Diamond State Iron Co v. Alex K. Rarig Co

• Decision Date: 01 October 1896
• Citation: 25 S.E. 894,93 Va. 595
• Parties: DIAMOND STATE IRON CO. et al. v. ALEX K. RARIG CO. et al.
• Court: Virginia Supreme Court

25 S.E. 894

93 Va. 595

DIAMOND STATE IRON CO. et al.

v.ALEX K. RARIG CO. et al.

Supreme Court of Appeals of Virginia.

Oct. 1, 1896.

Bill of Review—Essentials of—Judgment—Res Judicata — Proceedings to Distribute Assets of Insolvent Corporation.

1. A corporation conveyed all its assets to a trustee for the benefit of its creditors. The trustee resigned, and a receiver was appointed, who reported to the court as to a certain transaction out of which claims in favor of the corporation might arise. He was authorized, if so advised by his counsel, to bring action for their enforcement, but no such action was commenced, and a final decree for distribution, and discharging the receiver, was entered without objection. Afterwards a creditor, who participated in the distribution, without leave of court, filed a bill, not sworn to, nor alleging newly-discovered evidence, in which some of the parties to the former proceedings were made parties, and others were joined, seeking to enforce for the benefit of creditors the claims in favor of the corporation so reported on by the receiver. Held, that such bill could not be considered a bill of review of the court's decree.

2. Such proceeding is not a petition for rehearing.

3. A final decree in proceedings by which the assets of an insolvent corporation are administered through a receiver is conclusive as to all matters which were or should have been litigated in the course of such proceedings; and a bill cannot thereafter be maintained by a creditor of the corporation, who was a party to such proceedings, and participated in the distribution of the assets, against other parties, to enforce rights alleged to exist against them in favor of the corporation, upon which a report was made to the court by the receiver, but to enforce which no action was taken.

Appeal from circuit court, Rockbridge county; William McLaughlin, Judge.

Action by the Diamond State Iron Company and others against the Alex K. Rarig Company and others. Prom a decree sustaining a demurrer to the bill, complainants appeal. Affirmed.

Winbourne & Batchelor and Kirkpatrick & Kirkpatrick, for appellants.

J. G. Haythe, H. A. Burroughs, W. A. Anderson, R. L. Parrish, and Hugh A. White, for appellees.

CARDWELL, J. The single assignment of error in the petition for an appeal in this case is to the action of the circuit court of Rockbridge county in sustaining the demurrer to the petitioners' bill.

The bill filed March 19, 1896, by the Diamond State Iron Company and others, on behalf of themselves and all other creditors of the Alex K. Rarig Company, a corporation chartered by the circuit court of Rockbridge county, Va., August 30, 1890, against the Alex K. Rarig Company, Alex K. Rarig & Co., and numerous other parties, stockholders or subscribers to the stock of the Alex K. Rarig Company, avers that the complainants are creditors of the Alex K. Rarig Company, and, after setting out their respective demands, the amounts thereof, etc., it says that on the 9th day of February, 1892, the Alex K. Rarig Company conveyed all of its assets to J. E. Mullen, trustee, for the benefit ratably of all its creditors; that on the 3d Monday in March, 1892, the Southern Railway Supply Company, a supply lienor of the Aiex K. Rarig Company, filed a bill in the circuit court of Rockbridge county, on behalf of itself and all other creditors, against the Alex K. Rarig Company, and Mullen, trustee, for the specific object of enforcing its lien, and incidentally for having an account stated of all liens and their priorities; that the Pocahontas Coal Company also filed a bill in the same court against the same defendants for the enforcement of its supply lien; that on the 20th of April, 1892, the Morgan Engineering Company and others filed their bill of complaint in the corporation court of the city of Buena Vista against the same defendants, the objects of which were to have the deed of trust of February 9, 1892, to Mullen, trustee, administered, under the supervision and direction of the court, to require the trustee to give bond, to settle his accounts, and to have a proper account taken of the debts due by the Alex K Rarig Company, their respective priorities as liens on the corporate assets, and a sale of the trust property; that this last-named cause was removed to the circuit court of Rockbridge county, and consolidated with the other two causes; and that in the consolidated causes such proceedings were had that the trustee, Mullen, resigned his position as such, and the property and effects of the Alex-K. Rarig Company were committed to R. R. Witt, sheriff of Rockbridge county, and as such receiver. it is further averred that the receiver, in his report of September 19, 1893, refers to a contract between Alex K. Rarig & Co., of the one part, and the Buena Vista Company and others, of the other part, dated August 16, 1890, which provides for the purchase by the parties of the second part from said Alex K. Rarig & Co. of $25,000, at par, of the capital stock of the Alex K. Rarig Company; that the report states that this amount was paid to said Rarig & Co. by the Alex K. Rarig Company, and asks the judgment of the court whether suit should be brought for the recovery of the amount so paid; and that the court thereupon entered an order directing the receiver to sue if he should be so advised by his counsel, but at the September term, 1894, before any suit was brought by the receiver, and without any further report by him on this subject, a decree was entered striking the cause from the docket; and that, therefore, complainants are advised and aver that this decree was improvidently en tered; and that the receiver's counsel had not advised against the right to recover the said amount; and that complainants charge that the claim is a good, valid, and just one, and ought to be paid. Complainants here make exhibits, and ask that they be considered as parts of their bill, a copy of the contract of August 16, 1890, referred to, a copy of certain resolutions passed by the stockholders' meeting of the Alex K. Rarig Company on September 5, 1890, and a copy of the charter of Incorporation of said company, and aver that the $25,000 directed to be paid by the said resolution of September 5, 1890, was paid to and received by Alex K. Rarig out of the treasury of the Alex K. Rarig Company, in accordance with the terms of the resolution, and that this sum constituted part of the payment by shareholders on their subscriptions to the capital stock of the company. it is further averred that the agreement to purchase of Rarig & Co. $25,000 of the capital stock of the Alex K. Rarig Company was, by the express terms of the contract of August 16, 1890, an individual liability of the subscribers, with which the Alex K. Rarig Company had no concern; that the action of the stockholders' meeting of September 5, 1890,: n authorizing, and of the officers of the company in making, payment of this sum of $25,000 to Alex K. Rarig, was ultra vires, and as to complainants, creditors of the company, it was a grossly fraudulent misappropriation of the funds of the company, which then undertook to act as a corporate body; that, at the time, Alex K. Rarigwas president of the Alex K. Rarig Company, and a member of the firm of Alex K. Rarig & Co., which firm held $150,000 of the stock of the Alex K. Rarig Company, out of a total issue of $275,000, and was present and partisi-pated in the stockholders' meeting which authorized said payment; and that, without...