Court Opinion

ID: 5513879
Source: CourtListenerOpinion
Date Created: 2022-01-10 04:26:49.552542+00
Date Added: 2024-06-11T08:34:14.047887
License: Public Domain

By the Court, Sutherland. J.
It is contended on behalf of the defendant, that the replication admits that the plaintiffs have become dissolved as a corporation, and therefore having no legal existence, that a suit cannot be prosecuted in their name. The dissolution of the corporation, or the surrender of their rights, privileges and franchises, admitted by the pleadings, is such surrender or dissolution, and such only, as the 6th section of the act of 1825, page 450, declares shall be the consequence of its insolvency, or of its neglect or refusal to redeem its notes, or of the suspension of its ordinary business, for one whole year. A surrender in any other manner is possitively denied. The question then is whether, after such a dissolution or surrender, the receiver of the bank can institute a suit in its name for a cause of action which accrued before such surrender. 2. If it be conceded or shewn that such suit can be maintained for a debt due to the bank arising upon contract, can it for a cause of action like this—a penalty? 3. Is it sufficiently shewn by this replication that this suit was instituted by the directions of the receivers ?
The act of 1825 merely authorizes the court of chancery, -upon the application of the attorney general, or any creditor *653of any incorporated bank which has become insolvent, &c. “ to appoint a receiver of the property, monies and effects of said company.” Sect. 17, p. 453. It does not define the powers of the receivers, nor prescribe the manner in which they are to proceed. They are strictly common law receivers, and have no powers except such as are conferred upon them by the order appointing them, and the course and practice of the court. This was so held by the chancellor, in the recent case of Verplanck v. The Merchantile Ins. Co., 2 Paige, 452. They possess the same powers as the receivers authorized to be appointed by the 35th section of the act entitled, “ Of proceedings against corporations in equity.” 2 R. S. 463. But the 41st and 42d sections of that act, page 464, provide for a receiver of a very different character, and by those sections his duties are defined, to wit, to take charge of the property and effects of the corporation, and to collect, sue for and recover the debts and demands that may be due to it; and the 42d section declares that such receiver shall possess all the power and authority conferred upon receivers appointed in case of the voluntary dissolution of the corporation, 2 R. S. 469, sect. 68; and such receiver has all the power and authority of trustees or assignees of an insolvent debtor, 2 R. S. 21, sect. 28 ; and although I do not find' that the revised statutes give in express terms to such assignee the right to sue in their own name, (as he insolvent act of 1813 does, 1 R. L. 468, sect. 19, 21,) yet I presume he would possess such power under the general provisions of the act. The presumption is that the revised statutes did not intend to change the law upon this subject. In the case already referred to, Verplanck v. The Mercantile Insurance Company, the chancellor says such receiver is a statutory assignee, vested with nearly all the powers and authority of an assignee of an insolvent debtor. But the receiver, under the act of 1825, being a common law receiver or assignee only, and not a statutory assignee, cannot sue upon a chose in action thus assigned to him, in his own name. Although his rights as assignee will be protected, the action must be brought in the name of the original creditor. Where the suit is brought upon a negotiable instrument, it *654may be brought in the name of the receiver as endorsee ; such was the case in Haxton & Brace v. Bishop, 3 Wendell, 13. ' If the action can be sustained at. all, therefore, it must be in the name of the present plaintiff. 1 Johns. Ch. R. 61, and cases there cited. In this respect it stands upon the same. ground with actions brought to recover debts upon contracts not negotiable, due to the bank.
It is very obvious that the surrender of the franchises or dissolution of a corporation, spoken of in the 6th section of the act of 1825, is but a quasi, not an absolute and consummated surrender .or dissolution; for the very next section makes it the. duty of the attorney general to prosecute such corporation, and obtain judgment that it be dissolved; and the 17th section authorizes the attorney general, or any creditor of a bank which shall have become insolvent, &c. to apply for - an injunction and the appointment of a receiver. The corporation continues in esse, although shorn of its powers, until it is formally adjudged to have been dissolved, and its name may be used in the legal proceedings necessary to the winding up of its concerns.
The case of Slee v. Bloom and others, 19 Johns. R. 456, was very much relied upon by the counsel for the defendant. That was a bill filed by the creditor of the Dutchess Cotton Manufactory against the stockholders, to compel them to pay, or contribute to. the payment-of his debt, under the provisions of the 7th section of the act relative to incorporations for manufacturing purposes, under which that company had been incorporated. 1 R. L. 245, 7. The 7th section of that act provides, that for all debts which shall be due and owing by said company at the time of its dissolution, the persons then composing said company shall be individually responsible to the extent of their respective shares of stock. To establish the fact of a dissolution of the company, the bill, which was filed in April, 1819, charged, among other things. 1. That at a meeting of the stockholders in October, 1816, it was resolved that it was inexpedient to continue the factory in operation, and the superintendent was directed to shut it up and discharge the workmen; 2. That no election of trustees had been made since April, 1817, and the stockholders had come to a resolu*655tion never to make another election, but to abandon the factory and corporation altogether; 3. That all the real estate of the company was sold upon execution in February, 1818 ; 4. That there had been no meeting of the stockholders since May, 1817; nor had the trustees had any meeting, nor transacted any business since December, 1817, but had determined to abandon and give up the factory and corporation, and suffer it to be dissolved, &c. These allegations were substam tially admitted by the answer; and it was held in the court of errors, upon appeal, that they were evidence of a surrender of the corporate rights, and a dissolution of the company, for the purpose of giving its creditors a remedy against the individual stockholders for their debts. Judge Spencer, in his opinion, considers incorporations for manufacturing purposes, under the general act, as but a species of partnership, as possessing no franchises or privileges, and in that respect differing essentially from corporations to whom exclusive or peculiar privileges are granted ; and after adverting to the facts which have been stated, he says: “ This corporation was dissolved, within the meaning and intent of the act, as regards creditors> when it ceased to own any property, real or personal, and when it ceased for such a space of time from doing any one act manifesting an intention to resume their corporate functions. The end, being and design of the corporation were completely determined ; and if even it had the capacity to reorganize and re-invigorate itself, the case has happened when, as it relates to its creditors, it is dissolved.” It was held to be a dissolution, for the purpose of enabling the creditors of the corporation to enforce the remedy, which the legislature evidently intended to give them against the stockholders individually. It was well said that such remedy would be entirely illusory, if it could not be resorted to until the corporation had expired by its own limitation, or until the attorney-general, over whom the creditors had no control, should procure the corporation to be formally dissolved. But I doubt whether, if any action had been brought in the name of that corporation, to recover a debt due to it, it would have been held that it was so far dissolved that an action could not be maintained in its name. It was held to be dissolved for the sake of the partic*656uhr remedy given. The same doctrine was held in Briggs aand other v. Penniman and others, 1 Hopk. Ch. R. 301, and 8 Cow. 387, which was also an incorporation under the same general act. The doctrine of those cases is not applicable here, and I am of opinion that suits may well be brought by the receiver in the name of the bank.
I am also of opinion that the receiver may prosecute for the penalty given by the act, as well as upon contracts in the name of the bank. The penalty is a debt, and the act expressly provides, (2d section, page 449,) that the individuals who shall incur the penalty shall be liable therefor to the said cor-ration, and to the creditors thereof, in the event of its dissolution. It is to be collected for the benefit of the creditors of the bank. The cause of action does not die with the corporation. But the statute gives no direction as to the manner or name in which the suit is to be brought The replication avers that this action is brought for the benefit of such creditors.
The replication does not aver that this suit was brought by the direction of the receivers. This is assigned as a special cause of demurrer, and as such appears to me to be well taken. The replication shews that this claim was transferred from the bank to the receivers, and it ought to have averred that the suit was brought by their direction. On this ground the defendant is entitled to judgment, with leave to the pliantiffs to amend, on payment of costs.
The 3d and 7th pleas of the defendant are bad, inasmuch as they do not shew any fact by which the plaintiffs had surrendered their corporate rights. A mere general allegation that they had surrendered, is not sufficient. It will be found in all the cases that particular acts and circumstances are stated as evidence of the surrender, &c.