Jones v. Blun

• Decision Date: 12 March 1895
• Parties: JONES v. BLUN et al.
• Court: New York Court of Appeals Court of Appeals

145 N.Y. 333

39 N.E. 954

JONES

v.BLUN et al.

Court of Appeals of New York.

March 12, 1895.

Appeal from supreme court, general term, Fifth department.

Action by Thomas Jones, as receiver of the Rheubottom & Teall Manufacturing Company, against Ferdinand S. M. Blun and another. From a judgment of the general term (28 N. Y. Supp. 1129) affirming a judgment for plaintiff, defendants appeal. Affirmed.

B. T. Wright, for appellants.

E. C. Aiken, for respondent.

BARTLETT, J.

This action is brought to set aside certain transfers made by the Rheubottom & Teall Manufacturing Company to the firm of F. S. M. Blun & Co., on the ground that defendant Blun was a stockholder of said corporation, and that the transactions attacked were after the corporation had refused the payment of its notes of other evidences of debt, and were therefore prohibited by statute. 1 Rev. St. p. 603, § 4 (Banks & Bros.' 8th Ed. vol. 3, p. 1729). The plaintiff recovered at special term, and the general term affirmed the judgment.

A preliminary point is raised by the appellants to the effect that the judgment of the supreme court sequestrating the property of the Rheubottom & Teall Manufacturing Company and appointing the plaintiff receiver of its property is void. This contention rests on the allegation that the supreme court suit is based upon a judgment recovered against the corporation in the city court of Auburn, and that, as matter of fact, the latter court had no jurisdiction of the corporation, as it did not do business and was not located in the city of Auburn. The defendant Ferdinand S. M. Blun was sued by Frank M. Hunting, as assignee of certain employés of this corporation, and in that action Blun sought to attack the validity of the judgment of the supreme court in the sequestration suit on the same ground as above stated. This court held (Hunting v. Blun, 143 N. Y. 511, 38 N. E. 716) that the complaint in the sequestration action fairly alleged all that was needed to authorize the judgment of the court. Judge Finch says: ‘It avers the recovery of a judgment against the corporation in the Auburn city court, the docket of that judgment in the Cayuga county clerk's office, the issue of an execution, and the return of the same unsatisfied. Those allegations presented a case over which the jurisdiction of the court was unquestionable. They were sufficient to invoke and require a judicial determination whether they were true or not, and whether sequestration should follow. It may be that the court erred in regarding the city court judgment as valid. That was a question of law for the court to decide, and its error, if it made one, was a judicial error, to be corrected by an appeal.’ Judge Finch then goes on to point out that this court held in Whittlesey v. Frantz, 74 N. Y. 457, that the judgment of sequestration could not be collaterally attacked for error in the proofs on which it rested. In the case at bar the learned counsel for the defendants seeks to avoid the effect of our decision in the Hunting Case by claiming that the attack here made upon the judgment of sequestration is not collateral, and that the question of its validity is directly in issue. We regard this view of the situation as unsound, this court having decided that the judgment of sequestration is valid until reversed on appeal. When the receiver appointed under this valid judgment sues to recover the assets of the corporation, and the defendants seek to assail the judgment, it is a collateral attack, and one the law will not tolerate.

A further objection is made to the receiver's power to sue on the ground that he was, before judgment, appointed temporary receiver, and as such duly executed his bond, but failed to furnish a new bond when by the judgment of the court he was continued as permanent receiver. It is undoubtedly true, as a general rule, that a receiver, before interfering with the assets, must furnish his bond. In the case at bar no such question is presented. The judgment recites that ‘Thomas Jones, heretofore appointed the receiver of the corporation, is hereby continued as the permanent receiver.’ The court is thus dealing with its own officer in charge of assets, and with his bond on file. If a further bond were deemed proper, the court had ample power to direct it to be given. Section 1788 of the Code of Civil Procedure provides that where a temporary receiver is continued by final judgment he is a permanent receiver, and has the powers and authority and is subject to the duties and liabilities imposed upon a receiver appointed in proceedings for the voluntary dissolution of a corporation. The appointment of a receiver in proceedings for the voluntary dissolution of a corporation is provided for by section 2429 of the Code of Civil Procedure, and the matter of the receiver's bond is regulated by the Revised Statutes (2 Rev. St. p. 468, § 66). That section provides that the receiver shall give such security to the people of this state as the court shall direct. When the court continues in office its receiver already in possession of the assets, with his bond duly executed and on the files, it is fair to assume that the security is deemed satisfactory if a further bond is not required. In the case before us, the temporary receiver was authorized to sue by order of the court, and the final judgment reaffirmed the order. We therefore hold the receiver entitled to sue, and that, while a further bond may be exacted, in the discretion of the court appointing him, he is under no obligations to furnish additional security until required to do so.

This brings us to the merits of the controversy. Among a large number of facts found by the special term, the following are material to the case as presented on this appeal: The Rheubottom & Teall Manufacturing Company was incorporated under the act of 1848, and the defendant Ferdinand S. M....