to the cast1 made by the petition. The petition charges no fraud or mismanagement on the. part, of any directors of the corporation. It states that the president has resigned; that the manager has abandoned the plant; and that the treasurer paid certain debts of tin1 corporation to a banking institution of which he was president with part of the company’s assets; hut it nowhere, charges or asserts that the governing body of the corporation is not in possession of the property nor able to carry an its business. It is true it alleges the corporation is short of funds, and perhaps tin1 true reason why the plaintiff desired the appointment of a receiver is to be found in the allegation that a large number of creditors are threatening to commence attachment proceedings and oilier litigation, etc.; but this *590is no ground, for the appointment of a receiver. If the attorney for the plaintiff had been as prolific of charges of fraud and mismanagement by the officers of the company in his petition as he has been in his briefs, he would be in a better position to claim the relief he asks.
A court of equity has no power to appoint a receiver for a. solvent concern, for the purpose of preventing its creditors from maintaining actions against it for the recovery of their debts; and, under the facts alleged as to assets, the value of the property largely exceeded the debts. Further than this, the petition seeks no relief beyond the mere appointment of a receiver to care for, manage and control the property and business of the company. Proceedings for the appointment of a receiver in a court of equity are usually ancillary in nature, and the. appointment is only granted as an incident to the relief sought in the petition. It is analogous to an attachment proceeding in an action at law, in so far as being dependent upon the main action. In a recent case in this court, Vila v. Grand Inland Electric Light, Ice & Cold Storage Co., 68 Neb. 233, this question has been fully discussed by Holcomb, J., and the principles fully and clearly slated. Rut in the petition it is not alleged that the directors of the corporation are not entirely able and willing to carry on its business, nor that any dissension or trouble exists among them. The relief sought amounts, practically, to a removal by the court of the officers of the corporation and the installation by tin* court itself of its officer, the receiver, as the manager of the corporate affairs. We know of no such power residing in the court under the facts recited in the petition.
A receiver was appointed under this petition and, on the 3d of January, 1903, Abel Anderson, trustee,v was served with a notice that the receiver would apply to the district court for orders authorizing him to issue receiver’s certificates, as first liens upon the-property of the defendant company, for 'the necessary expenses of preserving the property and placing its product upon the market. Pursuant to 111 is notice, Anderson appeared specially and ob*591jected to the granting of any order making any charges of the receivership a lien prior to the mortgage, among other matters alleging that the petition did not state facts sufficient fo empower the court to appoint a receiver, and therefore the receivership is void. The cause was heard on the 12th of January, at chambers, and the objections overruled. On February 17 another summons was issued in the case and served upon Fred Miller, the president of the defendant company, together Avith a notice of application for the appointment of a receiver, but no neAV petition appears to have been filed. Following the service of these papers, on the 23d day of February, another order was made in the district court appointing Cramper receiver. If Cramper Avas already receiver, the object of this second order is not obvious. On the first day of July, 1903, a report of the receiver Avas filed, Avith exhibits shoAV-ing the receipts and disbursements from December 24 to June 1; a list of receiver’s certificates issued and accounts for services rendered by attorneys to the receiver; and, on the same day, there Avas filed by Abel Anderson, trustee, intervener, what he terms an intervention by leave of court, in Avhich he alleges the execution of the mortgage, its recording, that $18,500 of the debt are due mid unpaid, that he was not a party to the application for a receiver, and had no notice of the same; that the petition for such appointment does not state facts Avhich entitle the plaintiff to the relief demanded; and asks that the receivership and the costs thereof be decreed to be junior and inferior'to the plaintiff's rights. A hearing Avas had upon the intervention and objections, the objections were overruled, the report of the receiver confirmed and al-loAved, and the amount evidenced by the receiver’s certificate's decreed to be first liens upon the property of the corporation superior to the lien of the? bonds and mortgage;.
It is contended that Anderson appeared at the time that the. order allowing the receiver to issue certificates was made; that he did not appeal from fhe same and, therefore, the order allmving them to be issued was final as to *592him. It will be observed, however, that the order then made allowing the receiver to issue certificates was merely interlocutory in its nature, and was not a final order in the cause from which appeal or error might be taken.
It is further argued that the order appointing the receiver is not subject to collateral attack, but the attack made by Anderson in his intervention is not a collateral attack. He had an interest in the subject matter, and came into court as a party to the action when he intervened and filed his objections seeking to challenge the jurisdiction of the court. The rule is settled in this state that the question of the sufficiency of a petition and whether it states a cause of action may be raised at any step of the proceedings, hence, Anderson was not too late, the trial court was entitled to consider and pass upon the question of jurisdiction, and this court, also, is entitled to pass upon the same question upon appeal. The petition being clearly insufficient, the appointment of the receiver by the lower court was erroneous and, as against the in-tervener and the bondholders whom he represents, the; charges of the receivership do not constitute prior liens upon the property of the defendant corporation.
E'er these reasons, the judgment heretofore rendered, reversing the action of the district court, should be adhered to.
Ames, 0., concurs.
By the Court: For the reasons stated in the foregoing opinion, the former judgment of reversal entered in this court is adhered to
Reversed.