Childress v. The Fox Mining Company

• Decision Date: 05 April 1930
• Docket Number: 29,230
• Citation: 130 Kan. 402,286 P. 262
• Parties: FRANK CHILDRESS, Appellee, v. THE FOX MINING COMPANY, Appellant
• Court: Kansas Supreme Court

286 P. 262

130 Kan. 402

FRANK CHILDRESS, Appellee, v. THE FOX MINING COMPANY, Appellant

No. 29,230

Supreme Court of Kansas

April 5, 1930

Decided January, 1930.

Appeal from Cherokee district court; JOHN H. HAMILTON, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

CORPORATIONS -- Receiver -- Preservation of Rights and Property. A petition alleged that a mining corporation had abandoned the operation of the lease and had refused to take any proceedings to preserve or protect the property for the benefit of its creditors and stockholders, and was insolvent or in imminent danger of insolvency; that it had procured insurance against liabilities for injuries to its employees amounting to about $ 30,000, and the insurance carrier had failed to comply with the indemnity contract; that there was a threat that the claims, awards and judgments in favor of injured employees were about to be enforced against the property of the company in separate proceedings, which would result in an unnecessary sacrifice of the assets of the company. The plaintiff, a stockholder and creditor of the company, asked for the appointment of a receiver to take charge of the property, protect the leasehold interest pending an adjustment of the claims against it, to prosecute actions against the insurance carrier and the recovery of moneys due the company, and staying the enforcement of individual claims until adjustment is made and preferences and priorities determined, all to be considered in the ultimate distribution of funds remaining in the hands of the receiver. A receiver was appointed, and four years later, when the estate was largely settled, a motion was filed to vacate the appointment of the receiver and all proceedings in the case upon the ground that the petition did not state a cause of action or grounds for any relief, except for the appointment of a receiver. Held, that a cause of action was stated, which warranted the appointment of a receiver.

E. B. Morgan, of Galena, M. W. Hinch, of Miami, Okla., Harry C. Brownlee and Thomas R. Blaine, both of Kingfisher, Okla., for the appellant.

Al F. Williams, of Topeka, Don H. Elleman, of Columbus, and Vern E. Thompson, of Miami, Okla., for the appellee.

OPINION

JOHNSTON, C. J.:

This appeal brings up for review a decision of the trial court overruling a motion to vacate and set aside all proceedings formerly had in an action brought by Frank Childress, a stockholder and creditor of the Fox Mining Company, alleging that it was insolvent and was no longer a going concern. The purpose of the action was to collect and preserve the assets of the mining company, establish its liabilities, provide for the allowance and rejection of the claims of creditors, and the final settlement and distribution of the proceeds of its assets. A motion to obtain a vacation of the proceedings is based on the contention that the petition asks for nothing but a receivership and that as no additional relief was asked all subsequent proceedings were a nullity. The plaintiff in its petition which was filed October 13, 1924, after naming the Fox Mining Company and certain creditors and claimants as defendants, alleged--

"That the Fox Mining Company is a corporation engaged in the mining business in Cherokee county, Kansas, and that the other defendants are creditors of said defendant corporation, who have obtained and now hold unsatisfied judgments against said defendant company on account of awards made for injuries alleged to have incurred in the mines being operated by said defendant corporation.

"This plaintiff alleges and states that he is a stockholder in said corporation. That said mining company is possessed of a mining lease on the southeast quarter of the northeast quarter of section 11, township 35 south, range 23 east of the sixth principal meridian in Cherokee county, Kansas, and the concentrating mill and appurtenances located thereon. That said company is not now engaged in the operation of its lease for the reason that at the present time it has not developed or discovered a sufficient amount of ore to justify the operation of its said mill, but that its lease is as yet not thoroughly explored by drilling, and that therefore the value of its property is problematical, but this plaintiff alleges and states the facts to be that the property of said company as it now stands is not worth an amount equal to its indebtedness, and that said corporation is insolvent, or at least is in imminent danger of insolvency.

"Plaintiff further alleges that said defendant company was insured against liability for injuries incurred in its said mine with the Associated Employers Reciprocal, a reciprocal insurance company, conducted and managed by Sherman-Ellis, Inc., as its attorneys in fact; that under the terms of its policy, when an accident was incurred by its employees in the operation of its mine, said company immediately advised its said insurance carrier, who had agreed to pay promptly all claims established against said company, and that until a short time ago, the said defendant company and this plaintiff as a stockholder in said company, were of the belief that all indemnity claims against said company were being adjusted by said insurance carrier, but that they are now advised that for a considerable period of time said insurance carrier has failed, without knowledge of said defendant corporation or of this plaintiff, to pay said claims, and that this plaintiff is now advised and states the facts to be that the other defendants named herein hold judgments or awards made and entered against this company under the workman's compensation law of the state of Kansas, providing for the payment of weekly indemnities, and that said defendants are now threatening to bring proceedings to recover lump-sum judgments against said company, by reason of the fact that said claims are not being paid promptly; and this plaintiff states that the contingent liability of said company on said unpaid claims is now approximately $ 30,000, and there is outstanding other legitimate claims against said company in the amount of approximately $ 20,000.

"Plaintiff respectfully shows the court that he is a stockholder and creditor of said company; that he desires to see that the interests of said stockholders and creditors of said company are conserved, that the interest of all of the stockholders and creditors of said concern may be protected so far as possible, but that if the assets of said company are not protected by this court, and that if separate executions are levied upon its property, that the value of the estate of said defendant corporation will be diminished and that the interests of the creditors and stockholders will be unnecessarily sacrificed.

"Plaintiff further respectfully shows to the court that he is advised that there are reasonable grounds to believe that said indemnity insurance company will be enabled to ultimately settle in full all indemnity claims outstanding against said defendant company.

"Plaintiff further shows that said corporation has failed and refused to take any proceedings to preserve or protect said property for the benefit of its creditors and stockholders, although frequent requests have been made to said company so to do by this plaintiff.

"Wherefore, and for the reasons stated herein, this plaintiff prays that a receiver may be appointed to take charge of the assets of said company and to protect its leasehold interest, pending an adjustment of the claims outstanding against said company, and that said receiver so appointed may also be authorized and directed to prosecute such action or actions as may be necessary against said indemnity insurance company, for the recovery of moneys due said company or its creditors, and that the other defendants herein named be enjoined from further prosecuting their individual claims against said company, and that all proceedings in said matters be stayed, and that all the creditors of said company be required to file and present their claims to the receiver so appointed, all preferences or priorities which may have been obtained by proceedings brought by any of said defendants being recognized and considered in the ultimate distribution of the funds which may come into the hands of said receiver, by virtue of this proceeding; and that plaintiff be given such other and further relief in this action as shall appear to the court to be just."

The record shows that on October 18, 1924, the mining company accepted service of a summons and entered its appearance in the action, and the other defendants also accepted service of summons. After due notice and on October 18, 1924, a receiver was appointed, who was directed to take into his possession all the property of the mining company; to protect and manage it under the orders of the court; to prosecute such actions and...