Full opinion text
Beatty, C. J. This is an original application for a writ of prohibition to the superior court of the city and county of San Francisco, department No. 6, William T. Wallace, judge, commanding and directing said court and judge, and the receiver of said court, Patrick Beddy, Esq., to desist and refrain from proceeding or acting upon or in pursuance of a certain order appointing said receiver. The importance of the case, not only as regards the interests at stake, hut also in respect to the questions of law and practice which it involves, will justify, if it does not require, a somewhat detailed statement of the facts out of which it arises. It appears that in the month of November, 1888, the people of the state of California, on the relation of the attorney-general, commenced an action in said superior court against the American Sugar Befinery Company, a California corporation, for the purpose of forfeiting its charter. The corporation appeared and answered the complaint, and after trial the judgment of said superior court was pronounced, declaring the forfeiture and imposing upon the corporation defendant a fine of five thousand dollars and costs of suit. The judgment was rendered January 8, 1890, and on the same day, at the instance of the attorneys representing the state, a rule was issued and served requiring said corporation and its attorneys to show cause on the 10th of January why a receiver should not be appointed “to take charge of the estate and effects of the said defendant corporation, and to distribute the same according to law, or to preserve the same pending an appeal herein, if such appeal be taken herein, on the ground that said defendant corporation, has been dissolved and has forfeited its corporate rights.” On the return day of the rule, the corporation appeared, and the hearing was continued until January 20th. Meantime — on January 18th — the corporation duly served and filed its notice of appeal to this court from the judgment against it, and at the same time filed in due form a bond in the penal sum of twelve thousand dollars to stay proceedings on said judgment. After hearing the motion for a receiver, the judge of the superior court held the matter under advisement until February 17th, on which day he made an order as follows (after reciting the previous proceedings):— “It is ordered that Patrick Reddy, a resident of the city and county of San Francisco, state of California, be, and he hereby is, appointed receiver of the property and effects of the defendant, wherever the same may be situate, including the American Sugar Refinery, situate at the southwest corner of Union and Battery streets, in this city and county, and its appurtenances. “It is further ordered that the defendant, its officers, agents, attorneys, servants, and employees, and all persons and corporations, associations, or firms holding any of the defendant’s property in trust for said defendant or its stockholders, do immediately, upon the production of this order, surrender into the possession of said receiver all the said property, real, personal, and mixed, wherever . situate, belonging to said defendant, including all its books, records, and papers. “ And it is further ordered that said receiver do immediately take into his exclusive possession all the books, records, and papers of said defendant, and all the said property, real, personal, and mixed, of the said defendant, including the said American Sugar Refinery so, as aforesaid, situate in said city and county, and hold the same pending the appeal from the judgment herein, and the final determination of the motion for new trial, and until the further order of this court; and that said receiver at once close the said refinery, and do not dispose of any of the said property of the said defendant until the further order of this court. “It is further ordered, and I hereby direct, that the said receiver execute to the state of California an undertaking, with two sufficient sureties, to he approved by me, in the sum of ten thousand dollars, to the effect that he will faithfully discharge the duties of receiver in the above-entitled action. “Dated February 17, 1890. “William T. Wallace, Judge.” On the same day a second order was made, which, after reciting the one above quoted, and the fact that the receiver had executed and filed a sufficient undertaking as therein required, and had taken the oath of office, concludes as follows: — “Now, therefore, it is hereby ordered that said receiver be, and he is hereby, invested with all the power and authority mentioned and conferred in said order herein-above recited, to the same extent as if the same were again here repeated and recited at length. “Dated February 17, 1890. “ William T. Wallace, Judge.” Immediately upon the issuance of this order, Mr. Reddy proceeded to the sugar refinery therein mentioned, which he found in full operation under the direction and control of a superintendent, foreman, and others in the pay and employment of the petitioners herein, who claim to have purchased the property and to have received a conveyance thereof from the American Sugar Refinery Company in the month of March, 1889, since which time they assert that they have been in full and complete possession as absolute owners in their own exclusive right. Mr. Reddy, however, demanded of those in charge that they should immediately transfer the possession of the premises and everything connected with and contained in the refinery to him, as receiver, and he claims that on the evening of the 17th he had succeeded in obtaining full and absolute possession and control of the entire establishment. This claim is disputed by the petitiouers, and whether it is true or not is one of the principal questions in the case. The facts upon which its solution depends will be reviewed when the question is reached. Meantime, and for the purposes of this preliminary statement, it is sufficient to say that the petitioners and the receiver each claim to have had possession of the refinery on the 17th of February and on the following day. The receiver claims that his possession was complete and absolute from and after the evening of the 17th. The petitioners contend that, at most, there was a mere scramble for possession by the receiver up to the time when he was served with notice of the alternative writ of prohibition herein on the afternoon of February 18th. The first notice that the petitioners, or their employees, had of the order appointing the receiver, and directing him to take possession of the sugar refinery, was Mr. Reddy’s demand for possession and proclamation of his authority. The agents in charge of the refinery, before yielding to his demands, asked to be allowed an opportunity of obtaining legal advice as to their rights and duties in the matter. This was conceded by Mr. Reddy, upon the understanding that the superintendent of the refinery would notify him at ten o’clock next morning what course he had decided to take. Availing themselves of this respite, the agents of petitioners consulted counsel, and during the night of February 17th, affidavits were prepared upon which to base an application to Judge Wallace for a suspension or modification of his order. Prior to ten o’clock on the following morning, Mr. Reddy was notified of this intended application, and at about the hour of ten o’clock he and his counsel, and counsel for petitioners, met Judge Wallace at his chambers, where, at least, an informal application was made to the judge for a stay of proceedings pending a motion to set aside or modify his previous order directing the receiver to take possession of and close the refinery. What occurred at this interview is one of the principal points of controversy in the case, as involving a question of practice or procedure. The facts will be stated, so far as necessary, when we come to consider that question. For the present it is sufficient to say that Judge Wallace refused to grant any stay of proceedings for even an hour, unless the petitioners would at once desist from all opposition to the receiver, and yield instant and absolute possession of the refinery and other property. This condition was not assented to, and it was then agreed between Mr. Reddy and his counsel, upon one side, and counsel for petitioners-on the other, that at the hour of twelve o’clock on that day counsel for Mr. Reddy should be informed what further steps the petitioners had decided to take, and whether they would further oppose his claims, as receiver, to the possession of the refinery. At twelve o’clock, counsel for Mr. Reddy was notified in substance that his right to the possession could not be admitted, and that his taking possession would be opposed so far as it could be done without a resort to actual, force or violence. Meantime, Mr. Reddy had again attempted to assert and enforce his possession and authority at the refinery, and had met with such resistance that he felt it necessary to resort to the court for its aid. He therefore made,.and filed an affidavit entitled in the action against the American Sugar Refinery Company, in which, after reciting the various proceedings and orders therein, including his appointment and qualification as receiver, he proceeded as follows:—• “That deponent, as such receiver, entered into possession of the American Sugar Refinery, and the property therein situate, in the city and county of San Francisco; that H. C. Mott and R. H. Sprague impede, hinder, and delay this deponent in the discharge of his duties as such receiver, and refuse to allow deponent to take into his possession and control certain property situate on the premises aforesaid; that said parties last-above named, notwithstanding the receiver’s possession of said premises, dispute his right to said possession and resist the full enforcement of the order and judgment of this court, and especially of the order hereinabove set forth. Wherefore this deponent prays this honorable court to give its order and direction to the sheriff of said city and county of San Francisco to enforce the orders and direction of this court as duly given and made in and by the order hereinabove set forth, and to do and perform all acts which may be necessary to place said receiver in complete possession of said American Sugar Refinery, and all and singular the property therein situated, and the property of said defendant of whatever character and wherever situated.” Immediately upon the filing of this affidavit of the receiver, and at about the hour of 1:30, p. m., of February 18th, Judge Wallace made and filed an order which, after reciting the previous proceedings, concludes as follows- — “Now, you, the said sheriff, are hereby required to execute and enforce each and every, all and singular, the matters in said order appointing a receiver contained, in so far as may be necessary to place said receiver in possession, and to do and perform all acts which may be necessary to place Patrick Reddy, said receiver, in exclusive, full, and complete possession of the land and premises known as the American ¡Sugar Refinery, situated at the southwest corner of Union and Battery streets, in said city and county of San Francisco, and of all and singular the property, real and personal, of said American Sugar Refinery Company, in said city and county of San Francisco. And you, said sheriff, are directed to make return of said order appointing a receiver, and of this order, within ten days after your receipt hereof, with what you have done indorsed thereon. “.William T. Wallace, Judge.” This order, which the superior judge and sheriff denominate a writ, was afterward, on February 28, 1890, filed by the sheriff, with the following return indorsed thereon:—■ “I, C. S. Laumeister, sheriff of the city and county of San Francisco, state of California, certify that the annexed and accompanying orders and writs, issued out of the superior court of the city and county of San Francisco, were placed in my hands at 1:45, p. m., on Tuesday, February 18, 1890. In obedience to the said orders and writ I proceeded to the premises designated therein, and found Patrick Reddy, who had theretofore been appointed by said honorable court as receiver in said action, in possession of said premises, in said orders and writ mentioned and described; that I found upon said premises certain persons who, I was informed, were interfering with the possession and enjoyment of said premises by said receiver; that I thereupon exhibited said order and requested said persons to retire from said premises, and that said persons thereupon retired from said premises described in said writ and order, and thereupon left said Patrick Reddy in the peaceful and undisturbed and undisputed possession of the land and premises known as the American Sugar Refinery, situated at the southwest corner of Union and Battery streets, in said city and county, with the appurtenances thereto belonging, and the fixtures therein, and all property, real and personal, appertaining thereto; that I also found said receiver in possession of the office of the American Sugar Refinery Company at No. 220 California Street, and I left him in possession thereof; that I also found said receiver in possession of an office and premises situated in the second story of a building, No. 124 California Street, which said office and premises were designated with the name, the American Sugar Refinery Company, and I left said receiver in absolute possession of said premises last-above described, and all of the premises and property herein-above mentioned and described; that all of said actions and proceedings done, had, and performed by me, under and in obedience to said orders and writ, were done, had, and performed, and completed at and before the hour of three o’clock, p. m., of said eighteenth day of February, 1890.” While these proceedings by and on behalf of the receiver were in progress, the petitioners were applying here for a writ of prohibition, and about the hour of two o’clock, p. m., February ISth, an order for the issuance of an alternative writ was made and filed. The writ issued in pursuance of our order was served on the receiver about 3:30 o’clock, p. m., and upon Judge Wallace about six o’clock, p. m. In their petition for the writ the petitioners set out the whole proceedings in the case of the People v. American Sugar Refinery Company down to and including the order appointing the receiver, and the order supplementary thereto. They allege that ever since the twenty-first day of March, 1889, they have been the owners in fee-simple in their own right of the several tracts and parcels of land in San Francisco, which they specifically describe, and upon which are situate the sugar refinery and the various shops and offices appertaining; that ever since said date they have been carrying on in said buildings the business of refining sugars for sale in the markets of California and elsewhere; that they, also, have offices, furniture, books, and other personal property used by them in and about said business; that they do not use, hold, or possess said property, or any part thereof, in trust, for the use or benefit of the American Sugar Refining Company, the defendant in the action referred to, or any of its directors, trustees, creditors, or stockholders, but solely for themselves, and for their own exclusive use and benefit, and have ever since said thirty-first day of March, 1889, been in the quiet and peaceable possession of the same, claiming title thereto and the exclusive ownership thereof; that since September, 1889, Henry C. Mott has been the general agent and attorney in fact of the petitioners, in actual charge and custody of all of said property, and duly authorized to conduct said business. They then allege the demands of Reddy to be let into the possession of said property, their refusal and resistance, the damage that would result from a stoppage of the works, and that Reddy is threatening to cause the arrest of said agent and the superintendent of the works for contempt of the superior court in resisting the said order. They further allege that they have, through their said agent, Henry C. Mott, respectfully presented the foregoing facts to said superior court, and called its attention to the excess of jurisdiction by it committed in making said order, and in directing said receiver to enter upon and take possession and control of their said property; and that they have requested said court to modify its said order so as to direct him to bring a proper action for the recovery of said property instead of taking possession without action, which request they say said superior court has denied. They further allege that said orders, so far as they authorize the receiver to take the property in their possession and claimed by them, are beyond the power and jurisdiction of the court, and in violation of their rights; that they are not parties to said action of the people against said American Sugar Reiinery.Company, nor did they make any appearance or participate in any respect in said action. They further allege that, after said judgment against the Sugar Refinery Company, said company, on the 18th of January, 1890, had taken and perfected an qppeal therefrom to this court, and had filed an undertaking sufficient to stay the execution thereof. And, averring that they have no plain, speedy, or adequate remedy against said proceedings of the superior court in ordinary course of law, they pray'“that a writ of prohibition herein may be issued to said superior court of the city and county of San Francisco, department No. 6, and the judge thereof, commanding and directing said court, and said judge, and also its said receiver, Patrick Reddy, to desist and refrain from further proceedings upon the order aforesaid appointing its said receiver, and from exercising any of the powers in said order granted with regard to any property in the possession of said Havemeyers & Elder through their agents or employees, and especially said sugar refinery, and from interfering with or disturbing the possession and control of the said Havemeyers & Elder of the said sugar refinery, or any other property by them possessed and claimed in their own right.” The order made by us upon the filing of this petition directed the issuance of an alternative writ of prohibition to department No. 6 of the superior court of the city and county of San Francisco, and to lion. W. T. Wallace, judge of said court, in accordance with the prayer of the petition, “ commanding said court and judge, either through said Patrick Reddy, receiver, or otherwise, from taking possession of or interfering with the possession or control by said Havemeyers & Elder, through their agents, or otherwise, of any property, real or personal, in their possession, and claimed by them in their own right, and especially of the said property situate on the southwest corner of Union and Battery streets, in said city and county, and the refinery situate thereon, or from interfering with the agents and employees of said Havemeyers & Elder in the conduct of the business of the same, or from exercising any of the powers granted to said receiver in the order appointing him, so far as enforcing the same -is concerned against said Havemeyers & Elder.” Said order further directed said court and judge to show cause on March 3d why said prohibition should not be made absolute and perpetual, and that in the mean time, until further ordered, “all proceedings in said action upon the said order so appointing said receiver be stayed, so far as the said Ilavemevers & Elder, and the property, real and personal, in their possession at the time said order was made appointing said receiver, are concerned.” The writ issued in pursuance of this order, in the name of the people and under the seal of the court, was, in substance, a repetition of the order, with some amplification of its terms, and not only the writ, but copies of the order and petition upon which it was founded, were served at the hours above mentioned on Judge Wallace and Mr. ¡Reddy. On February 25th, which was prior to the day upon which the respondent was required to show cause against the prohibition, affidavits were filed on behalf of the petitioners, alleging that the respondent and the receiver had committed a contempt of this court in proceeding under said order appointing the receiver contrary to the injunction contained in our order for the writ nf prohibition; whereupon, we made and directed to be served upon Judge Wallace and Mr. ¡Reddy another order, in which, after reciting the substance of the charge contained in said affidavits, we commanded them to show cause, on March 3d, why they should not be adjudged guilty of contempt, and why the receiver should not be compelled to withdraw and retire from the sugar refineiy, and make restitution of the personal property which he had taken into his possession. On March 3, 1890, Judge Wallace and Mr. Reddy appeared and answered in both proceedings,—the prohibition and the contempt,—and they were heard, argued, and submitted together. It is not necessary in this connection to set forth in detail the matters contained in the answers of the respondent and the receiver. It is sufficient to say that the answer of Judge Wallace contains denials and averments, upon which he claims that his power and jurisdiction to appoint a receiver of the property of the American Sugar Refinery is complete, and also that he had the like power and jurisdiction in the action against the corporation to command and authorize the receiver to take the specific property described in his order, notwithstanding it was in possession of the petitioners, under claim of exclusive ownership. As to the matter of contempt, Judge Wallace takes the position that the effect of our order for and writ of prohibition was simply to tie his hands and shut his mouth, so that he could not, without a violation of its terms, give any order o,r direction to the receiver whatsoever, or in any manner interfere with his proceedings; and he shows that he strictly adhered to this role of inaction. Mr. Reddy says that he and his counsel construed our order and writ in the same way, so far as it affected Judge Wallace, and therefore that he refrained from seeking any advice or direction from the superior court as to his own duties in the premises, relying in that matter wholly upon the advice of counsel, which he followed in good faith. He says that he was advised,-—and that such was his own opinion,—-that the effect of the writ and order upon him was to confine him to the exact position in which they found him at the moment they were served. He contends that when the writ and order were served on him, he was in complete and absolute possession, to the exclusion of petitioners, of the sugar refinery, offices, shops, machinery and supplies, books, papers, etc., engaged in working up about fifty thousand dollars’ worth of sugar then in solution, preparatory to shutting down the works, and that he did nothing except to retain the possession which he had, and to shut down the works as soon as possible. From this general statement of the case, the nature of the questions to be decided is sufficiently shown. We have nothing whatever to do with any question as to the validity, correctness, or propriety of the judgment of fine and forfeiture pronounced against the American Sugar Refinery Company in the action instituted by the attorney-general in behalf of the people of the state. For all the purposes of this case that judgment is assumed to be absolutely j-'ust and valid, though suspended by the appeal. But conceding the perfect validity of that judgment, the question remains, whether the superior court had any jurisdiction to make the order appointing the receiver and directing him to take specific property from the possession of the petitioners', who were not parties to the action, and were claiming said property in their own right. Subordinate to this main question are a variety of others, which have been elaborately discussed by counsel; as, for instance, whether prohibition is the proper remedy when the court has exceeded its jurisdiction in appointing a receiver; whether, conceding it to be the proper remedy in such case, the petitioners have complied with the necessary conditions of its issuance; whether the court should not, in the exercise of its discretion, refuse its aid to these petitioners, even if they have proceeded correctly in the matter of practice, and this not only because they have other plain, speedy, and adequate remedies, in the ordinary course of law, but principally because they are participes criminis with the corporation in the misconduct for which its charter has been forfeited. There are still other questions involved in the matter of the prohibition, and then there are the questions arising in the proceeding for contempt. We shall proceed to discuss such of these points as we deem material, in about the order in which they have been stated. And, first, as to the power of the superior court to make the order complained of. The appointment of receivers and their powers and duties are regulated by sections 564 et seq. of the Code of Civil Procedure. It is therein provided that a receiver may be appointed by the court in which an action is pending, or by the judge tliéreof, in various cases, and among others: — “ 5. In the cases where a corporation has been dissolved, or is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights.” It is not necessary to refer to other grounds for the exercise of the power of appointment, because it is distinctly admitted by respondent and his counsel that the order here in question finds its sole support in the clause just quoted. The learned judge of the superior court, respondent here, in ruling upon the motion for a receiver, prepared and filed a written opinion, to which we have been referred as containing the essence of the argument on his behalf respecting the question under consideration, and we know of no better way to state the position for which he contends than to quote the opinion in full. It is as follows:— “It was lateljr decided here that the corporation defendant had grossly abused its corporate franchise,— united itself with the Sugar Refinery Company in maintaining a monopoly of the article of refined sugar, destroying competition in its production, deteriorating its quality, and arbitrarily increasing its cost to consumers. Judgment of forfeiture of its corporate charter and the imposition of a fine of five thousand dollars followed. “The attorney-general now applies for the appointment of a receiver of the corporate estate and effects. “1. It is to be observed, in limine, that the application for a receiver in a case of this impression is not to be dealt with as one made to a court of equity in the exercise of its preventive jurisdiction. “The proceeding is for a forfeiture. That circumstance would of itself be fatal to an application made to a court of equity for a receiver; for equity never, under any circumstances, lends its aid to enforce a forfeiture or penalty, or anything in the nature of either. “ As observed by Chancellor Kent in Livingston v. Tompkins, ‘It may be laid down as a fundamental doctrine of the court that equity does not assist the recovery of a penalty or forfeiture, or anything of the nature of a forfeiture.’ (4 Johns. Ch. 431; 8 Am. Dec. 598.) “ The proceeding is now, as in its inception, distinc- . tively at law, and, as observed by the learned counsel for the defendant, ‘ without a single incident of a court of equity connected with it’; the information in the nature quo warranto with which it began, the judgment which followed, and the present application for a receiver, are but the successive steps taken in an action at law, and therefore to be governed by rules of mere law, and wholly irrespective of equitable consideration. “ Whether the receiver shall be appointed is dependent upon a statutory condition of fact, — the fact that the corporation has forfeited its corporate rights. “The Code of Civil Procedure, section 564, so far as pertinent to the case, is as follows: ‘A receiver may be appointed .... when a corporation .... has forfeited its corporate rights.’ And that the defendant is precisely in that category is the purport of the decision already rendered. “Under the New York code, sections 1798-1801, a receiver is provided for in the judgment itself; under the California code, by an order entered subsequent to judgment. The difference is practically but one of sequence; the principle common to both statutes is, that an ascertained forfeiture implies a receiver. So it was substantially ruled in New York, in 1865,— the statute of that state being then much the same as ours, —in People v. Washington Ice Company, that an application for a receiver, made by the attorney-general before forfeiture ascertained, was premature, and not to be entertained by the court. (18 Abb. Rep. 383.) “ Recurring, then, to the statute of this state (Code Civ. ■Proc., sec. 564), the language is, that upon forfeiture a receiver may be appointed, etc. Now, though the word ‘may’ is but permissive in ordinary signification, it here means ‘ must/—a receiver must be appointed, etc. That this is the settled rule of interpretation is pointed out in • Potter's Dwarris, text and note, page 220. It is there said as follows: ‘“May,”in a statute, means “must” whenever .... the public have an interest in having the act done which is authorized by such permissive language’; again, ‘ Words of permission shall, in certain cases, be obligatory; when a statute directs the doing of a thing for the sake of justice, the word “may” means “ shall.”’ So in Newburgh Turnpike Company v. Miller,Chancellor Kent observed as follows: ‘And in respect to statutes, the rule of construction seems to be that the word “ may” means “must” or “shall,” .... in cases when the public interest and rights are concerned, and when the public have a claim de jure that the power shall be exercised.’ (5 Johns. Ch. 113; 9 Am. Dec. 274.) “That the public have an ‘interest/ that the doing of a particular thing is ‘for the sake of justice/—change ‘ may ’ to ‘ must’; convert a word of permission to one of obligation. This principle is peculiarly applicable to the circumstances of this case. “To guard the public interest and vindicate justice is the distinctive purpose of this proceeding by the attorney-general; to maintain that a corporation, as being but a creature of the law, must obey the law,— cannot be permitted to violate it with impunity; that its stockholders must respect theobligation they assume to the public when they sought and accepted their franchise at the hands of that public; that they must observe the policy upon which the commercial police power of the state proceeds, —the policy which, notoriously disfavoring restraint of trade, absolutely forbids corporations to embark in monopoly in an article classed among the necessaries of human life,—these features characterize this as a case of grave public interest, and one in the vindication of which the court is bound to employ all the powers provided by the law, one of which is the power to appoint a receiver of the estate and effects of the delinquent corporation. “2. Nor is this conclusion, founded as it is upon the text of the Code of Civil Procedure, already referred to, inconsistent with section 400 of the Civil Code, to the effect that stockholders in a dissolved corporation may, in the discretion of the court, be permitted to administer and wind up its business affairs. “In my judgment, this provision has reference only to cases of voluntary corporate dissolution. .A similar provision is found in the Revised Statutes of the state of New York (3769, sec. 77), and is there limited to cases of voluntary dissolution, as in the nature of things it ought to be here, under the true construction of our statute. “ In cases of voluntary corporate dissolution, the stockholders are without fault, — or may be, —■ therefore, the court has a discretion to permit them to hold and distribute the corporate assets; but this is not such a case. Here the corporate franchise has not been voluntarily surrendered, but has been forfeited because of the mis- _ conduct of the entire body of the stockholders already ascertained,—in fact become the distinct ground upon which the forfeiture proceeds. “ For, as pointed out in my opinion heretofore filed in this case, the judgment in this action, though in form one against the corporation, is in fact against the stockholders, who, as there said, were the actual owners of the corporate franchise, a forfeiture of which was adjudged. The misconduct by which the corporate charter was lost was, therefore, the misconduct of the stockholders sued and making defense here by their corporate name, —American Sugar Refinery Company. “As observed by Mr. Chief Justice Nelson in People v. Kingston and Middletown Turnpike Road Company, ‘ Though the proceedings by information be against the corporate body, it is the acts or omissions of the individual corporators that are the subject of the judgment of the court. The powers and privileges are conferred and the conditions enjoined upon them; they obtained the grant and agreed to perform the conditions,’ etc. (23 Wend. 205; 35 Am. Dec. 551.) “ Upon this view it would indeed have been somewhat singular had the Civil Code conferred upon stockholders thus convicted of the breach of one important trust the immediate exercise of another trust, and one in itself of no slight importance,—the trust of administering and distributing the assets of the dissolved corporation. Such inconsistency is not to be attributed to that code. Beside, it will be seen, upon looking into the decisions at large, that such a practice has never been pursued by the courts. Stockholders whose ascertained misconduct has already operated a forfeiture of the corporate franchise have never been permitted to assume the administration of the corporate assets. Even in cases of voluntary dissolution, — cases in which no malfeasance of the stockholders appeared, — inquiry has often been made by the court as to whether the dissolution had in point of fact been brought about by the misfeasance or mismangement of the particular person seeking to become a trustee of the corporate affairs. I must therefore decline to permit the offending stockholders here, or their nominees, to become the trustees of the corporate assets. “3. But one other question remains to be considered, which will now be stated. “ Au appeal from the judgment of forfeiture has been taken, — taken and perfected in such a form as to stay the judgment, pending the appeal, if that be possible. The judgment was rendered here on the sixth day of January; on the 8th, this application for a receiver was made and set down for hearing on the 10th; was actually heard on the twentieth day of January; the appeal was taken on the 18th, while the application was yet pending, and some two days before it was submitted for decision. “It is now claimed that the judgment is stayed by the appeal, and that, as a consequence of such stay, the power of the court to appoint a receiver has ceased. “But, in my opinion, no appeal, in whatever form it be taken, can operate a present stay of a judgment of the. character of the one rendered in this case. To hold that it can is to imply that a corporation already dissolved for ascertained corporate abuses may by this means practically rehabilitate itself at pleasure, — resume its proper corporate existence,—despite the judgment, and so continue its misemployment of its franchise for an indefinite period of time. The correctness of a construction leading to such results may well be doubted. “But waiving this, and assuming that the judgment has been stayed by the appeal taken, it would not follow • that the authority to appoint has been superseded because of the appeal. The subject of appeals, as well as their effect when taken, is governed by the Code of Civil Procedure (sec. 946). An appeal ‘stays all further proceedings .... upon the judgment, .... or upon the matters embraced therein; .... but the court .... may proceed upon any other matter embraced in the action/ etc. “That the appointment of a receiver is a matter ‘embraced in the action’ has already been pointed out in connection with section 564 of the same code; the appeal from the judgment does not suspend the power to appoint, unless the appointment be a matter embraced in the judgment, which it is not (as upon inspection of the judgment will appear), or is itself distinctively a proceeding ‘upon the judgment.’ That the appointment of a receiver in a cause is not a proceeding upon the judgment in that cause, but is merely ancillary in character, is understood to have been often ruled in our courts. It is not necessary for me; however, to cite the cases nor to enter now upon an analysis of the text of the statute, because I consider the recent ruling in Baughman’s case 72 Cal. 572, as directly in point in support of the power. An appeal from the judgment had been taken in that case, yet the authority of the court over the general subject of receivership appears to- have been upheld, notwithstanding the pending appeal from the judgment. In that case it ivas the power to remove which was immediately in question; here it is the power to appoint; but these powers must co-exist; any construction of the statute which would uphold either must necessarily uphold the other. “The conclusion reached is, that the application must be granted, and a receiver appointed; an order to that effect will now be entered. “ William T. Wallace, Judge. “ Dated February 17, 1890.” As we cannot accept the conclusions reached in this opinion, we will state as briefly as possible in what we think their unsoundness consists. The assumption which forms the basis of the entire argument is, that the appointment of a receiver to administer its assets is one of the penalties designed, and in effect prescribed, by the legislature as part of the punishment to be visited upon the stockholders of a corporation, which by any misconduct of its own has incurred a forfeiture of its charter. There is, in our opinion, little to justify this assumption, even in the statutes of New York, upon the supposed construction of which so much reliance is placed. But if such were the declared or plainly implied policy of that state, the significant fact remains, that our statutes not only contain no semblance of such a declaration, but that our legislature, in framing the law of this state, while looking to the statutes and codes of New York for a model and guide, has deliberately rejected every provision from which such an implication might arise, and in place thereof has substituted one of opposite import. In order to a due appreciation of the force and meaning of these statutes, it is necessary to consider, for a moment, the subject with which they deal. When a corporation ceases to exist, from whatever cause, whether from lapse of time, voluntary dissolution, or judgment of forfeiture for neglect or abuse of its powers, it necessarily results that its property is left to be disposed of according to law. Even in those times w'hen the doctrine prevailed that such of its property as did not revert to its grantors was forfeited or escheated to the crown, some officer exercising a general authority under the common law or statutes, or invested with a special authority for the occasion, was charged with the duty of collecting the assets for the benefit of the king, or his donee; and since it has come to be recognized everywhere that, upon t.he dissolution of a trading corporation, its property neither reverts to its grantors nor escheats to the state, but belongs, after payment of its debts, to those who were stockholders at the date of dissolution, the appointment of some officer with the same or more minutely defined authority is a recognized necessity. Some means must be provided for winding up the corporation and distributing its assets according to the equitable rights of those interested. In the absence of any statute regulating the matter, a court of equity would have the undoubted right, in a proper proceeding instituted by a creditor or a stockholder, to appoint a receiver to administer the property. But in many of the states, statutes have been passed expressly providing for the appointment of receivers, or trustees exercising the same functions, though sometimes called by other names. In all cases it is made their duty to collect the assets, pay the debts, and distribute the surplus pro rata to the stockholders. As this is precisely what a court of equity would have done in the absence of a statute, it is to be inferred that the motive of such legislation has been to accomplish some other object, — some object, that is to say, for which express legislation was necessary. This inference is fully justified and amply borne out by reference to the different statutes. They seem to have been enacted with the object, in some instances, of abrogating the old law of forfeiture, and reversion; in others, of committing the administration to other courts than courts of equity; in others, to provide general and uniform rules of procedure, as to giving notice to creditors, etc., to take the place of rules of court and specific orders to be made by the chancellor in each particular case; in others, to keep the matter out of the courts altogether, as by allowing the dissolved corporation to continue its existence for a term for purposes of liquidation, but for no other purpose. The whole mass of this legislation seems to be pervaded by the one idea of simplifying, expediting, and cheapening the means of accomplishing the one object of transferring to the stockholders of a defunct corporation their full share of its surplus assets. There is, from beginning to end, no suggestion of added penalites or punishment after death. Now, to revert to the New York statutes in force at the date of the decision in People v. Washington Ice Company, cited in the opinion of Judge Wallace. They provided, as ours do, for both voluntary and involuntary dissolution of corporations, and in express terms directed the appointment of receivers in all cases, whether voluntary or involuntary; they also contained minute and specific directions as to the duties of receivers, notice to creditors, fees and commissions, settlement of accounts, etc., very similar to our statutes regulating the proceedings of executors and administrators. The object of such legislation is apparent, and clearly it is not the infliction of penalties, but merely the conservation of rights. In view of these provisions of the New York statute, it is difficult to see how the general principle can be deduced from the decision referred to that “an ascertained forfeiture implies a receiver.” That was not the question litigated in the case, and was not decided. The point decided was, that in an action to forfeit a charter a receiver could not be appointed until after judgment dissolving the corporation; in other words, that there is no forfeiture in the sense of the statute until the judgment of dissolution is entered. All that this implies is, that after judgment a receiver may, not that he must, be appointed, and therefore the implication falls short of what the statute under consideration expressly enjoined, viz., that it should be “the duty of the attorney-general, immediately after the rendition of such judgment [of forfeiture], to institute proceedings for that purpose” (the appointment of a receiver). (Voorhies’ Code, sec. 444.) Nothing, therefore, can be gained for the argument by reference to this decision. It merely construes the New York statute on a point not in controversy here. And even if it had been otherwise, the question would have remained, whether our law is the same in substance as the law of New York. The opinion of the superior court assumes that it was “much the same as ours.” We think, on the contrary, that the points of difference between our law and that of New York are much more striking and manifest than the points of resemblance. The laws of New York, it is true, recognize, as our laws do, and as, in the nature of things, every law on the subject must, the necessity of providing some means of administering the assets of a defunct corporation, and the propriety, in the absence of other provision, of appointing a receiver for that purpose; but there the resemblance ends. In Hew York, as we have seen, there was no other provision, and ’the appointment of a receiver was made obligatory in all cases of dissolution, whether voluntary or involuntary. That was the rule, to which there was no exception. Under our codes, on the contrary, the rule is not to appoint a receiver, but to leave the whole matter of liquidation and distribution to the exclusive control of the directors of the corporation in office at the date of dissolution. The appointment of a receiver is the exception, not the rule, and is not to be made unless some party interested, either a creditor or a stockholder, can show that for the protection of his rights the appointment of a receiver and the administration of the assets under the control and superintendence of a court of equity is necessary; and even then no receiver will be appointed upon his ex parte application without requiring ample security by his undertaking with sufficient sureties for all damages that may be caused by the appointment if it shall turn out that it was made without sufficient cause. In support of this statement we refer to the following provisions of the codes:— Sections 399 and 400 of the Civil Code are as follows:— “Sec. 399. The dissolution of corporations is provided for: 1. If involuntary, in chapter 5 of title 10, part 2, of the Code of Civil Procedure. [Secs. 802, 810.] 2. If voluntary, in title 6, part 3, of the Code of Civil Procedure. [Secs. 1227-1233.] “Sec. 400. Unless other persons are appointed by the court, the directors or managers of the affairs of such corporation at the time of its dissolution are trustees of the creditors and stockholders or members of the corporation dissolved, and have full power to settle the affairs of the corporation.” Sections 565 and 566 of the Code of Civil Procedure are as follows: — “ Sec. 565. Upon the dissolution of any corporation, the superior court of the county in which 'the corporation carries on its business or has its principal place of business, on application of any creditor of the corporation, or of any stockholder or member thereof, may appoint one or,more persons to be receivers or trustees of the corporation, to take charge of the estate and effects thereof, and to collect the debts and property due and belonging to the corporation, and to pay the outstanding debts thereof, and to divide the moneys and other property that shall remain over among the stockholders or members. “Sec. 566. No party or attorney or person interested in an action can be appointed receiver therein, without the written consent of the parties, filed with the clerk. If a receiver be appointed upon an ex parte application, the .court, before making the order, may require from the applicant an undertaking, with sufficient sureties, in an amount to be fixed by the court, to the effect that the applicant will pay to the defendant all damages he may sustain by reason of the appointment of such receiver and the entry by him upon his duties, in case the applicant shall have procured such appointment wrongfully, maliciously, or without sufficient cause, and the court may, in its discretion, at any time after said appointment, require an additional undertaking.” It will be observed that section 399 of the Civil Code refers to those parts of the Code of Civil Procedure which provide for involuntary as well as voluntary dissolutions, and that section 400, by its terms, applies as well to one kind of dissolution as to the other. By its own unaided force, without the intervention or any necessity for the intervention of a court, it makes the directors managers of the affairs of the corporation and trustees for the creditors and stockholders, with full power of settlement. These trustees, like trustees in general, are of course amenable to the jurisdiction of a court of equity, and may be called to account there for any neglect of duty or abuse of power. But until they are so called to account in an independent action or proceeding by a party in interest, no couit has any excuse for interference; and if they are sued and brought into court without sufficient cause, even by a creditor or stockholder, they will recover costs. But in the opinion of the superior court these provisions of our statutes are, upon their true construction, to be limited to cases of voluntary dissolution. It seems to us that the terms of the law are too plain in an opposite sense to admit of construction, and even if it were otherwise, that the reasons given for the construction adopted are wholly insufficient. In section 399 of the Civil Code, separate reference is made, first, to cases of involuntary dissolution, and second, to cases of voluntary dissolution. Then, right on the heels of this reference follows the provision for the settlement of the affairs of “such corporation.” If it was the intention of the legislature to limit this provision to cases of voluntary dissolution, nothing could have been easier or more natural than to say so. And if it were true that this section of our code is similar to the section cited from the Revised Statutes of New York (3769, sec. 77), and that that section is limited to cases of voluntary dissolution, the fact that our legislature has adopted the provision without the limitation would be a strong circumstance indicative of an intention to make its operation general. But in truth the two sections are not substantially the same. Section 400 of our Civil Code, as is apparent, provides a means of settlement of the affairs of a dissolved corporation without the intervention of a court, unless such intervention is specially invoked, and that is its whole scope. The section cited from the Revised Statutes of New York is part of a scheme in which the rule is to appoint a receiver in all cases; and it merely provides that any of the directors, trustees, or other officers of such corporation, or any of its stockholders, may be appointed receivers. It is not by any means clear, moreover, that this provision was limited to cases of voluntary dissolution. It is true that it is found in an article relating to voluntary dissolutions, but that article is by reference made part of the law of involuntary dissolution. The very section of the New York Code of Civil Procedure, section 444, which enjoins upon the attorney-general the duty of applying for a receiver whenever the charter of a corporation has been forfeited at the suit of the state, makes the article relating to voluntary dissolutions the measure and limit of the power of the court “ to restrain the corporation, to appoint a receiver of its property, and to take an account, and to make distribution thereof among its creditors”; from which it is perfectly evident that the legislature of New York intended no discrimination against the stockholders of a corporation which had forfeited its charter by misconduct; for if they were to enjoy every advantage in the management and distribution of their property that the law afforded to stockholders in corporations voluntarily dissolved, how can it be claimed that the law was framed with a view to punishment in one case, unless that was its object and effect in all cases ? It is therefore plain that if any foundation exists for the notion that the appointment of a receiver, in case of a forfeited charter, is part of the punishment prescribed for the offenses of the corporation, that foundation must be sought elsewhere than in the statutes and decisions of the state of New York. Where, then, is it to be found? The first general consideration suggested in the opinion of the superior court is, that “it would indeed have been somewhat singular hád the Civil Code conferred upon stockholders thus convicted of the breach of one important trust the immediate exercise of another trust, and one in itself of no slight importance,—the trust of administering and distributing the assets of the dissolved corporation. Such inconsistency is not to be attributed to that code.” We admit that no inconsistency should be attributed to the law; but before we construe a section of the code contrary to its obvious meaning, we should be very certain that such construction is necessary, in order to prevent a conflict with some other provision of controlling force, or some legal principle of general application. It is not pretended that the literal purport of section 400 of the Civil Code and section 565 of the Code of Civil Procedure conflicts with any other statutory provision; but the idea seems to be, that it is absurd to suppose that the legislature would have left to the directors of a corporation convicted of violating their -duty to the people of the state the power and discretion to pay their own debts, and divide their own property, subject to the right of a court of equity to interfere and compel them to proceed properly, if any occasion for such interference should arise. We confess that there does not appear to us to be any absurdity in this supposition. Because a corporation has violated its duty to the public, it does not follow that its members cannot be trusted to look out for their own interests. Quite the contrary; for it is usually a too exclusive regard for their own interests that constitutes their dereliction to the public. As to creditors, their interests must in most cases be opposed to the appointment of a receiver. They will be paid more quickly and more certainly without a receiver than with one. If there is any one thing more certain than another, it is that the appointment of a receiver implies a material diminution of the fund out of which creditors are to be paid. For, in the first place, the fees of the receiver, his counsel and assistants, are to be subtracted. Then the estaj must, in many cases, as it has been in this case, be condemned to unproductive idleness and disuse, and exposed to danger of loss and dilapidation from rust and decay during the long and tedious progress of the legal proceedings that are necessarily entailed. And all this time the creditors must wait and look on, while the fund upon which they rely for payment is being depleted by the processes above referred to. On the other hand, supposing the affairs of the defunct corporation to he under the control of its late directors as trustees for its creditors and stockholders, the creditors have nothing to do but present their demands and receive payment in the ordinary course of business, or if payment is refused or delayed, they may proceed to enforce their demands. How much better this is for the creditors than to have to wait upon the motions of a receiver and the court, under whose order he acts, every one knows who has had any experience of the two methods of settling the business of a partnership or a corporation. And then it is, as Ave have seen, always at the option of a creditor or stockholder to have a receiver, if they can allege facts showing that a receiver is necessary. So far, therefore, as the rights and interests of the sole beneficiaries of the trust are concerned, there is no need to construe section 400 of the Civil Code and section 565 of the Code of Civil Procedure contrary to their express terms, in order to rescue the legislature from the imputation of having enacted an absurdity. On the contrary, the rule which they prescribe, according to their natural and obvious construction, by which they apply as well to cases of forfeiture of charter as to cases of voluntary dissolution, is most salutary, so far as the beneficiaries are concerned, and such construction must prevail, unless, indeed, it be true that the paramount interests of the people of the tate demand a different construction. This proposition that the people of the state have an interest in the appoin meat of a receiver, whenever the charter of a corporation has been forfeited, was decided adversely to the contention of the respondent at an early stage of these proceedings in ruling upon a preliminary objection made by counsel for the state, who appeared specially for that purpose, — an objection founded upon a clause of the twenty-eighth rule of this court, which reads as follows: “In case any court, judge, or other ofiicer, or any board or other tribunal, in the discharge of duties of a public character, be named in the application as respondent, the affidavit or petition shall also disclose the name or names of the real party or parties, if any, in interest, or whose interest would be directly affected by the proceedings, and in such case it shall be the duty of the applicant obtaining an order for any such writ to serve, or cause to be served, upon such party or parties in interest a true copy of the affidavit or petition, and of the writ issued thereon, in like manner as the same is required to be served upon the respondent named in the application and proceedings, and to produce and file in the office of the clerk of this court the like evidence of such service.” Neither the petition nor the writ herein was served upon the state or its attorneys, and the objection made in behalf of the state was, that the hearing could not proceed, and that the alternative writ must be quashed, for the reason that it appeared on the face of the petition that the state was the real party in interest, or whose interest would be directly affected by the proceedings. The court, however, were unanimously of the opinion, and so decided, that the state had no interest to lie affected, and that the only persons interested were the creditors and stockholders of the corporation. It must be confessed, however, that when this ruling was made we did not understand, and of course did not consider, the real position of respondent with respect to this matter. It did not occur to us, and if the point was suggested in the course of the argument upon -this preliminary objection, it failed to impress us at the time, that any person could have an interest in the appointment or removal of a receiver, except those who would be entitled to share in the distribution of the fund committed to his control; and as it was conceded that the state had no interest in the fund, we naturally concluded that the interests of the state could not possibly be affected by any result of these proceedings, and ruled accordingly.- But in the light of the fuller argument made at and since the hearing, we perceive that the real claim of the state remains to be stated and considered. Before, however, proceeding to this discussion, we take occasion to say a few words as to the proper construction of the rule of court above cited. It does not, as counsel seem to suppose, require that the state should have been made a formal party to this proceeding, by being named as a defendant in the petition or writ, but only that the names of the parties really interested should be disclosed by the petition, and that service of a copy of the petition and writ should be made upon them. {Baker v. Superior Court, 71 Cal. 583.) The effect, therefore, of a failure to serve such parties would not be an abatement of the whole proceeding, but, at most, to require a postponement of th