Court Opinion

ID: 5459830
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:31:50.803634+00
Date Added: 2024-06-11T08:32:49.724651
License: Public Domain

By the Court, Mullin, J.
The second count or cause of action in this complaint charges in substance that the plaintiff is a creditor by judgment of the American Exchange Bank, a banking corporation, located in Hew Jersey and organized under the banking law of that state, which is substantially like the general banking law of this state. It is also alleged that said corporation, having become insolvent, was dissolved by the court of chancery of that state; that the defendant, being the principal stockholder in said bank, fraudulently abstracted the assets of said bank to the amount of some $16,000, and that the plaintiff is- the only creditor of said bank. The relief demanded is that the defendant pay to the plaintiff his *411said debt with the costs of the action, and such other or further relief as the court may deem proper.
There is a demurrer to this cause of action, on the ground that it does not contain facts sufficient to constitute a cause of action. The demurrer admits the facts alleged in the complaint.
The question which lies at the foundation of this action is this: Have the creditors of a dissolved insolvent corporation a lien on its assets for the payment of their debts ? If they have, it would not seem to be very material in whose hands the assets were, or how they came into the hands in which they are sought to be charged; unless the holder has acquired a higher or better equity to such assets than the creditor. In other words, it does not seem to me to be material whether the person holding them came by them fairly, or by force or fraud.
Have these creditors, then, of an insolvent corporation, such an equitable lien as is claimed in this case ? At common law the assets of a dissolved corporation reverted to the crown, and the debts due by it were canceled. (2 Kent’s Com. 307. Angell & Ames on Corp. 667.)
A rule so repugnant to every principle of right and justice should not be followed, unless it is imperatively required by the binding force of express adjudication. While the existence of the old rule is admitted, that it is now the law in this state, aside from the statute, may, I think, be safely denied. The provision now in force, (2 R. S. 5th ed., 597, § 9,) declaring that on the dissolution of a corporation the directors or managers, unless some other persons shall be designated, shall be trustees of the creditors and stockholders, was copied from 1 R. L. 248, § 1. This statute does not in terms create a lien of any kind on the corporate property. But it recognizes very distinctly the right of creditors and stockholders to the assets, and constitutes the directors the trustees to take charge of them for the parties entitled.
In Mann v. Pentz (3 Comst. 415) Judge Pratt asserts, in the most distinct terms, the existence of the equity, and relies, *412in support of the proposition, not on the statute But upon cases in Massachusetts and in chancery in this state.
I entertain no doubt but that creditors of dissolved insolvent corporations have a lien on the assets, for the payment of their debts.
It is insisted that if there is any right to charge the defendant with the debts of this corporation, the creditor cannot do it in his own name, hut the receiver whom the law will ■ presume to have been appointed by the court of chancery of New Jersey, on dissolving the corporation, or the state itself should be the party plaintiffs.
The defendant and the fund sought to be charged are both in this state; the plaintiff is seeking the aid of our courts to enforce a plain equity under circumstances which entitle him to relief if it can be consistently rendered. It is not alleged that the equity claimed is not recognized in New Jersey, and as that state has a court of chancery we must presume that it recognizes the existence of this equity. But we cannot presume that that court has appointed a receiver of the effects of the dissolved corporation; but if it had, it is by no means clear that he could maintain an action as such in this state. Nor has it been suggested how the state could sue, unless it was upon the ground that it owned the assets by reverter.
Where a fund exists in this state which our own citizens are entitled to have applied to the payment of their debts, the courts will detain and appropriate the fund, although the persons holding it may be accountable to a foreign jurisdiction in reference to it. The court will not, in such case, disregard the rights of other parties, but it will ascertain them and apply that portion which after such investigation is found to belong to our own citizens.
It was said, on the argument, that there is no privity between the plaintiff and the bank, to which the right of action for the fraudulent conversion of the assets of the bank belonged, and because the plaintiff cannot maintain this suit. This action *413is not sustainable on any such theory. It rests on the equity already referred to, and not on privity, or upon any assignment legal or equitable.
New York General Term,
May 7, 1860.
I am of the opinion that the second cause of action does contain facts sufficient to maintain the action, and that the demurrer to it could not be sustained. But the third cause of action is defective.
The order appealed from must be affirmed as to the third cause of action and reversed as to the second; with leave to the plaintiff to amend his complaint and to the defendant to answer; costs of the appeal to abide the event.
Sutherland, Mullin and Leonard, Justices.]