Galway v. United States Steam Sugar Refining Co.

Majority

p. 313

SUPREME COURT.

Thomas Galway and others agt. The United States Steam Sugar Refining Company and others.

Headnote

The law forbids transfers of property by corporations in contemplation of insolvency. And suffering a creditor to obtain judgment, while the corporation is insolvent, with a view to give such creditor a preference, is illegal, as resulting in the transfer of the property of the corporation.

The courts are authorized to restrain by injunction any creditor from proceeding at law, and obtaining a preference.

New York Special Term, July, 1861.

Motion to continue injunction, and the appointment of a receiver.

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 preference, 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 courts are authorized to restrain any creditor from proceeding at law, and obtaining a preference. (Sec. 65, p. 767, 5th ed., 3 R. S.)

The injunction is authorized on behalf of any creditor. (Sec. 43, p. 763.)

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 ques

p. 314

tion 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 on 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 plaintiffs on one day’s notice to defendants’ attorneys.