Phœnix Foundry & Machine Co. v. North River Construction Co.

Smith, P. J.: The object of the action brought by the stockholder Woerish offer, and of that to which it is ancillary, is to wind up the affairs of the insolvent corporation and make an equitable distribution of its assets among all its creditors. The receiver appointed in those actions represents the corporation, its stockholders and its creditors, and the court by which he was appointed had authority, as an incident to the power of appointment, to prevent any interference with the assets of the corporation by individual creditors or others, in order to preserve the fund for distribution. (In the Matter of the Application of the Attorney General v. The Guardian Mutual Life Insurance Company, 77 N. Y., 272.) Such authority may be exercised by an order made in the suit in which the receiver is appointed. (Id.) An order of that nature, being for the protection of the fund which the court has in its possession through its receiver, is not subject to every provision of the statute and of the rules of court which apply to injunction orders granted upon the application of a party for the protection of his individual rights. It is properly made in the 'action in which the receiver is appointed, and a creditor who attempts to interfere with the fund by unnecessarily subjecting it to the costs of an action to enforce his claim, cannot set up that the' order is ineffectual as to him because not made in his [158] own action. ' If there are controversies to be litigated, or accounts to be adjusted, between such creditor and the corporation, all can be done on the investigation of the claim in the winding up suit, and the creditor is a party to that suit, through his representative, the receiver. In short, the order is made in the exercise of the inherent power of the court to protect its receiver and the fund in his. hands, and is not a creature of the Code. (2 Story’s Eq. Jur., § 891.) This power is recognized by section 1806 of the Code, in the classes of actions therein referred to, in which, however, the present action is not included, but that section is simply declaratory of the common law, as far as it goes, and does not divest the court of its power in cases not within its provisions. That this court has the power, by an order made in one action, to restrain proceedings in another pending before it in another district, was held in Erie Railway Company v. Ramsey (45 N. Y., 637), overruling the case of Schell v. Erie Railway Company (51 Barb., 368), cited by the appellant’s counsel. True, the power is to be exercised in extreme cases only, but here is a case in which' its exercise is necessary for the equal protection of all the .creditors of the insolvent corporation, including the creditor whose action is stayed by it. If these views are correct, it results that none of the objections urged by the appellant’s counsel are tenable. As we have seen already the order is valid, although not made in the action brought by the present plaintiff. And the provisions requiring an undertaking to be given on obtaining an injunction order, and that the order shall state the grounds on which it is granted, do not apply to an order like the one in hand. If the mode of service was ■ insufficient, it does not warrant the ■ vacating of the order; whether it would authorize proceedings against the plaintiff for a contempt, in case of disobedience of the order, is a question not involved in this appeal. The order should be affirmed, with ten dollars costs and disbursements. Hardin, J.: In the "Woerishoffer action against the North River Construction Company, the court acquired jurisdiction of the defendant, and had [159] power to appoint a receiver. The receiver so appointed represents-all the creditors, and as Andrews, J., says in Attorney General v. Guardian Mutual Life Insurance Company (77 N. Y., 277): “ They are subject to the summary jurisdiction of the court in matters pertaining to the administration of the estate of the insolvent-corporation.” The court at Special Term, in New York, had power to make the order staying proceedings against the insolvent corporation. If that stay order was improperly granted, or if reasons exist why it should be vacated or modified quo ad the plaintiff in this action, the reasons should be presented to the court in the district wherein the stay order was made. If the plaintiff is entitled to such remedy, it “ must be sought by application to the court in the district in which the receiver was appointed and in the action in which the appointment was made.” Andrews, J., in Rinn v. Astor Fire Insurance Company (59 N. Y., 148) used the-language just quoted. Besides, it is proved by section 769 of the Code of Civil Procedure, viz.: “ A motion upon notice in an action in the Supreme Court must be made within the judicial district in which the action is triable.” The same proposition, we have already stated, was asserted by the court in the First- Department, in 1881, in deciding Attrill v. Rockaway Beach Improvement Company (reported in 25 Hun, 378). If the order was irregular because obtained without complying-with section 610 of the Code, or Rule 13, without reciting the grounds upon which it was granted, the remedy was by motion in the district wherein it was made. Section 769 of the Code was not referred to in Walsh v. Stern (12 Week. Dig., 424), and the court incidentally remarked that the “ legal effect of the order was to-remove an illegal restraint, and it had no other effect.” We do not regard that authority as applicable here. But if a full examination of that case should present the point involved, and a holding advérsete the views we have stated, we should be constrained to disregard it, and follow cases we have hereinbefore cited. Percy v. Seward (6 Abb., 327) is not applicable. It was decided in 1858, long before the enactment of section 769, and the motion was made in all the actions, and was a motion to consolidate all of the actions. And it was made in the county “ in which all the parties resided,” and the actions “ were all triable in Albany county,” [160] •where the motion was made. If the order restraining or staying actions is too broad, it is not therefore void, and a party may not disregard the order simply because it is too broad or extensive. (Mayor v. N. Y. and S. I. R. R. Co., 64 N. Y., 622; People v. Sturtevant, 9 id., 263.) We think the plaintiff must seek his remedy, if he wishes to assert it, in the lifetime of the order complained of in the action pending in the first district. ( Wilkinson v. This Defendant, 66 How., 428; Atty. Genl. v. North Am. L. Ins. Co., 6 Abb. N. C., 297; People ex rel. Atty. Genl. v. Security L. Ins. Co., 79 N. Y., 272; Pringle v. Woolworth, 90 id., 502.) The order should be affirmed, with ten dollars costs and •disbursements. Barker, J., concurred. Order affirmed, with ten dollars costs and disbursements.