Walton v. Grand Belt Copper Co. — 31 N.Y. St. Rep. 259

Majority

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William M. Walton v. The Grand Belt Copper Company.

(Supreme Court, General Term, First Department,

Filed March 28, 1890.)

Headnote

Injunction—Foreign action.

In an action brought in Texas to foreclose a mortgage given by a corporation, the complaint alleged that a receiver had been appointed of the corporation in an action in this state; that the mortgagee’s i ights were not affected thereby; that the receiver claimed to have issued certificates of indebte lness, and that they were junior of right to the mortgage. The receiver and the holder of the certificates were made parties. The receiver, in the action in which he was appointed, upon an order to show cause, obtained an injunction restraining mortgagee from assailing in that action the appointment or powers of the receiver. Held, that no case for an injunction was made out and the order was erroneous; that the question of the right of the receiver to issue certificates having priority over the mortgage was a legitimate subject of inquiry in the foreclosure action, and should be left to be determined in that action; and that the order was also erroneous under §§ 603, 604 of the Code, as the mortgagee was not a party to the action in which it was granted".

Appeal by the Farmers’ Loan & Trust Company from an order of injunction.

David McClure, for app’lt; Fielding L. Marshall, for William Belden, receiver, etc.

The respondent, William Belden, was appointed receiver of the property of the Grand Belt Copper Company in March, 1887, by a judgment recovered in this action. In July, 1884, the Grand Belt Copper Company executed a mortgage to-the Farmers’ Loan & Trust Company upon real estate situate in Texas, and secured thereby the sum of $400,000 in corporate bonds of $1,000 each issued by the copper company. That company made default in the payment of the indebtedness, and in September, 1889, the Farmers’ Loan & Trust Company commenced an action in the district court of Hardeman county, in the state of Texas, for the foreclosure of this mortgage and the sale of the property on which it was given.

It is alleged in the complaint for the foreclosure, that William Belden had been appointed receiver of the Grand Belt Copper Company, and that the order appointing him was of no force or effect, so far at least as the interests of the Farmers’ Loan & Trust Company were concerned, and that its rights as mortgagee

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in trust were in no way affected by this action, or the appointment of the receiver, or any indebtedness he might have incurred; but upon information it was alleged that the receiver claimed to have issued and negotiated notes and certificates of indebtedness as receiver, and that Hiram Pool claimed to be the owner of the notes or certificates. It is further averred that the Farmers’ Loan & Trust Company, the mortgagee, never consented to the making or issuing of the certificates; that it was no party to this action, and that any right or claim of either the receiver or Pool must be subsequent, subsidiary and junior in lien to the lien of the mortgagee under its mortgage, or trust deed. These two persons were made defendants in the foreclosure case, to extend to them the opportunity of setting up such rights and claims therein as they might be advised. And it was upon this part of the complaint in the foreclosure action that the application was made by the receiver in this action, for an injunction restraining the prosecution of the action pending for the foreclosure of the mortgage in the state of Texas. Upon a hearing of the motion the court made an order enjoining the Farmers’ Loan Company from assailing in the foreclosure suit the appointment or powers of the receiver, but declaring that the order should not be construed as enjoining the company from contesting in the foreclosure suit in Texas any claim of priority which might be asserted by the receiver, or of any one claiming under him, irrespective of the power and authority conferred upon him by this court.

Ho cause or ground for the injunction was presented by the facts in this manner alleged in the complaint in the suit in Texas. For it was not a part of the design of the allegations set forth to question the regularity of the appointment of the receiver in this action, but what was intended to be contested under this part of the complaint was his right to issue notes or certificates having a priority by way of lien, or right to payment, over the preceding mortgage executed and delivered to the Trust Company.

That was an entirely legitimate subject of litigation, incident to the complete disposition of the foreclosure suit in the state of Texas. And it is not the practice of this court by way of injunction to interfere with the proceedings in the court of another state, unless .they may appear to be vexatious or oppressive, or instituted to obtain some unjust or inequitable advantage. Claflin v. Hamlin, 62 How. Pr., 284 ; Bowers v. Durant. 43 Hun, 348 ; Cowper v. Theall, 40 Hun, 520 ; 2 N. Y. State Rep., 108.

Where no fact of that nature can be presented to support the right to an injunction, the party is ordinarily left to vindicate his right in the action brought against him by the party desired to be enjoined. Savage v. Allen, 54 N. Y., 458 .

So far as the receiver’s rights and powers were intended to be brought into controversy in the suit in Texas, they necessarily affected the rights of the trust company under the mortgage, and should in that action be contested and determined.

The Farmers’ Loan & Trust Company was not a party to the action in which the receiver by the judgment recovered had been appointed. Heither was any action brought by him against the

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company to obtain the injunction, but it was issued wholly upon affidavits and an order to show cause, without in any manner making the Trust Company a defendant in this suit. And the Code has provided, in regulating and prescribing the practice for obtaining an injunction, for issuing it only against a party to the action. By § 603 of the Code of Civ. Pro. the injunction is allowed to be issued where it appears from the complaint that the plaintiff is entitled to a judgment against the defendant restraining the commission, or continuance of an act, etc. And by the following section also where it appears by affidavit that the defendant during the pendency of the action is doing or procuring or suffering to be done, or threatens to do, an act in violation of the plaintiff's right respecting the subject of the action, and tending to render the judgment ineffectual, or where it appears that the defendant during the pendency of the action threatens, or is about to remove or dispose of his property with intent to defraud the plaintiff.

This language clearly contemplates the intention to have been to provide for the injunction only against a party to the action, and constructively those who may act in his employment, or under his authority. The Farmers’ Loan & Trust Company sustained no such relation to any party to this action, and it was in no sense made á party to it by the proceedings which were taken. And for that, as well as the other reason already assigned, no case for an injunction was made out. It is true as the order was made it might not interfere in any serious degree with the prosecution of the foreclosure suit in the state of Texas. But the Trust Company was not obliged to submit to the risk of its doing so or not, inasmuch as the case made required no injunction, ana the order itself was irregular. It should, therefore, be reversed, with ten dollars costs and the disbursements, and the motion denied.

Van Brunt, P. J., and Brady, J., concur.