legations contained in the petition or bill, and upon such notice, if any, as the court by order may direct, may proceed in a summary way to hear the affidavits, proofs and allegations which may be offered on behalf of the parties, and if upon such inquiry it shall appear to the court that the corporation has become insolvent and is not about to resume its business in a short time thereafter with safety to the public and advantage to the stockholders, it may issue an injunction to restrain the corporation and its officers and agents from exercising any of its privileges or franchises and from collecting or receiving any debts, or paying out, selling, assigning or transferring any of its estate, moneys, funds, lands, tenements or effects, except to a receiver appointed by the court, until the court shall otherwise order.

P. L. 1829, p. 59-60; P. L. 1852, p. 397; Act of 1875, §§70, 71, 83; P. L. 1877, p. 74.

Sections 65 and 66 remain practically the same as in "An Act to prevent fraud by incorporated companies, passed in 1829. They transfer to creditors and stockholders rights to proceed against a corporation, which were formerly secured by means of quo warranto proceedings instituted by the state. The purpose is not to give one creditor relief, but to protect the rights of all creditors and stockholders and the public; to provide a method of depriving a corporation of its franchises and of distributing its assets by one action instead of the old double procedure, first in law and then in equity. The primary object being to prevent fraud and the action being a proceeding in rem instituted by one or more stockholders or creditors in behalf of all, it follows that after a decree has passed disabling the corporation, the power of the particular stockholder or creditor who instituted the proceedings is gone. The result is that our present practice treats the summary hearing upon an order to show cause as a final hearing for a determination of all the issues in the case, and the decree thereupon as a final decree.

The power to dissolve and wind up an insolvent corporation is statutory.

"This statute empowers the Chancellor, on the application of a creditor or stockholder, alleging that the corporation in which he is

interested has become insolvent, to proceed in a summary way to inquire into the truth of such allegation, and if, upon such inquiry, it shall be made to appear that the corporation has become insolvent, and shall not be about to resume its business in a short time, with safety to the public and advantage to the stockholders, he may enjoin it from the further exercise of its franchises, and also from the further transaction of business; and he may also, at the same time, or at any subsequent time during the continuance of the injunction, if, in his judg ment, the circumstances of the case and the ends of justice require, appoint a receiver to dispose of its assets and distribute the proceeds. The statute makes insolvency the jurisdictional fact. The court can do nothing-neither issue an injunction nor appoint a receiver -until insolvency is first established. The proof in support of a jurisdictional fact must always be clear and convincing, for the court derives its power from the fact, and hence, until the fact is shown to exist, it has no power. To doubt in such a case is to deny.

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* If it be a balancing question,' and the conduct of those who have the management of the affairs of the corporation appears to have been upright and just, the court must resolve its doubt against the application and refuse to interfere-nor is it the duty of the court to use its power in all cases where insolvency is shown. Something more is required. The prerequisites prescribed by the statute are, that it shall be made to appear that the corporation has become insolvent, and also, that it will not be able to resume its business in a short time with safety to the public and advantage to the stockholders. The power is only to be used when the ends of justice require its exercise. The court should strive in such cases to foster and preserve rather than to strangle or destroy." Vice-Chancellor Van Fleet in Atlantic Trust Co. v. Consolidated Electric Storage Co., 49 N. J. Eq., 402, 404, 406; see also Oakley v. Paterson Bank, 2 N. J. Eq., 173, 176; Parsons v. Monroe Mfg. Co., 4 N. J. Eq., 187, 206; Brundred v. Paterson Mach. Co., 4 N. J. Eq., 294, 305; Goodheart v. Raritan Mining Co., 8 N. J. Eq., 73, 77; Laurel Springs Land Co. v. Fougeray, 50 N. J. Eq., 756; Rawnsley v. Trenton Mut. L. Ins. Co., 9 N. J. Eq., 347; Streit v. Citizens' Fire Ins. Co., 29 N. J. Eq., 21; Nichols v. Perry Patent Arm Co., 11 N. J. Eq., 126; Jacobs v. Mexican Sugar Co., 130 Fed. Rep., 589.

The proceeding under this section and a suit with the ordinary motion for an injunction against the corporation and its directors, brought under the general equity jurisdiction of the court, are entirely different in their nature and cannot be joined in the same bill.

Although in some instances and for particular reasons another defendant has been joined in an action against an insolvent corporation, American Ice Machine Co. v. Paterson Steam Co., 22 N. J. Eq., 72; Goodheart v. Raritan Mining Co., 8 N. J. Eq., 73, there is no case in which a court has entertained in one bill an action in the nature

of a quo warranto and an action based upon the general equitable jurisdiction of the court against the same corporation and numerous other defendants. Pierce v. Old Dominion Copper Co., 67 N. J. Eq., 399; 72 Id., 595; aff'd 70 Atl. Rep., 1101.

Appointment of receiver; where applied for.

The court of chancery is a court of state-wide jurisdiction and all of its orders and decrees are operative throughout the entire state. An application for an injunction or other order can be made to the chancellor or to any one of the vice-chancellors; but the practice has obtained of making all such applications to members of the court who sit in the locality within which the suit arises and before whom the member of the particular local bar generally practices. Thus, for instance, a manufacturing company having its place of business and registered office in Newark becomes insolvent and a member of the bar either of Newark or Jersey City being retained to file a bill against the company for injunction and receiver, he would make the application to one of the two vice-chancellors who habitually sit in Newark, but if both were out of town and neither could be found and the matter was one of urgency, the application could be made to and would be entertained by a vice-chancellor sitting in Jersey City or elsewhere. If a lawyer residing in Trenton should file a bill against a Newark corporation, as well he might and as often happens, he would feel constrained to make the application to a Newark vice-chancellor, and if he made the application before the vice-chancellor in Trenton he would probably be directed to take the bill before a Newark member of the court unless he could give a good reason for presenting it outside of the locality where the suit arose, that is, where the defendant resided; and if the Trenton vice-chancellor should take jurisdiction and make an order to show cause why a receiver should not be appointed he would undoubtedly make it returnable at Newark on one of the court's regular motion days there. Whenever any member of the court takes jurisdiction in any such matter, the court's action is never questioned, and cannot be questioned. While the state is not divided into equity districts the members of the court of chancery are distributed all over the state, that is to say, they reside in different sections of the state and hold the court in the localities in which they live. The chancellor and two vice-chancellors live at Morristown; one vice-chancellor in Paterson; one in Jersey City; one in Newark; another at Trenton and still another at Camden. Lawyers living in the rural counties adjacent to any one of these places are at liberty to make applications to the vice-chancellor most accessible to them, and their applications are always entertained. Chancery Chambers are maintained in Trenton, Newark, Jersey City, Camden and Atlantic City, where trials are held. The members of the court may be applied to either at those chambers or at their residences.

A receiver should not be appointed in case of insolvency where the directors are closing the affairs of the corporation and it appears that they are in all respects trustworthy. City Pottery Co. v. Yates, 37 N. J. Eq., 543. See Reinhardt v. Interstate Telephone Co., 71 N. J. Eq., 70.

A receiver will not be appointed at the instance of a stockholder on a bill filed against a director of the company to take charge of moneys alleged to have been improperly received by the director, where no apprehension of loss is alleged in the bill and the answer shows that the money was loaned to the director by the board of directors. Hager v. Stevens, 6 N. J. Eq., 374.

The continuance in control of directors or officers, directly or indirectly, against whom is made out a prima facie case of malfeasance in office is repugnant to the well-settled judicial policy of this state. Fitzgerald v. State Mutual Building & Loan Ass'n, 69 Atl. Rep., 564. For further cases, see Michigan Law Review, Vol. 7, p. 53.

The fact that one creditor of an insolvent corporation not able to resume its business with safety to the public or advantage to its stockholders, institutes proceedings to have the corporation adjudged insolvent and a receiver appointed with ulterior purposes of self-advantage, will not defeat the proceedings. Ft. Wayne Electric Corporation v. Franklin Electric Light Co., 57 N. J. Eq., 7, 16; aff'd 58 Id., 543, 579. The requirement of the statute that before a receiver can be appointed, proof shall be made that an insolvent corporation will not be able to " resume'' its business with safety to the public and advantage to its stockholders within a short time, does not predicate a complete suspension but an inability to take up again and perform such functions or duties as shall have been suspended because of the insolvency, such as the payment of its current obligations. Ibid.

An application for the appointment of a receiver of a corporation will not be defeated on the ground that the misfortunes of the corporation are due to the wrongful conduct of the applicant; such an application not being for the individual benefit of the applicant. MeMullin v. McArthur Electric Mfg. Co., 68 Atl. Rep., 97.

Where the evidence justifies the belief that the creditors will be paid and the business of the corporation resumed if a receiver is not appointed, a receiver will not be appointed. The court must ascertain whether insolvency exists and whether a receivership is necessary for the safety of the public and advantage of the stockholders. Ibid.

A corporation may make a general assignment for benefit of creditors (P. L. 1899, p. 146, Sec. 24), but this same section further provides that if such corporation become insolvent a receiver shall be appointed by the Court of Chancery. Insolvent corporations are therefore still subject to the jurisdiction of the Court of Chancery. Gilroy v. Somerville Woolen Mills, 67 N. J. Eq., 479.

The facts and circumstances must be set out in the bill from which

the insolvency of the company shall appear. Newfoundland R. R. Construction Co. v. Schack, 40 N. J. Eq., 222, 226.

It is sufficient to authorize the appointment of a receiver if it appears that a company cannot continue in business. Wood & Nathan Co. v. American Mach. & Mfg. Co., 62 Atl. Rep., 768.

A receiver will not be appointed on preliminary hearing where all the grounds which would authorize such an appointment are denied by proper affidavits. Taylor v. Cuban Land & Steamship Co., 106 Fed. Rep., 437; Brady v. Bay State Gas Co., Id., 584.

In judging of the solvency or insolvency of a company, its property should be estimated at its fair value, and not at the depreciated price which it might command at a forced sale. The most unfavorable inference as to the condition of a corporation may justly be drawn from the circumstance of the company's withholding its 'books upon an investigation touching its insolvency. Parsons v. Monroe Mfg. Co., 4 N. J. Eq., 187.

In Edison v. Edison United Phonograph Co., 52 N. J. Eq., 620, an unsuccessful attempt was made to have a receiver appointed, not "because the corporation is now actually insolvent, but because of a fear, resting entirely on conjecture, that it will become so at some time in the future." Dissensions had arisen among the members of the board of directors as to the business policy of the company.

A complete suspension of the business of a corporation is not necessary; the fact that it is seriously embarrassed and losing money being sufficient to permit an injunction and the appointment of a receiver. That creditors may have instituted an action for the appointment of a receiver, with the ulterior purpose of securing control of the affairs of the corporation, will not defeat the action. Catlin v. Vichachi Mining Co., 67 Atl. Rep., 194; Cook v. East Trenton Pottery Co., 53 N. J. Eq., 29.

The owner of a "voting trust" certificate is a stockholder within the meaning of this section. O'Grady v. U. S. Ind. Tel. Co., 71 Atl. Rep., 1040.

Bondholders being the beneficial owners of a decree of foreclosure obtained against the corporation by the trustee, are creditors of the corporation within this section. Ibid.

A person connected with the management will not be appointed receiver. Middlesex Freeholders v. State Bank, 29 N. J. Eq., 268; aff'd 30 Id., 311.

See also Conklin v. U. S. Shipbuilding Co., 140 Fed. Rep., 219 (Circuit Court).

This section is not superseded by the national bankruptcy act. Brown v. Allebach, 156 Fed. Rep., 697. The effect of the Federal Bankrupt Act upon insolvency proceedings under state law is discussed in Singer v. National Bedstead Mfg. Co., 65 N. J. Eq., 290.