47 N.J. Eq. 18 | New York Court of Chancery | 1890
The appellants’ claims are substantially for damages caused by the breach of their several contracts for service. The breach -was occasioned by the insolvency of the defendant corporation. Upon such insolvency being ascertained by adjudication, a receiver was appointed, whose duty, under the statute, is to collect the assets of the corporation and distribute them as that law directs. His proceedings are regulated entirely by the statutory law. He is not at liberty to recognize any liability or to make any payment which is not approved by the statute. Such is the view taken of proceedings under a national Bankrupt act (Heywood v. Schreve, 15 Vr. 94), and it can hardly be questioned that the proceedings now considered partake of the same character. State Bank v. Receivers of Bank of New Brunswick, 2 Gr. Ch. 266, 270; Receivers of People's Bank v. Paterson Savings Bank, 2 Stock. 13, 17.
Upon examination of the statute, it is perceived that the assets, including rights of action, damages and demands of every nature, existing in favor of the company at the time of insolvency or “ accruing subsequent thereto,” are to be collected by the receiver, who is receiver of both creditors and stockholders. Rev. p. 191 § 77. After such collection the receiver is to dispose of the assets and is then to distribute the moneys realized from them among the “creditors” of the corporation under the order of this court. Rev. p. 198 § 72. (The creditors are to be paid proportionately to the amount of their “ debts,” except mortgage •and judgment creditors, and are to be entitled to distribution upon “ debts not due ” upon making rebate of interest. After the payment of the cost of the proceedings and expenses of tl>e receivership the surplus of the moneys, if any, “ may ” be divided, first to the preferred and then to the general stockholders, proportionately, according to their respective shares.) Rev. p. 191 $80.
The general scheme of the act contemplates the ascertainment •and payment of all just liabilities. •' The terms “creditor” and •“ debt ” are not used in a narrow, restrictive, or technical sense. It could hardly have been the intention of the law-makers to
The difficulty which led the English courts to disallow claims of the character of those here considered, under the English Bankrupt act prior to 1861, was the failure of that statute to make provision for the ascertainment of damages. The seventy-eighth section of the act before me providers the means for framing an issue and for a jury — the very machinery which is necessary to ascertain damages and effectuate the practical working of the-interpretation here given — and I can see no reason, under this law, for distinguishing between cases where the breach of contract precedes the adjudication of insolvency and cases where the breach follows in consequence of that adjudication. The insolvency, suspension of business and receivership, do not extinguish the corporation’s life. The chancellor “ may ” declare-the charter to be forfeited and void, and “ may” direct a division of the surplus assets among the stockholder^; but c.ases may arise, and do arise, where he should not, and does not, exercise that power, because the assets are sufficient to pay creditors and'.
I think that the claimants before me, although entitled to something, are not entitled to the amounts they ask. In measuring their damages, their condition of health and their liberty and opportunity to obtain other employment, must be considered. Yelland’s Case, L. R. (4 Eq. Cas.) 350 ; Ex parte Maclure; In re English and Scottish Marine Assurance Co., L. R. (5 Ch. App.) 737; In re Dean and Gilbert’s Claim; In re Patent Floorcloth Co., 41 L. J. Ch. 476.
Application should be made to the justices of the supreme court to direct issues for trial by jury.
When the amounts of the claims shall be determined, the claimants will be entitled to dividends upon them as other unsecured creditors are upon their claims. The claims are for damages, not for wages due, and they will therefore not be entitled to preference under the sixty-third section of the Corporation act. Rev. p. 188.