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Perilstein Glass Corp. v. Shieldwell Aluminum Corp.

Decided: November 1, 1962.


Collester, J.s.c.


This matter comes before this court upon the petition of the receiver of Shield-Well Aluminum Corp., an insolvent corporation, for an order directing the United States Extrusions Corporation and the Excelum Aluminum Products Corporation, creditors of the insolvent corporation, to turn over the sums of $7,840.86 and $2,016.24, respectively, allegedly paid to them by Shield-Well Aluminum Corp. as preferential payments while the latter was insolvent. The pertinent facts are as follows.

On May 11, 1961 the plaintiff Perilstein Glass Corporation (Perilstein), a corporation of the State of New York filed a complaint with a supporting affidavit in this court alleging that Shield-Well Aluminum Corp. (Shield-Well), a corporation of the State of New York, authorized to do business in New Jersey and engaged in the business of manufacturing, selling and installing storm doors and storm windows at 82 Sherman Place, Garfield, New Jersey, was insolvent. Perilstein, a creditor of Shield-Well, sought the appointment of a receiver. Upon the filing of the complaint an order issued out of this court directing Shield-Well to show cause on May 18, 1961 why a judgment should not be entered adjudging the defendant corporation insolvent, enjoining it, its officers and agents from exercising any of its corporate privileges, and appointing a receiver. On May 18, 1961, the return day of said order, this court entered an

order adjudging Shield-Well insolvent and appointing William A. Fasolo a receiver for said corporation.

The petition of the receiver recites that a special audit report prepared by accountants appointed by this court reveals that from at least July 31, 1960 to May 8, 1961 Shield-Well was insolvent and that during said period Shield-Well made preferential payments of $7,840.86 to United States Extrusions Corporation (Extrusions), a Delaware corporation doing business in Nassau County, New York, and $2,016.24 to Excelum Aluminum Products Corporation (Excelum), a New York corporation. The receiver, in a summary proceeding on his petition and order to show cause, seeks to compel these nonresident corporations to turn over to said receiver the alleged preferential payments.

The facts before this court further show that on May 18, 1961, the date Shield-Well was adjudged insolvent by this court, the two nonresident corporations filed in the New York courts confessions of judgment against Shield-Well; Extrusions in the amount of $32,000, and Excelum in the amount of $18,000. Thereafter Extrusions Corp. and Excelum, through their New Jersey attorney, filed claims with the receiver for such money.

The defendants in this proceeding, Extrusions and Excelum, contest the jurisdiction of this court to hear and determine the receiver's petition for an order directing them to turn over the alleged preferential payments. While conceding that they have filed claims with the receiver in this State, appointed by this court, they contend that since they are nonresident corporations the receiver has no right to proceed against them in this summary manner, and that jurisdiction can be acquired only by a plenary suit instituted by the receiver in the State of New York.

The question presented is a novel one. In Grobholz v. Merdel Mortgage Investment Co. , 115 N.J. Eq. 411 (E. & A. 1933), the receiver of the insolvent corporation, upon filing "a report of receiver and inventory," secured an order to show cause why the directors of the insolvent corporation

should not account for and pay over to the receiver certain money allegedly due to the corporation. The court held that as against strangers to the record who hold adversely property of the insolvent company, at the time of the appointment of the receiver, the receiver must proceed by adverse action, namely, by an independent, plenary suit and not in a summary proceeding.

In Tager v. Coronet Curtain Corp. , 128 N.J. Eq. 537 (Ch. 1941), the court held that where a creditor of an insolvent corporation filed a petition in the cause seeking affirmative relief against the receiver based upon his alleged rights under an assignment of the corporation's accounts receivable prior to insolvency, the receiver had a right in a summary proceeding not only to raise a defense to the creditor's claim but to counterclaim for money paid to the creditor for an unlawful preference. The court held that by instituting proceedings the creditor placed directly before the court the validity of the assignments; that he thereby waived his right to a trial of his claim in a plenary suit rather than by summary proceedings, and that the receiver could assert a counterclaim seeking affirmative relief when the subject matter of the counterclaim is relevant or interrelated to the subject matter of the creditor's petition.

In the matter sub judice the creditors have filed claims against the receiver. They have not petitioned this court for relief, as in Tager. The issue is whether or not by filing their claims with the receiver the creditors have consented to the jurisdiction of this court to determine setoffs or counterclaims against them by the receiver in a summary proceeding, or whether the ...

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