Court Opinion

ID: 5181924
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:43:20.10882+00
Date Added: 2024-06-11T08:26:36.049891
License: Public Domain

Ingraham, J. (dissenting):
I concur with Mr. Justice Rumsey in his conclusion that, by the entry of the judgment in the Attorney-General’s suit, by which the corporation was dissolved, this proceeding abated, and that this special proceeding stood then in the same position as an action or special proceeding against an individual where the individual died. Ho further order or judgment could be granted in this proceeding until it was revived, if such revival were possible. The question, then, presented is, whether all former orders in the special proceeding were at once abrogated, so that the rights acquired under them were lost, because of the abatement of this proceeding. This corporation thus dissolved by the judgment entered in the action by the Attorney-General was, at the time of the commencement of this special proceeding-for a dissolution of the corporation, the owner of a large amount of property and liable to others in a large amount, being at that' time insolvent. When this proceeding was commenced, the court, having jurisdiction of the subject-matter and of the parties, appointed temporary receivers. By such appointment, the title to the property of the corporation was divested and vested in the receivers for the benefit of the creditors of the corporation, whose duty it was to protect the property until such further order of the court was made as should direct a proper disposition of it. Immediately upon the appointment of these temporary receivers, it became their duty to proceed to collect all of the property of the corporation that had vested m others. This question as to the rights vesting in a temporary receiver in such a proceeding was before the Court of Appeals in the casé of Nealis v. American Tube & Iron Company (150 N. Y. 44). It was there held that, upon the appointment of the receiver of a corporation in such a proceeding, the title of the *330property of the corporation vested in the receiver, and that he was at once authorized and it was his duty to commence actions or proceedings to recover the possession of such property,- either from the corporation itself or from such persons as had received such property in fraud of the rights of the creditors. The language of the court is: “ And it was the duty of its temporary receiver, who was vested with all its property, to sue, recover the money, if possible, and to hold it subject to the further order of the court. It is the evident policy of the statute to vest in the temporary receiver many of the important powers that are exercised by a permanent receiver, and this for the very obvious reason that, before final judgment in an action to procure the dissolution of a corporation, it is of vital importance that the title of the corporate property should be vested in' an officer of the court who has full authority to reduce it to possession wherever found and to maintain- any action or special proceeding necessary in the premises. In such an action, it- would be not only an empty form to make the insolvent corporation a defendant,, but would be inconsistent with the appointment of the temporary receiver, who, for the purposes of holding, protecting and reducing ■to possession the property and assets of the company, is vested with title and represents the corporation and its creditors as fully as a permanent receiver after final judgment of dissolution.” Thus, by ..the entry of this order appointing them, these temporary receivers, by virtue of their appointment, became vested with the title of the property for the purpose of holding, protecting and reducing it. to-possession, and for that purpose such receivers are vested with the title and represent the corporation and its creditors as fully as á permanent receiver.
Now, the abatement of this proceeding does not vacate this order, nor does it, in my opinion, divest these receivers of the title of the property vested in them by -operation of law upon their appointment. It is true they are still the mere custodians of the property until the permanent receiver is appointed, or until the court makes some direction as to the disposition that they shall make of the property; but it is as the holders of the legal title of the corporate property that has become, vested in such receivers by operation, of law that they are entitled to bring actions or take such proceedings as are necessary to reduce such property to possession, and to pre*331serve the same until the further order of the court. It is settled that by the abatement of an action in consequence of the dissolution of a corporation or the death of an individual a warrant of attachment granted in the action, which by such dissolution or death has become abated, is not vacated. (See Moore, Executor, v. Thayer, Administrator, 6 How. Pr. 47; Thacher v. Bancroft, 15 Abb. Pr. 243.) In the case of Burkhardt v. McClellan, reported in a note to the last case cited (15 Abb. Pr. 243), the Court of Appeals held that a warrant of attachment issued and served upon real estate of the defendant, a non-resident, was a valid lien upon the property, and as such continued until the final judgment was entered, and a sale upon execution on such final judgment vested a valid title in the purchaser, although the defendant in the attachment suit died immediately after the attachment was issued. I think that Mr. Justice Rumset fails to appreciate the distinction between an action by receivers, in whom, by their appointment, the title of the property vests, to reduce such property to possession, not as an affirmative act in the proceeding in which the order appointing them was entered, but an independent act taking possession of the property, the title to which has vested in them by the entry of the order of appointment, and a proceeding in the action or proceeding in which the order was made. Certainly the action commenced by the receiver in' the Nealis case (supra) to recover the possession of the property transferred by the corporation before his appointment was not a proceeding in the action or special proceeding in which the receiver was appointed. When the receiver commenced that action he commenced it as the owner of that property, the title to which had vested in him by operation of law; and the order appointing him temporary receiver was evidence to show that the title had by that order vested in the plaintiff. That action was no more a proceeding in the special proceeding in which he was appointed than was this motion in- the court below a proceeding in that special proceeding in which the order of appointment was entered. The order' appointing these respondents receivers operated when entered, and under it the title vested in these respondents, which gave them ' a right to apply to have the property of this corporation turned over to them to hold until the further order of the court.
The provision as to the property vesting in the trustees of a dis*332solved corporation, where no receivers are appointed to distribute it, does not apply when the title to such property has vested in' other, receivers appointed by the court prior to the dissolution of the corporation. It is well settled that valid contracts made by a corporation survive its dissolution by voluntary surrender or sale of its corporate franchises, and that the creditors of the corporation, notwithstanding such surrender or sale, may still enforce their claims against the property of the corporation, as if no such surrender or sale had taken place. Moneys derived from the sale and transfer of the franchises and capital stock of an incorporated company are assets ■of the corporation, and as such constitute a fund for the payment of its debts, and if held by the corporation itself, and so invested as to be subject to legal process,. the fund may be levied on by such process; but if the fund has been distributed among the stockholders, or passed into the hands of other than bona fide creditors or purchasers, leaving any debt of the corporation unpaid, the established rule in equity is that such holders take the fund charged with the trust in favor of the creditors, which a court of equity will enforce, and compel the application of the same to the satisfaction of their debts. (Railroad Company v. Howard, 7 Wall. 410.) Now, upon the appointment of these temporary receivers, they represented the stockholders and creditors.of the corporation, and, for the purposes of holding, protecting and reducing to possession the property and assets of the company, were vested with title, and represented the corporation and its creditors as fully as a permanent receiver after1 final judgment of dissolution. (Nealis v. American Tube & Iron Co., supra.) As representing these creditors, this fund, as a trust fund for the payment of the debts of this insolvent corporation, had vested in these receivers. To say that the mere abatement of the proceeding divests these creditors and their receivers of the title to this trust fund, which belongs to such creditors, and which was a fund for the payment of their demands, and thus, leaves this, large fund, consisting- of money and property, without a legal custodian, without any one to protect it, and subject to be wasted and lost for the want of a. proper custodian, until the court can determine the method by which it shall be distributed, seems to me to be a great injustice. In consequence-of a dispute as to the particular officers of the court who should distribute the property of this insolvent cor*333poration among the creditors, this large amount of property, the only fund to which these creditors can look for any payment of their demands, has been for month after month without even a responsible-custodian with authority to protect it. These receivers (respondents) have been adjudged to be legal receivers in whom this property is. vested. By the action of this court in this case the property is-again placed in a position with no legal custodian. The persons who had been appointed receivers in the Attorney-General’s action certainly have now no title to the property, no right to its posses- ' sion. They have no power to collect any claim due to the bank by legal proceeding. The order appointing them receivers has been, reversed, and the final judgment by which they were appointed vacated. They' can have no possible right to the possession of this-property; and, unless these respondents have such right, as I think it clear they have, for the reasons before stated, this property is now in a situation that it can be appropriated by any one with impunity,, and where no one is in the position to protect it. 1 am not willing to be responsible for a decision which will produce that result,, especially when it seems to me that for the reasons before stated this property has vested in these temporary receivers as custodians-until the further order of the court.
I, therefore, dissent from the proposed action of the court upon this appeal.
Order reversed, without costs.