State v. Bank of New England

55 Minn. 139 | Minn. | 1893

G-ileillan, C. J.

This is an action under 1878 Gr. S. ch.- 76, by the attorney general on behalf of the state as a creditor against the defendant, an insolvent banking corporation. On the complaint and an affidavit, which made a case for the appointment of a receiver and for an injunction, an order was granted requiring the defendant to show cause, why a receiver should not be appointed, and an injunction issued. At the time specified in the- order the defendant did not attempt to show cause otherwise than by showing that after the commencement of the action it had made an assignment under the insolvency law of 1881 of all its property for the benefit of its creditors. On this showing the court refused to appoint a receiver or issue an injunction. The state appeals from the order so refusing.

Chapter 76 provides but a mere skeleton , of procedure for the action authorized by it. Its provisions are very meager. But it gives an action to the creditor of a corporation whenever it is in the condition, or is guilty of the acts or omission, specified in the chapter. The action is given for a remedy which the creditor is entitled to as a matter of right, and which does not rest in the discretion of the court. It is the duty of the court to make the action effectual, and to exercise for that purpose the powers vested in it. Thus the court must appoint a receiver when it has been determined that a case exists under the chapter for the conversion and distribution among creditors of the property of the corporation, for it is only by means of a receiver that the property can be collected and preserved, and its conversion and distribution effected. To say tbat in such case the court may, in its discretion, appoint or refuse to appoint a receiver, is to say that it may, in its discretion, grant or refuse the remedy given by the statute. Before a formal determination of an issue upon any of the plaintiff’s allegations of fact essential to sustain the action or of facts alleged by defendant constituting a defense, it is in the sound discretion of the court to appoint or refuse to appoint a receiver. The appointment in such case is in the nature, of a provisional remedy— a measure of precaution — to preserve the property to abide the determination of the issues on which plaintiff’s right to have the defendant’s property converted and distributed depends. But when on an application for such a receiver it appears that the court must finally convert and distribute the property, — in other words, when it is admitted that the facts which, under the statute, give the right to the action, exist, and there is no defense, — it would be an abuse of discretion to refuse to appoint a receiver to take charge of and preserve the property until the court shall order it converted, and the proceeds distributed.

What we have said of the appointment of a receiver applies equally to the issuing of an injunction.

We are satisfied, however, that the court did not refuse to appoint a receiver and to issue an injunction as a matter of discretion, but on the ground that the assignment by the defendant furnished a legal reason for refusing, and under the opinion that the case comes within the decision of Hyde v. Weitzner, 45 Minn. 35, (47 ¡N. W. Hep. 311.) The cases, however, are not analogous. In that [case the same end had been accomplished by the assignment which [the petitioning creditors sought , to have accomplished by the appointment of a receiver, to wit, the institution of an insolvency [proceeding under the act of 1881. The only change which the appointment of a receiver would have effected would have been in [the official name of the officer of the court, by designating him iheceiver” instead of “assignee.” And this court held that, al-Ithough the assignment was made pending the application for a receiver, the court might allow it to stand instead of appointing a receiver. But in this case the two proceedings, while resembling pach other in some particulars, are yet entirely different.

(Opinion published 56 N. W. Rep. 575.)

We need mention but two particular features of chapter 76' affecting the rights of the creditors: First, in an action under that chapter no releases are required as a condition of sharing in the distribution of the proceeds of the defendant’s property; second, in such an action the creditors may have the directors or stockholders brought in to answer to any liability -which -the law imposes on them in favor of creditors of the corporation. The chapter gives a much larger remedy to the creditor than he can have under the insolvency law. It must be evident that the two proceedings— the action under chapter 76 and the insolvency proceeding under the act of 1S81 — cannot go on effectually together against the same corporation. If the two are commenced, one must stand and the other give way. Now, without determining -whether by being commenced first the insolvency proceeding gets a preference so that the remedy of any creditor shall be confined to such as the insolvent law affords, we do not hesitate to hold that when a creditor has commenced his action under chapter 76 no subsequent act on the part of the corporation, or of any other creditor of the corporation, by making an assignment, or procuring the appointment of a receiver under the insolvent law, or otherwise, can defeat or impair his remedy by such action.

Order reversed.