In re Mallory — 18 N.Y. St. Rep. 499

Majority

p. 499

In the Matter of the Petition of L. A. Mallory, Collector of Taxes, etc.

(Supreme Court, General Term, Fifth Department,

Filed October 19, 1888.)

Headnote

1. Receiver—Practice—Application to compel payment of money— Must be made in action in which receiver was appointed.

For the purpose of reaching funds in the hands of a receiver, the application to the court must be made in the action in which the receiver was appointed. (Following Sinn v. The Astor Fire Ins. Co., 59 M. Y., 143.)

8. Same—Railroad company—Taxes and assessments—Must be made TO RECEIVER.

After the appointment of a receiver of a railroad company by an order which, under the provisions of section 1789 of the Code of Civil Procedure, confers upon him all the powers and authority of a permanent receiver, he is by virtue of his appointment vested with all the estate, both real and personal, of the corporation, and becomes trustee of such estate for the benefit of its creditors and stockholders. He is, therefore, both the owner and the occupant of the real estate of the railroad company, and a tax which is afterwards assessed to the railroad company, and not to the receiver, is invalid and cannot be collected.

Appeal from an order of special term, overruling preliminary objections, and directing a reference to take proofs on issues of fact raised by the petitioner and opposing affidavits.

Frank S. Smith, for app’lt; F. L. Eaton, for resp’t.

The petitioner is the collector of taxes of Olean: the appellant is the receiver of the Lackawanna and Pittsburg Eailroad Company, appointed such in an action by the people to dissolve the corporation. The petition is for an order to compel the receiver to pay certain taxes, assessed to the railroad company. There are several preliminary objections to the application, two of which, we think, were well taken, and should have been sustained. They were:

First. That the application was not made in the action in which the receiver was appointed.

Second. That the tax was not legally assessed; it having been assessed to the railroad company after the property had passed into the hands of the receiver, and the title had vested in him.

The first of these objections is, in a manner, jurisdictional. The receiver, it is true, is subject to the control of the court, but the court must be moved to the exercise of such control in some action or proceeding of which it has jurisdiction; and the rule seems to be well established that, for the purpose of reaching funds in his hands, the application must be made in the action in which the receiver was appointed. The case of Rinn v. The Astor Fire Insurance Company ( 59 N. Y., 143 ), is a strong one to that effect. In that case

p. 500

the plaintiff applied to the court in the action in which she .had recovered a judgment against an insurance company, for an order requiring a receiver appointed, pending the action, to pay her judgment. The court of appeals reversed the order of the general term, granting such application,, upon the sole ground that the remedy of the plaintiff must be sought in the action in which the receiver was appointed. See also Riggs v. Whitney, 15 Abb. Pr., 388 ; Phœnix Foundry v. North River Construction Co., 33 Hun, 156 .

The second objection goes to the merits of the application. The receiver was appointed in December, 1884, by an order which, under the _ provisions of section 1789 of the Code, conferred upon him all the powers and authority of a permanent receiver. He was thus by virtue of his appointment vested with all the estate, real and personal, of the-corporation, and became trustee of such estate for the benefit of its creditors and stockholders. Code Civ. Pro., § 1788: 2 R. S., 469, § 67.

The receiver was therefore both the owner and the occupant of the real estate of the railroad company, and the' assessment not having been made to him was invalid, and cannot be collected. 1 R. S., 389, §§ 1, 2; Trowbridge v. Horan, 78 N. Y., 439 .

We think that the two objections considered ' were improperly overruled and, for that reason, that the order of reference should be reversed.

Order reversed, without costs.

Barker, P. J., Haight and Bradley, JJ., concur.