Pittsburgh Carbon Co. v. McMillin — 24 N.Y. St. Rep. 848

Majority

p. 848

The Pittsburgh Carbon Company, Limited, App’lt, v. Frank C. McMillin, as Receiver of the United Carbon Companies, Resp’t.

(Supreme Court, General Term, Fifth Department,

Filed June 22, 1889.)

Headnote

Corporations—Illegal Combinations—Rights of beceiver as against TO RECOVER ASSETS.

Prior to March, 1887, the plaintiff had a contract for supplying the-Brush Electric Light ,Co., of Buffalo, with carbons. In March, the plaintiff, together with eight other companies, entered into' a combination known as the United Carbon Companies. Between April, 1887, and June, 1887, the plaintiff furnished to the Brush Electric Light Co. carbons, to a certain amount. In June of the same year, plaintiff notified this company that it had severed its connection with the other companies-of the combination, and demanded that payment be made direct .to it. Payment not being made this action was brought. The defendant, as receiver, also brought an action against the Brush Electric Light Co. for the same cause of action. Plaintiff claims that inasmuch as the original combination or trust of the nine companies was illegal, no action by the receiver of such combination can be maintained to enforce any liability to it. Held, that the plaintiff cannot take advantage of its own participation in the wrong, and deny its liability to creditors, and that the receiver; who unites all the rights of the creditors, can recover the assets of the-combination wherever found.

Appeal by the plaintiff from a judgment by the Erie special term, entered in November, 1888, by which it was adjudged that the defendant should recover of the plaintiff $1,080 which had been deposited by the Brash Electric Light Company, the original defendant in this action on a motion substituting the receiver of the United Carbon Companies in place of such defendant.

O. S. Grosser, for app’lt; Ansley Wilcox, for resp’t.

This appeal presents questions arising upon exceptions only, and not upon the case.

Prior to the first day of March, 1887, the plaintiff had a contract for supplying the Brush Electric Light Company of Buffalo with certain electric light carbons, as they should be required. In the month of March, 1887, the plaintiff, together with eight other companies manufacturing electric light carbons, entered into an agreement by which the business of the nine companies should be exclusively managed and directed by one Edward C. Hawks.

Between the 30th day of April, 1887, and the 27th day of

p. 849

June, 1887, the plaintiff furnished to the Brush Electric Light Company, electric light carbons, in several installments, at a contract price of $1,080, which sum, at the time of the beginning of the action, was unpaid. Hawks was subsequently superseded as the manager of this trust or combination by one D. A. Dangler, of Cleveland, Ohio. From this time to the appointment of the defendant as receiver, the combination or organization of said nine companies was known as the united carbon companies. In the month of June, 1887, the plaintiff notified the Brush Electric Light Company of Buffalo that it should no longer continue its combination or relation with the other companies after the first day of July of that year, and subsequently claimed that the Brush Electric Light Company of Buffalo should pay directly to the plaintiff, and not to the trustee or agent of the several combined companies, the amount owing by it for the electric light carbons. Payment not being made, this action was brought. The defendant, McMillin, was appointed receiver of the united carbon companies by a court of competent jurisdiction in the state of Ohio, upon the ground that, as an organization or combination, it was insolvent, owing a large number of debts. Such receiver also brought an action against the Brush Electric Light Company to recover for the same cause of action stated above, whereupon the two actions were consolidated, and the receiver made the defendant in place of the Brush Electric Light Company, upon the latter depositing the amount claimed against it by the present parties to this action.

The principal argument advanced by the counsel for the appellant, is based upon the proposition that inasmuch as the original combination or trust of the nine manufacturing companies was an illegal combination, no action by the receiver of such combination can be maintained po enforce any liability to it. It seems to us, however, that the plaintiff is not in a position which will enable it to assert, successfully, the invalidity of the original illegal contract, and thus prevent the payment to the receiver of such combination of the debts justly due to it. The receiver represents, primarily, the creditors of the insolvent combination as well as the combination itself, together with the stockholders and parties who may be interested in the payment of the debts. He is empowered to recover the assets of the combination wherever they are to be found. In him are united all the rights of the creditors and of the parties interested in the combination. This combination or trust, so-called, was a combination of several incorporated companies or co-partnerships and was itself a co-partnership composed of such companies.

Though its general purpose was unlawful under the common law, as administered alike in Ohio and Hew York,

p. 850

yet the court is not powerless, when set in motion, to interpose its hand and save whatever property there may be in the co-partnership for the protection of innocent creditors.

The plaintiff cannot take' advantage of its own participation in this wrong and deny its liability to any of the creditors, to which the combination, if it had been a lawful body, would have been liable. Bach company, composing the trust or consolidated co-partnership, was separately liable to all creditors of the trust for the payment of its just debts. Any one of the creditors represented by this receiver could have maintained an action against this plaintiff, or against any other member of the concern as a co-partner, to recover whatever indebtedness the co-partnership owed to him. The creditors of the trust are not in any sense in pari delicto with the several contracting companies.

Under these circumstances the receiver stands in a light much more favorable than the combined co-partnership of which he was appointed receiver, for the simple reason that he is charged with the duty of distributing the assets among the lawful creditors of the concern.

The judgment should be affirmed, with costs.

All concur.