Case Name: PEOPLE v. E. REMINGTON & SONS
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1887-07
Citations: 19 Abb. N. Cas. 350
Docket Number: 
Parties: PEOPLE v. E. REMINGTON & SONS.
Judges: 
Reporter: Abbott's New Cases
Volume: 19
Pages: 350–355

Head Matter:
PEOPLE v. E. REMINGTON & SONS.
N. Y. Supreme Court, Fourth Department, General Term ;
July, 1887.
1. Receivers of corporation ; indemnity for expense of litigation against receive?•.] In an action to dissolve a corporation as insolvent, temporary receivers were appointed, and a general injunction issued against interference with the corporate property. The holders and guarantors of a corporate note applied for and procured against the receiver’s opposition a modification of the injunction so as to permit them to sell property of the corporation held as collateral to the note. Held, that the special term had power upon motion to ascertain by a reference whether the holders and guarantors, or either of them, had a valid claim against the receiver’s estate for counsel fees and other expenses incident to such litigation with the receiver, and if they had, to fix the amount. The remedy is not limited to an action against the receiver.
2. The same J The claimants’ right to indemnity does not rest upon, nor is it controlled by, the sections of the Code of Civil Procedure regulating the allowance of costs.
Appeal by tbe Importers’ & Traders’ Nat. Bank, tbe Chemical Nat. Bank, tbe American Loan and Trust Co. and B. J. Dean & Co., from that portion of an order dated August 7, 1880, made at special term and entered in the clerk’s office of Herkimer Co.-, in tbe above entitled action, by which tbe appellants were refused tbe counsel fees incurred by them in procuring a modification of a general injunction order served upon them, obtained by tbe receivers of the defendant, an insolvent corporation.
April 20, 1886, -this action was brought by tbe attorney general to procure a judgment dissolving tbe defendant (a corporation created under tbe laws of this State), because of its insolvency, and April 21,1880, Addison Brill and Albert N. Russell were appointed temporary receivers, pursuant to section 1788 of tbe Code of Civil Procedure, and at tbe same time an injunction order was issued pursuant to section 1806, restraining creditors from suing defendant, and all persons from interfering with its property. At this time three banks held defendants’ notes, amounting to §17,000, which were guaranteed by B. J. Dean & Co., as security for which certain chattels were pledged by defendant to the banks and said guarantors. The banks and the guarantors asked the receivers to pay the notes and take the property, or consent to a modification of the injunction, so that the chattels pledged might be sold to pay the notes; but the receivers declined to do either. A motion was made for an order permitting the property pledged to be sold, which was resisted by the receivers, but was granted. After the payment of one of the notes, five hundred rifles, which were, pledged as security for it, were unsold, and the guarantors claimed to hold them as security for their liability upon the two other notes, which claim was resisted by the receivers, and a second injunction was obtained restraining the hanks and the guarantors from selling the rifles ; but after a reference it was lield that the rifles were pledged as security for the three notes, and the injunction was vacated. Thereupon the banks and the guarantors asked for an order directing the receivers to pay such a sum as would indemnify them for their counsel fees and expenses in the litigation, which was denied at special term, “ on the ground that the court has no power or jurisdiction to grant such allowance in this proceeding.” From this order, the banks and the guarantors appeal.
Blandy & Hatch, for the banks and guarantors, appellants.
Thomas Richardson, for the receivers, respondents.

Opinion:
Follett, J.
It is conceded that the receivers, by denying and resisting by injunctions, the rights of the banks and guarantors, caused them considerable expense. A principal is liable to indemnify his surety, or guarantor, for such damages as directly flow from the principal's conduct. Under this rule, the estate represented by the receivers is liable to. the guarantors for such damages as were caused by the action of the receivers. Whether the estate is liable to the banks for damages is not, from the facts now before the court, entirely clear (Lawton v. Green, 64 N. Y. 326; High on Inj. § 962). The appeal book does not show whether the injunctions were issued with or without security ; as the first, at least, might' have been, under sections 1806 and 1990 of the Code of Civil Procedure. The damages caused by an injunction should be determined by the court, or by reference (Code Civ. Pro. § 623 ; High on Inj. § 962).
The special term did not deny the application of the banks and guarantors for indemnity upon the ground that the estate was not liable, but upon the ground that the court had not power, in this proceeding, or upon a motion, to award the claimants their damages. The court seems to have been led to this conclusion by the mistaken assumption of counsel that the sums claimed were by way of " costs " in the proceeding or motion. The claimant's right to indemnity does not rest upon, nor is it controlled by the sections of the Code regulating the allowance of costs. The motion for indemnity seems to have been denied solely upon the ground that it must be sought by action. Section 1807 of the Code requires creditors of the corporation to prove their claims before "a referee. The validity and amount of claims against an estate in the hands of receivers . which arise from the acts of the receivers, are not usually determined by action, but by reference. When leave is sought to sue receivers for such claims, it is the usual practice to deny the application and order a reference, as the cheapest and most expeditious mode of determining the controversy. Ho reported exception to this practice has.been found when the claimant has been willing to refer, unless the facts out of which the claim arose were so intricate, the law supposed to be applicable so uncertain, and the claim so largo as to render this summary mode of trial unsuitable ; but this is not such a case. The special term clearly had the power to ascertain by a reference whether these claimants, or either of them, had a valid claim against this estate, and if they had, to iix the amount (De Groot v. Jay, 30 Barb. 483; S. C., 9 Abb. 364; Matter of Receivers of Globe Ins. Co., 6 Paige, 102; Holbrook v. Receivers, Id. 220, 226 ; Guardian Savings Inst. v. Bowling Green Savings Bank, 65 Barb. 275 ; 1 Wait's Pr. 199, 200; 2 Id. 255).
That part of the order denying the application of the claimants to have their damages determined and paid, is. reversed, with ten dollars costs and disbursements.