117, has been changed by statute. Mingin v. Alva Glass Mfg. Co., 55 N. J. Eq., 463.

This section being in derogation of the common right of creditors of the same class to be paid equally must be construed strictly. And the right conferred by it is held to be personal, inherent in the person alone who actually performs labor or services. Lehigh Coal & Nav. Co. v. C. R. R. Co. of N. J., 29 N. J. Eq., 252. See Cogan v. Conover Mfg. Co., 69 N. J. Eq., 358, 386.

A drayman, who is regularly employed, and whose services are essential to the conduct of the business of a corporation, is entitled to protection under this section. Watson v. Watson Mfg. Co., 30 N. J. Eq., 588. Likewise, a manager, though a stockholder and director, who has supervised and organized the operative force. Buvinger v. Evening Union Printing Co., 72 N. J. Eq., 321.

Labor claims are always to be paid in full, unless it is necessary to encroach upon them to meet the expenses of the receivership. Lyle v. Staten Island Terra Cotta Lumber Co., 62 N. J. Eq., 797.

A mechanic's lien should receive preference although filed in the name of the corporation and although no action to enforce it has been begun within the four months. Doty v. Auditorium Pier Co., 56 Atl. Rep., 720; aff'd Id., 1132.

The rule as laid down in Wright vs. The Wynockie Iron Co., 48 N. J. Eq., 29, was changed by the Act of 1892 (P. L. of 1892, p. 426). See also Vail v. Jameson, 41 N. J. Eq., 648.

84. Priority of lien; exception.

Such lien shall be prior to all other liens that can or may be acquired upon or against such assets, except the lien and incumbrance of a chattel mortgage, recorded more than two months next preceding the date when proceedings in insolvency shall have been actually instituted against such insolvent corporation, and except the lien and incumbrance of a chattel mortgage recorded within two months next preceding the date when proceedings in insolvency shall have been actually instituted against such insolvent corporation, for money loaned or for goods purchased within said period of two months; and also except as against the

lien of mortgages given upon the lands and real estate of such insolvent corporation.

P. L. 1849, p. 309; Act of 1875, §63; P. L. 1887, p. 99; P. L. 1892, p. 426.

This section defines and limits the only liens which are allowed to take preference over the lien of laborers.

A chattel mortgage, void as to creditors, may still be valid as against the claims of a receiver of an insolvent corporation. Fidelity Trust Co. v. Staten Island Clay Co., 70 N. J. Eq., 550, 558.

85. Compensation of receivers.

Before distribution of the assets of an insolvent corporation among the creditors or stockholders the court of chancery shall allow a reasonable compensation to the receiver for his services and the costs and expenses of the administration of his trust, and the cost of the proceedings in said court, to be first paid out of said assets.

Receiver's allowances and his expenses in winding up the company are entitled to preference over state franchise taxes. Chesapeake & Ohio Ry. Co. v. Atlantic Transportation Co., 62 N. J. Eq., 751.

In case of a "dry" receivership when services of a receiver and his counsel amounted practically to a mortgagee's suit to foreclose liens, they should be allowed the same compensation as if they had been appointed in a suit to foreclose the mortgage. Lembeck v. Jarvis Terminal Cold Storage Co., 68 N. J. Eq., 352; s. c., 69 Id., 781; 70 Id., 757. Boehme, Ree 'vr, v. Rall, 51 N. J. Eq., 541.

A court cannot discharge a receiver from his trust except on an accounting. Reference to a master may be had for this purpose. Strauss v. Casey Machine & Supply Co., 69 N. J. Eq., 19; s. c., 66 Atl. Rep., 958.

As to compensation of counsel, see Silvers v. Merchants' & Merchants' Sav. Fund & Bld. Ass'n, 56 Atl. Rep., 294.

The court may make orders by which a receiver's claim for compensation will be preferred. Nessler v. Land Development Co., 65 N. J. Eq., 491.

86. Distribution; how made.

After payment of all allowances, expenses and costs, and the satisfaction of all special and general

liens upon the funds of the corporation to the extent of their lawful priority, the creditors shall be paid proportionally to the amount of their respective debts, excepting mortgage and judgment creditors when the judgment has not been by confession for the purpose of preferring creditors; and the creditors shall be entitled to distribution on debts not due, making in such case a rebate of interest, when interest is not accruing on the same; and the surplus funds, if any, after payment of the creditors and the costs, expenses and allowances aforesaid, and the preferred stockholders, shall be divided and paid to the general stockholders proportionally, according to their respective shares.

P. L. 1829, p. 63; Act of 1875, §80; P. L. 1877, p. 74.

The language of this section does not create a statutory preference irrespective of the charter. The words "preferred stockholders' must be construed to mean "preferred stockholders according to their preferences as created by express language in the certificate of incorporation."

The Revision of 1896 eliminated the statutory preferences contained in the Act of 1875. Therefore, unless by express language in the certificate of incorporation the preference shares are entitled to payment of the principal in case of dissolution or liquidation before payment to the common stockholders, this section does not create such a preference.

This section and Sections 8 and 18, when considered in connection with the spirit of the laws and decisions, lead to the conclusion that, in the absence of other stipulations, preferment as to dividends means also preferment in distribution of assets on dissolution. Hellman v. Penn. Electric Vehicle Co., 67 Atl. Rep., 834.

When the preferred stockholders are entitled to preference in the distribution of assets the act of the directors as statutory trustees of a voluntary dissolution in reducing the value of the preferred stock to the amount actually paid in thereon, is not unlawful justifying a receivership where the money, if paid in, would necessarily be repaid to the same persons. Id.

Calling stock "preferred stock" does not, per se, define the ghts of such stock. In order to determine in what respect the holder of such stock is to be preferred to the holder of ordinary stock, recourse must be had to the certificate of incorporation, in

which the preferences must be "stated and expressed." Sec. 18. Elkins v. Camden & Atl. R. R. Co., 36 N. J. Eq., 233, 236.

Sections 8 and 18 make it clear that the Legislature intended to require all the conditions under which stock is issued to be set forth in the certificate. Section 86 requires that the preferred stock shall be paid in preference to the general stockholders, and that means that they shall be paid so much, and so much only, as their contract gives them. Lloyd v. Penna. Electric Vehicle Co., 72 Atl. Rep., 16.

McGregor v. Home Ins. Co., 33 N. J. Eq., 181, is therefore inapplicable under the present provisions of the act.

Following the case of the State Bank v. Receivers of Bank of New Brunswick, 3 N. J. Eq., 266, decided in 1835, and because of the fact that the rule in bankruptcy therein adopted has prevailed, with judicial recognition, for seventy years, the Court of Errors and Appeals holds that a creditor of an insolvent corporation holding collateral security should apply such security to the payment of his debt before entering his claim against the debtor. Butler v. Commonwealth Tobacco Co., 70 Atl. Rep., 319; reversing 67 Atl. Rep., 514. In this case the leading decisions are reviewed.

Where preferred stockholders have not paid all instalments due on their stock they are not exempt from paying an assessment made to pay the debts of the corporation upon its insolvency. Kirkpatrick v. American Alkali Co., 140 Fed. Rep., 186.

Persons accepting stock under a resolution directing its issuance to them for advances made to the corporation are stockholders and not creditors. Iserman v. International Stoker Co., 72 N. J. Eq., 708. Both mortgage and judgment creditors are preferred only so far as they have acquired liens. Under the Act of 1875 and until 1895 there was a distinction between mortgages for the purposes of preferring creditors and judgments confessed for the same purpose. The former were not prohibited, the latter were. Doane v. Millville Ins. Co., 45 N. J. Eq., 274, 282; Whittaker v. Amwell Nat'l Bank, 52 N. J. Eq., 400, 414.

Under the Revision of 1896 no preferences whatever can be made by an insolvent corporation. See Section 64.

The franchise tax is a preferred debt in case of insolvency. Section 153. With this exception New Jersey does not possess the crown's common law prerogative to have its debts paid in preference to the debts of other creditors. Freeholders of Middlesex Co. v. State Bank, 29 N. J. Eq., 268; aff'd 30 Id., 311; see also Evans v. Walsh, 41 N. J. Law, 281.

Where no return is made under P. L. 1901, p. 31, claiming the exemption allowed a manufacturing corporation, the tax assessed by the State Board of Assessors on the full amount of the authorized capital stock of the company must be paid though the company

was judicially declared insolvent prior to the year of such assessment. King v. American Electric Vehicle Co., 70 N. J. Eq., 568.

Stockholders incurring liabilities under an agreement which is repudiated subsequently by the holder of a majority of the stock are entitled to stand as creditors and enforce an equitable lien. Wood & Nathan Co. v. American Mach. & Mfg. Co., 62 Atl. Rep., 768. The fact that a claim against an insolvent corporation was purchased for less than its par value does not authorize the receiver to refuse its allowance on the basis of par value. Dimmick v. W. Fred Quimby Co., 21 N. J. L. J., 339. But see Taylor v. Gray, 59 N. J. Eq., 621, where the claimants were also directors, and where it was held that assets withdrawn after insolvency of a corporation to secure some of the directors against a liability incurred in behalf of the corporation may be recovered by the receiver. But directors who have become sureties for creditors will be subrogated to the rights of such creditors.

As to the right of a judgment creditor to assert a prior lien on property of an insolvent corporation, see Squire v. Princeton Lighting Co., 72 N. J. Eq., 883.

The right of a preferred creditor to full payment outranks the right of a general creditor to partial payment. Lyle v. Staten Island, &c., Lumber Co., 62 N. J. Eq., 797.

This section is based on the rule that equality is equity. Therefore, equity will not reform an instrument where the effect of such reformation would be to prefer certain creditors of an insolvent corporation, and when the parties have not acted on the instrument to their detriment. Miller v. Savage, 62 N. J. Eq., 746.

Under this section all stockholders of the same class stand on an equality as to rights and there can be no preference. But when stock has been fraudulently issued the holders of such fraudulent stock may be excluded from the distribution of assets at the instance of subsequent stockholders who paid full value for their stock. Weber v. Nichols, 75 Atl. Rep., 997.

A stockholder who subscribes for stock and assigns mortgages in payment therefor merely for the purpose of giving the company credit and on condition that the company will redeem the stock, and who loses by the transaction, cannot recover the amount from the insolvent corporation as against bona fide stockholders and creditors. Eisenlord v. Oriental Ins. Co., 29 N. J. Eq., 437.

The rights of the holder of a confessed judgment; of a creditor to attack the claim of a co-creditor; of secured bondholders; of mortgagees when the receiver operates the plant; of creditors who fail to enter appearance in bankruptcy proceeding until after adjudication has been made; of sureties on a bond of an insolvent corporation; of an assignee to payments under an executory contract, and of bona fide holders of coupon mortgage bonds, are discussed in Consol.