Mabon v. Ongley Electric Co. , 48 N.Y.S. 967 ( 1897 )

Williams, J.:

The complaint alleged in brief that the defendant was a Uew Jersey corporation, organized in January, 1891, for the manufacture and sale of electrical and mechanical devices and appliances, and for the purchase and sale of patents therefor ; that the corporation had a factory and office in the State of Uew Jersey, but had its principal office in the city of Uew York, and transacted its principal business, other than manufacturing, in the State of Uew York ; that in January, 1895, the Court of Chancery in the State of Uew Jersey, in an action wherein Hopkins and Dickson were complainants, and the defendant herein was defendant, made a decree appointing the plaintiff herein receiver for the defendant, an insolvent corporation, with full power to demand, sue for, collect and receive, and take into his possession, all the property, effects and dioses in action of the defendant, and enjoining and restraining the officers and agents of the defendant from dealing or interfering with the same; .that the plaintiff had duly qualified and was such receiver; that he had taken possession of all the property and assets of the defendant in the State of New Jersey, but had been unable to obtain the hooks of record or any papers of the defendant, and had had no opportunity to inspect the same ; that such books and papers were in the possession of some one or more directors of the defendant in the State of New York, all of said directors being residents of the State of New York, and not personally within the jurisdiction of the courts of New Jersey; that the defendant had other property and assets in the State of New York, in the possession or control of said directors, the exact nature, amount and value of which property and assets the plaintiff could not ascertain; that among such property and assets were promissory notes, 'amounting in the aggregate to $37,500, made by said Hopkins and Dickson to the defendant, which were overdue and unpaid; that such notes were covered by an attachment, issued in this State in an action wherein a judgment had been recovered for the sum of $13,773.39, and that execution was liable to be levied upon said notes, and if the notes were collected in full there would be a surplus arising therefrom, after the satisfaction of the judgment, which would belong to the defendant herein ; that by reason of the premises it would he impracticable for the plaintiff properly to perform his duties as receiver, and to ascertain, collect and take possession of the property and assets of defendant in this State, unless a receiver should be appointed here in aid of the plaintiff, to collect and receive the ¡noperty and assets of the defendant within this State, and to hold the same until the rights thereto of all the parties in interest should be determined, and the disposition thereof directed by the courts of this State; and judgment was, therefore, demanded that the defendant, its officers, agents and servants, turn over to the plaintiff, as receiver, the property and assets of the defendant; that pending the action, a receiver be appointed in this State to take, recover and hold possession of such assets, and to preserve the same; that the defendant, its officers, agents and servants, be restrained from selling, disposing of or interfering with such property and assets, except to turn the same over to the receiver appointed herein, and that the plaintiff have such other relief as might be proper.

■Although the demurrer did not state as a ground thereof that the plaintiff, being a foreign receiver, could not maintain an action in the courts of this State, such question, nevertheless, seems to be presented on this appeal. There seems to be no doubt that foreign receivers may sue in the courts of this State. It was so held in Punk v. St. John (29 Barb. 585). The plaintiffs there were receivers of a corporation chartered in the States of Pennsylvania and New Jersey, and were appointed under. a decree dissolving the corporation made by a New Jersey court. The defendant’s counsel denied the capacity of foreign receivers to sue in the courts of this State. The court said: “ The laws and proceedings of other sovereignties have not, indeed, such absolute and inherent vigor as to be efficacious here under all circumstances. But in most instances they are recognized-by the courtesy of the courts of this State, and the right of foreign assignees or receivers to collect, sue for and recover the property of the individuals or corporations they represent has never been denied, except where their claim came in conflict with the rights of creditors in this State. All that has been settled by the decisions to which we have been referred on this subject is that our courts will not sustain the lien of foreign assignees or receivers, in opposition to a lien, created by attachment under our own laws. In other words, we decline to extend our wonted courtesy so far as to work detriment to citizens of our own State, who have been induced to give credit to the foreign insolvent. * * * Actions by foreign trustees and assignees have in several instances been sustained in the courts of this State. In the case of The New Jersey Lombard Bank v. Thorp (6 Cowen, 46) trustees, appointed by an act of the Legislature of the State of New Jersey, were allowed to be substituted as plaintiffs instead of the corporation. This decision is expressly recognized and approved by the Court of Appeals in the well-known case of Hoyt v. Thompson (1 Selden, 341).” Again, in the case of Pugh v. Hurtt (52 How. Pr. 22) the court held that a receiver of an Ohio corporation, appointed by a decree of an Ohio court, could maintain an action in the courts of this State, citing and approving the language we have quoted from the case of Runk v. St. John (supra). And again in the case of Petersen v. Chemical Bank (32 N. Y. 43), which was an action brought by the assignee of a foreign executor, the court, in the course of its opinion, said: “ Again the receivers of insolvent foreign corporations and assignees of bankrupt and insolvent debtors, under the laws of other States and countries, are allowed to sue in our courts. It is true their titles are not permitted to overreach the claims of domestic creditors of the same debtor pursuing their remedies under our laws; but, in the absence of such contestants, they fully represent the rights of the foreign debtors. (Story’s Conf. Laws, § 112; Hoyt v. Thomasen, 1 Seld. 320; S. C., 19 N. Y. 207; Willets v. Waite, 25 N. Y. 584.)”

And again, in Toronto General Trust Co. v. C., B. & Q. R. R. Co. (123 N. Y. 47), which was an action brought by a trustee appointed by the decree of a Canada court, it was said in the course of the opinion: “ Foreign receivers and assignees, taking their title to property by virtue of foreign laws, or legal proceedings in foreign courts, may come here and maintain suits in our courts when they do not come in conflict with the rights or interests of domestic creditors.”

It cannot be doubted, therefore, that foreign receivers may come into our courts and maintain actions for' any purposes which are not in conflict with the rights of domestic creditors of such corporations. The only question here is whether the cause of action set forth in this complaint is such an one as a foreign receiver is authorized to maintain. It is perfectly apparent, from the allegations in the complaint and' the relief asked for, that there is no design to interfere with any rights of creditors of the corporation in this State. On the contrary, the only creditor referred to in the complaint, who has an attachment issued in the State against the property of the corporation, is fully protected, claim being made for the surplus only, remaining after his debt is fully paid and satisfied. But beyond this, the relief sought by the plaintiff is such as enables the court to fully protect the rights and interests of any creditors of the corporation within this State. While the final judgment prayed for is that the property of the defendant in this State may be turned over to the plaintiff, the foreign receiver, yet a local temporary receiver is prayed for to take possession of and hold the property to be recovered during the pendency of the action, and, under the general prayer for relief, the court may and should fully protect the rights of any creditors of the corporation residing in this State. There is not a suggestion in the complaint of a design to set up the claim of the foreign corporation, or its receiver, against any lien or claim, made by the creditors of the corporation residing in this State, against the property or assets sought to be recovered.

In Runk v. St. John (supra) the action was brought to set aside a conveyance of real estate as fraudulent and void as against the corporation of which the plaintiffs were receivers; and the complaint prayed for a discovery and account, and that the defendants might be decreed to convey such estate to the plaintiff, and the court held that this was not a contest between the foreign and domestic creditors, and that, therefore, the action could be maintained by receivers.

In Pugh v. Hurtt (supra) the action was brought to enforce the liability of a stockholder for the debts of the corporation, and it was held that this cause of action involved no contest between foreign and domestic creditors of the corporation, and that, therefore, the action could be maintained by the receiver.

A precedent for this kind of an action is found in Redmond v. Hoge (3 Hun, 171) which was a ease decided by the late General Term in this department. That action related to a corporation, created under the laws of Connecticut which carried on its business in that State. The stockholders resolved that the affairs of the corporation should be wound up, its property sold, its debts paid, and its remaining assets divided among the stockholders; and the directors were authorized to carry out this resolution.

The property of the corporation was sold by the directors, except about $25,000 in value. Difficulties thereafter arose as to the disposition of the fund. All of the property remaining and the fund, realized from the sale of - property, had come into the State of New York, and the affairs of the corporation were being managed in this State. The receiver of the property of the corporation was appointed in Connecticut and he accepted the trust and filed his bond. The assets of the corporation were, however, detained in the city of New York, and the receiver was unable to get possession of any of them and was discharged. Thereupon an action was brought in this State by two stockholders of the corporation praying that a receiver be appointed, to whom all the property of the corporation should be delivered; that the unpaid debts of the corporation be ascertained and paid therefrom, and that the remainder of the assets be distributed among the stockholders of the corporation in proportion to their shares of stock. The appeal was from an order appointing a temporary receiver in the action. The court held that the action was maintainable and affirmed the order, saying that the action was not brought for the purpose of dissolving and winding up the affairs of the corporation, but its sole object was to preserve the fund which was in danger, and that the payment and distribution of it to the stockholders were secondary and incidental objects of the action.

The following language was used in the opinion (p. 175): “ The whole scope * * * of this action may be stated almost in a sentence. The officers who have complete control of a foreign corporation, now in process of voluntary dissolution, being all residents of this city and having in their possession here certain funds of the corporation, which their own insolvency has put in jeopardy, and neither they nor the funds being amenable to the jurisdiction of the State under whose laws the corporation was created and exists, refuse to make application of such funds to the creditors and stockholders, in conformity to the proceedings for dissolution, or to put the same in a place of safety. * * * We have clearly jurisdiction of the persons of the officers in the State, we have jurisdiction of the property because it is within our territory. * * * A receiver, if appointed there (in Connecticut), must resort to our courts to reach the appellants and the fund in their hands, by an action similar to the present, and become substantially the receiver of this court in order to acquire possession of the fund. But while no such officer exists in Connecticut, there seems to us no sound reason why the jurisdiction of this court may not be invoked to preserve a fund now in the hands of persons in our jurisdiction and in danger of being lost by their insolvency or improper use.”

It will be seen that the court recognized the fact that, if there was a receiver of the corporation in Connecticut, the action might properly be brought by him in the courts of this State; and only in the absence of such officer was it said that the action might be brought by a stockholder in this State. The corporation was a defendant in that action, and it is a defendant here. The persons having possession of the property were made defendants in that action, while they .are not made defendants here, as it seems to us they should have been. But if there is a defect of parties, the question should be raised by demurrer, and no such ground is alleged. It is claimed that the defendant being a foreign corporation cannot be sued by a non-resident plaintiff in this State under section 1780 of the Code of Civil Procedure. We think, however, that the cause of action alleged in the complaint is one which arose within the State within subdivision 3 of that section. The object of the action is to secure possession of the books, papers and property of the corporation, which are all in this State, and withheld from the plaintiffs possession, and to procure the appointment of a receiver here, for the purpose of receiving, holding and preserving the same; and the right to maintain and the necessity for the bringing of this action grew out of the fact, solely, that such books, papers and property were withheld from the plaintiff in this State. It seems to us, in view of the considerations hereinbefore referred to, that the court-did have jurisdiction of the subject of this action, and that the complaint did state facts sufficient to constitute a cause of action. The demurrer was, therefore, improperly sustained, and the judgment appealed from should be reversed, with costs of this appeal to the appellant, and judgment should be directed overruling the demurrer, with leave to the defendant to answer the complaint within twenty days, on payment of costs.

Van Brunt, P. J., dissented.