
    James W. Ridgway, as Receiver, etc., of Charles Casper & Co., Appellant, v. Samuel Symons, as Receiver, etc., of Robinson & Symons, Respondent.
    
      Insolvent corporation—preference obtained by a creditor, by default — the corporation is not bound to defend an action—when concluded by orders recognizing the judgment as valid,.
    
    Upon the trial of an action brought by the receiver of a corporation known as Charles Casper & Co., it appeared that the- defendant had been appointed receiver of the firm of Robinson & Symons, and had obtained a judgment on January 19, 1895,' against the corporation of Charles Casper & Co., which, as was alleged, was then insolvent. The -judgment', in- question was taken by default March 18, 1895, and an execution was issued thereon, under which a. levy was made, and on April 1, .1895, an order was made that the levy should . be 'released upon condition that the property of the corporation of CharlesCasper & Co. should be sold by a temporary receiver of its property, who had been appointed, and that the proceeds of the sale should be applied towards the payment of such judgment.
    The complaint in the action alleged that when the judgment was entered the corporation of Charles Casper & Co. was'wholly insolvent-ahd known to be so by its .officers and by the present defendant; that judgment was allowed to be entered by default in contemplation of insolvency to defraud other creditors and to give a preference to the present defendant. The answer of the present ■ defendant denied knowledge -of • 'the insolvency of Charles Casper & Co. and alleged .that the debt upon which the' judgment was obtained- was a bona fide debt. •
    On the trial it appeared that, by an order of June 4, 1895, under which the plaintiff was appointed permanent receiver of Charles Casper & Co., it was declared that the present defendant, by virtue of -the-judgment in question, had a first lien upon the assets of Charles Casper & Co.
    
      Held, that the action could not be maintained;
    
      That the orders granted on April 1, 1895, and on June 4, 1895, were obstacles to the maintenance of the action, as by the order,of June 4, 1895, which had not been modified or in any manner set aside, the very judgment in question was declared to be a first lien on any assets which should come into the hands of the receiver; •
    That the court had jurisdiction of the parties when making the orders, and that there were no facts alleged in the complaint which tended to impeach it;
    That the complaint contained no statements that anything had been done by ■ the officers of the corporation except to permit judgment to be taken for a debt which confessedly was due;
    That an insolvent corporation was not obliged to defend a suit brought against it for a valid debt, to which there was no defense, for the sole purpose of defeating a preference.
    Appeal by the plaintiff, James Ridgwáy, as receiver, etc,,, of Charles Casper & Co., from a judgment of the Supreme Court in' favor of the defendant, entered in the office of the cleric of the county of New York on the 31st day of October, 1895, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the plaintiff’s complaint upon the merits.
    
      Gibert Ray Hawes, for the appellant.
    
      Henry M. Goldfogle, for the respondent.
   Van Brunt, P. J. :

This action was commenced by the plaintiff as receiver of the property and assets of Charles Casper & Co., a corporation, against Samuel Symons as receiver of the' assets of. the co-partnership of Robinson & Symons, to set aside certain judgments obtained in an action brought by the defendant against the corporation of Casper & Co. on the 19th of January, 1895,-in which judgment was entered on the 18th of March, 1S95, by default, and an order was entered on the 1st óf April, 1895, whereby it wasArdered that the levy made upon the property of Casper & Co., upon the. execution issued upon said judgment, should be released upon condition that the property of thé defendant be sold by the receiver of "the defendant in that action who had been: subsequently appointed, and the proceeds of such sale be applied toward the'payment of the judgment recovered by the plaintiff. - .

."The complaint in this action, after setting up. the appointment of the plaintiff as permanent receiver of the corporation of Casper & Oó., and his qualification as such receiver and the entry of 'an order authorizing and empowering' this action to be brought, alleged the appointment of the defendant Symons as receiver of the firm of Robinson & Symons ; the insolvency of the corporation of Casper. &. Co., and that such insolvency was known to the officers and directors of the company, including one Robinson, its president, and one Stodola, its secretary and treasurer; the commencement of an action by the defendant on the Í9th of March, 1895 (January probably being meant)) in the City Court of New York against said corporation of Casper & Co., by the service upon -its president, Robinson, of a summons and- complaint which resulted in a judgment on the l8th of March, 1895, by default; the issue of execution and the. levy of such, execution upon the property of the corporation; the due entry of the order April 1, 1895, above referred to ; the payment by the temporary receiver on the 14th of May, 1895, of $100 on account of said judgment to the defendant; the payment, to the defendant of fifty dollars after the commencement of said action,'and' of the further sum of $588.33, after knowledge by its officers of its insolvency and after knowledge on the part of ■ said Robinson & Symons thereof.

The complaint further alleged the said judgment was made and entered while said .corporation of Casper & Co. was wholly insolvent, and known so to he by the officers thereof and by said receiver Symons, and that said, action was commenced and .judgment allowed to be entered by default in contemplation of such insolvency, and wus made and suffered .for the purpose óf defrauding the creditors of said corporation other than said Robinson & Symons, and said acts were performed and payments made with' the intention of giving a preference to the defendant in this action over the othel* creditors of said corporation, by transferring, to such defendant the' property of said corporation, contrary to the statute in such casé‘made, and provided; and -that the said execution so issued- and levied, and the stipulation on which the order was entered,, and the payment of $100 by the receiver, were all contrary to the statute in such case made and provided, and were wholly void and'without effect.

The defendant answered, denying knowledge of the insolvency óf Gasper & Co., admitting the commencement of the suit and the entry of the judgment, and alleging that the debt upon which the judgment was obtained was a bona fide debt, and setting up other facts not necessaiy to notice here. The plaintiff replied to such answer, putting in issue most of the allegations thereof.

The issues thus raised coming on for trial, the complaint was amended by setting up the additional fact that the corporation had refused to pay certain of its notes or other obligations when due, prior to the suffering of the' judgment set out in the complaint. The parties having conceded most of the facts hereinabove stated, the Order of April 1, 1895, directing the payment of the judgment out of the proceeds of the sale of the property of Casper & Co. was offered in evidence and also the stipulation therein referred to, and the articles of incorporation of Casper & Co., and the order of June 4, 1895, appointing the plaintiff as permanent receiver of Casper & Co. by which it was adjudged that ■ the defendant by virtue of the judgment above mentioned had a first lien upon all the money and assets of said Casper & Co. which lien was to be satisfied and paid in full before payment of any other creditors of said corporation, and said judgment was to have precedence over any other payment on any indebtedness due from said corporation, especially over any and all fees, costs and commissions applicable to the receivership.

The court having suggested that it did not think the plaintiff could maintain this action without a general motion setting aside all of those prior orders, and restoring the defendant as near as possible to the State he was in when the stipulation was made, the plaintiff offerted to make proof of the matters set forth in the complaint. The defendant objected upon the theory that upon the state of facts as alleged the plaintiff could riot recover. The court sustained this objection,, and upon motion of defendant’s counsel dismissed the complaint upon the ground that the facts proved, and those offered to be proved, did not constitute a cause of action. • And from the judgment thereupon entered this appeal is taken, it being claimed upon the part of the appellant that the court then having jurisdiction, not only could it declare the judgment fraudulent and void, but it also had power to vacate the order of May 1, 1895 (probably meaning April), as imp’royidently and improperly made, all of which was prayed for in the complaint.

We do not think that this contention upon the part of the plaintiff is well founded. . The court, in mating the orders in question, had jurisdiction of the parties and the right, to make the same, and there were no facts whatever alleged in the complaint tén'ding in any manner to impeach such jurisdiction. By .the' very order under which the plaintiff in this action was appointed receiver it was declared that the judgment in question should be the first lien upon the assets which should come into his hands, ■ This order has in no respect been modified, nor is it attempted in tins action to set the same aside.. There is a general allegation contained in the conv plaint that these acts and things were done for the purpose of defrauding the Creditors of the corporation. But there, is no-statement that. anything was done by the officers óf the corporation except to suffer the judgment above mentioned, and it is difficult to see upon what theory the officers of. a corporation, can put in an answer in.an.action brought against the corporation upon a debt which is confessedly due, even if such coloration should happen to be insolvent. 'No such duty is imposed upon the officers of a cor-^ poration. In the case of Varnum v. Hart (119 N. Y. 101) it' was held that the statute under which this action is brought does not impose upon the officers of ■ an insolvent corporation the duty to take measures to procure a disposition- of its property without preference among all its creditors. ' It is further -stated in that case that while the purpose of the statute was to prevent unjust discrimination, this was sought to be accomplished, not by securing affirmative action, but by restraint- upon the- action 'of the corporation and its officers, leaving the .property to ' be taken and disposed of by due. course of law, and that the corporation might, like an insolvent person, permit the creditors to- take hostile; proceedings and allow those to obtain a preference who were most vigilant; this does not constó tutean assignment or transfer on its .part;, and that-an insolvent corporation is not obliged to defend any suit brought against it for a valid debt, against which there is no valid legal .defense for the sole purpose of defeating a preference, but that it. may suffer default and thus allow a preference,' .

Upon a consideration of the case, cited it will be seen, that upon the facts alleged, if the plaintiff would be permitted in this action to attempt -to attack the orders and judgments above mentioned,mo right to a recovery is shown. ■'.

We are also of the- opinion that the court was correct in holding that the judgment and orders could not be assailed as. was attempted to be done in the case at bar.. ■ •• •

The judgment should be affirmed, with costs.

Babbett, Rtjmsey, Williams and Pattekson, JJ., concurred.

Judgment affirmed, with costs.  