Elkhart Nat Bank v. Northwestern Guaranty Loan Co.

• Decision Date: 12 April 1898
• Docket Number: 17.
• Parties: ELKHART NAT. BANK v. NORTHWESTERN GUARANTY LOAN CO. et al.
• Court: U.S. Court of Appeals — Third Circuit

87 F. 252

ELKHART NAT. BANK v. NORTHWESTERN GUARANTY LOAN CO. et al.

No. 17.

United States Court of Appeals, Third Circuit.

April 12, 1898

M. H Boutelle, for appellant.

John G Johnson, for appellees.

Before ACHESON, Circuit Judge, and BUTLER and BRADFORD, District judges.

BUTLER District Judge.

Can the suit be sustained? The bill avers, substantially, that the loan company was organized under the laws of Minnesota; that the individual defendants named, together with a large number of other persons not residents of Pennsylvania, hold its stock; that in May, 1893, the district court of Hennepin county, Minn., adjudged the company insolvent, in proceedings instituted under a statute of that state, and appointed a receiver, who took possession of its assets, and continues to hold them; that the plaintiff obtained a judgment against the company, since that date, which is unpaid; that the assets of the loan company do not exceed $500,000, while its indebtedness exceeds $3,000,000; that the individual defendants named hold 846 shares of its stock, worth at the par value $84,000, and reside in Pennsylvania; that by the laws of Minnesota the stockholders of the company are personally liable to its creditors, each in an amount equal to the par value of the stock held by him, or so much thereof as is necessary to pay his proportion of the balance due creditors, after the assets of the company have been exhausted; that the deficiency of assets is more than $2,500,000, and that the amount of stock liable to call for contribution, on account of this deficiency represents in money $1,250,000. The relief sought is stated as follows 'That said defendants may make a full disclosure discovery and answer to all and several the matters aforesaid, and according to the best and utmost of their knowledge, remembrance, information and belief, full, true, direct and perfect answers make to all and several the allegations and charges herein contained, as though specially interrogated on each thereof, and that an account be taken, ascertaining the value of all and several the assets, properties and effects of whatsoever kind or character of said defendant Northwestern Guaranty Loan Company, applicable to the payment of its indebtedness, the stockholders of said corporation and the amount of stock held by each at the date of the adjudication of insolvency of said Northwestern Guaranty Company; the amount of indebtedness of said corporation and to whom due; the amount due on plaintiff's judgment, and that a receiver herein and in this suit be appointed, and that each of said several stockholders within the jurisdiction of this court, defendants herein, be adjudged and decreed to pay to said receiver, for the equal benefit of your orator and all other creditors of said Northwestern Guaranty Loan Company, who may become parties hereto, and prove their claims herein, a sum equal in amount to the par value of the shares of stock held by each.'

Thus it appears that the suit is an ordinary proceeding in equity by creditors' bill, for an account and settlement of the rights and liabilities of parties. The individual defendants served demurred, assigning among other causes the absence of essential parties, to wit, the loan company, and stockholders outside this state. The court sustained the demurrer and dismissed the bill. The loan company is improperly joined as a defendant. Under the act of congress of March 3, 1887, it is not liable to suit here. Phosphate Co. v. Brown, 20 C.C.A. 428, 74 F. 321; Anderson v. Watt, 138 U.S. 694, 11 Sup.Ct. 449; Shaw v. Mining Co., 145 U.S. 444, 12 Sup.Ct. 935. The suggestion that the company may voluntarily come in is immaterial; it is not here, and the presumption is that it will not come. The nonresident stockholders are not joined.

We are now called upon to decide whether the company and nonresident stockholders are necessary parties to the litigation. This is the only question presented. The argument addressed to us for the plaintiff took a wide range, and was largely devoted to a consideration of the local laws of Minnesota. With these laws, however, we have no present concern, except in so far as they bear on the question of personal liability sought to be enforced. This question is not raised, nor is it open to controversy. Are the loan company and nonresident stockholders necessary parties? In determining this question we are not governed by the laws of Minnesota, but by the ordinary rules and practice of courts of equity. The practice adopted in proceedings under the local laws of that state against stockholders, or in equity proceedings there, based upon such laws, is unimportant to the inquiry before us. As before stated the suit is an ordinary one to ascertain the rights and liabilities of parties and to enforce contribution and settlement. The relations of the parties arise out of their mutual connection with the loan company-- the plaintiff as a creditor, and the individual defendants as stockholders. The laws of Minnesota impose on such stockholders a personal liability equal to the par value of the stock held, and render them subject to call for payment of so much thereof as may be necessary to pay creditors, after the company's assets have been exhausted. To enable the court to make a decree it must take an account, determine the amount of assets, the extent of indebtedness and the names and situation of the stockholders, the number of shares held by each, and thus determine...