Opinion
07-20-1927
GILL v. STATE GARAGE, Inc., et al.
John V. Laddey, of Newark, for complainant. William K. Flanagan, of Newark, for defendants.
(Syllabus by the Court.)
Suit by William Gill against the State Garage, Inc., and others, for discovery. Decree in accordance with opinion.
John V. Laddey, of Newark, for complainant.
William K. Flanagan, of Newark, for defendants.
BACKES, Vice Chancellor. The complainant sustained injuries while in the employ of the State Garage, Inc., for which the Workmen's Compensation Bureau awarded him, and he was paid compensation of, $12 a week for 200 weeks, to November 7, 1923. Forty weeks' additional compensation, to August, 1924, was paid by mistake; the employer resting under the belief that the allowance was for 250 weeks. In August, 1925, the bureau modified its previous award, and extended the period for 200 additional weeks. The award has been docketed as a judgment in the Essex county common pleas, on which execution was issued to the sheriff, and by him returned nulla bona. The bill is the ordinary discovery bill, under section 70 of the Chancery Act (1 Comp. St. 1910, p. 435), charging that the company is possessed of secret assets. The directors are made parties to the discovery. The validity of the judgment is not questioned; nor is the propriety of the bill criticized. The defendants' answer, and the proofs show, that in 1923, while the complainant's primary award was current, and long before it was modified and extended, the company, while insolvent, sold its garage, and used the proceeds to pay its creditors. Some of the proceeds were appropriated by Max Krueger, the president and sole stockholder, in part payment of his claim. Krueger paid all the debts except the complainant's.
There are no assets in the company's hands appropriable to the complainant's judgment; they having been consumed in the payment of the company's debts, and the complainant is not entitled to a recovery under the bill as presented. But he is not to be denied some measure of relief against the directors upon a properly framed bill, and will be given leave to amend. Distribution of assets by the directors among some of the creditors, after a company becomes insolvent, is in violation of the statute, and renders them personally liable to the sum of the misappropriation. Keen v. Maple Shade Land & Imp. Co., 63 N. J. Eq. 321, 50 A. 467; Turp v. Dickinson (N. J. Ch.) 134 A. 888. The procedure is pointed out in Mallory v. Kirkpatrick, 54 N. J. Eq. 50, 33 A. 205.
Upon amendment, and the appointment of a receiver, the directors will be charged with the funds unlawfully diverted, and distribution will be ordered ratably among the creditors. Whether the complainant is entitled to preference under section 22 of the Compensation Act (P. L. 1911, p. 143) is reserved, but it would appear to have been decided against his contention in Steel & Iron Mongers, Inc., v. Bonnite Insulator Co., 90 N. J. Eq. 200, 106 A. 380.