Board of Councilmen of City of Frankfort v. Deposit Bank of Frankfort

• Decision Date: 10 March 1902
• Parties: BOARD OF COUNCILMEN OF CITY OF FRANKFORT et al. v. DEPOSIT BANK OF FRANKFORT.
• Court: U.S. District Court — Eastern District of Kentucky

120 F. 165

BOARD OF COUNCILMEN OF CITY OF FRANKFORT et al. v. DEPOSIT BANK OF FRANKFORT.

United States Circuit Court, E.D. Kentucky.

March 10, 1902

T. H Crockett, Ira & W. H. Julian, John W. Rodman, and R. J Breckinridge, for petitioners.

Frank Chinn and D. W. Lindsey, for respondent.

COCHRAN District Judge.

This cause is pending on a motion by complainants for leave to file a bill of review, and on a motion by J. Buford Hendrick and Frank Chinn to quash the return on the notice served upon them of the motion to file the bill of review. By a decree of this court, rendered June 25, 1898 (88 F. 383), affirmed by the supreme court of the United States May 15, 1899 (19 Sup.Ct. 880), in a suit brought by Deposit Bank of Frankfort defendant herein, against state board of valuation and assessment and board of councilmen of the city of Frankfort, complainants herein, and Franklin county, said state board of valuation and assessment was perpetually enjoined and restrained from proceeding to value the franchise of said Deposit Bank of Kentucky under the act of November 11, 1892, for the years 1895, 1896, 1897, 1898, or any other subsequent years, until the expiration of the charter of the said bank, and from certifying such value to the county clerk of Franklin county, or to any officer of said board of councilmen of the city of Frankfort or the county of Franklin; and the county of Franklin and said board of councilmen of the city of Frankfort were enjoined and restrained from endeavoring to collect any tax upon any such valuation. This decree was based upon a judgment of the Franklin circuit court rendered February 1, 1896, enjoining and restraining the making of such valuation, the certifying of same, and the collecting of taxes thereon for the years 1893 and 1894, in a suit between the same parties, as res adjudicata. The ground upon which this decree is sought to be reviewed is that since its rendition and affirmance by the supreme court of the United States, to wit, on June 19, 1900, said judgment of the Franklin circuit court upon which it was based had been reversed by the court of appeals of Kentucky. 57 S.W. 787, 60 S.W. 19. On February 3, 1902, permission was granted by the supreme court of the United States, which had affirmed the decree sought to be reviewed, to apply to this court for leave to file the bill of review. The notice of the motion for such leave has been served upon J. Buford Hendrick, who was the president of the defendant herein, Deposit Bank of Kentucky, and upon Frank Chinn, who was its attorney in the suit in which said decree was rendered, during the pendency thereof. The ground upon which they base their motion to quash the return upon this notice is that since the rendition of said decree and its affirmance, and before the making of this motion and the application to the supreme court of the United States for said permission, to wit, on March 22, 1900, by an act of the general assembly of Kentucky, that day approved, containing an emergency clause, the charter of the defendant herein, Deposit Bank of Frankfort, was repealed absolutely, and that since then it has been and is now no longer a corporation liable to be sued or made defendant to a bill of review, and that since then they have been and now no longer are respectively president and attorney of said defendant.

If the effect of said act of March 22, 1900, is as claimed by said Hendrick and Chinn, it must necessarily follow that their motion to quash should be sustained, and the motion to file the bill of review should be overruled. It is well settled that, after a corporation ceases to exist absolutely, it cannot be sued, or made a party to a suit, no more than an individual can be after he dies.

Wat. Corp., Sec. 434, says:

'A defunct corporation, like a natural person who dies, cannot be brought into court by process served upon persons who were officers or agents when the corporation was in existence.'

2 Mor. Priv. Corp., § 1031, says:

'The dissolution of a corporation at common law not only means that the company has lost its franchise, and can no longer act in a corporate capacity, but it implies that the corporation has wholly ceased to exist in legal contemplation, and will not be recognized as a corporate body for any purpose. It follows that suits brought by or against a corporation are abated by its dissolution, and a judgment purporting to be rendered against a corporation which is not in existence is a nullity.'

In the case of Combes v. Keyes, 89 Wis. 297, 62 N.W. 89, 27 L.R.A. 369, 46 Am.St.Rep. 839, Cassoday, J., said:

'After the dissolution of a corporation, the power to proceed against it in an action is wholly divested, except as specially authorized by statute.'

In the case of Phosphate Co. v. Perry, 20 C.C.A. 490, 74 F. 425, 33 L.R.A. 252, Pardee, Circuit Judge, in delivering the opinion of Fifth circuit court of apppeals, said:

'That a dissolution of a corporation abates all suits against it is familiar law of the text-books.'

In the case of Investment Co. v. Hughes (C.C.) 77 F. 855, Gilbert, Circuit Judge, said:

'The statute of this state gives a bare extension of life, for a fixed period after the dissolution of the corporation. Without the statute, as we have seen, all corporations were defunct from the moment of their dissolution. The statute extends their existence for a further period for a stated purpose. At the expiration of that period it is the logic of the common-law rule that the corporation is as absolutely defunct as it would have been in the first instance had not its life been prolonged by the intervention of the statute.'

Upon this ground he held that an Oregon corporation could not maintain an action after the dissolution of its charter, and after the expiration of five years, in which it might, under the statute of Oregon, bring suits and round up its affairs.

Mr. Thompson, in his work on Corporations (volume 5, Sec. 6718), thus expresses the law in his usual vigorous style:

'Under the principles of the common law, excluding in this statement the principles of equity and the effect of saving statutes, the effect of the dissolution of a corporation is to put an end to its existence for all purposes whatsoever, and to destroy every one of its faculties, so that thereafter it can neither make nor take contracts, nor sue or be sued; and so that all debts to or from it become extinguished, and all actions by or against it abate; and so that its real property reverts to the grantors or donors thereof, or their heirs; and its personal property escheats to the crown or to the state. These principles illustrate at once the feebleness and the barbaric crudity of the common law, and expand into terror and jealousy with which corporations have been regarded by all classes of people from sovereign to populace in every country and in every age.'

The principles of equity to which he refers do not have effect of saving the existence of the dissolved corporation, so that it can sue or be sued, but its liabilities, and the right to collect same out of its property, into whosesoever hands it may have passed, provided he is not a bona fide purchaser, as shown in section 6730. It would follow from this that a bill of review cannot be filed against a corporation to set aside a decree in its favor after it ceases to exist absolutely, because it is well settled that the party in whose favor a decree has been rendered, or his representatives, must be made parties defendant to the bill of review. 2 Beach, Mod. Eq. Prac., § 873, says:

'A decree cannot be set aside upon the ground of fraud, or for any other cause, without having all the parties to a decree before the court. So, in a bill of review, it is indispensable that all the parties to the original decree should be included; and, if they be dead, their legal representatives must be made parties.'

In the case of Friley v. Hendricks, 27 Miss. 412, a bill of review was filed to set aside a decree in favor of one Dinkins. The bill stated that Dinkins had died, and that his estate had been administered upon, and his administrator discharged, before the bill of review was filed. The only party defendant was the purchaser of the property involved in the decree, named Hendricks. On demurrer to the bill, it was held that it could not be maintained. The court said:

'A preliminary objection to the bill of review is raised here under the demurrer which is decisive of the case. This is that the bill does not make the complainant in the decree sought to be reversed, or his representatives, parties to the proceeding. The legal object and effect of a bill of review being to have the decree examined and reversed, it was formally held to lie only against those who were parties to the original bill (2 Barb. Ch. Prac. 94; Lube, Eq. 129), in analogy to a proceeding in error. It was afterwards extended so as to embrace other parties in interest. Still it is held to be indispensable that all the parties to the original decree should be included. Bank v. White, 8 Pet. 268, 8 L.Ed. 938; Story, Eq. Pl. Sec. 420. And, if they are dead, their representatives must be made parties, as in other proceedings in error. The reason of this is manifest,-- that, the proceeding being in its nature one to reverse the original decree, it would be inequitable to entertain such case without giving the party in whose favor the decree was rendered an opportunity to justify it. This, being a technical bill of review, must fall by the application of this principle.'

Much more so cannot this bill be maintained without any party to the suit, which is the case if the defendant corporation has ceased to exist absolutely.

It is further well settled that Messrs. Hendricks...