Atkinson v. Fox

Order in so far as it denied plaintiffs’ motion to dismiss the first counterclaim reversed on the law, with ten dollars costs anil disbursements, and motion granted; in so far as it granted plaintiff’s motion to dismiss the second and third counterclaims, the order is affirmed. The plaintiffs, receivers, are the real plaintiffs. The activities of the Fox Theatres Corporation, as such, by way of enforcing claims in its favor or resisting claims against it are suspended while that corporation is in the hands of and under the control of the plaintiffs, receivers, duly appointed for that purpose. The rights which these equity receivers seek to enforce in the complaint herein are not subject to counterclaims of the character interposed in the first, second and third counterclaims, perforce the provision of section 267, Civil Practice Act, subdivision 3, and cases decided thereunder. To hold otherwise would enable the defendant Fox, in the event he prevailed, to obtain a preferential position as a creditor as against the corporation while it is in the hands of the equity receivers, to the detriment of other creditors. This, equity will not permit in such a situation as is indicated in the pleadings herein. (Osgood v. Ogden, 4 Keyes, 70; Hall v. Holland House Co., 12 Misc. 55; Republic Supply Co. of California v. Richfield Oil Co., 59 F. [2d] 35 [C. C. A. 9th]; Allaire v. Silberberg, 210 App. Div. 109; American Brake Shoe & Foundry Co. v. New York Rys. Co., 10 P. [2d] 920; Pennsylvania Steel Co. v. New York City Ry. Co., 198 Fed. 721, 728; Civ. Prac. Act, § 267, subd. 3.) Carswell, Tompkins and Davis, JJ., concur; Kapper, J., dissents from the reversal of so much of the order as denies the motion to dismiss the first counterclaim and votes to affirm the order in its entirety, being of opinion that this counterclaim existing against Pox Theatres Corporation was not destroyed by the appointment of the receivers, plaintiffs; Lazansky, P. J., not voting.