48 Kan. 507 | Kan. | 1892
The opinion of the court was delivered by
In December, 1886, an action was brought by the city of Atchison against the Chicago & Atchison Bridge Company, Lewis C. Burnes and other stockholders in the bridge company, charging fraud in the contracts and transactions of the bridge company and in the issuance of the capital stock of the same, and asking a recovery of the unpaid balance due upon the stock and the cancellation of that which was fictitious and fraudulent. In the amended petition, which was filed in July, 1887, it was substantially alleged that the Chicago & Atchison Bridge Company of Missouri was organized, with a capital stock of $1,000,000, for the purpose of building a bridge across the Missouri river at the city of Atchison ; that the Chicago & Atchison Bridge Company of Kansas was incorporated for the purpose of building a bridge across the Missouri river at the city of Atchison, with a capital stock of $1,000,000; that, for the purpose of raising money with which to construct the bridge, the Chicago & Atchison Bridge Company of Missouri, on June 1,1872, executed 1,200 bonds of the denomination of $1,000, and each bearing interest at the rate of 7 per cent, per annum, and executed a mortgage deed upon the bridge, approaches, together with the franchises
The sufficiency of the allegations of the petition were challenged by demurrers filed by the defendants, each of which was overruled by the court; after which an answer was filed by the Chicago & Atchison Bridge Company, admitting the allegation with reference to its incorporation, and that the city of Atchison was duly incorporated, but denied that the city ever subscribed to the capital stock of the Chicago & Atchison Bridge Company, and alleged that it acquired $100,000 of the stock from the American Bridge Company. It admitted the contract with the American Bridge Company for the construction of the bridge across the Missouri river, and alleged that the city had actual notice of the existence of the contract, and of all the terms and conditions of the same; that the contract was recognized in several ordinances passed by the city, and that the $100,000 bonds of the city, voted to aid in the building of the bridge, were deposited with a trustee in the city of New York to be delivered to the American Bridge Company under the terms and conditions of the contract- between the Chicago & Atchison Bridge Company and the American Bridge Company. It also alleged that the action was barred by the -statute of limitations; because that, during all the time from 1875 down to the institution of the action, the city had knowledge of the contracts and the conditions of the same; that it became and was a party to the contracts, and that it ratified and confirmed the action of the Chicago & Atchison Bridge Company in entering into contracts with the American Bridge Company; that it knew the amount that was to be paid to the American Bridge Company for the construction of the bridge, and acquiesced therein.
The allegations with reference to the issuance of the bonds and stock of the bridge company are admitted, and it is alleged
William H. Harris filed a separate answer and cross-petition, alleging that he paid the par value for his stock, without any knowledge or information concerning the construction contracts; and further, that the city of Atchison had no power or authority to subscribe to the stock of the bridge company, and was not entitled to dividends thereon; and he asks that the stock may be canceled, and the city be required to pay back the dividends which it has received thereon. Each of the other defendants filed a separate answer, adopting the allegations of the answer of the Chicago & Atchison Bridge Company. On January 5,1888, the city moved the court for the appointment of a receiver, and upon the hearing of the motion it was made to appear that on January 3, 1888, the United States circuit court for the district of Kansas, in an action by the trustee of the holders of the mortgage bonds against the bridge company, appointed a receiver of the property of the bridge company, including the franchises, rights-of-way and all other property connected with the bridge of the company, and directed him to collect all rents and moneys whatsoever, and apply the same under the order and direction of that court. It was then conceded that John C. Tomlinson, who was appointed receiver, had duly qualified and entered upon the discharge of his duties as such receiver. -
At the conclusion of the hearing, the judge of the district court of Atchison county denied the application of the city for a receiver to take the possession and custody of the bridge, property, franchises, rents, issues and profits of the Chicago & Atchison Bridge Company, and to manage and operate the same, but ordered that George W. Howell be appointed receiver for the purpose—
“Only of instituting and prosecuting this and other suits to cancel stock held by various parties claiming to be stockholders in said Chicago & Atchison Bridge Company, and the stock issued by said company or the officers thereof, or to in*514 stitute suits to recover the value of all stock issued by said Chicago & Atchison Bridge Company or the officers thereof, in such forum and jurisdiction as may be deemed advisable.”
The city of Atchison thereupon moved to substitute the receiver as plaintiff, which motion was sustained, and George W. Howell, as receiver, became the plaintiff in the action, and filed his amended petition therein, in which he alleged the order of appointment, his substitution as receiver, and adopted the allegations of the amended petition filed by the city. The defendants opposed the appointment of a receiver, as well as the substitution of the plaintiff, and demurred to the receiver’s amended petition for want of sufficient facts, and because he had no legal capacity to sue. This demurrer, as well as that of a like character filed by the other defendants, was overruled by the court. Separate answers were then filed by the defendants, which, among other allegations, denying the right or authority of the receiver to prosecute the action, and setting forth the prior appointment of a receiver in the federal court. In October, 1888, the cause was tried without a jury, when findings of fact were made by the court, and the court stated as conclusions of law — first, “that as to the defendants C. C. Burnes, J. "W. Parker, Benjamin F. Stringfellow, R. M. Manley, and B. P. Waggener, the action is barred by the statute of limitations;” second, “that as to the remainder of the individual defendants, the capital stock held by these in the Chicago & Atchison Bridge Company is deemed to have been issued without consideration, and will be adjudged and decreed to be canceled and held to be null and void;” third, “said stock is ordered to be brought into court and canceled;” fourth, “the Chicago & Atchison Bridge Company is enjoined from recognizing said stock or paying any dividends thereon.” Judgment was entered by the court in accordance with the conclusions of law. Exceptions were taken to the ruling of the court upon the demurrers to the pleadings, upon the appointment of a receiver and the substitution of the receiver as plaintiff in the action, as well as to many rulings upon the evidence, and the findings of fact and law. Motions for judg
The findings of the court covered a wide range, and many questions thereon are elaborately discussed by counsel. Although we have given much attention to some of these, we find that they cannot be properly considered or decided on account of an objection with which we are met at the threshold of the inquiry. The action was prosecuted by an unauthorized person, termed a receiver, and the judgment complained of was given in his favor. The defendants below resisted the appointment of Geo. W. Howell as receiver, objected to his substitution as plaintiff and to the pleadings which he filed, challenged his right to conduct the litigation by objections to the testimony and to the findings and judgment. If the appointment of the receiver was unwarranted, and if he had no-authority to prosecute the action, then there was no plaintiff in the proceeding, as the receiver was substituted for the city of Atchison, after which it dropped out of the case as plaintiff, and the action proceeded on the pleadings filed by the receiver and upon the issues formed between him and the defendants. The application of the city was for a receiver to take possession of the bridge property, franchises, rents, issues and profits of the Chicago & Atchison Bridge Company, and to manage and operate the business of the company, and also to prosecute this and other proceedings against the stockholders and officers of the company, to remedy the alleged wrongs that were stated in the pleadings. The court denied the motion of the city for a receiver to take possession of the property or to manage and operate the same, but did appoint the receiver for the sole purpose of instituting and prosecuting “this and other suits,” for the benefit of the city of Atchison. It thus appears that the court limited the functions of the receiver to being a mere representative of the city of Atchison, and pos
We are referred to § 254 of the civil code as an authority for the appointment; but the remedy there provided is a provisional one, to be exercised where there is property, funds, or rights of action to be protected, managed, and disposed of, and also where corporations have been dissolved or have forfeited their rights. This section affords no warrant for the appointment of a receiver, such as has been made, nor does
It is conceded by both parties that if a cause of action exists in favor of the city in this case it may be prosecuted in the name of the city; and if that is true, what reason is there for the appointment'of a representative of the city, and what authority is there for the substitution of another as plaintiff in its stead? The counsel for the receiver argue at great length, and cite numerous authorities to sustain the right of the city as a stockholder to bring the action, and thereby has furnished an argument against the appointment of a receiver and his substitution in the place of the city. If a cause of action exists in favor of a stockholder, and the corporation refuses, to proceed upon proper request, the city as a stockholder is a real and competent party to bring the action; and there is no necessity or reason in substituting a next friend or receiver to sue for it.
The principal cause of complaint is the contract which was made between the Chicago & Atchison Bridge Company and the American Bridge Company, by which all the stock and bonds of the former were given to the latter for the building of the bridge; but if a cause once existed in favor of the city by reason of the vice in that contract ■ and the fraud of the
The other questions in the case which have been so much discussed cannot be investigated in this proceeding, and can only be considered when the issues are framed between the real and the necessary parties to the controversy.
The judgment of the district court will be reversed.