Second Real Estate Investments v. Johann

• Decision Date: 30 March 1953
• Docket Number: No. 28891,28891
• Citation: 232 Ind. 24,111 N.E.2d 467
• Parties: SECOND REAL ESTATE INVESTMENTS, Inc. v. JOHANN et al.
• Court: Indiana Supreme Court

Page 467

111 N.E.2d 467

232 Ind. 24

SECOND REAL ESTATE INVESTMENTS, Inc. v. JOHANN et al.

No. 28891.

Supreme Court of Indiana.

March 30, 1953.

Isidor Kahn, Harry P. Dees, Arthur Donovan and Robert Kahn, Evansville, Kahn, Dees, Donovan & Kahn, Evansville, of counsel, for appellant.

Arthur C. Stone and Jack A. Stone, Evansville, Stone & Stone, Evansville, of counsel, for appellee W. Johann, Jr. EMMERT, Chief Justice.

This is an appeal from an interlocutory order appointing a receiver after summons had been issued and placed in the hands of the sheriff for service. The first specification of assignment of errors, which is that the 'court erred in appointing a receiver for the appellant,' is sufficient to present all questions involved in other specifications of error.

On February 19, 1952, William Johann, Jr., as Administrator De Bonis Non of the Estate of Bessie Johann, Deceased, filed his complaint against the Second Real Estate Investments, Inc. The complaint is as follows:

'The plaintiff, for cause of action against the defendant, alleges and says:

'1. That the plaintiff is the duly qualified and acting Administrator de bonis non of the estate of Bessie Johnann, deceased;

'2. That the said Bessie Johann, at the time of her death, was the owner of certain certificates of the common capital stock of the defendant, representing thirty (30) shares of stock, and that one, William Johann, Sr. was, and is, the President of the defendant, and was the Administrator of the estate of Bessie Johann, deceased, and had the custody of the assets of Bessie Johann, deceased; that William Johann, Sr., as President of the defendant, and as Administrator, and as an individual, concealed the ownership of Bessie Johann, deceased, in said defendant, and that this ownership was not discovered until the year 1951 because of such concealment; that since the discovery of the ownership by Bessie Johann, it has further been discovered that the defendant has conveyed property to its President, William Johann, Sr., from time to time, and to other persons that the said William Johann, Sr. directed the same to be conveyed, and that no adequate consideration was paid for said property to the defendant, and the proceeds of such sales have not been properly accounted for, but that the exact records of said transactions can only be determined by an accounting of the activities of the defendant and of its President, William Johann, Sr.; that the said William Johann, Sr. is now a non-resident of the State of Indiana, and is transferring his assets, and the assets of the defendant out of the Jurisdiction of the Courts of the State of Indiana; that the said William Johann, Sr. as President of the defendant, has concealed the facts surrounding the financial condition of the defendant, but that because of his transfer of assets out of the State of Indiana, the defendant is in imminent danger of insolvency, and that an emergency exists for the appointment of a Receiver for said defendant, without notice, and that unless a Receiver is appointed for said defendant, the said William Johann, Sr. will continue to transfer these assets and will remove all said assets leaving only liabilities, and the plaintiff will suffer irreparable damage.

'Wherefore, the plaintiff prays that an accounting be had of the corporate affairs of said defendant, and that the Court determine an emergency exists for the immediate appointment of a Receiver for said defendant, without notice, to take charge of the assets of said defendant, and that the Receiver be authorized to employ such accountants, attorneys, agents and assistants necessary to render a proper accounting thereof, with the usual powers and authority conferred upon Receivers in such cases, and for all other proper relief.'

William Johann, Jr., in his verification to the complaint stated, 'That he has read the foregoing complaint, and the facts set out therein are true.' The same day summons, returnable March 10, 1952, was issued on the complaint for the Second Real Estate Investments, Inc., and this was placed in the hands of the sheriff for service. The same day the administrator de bonis non signed a notice directed to the Second Real Estate Investments, Inc., for the hearing on the appointment of a receiver, said notice being as follows:

'You are hereby notified that the undersigned has filed complaint in the above entitled cause for an accounting and for the appointment of a Receiver, and that the same is set for hearing at 11:00 o'clock A.M., on the 19th day of February, 1952, in the Vanderburgh Probate Court.'

The service of this notice was acknowledged in behalf of the appellant by the following endorsement:

'The undersigned hereby acknowledges receipt of the foregoing notice this 19th day of February, 1952.

'Second Real Estate Investments Inc.

By (s) William Johann, Jr.

Secretary'

The Indiana statutory requirement for notice states that 'Receivers shall not be appointed, either in term or vacation, in any case, until the adverse party shall have appeared, or shall have had reasonable notice of the application for such appointment, except upon sufficient cause shown by affidavit.' Section 3-2602, Burns' 1946 Replacement. This section of the Code is declaratory of the equitable practice 'to require the moving party to give due notice of the application to defendant, over whose effects he seeks the appointment of a receiver, in order that he may have an opportunity of being heard in defense, and that his property may not be summarily wrested from him upon an ex parte application.' High, Receivers, 4th Ed., § 111, p. 128. It if be assumed that the service of notice was upon a proper representative of the corporation, it is quite evident that the notice served after the beginning of business hours of the court for a hearing on the appointment of a receiver to be held at 11:00 o'clock the same morning would not be sufficient time to prepare to resist an application for the appointment of a receiver, and that such a short time is not a 'reasonable notice of the application' as required by § 3-2602, Burns' 1946 Replacement. Therefore, unless the appointment was valid as an appointment without notice, the order should be reversed and the appointment vacated.

The evidence received by the court on the matter of the appointment consisted of the verified complaint and an affidavit executed by William Johann, Jr., which reads as follows:

'William Johann, Jr. being first duly sworn, upon his oath says:

'That he resides at 1419 Brookside Drive, Evansville, Indiana;

'That the officers of Second Real Estate Investments Inc. are William Johann, Sr., President, and this affiant, William Johann, Jr., Secretary; that they are the only officers of said corporation; that William Johann, Sr., the President of said corporation, is a non-resident of the State of Indiana and is now a resident of the State of Florida;

'That he has read the complaint filed in the above entitled cause, and that the statements set out therein are true;

'That William Johann, Sr., President of said Second Real Estate Investments Inc. is removing the assets of said corporation from the State of Indiana, and that he has been so doing for a number of years.'

When a receiver is appointed without notice the only evidence under § 3-2602, Burns' 1946 Replacement, which is proper to be considered by the court, must be in the form of affidavits, which also may include the verified complaint. Marshall v. Matson, 1908, 171 Ind. 238, 86 N.E. 339; Tormohlen v. Tormohlen, 1936, 210 Ind. 328, 332, 1 N.E.2d 596. Commenting on this requirement of the statute, this court, in Sullivan Electric Light and Power Co. v. Blue, 1895, 142 Ind. 407, 417, 41 N.E. 805, 808, said: 'There the statute quoted has wholesomely provided that cause for an appointment of a receiver without notice to the adverse party must by shown by affidavit. That implies that it must be in writing and filed as the cause of such appointment. Thus the adverse party may know the exact facts upon which the judge acted in appointing a receiver in his absence and wresting from him the control of his property without a hearing or an opportunity for such hearing. Without such facts being spread upon the record on appeal to a higher court from such an interlocutory order allowed by another section of the same statute, the appeal might prove to be fruitless and unavailing. So that we must look to the facts stated on paper, at the time the application in this case was made, exclusively to find the cause, if any there was, to justify the appointment without notice.' ¹

The briefs of both parties to this appeal make no contention that Second Real Estate Investments, Inc., was a nonresident corporation, but discuss the issues on the assumption that it was an Indiana corporation, and it will be so considered by us. The allegation that the president is a nonresident of Indiana and is transferring his assets, and the assets of the corporation out of the State of Indiana, and that because of such transfer of assets the corporation is in imminent danger of insolvency, is not a statement of evidentiary facts sufficient to make out a case where the corporation is in imminent danger of insolvency under the fifth clause of § 3-2601, Burns' 1946 Replacement. ² The corporation could be perfectly solvent since there is no allegation in this specification of the complaint that the assets would cease to be the property of the corporation, nor is there any allegation that the corporation was unable or would be unable to pay its debts in the usual course of trade or business. Nor was there any allegation that the corporation had any creditors anywhere. See Royal Academy of Beauty Culture etc., v. Wallace, 1948, 226 Ind. 383, 78 N.E.2d 32, 81 N.E.2d 534. The fact that it may have been difficult for the administrator de bonis non to prove insolvency or imminent danger of insolvency does not relieve him...