Galwey v. United States Steam Sugar Refining Co.

| N.Y. Sup. Ct. | Jul 15, 1861

Leonard, J.

—The law forbids transfers of property by incorporations in contemplation of insolvency.

Suffering a creditor to obtain judgment in the manner and to the extent charged in this complaint, while the defendants’ corporation is insolvent, with a view to give such creditor a prefer- ■ ence, is, in my opinion, illegal on the part of the trustees or directors. Such a judgment will result in the transfer of the property of the corporation. ■

The company is wholly unable to pay its debts at present.

Our statutes contemplate an equal division of the property of insolvent corporations among their creditors.

The court are authorized to restrain any creditor from pro- ■ ceeding at law, and obtaining a preference. (3 Rev. Stat., 5 ed., 767, §65.)

The injunction is authorized on behalf of any creditor, (Ib.. 763, § 43.)

The question to be tried is, whether or not the trustees or directors are illegally or fraudulently permitting certain creditors of the corporation, of a favored class, to obtain a preference over other creditors by judgment; or at least that is one inquiry in the case, and certainly it is the question in this case wherein there is the least doubt as to the jurisdiction of this court to interfere or grant relief.

The injunction against the corporation and its trustees or directors must be continued.

As to the creditors of the company the injunction must be so far modified as to permit them to enter judgments, which are to stand as security only, subject to the judgment of this court as to the validity and effect thereof oh the final hearing in this action.

I find no authority for the appointment of a receiver, and the motion in that respect is denied.

Ten dollars costs of the motion to the party finally prevailing.

Order to be settled by the plaintiff's on one day’s notice to defendants’ attorneys.

Injunction continued. Motion for receiver denied.