Dambman v. Empire Mill , 12 Barb. 341 ( 1851 )

By the Court,

Edmonds, P. J.

There are two prominent objections presented on this appeal to the order made at the special term. First. That the plaintiff being a creditor at large, and not a judgment and execution creditor, can not commence his suit, and ask for a receiver. Second. But if he can, still he has been anticipated by the Maynard suit.

The first objection is founded on the idea that because the statute, (2 R. S, 463, § 42, [sec. 36,]) confers upon a creditor, who has a judgment and an execution unsatisfied, the power of applying for a receiver and a dissolution of the corporation, that therefore a creditor who has not obtained a judgment has no such power. It is true that a creditor at large could not, under this section, apply by petition for a receiver; but it "by no means follows, that he could not by a suit to be brought, avail himself of the other powers of this court in respect to corporations. Those powers, as defined in this article of the revised statutes, (part 3, ch. 8, tit. 4. art. 2.) are by no means, in all cases, limited to judgment creditors; but for various purposes enumerated therein, may be exercised in behalf of general creditors. The judgment creditor has a peculiar privilege, by virtue of his unsatisfied execution, of having the property of the corporation sequestrated, a receiver appointed, and its property distributed among its creditors. At the same time, the attorney general may institute proceedings, in certain cases, for a dissolution of the corporation. And, at the same time, a general creditor may institute proceedings, either to restrain the improper exercise of certain powers, or to procure payment of his debt. The instituting of either of these proceedings does not, by any means, preclude the others, but each creditor may pursue his own remedy, as given him by the statute, and according to the circumstances of each case.

The court might, in' the exercise of its general controlling power over its proceedings, restrain the prosecution of an unnecessary number of suits, and confine its action to some one suit, where full and adequate relief could be given to all parties; but that would be a matter resting in its discretion, and none of the parties would have an absolute right to demand that it should be done, except in one case ; and that would be, where there should be a final decree in some one of the suits, for a final account and distribution among all the creditors ; in which ease a creditor would, not be allowed to bring a separate suit, because he could make himself a party to the other suit, and have all the benefit of the decree. But, with this exception, the restraining of other suits, or allowing one suit to answer for all, would be in the discretion of the court.

Until the event, when alone, other creditors than the plaintiff would have a right to control the suit, I do not see any thing to prevent any number of judgment creditors from instituting separate suits ; and much less could the mere initiation of a proceeding, by a judgment creditor, under § 36, be a bar to proceedings by the general creditor under § 33, or § 39 or § 44 ; or to proceedings by the attorney general under § 38 or §, 40.^(a) Even then, if Maynard’s suit was, in reality, and in good faith, prior to this of Dambman’s, it by no means follows that it is a bar, or that it ought to operate as such, in preventing the appointment of a receiver. The only question is, whether it would be proper for the court, in the exercise of its sound discretion, to allow Maynard’s suit so to operate, and deny a receiver in this suit. There-are two considerations which influence me to say, that such would not be proper action in the present stage of these proceedings. One is, that Maynard’s suit is not for the benefit of all the creditors ; and although it could be made so, by amendment, yet that is at the option of Maynard, whether he will amend or not. And the other is, the restriction upon the powers of the receiver, in Maynard’s suit, which forbids him to do any thing in hostility to the rights of any of - the judgment or execution creditors, and thus deprives him of a power which may be most essential to the creditors; that, namely, of inquiring into the validity of the demands which claim a preference.

This view of the case renders a minute examination of the other questions presented unnecessary; for it regards the order of the special term, extending the receivership to this suit, as valid, even if Maynard’s suit was prior in point of time and of right.

[New-York General Term, December 1, 1851.

The order must be affirmed, with costs.

Edmonds, Mitchell and King, Justices.]

(a) These references are to the sections as numbered in the second edition of the revised statutes; in the third, edition they are designated as §§ 42, 89, 45,50/44,46.