89 N.J. Eq. 409 | New York Court of Chancery | 1918
Painted Post Lumber Company is an insolvent corporation of the State of New York. After a receiver had been appointed in Few'York, application was made to this court under the pro
The receiver now seeks to settle his accounts as receiver under appointment by this court and prays for an order that he may pay the balance over to himself in his capacity as receiver appointed in New York. The New Jersey creditors object, insisting, first, that they are entitled, so far as the assets in this state are concerned, to a preference, and second, that if not this court should so control the- assets within this state as that domestic creditors will not be forced into another jurisdiction to obtain payment of the amounts to which they may be entitled from the' assets of the estate upon a general distribution.
First. Domestic creditors are not entitled to a preference. The policy of this state expressed in its statute law is not to prefer domestic creditors over foreign creditors in any case of dissolution or insolvency. Section 58, act concerning corporations, Revision of 1896, 2 Comp. Stat. p. 1637; sections 85 and 86, same act, 2 Comp. Stat. p. 1652.
The New Jersey creditors rely , upon the language of Chief-Justice Beasley in Hurd v. Elizabeth, 41 N. J. Law 1 (at p. 3), in which ease the chief-justice, speaking of the power of a receiver to sue in a foreign jurisdiction, said: “It (the power) could not be exercised in a foreign jurisdiction to the disadvantage of creditors resident there, because it is the policy of every government to retain in its own hands the property of a debtor until all domestic claims against it have been satisfied.” But the chief-justice, I think,, did not mean by “satisfied” “paid in full.” What he meant was that the court would not permit the exercise of power by a foreign receiver unless it were certain that the legal rights of domestic creditors would be protected. In Irwin v. Granite State Provident Association, 56 N. J. Eq. 244, Vice-
Second. While the receiver was appointed here after the appointment of the receiver in New York, he was appointed under the provisions of the statute, section 65, as amended, laws of 1912, page 535. The statutory procedure was followed. Under the provisions of section 75 of the Corporation act (2 Comp. Stat. p. 1648) an order was made directing creditors to bring in their claims within two months of the date of the order. Notice of such order in pursuance thereof was mailed to all of the credi tors of the company. In speaking of such an order the court of errors and appeals, in McDermott v. Woodhouse, 101 Atl. Rep. 376, 87 N. J. Eq. 615, said, arguendo: “As far as we know, the only authority for such a proceeding is section 75' of the Corporation act (Comp. Stat. p. 1648); but this can only apply to a New Jersey corporation; our courts cannot force a New York creditor of a New York corporation to submit his claim to our tribunals under penalty of losing all right to participate in the distribution of the assets.” It was not necessary for the determination of the cause then before the court that the point should be determined, and I think it must be considered dictum. It has been contended that the effect of the decision in McDermott v. Wood-
I considered the situation in Atwater v. Baskerville, 89 N. J. Eq. 121, and Dolan v. Universal Fire Brick Co., 89 N. J. Eq. 138, and held that the court might appoint a receiver under the
To the extent that there are assets within this state domestic creditors are entitled ordinarily to have their rights settled by the judicial tribunals of this state. I do not mean to infer that there may not be cases, where the claims of creditors here have arisen under such circumstances, as that, in cases of insolvency, they will be remitted to the foreign jurisdiction. I am now considering the ordinary relationship of debtor and creditor created under such circumstances as that the law of this state would apply in the determination of their legal rights. Were it not for the appointment of a receiver in this jurisdiction domestic creditors might, if the corporation were a foreign corporation, not recognized under the laws of this state, have proceeded by attachment. If the corporation was one recognized by the laws of this state, and authorized to do business here, they might sue at law. By the intervention of this court the creditors have been deprived of their ordinary legal remedies. For the remedies of
The policy of this state is well stated by the supreme court in Stone v. New Jersey and Hudson River Railway Co., 75 N. J. Law 174, to be to see to it that the assets here are so administered as that creditors in this state and in the foreign jurisdiction shall fare alike. If the sole duty of an ancillary receiver appointed in this state is to gather in assets and to remit to a foreign jurisdiction the proceeds thereof, as it is claimed is intimated by the following language of the court of errors and appeals in McDermott v. Woodhouse: “It is manifestly quite as necessary to ascertain the total assets of the corporation as its total liabilities in order to fisc the amount needed to pay creditors, and these assets can only be finally ascertained in the courts of the domicile to which assets may be remitted by courts of other forums acting through ancillary receivers,” then the reasoning indulged in by the courts in Hurd v. Elizabeth. Stone v. New
It seems to me to be clear that the creditors who have filed claims in this jurisdiction are entitled to have the validity of their claims settled here. That this court must retain control of the assets until it is assured that the validity of the claims as settled here will be recognized by the foreign tribunal, and the creditors paid their ratable proportion of all the assets. Hpon the court being so assured, the assets may be removed to the foreign tribunal for distribution there. It is conceivable, if the
I think that the jjroper course of procedure in the instant case is to require the receiver to act upon the claims filed with him in this jurisdiction, either to allow or disallow them, to present these claims in the New York receivership and to secure the action of the New York court upon them. The assets may then be turned over to-the New York receiver upon his giving bond that he will repay to the New Jersey receiver the amount of tire assets now turned over to the New York receiver unless within a reasonable time there be paid to the claimants whose claims are filed with the New Jersey receiver their fair distributive share of all the assets of the corporation.
The form of the bond is not settled definitely. I will hear counsel. It is not the policy of the court to interfere to any greater extent than necessary in the winding up proceedings pending in a foreign jurisdiction. The result to be accomplished is to protect the domestic creditors to the extent of the assets within the jurisdiction so that they may not be obliged to submit to the foreign jurisdiction the question of the validity of their claims, and so that they may not be driven into a court of another state to obtain their distributive shares. Of course, if the domestic creditors desire to share in the general distribution, the foreign court may compel them to come within the foreign jurisdiction. If so compelled, the creditors may elect to take
Settle order on live days’ notice.