Hammond v. Hudson River Iron & Machine Co.

C. L. Allen, Justice.

The relief asked for in the notice of motion is various. The first prayer is for the appointment of a receiver, in this action, of the property and effects of the Hudson River Iron and Machine Company, for the benefit of all the creditors of said company, in proportion to their debts respectively, pursuant to the complaint and petition. In considering the motion, I shall lay out. of view entirely the charge of fraud, so far as defendants, Beach and Hears, are concerned. That is a matter not to be tried on affidavit or on this motion, but on the trial, if any is hereafter had.

The important question that presents itself for consideration *33is, whether a corporation can be proceeded against, like an individual debtor, under § 292 of the Code %

That section does not speak of corporations, but only of the judgment debtor; and § 294, for the first time, names corporations, and provides that a judge, in certain cases, may make an order requiring such corporation or member thereof, to appear at a specified time and place, and answer concerning any property which may be in the hands of such corporation belonging to the judgment debior. It would seem, from the entire silence of § 292, that corporations were not intended to be included within its provisions ; and were it not for the general section of a statute, enacting that wherever the term “ person ” was used in the Revised Statutes, it should be held to include corporations as well as individuals, and from the remarks of the Chancellor in Morgan agt. The New- York & Albany Railroad Company, (10 Paige, 290,) I should be inclined to come to that conclusion. But conceding that the section would, under certain circumstances, and might be construed to include corporations, I am of opinion that it does not embrace those which are insolvent.

It has been well remarked that § 292 was a substitute for the old creditors’ bill; and'in the case just cited, it was held, that a judgment creditor who filed a bill to obtain his debt out of the property and effects of the corporation, after the return of an execution unsatisfied, must proceed, according to the provisions .of the Revised Statutes relative to proceedings against corporations, in equity.

The 36th section of that act (2 R. S., 463; 4th ed., 705, § 44,) declares that “ Whenever a judgment at law or a decree in equity shall be obtained against any corporation incorporated under the laws of this state, and an execution issued thereon shall have been returned unsatisfied in part or in the whole, upon the petition of the person obtaining such judgment or decree, or his representatives, the supreme court may sequestrate the stock, property, things in action and' effects of such corporation, and may appoint a receiver of the same.”

The next section declares, that upon a final decree on any *34such petition, the court shall cause a just and fair distribution of the property of such corporation, and of the proceeds thereof, to be made among the fair and honest creditors of such corporation, in proportion to their debts respectively, who shall be paid in the same order as provided in the case of a voluntary dissolution of a corporation. Section 38 enacts, that whenever any incorporated company shall have remained insolvent for one whole year, or for one year shall have failed and neglected to pay and discharge its notes, it shall be deemed to have surrendered its rights and privileges, and shall be adjudged to be dissolved.

The defendant, Beach, swears that to his knowledge and belief, the company was not insolvent on the 28th of January last, but admits that it was so insolvent on the 26th of May last; but he does not deny, nor does Hears, the allegations in the complaint and petition, that the company had, previous to the 30th day of January, 1854, refused payment of all, or some of its notes. Besides, it appears from the papers, on both sides, that the defendant Beach’s execution was returned unsatisfied, and that his case comes wholly within the provisions of section 36. These sections are not repealed by the Code, nor are they inconsistent with it. Indeed, section 411 seems to have been intended to preserve them entire, and to exempt proceedings as against corporations from its operation; and the case of Dambman agt. The Empire Mills and others, (12 Barb., 341,) intimates the same doctrine. I think, therefore, that the proceedings of defendant, Beach, under section 292, do not entitle him to a preference over the other creditors of the corporation; and that he, with all the other creditors, must be subject to the provisions of the several sections above, recited. It is contended by defendants, that if Beach obtained no preference by the supplementary proceedings, that relief cannot be granted by this motion, but that the remedy'was by appeal. These proceedings were ex parte by the judgment creditor. Plaintiffs were not a party to them, and had no opportunity of appealing ; and, I think, can avail themselves of this remedy.

*352. Another claim for relief is founded upon the position taken by the plaintiffs’ counsel, that the defendant, Beach, cannot acquire the interest of an insolvent corporation, to a right by contract, in real estate, under the provisions, 1 R. S., p. 744, §§ 4, 5, 6, any more than he can obtain a preference under section 292. If the former position is correct, that the proceedings must be regulated by the provisions of the statute before recited, it would seem to follow that this view is tenable. At all events, for the purposes of this motion, I will hold it to be so, reserving my final opinion for a future state of the cause. (See 10 Paige, 290; 15 Barb., 62 ; 6 Paige, 482.)

I think, however, that under section 122, the plaintiffs might apply to be made parties to Beach’s suit, to recover the real estate. But as the rights of all can be protected under the present action, I think it most advisable that all other suits be stayed, until the determination of the present one; and, if necessary, a notice must be published requiring all the creditors to exhibit their claims, and become parties to the suit within the time required by section 56. (2 R. S., 466 ; 4th ed., 708, § 64.)

As to the appointment of receiver, I perceive no good objection to retaining Mr. Bennett. He appears to be in no wise connected with the company, and is shown to be a proper and suitable person. Besides he has proceeded so far in the execution of the duties of that office, as to have probably made himself well acquainted with the affairs of the company, and will thus be able to discharge the trust in a manner more beneficial to the creditors, than a stranger. As it is probable that the undertaking which he has executed, will not be valid and binding under the present proceedings and appointment—he must renew his undertaking within 20 days, and file it with the clerk of this court in Washington county—and he is to retain in his hands, or invest as the court shall hereafter direct, all moneys and assets, and property which he has received or shall hereafter receive, belonging to the company, and is not to pay over any money to any person, except by the order of the court— *36but is to be at liberty to apply for instructions to the court, from time to time, as he shall be advised.

The defendant Beach is to be, in the meantime, restrained from prosecuting either of his actions commenced against the defendant, the company, and the Fort Edward Manufacturing Company; and, also, from any further action under his supplementary proceedings, until the further order of the court—and the plaintiffs are to- be at liberty to amend their complaint, by making the receiver, and such other persons, parties, as they may deem advisable. Ten dollars costs of this motion to abide the event of the action.

Order accordingly.