People v. Knickerbocker Life Insurance — 7 N.Y. St. Rep. 287

Majority

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The People v. The Knickerbocker Life Ins. Co.

(Supreme Court, General Term, First Department,

Filed March 3, 1887.)

Headnote

Receiver—Corporations, dissolution of—Revival of action—Proof of CLAIMS.

On the dissolution of a corporation, all actions then pending against the corporation must, to be effectual, be revived in the name of the receiver. But this procedure will be rendered unnecessary when the receiver voluntarily makes himself a party to the action, and a judgment recovered against the corporation after this participation by the receiver should be allowed to be proved as a claim against the assets in his hands.

Appeal by Pleasant H. Pendleton and others from an order affirming the report of a referee, disallowing a claim presented by them to the receiver of the defendant and against its assets.

A. Walker Otis, for app’lts; Leslie W. Russell, for receiver resp’t.

The receiver was appointed to settle the affairs of the insurance company Under an interlocutory judgment recovered on the 29th of December, 1882, by which the company was dissolved and its corporate rights, privileges and franchises forfeited. The judgment which was the foundation of the claim presented to the receiver was recovered in the circuit court of the United States, including the western division of the western district of Tennessee on or about the 25th of ■ January, 1886, and it was rejected by the referee as unauthorized and incapable-of legally sustaining the claim, by reason of the fact that it was recovered against the company after it was so dissolved.

■ But it appeared further from the evidence before the referee, whose report was confirmed, that a preceding judgment had been recovered on the trial of the issues in the same court on the 19th day of May, 1881. From this judgment, on the 28th of the same month, a writ of error was taken from the supreme court of the United States, and a supersedeas bond for the stay of proceedings was given by the company in the sum of $20,000, the sureties in which were secured to the extent of $21,000. After the appointment of the receiver he took charge of the proceedings in the action on the writ of error and employed counsel to argue the cause before the supreme court of the United States. It was so argued by the counsel in 1884, and in January, 1885, the court reversed the judgment and directed a new trial, but retained the mandate until the adjournment of the term. Before such adjournment the counsel for the plaintiff in the action filed a petition for

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a reargument, and while that was pending it was discovered by the court that the writ of error. and citation thereon had been addressed to but one of the plaintiffs in the action, and on that discovery the court ordered the parties to show cause why the judgment of reversal should not be vacated and the writ of error dismissed. The receiver filed a petition stating what had been done to secure the sureties in the bond, and asking for an amendment of the writ of error by bringing in the other plaintiffs in the action. This was allowed by the court, and the writ of error was amended and the other plaintiffs made parties upon the condition that there should be a reargument of the case. That condition was accepted, the cause was afterwards reargued, and the judgment was again reversed and a new trial ordered, and on that decision a mandate to that effect was issued to the circuit ■ court. This was filed on the 11th of December, 1885, and an order entered on the authority of the mandate directing “that the cause be docketed to stand for trial at this term.” And it seems to have been tried and the judgment recovered pursuant to this direction.

The referee considered that this interference in the litigation by the receiver did not authorize the circuit court afterwards to try the cause, and'direct judgment in favor of the plaintiffs. And whether that was the correct view to be taken of the effect of his interference in the litigation, is the point which must control the disposition of this appeal. If he made himself a party to the proceeding by taking charge of the writ of error and employing counsel, who represented him upon the argument and in the other proceedings before the supreme court and afterwards in the circuit court, then he could not by subsequently abandoning the action, prevent the plaintiffs from bringing it to trial, and obtaining a judgment in it entitling them to participate in the distribution of the proceeds of the assets of the company. That he was not named in the title of the cause as the receiver of the company, was not important, for a person may become a party to a legal proceeding without that formality, as was held in Jay v. De Groot ( 2 Hun, 205 ), and in Castle v. Noyes ( 14 N. Y., 329 ), to make himself a party to the action and to conclude him by the judgment, no more was required than the enjoyment of the right to appear and control it, to appeal from the judgment, and produce and resist evidence upon the trial of the issues. Id., 332 . And the receiver was allowed to place himself, as he voluntarily did, in a position where he secured these rights. For, while he did not himself, bring the writ of error from the judgment, he took charge of it after his appointment, and while it was pending, and controlled and directed all

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the proceedings under it, including their extension so far as to bring in the other plaintiffs in the action and which as to them, had the effect of a new writ. -Beyond that the mandate of the court "reversing the judgment and directing a new trial was filed under his authority, and the cause was in like manner directed to stand for trial, and as he had been allowed by the court to take charge of the litigation in this manner, he undoubtedly was in a position where he had the right to contest the plaintiffs’ cause of action upon the trial. And the fact that he voluntarily failed to do that cannot be permitted to relieve him from the effect of his preceding conduct by which he made himself a party to the action. In the proceedings carried on at his instance and under his authority, the supreme court of the United States must have taken this view of his relation to the litigation, and that his proceedings were regular for that purpose, without being himself substituted, as the nominal defendant in the action. For if that view had not been adopted the receiver would not have been permitted to carry on the litigation as he did and to be represented in the argument of the cause as that was done while it was pending in the supreme court. No other view can reasonably be taken of what there transpired than that the court considered him regularly entitled to proceed with the litigation as he did, as the receiver of the company, although the company itself had previously been dissolved, and in what he did he has as completely made himself the defendant in the litigation as though he had been named as such in the action.

This case differs in these material circumstances from that of McCulloch v. Norwood ( 58 N. Y., 563 ), for there was no participation there on the part of the receiver in the action in the state of Ohio, in which the judgment sued upon was recovered, and beyond that the illegality of the judgment was determined upon the concession that the law of the state of Ohio relative to the abatement and revival of actions was the same as that prevailing in this state, which required the receiver regularly to be made a - party after the corporation itself had been dissolved. There was neither no such concession in the present case, nor was it made to appear that by the law of the state of Tennessee, in which the action was pending and was tried, there was any irregularity in carrying the litigation to a final termination when the company had during its pendency been dissolved and a receiver of its effects had been appointed. The presumption, on the other hand, would be from the course of the proceeding before the supreme court of the United States that it was regularly conducted in the

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name of the company notwithstanding its dissolution during the pendency of the action. This circumstance also distinguished this case from that of Matter of Norwood ( 32 Hun, 196 ), and it is supported to some extent at least by a' decision which was made in Hibernia Bank v. Mechanics’ Bank ( 21 Hun, 166 ), and Cruger v. H. R. R. R. Co. (2 Kernan, 190) warrants no other or different view, for in that 1 case the conduct held not to be a waiver of the proceeding carried on in the absence of legal authority consisted of ■ mere objections, while here the receiver took charge of, and himself conducted, the litigation upon the writ of error, the filing of the mandate, and the entry of the direction for another trial. That was a litigation of the action upon its merits which, according to this authority, would have been a waiver in the proceedings under consideration. Id., 201 .

The receiver proceeded so far with the litigation as to deprive by his efforts the plaintiffs of the judgment which they had recovered against the company before it was dissolved, and in that manner he obtained the securities provided for the indemnity of the sureties in the bond on suing out the writ of error. After that he had nothing to gain by continuing to resist the plaintiff’s action, unless he might have made a successful defense upon the trial. But that he elected not to attempt, but left the action to be tried under the order entered in the circuit court, containing the necessary direction for that purpose. By this abandonment of the litigation after he had made himself for all practical purposes a party to it, and had secured , its control, direction and disposition, he could not relieve i himself legally from the result of the proceedings.

The action had become for legal purposes an action against himself' as' receiver by these proceedings taken under his authority with the sanction of the supreme court.

After that no necessity existed for a more formal revival of the action by inserting his name as defendant in place of the company, for he had sanctioned the regularity of the litigation in the shape in which it was terminated by himself continuing it in the name of the company. This rendered the judgment finally recovered legally effectual against him as receiver, and it should have been permitted to be included with the other claims to be paid as far as that might be done,- out of the proceeds of the assets of the company to be disposed of and distributed by the receiver. The order should be reversed with the usual costs and disbursements, and an order entered directing the allowance of the claim made, and the receiver to include it with those of the other claims against the assets of the insurance company.

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