Kirkpatrick v. Post

• Decision Date: 19 June 1895
• Citation: 32 A. 267,53 N.J.E. 591
• Parties: KIRKPATRICK v. POST et al.
• Court: New Jersey Court of Chancery

32 A. 267

53 N.J.E. 591

KIRKPATRICK

v. POST et al.

Court of Chancery of New Jersey.

June 19, 1895.

(Syllabus by the Court.)

Bill by Andrew Kirkpatrick, receiver, against Henry A. V. Post and others. Motion to set aside order of publication against Pest and Blake, absent witnesses. Denied.

R. V. Lindabury, for the motion.

J. E. Howell, opposed.

EMERY, V. C. The bill in this case is filed by the receiver of an insolvent corporation against seven of the directors of the corporation, to establish, by decree of this court, their joint and several liability, under section 7 of the corporation act, for the making and payment of dividends out of the capital of the company, and not from its surplus or net profits, and for an accounting of the assets and liabilities of the company, as far as necessary to determine whether these payments of dividends were so made. By the terms of this section, the directors under whose administration such payment of dividends from surplus or net profits or division of the capital among the stockholders shall happen are liable jointly and severally to the corporation, and to the creditors thereof, in case of its dissolution or insolvency, to the full amount of the dividend made or capital stock divided Revision, p. 178, par. 7. By the bill, process of subpoena is prayed against seven of the directors as defendants, including George Blake and Henry A. V. Post. Subpoena against all of the defendants was issued. Pour of them were served by the sheriff of Essex, and three (George Blake Henry A. V. Post, and Caleb B. Knevals) were returned as nonresidents, the affidavit of nonresidence showing that Blake resided in North Carolina, and Post and Knevals in New York. On this affidavit, an order of publication was made on March 23, 1895, against the three nonresidents "that the said absent defendants do appear, plead, demur, or answer to the complainant's bill on or before the 24th day of May next, or that, in default thereof, such decree be made against them as the chancellor shall think equitable and just"; and it was further directed that notice of the order, as prescribed by law and the rules, be, within 10 days, served personally on the absent defendants, or be published or mailed to them, as directed in the order. The defendant George Blake, on May 22, 1895, two days before the expiration of the time fixed for his appearance by the order, and too near to that date to permit of giving the five days' notice of motion to discharge the order, required by rule 141, filed a petition setting out the filing of the bill and its general object, his residence In North Carolina, and that he had not been served with a subpoena to answer in the cause, but that, in lieu thereof, the above order of publication had been made, of which he had received notice by mail. The petition prayed leave to enter a special appearance in the suit, for the sole purpose of applying to set aside the order of publication; that the order might be set aside as illegally and improvidently entered; and that all further proceedings in the action against him be stayed until the determination of the matter of his application. On filing the petition, an order was made directing (1) that he have leave to enter a special appearance for the purpose of applying to set aside the order of publication; (2) that the complainant show cause why the order should not be set aside as illegally and improvidently entered; and (3) that all further proceedings in said action against him be stayed until the determination. A similar petition was filed, and similar order made, on the same day, and under the same circumstances, as to the defendant Post; and on May 22, 1895, special appearances were entered on behalf of Post and Blake, for the sole purpose of applying to set aside the orders of publication made against them, respectively, as absent defendants. The receiver has filed an answer to the petition of Blake, setting out, in addition to the facts stated in the bill, that Blake filed with the complainant, as receiver, his claim as a creditor of the company in the insolvency proceedings; that he still is a shareholder and director of the company, and is possessed of a large amount of real and personal property in this state; and claiming that, in becoming a shareholder and director of the corporation, and filing his claim as creditor, he has submitted himself to the jurisdiction of this court, for the purpose of all decrees made in the original suit in insolvency, or suits ancillary thereto, brought by the receiver for the purpose of winding up its affairs. Substantially similar allegations and claims are made in an answer by the receiver to the petition of the defendant Post, his claim against the corporation being, however, one which he holds as assignee of a creditor who has proved. On the petition and answers, the counsel for petitioners move to set aside the orders: First Because they are not authorized by the law of the state. This claim is based on the contention that the statutes of the state cannot be construed to authorize orders of publication in suits where the bill is founded on a purely personal demand, upon which the court has no jurisdiction to make a decree in the suit unless the defendant is served within the jurisdiction or voluntarily appears. Second. Because the fourteenth amendment to the federal constitution provides that no state shall deprive any person of property without due process of law, and the order violates this provision of the federal constitution as construed by the United States supreme court, and is therefore illegal. This assertion of an alleged right under the federal constitution was not made in the petition or on the record, but is raised at the hearing.

The motion to set aside the order of publication must be denied, upon the following grounds: First. The order for publication was issued under the express authority of the statute. Revision, p. 106, par. 18, amended March 10, 1893, c, 114; P. L. p. 199, § L This statute, so far as relates to the character of the suit in which publication might be made against an absent defendant, was the same as the chancery act of February 29, 1820 (Laws 1821, p. 702, § 2), and confers the power "in case of a bill filed against any defendant or defendants," etc., without any limitation as to the character of the bill. This was an enlargement of the power conferred by the original chancery act of 1799 (Pat. Laws, p. 430, § 16), which extended only to cases where "any person shall file a bill against a defendant or defendants residing within the state in which it shall be proper or necessary to join other defendant or defendants residing out of this state, whether in the United States or any other country," etc. The present bill, it will be perceived, comes within the scope of the act of 1799; for the receiver was entitled, under the seventh section, to insist upon a joint liability of the directors implicated, and for this purpose a joinder of all such directors in the bill was proper. The joinder of nonresident debtors charged to be jointly liable with the resident directors, and the exhaustion of all the statutory power of bringing the nonresidents into court by service or publication, are, I think, necessary, as the foundation of any decree for joint liability against the resident directors, even if no final decree can be made against the nonresidents under the decree pro confesso expressly authorized by the statute. In Madox v. Jack son, 3 Atk. 406, Lord Hardwicke says: "The general rule of the court is, where a debt is joint and several, the plaintiff must bring each of the debtors before the court, because they are entitled to the assistance of each other for taking the account." 1 Daniell, Ch. Prac. (3d Am. Ed.) 264; Gifford v. Thorn (1848) 7 N. J. Eq. 90, 94. That the terms of the present statute extend to cases where the bill prays a decree in personam against a nonresident on a personal demand, as to which the court of equity has power to adjudicate against a resident, is settled in this court by the decision of Vice Chancellor Van Fleet in Insurance Co. v. Pinner (1887) 43 N. J. Eq. 52, 10 Atl. 184. In this case a nonresident defendant applied to set aside a decree for deficiency which had been rendered against him in a foreclosure suit on notice given to him under this statute. The vice chancellor denied this upon the ground (pages 57 and 58, 43 N. J. Eq., page 184, 10 Atl.) that every independent government had the right to declare by what means parties to suits should be brought before its tribunals; that the method of notice to resident or nonresident was a "subject over which the law-making power of each government had supreme control," and therefore a decree against a nonresident, pronounced under the notice prescribed by statute, was in all respects as valid and effectual for all local purposes as a decree made against a defendant brought into court by personal service of process. Chancellor Halstead, in Hoyt v. Thorn, 7 N. J. Eq. 9, 15, said that the statute of 1820 could only apply to "cases in which the court has Jurisdiction of the subject-matter of the suit," and set aside an order of publication against a sole defendant living in New York. This was a bill filed to set aside an assignment of an interest in a decedent's estate, made in this state, and to recover the...