Croll v. Empire State Knitting Co. , 45 N.Y.S. 680 ( 1897 )

Landon, J.:

Pending the actions in which plaintiff recovered his judgments, the defendant corporation made á general assignment for the benefit of its creditors without preferences. Having perfected his judgments, and issued executions thereon which were returned unsatisfied, the plaintiff commenced this action in New York county, and procured in that county a short order to show cause why a temporary receiver should not be appointed. The defendant’s legal residence is in the county of Schenectady, its principal office being located there. The defendant not appearing upon the motion, a temporary receiver was appointed as upon default November 2, 1896. On November 19, 1896, the place of trial of this action was "changed by an order duly made, from the county of New York to the county of Schenectady. Thereupon 'the defendant, upon affidavits excusing its default and showing the facts above stated, moved at a Special Term in the fourth judicial district, which embraces, the. county of Schenectady, to open its default, and for leave to oppose the motion for the appointment of a temporary receiver. The plaintiff in opposition read an affidavit, charging the general assignee of the defendant with misconduct in disposing of the property of the corporation, and also an order granting leave to the temporary receiver to bring actions against the defendant and its general assignee to set aside .the assignment as invalid on its face, and without authority under the law, and also to remove the assignee for misconduct. The Special Term, November 28, 1896, granted the motion from which this appeal is taken. On December 1, 1896, the plaintiff filed with the assignee a claim for. the ■amount due him upon his judgments against the defendant, at the same time giving notice that while he demanded his proportionate share of the assets, he assailed the validity and legality ■ of • the proceedings taken by the assignee for their distribution, ' The ■defendant moves to vacate this appeal, alleging that by presenting his claim to the assignee, the plaintiff has recognized the validity of the assignment.

•We think the motion to dismiss the appeal should be, denied.

If the-general assignment is good, the plaintiff is entitled to his distributive share under it; if it is bad, he is entitled to have a receiver appointed, and thus, obtain his distributive share. As a judgment creditor .he should be permitted to resort to whoever, for the time being, is charged with the administration of the estate of his debtor, without thereby foreclosing ■ any right he ■ may have to object to the misconduct of the assignee or to secure a more satisfactory-administrator, whether assignee or receiver. ■ ■ '

But we think the corporation defendant' had the' right to make a general assignment for the benefit, of creditors without preferences. At common law tins right existed. (Vanderpoel v. Gorman, 140 N. Y. 568.) It was in effect forbidden by the Revised Statutes prohibiting transfers of its property by the insolvent corporation, or its officers in contemplation of insolvency. , (1 R. S. 603, § 4.) This provision was repealed' by the Stock Corporation Law of 1890 (Chap. 564, § 48), and the- latter act w;as amended by chapter 688, section 48, Laws of 1892, which provides

“Eo corporation which shall have refused to pay any of its notes or other obligations when due * * * ■ shall transfer any of its ■property * * * for the payment of any debt: or upon any • other consideration than the full value of the property paid in cash. Wo conveyance, assignment or ira/nsfer of am/y property of a/ny sioch . corporation Toy it * * * when the corporation is i/nsolment, or its i/nsolvency is 'imminent, with the intent of giving a preference to any particular creditor over other creditors of the corporation shall Toe vaTÁdP ' .

Thus - the inference is that the cpmmon-law right to make an assignment is restored, subject to the condition that the assignment must be without preferences. (Home Bank v. Brewster & Co., 17 Misc. Rep. 442; S. C., 15 App. Div. 338; Bishop on Insolvent Debtors [3d ed.], § 119.) Such being the case, there is no occasion to appoint a receiver in sequestration proceedings, since the title to the property of the corporation is vested in its assignee and should not be divested by the appointment of a receiver except upon cause-shown. The statutory provisions for the appointment of a receiver, in an action for the sequestration of the property of a corporation, are not repealed, and, assuming that charges of misconduct against the assignee would, if established, justify the appointment of a receiver in a sequestration action, the answer here is that, upon the conflicting affidavits submitted, the Special Term did not find the charges established. These charges are not made in the complaint in the sequestration action and the assignee is not a party.

We think the change of the place of trial from New York to Schenectady county gave to the Special Term in the fourth district jurisdiction of the motion. Whether the appointment of the temporary receiver in a district other than that of the principal office of the corporation was void or voidable as an irregularity we need not decide.

The motion to dismiss appeal is denied, with ten dollars costs against the respondent, and the order is affirmed, with ten dollars costs and disbursements against the appellant.

All concur, except Parker, P. J., not sitting.

Motion to dismiss appeal denied, with ten dollars costs, and order appealed from affirmed, with ten dollars costs and disbursements.