Decker v. Gardner

• Decision Date: 24 February 1891
• Citation: 26 N.E. 814,124 N.Y. 334
• Parties: DECKER v. GARDNER.
• Court: New York Court of Appeals Court of Appeals

124 N.Y. 334

26 N.E. 814

DECKER

v.GARDNER.

Court of Appeals of New York, Second Division.

Feb. 24, 1891.

Appeal from a judgment of the general term of the fifth judicial department, which affirmed a judgment entered upon a verdict. This action was brought originally against the Buffalo, New York & Philadelphia Railroad Company, to recover for a trespass alleged to have been committed by said company in May, 1884. After the case was at issue, and in May, 1885, the defendant was appointed receiver of the property of said railroad company by the circuit court of the United States for the western district of Pennsylvania, in an action brought therein to floreclose general trust mortgages upon the railroad property. An action auxiliary to the aforesaid action was subsequently brought in the circuit court for the northern district of New York, and in such action said defendant was appointed receiver of said railroad in said district, and, pursuant to such orders, the defendant took possession of the mortgaged railroad property, and continued in possession until the sale thereof under judgment of foreclosure entered in said actions. By an order of the supreme court made in September, 1887, the receiver was substituted as defendant in this action in the place and stead of the railroad company, and it was provided that the action proceed with like effect as if originally commenced against him. An amended complaint was served, which alleged the incorporation of the railroad company, the trespass, the appointment of the receiver, and the other substituting him as defendant, and demanding judgment for damages. The receiver pleaded a general denial, and upon the trial moved that the complaint be dismissed on the ground that the action could not be maintained against him. The exception to the denial of that motion presents the question discussed in the opinion.

John G. Milburn, for appellant.

F. R. March, for respondent.

BROWN, J. ( after stating the facts as above.)

Jurisdiction to appoint receivers of corporations is wholly statutory. The power to declare a forfeiture of corporate franchises was originally, in England, vested in the courts of law, and was exercised in a proceeding brought by the attorney general in the name of the sovereign. The court of chancery never assumed jurisdiction in such cases until it was conferred by act of parliament. It declined, until the power was conferred by statute, to sequestrate corporate property through the medium of a receiver, or to dissolve corporate bodies, or to restrain the usurpation of corporate powers. Ang. & A. Corp. § 777; Slee v. Bloom, 5 Johns. Ch. 366-381;Attorney General v. Insurance Co., 2 Johns. Ch. 389. The courts of this country followed the English system, (Attorney General v. Insurance Co., supra; Attorney General v. Bank, Hopk. Ch. 354;) and the jurisdiction in such cases is now a subject of statutory regulation in most, if not all, the states. In 1825 the legislature of this state authorized the court of chancery to sequestrate the property of corporations against whom judgment at law had been obtained and execution was returned unsatisfied, and to appoint receivers of the same, and to decree the dissolution thereof in cases of insolvency. Chapter 325, Laws 1825. The system then inaugurated was continued by the Revised Statutes and subsequent legislation, and is known generally under the head of ‘Proceedings against Corporations in Equity.’ 2 Rev. St. 462; Code Civil Proc. c. 15, tit. 2. The receivers authorized by statute to be appointed upon the dissolution of the corporation are the representatives of the corporate body, and generally are vested with the title to the corporate property; and, for the purpose of administering thereon, and winding up the affairs of the corporation, succeed to its powers and franchises. In this state they are vested with all the real and personal estate of the corporation, and are made trustees of such estate for the benefit of the creditors and stockholders, and possess, generally, all the powers and authority conferred by law upon the assignees of insolvent debtors. 2 Rev. St. p. 464, § 42; Id. p. 469, §§ 67, 68; Code Civil Proc. § 1788. Receivers appointed pendente lite are, however, mere temporary officers of the court, and do not possess the powers of a permanent receiver, unless specially conferred upon them by order of the court. Code Civil Proc. §§ 1788, 1789; Herring v. Railroad Co., 105 N. Y. 372, 375, 12 N. E. Rep. 763. The court of chancery however, possessed and exercised in many cases the power to appoint receivers pendente lite of property which was the subject-matter of litigation before the court. Such receivers possessed no legal powers. They were officers of the court merely, and their functions were limited to the care and preservation of the property committed to their charge, and they possessed no authority except such as the orders of the court conferred. 3 Pom. Eq. Jur. §§ 1331-1336; Herring v. Railroad Co., supra; Keeney v. Insurance Co., 71 N. Y. 396. This power of appointment of a receiver pendente lite was one incidental to the jurisdiction of the court. It did not depend upon statute, and was not affected by the character of the parties before it, whether an individual or a corporation, or by the nature of the property. United States Trust Co. v. New York, etc., R. Co., 101 N. Y. 478, 5 N. E. Rep. 316. Its most common exercise was in foreclosure suits, whenever, by reason of the insufficiency of the security, it became necessary to impound the rents and profits of the mortgaged property during the litigation, in order that they might, after the decree and sale, be applied upon the debt for the security of the mortgagee. Hollenbeck v. Donnell, 94 N. Y. 342; 2 Jones, Mortg. § 1516. This particular jurisdiction has been extended to and is frequently exercised upon the foreclosure of mortgages upon railroads; and receivers of such property are charged with the duty of the operation of the road pending the foreclosure suit, to the end that the value of the property, which necessarily depends largely upon the condition of its business and continued operation, may not be depreciated, and also to the end that its income may not be diverted to the payment and satisfaction of debts which are not liens upon the property.

While this class of receivers have many duties and powers peculiar to themselves, they are such only that...