Meyer v. Indian Hill Farm

• Decision Date: 22 July 1958
• Docket Number: No. 343-345,Dockets 24999-25001.,343-345
• Citation: 258 F.2d 287
• Parties: Alexander MEYER, Plaintiff-Appellee, v. INDIAN HILL FARM, Inc., Defendant-Appellant, and Nathan Krupnick, Pacific Fire Insurance Company, Continental Casualty Company, The People of the State of New York, United States of America, and John Doe, Henry Doe, Mary Roe and Helen Poe, the last four names being fictitious, the true names of said defendants being unknown to plaintiff and the parties intended being any persons, firms or corporations not specifically named therein in possession of or claiming any right to possession of the premises herein described, or any part thereof, as tenants, occupants or otherwise defendants, Defendants. UNITED STATES of America, Libellant, v. CERTAIN REAL PROPERTY AND IMPROVEMENTS THEREON, KNOWN AS THE INDIAN HILL FARM. Nathan KRUPNICK, Plaintiff, v. Jean CLEMENS, as Administratrix of the goods, credits and chattels of Michael Clemens, Deceased, Indian Hill Farm, Inc. and United States of America, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

258 F.2d 287 (1958)

Alexander MEYER, Plaintiff-Appellee, v. INDIAN HILL FARM, Inc., Defendant-Appellant, and Nathan Krupnick, Pacific Fire Insurance Company, Continental Casualty Company, The People of the State of New York, United States of America, and John Doe, Henry Doe, Mary Roe and Helen Poe, the last four names being fictitious, the true names of said defendants being unknown to plaintiff and the parties intended being any persons, firms or corporations not specifically named therein in possession of or claiming any right to possession of the premises herein described, or any part thereof, as tenants, occupants or otherwise defendants, Defendants.

UNITED STATES of America, Libellant, v. CERTAIN REAL PROPERTY AND IMPROVEMENTS THEREON, KNOWN AS THE INDIAN HILL FARM.

Nathan KRUPNICK, Plaintiff, v. Jean CLEMENS, as Administratrix of the goods, credits and chattels of Michael Clemens, Deceased, Indian Hill Farm, Inc. and United States of America, Defendants.

Nos. 343-345, Dockets 24999-25001.

United States Court of Appeals Second Circuit.

Argued May 6, 1958.

Decided July 22, 1958.

COPYRIGHT MATERIAL OMITTED

Abraham L. Wax, New York City, for Indian Hill Farm, Inc., defendant-appellant.

Harte, Natanson & Gordon, New York City (George Natanson, of counsel), New York City, for Alexander Meyer, appellee.

Paul W. Williams, U. S. Atty., Southern District of New York, New York City (Robert L. Tofel, Asst. U. S. Atty., New York City, of counsel), for United States of America, libellant.

Before WATERMAN and MOORE, Circuit Judges, and GALSTON, District Judge.

WATERMAN, Circuit Judge.

Appellant, Indian Hill Farm, Inc., seeks reversal of an order of the district court appointing a receiver for certain real estate in which it has an interest. The only issues raised are (1) whether the district court lacked personal jurisdiction over appellant, and (2) whether, if the district court had jurisdiction, appointment of a receiver was an abuse of discretion under the facts of the case. For the reasons hereinafter stated, we hold that the district court acquired sufficient jurisdiction over appellant to appoint a receiver and that it did not abuse its discretion in doing so.

Appellant, which will be referred to as Indian Hill, owns, or at least has an interest in, certain real property in Orange County, New York upon which the appellee, Alexander Meyer, claims to have a mortgage. Meyer commenced this foreclosure action in the New York Supreme Court, Orange County, by personal service of the summons upon the United States and various other persons claiming an interest in the real estate. The jurisdiction issue arises from Meyer's attempts to serve process on Indian Hill.

Indian Hill is a New Jersey corporation which has been dissolved by that state for non-payment of franchise taxes. Its only officer or director appears to be Jean Clemens, who apparently resides on the real estate involved in the action. Meyer attempted to serve process on Mrs. Clemens in Orange County, New York, but was unsuccessful. Since Indian Hill does not do business in New York and has no registered agent there, Meyer then sought to bring it into the action by service of process outside that state. At one time Indian Hill had a registered agent in New Jersey, but he died prior to the commencement of Meyer's action, and a new agent has never been appointed. Meyer had no alternative but to serve process on Indian Hill by delivery of copies of the summons and the complaint in New Jersey to the New Jersey Secretary of State. This he did.

After the action had been thus commenced in the New York Supreme Court, it was removed by the United States to the United States District Court for the Southern District of New York. Thereafter, by order of the district court, the removed action was consolidated with two other actions pending there which also involved claims against the same real estate. Meyer then filed an ex parte application for a receiver of the rents of the mortgaged property. This application was granted by the district court on Meyer's affidavit which showed, in addition to the existence of the mortgage and the pendency of the foreclosure action, (1) that Indian Hill had entered into an agreement extending the mortgage, which mortgage provided that "the holder of this mortgage, in any action to foreclose it, shall be entitled to the appointment of a receiver"; (2) that rents on the premises aggregating $178 a month were being collected by Mrs. Clemens, who kept the money but did not report it for tax purposes; (3) that real estate taxes were unpaid for 1956 and 1957, and the real estate had previously been sold for nonpayment of 1953, 1954 and 1955 taxes; and (4) that the total liens claimed against the real estate in the consolidated action exceeded $100,000. Indian Hill appeared specially to move to vacate the order appointing a receiver. It primarily relied on its contention that the court lacked jurisdiction because of the alleged failure to serve process upon it in accordance with New York law. The United States participated in the argument on the motion but took no position. The court without opinion denied the motion. Indian Hill appealed.

An interlocutory order appointing a receiver is made appealable by 28 U.S.C. § 1292(2). We have held that Rule 54(b), F.R.Civ.P. 28 U.S.C. does not affect orders made appealable by 28 U.S.C. § 1292. Cutting Room Appliances Corp. v. Empire Cutting Mach. Co., 2 Cir., 1951, 186 F.2d 997. Although the Seventh Circuit has followed a contrary rule, Packard Motor Car Co. v. Gem Mfg. Co., 7 Cir., 1950, 187 F.2d 65, certiorari granted, 1951, 341 U.S. 930, 71 S.Ct. 803, 95 L.Ed. 1360, dismissed per stipulation, 342 U.S. 802, 72 S.Ct. 92, 96 L.Ed. 607, other circuits have followed our decision. George P. Converse & Co. v. Polaroid Corp., 1 Cir., 1957, 242 F.2d 116; Hook v. Hook & Ackerman, Inc., 3 Cir., 1956, 233 F.2d 180, certiorari denied 1957, 352 U.S. 960, 77 S.Ct. 350, 1 L.Ed.2d 325; Pang-Tsu Mow v. Republic of China, 1952, 91 U.S.App.D.C. 324, 201 F.2d 195, certiorari denied 1953, 345 U.S. 925, 73 S.Ct. 784, 97 L.Ed. 1356. Accordingly, our appellate jurisdiction is unaffected by the fact that the removed suit was consolidated with two others and the district court did not enter a Rule 54(b) certificate.

1. Personal Jurisdiction over Indian Hill. If the district court did not obtain proper jurisdiction over Indian Hill, the appointment of a receiver with respect to its property was void. Pusey & Jones Co. v. Hanssen, 1923, 261 U.S. 491, 43 S.Ct. 454, 67 L.Ed. 763. Since the order appealed from was entered in the action brought by Meyer, the validity of that order must rest on the jurisdiction acquired in that action and not on the jurisdiction acquired in the actions with which Meyer's action had been consolidated. See 5 Moore's Federal Practice (2d ed., 1951) 1209-1210. The jurisdiction of a district court on removal of a case from a state court is a derivative jurisdiction, Lambert Run Coal Co. v. Baltimore & O. R. Co., 1922, 258 U.S. 377, 382, 42 S.Ct. 349, 66 L.Ed. 671, and the federal court is without jurisdiction if the service of process with which the action was commenced in the state court was defective. Cain v. Commercial Publishing Co., 1914, 232 U.S. 124, 34 S.Ct. 284, 58 L.Ed. 534; cf. Employers Reinsurance Corp. v. Bryant, 1937, 299 U.S. 374, 57 S.Ct. 273, 81 L.Ed. 289. Thus the personal jurisdiction of the district court over Indian Hill rests on the validity under New York law of the service of process on the New Jersey Secretary of State.

Section 235 of the New York Civil Practice Act provides in pertinent part that "A defendant in any case specified in section two hundred thirty-two * * * may be served * * * without the state in the same manner as if such service were made within the state * * *".¹ Among the cases specified in § 232 are actions "Where the complaint demands judgment that the defendant be excluded from a vested or contingent interest in or lien upon specific real or personal property within the state; or that such an interest or lien in favor of either party be enforced, regulated, defined or limited; or otherwise affecting the title to such property."² And § 232-a, which further limits the cases in which § 235 is applicable, includes in the permissible situations a case "* * * where in a cause of action specified in section two hundred thirty-two of this act, the defendant * * * is a foreign corporation, or a foreign corporation which has been dissolved * * *."

It is clear that the present case squarely falls within these provisions, since Indian Hill, "a foreign corporation which has been dissolved," is the defendant in an action to enforce a lien upon specific real property within the state of New York. § 232-b³ limits the application of the procedure provided for in § 235 "* * * where the application is made upon the ground that the defendant is a foreign corporation * * *" to those situations in which the moving papers state "that the plaintiff, with due diligence, has been or will be unable to make personal service of the summons within the state." But § 232-b presents no obstacle to the application in this case of § 235. Meyer did attempt to make personal service within the state on Mrs. Clemens, and, in any event, the requirements of § 232-b do not appear to be applicable to "a foreign corporation which has been dissolved." Thus Indian Hill's reliance on the presence in New York of Mrs. Clemens, who thus far has successfully evaded service of process, is misplaced.

The crucial question is whether delivery of copies of the summons and complaint to the New Jersey Secretary of State is service "without the state in the same manner as if such service were made within the state" within the meaning of § 235. The purport of this provision would appear to be that service outside New York on a foreign corporation may be made "in the same manner" as if the...