Proctor v. Sidney Sash, Blind & Furniture Co.

This action was brought by the plaintiff, as a judgment creditor, against the Sidney Sash, Blind & Furniture Company, a domestic corporation, to obtain a sequestration of its property under the provisions of section 1784 of the Code of Civil Procedure. Certain of the directors and stockholders of the corporation were made parties, and facts were alleged in the complaint tending to show the liability of the former for a neglect to file the annual report required by the statute, and for incurring a corporate indebtedness beyond the amount of the paid-up capital, and the latter for a failure to fully pay np the capital stock. The Sidney National Bank and others were also made defendants, and The complaint alleged facts tending to show separate, illegal, and fraudulent transfers of the corporate property to such parties by the officers of the corporation. The Sidney National Bank and certain other defendants interposed a demurrer to the complaint upon the ground that two or more causes of action were improperly joined

It is conceded that the plaintiff was authorized, under the provisions of sections 1790-1735 of the Code of Civil Procedure, to make the directors and stockholders of the Sidney Sash, Blind & Furniture Company parties, and to insert in his complaint the allegations contained therein, tending to show a liability upon their part.

The only question, therefore, that requires consideration is whether the plain Git could, in an action brought under the provisions of section 1784, supra, against the Sidney Sash, Blind <& Furniture Company, make others defendants to whom it was alleged the officers of that corporation had made separate, illegal transfers of its property, and set up the facts in his complaint tending to show such illegal disposal of the corporate property. The appellants urge that the plaintiff in this action, brought to obtain a sequestration of the property of the defendant corporation, has united several oilier separate and distinct causes of action arising out of several distinct and separate alleged fraudulent transfers of the corporate property, in violation of the provisions of section 464 of the Code of Civil Procedure. The object of the action was to obtain- . a judgment of sequestration of the property of the Sidney Sash, Blind & Furniture Company. “Sequestrate” is defined to mean “to separate from the owner for a time; seize or take possession of, as the property or income of a debtor until the claims of creditors are satisfied.” Cent. Diet. By section 1793 of the Code of Civil Procedure it is provided that the judgment in such an action “must provide for a fair and just disposition of the property of the corporation and of the proceeds thereof among the fair and honest creditors.” The judgment obtained in such action does not dissolve the corporation. Kincaid v. Dwinelle, 59 N. Y. 548 ; Hollingshead v. Woodward, 35 Hun, 410 . An action brought under the provisions of section 1784, supra, is similar to a creditors’ bill brought by a judgment creditor against an individual. Like a creditors’ bill, it can only be maintained after a judgment and execution returned unsatisfied; and the object in both actions is to reach the assets of the judgment debtor for the benefit of Creditors. I think, also, an action to obtain a sequestration of the property of a corporation must be deemed a suit in equity. The provisions of sections 1784 and 1793, supra, are substantially the same as those contained in sections 36 and 37, 2 Rev. St. 463, which were embraced in article 2 of title 4, c. 8. Article 2 was entitled “Proceedings against Corporations in Equity.” Proceedings under the provisions of sections 36 and 37, supra, against corporations, under the former practice, were taken in the court of chancery. Although the sections referred to provided for a proceeding against a corporation thereunder by petition, it was held that a judgment creditor might, at his election, proceed by bill. Judson v. Rossie Galena Co., 9 Paige, 598; Morgan v. Railroad Co., 10 Paige, 290. The action to obtain a sequestration of the property of a corporation can only he maintained under the authority of the statute, yet it is an action of

“The object of the suit is single. The plaintiffs, defeated in the collection of their debts by the ordinary process of law, now seek to reach the property of their debtor in the hands of those to whom he has dishonestly conveyed it. However numerous the persons with whom the property has been thus deposited, however distinct the transactions by which the debtor has sought to place it beyond the reach of his creditors, or however widely it may have been scattered in the execution of this purpose, the effort to recover the property, and have it applied to the satisfaction of the plaintiffs’ debts, embraces but a single cause of action.”

See, also, Newbould v. Warrin, 14 Abb. Prac. 80 ; Brinkerhoff v. Brown, 6 Johns. Ch. 139 ; Railroad Co. v. Schuyler, 17 N. Y. 606 ; Morton v. Weil, 11 Abb. Prac. 421 .

The case of Reed v. Stryker, supra, was cited and approved by the general term of the Fourth district in Wood v. Furniture Co., 92 Hun, 22 , 37 N. Y. Supp. 885 , as applicable to actions under the present Code of Civil Procedure. If I am correct in the conclusions above arrived at,-—in this equitable action, which is similar to a- creditors’ bill brought by a judgment creditor against an indi

I conclude that the judgment should be affirmed, with costs, with leave to answer on payment of costs of this appeal and the costs below within 20 days. All concur.