Furnald v. Glenn, 56 F. 372

Furnald v. Glenn

56 F. 372 | U.S. Circuit Court for the District of Southern New York | 1893

TOWNSEXI), District Judge.

These are bills in equity for injunctions against the prosecution of actions at law, brought by the defendant herein, to recover of the several complainants amounts unpaid upon stock of the National Express & Transportation Company held by them. The facts concerning the insolvency of said express company, and the proceedings which led up to the appointment of the present trustee, are fully set out in Glenn v. Marbury, 145 U. S. 499, 12 Sup. Ct. Rep. 914. As the other questions to be passed upon are raised in all the cases, they will be considered and disposed of together. What is hereafter said applies to each of the cases.

The action at law sought to be enjoined is, in part, based upon decrees of a Virginia court, adjudging the validity of a certain deed of trust, and that unpaid subscriptions passed thereunder, appointing the defendant herein trustee, and maldng and directing the enforcement of certain calls for payment on the stock. The ground upon which it is urged that the action at law he enjoined is that, as claimed, the decrees were procured by fraud or collusion. It is urged, also, that the Virginia court had no jurisdiction of the corporation in the suit in which the decrees were made. If it were necessary to pass upon the question as to whether said corporation had a reasonable opportunity to defend against said suit, I should And that due service of process was made upon William H. Perot, the president, and Joseph It. Anderson, a director, of said corporation, and that the stockholders were bound by the decree therein. Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. Rep. 739. But this question of jurisdiction being open to inquiry in the action at law, it seems unnecessary, and perhaps improper, to pass upon it in this suit, Thompson v. Whitman, 18 Wall. 457.

It appears to be established by the decisions of the supreme court of the United States and other authorities that one court should not interfere with the operation of a judgment or decree of another court because procured by fraud or collusion, if the complainant either still has an opportunity to obtain relief by reveal*374ing tbe facts to tbe latter court in tbe suit before it, or bas lost sucb opportunity by bis own neglect. In Graham v. Railroad Co., 118 U. S. 161, 6 Sup. Ct. Rep. 1009, the supreme court approves tbe statement of tbe law made by Judge Nelson in tbe circuit court, (14 Fed. Rep. 753,) as follows:

“In Nougue v. Clapp, 101 U. S. 551. it was lield that tlie circuit court of the United States cannot revise or set aside a final decree rendered by a state court which had complete jurisdiction or the parties and subject-matter upon the ground that the decree was obtained by fraud, where the injured party has had an opportunity to apply to the state court to reverse the decree. The plaintiff is. a party to tlie foreclosure suit as a shareholder in the old corporation. The state court is still open to listen to the complaint of the corporation and its shareholders. The decree of the foreclosure, though final in one sense, as determining the respective rights of the partios to the property. in question, is still in its nature interlocutory, and is open to review by the court, upon petition or motion in the cause, or by bill of review, for good cause shown. The plaintiff has, therefore, an ample and complete remedy for all his alleged grievances in the state court, and Ihere is no occasion for his application to this court for relief by bill in equity.”

Judge Nelson, in that part of bis opinion immediately preceding tbe foregoing quotation, laid down tbe rule upon which tbe complainant relies, with its limitations, as follows:

“it is well settled in the courts of the United States that when a decree or judgment has been obtained against a party to a suit at law or in equity by fraud or deception practiced upon him by his opponent, and he has lost, without fault of his, his remedy of applying to the court for the revocation or reversal of the decree or judgment, -a court of equity will afford him relief.”

Foster v. Railroad Co., 146 U. S. 88, 13 Sup. Ct. Rep. 28; Marshall v. Holmes, 141 U. S. 589, 12 Sup. Ct. Rep. 62; Kent v. Iron Co., 144 U. S. 75, 12 Sup. Ct. Rep. 650; Sanders v. Soutter, 126 N. Y. 193, 199, 27 N. E. Rep. 263; Insurance Co. v. Hodgson, 7 Cranch, 332; 1 Black, Judgm. §§ 362, 371.

If, then, tbe Virginia court still bas the power in tbe suit in which tbe decrees were made to modify sucb decrees, or to give effect to them in the subsequent proceedings, so that no right of tbe complainant shall ultimately be violated, there would seem to be no ground for any relief in this suit. This is equally true if tbe court had sucb power for a reasonable time after tbe complainant bad notice, actual or constructive, of said suit.

That the plaintiff in tbe Virginia suit was a creditor of tbe company in some amount, and so entitled to bring the suit, and that, if tbe Virginia court bad been fully advised of the facts, it would and should have made some call upon the stockholders, is hardly open to doubt. Nor is there any foundation for tbe claim, if it is intended to be made, that tbe suit was wholly collusive. Any possible fraud or collusion must have related solely to the investigation of tbe debts of tbe company, thus affecting only tbe amount of the calls. The stockholders, if tbe court bad been fully advised, would have been called upon to make' some payment on account of their stock. It is claimed that, because of fraud or collusion, they were called upon to pay more than was necessary. This is tbe most that can be urged upon the evidence. It may, perhaps, be doubted whether it is still, or was at tbe time when *375this suit was begun, in the power of the Virginia court to modify its decrees so as to change the amount of the calls upon unpaid stock. But there seems to be no doubt that that court may still revise its findings as to the debts of the corporation, so far as they bear upon the distribution of the fund received, and to be received, by the trustee. It is in its power to determine to whom this fund shall go, without regard to these findings, aud in the light of all evidence as to the debts of the company which has been or may be offered to it by the complainant or any one else. It could undo a mistake, if there were any, into which it has been led by fraud or collusion as to the amount of such debts, at least so far as fo fix such amount for the purposes of distribution, unaffected by such fraud or collusion, and restore any balance remaining hf the stockholders in proper proportions. If, therefore, the alleged fraud be assumed to be proved, the case seems to turn upon the question whether the ’Virginia court in the said suit can, by so doing, ultimately protect the rights of the complainant, aud prevent any wrong from resulting to him from the alleged fraud and collusion. Or, to put ¡lie question a little differently, is it an injury, a legal wrong, the violation of a right of the stockholder, to make him pay in more than is needed, and later to pay back to him the excess?

What, then, is the obligation of a stockholder with respect to unpaid stock after the corporation has become moribund? Is his obligation absolutely limited by the amount needed to pay debts? Chief Justice Waite, in Terry v. Anderson, 95 U. S. 636, says: “The liability of the stockholders upon their unpaid subscriptions is that of debtor to the bank.” Ogilvie v. Insurance Co., 22 How. 380; Hatch v. Dana, 101 U. S. 205. What the stockholders thus owe is what ihey or their predecessors in the holding of the stock have agreed to pay; that is, the full amount of the par value of the stock, less what has been paid. If the corporation continued in control of its assets, ¡hough it has (‘eased to do business, may not its board of directors call the full amount? Can the stockholder, in such ease, as a defense to rlie action thereon, object that the call is larger than the amount of the debts makes necessary? When the court acts hi the stead of the directors, may if not call the full amount unpaid without violating the rights of stockholders? Foote v. Glenn, 52 Fed. Rep. 529.

Since the stockholders are entitled to what remains of the assets after debts are paid, it is, of course, a rule of procedure in courts of equity in such cases not to call in what is clearly unnecessary; but fills, it seems, is not because of any absolute right of the stockholder to refuse to pay what he has agreed to pay. The court doubtless should make some summary investigation, and, if it can be satisfied that no more than a certain amount is needed, it should- call only for that amount. But if it takes too superficial a view, if it is mistaken as to the facts, or in its inferences from facts, either in estimating the amount of the debts, or in surmising as to how much a call of a particular amount will actually bring in, it cannot be said that thereby it violates- the righ ts *376of tbe stockholders. The opinion in the case of Scovill v. Thayer, 105 U. S. 143, does not conflict with this view. There, where the corporation, so far as it could do so, had released the obligations of the stockholders, the court held that they were not bound to pay anything until the necessary amount was at least approximately ascertained. The use of the word “approximately” would seem to show that the court did not mean that the obligations of stockholders were absolutely limited in the way suggested. The decision in Hawkins v. Glenn, supra, that for the purposes of an action at law similar to that, sought to be enjoined herein the decrees against the corporation bind the stockholders, seems to me to be conclusive on this point; for, if the stockholder is bound only to pay what is needed to pay debts, if to compel him to pay more is to violate his strict rights, how can it be that the amount to be paid can be determined without his presence without allowing him to offer and object to evidence, to argue, and, if error is committed, to appeal? Let a decree be entered dismissing the bill.