Court Opinion

ID: 5227673
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:48:46.586455+00
Date Added: 2024-06-11T08:27:36.829557
License: Public Domain

Burr, J. (dissenting in part):
I am of the opinion that so much of the order appealed from as denies the motion of the Georgia-Florida Lumber Company to vacate the order made in the action of Chauncey S. Horton and others against the Thomas McNally Company on March 3, 1909, and which order appointed William E. Paine and Benjamin B. Odell, Jr., as receivers of the property of said defendant, should be affirmed. I am constrained to rest my decision upon grounds somewhat differing from those expressed in the opinion of my brother Woodward, which grounds I will briefly state.
As preliminary thereto, it may not be improper to observe that the position now taken by the moving party under the circumstances here disclosed does not commend itself upon ethical grounds, and the wisdom of the creditors of the McNally Company in rejecting the proposition made by the Georgia-Florida *335Lumber Company to secure them in the payment of their claims, may be questioned. But with these considerations we have nothing to do. Each party stands upon its or their strict legal rights, and this appeal must be disposed of in accordance therewith. I fail to see how the fact that the Georgia-Florida Lumber Company consented to the appointment of these receivers, or even asked for their appointment, if such is the fact, is conclusive against the motion to vacate the order appointing them. The question is one of jurisdiction of the court. While jurisdiction of .the person may be conferred by consent if it does not otherwise exist, jurisdiction of the subject-matter of an action or proceeding may not be. It seems, to me that the prevailing opinion in this case fails to clearly observe this distinction. I also think that the law is well settled that the courts of this State have not jurisdiction to entertain an action to dissolve a corporation organized under the laws of a foreign State and obtaining its corporate life therefrom, upon the ground of insolvency, and to determine such corporate life and sequestrate its assets. (Dreyfus & Co. v. Seale & Co., 37 App. Div. 351.) I think that it is also the case, at least unless restrained by a valid statute, that the Supreme Court of this State has- jurisdiction to appoint a receiver of the property of such corporation, situated within this State, for the benefit of the creditors thereof, and to “see to it that its own citizens are not unjustly discriminated against by reason of the administration in other States of the assets there of an insolvent corporation doing business within its limits.” (Blake v. McClung, 172 U. S. 239, 257; People v. Granite State Provident Association, 41 App. Div. 257; affd., 161 N. Y. 492; Popper v. Supreme Council, 61 App. Div. 405; Reusens v. Manufacturing & Selling Co., 99 id. 214; Moe v. McNally Co., 138 id. 480.) The learned counsel for the appellant contends, first, that there is such statutory restriction, and, second, that this action may not be classed as being one of the character referred to. There is a distinction between statutory authority and statutory restriction. At the date of the commencement of this action and of the appointment of the receivers, the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28) was in force. Article '6 of said act, sections 109-115, relating *336to actions for sequestration and dissolution of a corporation, may be deemed a statute of authority declaratory of the existing power of the court. But it is limited in its terms to domestic corporations. It must also be conceded that section 306 of the General Corporation Law (enacted in place of section 1810 of the Code of Civil Procedure), prescribing the cases in which a receiver of the property of a corporation may be appointed, is a statute of limitation. Its language is: “A receiver of the property of a corporation can be appointed only by the court, and in one of the following cases.” This action is not one of those therein specified, whether treated as an action to destroy defendant’s corporate fife or to preserve its assets. I think, too, that we must admit that the adverb “only ” qualifies not only the clause relating to the sources of appointment, but also that relating to the cases in which appointment may be made. Reference to the original act from which the Code section and the present provisions of the General Corporation Law had their derivation, makes this clear (Laws of 1870, chap. 151, § 3). I am of opinion, however, that this statute, in so far as it seeks to limit the power of the Supreme Court to appoint a receiver of the property within this State of a foreign corporation, doing business therein, for the protection and benefit of the creditors of such corporation, and to insure equality of treatment to so many of such creditors as are its own citizens with that accorded to creditors residing elsewhere, is in contravention of the constitutional powers of the Supreme Court, and is void. By the terms of the Constitution (Art. 6, § 1), “ The Supreme Court is continued with general jurisdiction in law and equity. ” As has been before pointed out, the jurisdiction of a general court of equity to appoint a receiver of the property within its jurisdiction of a corporation, whether domestic or foreign, for its safe preservation, has been long recognized. (See, also, 1 Pom. Eq. Rem. § 116.) Conceding the power of the Legislature to regulate the method of procedure in the appointment of receivers of the property of corporations, this is far more than a statute of regulation. If given the effect claimed for it by the learned counsel for appellant, it altogether deprives the Supreme Court of the exercise of a well-recognized and previously existing equity power. This the Legislature may not *337do. (People ex rel. Mayor v. Nichols, 79 N. Y. 582; Matter of Stilwell, 139 id. 337.) In Popper v. Supreme Council (supra), decided in this department in 1901, Presiding Justice Goodrich, writing for a unanimous court, calls in question the constitutionality of this very statute. It is true that the language then employed was not necessary to the decision of that case, but it was evidently used advisedly, and the concurrence by the entire court in the whole of the opinion, including that portion thereof just referred to, may be deemed a strong expression of the views of the learned justices participating in the decision.
It may be urged that if this proposition is sound, it must also follow that the Supreme Court in this State, under its general equity powers, may decree the dissolution of a foreign corporation. There is a clear distinction. The power of the Supreme Court in the former case is derived from the fact that the “ res,” the subject-matter, is property located here. In the latter the “ res ” is corporate life. This did not acquire existence here, nor derive its powers of continuance from any laws of this State. Its corporate death must be in the place of its birth.
The question then remains, may the action in which the receivers are appointed be treated as an action to preserve the assets of the McNally Company within this State \ The complaint states that the defendant named therein has property within this State, which it specifically describes, to wit, a contract with the city of New York through its board of water supply for the construction of a portion of the Catskill aqueduct, and a valuable plant used in such construction work. There is no reference to property of the corporation within the jurisdiction of its creation, nor of any assets elsewhere situated. The complaint sets forth not only the judgment recovered by plaintiff and the return of an execution unsatisfied, but the pendency of various other actions, in some of which attachments have been issued, and also the filing of certain notices of lien in the office of the comptroller of the city of New York, the insolvency of defendant, and the necessity of preserving its property for the benefit of its creditors from the sacrifice resulting from a forced sale thereof, and the possible danger of a forfeiture of said contract. The prayer for relief is that a. *338receiver be appointed by the court of the property and assets of defendant within the State- of New York, and that the creditors of defendant be enjoined and restrained from commencing actions against it, and from interfering in any way with the property of defendant, and from the prosecution of any actions now pending against it; and finally, that the proceeds-of the property of defendant, including profits under said contract, be justly and fairly distributed among its creditors and those equitably entitled thereto. There is no demand for any judgment destroying its corporate fife, nor for the ultimate distribution of its entire assets. The scope of the action is wholly limited to the preservation of its property within this State. The order appointing the receivers provides that they shall be “ authorized and required to take possession of all the property, business, assets and effects of the defendant within this State and to preserve and protect the same.” It may be that the order goes too far in attempting to define the powers and duties of the, receivers; and in seeking to confer upon them authority to carry on and continue the business of the said corporation so far as relates to the performance of its contract with the city of New York. But, given jurisdiction in the Supreme Court to make any appointment of receivers, and the order is not void because too broad. If it was in any respect improper, the remedy of the petitioner in this proceeding was to intervene in such action and seek to modify the order by striking out the improper provisions thereof. It is not necessary to determine whether by its long acquiescence, if not affirmative consent, it has not waived its right to this relief. It is sufficient for the present to say that this is not the relief sought.
The' conclusion which I have reached as to this portion of the order appealed from makes it unnecessary to consider the appeal in the action of the Georgia-Florida Lumber Company against the Thomas McNally Company from the order denying its motion to reinstate its attachment. I dissent from the affirmance of so much of the order in the action of Horton against the McNally Company as removes William E. Paine as one of the receivers of said company. Removal upon the grounds specified in the order should not be made except upon notice to the receiver and the persons interested in the subject-*339matter of the receivership. I think that the Géorgia-Florida Lumber Company, as the principal creditor of the Thomas McNally Company, has such an interest in the question of who shall he receivers of the property of said company within this State, that it is a person aggrieved by such decision, and may appeal therefrom.
To summarize: In the action of Chauncey S. Horton and others against the McNally Company, I concur in the result so far as the affirmance of so much of the order appealed from as denies the motion to remove the receivers is concerned. I dissent from the affirmance of so much of said order as removes William E. Paine as one of such receivers. In the case of the Georgia-Florida Lumber Company against the Thomas McNally Company, I concur in the affirmance of the order denying the motion to reinstate the attachment of the Georgia-Florida Lumber Company.
Order in Horton v. McNally Company affirmed, with ten dollars costs and disbursements. Order in Georgia-Florida Company v. McNally Company affirmed, with ten dollars costs and disbursements.