In re Le Blanc — 4 Abb. N. Cas. 221

Majority

p. 221

MATTER OF LE BLANC.

N. Y. Supreme Court, First Department; General Term,

March, 1878.

Headnote

Railroad Stock. — Dividends. — Lien of Stockholders. — Receiver.—Petition Instead of Action.

Where a railroad company, having declared a dividend upon its stock, deposited a sufficient sum with bankers, expressly to pay such dividend, but before the whole amount so deposited was paid out, withdrew the remainder, and subsequently became insolvent and a receiver was appointed ;—Held, that the fund so deposited should be regarded as specially appropriated for the payment of the dividend, and that the stockholders acquired in equity a lien upon such fund to the extent of the amount to which they were respectively

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entitled, and that the lien followed the fund in the hands of the receiver.

In such a case, a stockholder, who has not been paid his dividend, may apply to the court by petition for an order directing the receiver to pay him, instead of bringing an action therefor.

This was an appeal by a receiver from an order of the special term, directing the receiver of the Erie Railway Company, Hugh J. Jewett, to pay to the petitioner, Julius Le Blanc, $500, the amount of his dividend upon the stock of said company, owned by him.

The Erie Railway Company, on or about September 2, 1873, declared a dividend of one per centum upon its common stock, payable on and after October 1, then following. The petitioner was at the time, and has since continued to be, the owner of 500 shares of the stock of said company, of the par value of $100 each. The company deposited with Duncan, Sherman & Company, a sum sufficient to pay, and for the purpose expressly of paying the dividend thus declared. On December 10, 1874, there remained of such sum in the hands of Duncan, Sherman & Company, $4,918.85, which was withdrawn by said Erie Railway Company. Hugh J. Jewett was appointed receiver of the Erie Rahway Company, and as such assumed control of the funds in possession of such company including the amount withdrawn from Duncan, Sherman & Company. The respondent, having been absent, neglected to draw his' dividend while the fund was in the hands of Duncan, Sherman & Company. He presented his petition to the supreme court at special term, and obtained an order directing the receiver to pay to the said petitioner $500, the amount of his dividend, and the receiver appeals from such order.

W. W. McFarland, for appellant.

S. W. Holcomb, for respondent.

[After stating the foregoing facts.]— We conclude that the fund deposited with Duncan, Sherman & Company, should be regarded as specially appropriated for the payrhent of the dividend made by the company, and that the stockholders acquired in equity a lien upon such fund to the extent of the amount to which they were respectively entitled. That such lien followed the fund in the hands of the receiver, who holds the sum as trustee for the benefit of such stockholders (Le Roy v. Globe Ins. Co., 2 Edw. Ch. 656 ; Lowens v. American Fire Ins. Co., 6 Paige, 484). In the case Attorney-General v. Continental Life Ins. Co. in re Betsey A. Merrill, which has been very recently decided by the court of appeals, while that court reviewed the decision of the supreme court, upon the facts of that case, yet the reasoning contained in the opinion of Judge Church decidedly confirms the right of the petitioner in this case upon the facts here presented, and furnishes, in our judgment, an authority in support of the order appealed from.

The appellant further insists that the respondent should have proceeded by action instead of petition. No such question was raised before the special term. Again, we perceive no substantial reason, why, in a case like the present, a petition is not proper. The parties should not be subjected unnecessarily to the delay and expense of an action, when it is clear that the rights of all parties can be protected in this form of proceeding. Nothing is shown which induces us to doubt the propriety of the application by petition. The order should be affirmed, but without costs, as the appellant is an officer of the court.

Davis, P. J., and Brady, J., concurred.