Reusens v. Manufacturing & Selling Co. of America

The complaint avers that the defendant is a foreign corporation organized and existing under the laws of the state of New Jersey, and that the plaintiff is a stockholder thereof. It furthers avers, in substance, that the defendant’s board of directors have abdicated their functions, and handed over the entire control of the corporation to Ernest C. Mueller, one of the directors of the defendant, and that he is engaged in dissolving, liquidating, disposing of, and winding up the business of the defendant without the authority of the stockholders or the directors, and in violation of the laws of the state of New Jersey and of this state;

We are of opinion that the complaint states a good cause of action. There is a radical distinction between an action which seeks to have a receiver appointed of the property and assets of a corporation, in order that they may be preserved from unlawful disposition and waste, and an action for the appointment of a receiver of the corporation. In the former case it is settled by an abundance of authority that the action will lie. Woerishoffer v. North River Construction Co., 6 Civ. Proc. R. 113; Popper v. Supreme Council, 61 App. Div. 405 , 70 N. Y. Supp. 637 . The exercise of such equitable jurisdiction has been recognized and applied by the General Term in this department (Redmond v. Hoge, 3 Hun, 171 ), and by this court (Hallenborg v. Greene, 66 App. Div. 590 , 599, 73 N. Y. Supp. 403 ). In an action for the appointment of a receiver of a corporation at the instance of a stockholder or of a receiver appointed in a foreign jurisdiction, brought in this state to secure the appointment of an ancillary receiver, where thfe corporation is the sole defendant, it has been held that it will not lie. Such was the case of Mabon v. Ongley Electric Co., 156 N. Y. 196 , 50 N. E. 805 . Defendant’s demurrer to the jurisdiction of the court is based mainly upon this case. It is evident, however, that it has but little, if any, application, for therein the relief sought was a receivership of the corporation itself, and the court held that such action could not be maintained, for the reason that the plaintiff therein already possessed all of the power and authority which the ancillary receiver would have obtained if one were appointed, and for the further reason that, as the receiver plaintiff therein virtually represented the corporation, he was, in legal effect, maintaining an action against himself, and that it could in no sense be said to be for the benefit of the corporation. In the present case the stockholder does not represent the corporation, but its creditors, and the action asks for the appointment of a receiver in order that the assets may be preserved for their benefit.

“A receiver is sometimes appointed in an action brought by a stockholder of a foreign corporation, with its affairs in process of liquidation, upon proof of special facts showing that funds in this state are in jeopardy, owing to the insolvency of the custodian, * * * or upon the allegation of facts showing danger of loss, but in such cases the stockholders were powerless < without a receiver.”

That language precisely fits this case, and the court cites as authority to sustain its text most of the authorities to which we have called attention. It is true that the court adds that such jurisdiction will be exercised only when necessary to protect rights which would otherwise be lost or injured, were the exercise of jurisdiction denied.

It is unnecessary that we give any intimation as to whether the relief asked for will be granted. That will necessarily be determined upon the trial of the action after all the facts are developed. We are now only concerned with the question of jurisdiction, and not with the relief to be granted or refused upon a trial. That the court has jurisdiction is established by indubitable authority, and, having jurisdiction, the complaint states a cause of action.

It follows that the interlocutory judgment should be affirmed, with costs, and the defendant be permitted to plead over within 20 days on the payment of costs in this court and in the court below. All concur.