Trotter v. Lisman

• Decision Date: 20 June 1913
• Citation: 102 N.E. 575,209 N.Y. 174
• Parties: TROTTER v. LISMAN et al.
• Court: New York Court of Appeals Court of Appeals

209 N.Y. 174

102 N.E. 575

TROTTER

v.LISMAN et al.

Court of Appeals of New York.

June 20, 1913.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Walter F. Trotter, as receiver of the Gilman-McNeil Company, against Frederick J. Lisman and others. From a judgment of the Appellate Division (139 N. Y. Supp. 1148), overruling defendants' demurrers to the complaint, defendants appeal. Affirmed.

The plaintiff brings this action to recover property, alleged to have been diverted from the defendant Iron Railway Company, and to be held by the individual defendants, which should be applied to the payment of the claims of the plaintiff and of other creditors of the said company. The Iron Railway Company and certain of the individual defendants have demurred to the complaint, upon the grounds that the court has not jurisdiction of the subject of the action, and that the complaint does not state facts sufficient to constitute a cause of action. The complaint alleges that the plaintiff, a resident of Ohio, was duly appointed as the receiver of the Gilman-McNeil Company, a corporation of the state of West Virginia, in an action brought in that state. As such receiver, he recovered a judgment in the state of Ohio against the Iron Railway Company, a corporation of that state, for moneys due the Virginia corporation upon contracts relating to certain railway construction. Execution was issued upon said judgment, and was returned unsatisfied. It is alleged that the plaintiff was, and is, a nonresident of the state of New York; that the cause of action, upon which he obtained his judgment, did not arise within this state, and that it is not possible for him to maintain an action against the railway company in the courts of this state ‘so as to obtain judgment and issue execution thereon.’ The complaint sets forth that the Iron Railway Company, under a certain contract made in the state of Ohio with the Detroit Southern Railway Company, had agreed to convey to the latter company its railroad property, franchises, and assets in consideration of the payment of the sum of $600,000, to the Iron Railway Company, or its shareholders, upon the delivery of their shares of stock to the vendee. Upon the payment to the shareholders, ‘the officers of the company should be authorized to acknowledge the receipt of said consideration in their behalf with the same effect as if * * * paid to the Railway Company.’ It is then alleged that the firm of F. J. Lisman & Co. of New York city controlled the conduct of the affairs and business of the Iron Railway Company, through ownership and control of the capital stock, and arranged the terms of the contract of sale, which has been referred to; that the said firm of F. J. Lisman & Co., purporting to act on behalf of the railway company, received in New York city the said sum of $600,000, and interest thereon, and, thereupon, and in accordance with the provisions of said contract, paid the same in said city to certain firms named, who were shareholders of the railway company; that at the date of the said contract the railway company had no property nor assets of any description, other than the property agreed to be conveyed under the contract, and now has no property nor assets whatsoever, excepting its right to receive the consideration mentioned in said contract; that at the time of the distribution of the $600,000 received by Lisman & Co., the defendants knew of the obligations of the railway company to the Gilman-McNeil Company, a corporation of which the plaintiff is the receiver; that the latter company was continuing to perform its contracts, and that the railway company would be rendered incapable of paying the indebtedness then due and to be due under said contracts; and that the distribution of the $600,000 was made with the intention of preventing the use of that money for the payment of the railway company's debts to the Gilman-McNeil Company, or its other creditors. It is alleged that, though thereto requested, the Iron Railway way Company had failed to bring any suit against Lisman & Co. for the recovery of the said sum of $600,000. Judgment is demanded that a receiver be appointed, to whom the individual defendants should account and pay over the moneys and assets received by them under the aforesaid contract, and that the same be applied upon the plaintiff's claim, and upon any other claims properly payable therefrom. The defendants to the action other than the Iron Railway Company were firms doing business in the city of New York, who held between them the shares of the capital stock of the railway company. At the Appellate Division all the demurrers interposed to the complaint were overruled, and leave was given to appeal to this court; the following questions being certified:

‘(1) Does the complaint state facts sufficient to constitute a cause of action against the several defendants, or any of them?

‘(2) Has the Supreme Court of the state of New York jurisdiction of the subject-matter of the action?

‘(3) Has the plaintiff legal capacity to sue?’George Welwood Murray, A. H. Kohn, and Ralph Polk Buell, all of New York City, for appellants.

Hugh A. Bayne, of New York City, for respondent.

G R A Y, J. (after stating the facts as above).

[1][2] I think that the demurrers to the complaint have been properly overruled, and that the pleading sets forth a cause of action, of which the Supreme Court has jurisdiction. In a previous action, brought by this plaintiff against Lisman and others, the de...