Headly v. Ocean City Imp. Ass'n

• Decision Date: 23 August 1887
• Citation: 10 A. 471
• Parties: HEADLY v. OCEAN CITY IMP. ASS'N.
• Court: New Jersey Court of Chancery

10 A. 471

HEADLY

v. OCEAN CITY IMP. ASS'N.

Court of Chancery of New Jersey.

August 23, 1887.

The New Jersey corporation act, (Rev. St. 189, § 70, Ed. of 1878.) under which this petition was filed, provides that whenever any incorporated company shall have become insolvent, it shall be lawful for any creditor or stockholder to apply by petition to the chancellor for a writ of injunction and the appointment of a receiver. It further provides that the chancellor may proceed to hear the proofs and allegations in a summary way, and if, upon "inquiry into the matters or cause of complaint, it shall be made to appear to the chancellor that the said company has become insolvent, and shall not be about to resume its business in a short time thereafter, with safety to the public, and advantage to the stockholders," the chancellor may issue an injunction to restrain the company from exercising the privileges or franchises granted to it by its charter, and from interfering with its property. By section 72 the chancellor may at the time of granting the injunction, or afterwards, appoint a receiver of the corporate property.

Potter & Nixon, for petitioner. James H. Nixon, for defendant.

BIRD, V. C. I think this petition properly filed. The case made thereby seems to be within the seventieth section of the corporation act. It is said in the answer that the defendant is not insolvent, and yet it is admitted that it owes over $10,000, all of which is due, and $6,000 of which is on a note in bank, which had been renewed at least once. It is said that the company own a large amount of valuable sea-shore property, worth a great deal more than all their liabilities, and that it is now making assessments on the same in order to discharge all of said indebtedness. This is to be accomplished by each stockholder paying $10 per share on his stock, and receiving therefor lots of land, at prices already scheduled. The inherent weakness of this plan is that it provides that if any one refuse to join them, others may take an additional amount to the extent of the assessment upon the one so refusing. Hence it cannot be equal, if one should refuse. This inequality, practically, is demonstrated by the action of the complainant. But it is not necessary for me to consider either the practicability of this plan or its legality, under the view I take of the case.

The defendant insists that it is abundantly able to meet all demands against it, and to carry on its business successfully. It is proper that it should have an opportunity to do this. Therefore, I will advise an order that a receiver be appointed, unless the defendant, within 15 days from the service of a copy of the order upon its president or one of its directors, discharge or satisfy said liabilities, and all the costs of this proceeding; and the injunction or restraining order in the cause will be so far...