Court Opinion

ID: 5455398
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:17:40.235246+00
Date Added: 2024-06-11T08:32:37.589168
License: Public Domain

PRATT, J.
The injunction in this case did not restrain prosecution of the suit in behalf of Ilurlburt, nor did it restrain the receiver in that suit from disposing of the property, collecting the debts, and settling up the affairs of the corporation. It simply restrains the creditors of the corporation from proceeding at law. The purpose of this action ostensibly is to ascertain and enforce the liability of the officers and stockholders of the corporation and to wind up its entire affairs, under the direction of this court and through the instrumentality of a receiver, either by the one already appointed in Ilurlburt’s suit, or by one whom the court may appoint in this action. *400As an incident to an equitable distribution of the assets among all the legal creditors of the corporation, some of the judgments heretofore recovered against the corporation, and now owned by Hurlburt, are alleged to be fraudulent and void, and it is insisted that they should be set aside; still the main scope and purpose of the action seem to be as before stated.
An injunction to stay the proceedings in actions at law against the corporation is expressly given by statute.
The 56th section of the Articles of the Revised Statutes— “ Of proceedings against corporations in equity,” provides that “ whenever any bill shall be filed, or any application made, against any corporation, its directors, or other superintending officers, or its stockholders, according to the provisions of this title, the court may, by injunction, on the application of either party, and at any stage of the proceedings, restrain all proceedings at law by any creditor against the defendants in such suit.” (2 Rev. Stats., 466). This, I apprehend, is an independent provision of the statute, and not at all subject to those general provisions of the statute, in regard to the injunction to restrain proceedings in actions at law, and which require a bond to be executed, or a deposit to be made, before an injunction can be obtained.
The proceeding is not necessarily in hostility to the proceedings at law, but on the contrary it is instituted for the purpose of applying the assets of the corporation, including the liability of the officers and stockholders, to the payment and satisfaction of all the legal demands against it. This can be accomplished in most cases much more speedily and equitably in an action, through the instrumentality of a receiver, than by separate actions in behalf of each creditor. The receiver can sell the property absolutely, and is empowered to give the proper conveyances for the real estate immediately, and is not bound to wait for the time for redemption to elapse. The statute, therefore, has made provisions for what the Court of Chancery, in the exercise of its equitable powers, had previously assumed jurisdiction over, and has provided for granting an injunction, in order that its purposes may not be defeated by numerous actions at law by separate creditors of the insolvent or failing corporation. But if the amount of all judgments which may *401have been recovered, must be deposited or an undertaking for their payment must be given, to entitle a creditor or stockholder to the right to an injunction under that section, the benefit designed by the act would be very much impaired, if not rendered practically unavailing.
Such, I am quite confident, was not the design of the statute, and the injunction, therefore, should not have been dissolved for the reasons assigned by the learned judge at special term. It was argued with a good deal of force upon that argument, that as the granting of a temporary injunction was a matter of discretion for the court, the exigencies of this case did not require one; that the plaintiff’s demand was small and insignificant, compared with the amount of the judgments proposed to be stayed, and that as the defendant Hurlburt was amply responsible for any judgment which the plaintiff might recover, the injunction should not have been granted. There might be some force in this position, had not the defendant Hurlburt himself instituted a suit under the same provision of the statute, procured an injunction staying proceedings at law by the creditors of the corporation, and procured the appointment of a receiver, in whose hands the property and effects of the corporation now are. As the proceedings in that suit were not stayed by this injunction in this suit, he can suffer no detriment by it. He clearly would have no right after obtaining the injunction in this suit, to proceed at law to sell the property. He is as effectually stayed by the injunction in his suit as any other creditor. He clearly would have no right to stay proceedings at law by other creditors and proceed at law himself.
The object of the statute is to make an equal and ratable distribution of the property of the company among all the creditors. And although when judgments have been recovered before the commencement of proceedings in equity, they will of course be entitled to priority so far as the real estate is concerned, still if an injunction procured by the plaintiff in the equitable action will not stay him from proceeding at law after judgment, it would not stay him before judgment, and he might therefore commence proceedings and procure an injunction for the express purpose of enabling him to stay other cre*402ditors while he should proceed to judgment, and by that method gain a priority of lien. The statute manifestly contains no provisions for defeating the objects and purposes of its enactment in this manner. The case shows, therefore, that Hurlburt by his own proceedings is restrained from proceeding under his judgments to sell the property of the corporation, and he cannot therefore be injured by allowing this injunction to stand.
I think, therefore, that the injunction ought not to have been dissolved, and that the order made at special term dissolving it should be reversed, but without costs.