Acme Wire Co. v. Electrical Products Mfg. Co.

4 R.I. Dec. 164

• Court: Superior Court of Rhode Island
• Decided: June 9, 1928
• Docket: Eq. No. 8398
• Status: Published

Opinion

TANNER, P. J.

This is a petition brought by the receiver of the National Electric Corporation against the Electrical Products Manufacturing Company asking for the impounding and cancellation of sixteen promissory notes issued by the Electrical Products Manufacturing Company to one Burton and by him negotiated to the National Electric Corporation. The National Electric Corporation endeavored to prove said notes before a Master appointed to determine claims in said receivership. At the hearing before the Master the Electrical Products Manufacturing Company claimed a set-off against said notes and the notes were thereupon withdrawn from proof and were disallowed by the Master in his report.

We have no doubt of the power of the Court to protect the assets involved in this receivership but do not think that we can by impounding or cancellation prevent the holder of these promissory notes from negotiating them to a bona fide holder who might later enforce them against any future acquired assets of the Electrical Products Manufacturing Company not involved in this present receivership. Authorities have been quoted which indicate that the Court can enjoin the negotiation of promissory notes where there is failure of consideivation on the notes, a breach of some contract in which the notes have been given or some fraudulent conversion of the notes for a purpose for which they were not issued, but we have scon no case that goes so far as to say that a promissory note can not be negotiated before maturity so as to be free from any set-off which the maker of the note may have against the payee. To do this, we think, would be to place an illegal restriction upon the negotiability of promissory notes.

We do feel, however, that since the notes have been produced to the Master for proof against the assets of this receivership and have been disallowed by the Master without prejudice to the right of the claimant and its assigns to assert such claim in defence of any proceedings brought or to be brought by the Electrical Products Manufacturing Company or John R. Burton, no further claim should be allowed to be made by the claimant or its assigns against the assets involved in this receivership. If any such attempt should be made in the future, application may be made to the Court to enjoin such attempt.

The petition as prayed for is denied.