Chicago Title Trust Co v. Wilcox Bldg Corporation

• Citation: 58 S.Ct. 125,82 L.Ed. 147,302 U.S. 120
• Decision Date: 15 November 1937
• Docket Number: 24,Nos. 23,THIRTY-SIX,FORTY-ONE,s. 23
• Parties: CHICAGO TITLE & TRUST CO. v. WILCOX BLDG. CORPORATION (two cases)
• Court: United States Supreme Court

302 U.S. 120

58 S.Ct. 125

82 L.Ed. 147

CHICAGO TITLE & TRUST CO.

v FORTY-ONE THIRTY-SIX WILCOX BLDG. CORPORATION (two cases).

Nos. 23, 24.

Argued Oct. 21, 1937.

Decided Nov. 15, 1937.

Messrs. Frank H. Townes and Silas H. Strawn, both of Chicago, Ill., for petitioner.

Mr. George I. Haight, of Chicago, Ill., for respondent.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

Respondent was organized as a corporation under the laws of Illinois; and pursuant to those laws it was dissolved. The only property it ever owned or possessed was a building and the land upon which it stood, situated at No. 4136 Wilcox avenue in the city of Chicago. This property, when acquired, was subject to the lien of a first mortgage, securing bonds aggregating $95,000, and, subsequent to the acquisition of the property, to a junior mortgage to secure the payment of $15,000. The corporation was organized on April 10, 1929. On May 22, 1931, the superior court of Cook county, Ill., in a proceeding regularly before it, and in accordance with a statute of Illinois, entered a decree dissolving the corporation and declaring its charter and authority as such to be null and void. The decree has never been appealed from or otherwise challenged or assailed. That it became and is now effective cannot be doubted.

On July 10th, certain mechanics' liens were foreclosed, and a sale of the property thereafter made pursuant to the foreclosure decree. Certificate of sale was issued, entitling the holder thereof to a conveyance of the property upon the expiration of the period of redemption. The right of redemption expired as to respondent on August 5, 1932, and as to creditors on November 5, 1932. No redemption has ever been made or attempted. On October 24, 1931, suit was brought in a state court to foreclose the lien of the first mortgage; and on November 10, 1931, suit was brought in the same court to foreclose the lien of the junior mortgage. A receiver was appointed, who took possession of the property, and was in possession thereof at the time this case was heard in the federal District Court. Respondent appeared in both foreclosure suits, but apparently offered no defense.

By the statutes of Illinois (Laws 1919, pp. 312, 334 (Smith-Hurd Ill.Stats. c. 32, § 157.94 note)) it is provided:

'§ 14. All corporations organized under the laws of this State, whose powers may have expired by limitation or otherwise, shall continue their corporate capacity for two years for the purpose only of collecting debts due such corporation and selling and conveying the property and effects thereof. Such corporations shall use their respective names for such purposes and shall be capable of prosecuting and defending all suits at law or in equity. * * *

'§ 79. The dissolution, for any cause whatever, of any corporation, shall not take away or impair any remedy given against such corporation, its officers, or stockholders, for any liabilities incurred previous to its dissolution, if suit therefor is brought and service of process had within two years after such dissolution.'

The two-year period, within which the corporation could sue, acquire property, or perform any corporate function apart from suits then pending, expired May 22, 1933.

Thus matters remained until May, 1935, when three persons, namely, Mrs. Fay Fischel, her father Hyman Schulman, and her brother Sam Schulman, acquired all the shares of the respondent from the then stockholders. Meetings purporting to be stockholders' and directors' meetings were then held, officers and directors elected, and a resolution was passed authorizing the filing of a petition for the reorganization of respondent under section 77B of the Bankruptcy Act, 48 Stat. 912, 11 U.S.C. § 207 (11 U.S.C.A. § 207).

On June 13, 1935, respondent filed a petition for reorganization under section 77B; and on June 21st filed a petition praying for an order directing the receiver in the state foreclosure suits to turn over property in his possession and restraining the further prosecution of such suits. Petitioner answered, denying that respondent was a corporation, setting up the corporate dissolution, the foreclosure proceedings, and the sale of the corporate property. It also averred that the bankruptcy petition was not filed in good faith.

The special master, to whom the case was referred, found and reported that the bankruptcy petition had been filed in good faith; that respondent had legal capacity to file the petition; and that the petition was sufficient to confer jurisdiction upon the court over respondent and the property in question. The master further found that no deed ever issued under the mechanic's lien foreclosure certificate; and that such certificate was purchased and now is the property of the debtor. However, it appears from the record that the certificate was purchased in connection with the acquisition of the stock by the three persons already mentioned, more than two years after the period of redemption had expired.

The federal District Court confirmed the report of the master, appointed a temporary trustee, required the state-court receiver to turn over the property to the trustee, and restrained further prosecution of the foreclosure proceedings. On appeal, the court below affirmed the order of the District Court, Judge Briggle dissenting. In re Forty-One Thirty-Six Wilcox Bldg. Corporation (C.C.A.) 86 F.(2d) 667.

In the decisions of other circuit courts of appeal, cited by respondent, support may be found for involuntary proceedings in bankruptcy against a dissolved corporation, brought by creditors and based upon an act of bankruptcy committed within four months. The question presented here differs substantially from the questions presented in those cases; and we put them aside as inapplicable, without either approval or disapproval. The sole question now for determination is whether, under the facts just detailed, a corporation, dissolved and put out of existence by the state which created it, may, nevertheless, itself invoke the powers of a court of bankruptcy under section 77B. The record does not present a case where creditors are the moving parties, or where there has been any act of bankruptcy committed by the corporation, or where any pertinent law of the state is in conflict with the federal bankruptcy laws.

The decisions of this court are all to the effect that a private corporation in this country can exist only under the express law of the state or sovereignty by which it was created. Its dissolution puts an end to its existence, the result of which may be likened to the death of a natural person. There must be some statutory authority for the prolongation of its life, even for litigation purposes. Oklahoma Gas Co. v. Oklahoma, 273 U.S. 257, 47 S.Ct. 391, 71 L.Ed. 634; First National Bank v. Colby, 21 Wall. 609, 615, 22 L.Ed. 687; Oregon Railway Co. v. Oregonian Ry. Co., 130 U.S. 1, 20, 9 S.Ct. 409, 32 L.Ed. 837; see, also, Greeley v. Smith, 10 Fed.Cas. p. 1075, No. 5,748, 3 Story 657; Board of Councilmen v. Deposit Bank (C.C.) 120 F. 165, 166 et seq.; Dundee Mortg. & T. Inv. Co. v. Hughes (C.C.) 77 F. 855.

Sections 14 and 79 of the Illinois statute (Smith-Hurd Ill.Stats. c. 32, § 157.94 note) seem plain enough on their face; but, if any doubt as to their meaning and effect would otherwise exist, that doubt has been set at rest by the decisions of the Illinois appellate courts. In Life Ass'n of America v. Fassett, 102 Ill. 315, decided before the sections under consideration were enacted, the state Supreme Court held that it was the settled policy of the state that upon the dissolution of domestic corporations, however effected, they were to be regarded as still existing for the purpose of settling up their affairs and having their property applied for the payment of their just debts. See Singer & Talcott Co. v. Hutchinson, 176 Ill. 48, 51, 51 N.E. 622. In American Exch. Bank v. Mitchell, 179 Ill.App. 612, 615, 616, the general rule was announced that, after a corporation is dissolved, it is incapable of maintaining an action; and that all such actions pending at the time of dissolution abate, in the absence of a statute to the contrary. The state decisions following the enactment of these sections make it clear that this general rule still remains in force in Illinois except for the specific modifications in respect of time and circumstance set forth in sections 14 and 79. See Dukes v. Harrison & Reidy, 270 Ill.App. 372; Consolidated Coal Co. v. Flynn Coal Co., 274 Ill.App. 405. See, also, A. J. Bates Co. v. United States (Ct.Cl.) 3 F.Supp. 245 248; Charles A. Zahn Co. v. United States (Ct.Cl.) 6 F.Supp. 317, where the Court of Claims held that under these sections of the Illinois statute an Illinois corporation ceased to exist and became incapable of transacting any business whatever in its corporate capacity; and that a suit purporting to be brought by a dissolved corporation after two years to recover internal revenue taxes paid by the corporation could not be maintained.

It is plain enough, under the Illinois statute, that after the expiration of two years from the date of its dissolution, respondent was without corporate capacity to initiate any legal proceeding—including a proceeding under section 77B, unless we are able to say that the statute, in its terms or in its application, is in conflict with section 77B. While state laws in conflict with the laws of Congress on the subject of bankruptcies are suspended, they are suspended 'only to the extent of actual conflict with the system provided by the Bankruptcy Act of Congress.' Stellwagen v. Clum, 245 U.S. 605, 613, 38 S.Ct. 215, 217, 62 L.Ed. 507. The dissolution effected under Illinois law is in no way related to a state of insolvency or bankruptcy. Insolvency or bankruptcy as a ground for dissolution is not within the terms or contemplation of the law. Liquidation of a corporation is no part of the purpose of the...