89 F. 283 | U.S. Circuit Court for the District of Massachusetts | 1898
This suit was brought by the plaintiff, describing himself as receiver, and in his capacity as receiver, against the defendant, who is admitted to he a stockholder of the Northwestern Guaranty Loan Company, a corporation organized under the laws of Minnesota, to recover of the defendant, as such stockholder, an amount equal to the par of his stock, in accordance with the liability imposed on the stockholders of corporations of this class by the constitution and statutes of Minnesota. The declaration sets out that on the 20th day of May, 1893, the Northwestern Guaranty Loan Company. was insolvent, and that on the same day, on proceedings duly instituted in a local court of Minnesota, it was so adjudged, and a receiver therefor was appointed, which receiver, it is alleged, was “invested with, all and several, the rights, assets, properties of every kind and description, wheresoever situate, of said corporation,” “ail under and in accordance with certain statutes of Minnesota” which are set out. It is further alleged that this receiver duly qualified, and has ever since continued, and at the time of the filing of the declaration was still acting, as such. It is to he noted that the receiver appointed on the adjudication of insolvency is not the plaintiff at the case at bar, and that he was vested by the court with all the usual powers of trustees appointed to wind up insolvent corporations, and with all the assets of the corporation, and was authorized to adjust and
“First. The several sums due and owing to said several creditors by the defendant Northwestern Guaranty Loan Company, which said indebtedness, as therein adjudged and decreed, aggregated three million three hundred, and seven thousand three hundred and ninety-four and Vioo dollars. Second. That the value of the total assets and properties of said Northwestern Guaranty Loan Company in any wise applicable to the payment of such indebtedness was four hundred and fifty thousand dollars, and no more. Third. That the total capital stock issued by said Northwestern Guaranty Loan Company, all of which said stock was issued and outstanding at the time of the contracting of the said indebtedness, and the date of adjudication of the insolvency of said Northwestern Guaranty Loan Company, to wit, May 20, 1898, was twelve thousand five hundred shares, of the par value of one hundred dollars per share.” “Fifth. That each of said stockholders was liable upon such stock, to said creditors therein ascertained, for an amount equal to the par value of the stock held by him. Sixth. That plaintiil and said intervening creditors, so ascertained, recover, accordingly, from each of the several stockholder defendants within said state of Minnesota, a sum equal to the par value of the stock held by such stockholder. Seventh. That W. E. Hale be appointed receiver for collecting and enforcing, for and in bebalf of said ascertained creditors, said judgments against such Minnesota stockholders, and for the purpose of collection, by such proceedings as might be proper, the liability of nonresident stockholders of said Northwestern Guaranty Loan Company, over whom the court, by reason of nonresidence, had not acquired jurisdiction for purpose of rendering personal judgment. Eighth. That said funds, so collected, be held by said receiver for the purpose of equal aud pro rata distribution amongst said ascertained creditors, and subject to the further order of the court. Ninth. That the court retain jurisdiction of said cause for the purpose of making such other and further' orders and decrees in the matter of distribution as might he necessary to protect the rights of the several creditors in the premises.”
In order to thoroughly understand the case, it is necessary to observe — First, that there has been no dissolution of the corporation, and' therefore no possibility of the vesting of its assets in any person or corporation as its successor iu law; and, second, that by virtue of the insolvency proceedings in the first suit the title to all the assets of the corporation passed by an assignment, or quasi assignment, to the receiver named in that suit, who is in effect a trustee, and who is no party to the present litigation; and, third, that the suit in which the present plaintiff was appointed a so-called receiver related entirely to enforcing the liability of the stockholders, and in no way superseded the insolvency proceedings, or affected the title of the receiver previously appointed.
“Each stockholder in any corporation (excepting those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him.”
The only provisions found in the statutes of Minnesota for enforcing this liability are contained in Gen. St. 1894, c. 76, §§ 5905-5911, which, except section 5911, which is unimportant in this case, are as follows:
"Sec*. 5905. Whenever any creditor of a corporation seeks to charge the directors, trustees, or other superintending officers of such corporation, or the stockholders thereof, on account of any liability created by law, he may file his complaint for that purpose in any district court which possesses jurisdiction to enforce such liability.
“Pec. 5906. The court shall proceed thereon as in other eases, and, when necessary, shall cause an account to be taken of the property and debts due to and from such corporation, and shall appoint one or more receivers.
“Sec. 5907. If, on the coining in of the answer, or upon the taking of any such account, it appears that such corporation is insolvent, and that it has no property or effects to satisfy such creditors, the court may proceed, without appointing any receiver, to ascertain the respective liabilities of such directors and stockholders, and enforce the same by its judgment, as in other ca ses.
“Sec. 5908. Upon a, final judgment in any such action to restrain a corporation, or against directors or stockholders, the court shall cause a just and fair distribution of the property of such corporation, and of the proceeds thereof, to be made among its creditors.
“Sec. 5909. In all cases in which the directors or other officers of a corporation, or the stockholders thereof, are made parties to an action in which a judgment is. rendered, if the property of such corporation is insufficient to discharge its debts, the court shall proceed to compel each stockholder to pay in the amount due and remaining unpaid on the shares of stock held by him, or so much thereof as is necessary to satisfy the debts of the company.
“Sec. 5910. If the debts of the company remain unsatisfied, the court'sha'il proceed to ascertain the respective liabilities of the directors or oilier officers, and of the stockholders, and to adjudge the amount payable by each, and enforce the judgment, as in other cases.”
The proceeding in the local court of Minnesota instituted by virtue of these statutory provisions was evidently of an equitable character, analogous to a creditors’ bill. Although the distinction between suits at law and in.equity does not exist in Minnesota, yet it must be maintained in the federal courts; and therefore the first objection urged on us is that, as the proceedings were of an equitable nature, and the distinction between law' and equity must be maintained in this court, we cannot take jurisdiction of anything which flows out of them. Of course, if the pending suit involved an accounting, or was in any way in the nature of a creditors’ Mil, it would clearly fall within Cattle Co. v. Frank, 148 U. S. 603, 13 Sup. Ct. 691, and the litigation would
“But 11 u: order [that is, Ihe order making the assessments] was not, ami did not purport to he, a judgment against: any one. It did not undertake to determine the question whether any particular stockholder was or was not liable in any amount. K: did not merge the canse of action of the company against any stockholder on his contract of subscription, nor deprive him of the right, when sued for an assessment, to rely on any defense which he might have to an action upon (hat contract.”
But, before proceeding further, it is necessary to consider the condition of the law with reference to suits brought by so-called receivers in jurisdictions foreign to those where they were constituted. It must be confessed that the law on this topic is in a fluctuating condition, and yet there are landmarks of so decisive a character as to guide us in the present suit. There have been cited to us various decisions of the state courts and circuit courts pro and con, some of them entitled to very high consideration, on the one hand maintaining, and on the other hand refusing, jurisdiction. They deal, however, so largely in general terms, and some of them have paid so little heed to the distinctions which the supreme court has given for the guidance of the inferior federal tribunals, that we will not undertake to review 1 hem. We had occasion to consider this matter in our opinion passed down on January 30, 1896, in Avery v. Trust Co., 72 Fed. 700-702. There we pointed out the views expressed by the supreme court, and applied by it, in one direction, in Booth v. Clark, 17 How. 322, 331, and, in the other, in Relfe v. Rundle, 103 U. S. 222, in the following language:
“The result Is tha,t no one can maintain a suit at common law for this indebtedness, unless the plaintiff can do it. lie is siyled a ‘receiver’; hut he is, in substance, a trustee, appointed by the statutes and the courts to collect and distribute the assets of the corporation, a.nd vested with the title to them. He is the successor of tlie corporation, so far as the statutes and tlie courts can make him such. If he were a mere receiver, in tlie ordinary-sense of the word, the corpora tion would survive, and he could sue in a common-law court only in its name. This distinction must be kept in view, and was elaborately expounded in Booth v. Clark, 17 How. 322. Tlie plaintiff resembles, in some respects, a new corporation into which ail old one lias been merged. In Relfe v. Rundle, 103 U. S. 222, 225, a receiver of the same character was described as the successor of the corporation, and it was there said that he was tlie corporation itself, for all the purposes of winding up its affairs.”
We have already shown that, in a proceeding prior to that in which the present plaintiff was appointed a so-called receiver, all the assets of the corporation were sequestered, and turned over for administration and distribution. This proceeding was of the character of the parent suit in Hawkins v. Glenn, ubi supra; and if, under the laws of Minnesota, a. call or assessment could lawfully have been made therein, it is possible that, on the principles of Hawkins v. Glenn, it might have been enforced at law in this district, either in the name of the corporación itself in behalf of the so-called receiver, or by him in his own name. As was explained in our citation from Telegraph Co. v. Purdy, such a parent suit could not have been regarded as making an issue with the defendant in the case at bar, or as litigious, so far as he might he concerned. Its relations to him would have bben simply incidental, as in Hawkins v. Glenn, and open to be contested at every point, as stated in the citation from Telegraph Co. v. Purdy. On (lie other hand, the second proceeding in Minnesota, in which the present plaintiff was made a so-called receiver, was brought, not only against the corporation, but also against the stockholders, as formal part ios, for the sole purpose of enforcing their liability. The so-called receiver in that case succeeded to no assets of the corporation, and he was in no sense its assignee or trustee; but he was constituted the mere hand of the court, as an incident to the litigation, and for the purpose of working it out. Hot only, therefore, was he of the third class of so-called receivers which we have described, but the whole was, from the beginning, litigious as against the stockholders; and as the defendant was not within the jurisdiction of the local court, the entire proceeding, including the determination of the amount of the debts of the corporation by the first paragraph of the decree which we have cited, the adjudication of liability according to the fifth paragraph, and the appointment of the plaintiff as a so-called receiver, was coram non judice, so far as this defendant was concerned. The expressions otherwise in Hanson v. Davison (Minn.) 76 N. W. 254, already cited, are not in harmony with the run of the adjudications of the federal courts." It follows — First, that the proceeding in which this plaintiff was appointed a so-called receiver is void, so far as this defendant is concerned; and, second, that the plaintiff is not of the class entitled to maintain a suit at law in a jurisdiction foreign to that which vested him with his office.