State Ex Rel. Wade v. Mutual Building & Loan Ass'n

CoNNOit, J. The decisions of the courts of the several States upon the question presented by this appeal are not uniform. There is sharp conflict in judicial opinion as to the effect of a receivership upon the right of an officer, agent, or employee of a corporation, for which a receiver has been appointed, to recover anticipatory damages for the breach of an executory contract, by which the corporation, prior to the receivership has agreed to pay to its officer, agent or employee a salary, or compensation for services to be rendered to the corporation subsequent to the date on which the receiver was appointed. In 14 A, C. J., on page 980, it is said: “The question of whether an executory contract is discharged by the appointment of the receiver is one as to which there has been some differences of opinion, some courts taking the position that the contract is discharged, because rendered impossible of performance by act of the law, while other courts take a contrary position, although the claim for damages arising from the breach will constitute a debt of the corporation as distinguished from a debt of the receivership. It is obvious that the subject-matter of the contract is of importance in determining the question, and for that reason in analogy to the rule terminating contracts for personal service as between individuals upon the death of a party, contracts by the corporation for services are, according to the weight of authority, discharged by the appointment of a receiver, or in any event the right to compensation is suspended pending the receivership. There is, however, some authority to the effect that claims for damages arising from breach of contract for services occasioned by the insolvency of the defendant corporation are entitled to be paid pro rata out of funds in the hands of the receiver.” It may be conceded that decisions favorable to officers, agents or employees of a corporation for which a receiver has been appointed by a court of competent jurisdiction, and which for that reason has breached its contract to pay for services which such officers, agents or employees are ready, willing and able to render, pursuant to contracts of employment, subsequent to the receivership, find much support on principle. *174 However, we ba.ve a decision of this Court, which we think authoritative and therefore controlling in this jurisdiction; In Lenoir v. Improvement co., 126 N. C., 922, 36 S. E., 185, it is held that the appointment of a receiver for a corporation, who is directed to take control of all the property of the corporation, and to assume entire management of its affairs, has the effect of suspending all officers of the corporation; they cannot thereafter interfere with the business of the corporation and are entitled to no salaries during the continuation of the receivership. In the opinion in that case, written by Douglass, J., for the Court, it is said: “We frankly admit that this case has given us much trouble, and to it we have given careful consideration. The authorities on the exact point are not numerous, but they are conflicting, and from courts of the highest respectability.” The decision of the question presented in Lenoir v. Improvement Co., supra,, was made after a careful review of the authorities in other jurisdictions, and after full citations from opinions written in support of conflicting decisions of other courts. The principle approved and applied by this Court in rendering its decision, is that performance by a corporation of an executory contract to pay for services to be rendered by its officers, agents or employees, pursuant to contracts of employment, subsequent to the appointment of a receiver for the corporation, becomes impossible as the result of an act of the law, and that therefore the contract is discharged. By the appointment of a, receiver, who is authorized and directed to take control of all the property of the corporation and to assume the entire management of its affairs, both the corporation and its officers, agents and employees are discharged from their mutual obligations arising out of the contract of employment. The contracts of employment, by which its officers, agents or employees undertake to render service to the corporation are made subject to this principle. As this is the controlling principle upon which the question presented by this appeal is to be decided, it is immaterial whether the corporation for which the receiver is appointed is insolvent or not, or whether the receiver was appointed because of mismanagement of the corporation by its directors or because of conditions for which the directors cannot be held responsible. The principle is applicable where the receiver has been appointed by a court of competent jurisdiction upon any valid grounds. In the instant case, the claimant does not challenge the validity of the order of the court appointing the receiver; indeed, he makes no objection to the receivership, but by filing his claim acquiesces in the appointment. Upon the authority of Lenoir v. Improvement co., supra, the judgment must be Affirmed.