Case Name: Fay vs. The Erie and Kalamazoo Railroad Bank
Court: Michigan Court of Chancery
Jurisdiction: Michigan
Decision Date: 1840
Citations: 1 Harr. Ch. 194
Docket Number: 
Parties: Fay vs. The Erie and Kalamazoo Railroad Bank.
Judges: 
Reporter: Reports of Cases Determined in the Court of Chancery of the State of Michigan
Volume: 1
Pages: 194–196

Head Matter:
Fay vs. The Erie and Kalamazoo Railroad Bank.
Where an individual crcrlitor had filed bis bill against a moneyed corporation, obtained an injunction and the appointment of a receiver, and the receiver hart taken upon himself the trust, and o‘her ci editors hud filed their claims, it was held, that the creditor who lsa.Vfi'ed his bill, obtained (he injunction, and the appqintinenl of a receiver, was not entitled, as a matter of right, (upon being paid his demand,) to dissolve the injunction, dismiss his bill, and discharge the receiver.
There is no doubt that this court has the power, in such case, to dissolve the injunction, discharge the receiver, anti permit the party to dismiss bis bill, when it is satisfied that the interest of all concerned will be best subserved by permitting the corporation to manage its own. concerns.
The primary object of proceeding in chancery against failing corporations, is not for the purpose of dissolving the corporation, but to protect the assets for the benefit of creditors. The power to decree a dissolution of the corporation, is merely incidental.
It is the duty of the court to look into the condition of the corporation, before it will discharge the receiver, and make such order, either absolute or conditional, as the case may require.
This was an application on the part of the complainant, to dissolve the injunction granted in this case, to dismiss the bill, and discharge the receiver. A sufficient statement of the facts in the case, will be found in the opinion of the Chancellor.
Goodwin and Morey, in support of the motion.
George Mills, contra.

Opinion:
The Chancellor.
This application is founded upon an acknowledgment of payment by the creditor, and a motion on his part, to dissolve his own injunction, and discharge the receiver. No provision-is made for the payment of the expenses incurred by the receiver, or to.indemnify him against liabilities.
It is insisted that this application must be granted as a matter of right, and that the complainant and defendant having adjusted the debt claimed by the complainant, that no other persons have any interest in the matter, or any right to interpose any objections to the order asked.
If no rights, on the part of other creditors, have been ac quired under this proceeding, and the receiver has incurred no liabiiities to other creditors, this view is undoubtedly correct. To ascertain this, it becomes necessary to resort to the statutory enactments upon which these proceedings are based.
The act of June 21, 1837, (Session laws of 1837, page 307,) which is the first act bearing upon the subject, provides, that proceedings may be commenced by the Attorney Genera!, or by any creditor, and makes no distinction in the mode of proceeding,[[whether the suit shall have been instituted by either the one or the other.
Section five of the same act, provides that the receiver, upon his appointment, shall be vested, as trustee, with all the estate, real and personal, liabilities and securities, of such corporation.
The act of April 15, 1839, (Session laios, page 94,) further prescribes and defines the duties and liabilities of receivers. (See sections 11 and 17.)
This renders it necessary to examine the statute prescribing the powers, duties, and obligations of assignees. Revised statutes, page 60G.
The first section provides, that all assignees are declared to be trustees of the estate of the debtor, in relation to whose property they"shall be appointed, for the benefit of his creditors.
After this reference to the various provisions of the statute, the question recurs, may an individual-creditor, after having commenced proceedings under the statutes'before referred to, and pursued his remedy until a receiver has been appointed, and taken upon himself the trust, and until other creditors have filed their claims, and still, at this late stage of the proceedings, upon being paid his particular demand, as a matter of right, dissolve the injunction, dismiss his bill, and discharge the receiver, without any right or duty, on the part of the court, to protect the rights of the other creditors, who may have filed their claims with hipa, or to protect and save harmless the receiver, who has acted under its authority 1 I think not.
The statutes bearing upon the question, it is true, are not very explicit or satisfactory. But, from the examinations I have been enabled to give them, I cannot resist the conclusion, that, from a fair construction of their provisions, their object and intent is not solely to afford a remedy to the individual creditor to collect his demand, but that they contemplate also the security of such other creditors as may file their demands with the receiver, and thus, so far, become parties to the proceedings.
This view necessarily involves another question : Is it imperative upon the court, after the appointment of a receiver, to hold jurisdiction of the ease, and require the receiver to pursue his duties, until the concern is wound up and dissolved, although the party complainant in the suit, is satisfied, and declines further to prosecute, and when the proper prosecuting officer on the part of the state, is satisfied that the application of this severe remedy is unnecessary; and if, further, the court is satisfied that the interests of all concerned will be best subserved by permitting the corporation to manage its concerns, and that it may be safely donel The court entertains no doubt that it is vested with this power. The primary object of proceedings in chancery, against a failing corporation, is not a dissolution of its charter, for a violation, but to protect the assets for the benefit of the creditors. This power is merely incidental. This court having jurisdiction of the cause for other purposes, the legislature has also conferred the power to decree a dissolution of the charter.
But this is the proper duty of a court of law; and for this purpose, proceedings may be instituted at any time in the common law courts, for any violation of the provisions of its charter, by a corporation.
The conclusion, then, to which I arrive in this case, is, that it is the duty of the court to look into the condition and circumstances of this corporation, and to make such order, either absolute or conditional, as the case may require, unon such showing made by the parties who press this motion.