McCarthy v. Peake

Ingraham, J. The parties to this action were partners. In consequence of differences between them, each party commenced proceedings to close up the partnership, and to enjoin his partner from interfering with the partnership effects. Peake commenced proceedings in the Superior Court and McCarthy in this court. In the Superior Court a temporary injunction was granted on the 14th September, which, with the summons, was served on McCarthy on the 15th inst., about 3 p. m. In this court McCarthy commenced his action and obtained on an ex parte application an injunction and an order for a receiver, and the receiver took possession of the property on the 15th September, and afterwards, about 8 o’clock of the same day, the process in the action and injunction were served on the defendant. A motion is now made to set aside the injunction in this case, and to restrain further proceedings therein, mainly upon the grounds that the Superior Court had obtained jurisdiction of the parties and subject-matter before the application to this court, and that the appointment of a receiver on an ex parte application before service of the summons was irregular. The subject of the action, viz.: the partnership effects, and the parties, viz.: the two partners, are the same in both actions, and under the decisions which have repeatedly been made in this court and the Superior Court, the court which first acquires jurisdiction of the case should dispose of the whole matter ; and after such jurisdiction is obtained, any other court in which subsequent proceedings are taken for the same purpose should, as well from feelings of amity, as from a desire to avoid a conflict of jurisdiction, restrain the further prosecution of the second [166] action. This rule, however, is not to be extended beyond the subject-matter of both actions, and would not apply where other parties were made litigants. The question then in this case is, which court first obtained jurisdiction of the case. By section 139 of the Code it is provided that the court is deemed to have acquired jurisdiction, and to have control of all the subsequent proceedings from the time of the service of the summons or the allowance of a provisional remedy. In the case of issuing an attachment against a non-resident debtor, it has been held that such jurisdiction was obtained at the time the attachment was issued. In either case, whether the allowance of the injunction or the service of the summons is to be considered as conferring jurisdiction, it is clear that the action in the Superior Court has the priority. The injunction there was granted on the 14th, and in this court on the 15th September. The summons in the action in that court was served about three o’clock on the 15th, while the summons in the action in this court were served about eight o’clock of the same day. The appointment of a receiver was of no more weight than the allowance of the injunction. Both were provisional remedies, and either would give jurisdiction of the case to the court in which the action was brought. In the present case it may well be doubted whether the appointment of a receiver before service of the summons and without notice to the defendant, could be sustained. There are cases of a peculiar character where such an order may be made, but the cases are of such a nature as to require immediate action, such as those in which the party to be restrained is an idiot or lunatic, or where for any cause the immediate action of the court is required to save the property from destruction; but where an injunction is ample to protect the property from loss until a motion can be made for a receiver, it is manifestly improper to deprive a partner of the possession of partnership property without notice, and even without being served with a summons'. As I am of the opinion that the Superior Court had jurisdiction of this matter before any proceedings were taken in this court, this motion must be granted. The motion for a receiver and for an injunction by the court can be obtained by the defendant from that court on putting in his answer as well as in [167] this court, and the interests of both parties can be much better protected by either court in one action than by cross-suits between the same parties, necessarily tending to produce a conflict of jurisdiction between the two courts. As the receiver has expended money in protecting their property, and for other purposes connected with it, by order of the court, it is proper that he should be paid, and the motion is granted on condition that the defendant pay his expenses and compensation for the services rendered. The costs of this motion to abide event. Order accordingly.* Footnotes [*] McCarthy, the defendant in the action in the New York Superior Court, then moved in that action for the appointment of a receiver, and for a dissolution of the injunction. The motion was decided at special term in October, and the following opinion rendered: Boswokth, Ch. J.—Both parties seek a dissolution of the partnership, and agree in the position that the effects of the firm will not pay its debts unless there be good management in closing its affairs, and perhaps not even then. There is such a conflict in the affidavits of the parties in respect to almost every matter averred by them, that it is impossible to reach a satisfactory conclusion as to the truth of the matters in respect to which they differ, through the means presented by the papers before me. If all the allegations made against the plaintiff as to a misappropriation of portions of the funds received for the firm’s use had been fully answered, I should feel at liberty to do in this case as was done in Blakessey a. Dufour (19 Eng. L. & Eq., 76 and 78, note 1), or appoint the plaintiff a receiver without salary, on his giving proper security. Presumptively, it would be for the interest of the parties to have the affairs of the firm closed by a receiver who is familiar with them, and is conversant with the business of the firm, and personally competent to transact it. Such a receiver would close it to most advantage, and being closed by a receiver neither party can gain preferences, nor create embarrassments by attempting to do so, and the good-will of the business may he made to produce something for creditors and the parties. But as the allegations in relation to the misappropriation of the moneys received are not answered by the plaintiff, the only course likely to protect best the interests of the parties and of creditors, is to refer it to a referee to appoint a receiver and determine the proper amount of security to be taken, and to approve of sureties who may be offered, and shall be proved to his satisfaction to be sufficient. The parties must appear before the referee on t%vo days’ notice of the time and place of the hearing, to be fixed by him, and thenceforth from time to time, as he shall appoint, until matter of such reference be concluded. The injunctions now issued are to be continued in force, except that work heretofore contracted to be furnished by the firm, when in a condition to he delivered, so as to satisfy such contracts, may be delivered by the plaintiff, and he may receive the price agreed to be paid therefor, and may pay out of the same the amount justly due [168] for rent of the premises occupied by the firm, and upon the chattel mortgage mentioned in the pleadings, and upon judgments against the firm, on which executions have been issued and levied on the firm’s property. In all other respects they are to be continued in force until the further order of the court. William H. Ellis, Esq., is appointed a referee, and the plaintiff is at liberty to propose himself to act as a receiver, without salary. An order will be drawn in conformity with these views. The order of reference further directs the referee to inquire into and report what business, if any, the receiver should be permitted to prosecute or finish, and the referee’s reason therefor ; and the referee is to be at liberty to report separately in respect to the appointment of a receiver, and in respect to the business of the firm which the receiver should be permitted to prosecute or finish. Order accordingly. * Compare Kennedy a. Cotton, 28 Barb,, 59.