Jacobson-Lyons Stone Co. v. Silverdale Cut Stone Co.

• Decision Date: 07 April 1962
• Docket Number: JACOBSON-LYONS,No. 42608,42608
• Citation: 370 P.2d 68,189 Kan. 511
• Parties: STONE COMPANY, Inc., a Corporation, Appellee, v. SILVERDALE CUT STONE COMPANY, A Division of Forburger Company, Inc., a Corporation, Appellant.
• Court: Kansas Supreme Court

Page 68

370 P.2d 68

189 Kan. 511

JACOBSON-LYONS STONE COMPANY, Inc., a Corporation, Appellee, v. SILVERDALE CUT STONE COMPANY, A Division of Forburger

Company, Inc., a Corporation, Appellant.

No. 42608.

Supreme Court of Kansas.

April 7, 1962.

Syllabus by the Court

1. In an action by a creditor against a foreign corporation upon an account receivable the trial court appointed a receiver of the assets of the foreign corporation within the state of Kansas, without requiring the creditor to post bond, and upon one day's notice to the foreign corporation after the filing of the action. A bond was required and posted by the receiver before assuming his duties. On appeal from the order appointing the receiver it is held: The order appointing the receiver was valid as being within the realm of judicial discretion on a matter over which the trial court had jurisdiction, all as more particularly set forth in the opinion.

2. The attendance of a resident agent of a foreign corporation at a hearing in obedience to a subpoena duces tecum does not constitute an appearance by the foreign corporation at the hearing, even though notice of the hearing was served upon such resident agent.

3. A notice for hearing upon an application for the appointment of a receiver to be valid must reasonably afford an opportunity to the adverse party to be present and be heard. Under circumstances more fully disclosed in the opinion, one day's notice to a foreign corporation is held to be inadequate.

4. Where an ex parte application is made by a plaintiff in a civil action for the appointment of a receiver, the requirement of a bond pursuant to the provisions of G.S.1949, 60-1208, is construed not to apply where the party defendant is a foreign corporation.

5. By the provisions of G.S.1949, 17-505, foreign corporations authorized to do business in Kansas are subject to the same provisions, judicial control, restrictions, and penalties as corporations organized under the laws of this state.

6. A receiver of the assets of a foreign corporation within the state of Kansas, as distinguished from a receiver of the foreign corporation, may be appointed to prevent waste or dissipation of the assets located within the state of Kansas, whether or not a domiciliary receiver has been appointed for the foreign corporation. Thus where the officers of a foreign corporation are recklessly and extravagantly managing its affairs, involving it in debt, and converting its property to their own use to the detriment of local creditors, the interposition of a court of equity and the appointment of a receiver of the assets of the foreign corporation in Kansas are proper.

7. In an action by an individual creditor against a division of a foreign corporation, upon application for the appointment of a receiver on the ground of insolvency, and upon facts and circumstances more fully set forth in the opinion, the appointment of a receiver to conserve the assets of the foreign corporation located in Kansas for the benefit of all the creditors is proper.

8. The appointment of a receiver rests so largely in the judicial discretion of the trial court that its judgment will not be disturbed on appeal, unless it is evident that the exercise of such discretion has been abused.

Richard W. Stavely, Wichita, and W. F. Lilleston, George C. Spradling, Henry V. Gott, George Stallwitz, Ralph M. Hope, Charles S. Lindberg and Ronald M. Gott, Wichita, on the brief, for appellant.

Donald Hickman, Arkansas City, and Kirke W. Dale, William E. Cunningham and William R. Howard, Arkansas City, on the brief, for appellee.

SCHROEDER, Justice.

This is an action by a creditor against a foreign corporation on an account receivable. Upon motion a receiver was appointed by the trial court for a division of the foreign corporation within the state of Kansas, without requiring the creditor to post bond, upon one day's notice after the filing of the action. A bond, however, was required and posted by the receiver.

Appeal has been duly perfected pursuant to G.S.1949, 60-1209, from the order of the trial court appointing the receiver.

The primary question is whether upon the facts of this case the trial court erred in appointing a receiver. Other questions preliminary in nature are also presented.

On the 20th day of March, 1961, the Jacobson-Lyons Stone Company, Inc., a corporation (plaintiff-appellee), filed a petition alleging among other things:

'* * * that the defendant, Silverdale Cut Stone Company, is a division of Forburger Company, Inc., a Nebraska corporation, with its office and principal place of business at Lincoln, Nebraska, with a plant and a resident manager and agent at Silverdale, Kansas.'

It further alleged the defendant was indebted to the plaintiff in the sum of $1,194.46 for stone sold and delivered. Summons was issued commanding the sheriff to notify the 'Silverdale Cut Stone Co., a Division of Forburger Co., Inc., upon Eva Piatt, Silverdale Resident Agent.' The sheriff's return disclosed personal service upon Eva Piatt the 21st day of March, 1961, and further disclosed that the sheriff had made diligent search in his county for the president, cashier, treasurer, secretary or other officers of the Silverdale Cut Stone Company, and not finding any of such officers in his county other than the resident agent, summoned the defendant 'by delivering a certified copy of this writ with all endorsements thereon to Eva Piatt she being the Resident Agent and the highest officer of the above named defendant found in my county and being in charge of the office of said defendant at Silverdale, Kansas.'

The summons and the return was filed March 22, 1961.

Simultaneously with the filing of the petition the plaintiff filed a motion for the appointment of a receiver, which alleged among other things that property of the Silverdale Cut Stone Company, a division of Forburger Company, Inc., has been appropriated by C. W. Forburger, president of Forburger Company, Inc., at Lincoln, Nebraska, and the same is in danger of becoming lost, removed and materially injured. It further alleged the defendant was insolvent. The motion requested that a receiver be appointed to take charge and conserve all of the assets belonging to the Siverdale Cut Stone Company, a division of Forburger Company, Inc., and to pay the debts of said company and to wind up the business and affairs of said company. This motion was served upon the defendant with the summons the 21st day of March, 1961. Hearing of the motion was set for the 22nd day of March, 1961. The notice for hearing was dated and served upon the defendant the 21st day of March, 1961.

A subpoena duces tecum was directed to 'Eva Piatt, Resident Agent for Silverdale Cut Stone Co., a Division of Forburger Co., Inc., Silverdale, Kansas,' to appear on the 22nd day of March, 1961, with the 'books and records of Silverdale Cut Stone Co., showing debts, assets and accounts.'

The trial court after hearing the motion on the 22nd day of March, 1961, appointed a receiver without requiring the plaintiff to post bond. The order appointing the receiver recited that 'Eva Piatt, the duly registered resident agent of the defendant corporation appears in person in response to summons, subpoena duces tecum, and notice of hearing of said motion.'

At the hearing Eva Piatt testified that she was the 'resident agent for the Silverdale Cut Stone Company' as well as bookkeeper and office manager. She acknowledged receipt of summons and said she tried to phone C. W. Forburger, president of Forburger Company of Lincoln, Nebraska, of which 'Silverdale Cut Stone Company is a subsidiary,' but could not reach him and made no arrangements to have him contacted. She gave the correct name of the parent company of Lincoln, Nebraska, as 'Forburger Company, Incorporated, D. B. A. Forburger Stone Company.'

She brought the records of the Silverdale Cut Stone Company with her and testified that it was insolvent. She said the liabilities were $47,438; that no sufficient funds were available to pay this amount and no sufficient money was available to pay current expenses. She said there was $1,500 cash on hand; that 'Goods receivable' were $128,000, of which $105,000 was for Forburger Stone Company at Lincoln, Nebraska. She indicated that many creditors had often contacted her concerning the accounts payable and have threatened suit. When she notified Forburger 'he told me he would send some money, which he didn't, or to pay them $5.00 or $10.00 or something like that, but I didn't even have that much to pay them. We have just been making our payroll and that is about the extent of it.'

She further said Mr. Forburger or the Forburger Company will not pay her the $105,000 account, and she does not consider it a good account; that as a rule he charges it off at the end of the fiscal year; that almost all of the business consists of sending stone up to him at cost and below cost part of the time.

She further testified that on the 31st day of May, 1960, the sum of $36,504.85 owing by Manhattan Cut Stone Company was charged off. Another subsidiary of Forburger Company, Inc., now out of business, had an account with Silverdale in the amount of $24,926.73 charged off on August 24, 1959, at Mr. Forburger's directions. On February 9, 1961, an account payable of $3,620.58 by Omaha Cut Stone Company was charged off at the direction of C. W. Forburger, president and treasurer of the parent corporation. In her opinion 'the company' would not be able to pay off its debts.

The witness testified she had been with the Silverdale Cut Stone Company for fifteen years. That the expense of cutting the stone, getting it into shape to deliver, and trucking expense for delivery were all paid by the Silverdale Cut Stone Company. She further testified the charge-offs relative to the Omaha Cut Stone Company and the Manhattan Cut Stone Company were not part of the $105,000 owing to Silverdale Cut Stone...