James H. Rice Co. v. Libbey

105 F. 825 | 7th Cir. | 1901

PEE CURIAM.

Within the authority of McNulta v. Commissioners (recently decided in this court) 40 C. C. A. 155, 99 Fed. 900, and Kidder v. Safe-Deposit Co. (this day decided) 105 Fed. 821, the motion to dismiss the appeal for the reason that it was not joined in by the intervening creditors must be overruled.

The principal inquiry, on this appeal is, did the circuit court for the Eastern district of Wisconsin err in refusing to entertain jurisdiction of the cause without the presence of the Farson & Libbey Company or its assignee as parties thereto? Parties to a bill in equity have been divided by the supreme court in several decisions, and by this court in Ziegler v. Railroad Co., 39 C. C. A. 431, 99 Fed. 114, into the following classes: (1) Formal parties. (2) Persons having an interest in the controversy, and who ought to be made parties in order that the court may act according to the rule which requires it to decide on and Anally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it. These persons are commonly termed “necessary parties”; but, if their interests are separable from those of the parties before the court, so that the court can proceed to a decree, and do complete and Anal justice, without affecting other persons not before the court, the latter are not indispensable parties. (3) Persons who not only have an interest in the controversy, hut an interest of such a nature that a Anal decree cannot be made without either affecting that interest or leaving the controversy in such a condition that its Anal termination may be wholly inconsistent with equity and good conscience. The) statute on which this case is predicated has been construed by the supreme court of Illinois in Low v. Buchanan, 94 Ill. 76, and Woolverton v. Taylor, 132 Ill. 197, 33 N. E. 1007. In the latter case it is said:

“The statute certainly does not mean that the officers shall only become liable for one act of assenting to excessive indebtedness during the life of the corporation. The amount in excess may continue to he increased from time to time by different officers, running over a period of years. By a single hill for the benefit of all the creditors against all these officers that excess may he recovered, and made a fund for the payment of all the debts. * * * The officers, if liable at all, are liable to all the creditors of the corporation,— those existing prior to the contract creating the excessive indebtedness, those whose debts are created thereby, and also those who may afterwards become its creditors. As to the subsequent creditors, could it he said the cause of action accrued before they became creditors? The action must he for their benefit as well as that of all others, and yet they may not have become creditors of the corporation until more than five years after the first assenting to the excessive indebtedness.”

We are bound by the construction put upon the statute by the supreme court of Illinois. It is our opinion, in the light of this decision, that the case under consideration is an equitable suit for the beneAt of all the creditors, and that the fund recovered would be distributed ratably among all the creditors. To such a suit the corporation or its assignee is not an indispensable party. Without rheir presence, complete justice can be done as between the creditors and those charged with statutory liability. It might be convenient that they should be made parties in order to ascertain more readily the indebtedness of the corporation. But that can be done without their presence. So, also, it might be convenient to have them before the court in the ascertainment of the facts if indebtedness in excess of capital slock was created, and when; but the court can ascertain those facts without their presence. No right of the corporation or its assignee is to be determined or affected, and, while they may come within the class designated as necessary parties, they need never be summoned as parties, if by so doing the jurisdiction of the federal court would be ousted. Ziegler v. Railroad Co., supra. The liability here, if any, is not to the corporation or to its assignee, and its enforcement neither increases nor discharges any liability of the corporation. If the directors have incurred the liability of the statute, and should discharge that liability, they might possibly be subrogated to the right of the creditors to assets of the corporation after the creditors’ debts are paid. * But the corporation and its assignee have no interest in the enforcement of this statutory liability. This results in a reversal of this case upon the only question upon which the judgment of the court below was given.

The court below made no inquiry upon the merits of the case. A right decision involves a close examination of the evidence relating to each indebtedness of which it is averred that the appellees assented to its creation. We think that the case ought to.go back to the court below for this inquiry and judgment. The decree will be reversed.