Receivers of Middlesex Banking Co. v. Realty Inv. Co.

• Decision Date: 23 February 1926
• Court: Connecticut Supreme Court
• Parties: RECEIVERS OF MIDDLESEX BANKING CO. v. REALTY INV. CO.

132 A. 390

104 Conn. 206

RECEIVERS OF MIDDLESEX BANKING CO. v. REALTY INV. CO.

Supreme Court of Errors of Connecticut.

February 23, 1926

Error from Superior Court, Middlesex County; Donald T. Warner and John P. Kellogg, Judges.

Action by the Receivers of the Middlesex Banking Company against the Realty Investment Company, in which receivers for plaintiff were also made receivers for defendant. On motion of the receivers, the Central National Bank of Middletown and others were enjoined from prosecuting certain litigation in other states, and they bring error. No error.

The receivers filed a motion in the nature of a petition, in which they alleged that, as receivers both of the plaintiff and defendant corporations in April, 1915, they made a contract with the five respondents, all national banking corporations and all creditors of the defendant, by which the respondents were to advance to them certain moneys to enable them to carry on cropping operations during the season of 1915 upon lands which, subject to certain mortgages, were owned by the defendant, and which were located in states other than Connecticut, among them South Dakota; that this contract was made in Connecticut; that the receivers filed a motion in the superior court of this state in the county where the receivership is pending, asking for its approval and authority to proceed with the cropping operations; that the court thereupon made an order giving that approval, and directing that the proceeds of the operations should be accounted for and delivered to the respondents in accordance with the terms of the contract; that the receivers had already been appointed receivers of the defendant corporation by the circuit court of the Fifth judicial district in South Dakota, and the contract with the respondents was, in May 1915, also approved by that court; that the receivers proceeded with the cropping operations, and in December 1916, rendered to each of the respondents a final account showing the amounts received from the respondents, the proceeds from the cropping operations, disbursements and charges, and payments made to the respondents, a copy of which account was attached to the motion; that with this account they submitted to each of the respondents a statement of the amount due it under the contract; that these accounts were approved by the respondents, and they accepted the sums tendered by the receivers in full settlement of the amounts due under the contract; that subsequently the respondents sought and were seeking to compel the receivers, by order of the circuit court in South Dakota, to pay over to them additional sums, and to question the correctness of the account, and to involve the receivers in expensive, wasteful, and unnecessary litigation; that none of the respondents is located in South Dakota, and no interest of any local creditor in South Dakota is involved or ought to be protected; that only a part of the lands upon which the cropping operations were conducted are located in South Dakota, and the court there could not adjudicate upon the accounts in relation to lands outside of that state; that if the respondents are entitled to prosecute the proceedings in the courts of that state, they can also prosecute their demands in numerous other states, thus causing a multiplicity of actions and waste and expense to the estate; and that the funds and proceeds of the cropping operations have been transferred under proper authority to Connecticut and deposited in banks here. The receivers asked, first a judgment declaring that the final payment by them to the respondents and its acceptance constituted full satisfaction of their obligations to the respondents under the contract and were final and binding upon them; and, secondly, an injunction restraining the respondents from prosecuting any legal proceedings in any other state in which they should seek to obtain from the receivers any additional sums on account of the cropping operations.

The agreement referred to in the petition recites that the lands in question were owned by the defendant corporation; that the plaintiff corporation owned and controlled the defendant corporation; that the receivers had been appointed for both of them by the Connecticut court, and, as regards the defendant, by the courts of other states, including South Dakota; that the respondents were creditors of both corporations, holding notes made by the defendant and indorsed by the plaintiff; that to preserve the value of the lands, and incidentally of the mortgages on them, the receivers needed funds to provide for their cultivation, and these the respondents were willing to advance; and that certain of the lands were or would be leased to tenants under agreements, by the provisions of which the rentals would be paid by turning over to the receivers a certain portion of the crops raised. The agreement then provided that the respondents would, " upon the execution of this contract and its approval by the superior court of the county of Middlesex aforesaid, or of any judge thereof having jurisdiction," pay to the receivers an aggregate sum of $25,000, each respondent to advance a part proportioned to the indebtedness owed to it by the two corporations. Each of the respondents was to receive " a good and sufficient receipt, or evidence of indebtedness as shall be approved by said court or judge, payable at such time as shall be fixed and determined by said court or judge, and such receipt or evidence of indebtedness shall contain such other provisions as said court or judge shall decree, and shall bear interest at 5 per cent." The money advanced by the respondents was to be used by the receivers in buying seed grain and in furnishing other means of cultivating and cropping the lands and the necessary superintendence for the season of 1915, as the judgment of the receivers dictated. The receipts given the respondents " shall constitute and be a first and prior lien on the gross return or crop rentals for the season of 1915, and upon the sale of the same the said receipts or evidences of indebtedness shall be first paid out of the gross amount received from such sales, and before the payment therefrom of any other charge or expense whatsoever." After these receipts had been discharged, there was to be deducted from the proceeds such expenses and charges as had been necessarily and fairly incurred in the cropping operations and the sale of the crop, and the balance was to be divided among the respondents in proportion to the amount each had advanced, to be paid over to them by the receivers, and to be applied by them upon the notes of the defendant corporation held by them. And where the receivers themselves cultivated the lands, only such proportion of the proceeds was to be regarded as coming within the terms of the contract as would have resulted had the lands been leased.

All of the respondents filed pleas in abatement and to the jurisdiction. Three of them are located out of the state, and they alleged that service of the motion was not otherwise made upon them than by a copy of it, of an application for an order of temporary injunction attached to it, and of a rule to show cause, sent to them at their respective addresses by registered mail. The court sustained a demurrer to the plea, and the respondents then filed a motion seeking permission to answer or otherwise plead to the petition " without prejudice to their right of appeal from the order" sustaining the demurrer; this motion was granted, and they, along with the two resident banks, then filed an answer to the petition. In this answer they not only raised issues of fact upon the allegations of the petition, but also pleaded affirmatively that the accounts rendered them by the receivers were incorrect and contained false and fraudulent statements, and that, if they accepted the sums paid to them as final settlement of the matter, it was because they believed and relied upon these statements; and they prayed an order directing the receivers to make a true and just account of the cropping operations, and to pay the amounts which thereby would be shown to be due them. Later, the respondents amended their answer to include allegations that, if the misrepresentations made by the receivers were not fraudulent, they were at least due to a misapprehension on the part of the receivers as to the terms of the contract or as to other material matters of fact or law.

The court made an order directing that the issues be separated and those be first tried which had to do with the approval by the respondents of the accounts submitted to them by the receivers and their acceptance of the amounts paid them as full settlement of the sums due them under the contract, and with the question whether there were any fraudulent representations or other circumstances within the scope of the answer which invalidated that settlement and rendered it ineffective. The judgment recites that, these issues being tried and found for the receivers, the other issues in the case were later tried and also found for them, and then adjudges that the receivers did make a final settlement with each of the respondents, and paid to each of them all that was due under the contract, and that there was no fraud, mistake, or other circumstances justifying the setting aside of the settlement made with them; and it granted an injunction substantially as requested in the motion.

Ernest A. Inglis, of Middletown, for plaintiffs in error.

Francis W. Cole and Ernest W. McCormick, both of Hartford, for defendants in error.

MALTBIE, J.

The service made upon the three nonresident respondents by sending to them by registered mail copies of the petition and other documents would not in itself subject them to...