Burns v. Knight ( 1926 )

Howard F. Burns as receiver for the Fair-mount Pharmacy brought an action in the Cuyahoga Common Pleas against Wallace I. Knight to recover money in his hands belonging to the corporation and upon cross-petition of Knight, Kelly was made a party defendant.

Knight set up by way of answer and defense, that the corporation owed him money for legal services and that Kelly owed him money and was practically the sole stockholder in the Company. The trial court allowed the attorneys fees but would not permit any evidence of Knight’s claim against Kelly.

The Cuyahoga Court of Appeals reversed the judgment on the ground that the court erred in refusing to admit testimony of Knight’s claim against Kelly and in remanding the case required the Common Pleas in effect to review the action of the insolvency court in appointing a receiver. Burns contends in the Supreme Court:

1. The Court of Appeals erred in allowing the defendant to set off against the claim of the corporation a debt due from a stockholder. It is claimed that Knight can no more plead a set-off due him from Kelly than he could in an action by the corporation.

2. The Court of Appeals erred in requiring a collateral attack by the Common Pleas Court upon the judgment of the insolvency court.

“The appointment of a receiver for a private corporation by a state court of general jurisdiction having power under the state statutes to make such appointment in a proper case is a judicial act, which cannot be questioned collaterally by any other court.”