Black v. Consolidated Railway & Power Co.

AlleN, J. Every presumption is in favor of the regularity of the proceedings in the Superior Court, and that the judgment rendered is one authorized by law, and as there is nothing in the record to show the date of the appointment of the receiver, or to indicate that he was not appointed after the commence-ment of the action, we must assume that the action was commenced when there was no receiver — if necessary to sustain the judgment. The dates of the several steps taken in the action would also seem to justify us in doing so. The action was commenced against the corporation in July, 1909, and no answer was filed *471 suggesting a reason for not proceeding against it, and the application to make the receiver a party, was not until May, 1910 — a period of ten months having elapsed after the commencement of the action, during which the receiver could have been appointed. As it does not appear that the corporation was in the hands of a receiver at the institution of the acti.on, the demurrer was properly overruled, the plaintiff having the right upon these facts to proceed against the corporation,'and it being competent to make the receiver a party defendant. High on Receivers, sec. 258. It was not only within the power of the court to direct that the receiver be made a party, but it was proper to do so in view of the fact that the Revisal, sec. 1224, vests in him the title to all the property of the corporation, and it is made his duty under section 1227 et 'seq. of the Revisal to investigate all claims against the corporation for the purpose of protecting creditors and stockholders. If the fact was otherwise, and it appeared that the receiver had been appointed prior to the commencement of the action, we would hold that the action could not be maintained on the allegations of the complaint as they now are. The Revisal, sec. 1219 et seq., regulating the appointment of receivers of insolvent corporations, clearly contemplates the settlement of all questions involving claims against the corporation in one action, and while we do not think it withdraws from the court of equity the power to permit a separate action to be prosecuted, this should not be done until the receiver has at least had the opportunity to pass on the claim. By section 1227 the receiver is given power “to send for persons and papers,. and to examine any persons, including the creditors and claimants, and the president, directors, and other officers and agents of the corporation, on oath or affirmation (which oath or affirmation the receiver may administer), respecting its affairs and transactions, ‘and its estate, money, goods, chattels, credits, notes, bills, and also respecting its debts, obligations, contracts, and liabilities, and the claims against it; and if any person shall refuse to be sworn or affirmed, or to *472 make answers to suck questions as may be put to Mm, or refuse to declare the whole truth touching the subject-matter of the said examination, the court may, on report of the receiver, commit such person as for contempt.” By section 1228 it is provided that “The court may limit the time within which creditors shall present and make proof to such receiver of their respective claims against the corporation, and may bar all creditors and claimants failing to do so witMn the time limited from participating in the distribution of the assets of the corporation. The court may also prescribe what notice, by publication or otherwise, shall be given to creditors of such limitation of time,” and by sections 1229 and 1230: “Every claim against an insolvent corporation shall be presented to the receiver in writing; and the claimant, if required, shall submit himself to such examination in relation to the claim as the receiver shall direct, and shall produce such books and papiers relating to the claim as shall be required; and the receiver shall have piower to examine, under oath or affirmation, all witnesses produced before him touching the claims, and shall pass upion and allow or disallow the claims or any part thereof, and notify the claimants of his determination. It shall be the duty of such receiver to report to the term of the Superior Court subsequent to any finding by him as to any claim against the corporation, and exceptions thereto may be filed by any person interested, within ten days after notice of such finding by the receiver, and not later than within the first three days of the said term; and if, on any exception so filed, a jury trial shall be demanded, it shall be the duty of the court to prepare a proper issue and submit the same to a jury; and if such demand is not made in the exceptions to the report the right to a jury trial shall be deemed to have been waived. The judge may, in his discretion, extend the time for filing such exceptions.” It is the purpose of these sections to save expense and to avoid needless litigation and costs, and to this end it is required that every claim against the corporation shall be presented to the receiver, and he is given full power to investigate. Pelletier v. Lumber Co., 123 N.C., 601; Crutchfield v. Hunter, 138 N.C., 54. *473 If be disallows a claim, tbe claimant may except and bave bis rights passed on by a jury, wbicb gives bim all tbe advantages of a separate action; and if be recommends payment, tbe court will usually act favorably on bis report, and tbe costs of a separate action will be saved. We are, therefore, of opinion that when a receiver has been appointed before tbe commencement of tbe action tbe plaintiff must allege and prove that be bad presented bis claim to tbe receiver and it bad been disallowed, and that be bad obtained permission from tbe court to institute a separate action, wbicb ought not to be granted as a matter of course, but for good cause shown. This will enable tbe court having jurisdiction of tbe appointment of tbe receiver and tbe administration of tbe assets of tbe corporation to bave before it tbe claims of all parties, and to consider tbe receivership as a whole. No definite rule can be adopted as to what is “good cause,” but tbe place where tbe cause of action arose, venue, tbe convenience of witnesses, additional costs, and other circumstances, addressed to tbe discretion of tbe court, should be considered. We bave been induced to consider this question, which is not directly presented, because of an expression in tbe brief of tbe appellant, indicating that tbe receiver in this ease bad been appointed when tbe action was commenced; but for tbe reasons first stated tbe judgment is Affirmed.