Opinion
February, 1895.
John A. Straley, for plaintiff, appellant.
Frederic W. Hinrichs, for defendant Maddock, appellant. George C. Blake, for defendant Steel, respondent.
William H. Maginniss, for defendant Kent, respondent.
Andrew Wesley Kent (of counsel), for respondents.
At the opening of the trial the defendants Steel and Kent moved to dismiss the complaint on the ground that it exhibited no cause of action in favor of plaintiff. By the complaint it is alleged that the firm of Maddock Steel, represented by plaintiff as receiver, was dissolved, under the articles of copartnership by limitation, on the 26th of January, 1893; that after that time, and until the appointment of plaintiff as receiver, the property, assets and effects of the firm were in the possession and under the control of the defendant George Steel; that after the dissolution of the copartnership an action was brought by the defendant Jeanie E. Maddock in the Supreme Court against George Steel to wind up the affairs of Maddock Steel, in which action, on February 27, 1893, plaintiff was appointed receiver of the property, assets and effects of the firm of Maddock Steel pendente lite with the usual powers of such receivers in like cases, and that he duly qualified; that an order was entered about June 2, 1893, authorizing the plaintiff as receiver to commence and prosecute this action; that at the dissolution of the firm the partnership was insolvent and unable to pay its creditors to the knowledge of defendants Steel and Kent. That on the 8th, 9th and 10th days of February, 1893, defendant Steel withdrew from the copartnership assets of the firm of Maddock Steel several sums of money, and paid the same to defendant Kent in part settlement of an individual indebtedness of Steel and Kent and not otherwise. That such sums were paid by Steel, and received by Kent, with full knowledge on the part of both that the same was in payment of an individual indebtedness of Steel to Kent and not applied in payment of a copartnership liability. That a demand was properly made on both of these defendants to return the moneys to plaintiff, which they refused. That Kent is an attorney and counselor at law and has been the legal and confidential adviser of Steel, and had full knowledge of the relation of Steel to the firm of Maddock Steel; and that defendant Maddock is a party defendant for the reason that, as a copartner of said firm, she may be entitled to an equity in the assets of the firm, if any. The complaint then prays that the money paid by Steel to Kent may be adjudged assets of the firm of Maddock Steel, and that they or either of them be directed to return the money to plaintiff as receiver, with interest.
The only question, therefore, in the case is whether plaintiff as receiver has capacity to sue. As alleged in the complaint, the plaintiff was appointed receiver pendente lite in the action brought by Maddock against Steel, with the usual powers of receiver in such cases, and as such he brings this action. The order of the court permitting him to sue, as alleged in the complaint, does not confer upon him any other powers than those already given him, and did not in any way attempt to clothe him with new powers or to invest him with title to the property, and consequently did not enlarge his powers. We have repeatedly held that receivers so appointed were mere common-law receivers and as such acquired no title to the copartnership property; their right was one of possession merely as officers of the court, and that the title remained where it was when they were appointed, and that such appointment did not make them trustees of creditors. Devlin v. Mayor, 4 Misc. 106; Forker v. Brown, 10 id. 161; 62 N.Y. St. Repr. 480; Buckley, as Receiver, v. Harrison, 10 Misc. 683; N.Y.L.J. January 28, 1895. Such receivers have power to collect and receive the debts, demands and other property of the corporation, to preserve the same, and in proper case to sell or dispose of the property as directed by the court, and to maintain any action or special proceeding necessary and proper for these purposes, but no other. It would follow, therefore, that such receivers may commence actions which can be sustained by proof of possession only without proof of title, legal or equitable.
The question then arises whether the payment of the moneys to the defendant Kent under the circumstances alleged in the complaint transferred title to him, or whether such moneys remained assets of the copartnership. This question has been much debated and has received different answers. In the courts of Pennsylvania, Ohio, Wisconsin, and certain other states, such moneys have been held to remain assets of the copartnership. Purdy v. Powers, 6 Penn. St. 492; Thomas v. Pennrich, 28 Ohio St. 55; Viles v. Bangs, 36 Wis. 131. But a directly opposite conclusion has been arrived at by the courts of England, Massachusetts, New Jersey, Illinois and of this state. Jones v. Yates, 9 Barn. Cress. 532; Wallace v. Kelsall, 7 M. W. 264, 273; Homer v. Wood, 11 Cush. 62; Craig v. Hulschizer, 34 N.J.L. 363; Church v. Bank, etc., 87 Ill. 68; Calkins v. Smith, 48 N.Y. 614. The learned counsel for the plaintiff in an able and ingenious brief, showing much research, claims that the case last cited is distinguishable from the one under consideration in that the decision was made in an action at law for the recovery of damages, and not in an action in equity. But in that case the court distinctly held that the cause of action was not a part of the assets of the firm, and that no interest therein was conveyed by the various assignments to the plaintiff in that action, including that of a receiver pendente lite, and the reasoning in the prevailing opinion applies as well to an equitable action as to one at law. Judge EARL, in delivering the prevailing opinion, said: "I am inclined to think that the fraud was not a joint fraud for which the three partners could unite in a common-law action. But it was a fraud upon each partner separately, for which he could sue alone to recover the damage which he sustained. The damage sustained by each partner was not the same, but was in proportion to his interest in the partnership." Again, plaintiffs' counsel "claimed that plaintiffs took their title to this demand through the assignment from the receiver. But it passes my comprehension how they could get title to the cause of action from that source, as Tift was appointed receiver only of the assets of the firm. This cause of action was no part of the assets of the firm, was never vested in Tift, and he could not, therefore, transfer any title thereto to the plaintiffs." It is true that this decision was arrived at by a divided court, nevertheless we regard it binding upon us in this case, and it would, therefore, be bootless for us to review the various arguments by which diverse conclusions are arrived at in the different courts, for no matter what conclusion we arrive at, we would still feel bound to follow the decision of the highest court in this state.
The ingenious suggestion that this action is brought to declare the funds copartnership assets, and to reach them as such, and not an action to set aside a fraudulent title to property, cannot, therefore, prevail, and the complaint was properly dismissed as to the plaintiff.
But the defendant Maddock claims that even though the complaint may have been properly dismissed as to the plaintiff, it ought to have been continued in order to determine her rights as a member of the firm; and it is certainly true that where all parties to a controversy are before the court, and one asserts or establishes a right against another, the court may determine the rights of the parties. But in such case the judgment must be secundum allegata et probata. In other words, judgment cannot be given in direct hostility to the theory of the action and the substantial allegations of the pleadings. Day v. Town of New Lots, 107 N.Y. 148; Hawes v. Dobbs, 44 N.Y. St. Repr. 890, 893, and cases cited.
As far as the defendant Maddock is concerned, the theory of this action is that the title to the claim is vested in the receiver of the copartnership, and hence that he can recover. The answer of defendant Maddock reasserts this position, and demands judgment accordingly. To hold that because all the parties are before the court that any claim which might be established in favor of one and against another can be made the subject of trial and judgment irrespective of the pleadings and the theory of the action, would be to ignore all principles of pleadings.
The complaint was, therefore, properly dismissed as to the defendant Maddock, and the judgment should be affirmed, with costs.
BISCHOFF and GIEGERICH, JJ., concur.
Judgment affirmed, with costs.