Opinion
11-02-1888
EMMONS v. DAVIS & DOWD POTTERY CO.
G. D. W. Vroom, for receiver. J. H. Backus, for mortgagee.
On petition for leave to make the receiver of the Davis and Dowd Pottery Company, an insolvent corporation, party to a foreclosure of a mortgage of its property, and on cross-petition by the receiver for an order of sale. Revision, p. 192, § 84, (the corporation act,) provides that "where the property of an insolvent corporation, in the hands of a receiver or receivers, or trustee or trustees, appointed under the laws of this state, is incumbered with mortgages or other liens, the legality of which is brought in question, and the property is of a character materially to deteriorate in value pending the litigation, the court of chancery may order such receiver or receivers, or trustee or trustees, to sell the same, clear of incumbrances, at public or private sale, for the best price that can be obtained, bringing the money into the court of chancery, there to remain subject to the same liens and equities of all parties in interest as was the property before it was sold, and to be disposed of as the said court, by its decree, shall order and direct."
G. D. W. Vroom, for receiver. J. H. Backus, for mortgagee.
BIRD, V. C. The mortgagee asks leave to make the receiver a party defendant in a suit to foreclose a mortgage which purports to cover the lands owned by the said insolvent corporation, and also a large number of the goods and chattels which were on hand at the time of the appointment of the receiver. The receiver, by his petition, says that there are other liens, and that one of them, though subsequent as a lien on the real estate, is claimed to be prior as a lien on the personal estate. He also shows that from this claim on the part of the last-named mortgagee to the priority of right to the lien on the goods a legal controversy will arise that will postpone the final settlement of the affairs of the company for a considerable time. He also makes it very apparent that a very large amount of the personal property is of a perishable nature, and is liable to greatly depreciate in value, if not sold within a reasonable time. In view of these facts it is the judgment of the receiver that the interest of all parties will be promoted by a speedy sale of all the assets so incumbered by the said mortgages, and asks the aid of the court.
It is said in opposition to this asking of the receiver that these proceedings are all statutory, and that the act under which the receiver was appointed confers no authority on the court to order these lands and goods to be sold free from said liens, as the case is now presented. It is said that the legality of neither of these liens is disputed, within the meaning of the law which gives jurisdiction, and that the eighty-fourth section of the corporation act provides for sale only when the legality of the lien is disputed. In other words, the claimis that, as long as the lien is not assailed as absolutely void, the act has no application, however seriously parties may dispute about questions of priority, or however protracted their disputes may be as to the amounts actually due in my judgment, the statutory phrase has no such limited and comparatively useless signification. It must certainly include every form of legal controversy. It applies to every case where it is apparent that lienholders assert conflicting rights which, in their settlement, may consume so much time as to imperil the rights of those who may not be secured as well as those who may be. It will be admitted that the same disasters may follow from litigation as to the amount due on a lien, or as to the order of priority, as over the question of the legal existence of any lien at all. If part of the amount claimed is alleged to have been paid, the legality of the lien is thereby disputed to that extent; and so, also, if there is an assertion of right as to priority, which is questioned, that undoubtedly presents the legal dispute contemplated by the act. The case of Potts v. Ordnance Co., 17 N. J. Eq. 395, seems to sustain this view.
But, notwithstanding this view, the counsel for the mortgagee insists that there is no sufficient proof for the court to act upon; urging, further, that the court is powerless until the disputants themselves make it evident by their proceedings in court that there is a dispute between them. This contention seems to me to be altogether too illiberal, and, should it prevail, would often subject all the assets of the corporation to the whim of such lienholders as might hold such favorable position as not to suffer by delay in asserting their rights, even though they knew they would meet with opposition. Whenever the court is reasonably well satisfied that such legal questions have an existence, and that sooner or later they will be precipitated in the case, it is the duty of the court to act, in case the property is of a character which will depreciate by delay.
In considering this question, I have not been unmindful of the important fact that the title to real as well as personal estate is involved. But remembering that the act is remedial in its character, and that the section under consideration was passed to promote or enlarge this remedial nature, I am the more constrained to regard it as my plain duty to advise a sale in this case, rather than to allow the mortgagee to proceed, and to incur costs in the litigation, and so increase the mischiefs which the statute was designed to pre vent. If there should be serious doubt about the correctness of this view, it should be settled at once by the court of last resort.