In re Directors of Binghamton Gen. Elec. Co.

• Decision Date: 09 October 1894
• Citation: 38 N.E. 297,143 N.Y. 261
• Parties: In re DIRECTORS OF BINGHAMTON GENERAL ELECTRIC CO.
• Court: New York Court of Appeals Court of Appeals

143 N.Y. 261

38 N.E. 297

In re DIRECTORS OF BINGHAMTON GENERAL ELECTRIC CO.

Court of Appeals of New York.

Oct. 9, 1894.

Appeal from supreme court, general term, fourth department.

Proceedings for the voluntary dissolution of the Binghamton General Electric Company, a corporation, and for the appointment of a receiver. An order was entered by the special term restraining holders of the bonds of the company as collateral from disposing of such bonds, and was afterwards modified to allow the Binghamton Trust Company to sell the bonds in its hands. From an order of the general term (28 N. Y. Supp. 1119) striking out the modification of the order the trust company appeals. Reversed.

W. J. Welsh, for appellant.

George F. Lyon, for respondent.

BARTLETT, J.

This is a proceeding for the voluntary dissolution of a corporation under title 11, c. 17, of the Code of Civil Procedure. In the order appointing the temporary receiver, all creditors, corporations, and other persons were restrained from foreclosing or selling the bonds of the Binghamton General Electric Company pledged as collateral, and from reducing the same to possession. The BinghamtonTrust Company, having, prior to the institution of this proceeding, loaned money to the Binghamton General Electric Company, and taken its bonds as collateral security, moved to modify the injunction contained in the order appointing the temporary receiver so as to permit it to dispose of the bonds of the Binghamton General Electric Company held as collateral to loans. The special term granted the motion, and modified the injunction clause accordingly, inserting in its order this provision, viz.: ‘It being hereby intended to amend said order to the purpose it shall not restrain or prohibit the Binghamton Trust Company, a creditor of said corporation, from foreclosing or selling the bonds of said corporation pledged to it as collateral, and for no other purpose.’ The petitioners in this proceeding appealed from the order of modification, and the general term modified the order of the special term by striking out that part which modified the restraining clause in the original order appointing the receiver. From this order the Binghamton Trust Company appeals.

We are of opinion that the order of the general term should be reversed. This proceeding is purely statutory, and the terms of the order appointing the temporary receiver, and the scope of its injunction clause, are defined by section 2423 of the Code of Civil Procedure. The court is empowered to restrain the creditors of the corporation from bringing any action against it for the recovery of a sum of money, or from taking any further proceedings in an action theretofore commenced. There is nothing in the statute under which this proceeding was instituted authorizing the court to restrain the creditors of the corporation from disposing of its bonds held as collateral to loans under lawful contracts empowering them to sell. It has long been the...