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    William Herring, App’lt, v. New York, Lake Erie and Western Railroad Company, Farmers’ Loan and Trust Company, and Hugh J. Jewett, Receiver of Erie Railway Company, Resp’ts.

      (Court of Appeals,

      Filed April 19, 1887.)

    1. Equity—Suit by creditors at large cannot be maintained to subject PROPERTY HELD ADVERSELY BY A STRANGER TO THE PAYMENT OF his debts—Complaint—When cause of action not shown by.
    The people began an action, May 25, 1875, for the dissolution of the Brie Railway Company, on the ground of insolvency, under 2 Revised Statutes, 463, section 38, and Hugh J. Jewett was appointed temporary receiver. June 14, the Farmers’ Loan and Trust Company began an action to foreclose mortgages held by it against the Erie Railway Company, and Jewett was appointed receiver of the mortgaged property June 15. The Erie Railway Company, at the time of the commencement of said actions, owned a large amount of stock and bonds in other corporations, which were not covered by or subject to the mortgages. On the 6th of April, 1876, an order was made that the receiver should hold and deal with said stock and bonds as a part of the general fund, etc.,and the judgment in foreclosure, in November, 1877, authorized the referee to sell them, which he did, to the N. Y. L. E. and W. R. Co., and in May, 1878, it was ordered that he deliver to said company “ all the property and franchises whereof he is now possessed, as receiver in this action, and which were embraced, or intended to be embraced, in tlie judgment of foreclosure herein, subject to the reservátions and exceptions hereinafter specified, and subject to all and singular the rights of the people of this state "  * as the same maybe ascertained * * * by the attorney general, in the action against the Erie Railway Company, now pending, to the end that such rights and interests may be as fully protected as if this transfer had not been ordered and directed.” The complaint in this action, on behalf of certain insecured debts, set forth the facts, and asked that the estate of the Erie Railway Company be decreed a trust fund to pay interest on certain bonds named, and that any orders, decrees, etc. * * which bar or stop the rights of the plaintiff be adjudged fraudulent in law, etc., and to constitute no bar or estoppel against him, etc. Held, that plaintiff did not by the facts alleged in his complaint show a cause of action against the defendants.
    .2. Same—Court mat determine what property sold under foreclosure.

      Held, that but for the pendency of the people’s action, it cannot be doubted that the judgment in the foreclosure action would have been conclusive upon every one. It was within the province of the court to determine what property was actually embraced within, or subject in express terms, or by subrogation, or any other equitable principles, to the mortgages foreclosed.
    3. Same—Unsecured creditors .not necessary parties.
    That there is no provision of law which required that the general creditors should be made parties to that litigation or have notice thereof; and none of their legal rights were violated by carrying the same on without notice to them. They were represented by the attorney general, and could have intervened or appealed, but had no right to attack the judgment or orders collaterally, unless for fraud, sufficient to set aside the judgment.

      4. Same—Parties.
    Neither Jewett, as receiver in the people’s action, nor the people, were necessary parties to the action to foreclose.
    5. Same—Remedy of persons aggrieved by judgment.
    Where a court having jurisdiction of the subject matter and the parties, pronounces judgment upon insufficient or illegal evidence or mistakes, the evidence or the law, the only remedy of any person aggrieved by the judgment is by an appeal therefrom, or a motion in the action. It cannot be assailed collaterally.
    6. Same.
    There never was a time when the general creditors of the corporation had any vested rights in these stocks and bonds, or to be paid out of them, and the disposition made of them did not impair the obligation of their contracts with the Erie Company, or deprive them of due process of law.
    7. Same—Duties of receiver.
    There is nothing in the statutes in force in 1875, which requires a final receiver to consult the general creditors of an insolvent corporation in the prosecution or defense of any action. He is required to publish notices and call a meeting of the creditors, but it is still his duty to take into his possession the insolvent estate, and use the legal means for that purpose.
    8. Same—3 R. S., 463, § 38 unaffected by the Code, § 430, etc.
    The proceedings in equity, under section 38, for the dissolution of a corporation, were unaffected by the Code of Procedure, sections 438-430, which was simply intended to substitute actions in the form prescribed in the place of the writs of seire facias and quo warranto.

    Appeal from a judgment of supreme court, general term, first department, affirming a judgment of special term sustaining a demurrer to the complaint.
    The plaintiff commenced this action on behalf of himself and all other creditors of the Brie Railway Company similarly situated, and made parties defendants the New York, Lake Erie and Western Railroad Company, the Farmers’ Loan and Trust Company, and Hugh J. Jewett, receiver of the Erie Railway Company.
    In his complaint, he alleges that, prior to its dissolution, the Erie Railway Company was a corporation organized under the laws of this state; that in the year 1870 (to secure the payment of its bonds, amounting to about $16,-000,000) it executed and delivered to the Farmers’ Loan and Trust Company, as trustee, a mortgage of its railway and certain property then owned by it, which railway and property were described in the mortgage in the following words, to wit:
    “ All and singular the railway of the party of the first part, from and including Piermont on the Hudson river, to and including the final terminus of the said railway on Lake Erie, and the railway known as the Newburgh Branch, from Newburgh to the main line, and also all that part of the railway designated as the Buffalo Branch of the Erie Railway, extending from Hornellsville to Attica, in the state of New York, and also all other railways belonging to the party of the first part in the states of New York, Pennsylvania and New Jersey, or any of them, together with all the lands, tracks, lines, rails, bridges, ways, buildings, piers, wharves, structures, erections, fences, walls, fixtures, franchises, privileges and rights of the said company, and also all the locomotives, engines, tenders, cars, carriages, tools, machinery, manufactured or unmanufactored materials, coal, wood and supplies of every kind, belonging or appertaining to the party of the first part, and all the tolls, income, issues and profits arising out of the said property, and all rights to receive or recover the same; also all the estate right, title and interest, terms and remainder of terms, franchises, privileges and rights of action, of whatsoever name or nature, in law or in equity, conveyed or assigned unto the New York and Erie Railroad Company, or unto the Erie Railway Company, by the Union Railroad Company, by the Buffalo, New York and Erie Railroad Company, by the Buffalo, Bradford and Pittsburgh Railroad Company, by the Rochester and Genesee Valley Railroad Company, and by the Long Dock Company.
    That afterward, in 1874, to secure the payment of other bonds, amounting to about $24,000,000, it executed to the same trustee another mortgage upon its railway and property, by the same description contained in the prior mortgage.
    - That about the 25th day of May, 1875, an action was brought by the attorney-general, in the supreme court of this state, in the name of the People as plaintiffs, against the Erie Railway Company, its directors and certain trustees under various mortgages, including the Farmers’ Loan and Trust Company, as defendants; that the relief prayed for in that action, among other things, was that the corporation should be dissolved and be wound up, that the plaintiffs should have judgment accordingly, and that in the meantime, while the action was pending, Jewett, President of the Company, should be appointed receiver to take, hold and possess, under the immediate authority and direction of the court, the franchises and property, with full power to operate the road and to preserve its franchises and corporate existence until final judgment, and with such other general powers as it is usual and in accordance with the rules and practice of the court to confer upon receivers in like cases; that on the 26th day of May, 1875, on the application of the attorney-general in that action, Jewett was appointed receiver of the company, in pursuance of the prayer of the complaint; that, by virtue of such appointment, Jewett undertook the duties of the receivership, and all the estate of the Erie Company and its franchises thereupon became vested in him as receiver, to be administered and distributed by him in accordance with the statutes in such case provided:
    That about the 15th day of June, 1875, the defendant, The Farmers’ Loan and Trust Company, as trustee, commenced an action against the Erie Railway Company for the foreclosure of the two mortgages above mentioned; that in that action the trust company was sole plaintiff and the Erie Railway Company ana the trustees under prior mortgages were the only defendants; that subsequently the summons and complaint in that action were amended so as to make certain creditors of the Erie Company co-defendants therein; but Jewett, as receiver in the people’s action, was at no time made a party to that action; that the complaint in that action alleged, among other things, the insolvency of the Erie Company; that it had made default in the payment of the interest falling due upon its bonds; that to the extent of the rightful interest in the mortgaged premises o£_ the Trust Company as the mortgagee, its rights were in law and equity superior to the rights of the people of the state of New York; that the Trust Company was entitled to have the mortgaged premises foreclosed and sold for the payment and satisfaction of the respective debts, to secure which premises were mortgaged to it; and that the prayer of the complaint demanded that an accounting should be had as to the bonds outstanding under the mortgages; that Jewett should be appointed receiver of the mortgaged premises and property in that action, and that the mortgaged premises and property should be sold and the proceeds applied for the payment of the mortgage debts, and that the complaint further demanded in words following, to wit: “That an inquiry may be had and an account taken of and concerning all and singular the premises and property so mortgaged to this plaintiff as aforesaid, in order that it may lie fully and at large ascertained whereof the said mortgaged premises consist;” that on the 15th day of June, 1875, Jewett was appointed receiver in that action of all the property covered by the two? mortgages.
    That the estate of the Erie Railroad Company at the time Jewett was appointed receiver in the people’s action, consisted not only of the railway and the property described in the two mortgages, but also of a large amount of other property, such as bonds and stocks in other corporations, which property was not appurtenant to the mortgaged premises, not subject to the lien of the mortgages or either of them, and not in any manner necessary for the practical operation of the mortgaged premises, or to the use, management or maintenance thereof, amounting to many millions of dollars in value; that part of such property had been acquired by the Erie Company subsequently to February 4, 1874, the date of the second mortgage; that the property not subject to the lien of the mortgages constituted a large and valuable fund applicable to the payment of the general and unsecured creditors of the Erie Company; that the Farmers’ Loan and Trust Company, or its attorney, admitted in the foreclosure action the existence of such fund and the necessity of an accounting with respect to the same, on a motion in that action in which it was made to appear to the court by the affidavit of such attorney, on or about the 6th day of April, 1876, that there were in the hands of Jewett, as receiver, stocks and bonds, as before mentioned, representing interests in other corporations to the nominal amount of more than $22,000,000, which belonged to the estate of the Erie Company; that an unascertained portion of such securities was covered by the two mortgages; that another unascertained portion had been acquired with moneys supplied by the respective parties for whom the Farmers’ Loan and Trust Company was trustee; that advances had been made upon or against a further portion thereof out of the income of the mortgaged property in the hands of the receiver; that the receiver had Eaid out of the income of the mortgaged premises in his ands certain debts of the Erie Railway Company, constructed prior to the appointment of the receiver, for labor, salaries and supplies which ought of right to be reimbursed to the mortgage-creditors out of the assets of the Erie Company not covered by the mortgages; that certain resulting trusts existed in favor of the mortgage-creditors in such securities; and that such securities or the proceeds thereof, in case of their sale, should be dealt with by the receiver as a part of the general funds in his hands under the several mortgages; and that it was alleged in the affidavit that it was impracticable at that time to take, state and adjust the accounts and to finally account in respect to the matters above referred to, and that such final accounting and adjustment could only be had with due regard to the rights and interests of the parties upon the accounting preliminary to the final decrees, and by the final decrees to be made upon the basis of such accounting; that an order was made on that motion in the foreclosure action, on or about the 6th day of April, 1876, authorizing the receiver to treat the fund as a part of the general fund and estate embraced in the two mortgages, “ without prejudice to any equitable rights and interests of the respective parties, which may be established on final accounting.”
    That during the pendency of the foreclosure action, the holders of the bonds and stocks of the Erie Company formed a plan for the' formation of a new corporation in which their- interests were to be represented; but no provision, whatever, was made in the plan of reorganization, for the unsecured debts or obligations of the Erie Company; that the reorganization was consummated in pursuance of the plan and the sanction of the court and with the co-operation of Jewett, as receiver, in the foreclosure action, and that the new organization thus formed is the defendant, the Lake Erie and Western Railroad Company.
    That such proceedings were had in the foreclosure action that judgment of sale was rendered therein on or about the 7th day of November, 1877, and that the decree recited among other things as follows: “That the receiver in the course of his receivership has lawfully acquired and become possessed of a large amount of stocks in other corporations, bonds and other obligations for the payment of money, a large part of which has been lawfully and properly pledged by him to secure the payment of money borrowed by him,, which he was authorized to borrow for the general purposes of his receivership, and which will probably remain to a greater or less extent so pledged at the time of the sale of the mortgaged premises; that all or nearly all of such stock, bonds, obligations and securities are embraced and described in the inventory of the mortgaged premises and property made and filed in this case by the receiver in pursuance of the order of this court; that the said stocks, _ bonds, securities and obligations are held by the receiver as part and parcel of the property and premises mortgaged to the plaintiff, and as the product of the rents, profits and issues of the mortgaged premises during the same receivership, subject, however, to the liens existing thereon by reason of such pledge or pledges thereof as hereinbefore stated;” “that the referee appointed to sell the mortgaged premises should be authorized at the request of the plaintiff’s attorney to expose for sale and sell, as. part of the mortgaged premises, all and singular the said stocks, bonds, obligations, accounts and evidences of indebtedness and other choses in action of which the receiver may have become lawfully possessed in any way or manner during his receivership; subject, however, to any lawful lien or liens existing thereon, whether created, by the receiver or otherwise.”
    That it was by the foreclosure judgment ordered, adjudged and decreed, among other things, that sale be made of “ all and singular the mortgaged premises, franchises and property, both real, personal and mixed, mentioned in the complaint in this action and hereinafter mentioned;” being the same premises and property described in the two mortgages, with the following addition: “And this description is to be understood as embracing and including all and singular the choses in action, stocks, bonds, book accounts, bills receivable aiid other evidences of indebtedness, leasehold estates, contracts and other property hereinbefore mentioned;” that a sale was had under the judgment by a referee appointed for that purpose on the 21th day of April, 1878; that the terms of sale as announced by the referee described the property to be sold by the words of description contained in the mortgages with the adition of the following words, namely: “ Embracing and including all and singular the choses in action, stocks, bonds, book accounts, bills receivable and other evidence of indebtedness, leasehold estates, contracts and other property mentioned and described in the lists and schedules to be exhibited at the sale and contained and described in the receiver’s inventory of the real and personal property of the Erie Railway Company, also to be exhibited at the sale, not consumed or disposed of by the receiver in the discharge of his duty prior to' the sale, and including all property of every kind and description acquired by the receiver during his receivership, with the proceeds, of the rents, profits and issues of the mortgaged premises since the making of the said inventory, and not embraced therein, and excepting therefrom such portions thereof as will be declared excepted at the time and place of the sale.”
    That the receiver’s inventory of the real and personal property of the Erie Railway Company referred to in the terms of the sale was exhibited at the sale, and it contained all • the mortgaged premises and also all the other-assets, real and personal, above described, not covered by the mortgages and which were held by Jewett, as receiver, in the people’s action for the benefit of the unsecured creditors of the company; that there were present, and exhibited at such sale, lists, including not only_ the mortgaged premises and property, but also other claimed estate and assets of the company which were not covered by the mortgages; that the sale was made to certain trustees under the re-organization plan; that on or about the 25th day of April, 1878, an order was entered in the foreclosure action, confirming the sale and the report thereof by the referee, and it was thereby ordered “that the said referee be and he hereby is ordered and directed, forthwith to execute and deliver a proper deed or deeds of conveyance of all and singular the said premises, franchises and property so as aforesaid sold or intended so to be, to the said purchasers or their assigns, on their complying with the conditions on which, by the terms of said sale and by said decree, such deed or deeds were to be delivered.”

      That on or about the 26th day of April, 1878, the referee executed and delivered to such trustees a referee’s deed of the property sold, which described it in the words following, to wit: “All and singular the property, franchises and estate, whether real, personal or mixed, and wherever situate and whether within or without this state, embraced and included in the said judgment, and authorized and directed to be sold therein and thereby, of which said property, franchises and estate, real, personal and mixed, the following is the general and the best practical description, that is to say ”—then in addition to the description of the premises in the mortgages were the following words: “ This description is to be understood as embracing and including all and singular the choses in action, stock, bonds, book accounts, bills receivable and other evidence of indebtedness, leasehold estates, contracts and other property in the said judgment mentioned or therein directed to be sold,” with some exceptions not material now to be mentioned; that the Erie Railway Company also executed to the trustees a deed, of even date with the deed mentioned, of the same premises described as in the deed of the referee; that thereafter, on the 27th day of April, 1878, the defendant, the New York, Lake Erie and Western Railroad Company, was incorporated in pursuance of the reorganization plan, and thereupon the trustees executed and delivered to it a deed of the property held by them under the deeds of the referee and of the Erie Railway Company above mentioned, describing the same in the words used in those deeds.
    That on or about the 3d day of May, 1878, Jewett, as receiver, presented to the supreme court in the foreclosure action a petition for an order authorizing the delivery by Mm to the New York, Lake Erie and Western Railroad Company, of the property sold in the foreclosure action; and that thereupon on. that day an order was made in the foreclosure action in which, among other things, it was ordered “that the said receiver do transfer, deliver and surrender to the said New York, Lake Erie and Western Railroad Company all the property and franchises whereof he is now possessed as receiver in this action, and which were embraced or intended to be embraced in the judgment of foreclosure herein, subject to the reservations and exceptions hereinafter specified, and subject to all and singular the rights of the people of this state in and to the premises, or any part' thereof, as the same may be ascertained on due inquiry and examination by the attorney-general, in the .action of the people of this state against the Erie Railway Company, now pending, to the end that such rights and interests may be as fully protected as if this transfer had mot been ordered and directed; and that upon such transfer, delivery and surrender, the said receiver be and he is hereby absolutely and forever discharged of and from, any and all liability as receiver in this action, for the property and franchises so delivered, transferred and surrendered.”
    That on or about the 1st day of June, 1878, Jewett, as receiver, delivered to the New York, Lake Erie and Western Bailroad Company all the property referred to in that order, or the greater portion thereof, subject, however, to the terms of the order, and. took therefor a receipt from the New York, Lake Erie and Western Bailroad Company, containing a list of certain shares of stocks and bonds in other companies and other personal property; that none of the property specified in that list was as matter of fact or law embraced in or covered by any of the mortgages of the Erie Bail way Company, or subject to the lien thereof, or appurtenant to the mortgaged premises; nor was any of the same necessary for the use, operation or maintenance of the Erie Bailway, and a great portion of the property was not the property of the Erie Bailway Company or in its possession at the date of the mortgage; that no accounting whatever was had in the foreclosure suit, by which it was or could be ascertained or determined what portion of the assets which came into the hands of the receiver was subject to the mortgages, and what portion thereof was not so subject; and judgment and sale “was had and said assets were disposed of, as herein above described, without any such determination in said suit; and the New York, Lake Erie and Western Bailroad Company took over the assets formerly owned by the Erie Company, expressly subject to such examination and determination to be duly and properly made under the direction of the court in the aforesaid suit of the people of the state of New York against the Erie Bail way Company, or otherwise, and to the results of such examination; and no such accounting or determination has yet been had in that suit or otherwise.”
    That on or about the 20th of May, 1878, on the petition of the attorney-general, an order was made by the supreme court in the people’s action, wherein it was ordered among other things as follows: “That James C. Spencer be and he is hereby appointed referee to examine, adjust and pass upon all the accounts, acts and doings of Hugh J. Jewett, receiver in this action, for and during the entire period of his said receivership, and that for the purpose of such accounting the accounts heretofore rendered by the said Hugh J. Jewett, as receiver in the action of the Farmers’ Loan and Trust Company against the Erie Bailway Company, and which had been examined and passed upon by the said James C. Spencer, as referee duly appointed in said action, and approved by this court, shall be deemed and taken as accounts rendered and filed in this action, but shall not preclude the attorney-general from making such further examination of said accounts, acts and doings as he may deem necessary, and such action thereon by the referee and by this court as .may be just and proper, nor preclude the attorney-general nor this court from requiring additional or more specific accomits by said receiver, and the said referee shall take testimony for the purpose of ascertaining what property or assets, if any, the said Hugh J. Jewett, as receiver in this, acquired, held or disposed of, not covered by or subject to the lien of the mortgage of the Erie Railway Company to the Farmers’ Loan and Trust Company, which has been foreclosed, and, if any such property has been disposed of by said receiver, what disposition has been made thereof; and also what rights and equities, if any, the said Farmers’ Loan and Trust Company, the purchasers at the foreclosure sale of the mortgaged premises, or their assigns, had or have in or to such property or assets or any part or portion thereof; and that the said referee report to this court the testimony so taken by him, and the material facts which we shall deem established by such testimony, with his opinion thereon, for the further action of this court.
    That subsequently to the entry of that order, in the month of March, 1879, the people’s action was discontinued as to all parties defendant, except the Erie Railway Company and the Farmers’ Loan and Trust Company, without prejudice to proceedings already had; that supplemental pleadings were served therein, setting up the foreclosure sale, and the conveyance herein above described, including the conveyances to the New York, Lake Erie and Western Railroad Company, and that the attorney-general under date of the 3d day of April, 1879, in his reply to the answer theretofore served, of the Farmers’ Loan and Trust Company, made the following allegations, among others, to wit: “First alleges and shows that, at the time the receiver heretofore appointed in this action entered upon the performance of his duties as such receiver, he became seized and possessed of all the assets of the said Erie Railway then in possession of said company, including a large amount of stocks and bonds of other corporations, real estate in the city of New York and elsewhere in the states of New York, New Jersey and Pennsylvania, and of certain property, choses in action and effects, which were not embraced in the mortgage known as the second consolidated mortgage of the Erie Railway Company, nor subject to the lien thereof. And that also during his said receivership the said receiver has lawfully acquired for the benefit of the estate of the Erie Railroad Company certain other property, including stocks and bonds of other corporations which are not affected by said mortgage, nor subject to the lien thereof.
    “ Second. That said property was improperly, wrongfully and unlawfully included in the judgment entered in the action to foreclose the said second consolidated mortgage, and in the sale thereunder, and was improperly, wrongfully and unlawfully included in the deeds to the purchasers at such sale and in the deeds to the New York, Lake Erie and Western Railway Company from said purchasers, and in the mortgage by said New York, Lake Erie and Western Railroad Company to the said Farmers’ Loan and Trust Company, which deeds and mortgage are referred to in said answer of said trust company.
    “ Third.' And the said plaintiffs deny that by reason of any proceeding had in said foreclosure action or by reason of any of said conveyances, or of said mortgages, the said Farmers’ Loan and Trust Company has been, or is now, invested with the title in trust or otherwise, to any of the aforesaid property, stocks, bonds, real estate and effects, or any part or portion thereof, or has any right or claim thereto.”
    That hearing upon these objections was had before Spencer, the referee in the people’s suit, to which hearing the People of the State of New York, by the attorney-general, the Erie Railway Company, and the defendant, the Farmer’s Loan and Trust Company, were the only parties, and of which hearing no notice was given to unsecured creditors; that such proceedings were thereupon had that on or about the 25th day of November, 1879, a final judgment was entered in the people’s suit, in which a report theretofore made by the referee was confirmed, and it was adjudged among other things, as follows, to wit:
    “That the receiver in this action did not at anytime acquire, hold or dispose of any property of any kind not covered by or subject to the lien of the mortgage of the said defendant, the Erie Railway Company, to the said defendant, the Farmer’s Loan and Trust Company, which mortgage has been foreclosed as fully and at large set forth in the said reports of the said referee; that the judgment of foreclosure in the action of the said Farmer’s Loan and Trust Company, and the sale under the said judgment, and the conveyance made by the referee in pursuance of such sale, the conveyances and assignments subsequently made to the purchasers at such sale and by such purchasers to the New York, Lake Erie and Western R. R. Co., did vest in the said * * * Company a good and valid title to all the property of every kind and description embraced and described in the said judgment and in the several said conveyances and assignments.
    “ That the said defendant corporation, the Erie Railway Company, be and the same is hereby adjudged to be dissolved.
    “That whereas Hugh J. Jewett was heretofore, by an order of this court, duly appointed receiver in this cause, and duly qualified as such receiver, it is further ordered,, adjudged and decreed that said Hugh J. Jewett be and he is hereby continued as receiver of the Erie Railway Company, with all the power and authority conferred by law upon receivers of dissolved corporations in like cases.”
    That the Erie Railway Company was by that decree judicially dissolved; that during all this time the plaintiff and other persons referred to in the complaint similarly situated were unsecured creditors of the Erie company, holding large obligations against it; that Jewett, as receiver in the people’s suit, never advertised any notice of his appointment, or any notice to persons holding “open or subsisting contracts of the Erie Railway Company, or other creditors, to present their claims to said receiver, nor did he call any general meeting or other meeting of the creditors of such corporation within four months from the time of his appointment, or at any time, for the ascertainment and adjustment of open and subsisting contracts of said corporation, or for any other purpose; and he did not, previous to rendering his account under the foregoing order of reference, or at any time, publish a notice of-his intention to present an account, in the state paper, or in a newspaper published in the county of New York, which was the county in which was the principal place of conducting the business of said Erie company, or in any county, specifying the time or place at which such accounts should be rendered; nor did he in anywise comply with any of the provisions of the statutes of the state in that behalf and hereinbefore recited; but on the contrary thereof he purposely, and without authority of law, and with the unlawful intent to prevent the'general creditors of said Erie company, including this plaintiff and those similarly situated, from being heard in said proceedings, abstained from complying and did not comply with any of the provisions of the said statute so as aforesaid recited, and which provisions encroached upon the rights of the said persons and creditors, and were to be strictly pursued; and there was no opportunity or notice given to all concerned in said accounting, or to this plaintiff or those similarly; situated, or to anyone holding claims upon open or subsisting engagements of the Erie company, to be heard by the court in said suit of the people on the accounting of said receiver or otherwise; and the court did not hear the allegations of all concerned in said accounts; and the court did not at any time decree the said accounts to be final or conclusive upon all the creditors of such corporation, or upon the persons who have claims against it upon open or subsisting engagements; and the said court did not have or acquire any jurisdiction in said suit, or otherwise, at any time or in any manner as against such persons or creditors as aforesaid, including this plaintiff, and those similarly situated, to make the said order of reference hereinbefore recited, or any order or decree which should or could deprive such persons and creditors of this plaintiff of their legal rights to the premises or estop or bar them from asserting the same in any court of competent jurisdiction, or from pursuing in such court their legal remedies against the property of said company wherever found, or in whosesoever possession the same might be; and said accounting and decrees, and all the aforesaid proceedings, prior or subsequent, for the determination of the question whether any of the assets received by said Jewett, as receiver, were held by him free from the lien of the mortgages of the Erie company, and liable to be distributed among the unsecured creditors of the said company, were and are wholly without jurisdiction and void, and are not binding upon or a bar to this plaintiff or those similarly situated with him, he and they having had no opportunity or notice to be heard in the above-described actions on the determination of the said question, as by the statutes of the state they had a right to have; and that the same cannot, nor can either or any thereof, without the committing of a fraud in law upon the persons and creditors aforesaid, including this plaintiff and those similarly situated, be interposed as a bar or estoppel, upon their right to pursue the property of the said Erie company, wherever the same may now be found; and this plaintiff insists, notwithstanding the said proceedings and decrees, that a very large amount of property, consisting or real estate, stocks and bonds of other corporations and other assets, did come into the hands of said Jewett, as receiver, which were not affected by or subject to the lien of the aforesaid mortgages, and a portion of which, to an amount not known to this plaintiff, but believed by him to be of the value of many hundreds of thousands of dollars, have been transferred and delivered to said New York, Lake Erie and Western Railroad Company, which assets, comprising not only the property enumerated in the receipt set forth in this complaint, but also other assets of large value, constitute a fund as hereinabove described, wherever they may be traced, for distribution among the unsecured creditors of the said company, including this plaintiff and those similarly situated with him.”

      And the plaintiff prayed judgment that the estate, late of the Erie Railway Company and covered by the mortgages mentioned, be adjudged and “decreed a trust fund, to be applied as the court may direct to the payment and satisfaction of the interest accrued and yet to accrue upon said western extension bonds of the Atlantic and Great Western Railroad Company bearing the guaranty of the Erie Railway Company, according to the terms thereof, except so far as said interest has been paid by net proceeds of dividends upon the shares of the Cleveland, Columbus, Cincinnati and Indianapolis Railroad Company; that any and all orders, decrees, accountings or proceedings in suits hereinabove described, which may or which can be alleged or claimed to bar or estop the rights of this plaintiff and of other creditors of said company similarly situated with him, to pursue, recover and enjoy the property of said Erie company not embraced in and covered by the mortgages of the Erie company hereinabove described, be adjudged and decreed as to this plaintiff and the said creditors of the Erie company, fraudulent in law and without jurisdiction on the part of the court purporting to have made the same, and void, and to constitute no bar or estoppel against this plaintiff or said other creditors from pursuing and recovering said property in whosesoever hands the same may be found, and that the said orders, decrees and proceedings, and each thereof may be, as to this plaintiff and said other creditors, vacated, annulled and set aside; that the sale of the property of the Erie Railway company, now or formerly in the possession .of the said Jewett, as such receiver, to wit: all stocks, bonds and interests in other corporations, and patent-rights, licenses and other property, real or personal, not covered by the mortgage to the Farmer’s Loan and Trust Company or subject to the lien thereof, maybe declared to be invalid and void, and that such sale may be annulled and set aside; that an accounting be had of such property,” and for other relief. All the decrees, legal proceedings, orders and judgments referred to in the complaint are by reference made parts of the complaint.
    To this complaint the defendants severally demurred, on the ground that certain parties named were necessary parties defendant to the action, and that the complaint did not state facts sufficient to constitute a cause of action.

      Clarence A. Seward and J. Alfred Davenport, for app’lt; Herbert B. Turner, for resp’t; W. W. Macfarland and George F. Comstock, with Messrs. Shipman, Barlow, Larocque & Choate, for other resp’ts.

       Affirming 34 Hun, 634, mem.

   Earl, J.

The plaintiff alleges that at the time of the commencement of the actions by the People against the Erie Railway Company for its dissolution, and by the Farmers’ Loan and Trust Company for the foreclosure of the mortgages upon its property, it owned a lai'ge amount of stock and bonds in other corporations whieh were not covered by or subject to the mortgages; and he seeks now to reach that property and to subject it to the payment of certain unsecured obligations which he and other, creditors similarly situated then held and still hold against the Erie Railway Company. He finds in his pathway the orders and decrees made in the actions mentioned, which must be brushed aside or disregarded before he can succeed.

He does not allege in his complaint that any fraud was practiced upon the court or any party to the action, and he does not assail those orders and decrees as in fact fraudulent, and seek to have them vacated or annulled on that account. He does not claim that if the court had jurisdiction, as against him and the other general creditors, to make them that he can attack them collaterally or maintain this action. What he claims is that those orders and decrees, so far as they assume to adjudicate upon or dispose of the property in question, were made without any jurisdiction and may therefore be disregarded, and that they furnish no obstacle to the maintenance of this action. Hence, the general inquiry upon which we are to enter is whether the supreme court had jurisdiction to adjudicate upon and dispose of the property by the orders and decrees made in those actions.

About the 25th day of May, 1875, the People’s action was commenced for the dissolution of the Erie Railway Company, upon the ground, among other things, that it was insolvent and had been for one whole year; and the complaint in that action, besides other relief, prayed that Hugh J. Hewett, who was then president of the company, might be appointed receiver during the pendency of the action. On the 26th day of May he was so appointed, with power, as provided in the order appointing him, among other things, to prosecute and defend actions for or against the company, either in the name of the company or in his own name as receiver, and to maintain and preserve the corporate organization and franchises of the company until final judgment in the action.

Thereafter application was made in that action on behalf of the Farmers’ Loan and Trust Company for leave to commence an action against the Erie Railway Company to foreclose the mortgages held by it. Such leave was granted, and on the 14th day of June, 1875, the foreclosure action was commenced in the supreme court. In the prayer for judgment in that action the plaintiff, besides other relief, prayed that an inquiry might be had and an account taken of and concerning the premises and property mortgaged to the plaintiff, in order that it might be fully and at large ascertained whereof the mortgaged premises consisted; and that Jewett might be appointed receiver in the action.

On the 15th day of June, by an order duly granted, Jewett was appointed receiver of the mortgaged property in that action; and he was specially authorized to receive and enforce possession of whatever he was bound to receive, to run and operate the railway, to institute, as he might deem needful, whatever suits or proceedings he, by counsel, might be advised to be necessary and proper in. the appropriate discharge of his duty as receiver, and to defend and resist any suit or proceedings which he should be so advised and should believe would otherwise be prejudicial to the property, interests or franchises committed to his charge, and generally to do and cause to be done in a lawful manner, as receiver, what might be reasonable and needful in and about the care and preservation of the rights, interests and franchises on which the mortgages were a lien, or the discharge of his duty as receiver might render needful. These orders appointing Jewett receiver, and all the other orders in the two actions were made in the same court, the same judge presiding; and thereafter Jewett must be deemed to have taken and held, as receiver in the foreclosure action, all the property covered by and subject to the mortgages, and as receiver in the people’s action all the other property of the company.

On the 6th day of April, 1876, upon affidavit and notice of motion, an order was made by the court in the foreclosure action that the receiver should hold and deal with the stocks and bonds in question in all respects as a part of the general fund of the estate embraced in the mortgages, among other things for the reimbursement to the plaintiff in that action of all sums paid under the orders of the court out of the proceeds of the mortgaged premises for the discharge of debts due from the Erie Railway Company, at the date of the receiver’s appointment, for labor and supplies, “without prejudice to any equitable rights and interests of the respective parties which may be established on final accounting.” And he was also authorized to sell any part of the stocks or bonds at public or private sale, and to use and apply the proceeds for the purposes of the trust.

The foreclosure action proceeded to judgment on the 7th day of November, 1877, which judgment recited that the bonds and stocks lawfully came into the possession of the receiver, and that they were held by him as part and parcel of the property and premises mortgaged to the plaintiff; and it authorized the referee appointed to sell the mortgaged premises, to expose for sale and to sell as part thereof the stocks and bonds mentioned which were described in the decree as a portion of the mortgaged premises; and they were sold by the referee. The sale was afterwards confirmed and the referee was authorized to convey the stocks and bonds with the other property, and he made such conveyance; and the Erie Railway Company executed a similar conveyance of the same property.

Afterward, upon the petition of Jewett in the foreclosure action, an order was made by the court on the 3d day of May, 1878, by which it was ordered that the receiver deliver to the New York, Lake Erie and Western Railroad Company, “all the property and franchises whereof he is- now possessed, as receiver in this action, and which were embraced or intended to be embraced in the judgment of foreclosure herein, subject to the reservations and exceptions hereinafter specified, and subject to all and singular the rights of the people of this state in and to the premises, or any part thereof, as the same may be ascertained on due inquiry and examination by the attorney-general, in the action of the people of this state against the Erie Railway Company now pending, to the end that such rights and interests may be as fully protected as if this transfer had not been ordered and directed.”

In pursuance of that order, and upon the terms thereof, he did make the delivery, and that substantially terminated the proceedings in the foreclosure action. But for the pend-ency of the people’s action, it cannot be doubted that the determination and judgment in the foreclosure action would have been conclusive upon everyone. It was within the province of the court to determine what property was actually embraced within or subject in express terms or by subrogation or any other equitable principles, to the mortgages foreclosed.

The unsecured creditors were not necessary or proper parties to that action and had no right to intervene therein, and any adjudication made against the mortgagor was binding upon them. Bronson v. La Crosse, etc., R. R. Co., 2 Black, 524 (67 U. S. Bk., 17, L. ed., 359); Stout v. Lye, 103 U. S., 66 (Bk., 26, L. ed., 428); Candee v. Lord, 2 N. Y., 269.

Jewett, as receiver m the people’s action, was not a necessary party to that action. As temporary receiver he was not vested with the title to the property of the corporation; it was not divested of its property until final judgment of dissolution and the appointment of the final receiver. The temporary receiver was not a trustee for the creditors of the corporation, but he was a mere care taker, custodian and manager of its property and franchises, under the direction of the court, during the pendency of the action, having lawful possession of the property; and if a trustee in any sense he was a trustee for the corporation.

Nor were the people in any sense a proper party to that action. They had no lien upon or interest in the property. The main purpose of their action was to procure a judgment dissolving the corporation; and any other relief they could obtain was incidental to that. The court could have per ■ mitted the people or the receiver in their action to intervene in the foreclosure action, if application had been made for that purpose; but whether it would or not rested in its discretion.

The foreclosure judgment absolutely determined that these stocks and bonds were subject to the mortgages, and liable to be sold with the mortgaged premises. They were so sold, absolutely; the sale was confirmed, and the referee was ordered to make the conveyance, including these stocks and bonds to the purchasers; and all this was done without any violation of the rights of the general creditors. The title of the purchasers under the foreclosure sale was in no way made subject to the rights of the people in their action, until an order wás made, subsequently to the conveyances by the referee and railway company, to the purchasers for a delivery of the property by the receiver; and in that order it was for the first time provided that the delivery should be subject to all the rights of the people as they might be ascertained by the attorney-general in the people’s action; and the delivery was so made.

The adjudications made in the foreclosure action absolutely bound all the parties thereto, and none of them could thereafter be heard to say that they were not founded upon sufficient evidence. The supreme court, having general jurisdiction of the parties ana the subject matter, is conclusively presumed to have had sufficient facts before it to authorize the judgment and the orders which were made; and neither the Erie company nor any of its general creditors can now be heard to say that the judgment was not pronounced after full examination and investigation of all the facts upon which it was based. It imports absolute verity, and it must be presumed that these stocks and bonds were properly subject to the mortgages and were, properly sold in connection with and as a part of the mortgaged property. Grignon v. Astor 2 How.. 319 (43 U. S. bk., 11, L. ed., 283).

Where a court, having jurisdiction of the subject matter, and the parties, pronounces judgment upon insufficient or illegal evidence, or mistakes the evidence or the law, the .only remedy of any person aggrieved by the judgment is by an appeal therefrom, or a motion in the action in which it was rendered; but it cannot be assailed collaterally. Therefore, whatever rights the plaintiff has in this action grow out of the commencement and pendency of the people’s action against the Erie company; and such, indeed, is the contention of his learned counsel.

It cannot be claimed that the pendency of the people’s action, in which a temporary receiver had been appointed, absolutely prohibited the commencement of the foreclosure action. That action was commenced after leave was regularly obtained by an order of the court made in the people’s action. In the action for the dissolution of the corporation, the court was not bound to appoint a temporary receiver. It could have permitted the action to proceed to judgment and then appointed a final receiver, to be vested with the title of the corporate property, and to administer and distribute such property under the direction of the court. The temporary receiver was entirely under the control of the court.

There was no statute regulating or prescribing his duties. He was what was called in the argument a common-law receiver, with such powers and duties as, in the exercise of its equitable jurisdiction, the court might devolve upon him. His duties were in the main to manage, protect and preserve the property and franchises of the company during the pendency of the action. The people’s action could have been discontinued at any .time, by the order of the court, and the receivership vacated and set aside, and the property restored to the corporation, and thus fully subjected to the action of the court in the foreclosure action.

The whole matter was constantly under the control of the court until final judgment. Therefore the court had the power to permit the foreclosure action to be commenced, and proceed to appoint a receiver therein, and to supersede the receiver appointed in the people’s action, to transfer all the duties of the receiver in that action to the receiver appointed in the foreclosure action and to order all the property covered by the mortgages to be delivered to such receiver.

• The judgment in the foreclosure action appears to have been regularly obtained. There was service of process, upon an appearance by the Erie Company, and an answer admitting the allegations of the complaint. The answer entitled the plaintiff to judgment against it.

But it appears in the record that the attorneys for the Erie Company, more than two years after the commencement of the foreclosure action, consented to the entry of the judgment therein; and this, it is claimed, rendered the judgment absolutely void against the final receiver in the people’s action and the creditors of the corporation under section 11, of 2 Revised Statutes, 469, which provides as follows:

“All sales, assignments, transfers, mortgages and conveyances of any part of the estate, real or personal, including things in action, of every such corporation, made after the filing of the petition for a dissolution thereof, in payment of, or as a security for any existing or prior debt, or for any other consideration, and all judgments confessed by such corporation after that time, shall be absolutely void as against the receivers who may be appointed on such petition, and as against the creditors of such corporation.”

That section was aimed, not at the disposition of the corporate property made under the order of the court by its receiver, or even by the corporation, but at the voluntary disposition of its property by the insolvent corporation; and the confession of judgment prohibited was one made by the corporation as its voluntary act without the interference of the court, and not a judgment like this which rests upon no confession, nor even consent, but upon the action .and order of the court at a regular term and session thereof. Such a judgment is in no sense a judgment by confession. If, therefore, it be assumed that section 11 was applicable, it was not violated.

The people’s action was one in equity, under the Revised Statutes (2 R. S., 463, § 38), which provide as follows: “Whenever any incorporated company shall have remained insolvent for one whole year or ■ for one year shall have neglected or refused to pay and discharge its notes or other evidences of debt, or for one year shall have suspended the ordinary and lawful business of such corporation, it shall be deemed to have surrendered the rights, privileges and franchises granted by an act of incorporation, or acquired under the laws of this state, and shall be adjudged to be dissolved.”

That section was unrepealed in 1875, and it is conceded that under it, as originally enacted, an action could be brought in equity for the dissolution of a corporation in the cases mentioned; that in such an action both a temporary and final receiver could be appointed who would be common-law receivers, possessing the powers and charged with the duties devolved upon them by the orders of the court in the exercise of its equity jurisdiction, that they would not be controlled by the provisions of law which regulate the appointment of receivers in the case of the voluntary _ dissolution of corporations under part 3, chapter 8, title 4, article 3, of the Revised Statutes, and that if the Code which was in force in 1875 did not operate upon receivers appointed in actions commenced under that section, then all of the proceedings in the people’s action and the foreclosure action were so far regularly conducted within the jurisdiction of the court that the plaintiff is in no position to assail them. But his contention is that while the temporary receiver appointed in the people’s action was a common law receiver, whose powers and duties were not regulated by.statute, yet that when Jewett became a final receiver in that action, his powers and duties then became subject, under the Code, to the statutory provisions referred to; and for the present we will proceed upon that assumption.

Upon that assumption, then, what could be done under the authority and direction of the court by Jewett as temporary receiver in both actions before judgment and his appointment as final receiver in the people’s action? He had such powers and duties as temporary receiver as the court conferred upon him. He could manage, control and care for the property of the corporation; and until final judgment in the people’s action the general creditors of the corporation had no right to notice and no absolute right to intervene or to a hearing. The receiver could reduce the property to possession without consulting them; he could manage the railways under the order of the court and incur and discharge debts, sell and buy property in the ordinary business of the company; and he could bring and defend actions without any notice to or light of interference by the general creditors. If after his appointment, as receiver in the people’s action he had found a large amount of the assets of the company in the possession of adverse claimants, he could have commenced suit therefor, either in his own name or that of the company; and if he had failed in the suit, and judgment had gone against him, the adjudications would have bound the creditors of the Erie Company. If he or the Erie Company had been sued for a debt a judgment in the suit would have bound the creditors of the Company.

Here, before final judgment, there was a claim on the one side by the holders of the mortgages that these stocks and bonds belonged to it under the mortgages, and that they were in equity part of the mortgaged estate. On the other hand, the people claimed that they were not covered by the mortgages and could not properly be sold under the foreclosure judgment or transferred to the purchasers on the foreclosure sale; and the people claimed that the purchasers under that sale did not get good title, and thus there was a controversy as to this property. That was a controversy which the court had a right to determine before judgment, like any other controversy respecting the property-in the hands of its receivers. It appointed a referee to investigate the facts and to report thereon. An apparently thorough and exhaustive investigation was made, in which the people, through their attorney general, participated; and as a result of it the court determined that these stocks and bonds did come under the mortgages; that they were properly sold with the mortgaged premises; that the purchasers at the foreclosure sale.obtained a good title to them; and that they never in fact came to the possession of the receiver appointed in the people’s action.

So far, no statute was violated and no statutory right of the general creditors was disregarded. They were represented in the litigation by the people and by their debtor; and any judgment rendered or decision made was binding upon them, as it was binding upon the actual parties to the litigation. The court was not bound to defer that litigation, until a final receiver was appointed, but has the right to-permit it to proceed to a conclusion before final judgment, in the people’s action. The fact that Jewett was receiver in both actions makes no difference. We may assume for the purpose of testing the matter that there was a different receiver in each action, and that they both claimed this property, and that there was thus a controversy to be settled. It cannot be doubted, if such had been the case, that the court would have had jurisdiction to permit one receiver to sue the other for the purpose of settling the controversy, and that a decision made in such a litigation would be-binding upon everybody.

It matters not that this controversy and litigation involved all the assets of the corporation which were not. plainly covered by the mortgages. The same principles-must rule, whether the amount involved was large or small. If the receiver, could, under the direction of the court,, engage in a litigation over a single, steam engine, or over-a debt of $100,000, for or against the corporation, and bind, the corporation and its creditors by the result, upon precisely the same principles he could engage in this litigation,, to which the people and the corporation were also parties,, and bind the corporation and its creditors by the result.

There was no distribution of the assets of the corporation-in violation of the rights of the final receiver, or of its. general creditors. It was judicially determined that these-assets were subject to the-mortgages; and that was a. determination, as we have Seen, which the court could make without the presence of the general creditors, except as they were represented by the people. The final receiver,, when appointed, was vested with all the estate-which the corporation had at the time of its dissolution; and these stocks and bonds which had been swept away by the mortgage foreclosure and sale were no part of that estate. The rights which the statutes secure to creditors, in the case of the statutory final receiver of an insolvent corporation are such only as pertain to the property which comes-to the receiver to be administered by him and distributed to creditors; and there is no statute which entitles them to notice or gives them the right to a hearing before the receiver, except as to claims upon and their rights in such property.

There never was a time when the general creditors of the corporation had any vested right in these stocks and bonds, or to be paid out of them; and the disposition made of them did not impair the obligation of their contracts with the Erie company or deprive them of due process of law.

It is claimed on behalf of the plaintiff that the title of the final receiver related back to the commencement of the people’s action, and that therefore it overrode the disposition made of these stocks and bonds. But the equitable rule which gives a receiver title to the debtor’s property by relation, as of the commencement of the action, is one adopted to defeat fraudulent, unwarranted and unjust dispositions of the debtor’s property* and to accomplish just and equitable ends; but it is not applicable to a case where property has been legally disposed of under the direction of the court, and certainly has no application to a case like this, where the property claimed for a final receiver was subject to a lien in favor of mortgaged creditors, and has been sold and disposed of by virtue of that lien during the pendency of the action.

There is a feature of this case which must be here more: particularly noticed. After the termination of the foreclosure suit and the sale and the transfer of the mortgaged, premises to the new corporation, the New York, Lake Erie and Western Railroad Company, the latter company executed a new mortgage to the Farmers Loan and Trust Com • pany, to secure a large amount of its bonds. After the final order of reference, among other things, to ascertain, whether these stocks and bonds were covered by or subject to the lien of the mortgages, in March, 1879, the people’s action was discontinued as to all parties defendant, except the Erie Railway Company, and the Farmers Loan and Trust Company; and by leave of the court obtained in that action a supplemental complaint was served, alleging the foreclosure proceedings and the sale and transfer under the forer closure judgment, and other matters. To that complaint the Farmers Loan and Trust Company, in its answer thereto* alleged the foreclosure proceedings, insisting upon the validity of the sale therein made and its title to the stocks and bonds under its mortgage. To this answer the attorney-general, on the 3d day of April, 18Y9, served a reply in which he denied that these stocks and bonds were embraced within the mortgage, and alleged that they were improperly, wrongfully and unlawfully included in the foreclosed judgment, in the sale thereunder, and in the deeds to the purchasers at such sale, and denied that they or the Farmers Loan and Trust Company acquired any title thereto. Thus an issue was framed by the parties to that action, to be tried and disposed of before the referee appointed for that purpose.

Even if final judgment could have been entered in the action before the trial and disposition of that issue, how •can it be said that the parties and the court could not delay the entry of final judgment until after the trial of that issue ? It was an issue framed before judgment, which it was quite proper to try before judgment; and the decision of that issue embodied in the final judgment upon the report of the referee; that the bonds and stocks were covered by and subject to the mortgages and were legally transferred under the foreclosure sale, bound all the parties to that action, and the persons who were represented by them. The people and the railway company represented the general creditors of the railway company; and the Farmers Loan and Trust Company represented the bondholders, whose trustee it was. Hence, upon the assumption that the final receiver appointed in the people’s action was clothed with the powers and subject to the duties Of receivers in the case of the voluntary dissolution of corporations, precisely as claimed by the learned counsel for the plaintiff, yet we reach the conclusion that during the pendency of that action and of the temporary receivership, the court had jurisdiction to make the orders and decrees "complained of, and to authorize the disposition which was made of this property.

But we need not stop here. Even if the reference to, hearing before and decision by, the referee Spencer, had been after final judgment in the people’s action, and the appointment of Jewett as final receiver, with all the powers of a receiver, in the case of the voluntary dissolution of a corporation, still our conclusion would be the same. Prior to the Code of Procedure, final receivers appointed in equitable actions, under section 38, were common law receivers, whose powers and duties were not regulated bv statute (Mann v. Pentz, 3 N. Y., 415); and this is conceded by the learned counsel for the plaintiff.

But he claims that the law was changed by that Code, and that in consequence of the provision thereof the powers and duties of final receivers under, section 38 were the same" as were devolved upon a final receiver appointed in the case of the voluntary dissolution of a corporation. The Code, as originally reported and enacted in 1848, contained no provisions in reference to the winding up or dissolution of corporations, and section 38 remained unaffected. But in 1849 section 430 of the Code was added, which provided as follows : “ An action may be brought by the attorney-general, in the name of the people of this state, on leave granted by the supreme court, or a judge thereof, for the purpose of vacating the charter or annulling the existence of a corporation, other than municipal, whenever such corporations shall

“ 1. Offend against any of the provisions of the act or acts creating, altering or renewing such corporation; or,

“2. Violate the provisions of any law, by which such corporation shall have forfeited its charter, by abuse of its powers; or,

“3. Whenever it shall have forfeited its privileges or franchises by failure to exercise its powers; or,

“4. Whenever it shall have done or omitted any act which amounts to a surrender of its corporate rights, privileges and franchises; or,

“5. Whenever it shall exercise a franchise or privilege not conferred upon it by law.

“And it shall be the duty of the attorney-general, whenever he shall have reason to believe that any of these acts or omissions can be established by proof, to apply for leave, and upon leave granted, to bring the action in every case or public interest, and also in every other case in which satisfactory security shall be given, to indemnify the people of this state against the costs and expenses to be incurred thereby.”

And then, by section 444, it was provided that when judgment should be rendered against a corporation, the court should have the same power to restrain the corporation, to appoint a receiver of its property and to take an account and make distribution thereof among its creditors as were given in article 3, title 4, chapter 8 of the third part of the Revised Statutes, and that it should be the duty of the attorney-general, immediately after the rendition of such judgment, to institute proceedings for that purpose.

By section 68 of the_ Revised Statutes referred to, it is provided that such receivers shall have the power and authority conferred by law upon trustees to whom an assignment of the estate of insolvent debtors may be made pursuant to the provisions of the fifth chapter of the second part of the Revised Statutes.

Section 70 provides that the receivers, immediately on their appointment, shall give notice thereof, which shall contain the same matters required by law in notices of trustees or insolvent debtors; and in addition thereto. shall require all persons holding any open or subsisting contract of such corporation, to present the same in writing and in detail to such receivers at the time and place in such notice specified, which shall be published for three weeks in the state paper, and in a newspaper printed in the county where the principal place of conducting the business of such corporation shall have been situated.

In section 72 it is provided that after the first publication of the notice of appointment of receivers, every person having possession of any property belonging to such corporation, and every person indebted to such corporation, shall account and answer for the amount of such debt and for the value of such property to the receivers; and all the provisions of law in respect to trustees of insolvent debtors, the collection and preservation of the property of such debtors, the concealment and discovery thereof, and the means of enforcing such discovery, shall be applicable to the receivers so appointed, and to the property of such corporation.

Section 73 provides that such receivers shall have the same power to settle any controversy that shall arise between them and any debtors or creditors of such corporation by a reference, as is given by law to trustees of insolvent debtors; that the same proceedings for that purpose shall be had, and with like effect; that application for the appointment of referees may be made to any officer authorized to appoint such referees on the application of trustees of insolvent debtors, who shall proceed therein in the same manner; and that the referees shall proceed in like manner and file their report with the like effect in all respects.

Section 74 provides that the receivers shall be subject to all duties and obligations by law imposed upon trustees of insolvent debtors, so far as they may be applicable, except where other provision shall be made; that they shall call a general meeting of the creditors of such corporation, within four months from the time of their appointment, when all accounts and demands for and against such corporation, and all its open and subsisting contracts shall be ascertained, and adjusted as far as may be, and the amount of moneys in the hands of the receiver declared.

Section 79 provides how the receivers shall distribute the residue of the moneys in their hands among those who shall have exhibited their claims as creditors, and whose debts shall have been ascertained.

Section 85-provides that the receivers shall be subject to the control of the court of chancery, and may be compelled to account at any time, and may be removed by the court.

Section 90 provides that any decree or order of the court of chancery, made upon any petition presented pursuant to the provisions of that article, or in the course of any proceedings therein, shall be subject to an appeal.

By looking at the fifth chapter of the second part of the Revised Statutes (2 R. S., 41), we find that in section 7 it is provided that the trustees shall have power to sue in their own names, or otherwise, and to recover all the estate, debts and things in actions belonging or due to the debtor, in the same manner and with the like effect as such debtor could or might have done if no attachment had been issued,, or trustee appointed, or an assignment had not been made; and, among other things, to settle all matters and accounts between such debtor and his debtors or creditors, and to examine any person touching such matters and accounts on oath, and to compound with any person indebted to such debtor, and discharge all demands against such person.

Section 8 provided that the trustees, immediately upon their appointment, shall give notice thereof, and therein shall require: First, all persons indebted to such debtor, by a day and at a place therein to be specified, to render an account of all debts and sums of money owing by them respectively, to such trustees, and to pay the same; second, all persons having in their possession any property or effects of such debtor, to deliver the same to the trustees by the day so appointed; third, all the creditors of such debtors to deliver their respective accounts and demands to the trustees, or one of them, by a day to be therein specified not less than forty days from the first publication of the notice.

Section 19 provides that if any controversy shall arise between the trustees and any other person, in the settlement of any demands against such debtor, or of debts due to his estate, the same may be referred to three indifferent persons, who maybe agreed upon by the trustees, and the party with whom such controversy shall exist by a writing to that effect signed by them.

Section 26 provided that the trustees shall, as speedily as possible, convert the estate real and personal, of such debtor into money; and section 27 provides that the trustees within fifteen months from the time of their appointment shall call a general meeting of the creditors of such debtors, by a notice to be published in the same manner as before directed respecting the publication of the notice of their appointment, in which notice they shall specify the time and place of such meeting, which time shall not be more than three months, nor less than two months, after the first publication of such notice; and every such notice shall be published at least once in each week until the time of such meeting.

Section 28 provides that at such meeting, or other adjourned meeting thereafter, all accounts and demands, for and against the estate of such debtor, shall be fairly-adjusted, so far as the same can be ascertained, and the amount of moneys in the hands of the trustees declared; and further sections provide for the distribution of moneys in their hands.

Section 46 provides that such trustees shall be subject to the orders of the supreme court, and of the court of common pleas of the county in which they were appointed, upon the application of any creditor, or of any debtor in respect to whom they were appointed, in relation to the execution of any of the powers and duties confided to them; and they may be removed by the supreme court for causa shown.

From this careful reference to the statutes, upon the assumption that they are applicable, it will be seen that there is nothing in them which requires a final receiver to consult the general creditors of the insolvent corporation in the prosecution or defense of any action. He is required to publish certain notices and to call a meeting of the creditors, that their claims may be adjusted and that the balance of the property in his hands, after the adjustment of the claims, may be determined. But it is still his duty to take into his possession the insolvent estate and to use the legal means for that purpose; and he may commence and settle suits, and, under the direction of the court, compromise claims; and he is subject at all times to the order of the court.

In this case there was a controversy as to the ownership of this property, and as to whether it came to Jewett as receiver - in the people’s action, or as receiver in the foreclosure action, and that was a controversy to be settled under the direction of the court; and by a reference and investigation, and an orderly legal proceeding, it was determined that the property did not come to him as receiver in the people’s action, but that it came to him as receiver in'the foreclosure action, and that as receiver in the people’s action he had no title or claim thereto, and that the same was properly sold and disposed of in the foreclosure action.

There is no provision of law which required that the general creditors should be made parties to that litigation, or have any notice thereof; and none of their legal rights were violated by carrying the same on without any notice to them. They were represented therein by the people, through the attorney-general, and by the receiver, and by the defendant, the Erie Railway Company. They could, undoubtedly, have been permitted to intervene or to appeal from the judgment, or any of the orders, if any ground of appeal existed. But they had no right to attack the same collaterally, unless for fraud sufficient within the rules applicable to such cases to sustain an action to set aside a fraudulent judgment.

These provisions as to notice by the receiver were mostly directory, and were not essential to the jurisdiction of the court. Their omission would constitute an irregularity against which any party aggrieved could have relief by application to the court in the proceeding or in the action..' They had reference to the settlement of the claims against the debtor, and the distribution of the debtor’s property among creditors. But they had no pertinency whatever, until the estate should come into the hands of the receiver for distribution by him among those entitled to share therein.

Therefore, standing upon the very ground taken by the plaintiff, assuming the fundamental law to be precisely as he claims, yet we are unable to perceive how‘it can be said that the court did not have jurisdiction to make the final adjudication which was entered in the final judgment in the people’s action. _ And if we are right in this conclusion, then there is no ground for the maintenance of this action. But the magnitude of the interests involved in this action is such as to justify us in fortifying our conclusions by still further' prolonging this discussion; for if the court had no right in the foreclosure action, in consequence of the pendency of the people’s action and the temporary receivership therein, to determine whether these stocks and bonds were covered by or subject to the mortgages, then for precisely the same reasons it had no right to determine what property was covered by the mortgages, or how much was due thereon; and all the foreclosure proceedings are open to the collateral assaults of this plaintiff and other creditors.

We are of opinion that the learned counsel for the defendants are right in their claim that the proceedings in equity under section 38 for the dissolution of a corporation for the reasons therein stated were unaffected by the Code of Procedure. It was provided in section 13 of title 2 of chapter 13, part 3 of the Eevised Statutes (2 E. S., 579), that a writ of scire facias might be issued out of the supreme court upon the relation of the attorney-general against any corporation created or renewed by any act of the legislature, for the purpose of vacating or annulling such act, on the ground that the same was passed upon some fraudulent suggestion or concealment of a material fact made by the persons incorporated by such act, or made with their consent or knowledge. That was contained in the article entitled “ of scire facias.”

Section 27 provided that whenever any judgment should be rendered for the vacating and annulling of. any act of incorporation pursuant to the provisions of that article, the court of chancery should have the same powers to restrain the corporation created by such act; to appoint a receiver of its property and effects, and to take account -and make distribution thereof among its creditors, as were given in the third article of the fourth title of the eighth chapter of that act, relating to the voluntary dissolution of corporations; and that it should be the duty of the attorney-general immediately after the rendering of any judgment vacating and annulling any such act of incorporation, to institute proceedings for that purpose.

Article 2 of the same title is entitled 11 of information in the nature of quo warranto, and in certain other cases,” and section 39 provided as follows:

“An information in the nature of a quo warranto may also be filed by the attorney-general, upon his own relation, on leave granted, against any corporate body whenever such corporation shall: 1, offend against any of the provisions of the act or acts creating, altering or renewing such corporation; or 2, violate the provisions of any law by which such corporation shall have forfeited its charter by misuser; or 3, whenever it shall have forfeited its privileges and franchises by nonuser; or 4, whenever it shall have done or omitted any acts which amount to a surrender of its corporate rights, privileges and franchises; or 5, whenever it shall exercise any franchise or privilege not conferred upon it by law. And it shah be the duty of the attorney-general to file such information, in every instance in which he shall have good reason to believe that the same can be established by proof.”

Section 49 provided that whenever it should be found or adjudged that any corporation against which an information in the nature of a quo warranto should have been filed, had by any misuser, nonuser or surrender forfeited its corporate rights, privileges and franchises, judgment should be rendered that such corporation should be ousted, and altogether excluded from such corporate rights, privileges and franchises, and that the corporation be dissolved.

And section 51 provided that whenever any such judgment should be rendered, the court of chancery should have the same powers to restrain the corporation created by such act; to .appoint a receiver for its property and effects, and to take an account and make distribution thereof among its creditors, as were given in the third article of the fourth title of the eighth chapter of that act; and that it should be the duty of the attorney-general, immediately after the rendering of any such judgment, to institute proceedings for that purpose.

It is thus seen that there were two systems of procedure which might be carried on against insolvent corporations, or corporations which have done or omitted any act which amounted to a surrender of their corporate rights, privileges or franchises; one was a suit in equity by the attorney-general, of his own motion, without leave of any court, under section 38 above referred to, in which a temporary receiver, and after final judgment, a final receiver, could be appointed, each of whom would possess such powers and duties as might be devolved upon him by the court, uncontrolled by any statutory regulations; the other was a proceeding instituted by writ of quo luarrcinto by the attorney-general, after leave obtained of the court, which was a proceeding at law in which the corporation was entitled to a jury trial; and in that proceeding judgment could be rendered dissolving the corporation, but the supreme court had no right to appoint a receiver. But after final judgment annulling and disolving the corporation, the attorney-general was required to apply to the court of chancery for the appointment of a final receiver; and his powers and duties are regulated by the provisions contained in article 3, above referred to, in reference to the voluntary dissolution of corporations.

These two systems of procedure against corporations went along, side by side, one in chancery the other at law. Now what change did the Code of Procedure work ? Section 38 was not repealed by that Code, but was expressly saved by section 471 thereof, and remained in force in 1875, when the people’s action was commenced. The chapter of the Code which embraced section 430 was entitled “Actions in place of scire facias, quo warranto, and of information in the nature of quo warranto,” and the title is quite a clear indication that that chapter was not intended to take the place of article 2, title 4, chapter 8, part 3 of the Revised Statutes which contained section 38, and which was entitled “ Of proceedings against corporations in equity.”

Section 428, the first section of the Code and chapter, provides that the writs of scire facias and of quo warranto are abolished, and that “ The remedies heretofore obtainable in those forms may be obtained by civil action under the provisions of this chapter ”

And section 429 provided in substance the same as was provided in section 13 of chapter 9 of the Revised Statute, above mentioned, simply substituting an action in the place of the writ of scire facias.

Section 430 of the Code above set out is substantially the same as section 39 of the same chapter of the Revised Statutes, and was evidently intended to take its place; and section al provides_ that leave to bring the action mentioned in the preceding sections may be granted upon the application of the attorney -general.

Section 432 is a substantial re-enactment of section 28, of chapter 91, and section 442 of the Code is substantially like . section 49 of chapter 9; and section 444 is a substitute for sections 27 and 51 of the same chapter.

It is, therefore, we think quite clear that the chapter of the Code was simply intended to substitute actions in the form prescribed by the Code, in the place of writs of scire facias and quo warranto, and to regulate the proceedings in such actions. But there was nothing in that chapter which took away from the court of equity the general power which it had already possessed, and which it had previously exercised under section 38, in actions for the dissolution of corporations, for the reasons stated in that section, or which subjected the receivers appointed in such an action to the provisions of - section 444 of the Code.

_ The actions commenced under section 430 of the Code, like those commenced by writ of quo warranto, under section 39 of the Revised Statutes, for which it was a substitute, continued to he strictly legal actions in which the defendants had the constitutional right of jury trial, and neither a temporary injunction could be granted nor a temporary receiver appointed.

Section 444 made special provision for injunctions and receivers after judgment, and thus forbade them by implication at an earlier stage of the action. The maxim, Expressio unius, exclusio alterius, applies.

But this construction of the Code of Procedure is made still clearer by a reference to the present Code. By the repealing act (chapter 245 of the Laws of 1880), section 38 of the Revised Statutes was for the first time repealed, and section 1785 of the Code was substituted in its place.

Section 1786 provides that the actions specified in the last section may be maintained by the attorney-general in the name of, and in behalf of the people.

Section 1788 provides for the appointment of a temporary and permanent receiver, in such an action; and by that section and the repealing act of 1880, the duties and powers of a permanent receiver so appointed were made the same as those of receivers in the case of the voluntary dissolution of corporations under the Revised Statutes.

The sections to which we have referred, sections 1885, 1786 and 1788, are contained in article 3 of title 2, chapter 15 of the Code; and actions under that article could be commenced without leave of the court. Then in article 4 provisions are made for the commencement of actions by leave of the court, and those provisions are substantially like those contained in the Code of Procedure, and which before that Code were contained in that part of the Revised Statute which related to writs of scire facias and quo warranto against corporations. When judgment has been rendered in an action provided for in that article, the final receiver is subject to the powers and duties which devolve upon receivers of corporations voluntarily dissolved, and all the actions under that article are triable by jury.

So it appears that the two systems of procedure against corporations which were provided in the Revised Statutes have been continued since the enactment of the Codes. Under the one system the actions may be commenced without leave of the court, and they must be tried as equitable actions; under the other system the actions can be commenced only by leave of the court, and the parties are entitled to jury trial as matter of right. Under the present Code, for the first time under both systems, by special provisions a temporary injunction may be issued and a temporary receiver may be appointed during the pendency of an action, and .the final receivers are subject to the provisions of law applicable to receivers in the case of the voluntary dissolution of corporations, whose powers and duties are regulated by law.

Under the Revised Statutes, when- equitable and legal remedies were administered in different courts, there was reason for the existence of the two systems. But now, when all the remedies maybe administered in the same court, it is difficult to perceive any reason for the continued existence of the two systems; but they do exist, and each must have its proper significance and operation.

We think, therefore, that it is clear that prior to 1880 there was no statute regulating the powers and duties of receivers appointed in the equitable actions commenced under section 38 of the Revised Statutes above referred to.

We have taken no notice of the act, chapter 151 of the Laws of 1870, to which our attention has been called, for the reason that that act has no pertinency to any questions involved in this case. It did not extend injunctions and receiverships to new cases. It simply provided that they should be issued and granted in actions, and regulated the practice so as to prevent abuses which had previously been just cause for complaint.

There are other topics brought to our notice in the learned briefs submitted to us. They have not been overlooked; but the necessities of time and space forbid any attention to them here. We have written enough to show that the plaintiff does not, by the facts alleged in his complaint, show a cause of action against the defendants; and that

The judgment should, therefore, be affirmed.

All concur, except Finch and Peckham, JJ., dissenting.


source: Caselaw Access Project

author: Hardin, P. J.

license: Public Domain

text:
    George H. Putnam, Resp’t, v. J. Erwin Anthony, App’lt.

      (Supreme Court, General Term, Fourth Department,

      Filed April, 1887.)

    Practice—Supplemental proceedings—Contempt.
    The judgment debtor having been guilty of contempt, by failing to appear for examination in supplemental proceedings on the day to which the examination was adjourned, the judge made an order in the contempt' proceedings terminating them and allowing the debtor to appear and be examined, and as a condition thereof, directed the said debtor to pay the referee’s fees, already accrued, an ounting to twelve dollars The order contained no adjudication of contempt in terms. Held, the judge did not exceed his power and did not abuse his discretion, and the apoeal from the order cannot be sustained.
    2. Same—Effect of delay.
    Mere delay of the judgment creditor to proceed with the contempt proceedings does not amount to an abandonment or waiver of the proceedings.
    Appeal from an order in supplemental proceedings made by the county judge of Schuyler county,- July 22, 1886, requiring the defendant to appear on the 28th of July, 1886, at 10 o’clock A. M., and then and there submit to a further examination in these proceedings, and that on or before the time above fixed for such examination, the said defendant pay to the said John M. Roe his referee’s fees, heretofore incurred, amounting to the sum of $12, or to the plaintiff’s attorney for said John M. Roe; and that upon the payment of said fees and the submission to such examination, the said proceedings for the alleged contempt be discharged.

      Cole Brothers, for app’lt; C. H. Everts, for resp’t.
   Hardin, P. J.

In March, 1885, plaintiff instituted proceedings supplementary to execution upon a judgment . recovered in Schuyler county court, and obtained an order requiring defendant to appear and be examined on the 16th day of March, 1885, before John M. Roe. An examination was begun on the last named day, and the proceedings adjourned to the thirtieth day of March, but the defendant misunderstood the day and supposed it was the thirty-first day of March he was to again appear. He therefore failed to appear on the thirtieth of March, although the referee and plaintiff’s counsel appeared, as well as W. F. Bishop, Esq., counsel for defendant.

The referee on the thirtieth of March, certified and reported defendant’s default and failure to appear, and the county judge granted an order to show cause, returnable the 31st of March, 1885, at 2 p. M. That order and the papers on which it was issued were served on defendant on the 30th of March, 1885. Apparently, nothing further was done in the premises until July 9, 1886.

Mere delay of plaintiff to proceed did not amount to an abandonment or waiver of the. proceedings. Stanley v. Lovett, 14 Hun, 412.

Upon the ninth of July an attachment was issued by the county judge, relating the various steps taken, requiring the defendant to show cause before him on the 16th day of July, 1886, at 10 A. M., to answer for alleged misconduct in not obeying the said order, and to show cause why an attachment should not be issued against defendant.

That order and the report of the referee was on the 9th of July, 1886, personally served upon the defendant.

It seems that in- March, 1885, the parties entered into some terms of adjustment by which defendant was to pay five dollars a month, beginning the first of July, until the judgment and ten dollars costs were paid. Defendant partly performed by paying five dollars, and then failed to further perform. In July, 1886, when before the county judge, the defendant offered to be further examined, and the attorneys consented that Frank W. Fiero, Esq., may be substituted as referee.

The county judge made the substitution, and fixed July 28, 1886, at 10 A. M., for the continuance of such examination, and provided that on or before the time above fixed for such examination the said defendant pay to said John M. Roe his referee’s fees heretofore incurred, amounting to the sum of twelve dollars, or to the plaintiff’s attorney for said John M. Roe; and that upon the payment of said fees, and the submission to such examination, the said proceedings for the alleged contempt be discharged.

Dated July 22, 1886.

Apparently upon the hearing before the county judge, the parties made some concessions and consents, and the county judge took them into consideration in making his order.

As a condition and terminating the proceedings for the contempts, he allowed defendant to appear and be examined, and to pay the former referee his fees of twelve dollars. • If such examination had been had and the fees paid, the proceedings to punish for contempt would have-ended.

The county judge made his order conditional in the exercise of his discretion. Code of Civil Procedure, section 2454 and 2455.

The order contains no adjudication of contempt in terms. It does not specify any specific act of contempt.

Indeed it would seem that the proceedings were to be dismissed if the defendant performed. He was given an opportunity to arrest the proceedings. Instead of availing he has appealed from the order allowing him privileges. If he does not avail of the privileges the proceedings may be continued before the county judge.

We think the county judge did not exceed his power, did not abuse his discretion, and that the. defendant has no just ground for complaint of the order made by the county judge.

Defendant would have acted more wisely had he complied with its conditions and availed of its privileges than he has by appealing.

The order is affirmed, with ten dollars costs and disbursements.

Boardman and Follett, JJ., concur.