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In re Christian Jensen Co.

27 Abb. N. Cas. 303 Court N. Y. Court of Appeals; English

Delivered by Earl, J.

Contents

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MATTER OF CHRISTIAN JENSEN COMPANY.
N. Y. Court of Appeals;
October, 1891.

Headnote

1. Corporation; voluntary dissolution.] In proceedings for voluntary dissolution of a corporation, the Court acquires jurisdiction by the presentation of a proper petition. Even if, therefore, an order to show cause issued upon such a petition, by which a temporary receiver is appointed, is in some respects imperfect and informal, it will not be a nullity, but will be sufficient to pass the title of the corporate property to the receiver, so as to enable the Court to prevent subsequent interference with it.[3]
2. The same; receiver.] The title of a temporary receiver, appointed in an order to show cause granted upon a petition for the voluntary dissolution of a corporation, relates back to the time the order was granted, upon his subsequently filing his bond.
3. The same.] Such a receiver has a right to the custody of corporate property that has been seized in judicial proceedings against the corporation by a creditor subsequent to the granting of the order to show cause, but before its service upon the creditor.
4. The same.] Although goods of which a corporation has obtained possession as a naked wrong doer, may be replevied by the owner, notwithstanding the prior appointment of a receiver in voluntary proceedings to dissolve a corporation, if replevied before the goods have actually come into the receiver’s possession,[2] yet, if the relation between the person replevying the goods and the corporation does not appear, and it is not known whether the corporation may not have some interest in the goods as that of a mortgagee, or pledgee, or a purchaser, whose title is only disputed for fraud in procuring the sale, the Court, on motion of the receiver, will direct goods so replevied, to be delivered up to be disposed of in the proceedings for dissolution.
5. The same; order to show cause.] In commencing voluntary proceedings to dissolve a corporation, an order, entitled: “ In the
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matter of the application of the directors of the Christian Jensen Company, limited, for a voluntary dissolution,” reciting that the corporation was insolvent, and requiring the persons interested to show cause “why the prayer of the petition should not be granted,” substantially complies with Code Civ. Pro. § 2423, providing in such proceedings that an order to show cause may issue, “why the corporation should not be dissolved,” and is sufficient, although served without a copy of the petition.
6. The same.] Such an order to show cause is defective, if it does not contain a direction in accordance with Code Civ. Pro. § 2424, requiring the order to be published and specifying the newspaper.[3] But such defect can be taken advantage of only by motion or in some other way, and does not render the appointment of a temporary receiver contained in such order a nullity, or affect the receiver’s right to the corporate property as against subsequent seizure in replevin or by attachment. The defect, therefore, being merely formal, may be remedied by amendment nunc fro tunc.
Appeal from an order of the General Term of the Superior Court of New York affirming an order of the special term, enjoining, on motion of the receiver of the Christian Jensen Company, Limited, appointed in proceedings for the voluntary dissolution of the corporation, further proceedings in certain actions brought by Charles F. Wahlig and others against the company; and directing that the corporate property replevied or levied in attachment after the receiver’s appointment be surrendered to him.
The material portions of the order to show cause why the company should not be dissolved and appointing the receiver, was as follows:
“ In the matter of the application of the directors of the Christian Jensen Company, Limited, fora voluntary dissolution.” ,
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On reading and filing the petition, etc., “ It is ordered that all persons interested in said corporation1 show cause .before this court at the court house-in the city of New York, on June n, 1891, at 10.30 o’clock in the forenoon of said day or as soon thereafter as counsel can be heard, why the prayer of the petition should not be granted.”
“It is further ordered, that whereas it appears to the satisfaction of the court that the said Christian Jensen Company, Limited, is insolvent; now therefore on further motion,” etc.
“ Ordered that Isidor Grayhead, Esq., of the city of New York, be and he hereby is appointed temporary receiver of all the property and assets of the said Christian Jensen Company, Limited,” etc.
This order was made on March 10. On March 11, Charles F. Wahlig and others commenced two actions against the company and attached and replevied property in the companj^’s possession. On the 12th the above order was served on the persons bringing the actions, but no copy of the petition upon which it was granted was served with it. On the same-day the order was amended without notice, nunc pro-' tunc, so as to make it literally comply with Code Civ.. Pro. § 2423, by directing persons interested to show-cause, etc., “ why the said corporation should not be: dissolved,” instead of the direction in the original order “ why the prayer of the petition should not be-granted and also to contain a direction for the publication of the order as required by Code Civ. Pro. § 2424, which the original order had entirely omitted to-provide for.
McAdam, J., on granting at special term.the order-appealed from, rendered an opinion holding that the order to show cause “ why the prayer of the petition should not be granted,” was a substantial compliance-
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with Code Civ. Pro. § 2423, as the order was entitled in the proceedings which expressed its purpose and referred to a petition on file (Citing 1 Abbott's New Pr. & F. 668 ; dist’g In re Pyrolusite Co., 29 Hun, 429 ; s. c., 3 Civ. Pro. R., 270, on the ground that there the petition was defective).
Although the order of the court was sufficient without amendment the court had power to amend it in furtherance of justice. The receiver’s title related back to the time when the original order was signed, and therefore motion for injunction and delivering up of the property to the receiver should be granted as to all proceedings instituted after the receiver’s appointment.
On appeal the general term affirmed the order upon the opinion of the special term. An appeal was taken to this court.
John Fennel, for appellants.
I. The proceeding is statutory and unless the statute is fully complied with there is no jurisdiction (Citing In re Pyrolusite Manganese Co., 3 Civ. Pro. R. 270 ; s. c., 29 Hun, 429 ; Bloom v. Burdick, 1 Hill, 130 ; Chamberlain v. Rochester S. P. V. Co., 7 Hun, 558 ; Matter of Dubois, 15 How. Pr. 7 ; In re Valentine, 72 N. Y. 184 ; Stillwell v. Swartout, 81 Id., 109; Brown v. Mayor, etc., 3 Hun, 686 ; People ex rel. Gambling v. Board of Police, 6 Abb. Pr. 164 ; Sibley v. Waffle, 16 N. Y. 190 ; Bangs v. McIntosh, 23 Barb. 599 ).
II. Where there is a failure to comply with the statute - it is fatal to a proceeding in a superior court as to a proceeding in an inferior court (Citing Bloom v. Burdick, 1 Hill, 139 ; Chamberlain v. Rochester, etc. Co., 7 Hun, 557 : Bangs v. McIntosh, 23 Barb., 598 ).
III. There was no jurisdiction to amend the order (Citing Comin v. Merritt, 3 Barb. 346 ; In re Valentine, 72 N. Y. 84 ; Battel v. Torrey, 65 Id. 295 ; People v. Hulburt,
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46 Id. 110 ; Stillwell v. Swartout, 81 Id. 109 ; Bangs v. McIntosh, 23 Barb., 601 .)
IV. The title of the receiver was not vested until he filed his bond.
V. The court had no power to order the goods taken in replevin to be delivered to the receiver (Citing German Savings Bank v. Habel, 80 N. Y. 273 ).
John C. Coleman, for respondent.

On March 10, 1891, the directors of the Christian Jensen Company Limited presented a petition to the superior court of the city of New York praying for a voluntary dissolution of the corporation. As the petition is not contained in the record, we must assume that it was proper in form and substance. In fact, no objection is made that it did not comply with the provisions of the Code relating to the voluntary dissolution of corporations (secs. 2419, et. seq.).

Upon the presentation of the petition, the court made an order appointing Isidor Grayhead temporary receiver of all the property and assets of the corporation, as authorized by section 2423 of the Code, which also provided “ that all persons or persons whomsoever, whether creditors of the said Jensen Company (Limited) or otherwise, are hereby enjoined and restrained from bringing or continuing any action against the said corporation for the recovery of any moneys due said creditors, and until further order of this court in the premises.” The nest day the receiver filed his bond and became qualified to act; and he took actual possession of the property of the corporation on March 12. The order of March 10 was served on the appellants who composed the firm of Charles F. Wahlig’s Sons, on March 12, but no copy of the petition was served with the order. On March 12, the attorney for the petitioners, without notice to the appellants, made a motion that the order of March 10 be amended

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nunc fro tunc in certain particulars, and that motion was granted. On M'arch n, the appellants commenced an action in one of the district courts in the city of New York against the corporation, and in that action a writ of replevin was issued to one of the city marshals, who, on the same day, replevied from the corporation certain property in its possession, and on the same day they commenced an action in the court of common pleas to recover a money judgment, and in that action a warrant of attachment was issued to the sheriff of the city and county of New York, and on the same day he attached certain property of the corporation.

Thereafter the receiver made a motion at a special term of the superior court to restrain the prosecution of the suits thus commenced by the appellants, and after hearing counsel for the parties the court made an order granting the motion, and permanently restraining the appellants from taking any further proceedings in the actions brought by them.' From that order they appealed to the general term, and then to this court.

They now contend that the first order made by the superior court on March 10, did not require, as provided in section 2423 of the Code, all persons interested in the corporation to show cause “ why the corporation should not be dissolved,” and hence that the order was a nullity. It was the presentation of the petition that gave the court jurisdiction, and even if its order was in some respects irregular, imperfect and informal, it was not a nullity. It was effectual to appoint the receiver, and the moment he was appointed he became an officer of the court, and from that time the property of the corporation was in custodia legis, and the court had the power to preserve and protect it. While the receiver could not interfere with the property of the corporation until he filed his bond, yet

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after he filed his bond, his title related back to the date of his appointment, and so it has frequently been held (Rutter v. Tallis, 5 Sandf. 610 ; Storm v. Waddell, 2 Sandf. Ch. Rep., 494, 504; Wilson v. Allen, 6 Barb. 542 ; In the matter of Berry, 26 Barb. 55 ; Deming v. The New York Marble Company, 12 Abb. Pr. Rep. 66 ).

It therefore follows that when this property was attached and replevied, on March 11, the title was in the receiver, and the property was in the custody of the law, and the court had power to prevent any interference with it in any action, and its dissipation and removal by writ of replevin or attachment.

The court had express authority, under section 2423 of the Code, to restrain proceedings in the action in which attachment was issued. As to the replevin action, if the corporation had been a naked wrongdoer in obtaining or retaining the possession of the appellants’ property, and they had been the absolute owners of the property, they could have replevied it from the wrongdoer before it came into the actual possession of the receiver, and thus into the. custodj' of the court. Even then, after the property had passed with the other property into the actual possession of the receiver, it could not, without leave of the court first obtained, have been replevied from him in an action against him. The only remedy then of the appellants would have been by an action commenced with the leave of the court or by petition to the court (Noe v. Gibson, 7 Paige, 513; Riggs v. Whitney, 15 Abb. Pr. 388 ; Chautauqua County Bank v. Risley, 19 N. Y. 369 ; Barton v. Barbour, 104 U. S., 126 ; Evelin v. Lewis, 3 Hare, 472; Ex parte Cochran, Law Reports, 20 Eq., 282; High on Receivers, § 143). But here there was no proof showing what the relations of the corporation and the appellants to the property replevied were. The appellants may have been mortgagees or pledgees, or the corporation may have pur

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chased or obtained the property by fraud which the appellants could disaffirm. In either of these cases the corporation had an interest in the' property and in its final disposition, and it should remain in the custody of the court to be disposed of in this proceeding under the rules and practice applicable to such cases.

As to the alleged defects in the order of March io, it did, in substance, require all persons interested to show cause “ why the corporation should not be dissolved." The title of the order, “ In the matter of the application of the directors of the Christian Jensen Company, Limited, for a voluntary dissolution " showed that the proceeding was for a voluntary dissolution of the corporation, and the order recited that the corporation was insolvent, and it required all persons to show cause why the prayer of the petition should not be granted. Under the provisions of the Code, the only prayer to' be contained in the petition is for'a dissolution of the corporation, and we think the order in substance required the persons interested to show cause why such a prayer should not be granted.

It is also objected that the order is defective for not complying with the provisions of section 2424 of the Code, because it did not require the order to be published and did not specify the newspapers in which it was to be published, it is quite true that that is a defect which the parties could have taken advantage of by motion, or in some other way, but it was not a defect which rendered the appointment of the receiver a nullity. Furthermore, the court having jurisdiction of the proceeding could make an order, as it did, nunc pro tunc, correcting the formal defects in its order. Such an order was in furtherance of justice, did not interfere with any rights which had accrued, did no harm to any one, and the court was perfectly competent to make it. It is quite true that if the order made on the 10th had been an absolute nullity, the

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court would have been without power to interfere with the seizure of the property under the attachment and writ ol replevin, by thereafter making an order nunc pro tunc which then, for the first time, became effectual.

Our conclusion, therefore, is that by the order made on March ioth, upon a petition properly presented, the court acquired jurisdiction of the proceeding ; that its appointment of the receiver was valid ; that the property thus came into its possession, and that it had a right to prohibit an interference therewith in any action thereafter instituted.

The order should be affirmed, with costs.

All the judges concurred.

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