Case ID: misc_22/html/0599-01.html
Source: Caselaw Access Project
Author: {"author": "Russell, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The First National Bank of Saratoga Springs, Plaintiff, v. The Rock City Falls Paper Co., Defendant.
    (Supreme Court, Saratoga Special Term,
    February, 1898.)
    Domestic assignment by insolvent foreign corporation — Conflict of laws — Estoppel.
    Where a corporation, incorporated in a foreign state, where an in- . solvent corporation is forbidden to make any assignment of its property, carries on business and subsequently makes a general assignment in the state of New York, containing no preferences other than those to employees, a creditor, resident in this state, and which is also the depositary of the funds of the general assignee, is, after the making of a final decree to which it was a party, and under which, it would receive a distributive share, estopped from bringing an action, in order to levy by attachment upon the funds of the general assignee, upon the theory that the assignment in this state is void because it conflicts with the laws of the foreign state relative to assignments by insolvent corporations.
    Motiokt by an assignee for the benefit of creditors to set aside an'attachment.
    W. D. McNulty, for plaintiff.
    E. T. Brackett, for assignee.
   Russell, J.

The defendant is a manufacturing company organized under the laws of the .State of Rew Jersey which prohibit an insolvent corporation from making any assignment of its property. Its industrial business was carried- on in the state of RewYork, which was permitted by the laws of Rew Jersey. Becoming insolvent, defendant made a general .assignment without preference, except to employees in pursuance of the laws of the state of Rew York. The plaintiff was "a party to the proceedings under the assignment, both as creditor and depositary of the funds of the assignee. The proceedings under the assignment went to a general accounting and a'’decree dividing the proceeds. By that • decree the plaintiff was entitled to ,a distributive share. Thereafter the plaintiff brought this action and levied by attachment upon the cash in the hands of the assignee under the legal theory that the assignment was in conflict of the laws of the state of Rew jersey, which created the corporation and, therefore, void. This motion is now made by the assignee to set aside the attachment, and allow the distribution of the funds as directed by the decree of the County Court of Saratoga county. ■

There is’no doubt that the assignment would be void under the laws of the state of Rew Jersey so far as those laws have valid operation. In the conflict of laws between two states the disposition of the property of the insolvent, as a matter in rem, is generally guided by the rules of municipal policy -as to ¡the proper division of the property of insolvents within the jurisdiction of the forum in which the controversy lies.

Where both the property-was acquired "by the corporation and the liabilities created by it within that forum, the general rules of public policy, adopted for the best interests of the citizens of the. state, should apply rather than mere questions of state comity; and it is a serious question whether .one state can create an artificial being, with permission to maize contracts and deal in property in another state and yet withhold from the other state the power to dispose of that property among the creditors in the way which seems to it just. It would be confessedly within the power of the state of Few York by general law to devote such property to the payment of creditors, irrespective of any provisions of the laws of the state to which it owed simply its formal existence; and, even if the 'grasp of the courts of this state upon the property was secured by voluntary action of the corporation itself, forbidden by the laws of the state of Few Jersey, still the general laws of the state of Few York may accept the imperfect action as a cause of distribution, as in case of insolvency, and so administer the estate.

These views- arise from the situation of this case, uncomplicated by any action of the plaintiff. That action, however, has an important bearing upoij the question to be solved. The plaintiff was duly made a party to the proceeding* in the County Court and should be bound by its decree of distribution. Fo protest in that proceeding was taken by the plaintiff, and its validity was affirmed by the acceptance of the position of depositary of the trust funds.. The decree of the county judge was final as to every conclusion embraced within the power incidental to- the performance of the duties imposed upon that court. It was one of the necessary duties of that court to say how the proceeds should be. divided, and to what share the plaintiff should be entitled. Jurisdiction of the persons of the creditors was gained by that court find the estoppel applies as forcibly under the circumstances of this case as though the plaintiff had accepted the dividend’ awarded, and then sought by attachment to 'take away the remainder left to its companion creditors.

The motion to vacate the attachment is granted, with costs.

Motion granted, with costs..