In re Flexlite Corp.

180 Misc. 718 | N.Y. Sup. Ct. | 1943

Peck, J.

The Flexlite Corporation filed a certificate for voluntary dissolution with the Secretary of State on April 5, 1943, pursuant to section 105 of the Stock Corporation Law. On July 15, 1943, Marathon Paper Mills Company obtained a judgment against said corporation, and on July 26, 1943, a subpoena in proceedings supplementary to judgment was served on the liquidating directors of the corporation. This motion is made by the directors to stay Marathon from taking any proceedings to enforce or collect its judgment on the ground that Flexlite Corporation is insolvent and to permit Marathon to proceed on its judgment would give it a preference over other creditors of the corporation.

Marathon claims that there is no authority for a stay under section 105, and that the section is not available for the liquidation of an insolvent corporation.

As a matter of first impression, there would be doubt as to whether a voluntary dissolution of an insolvent corporation could be had by the nonjudicial procedure of section 105. Article 9 of the General Corporation Law provides for the voluntary dissolution of corporations by judicial process and for the appointment of a receiver if the corporation is insolvent. There is no express provision in section 105 of the Stock Corporation Law for ratable distribution. However, the courts have held that the section does apply to insolvent corporations and that ratable distribution must be implied. (Central Union Trust Co. v. American Ry. Traffic Co., 198 App. Div. 303, affd. 233 N. Y. 531; Steinhardt Import Corp. v. Levy, 174 Misc. 184.)

The 1941 amendments to section 105 (L. 1941, ch. 304), subsequent to these decisions, do not indicate any intention on the part of the Legislature to counteract the judicial interpretation of section 105 contained in these decisions. Motion for a stay is granted. Settle order.