Hyperlawhypertext legal database Knauer v. Globe Mutual Life Insurance 46 N.Y. Super. Ct. 370

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Knauer v. Globe Mutual Life Insurance

46 N.Y. Super. Ct. 370 14 Jones & S. 370 Court N.Y. Super. Ct. Decision date 1880-11-22 English

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p. 370
ANDREW KNAUER, et al., Respondents, v. THE GLOBE MUTUAL LIFE INSURANCE CO., Appellant.

Headnote

(Receiver of corporation pendente lite—effect of appointment of.—Default —power of general term to direct entry of order opening.
'It is not necessary that the receiver pendente lite, of a corporation should be substituted as defendant in an independent action brought
p. 371
against the corporation prior to his appointment, in order to enable the plaintiff therein to proceed to judgment.
Upon an appeal from an order denying a motion to open a default, the general term may, on reversal, direct the entry of such order opening the default as the special term should have granted.
In this' case, the court held that the default should be opened as matter of favor, the receiver having been guilty of no laches.
Before Sedgwick, Ch. J., and Russell, J.
Decided November 22, 1880.
Appeal from an order denying a motion to open a default.
The action was begun in September, 1878, its object being to set aside an insurance policy for fraud, and to recover moneys paid on account thereof. The answer denied any fraud, and alleged that the plaintiffs acted with full knowledge of all the facts and circumstances in reference to the matters complained of. Issue having been joined, the case was on the calendar of this court at the May term in 1879, and went over at the request of plaintiffs’ counsel. On the first day of June, the attorney-general, with the leave of the supreme court, began a suit to have the defendant judicially declared insolvent, and a receiver of its effects appointed. On On the 17th of June, James D. Fish was appointed receiver pendente lite, and duly qualified as such. This case was on the calendar in June, but was not tried on account of the illness of the judge. Being again on the calendar in October, the attorneys for the defendant notified the attorneys for the plaintiff that a receiver of the defendant had been appointed, and claimed that thereby proceedings were stayed until the receiver should be substituted as a defendant. The receiver was not substituted; but on the 17th day of October the plaintiffs took judgment by default for the sum of $1,054.07. The receiver, asserting that he had only recently heard of this judgment by default, petitioned
p. 372
this court in December to open the default and allow him to come in and defend. The receiver’s counsel, upon his appointment, were not the counsel of the company, but since he learned of the default in this case, he retained the counsel of the company to continue to act.
Sewell & Pierce, attorneys, and Robert Sewell, of counsel, for appellant.
Bushnell & Albright, attorneys, and Samuel Jones, of counsel, for respondents.

This default seems to have been permitted in part because the defendant’s attorneys believed that the appointment of a receiver of their client’s property made it necessary, before plaintiffs could proceed with their action, that the receiver should first be substituted as a defendant; but more because their client’s property having been taken away by the court, so that it was somewhat uncertain whether or not they would be compensated for their services, they did not choose to continue the defense until some satisfactory understanding on that point was arrived at.

1. It was not necessary that the receiver should be substituted as a defendant before the plaintiff’s action could proceed to judgment. A receiver, pendente lite, does not absolutely, and in all respects, supersede the corporation. The corporation was in extremis, but it was not dead. Until it was dissolved the suit against it could proceed even to judgment (In the Matter of Waterbury, 8 Paige, 380; Kincaid v. Dwinelle, 59 N. Y. 552 ; Potter on Corporations, 845-847 ; Meckles v. Rochester B’k, 11 Paige, 118 ; N. Y. Marbled Iron Works v. Smith, 4 Duer, 362 ; People v. Manhattan Co., 9 Wend. 351 ; Attorney-General v. At

p. 373
lantic Life, 74 N. Y. 183 ). The plaintiffs’ proceedings were therefore regular.

2. I am of opinion that the default ought to have been opened as a matter of favor. The defendant’s attorneys were not the attorneys of the real party in interest, i. e., the receiver, at the time the default was taken; and a receiver—an officer of the court—ought not to be prevented from protecting his trust on account of their mistake of or a misunderstanding with them. The answer discloses a good defense to the action. The case is peculiar in its nature and ought to be openly litigated; and whether or not the attorneys of the corporation were guilty of laches, the receiver has been guilty of none, such as to justify the court in refusing to aid his efforts to protect the property committed to his care.

The order appealed from should be reversed and the motion granted, upon the payment of the costs for the trial of an issue of fact, and the disbursements of the trial term, and also disbursements up to and including entry of judgment and the costs of opposing this motion below—the judgment to stand as security —without costs of appeal to either party. And as this court has power to make the order which the special term should have made (Griffen v. Helmbold, 72 N. Y. 437 ), let such an order be entered.

Sedgwick, Ch. J., concurred.

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