Nealis v. American Tube & Iron Co. — 59 N.Y. St. Rep. 120

Majority

p. 120

James J. Nealis, as Receiver, etc., Resp’t, v. American Tube and Iron Company, App’lt.

(Supreme Court, General Term, First Department,

Filed February 16, 1894.)

Headnote

1. Receiver—Appointment.

Section 1788 of Code does not render applicable to temporary receivers the-provisions of § 70 of 2 R. S., 469.

2. Same—Action.

That the complaint in an action by a temporary receiver alleges that he-is a permanent receiver, does not bring him within the requirement of the said section of, the Revised Statutes. , >

3. Same—Attorney-General.

Attorney General need not appear, nor papers be served upon him, in an action by such receiver, brought by leave of court, to recover assets.

4. Pleadings—Demurrer.

Objection on ground of non-joinder of parties/ if it appears upon the face of the complaint and is not taken by demurrer, cannot be raised by answer.

Appeal from a judgment in favor of plaintiff.

P. Q. Pekerson, for app’lt; Walter Large, for resp’t.

This action was brought by the plaintiff as: receiver of the New York Supply Company, to set aside a judgment obtained by defendant against said New York Supply Company, and for a recovery of the money realized upon said judg-i ment. The answer consisted of a general denial, and an allegation that the New York,Supply Company was a necessary party to the action. The complaint alleged that the plaintiff was appointed permanent receiver of the New York Supply Company,. Limited, and that he qualified as such receiver, and took possession-of the property and effects of said company, and that in June, 1889, this court made an order authorizing and directing him to commence and prosecute this action. It further alleged' that the defendant, was a foreign corporation,. and that in October, 1888, the New York Supply Company was insolvent, and wholly unable to pay its debts,- which was well known to - its officers, and also to the-' defendant; that on or about the 30th of said October the defendant began an action against the New York Supply Company, as defendant, by service of a summons upon its treasurer; that on the same day the said company, by its attorney, offered to allow judg

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merit, which offer this defendant accepted, and judgment was thereupon entered on the 31st of October; that the defendant issued an execution upon said judgment, levied on the property of said company, which was sold, and realized the sum of $578.50 and §77.47 sheriff’s fees. It further alleged that at the time of the-offer of judgment, and the acceptance thereof, the supply company was wholly insolvent, and said offer was made with the intention to give a preference to the defendant in this action over other creditors of said corporation; and judgment was demanded declaring the offer of judgment and the acceptance thereof, and the judgment and the execution issued thereon, to have been fraudulent and void, and of no effect as to this plaintiff, as receiver, and adjudging that the defendant pay to the plaintiff, as receiver, said sums of money. Upon the trial the plaintiff proved these facts, and also that, at the time of the entry of the judgment, suits-were pending against the New York Supply Company, and that judgments were entered at or about that time for a considerable amount. The court found from this evidence that at the date of the offer of judgment the New York Supply Company was insolvent, and unable to pay its debts, and that such condition was known to the treasurer and general manager thereof at the time they authorized said offer of judgment to be made, and also to the defendant, and that said offer was made in contemplation of such insolvency, and granted the relief asked for in the complaint.

It is urged upon this appeal that the defendant’s motion to dismiss the complaint"should have been granted, because the complaint did not state a cause of action, nor was such a cause of action made out by the evidence. It is urged that it was neither alleged nor proved that the plaintiff, who was appointed receiver in a creditor’s action to sequestrate property of the judgment debtor, the New York Supply Company, ever gave or published notice of his appointment as receiver, and that before publishing such notice he could not, as such receiver, maintain tliis action. And reliance is placed upon the provisions of 2 Rev. St., p. 469, § 70, which is to the effect that receivers, immediately after their appointment, shall give notice which shall contain the same matters as are required by law in notices to trustees of insolvent debtors; and by § 72 it is provided that, after the first publication of the notice, every person in possession of any property belonging to such corporation, and indebted to such corporation, shall account, in answer to such debt, and for the value of such property, to said receivers. It is urged that, the allegation of the complaint being that the plaintiff was a permanent receiver, this provision applied, and he could not maintain this action. It is true that the complaint did, aver that the plaintiff was a permanent receiver, but no proof was given, and the evidence which was admitted without objection showed that he was a temporary receiver; and the court, upon the decision of the case, conformed the pleadings to the proof in that regard, and held that the provision did not apply to a temporary receiver.

It is urged, however, upon the part of the appellant, that there

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is no distinction in this regard between temporary and permanent receivers, because § 1788 of the Code, relating to temporary receivers, provides that a temporary receiver has power to receive debts, etc.,'of a corporation, and also that a temporary receiyer must qualify as prescribed by law for the qualification of a permanent receiver. It is undoubtedly the fact that, in referring to qualifications, no reference is made to the proceedings of the receiver after his appointment, but rather to those things which he -must do in order that he may act at all. Section 66 of the Revised Statutes provides what a receiver shall do in order to qualify himself for his office. It provides that a receiver, before entering upon the duties of his appointment, shall give security to the people in such penalty as the court shall direct, conditioned on the faithful discharge of his duties as receiver, and accounting for all moneys received, etc. And it is to this provision that the Code refers when it provides that a temporary receiver must qualify as prescribed by law for the qualification of a permanent receiver. ' '

The objection that the attorney general does not appear in the action in any way, and that no papers appear to have been served on him, certainly is not well taken. A receiver is not bound to give the attorney general notice of every suit which he may be authorized by the court to commence. Notice of all proceedings in inspect to the dissolution of á corporation and the distribution of its assets is required to be given to the attorney general by the receiver. But chapter 378 of the Laws of 1883 cannot be given any such extended interpretation as is claimed by the appellant.

The further objection is raised that the New York Supply Company should have been made a party to the action. It is sufficient to say that such objection appeared upon the face of the complaint, and,, not having been taken by demurrer, cannot be raised by answer. Sections 498, 499, Code.

The claim that there was no allegation of any other existing creditors of the New York Supply Company a't the time of the alleged offer of judgment, or of any injury occurring to any creditors by reason of such offer, and that, therefore, the complaint is defective, is not well founded. The allegation is that the company was insolvent, and that its officers knew it, and the defendant knew it, and that this offer was made in contemplation of insolvency. .It appeared from the evidence in the action that suits were pending, and judgments were about to be entered, at the time of the offer; and yet it is claimed upon this argument that there is no evidence that any creditor was injured by reason of the alleged offer of judgment. It is claimed that several judgment rolls were offered in evidence, but no judgment cjocket or record or ■other evidence showing that any such judgment remained unpaid or was unsatisfied, and that, unless it appeared that some of the creditors were injured by the offer of judgment, the action could not be sustained, and, further, that there was no evidence in the case that the company was insolvent at the time of the offer, nor ‘ that the offer was made in contemplation of such insolvency, but, on the contrary, was solvent at the time of making such offer, and

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so represented to the defendants. This is giving a force to the representations of the officer of an insolvent corporation which has certainly not, as yet received the sanction of courts of law. Judgments were being entered against it, and it was unable to meet its obligations according to the proof presented, and even the defendants in this action upon their execution were unable to realize their judgment. If this does not show a condition of insolvency, then it is difficult to see what character of proof would establish such fact. The evidence in the case seems to fully establish the findings of the court below, and the judgment appealed from should be affirmed, with costs.

All concur.