Case ID: ny-st-rep_33/html/0959-01.html
Source: Caselaw Access Project
Author: {"author": "Barrett, J. Van Brunt, P. J. Bartlett, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Michael Snow v. The Russell Coe Fertilizer Co. Appeal of Robert C. Davidge.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed October 24, 1890.)
    
    Corporations—Priority of creditors—Agreement to postpone claim.
    PT. & Co., who were creditors of the corporation, having pressed their claim for payment, the appellant, who was president ot the company, agreed not to draw or receive any salary while its affairs were liquidating, in consideration of the firm’s not pressing their claim to compulsory collection. Ileld, that as the agreement did not state the time of forbearance of either party thereto there was neither a valid consideration nor mutuality, and it could not be enforced by the receiver by way of postponement of appellant’s claim to that of PL & Co.
    (Bartlett, J.. dissents.)
    Appeal by Bobert C. Davidge from a special term order postponing payment of his claim against the defendant until all the claims of other creditors have been paid by the receiver.
    
      F. C Canline, for app’lt; Henry Sanger Snow, for receiver.
   Barrett, J.

I agree with Mr. Justice Bartlett that the promise alleged to have been made by Davidge to Nichols & Oo. is not enforceable by the receiver as the representative of the company or of its stockholders generally. But I cannot concur in the conclusion that such promise is enforceable by the receiver as the representative of Nichols & Co. The receiver does not represent any particular creditor, nor has he any privity in the disputes between individual creditors growing out of special arrangements between themselves, such as are set up in this proceeding.

If Nichols & Co. are entitled to exclude Davidge or to take for themselves the whole or any part of the dividend coming to him, they must act directly.

The receiver cannot, for their benefit, avail himself of any estoppel which may have enured to them.

But further, I am of opinion that no. case for Davidge’s exclusion, oven as against Nichols & Co., has been made out. The agreement on that hand is too vague and indefinite for enforcement. Nichols & Co. did not bind themselves to refrain from proceeding against the company for any given period, nor was the period of Davidge’s forbearance, with regard to his salary, stipulated. There was neither a valid consideration nor mutuality.

Now that the company is in the hands of a receiver, I can see no good reason for discriminating between these creditors. They should share alike. Davidge’s claim, however, is only for the sum of $1,945.87, that being the amount which had accrued at the date of the appointment of the temporary receiver.

The order should be reversed, and the receiver directed to admit Davidgo’s claim to the above extent as valid, and to pay it pro rata with the other claims against the company.

Van Brunt, P. J.

I concur with Mr. Justice Barrett upon the ground that no valid agreement has been proven.

Bartlett, J.

(dissenting).—This proceeding appears to have been instituted by the receiver of the Bussel Coe Fertilizer Com-pony, an insolvent corporation, to obtain the direction of the court in respect to the payment of the claim of Robert C. Davidge. The first paper in the appeal book is a notice of motion for the appointment of a referee “ to take testimony and report concerning the controversy between the said receiver and Robert C. Davidge, respecting the claim of said Davidge, submitted to the said receiver, for $3,279.20, which claim said receiver has disallowed.” Upon this notice an order was made appointing a referee “ to take testimony and report the same with his opinion thereupon, touching the claims in controversy aforesaid.” The evidence which appears in the appeal papers was taken before the referee; who, instead of simply reporting the same with his opinion, made findings in the form usual upon the trial of issues, followed by a conclusion of law to the effect that Robert C. Davidge was not a creditor of the defendant, and had established no valid claim against the corporation. The appellant thereupon filed exceptions to certain portions of the report, and the matter was brought to a hearing at special term, where an order was made in effect modifying the decision of the referee that the claimant was not entitled to be paid at all, and directing that his claim be paid, if sufficient assets remained in the hands of the receiver after the payment in full of all other claims against the Russel Coe Fertilizer Company. From that portion óf the order which thus postpones his claim Mr. Davidge has appealed.

The opinion of the learned judge at special term indicates that he regarded the view of the facts- adopted by the referee in his so-called findings as substantially correct. According to these findings the trustees of the defendant corporation entered into an agreement with the appellant to pay him a salary at the rate of $4,000 a year for his services as president and general manager of the company, and a'balance of $1,945.87 on account of such salary still remains unpaid. The referee’s opinion that Mr. Davidge is not entitled to receive this balance in any event, and the opinion of the court at special term that he should receive it only after the other creditors shall have been fully paid, are based upon an agreement which was made in July, 1885, between Mr. Davidge, the president of the corporation, and Messrs. George H. Nichols & Co., who were creditors of the Russell Coe Fertilizer Company.

' The firm were pressing the corporation for the payment of their claims. Mr. Davidge, the president and largest stockholder, agreed with the firm not to draw or receive any salary from the company while its affairs were being liquidated, “ in consideration of the firm’s not pressing their claim to compulsory collection.”

George H. Nichols & Co. fulfilled their part of the agreement, and did not sue the company and have not collected their demands, but still remain creditors of the corporation. 'The effect of this agreement, as held by the court below, was to defer any right on the part of Mr. Davidge to enforce his claim until after the payment of all other persons having claims against the corporation.

;As the receiver has not appealed from any portion of the order of the special term, he is not in a position to attack that part of the decision which adjudges Mr. Davidge to be a creditor of the defendant. The only question which is now presented for consideration is that which arises upon Mr. Davidge’s appeal, to wit, whether it was proper to postpone the payment of his claim for salary as president and general manager of the Russel Coe Fertilizer Company until all other claims against the company should have been satisfied.

The theory of the respondent is that the case is governed by the doctrine of Lawrence v. Fox, 20 N. Y., 268, as that doctrine has been modified by later decisions. According to this view, the receiver, as the representative of the corporation, is entitled to enforce for its benefit the promise made by Mr. Davidge to Messrs. George H. Nichols & Co., that he would not draw any salary during the period of liquidation. The learned counsel for the respondent concedes that to render the promise thus enforceable, however, it must appear either that some obligation or duty existed on the part of the promisee toward the third party, that is on the part of Messrs. George H. Nichols & Co. toward the Russell Coe Fertilizer Company, or that the promisee intended that some benefit should result to the third party from the promise, that is to say, there must have been an intent by Messrs. George H. Nichols & Co. to secure some benefit to the corporation. In the case of Vrooman v. Turner, 69 N. Y, 280, 284, Judge Allen declares that both the obligation and intent must exist in order to give a third party a right of action on the promise. In the case at bar, however, I am unable to discover either. Certainly, the firm of George H. Nichols & Co. owed no duty to the Russel Coe Fertilizer Company, and were under no obligation to it. The duty and obligation were entirely on the other side. The firm were simply creditors of the corporation. Nor can I find anything to indicate an intention on their part to benefit the company by getting Mr. Davidge to promise not to draw any salary. Their sole purpose would seem rather to have been to benefit themselves by thus increasing the amount applicable to the payment of their own claim; but it is difficult to see how this arrangement could do the company any good if it still remained liable to pay Mr. Davidge's salary afterward, as the court below has held it did.

For these reasons I do not think the promise of Mr. Davidge is enforceable by the receiver as the representative of the company or its stockholders. There is no difficulty in the way of its enforcement by him, however, to a certain extent, as the representative of the creditors of the corporation. The promise was made, not for the benefit of the creditors generally, but for the particular benefit of particular creditors, Messrs. George H. Nichols & Co. The receiver represents these creditors, and it is his duty to protect their rights. They have the right to priority in pay ment o.ver Mr. Davidge. They abstained from pressing' their claims to a compulsory collection, in consideration of his promise not to draw any salary during the period of liquidation, and he is estopped from enforcing any claim for such salary which-will operate to lessen the amount receivable by them. In other words, the appellant’s claim for salary must be postponed to the claim oMessrs. George H. Nichols & Go., but not to the claims of the other creditors of the Russell Coe Fertilizer Company.

This result can be brought about by paying Messrs. George H. Nichols & Co. just what they would receive if the appellant’s claim of, $1,945.87 were not considered as a claim against the assets in the hands of the receiver. After this has been done, the appellant will be entitled to his rateable dividend like the other creditors.

The order appealed from should be modified in accordance with the views which have been expressed, without costs to either party on this appeal.

Order reversed, and the receiver directed to admit Davidge’s claim to the extent of §1,945.87 as valid, and to pay it pro rata with the other claims against the company.