Bissell v. Besson

• Citation: 22 A. 1077,47 N.J.E. 580
• Parties: BISSELL et al. v. BESSON.
• Decision Date: 30 November 1890
• Court: New Jersey Supreme Court

22 A. 1077

47 N.J.E. 580

BISSELL et al.

v. BESSON.

Court of Errors and Appeals of New Jersey.

Nov. Term, 1890.

Appeal from court of chancery.

Suit by John C. Besson, receiver of the Argus Printing Company, against John W. Bissell, to set aside a mortgage. Decree for complainant. Defendant appeals. Affirmed.

On a hearing the vice-chancellor filed the following conclusions:

"The chattel mortgage assailed in this case was executed in contempt of the authority of this court. As the record in the case of Day et al. v. The Argus Printing Company now stands, that fact is indisputable. The mortgage was executed on the 17th day of November, 1888, and the suit of Day et al. v. The Argus Printing Company was not dismissed until November 19, 1888, so that when the mortgage was executed the injunction, commanding the defendant corporation not to mortgage or otherwise dispose of its property, was in full force. The persons to whom the mortgage was made knew this fact. They knew that the corporation was insolvent; that some of its creditors had, on behalf of themselves and all other creditors, commenced a suit against it to wind it up as an insolvent corporation; and that this court had issued an injunction interdicting the corporation from making any disposition whatever of its assets, to the end that its property might be sequestered, converted into money, and the money distributed among its creditors in the manner directed by the statute. In this posture of affairs it seems to me that there can be no doubt that the mortgage must be held to be a nullity, not only because it was executed in contempt of the authority of this court, but also because it was executed with the manifest design to defeat the fundamental purpose of that part of the statute concerning corporations which regulates the distribution of the assets of an insolvent corporation among its creditors. No one will pretend, I suppose, that if the suit of Day et al. against the defendant corporation had not been dismissed the mortgage in question could be upheld as a valid instrument. While that suit remained pending, the mortgage was, in my judgment, an absolute nullity; and this was its legal condition, not merely because it had been executed in contempt of the authority of this court, but also because it is manifest, in view of the fact that a suit was then pending against it to wind it up as an insolvent corporation, that the mortgage was made and accepted with the intent to defeat one of the fundamental purposes of the statute concerning corporations. Though the suit has since been dismissed, the mortgage, nevertheless, remains infected with this vice. The dismissal of the suit did not give legal life and force to that which before the dismissal was a nullity. An insolvent corporation has a right, as the law now stands, to prefer one of its creditors over another, but, in order to impart legal efficacy to its acts in attempting to create preferences, it is obvious that the highest considerations of public policy require that such right should be exercised in a lawful manner. Here it was not exercised in a lawful manner, but in plain contravention of a statute, and also in violation of an injunction. In my judgment, the mortgage is a nullity."

Robert L. Lawrence, for appellants.

Collins & Corbin, for respondent.

PER CURIAM. Judgment affirmed.

Dixon, J., (dissenting:)

On September 13, 1888, David B. Day filed a bill in chancery against the Argus Printing Compauy, a domestic corporation, on behalf of himself and all other creditors and stockholders of the company who should come in and contribute to the expenses of the suit, alleging that he was a creditor of the corporation, and that it was insolvent, and praying that it might be enjoined from receiving any debts, and paying, transferring, mortgaging, or otherwise incumbering its money or property, and continuing its business, and praying also that it might be decreed to be insolvent, and that a receiver might be appointed to take charge of and wind up its affairs, pursuant to the statute. Thereupon an order...