United States Trust Co. of New York v. New York, W.S. & B. Ry. Co.

• Decision Date: 02 March 1886
• Citation: 101 N.Y. 478,5 N.E. 316
• Court: New York Court of Appeals Court of Appeals
• Parties: UNITED STATES TRUST CO. OF N. Y. v. NEW YORK, W. S. & B. RY. CO.

101 N.Y. 478

5 N.E. 316

UNITED STATES TRUST CO. OF N. Y.

v.NEW YORK, W. S. & B. RY. CO.¹

Court of Appeals of New York.

Filed March 2, 1886.

Appeal from order of the general term of the supreme court, Second judicial department, made February term, 1885.

Wm. S. Choate and Elihu Root, for appellants.

Joseph H. Choate and E. W. Paige, for respondents.

ANDREWS, J.

The Code of Civil Procedure, which was in force when the proceedings in this action were taken, furnished the general rule governing the allowance of commissions to receivers. It is found in section 3320, which provides as follows:

‘Sec. 3320. A receiver, except as otherwise specially prescribed by statute, is entitled, in addition to his lawful expenses, to such a commission, not exceeding five per centum upon the sum received and disbursed by him, as the court by which or judge by whom he is appointed, allows.’

The judge at special term in substance held that this section governed the allowance of commissions in the case, and made an order fixing the commissions of the receivers at a gross sum, less than 5 per centum upon the sums received and disbursed. The order of the special term was affirmed by the general term, and the only question presented on this appeal is as to the application of section 3320 to the case of a receiver pendente lite, appointed in a foreclosure action, to foreclose a mortgage executed by a corporation.

It is plain that the section is applicable to receivers appointed in foreclosure actions, where the mortgagor is an individual. But it is claimed that the case of a receiver appointed in a foreclosure action against a corporation is taken out of the general rule of law by force of section 2, c. 378, of the Laws of 1883, and that by that section such a receiver is entitled to a fixed percentage upon receipts and disbursements, which the court is bound to allow irrespective of any consideration of the character or value of the services rendered. The act of 1883 is entitled ‘An act in relation to receivers of corporations.’ The second section, upon which the appellants rely, is as follows:

‘Sec. 2. Every receiver shall be allowed to receive, as compensation for his services as such receiver, five per cent. for the first one hundred thousand dollars actually received and paid out, and two and one-half per cent. on all sums received and paid out in excess of the said one hundred thousand dollars.’

We have reached the conclusion that the appellants were not ‘receivers of corporations,’ within the meaning of the act of 1883, and shall content ourselves with a brief statement of the reasons for our judgment. The power of a court of chancery to appoint a receiver pendente lite in foreclosure cases is a part of its incidental jurisdiction, not depending upon any statute, and which it exercises whenever, by reason of the insufficiency of the security, or other reason, equity required that the rents and profits of the mortgaged property, pending the litigation, should be impounded and retained, to be applied upon the debt, to be ascertained by the final judgment. Hollenbeck v. Donnell, 94 N. Y. 342. The receiver, by virtue of his appointment, took possession of the mortgaged property, and received the rents and profits as the officer of the court, but the title to the property was not changed, but remained in the mortgagor until a sale under the decree in the action. Keeney v. Home Ins. Co., 71 N. Y. 396. This jurisdiction was not affected by the character of the mortgagor, whether an individual or a corporation. It rested upon grounds quite independent of the character of the parties to the instrument, or the nature of the mortgaged property. But it was held at an early day in this state that the jurisdiction of chancery did not extend to the sequestration of the property of a corporation by means of a receiver, or to the winding up of its affairs, or to control or restrain the usurapation of franchises by corporate bodies, or by persons claiming without right to exercise corporate powers. Attorney General v. Utica Ins. Co., 2 Johns. Ch. 371;Attorney General v. Bank of Niagara, Hopk. 354.

The refusal of the court of chancery to entertain jurisdiction of corporate bodies, at the instance of creditors, or to wind up their affairs in case of insolvency, led to the enactment by the legislature, in 1825, of the act (chapter 325 of the Laws of that year) entitled ‘An act to prevent fraudulent bankruptcies of incorporated companies, and to facilitate proceedings against them,’ ect. By this act jurisdictionwas conferred upon the court of chancery to sequestrate the property of a corporation, upon the application of a judgment creditor, after the return of an execution unsatisfied, and to appoint a receiver of its property, (section 15;) and in case of an incorporated bank, which had become insolvent, or had violated its charter, it authorized the court of chancery, upon the petition of the attorney general, or of a creditor, to proceed by injunction, and to appoint a receiver of the property of the bank, and to distribute the same among its creditors, (section 17.) The provisions of the act of 1825, enlarged and extended, were incorporated into the Revised Statutes, in the article entitled ‘Of Proceedings against Corporations in Equity,’ (2 Rev. St. 462;) and a complete statutory system was enacted for the winding up of the affairs of a corporation against which an execution had been returned unsatisfied, at the instance of the creditor in the execution; and for similar proceedings against insolvent banking or other specified corporations, at the instance of the attorney general or any creditor or stockholder, (sections 36, 39-41.) The court was authorized to appoint receivers of the corporate property. Their powers and duties are specified in the statute in great detail, and it is declared that receivers so appointed shall be ‘vested...