Gaskins v. Bonfils, 9296.

• Decision Date: 01 September 1933
• Docket Number: No. 9296.,9296.
• Citation: 4 F. Supp. 547
• Parties: GASKINS et al. v. BONFILS et al.
• Court: U.S. District Court — District of Colorado

4 F. Supp. 547

GASKINS et al. v. BONFILS et al.

No. 9296.

District Court, D. Colorado.

September 1, 1933.

Joel E. Stone, of Denver, Colo., and Watson, Ess, Groner, Barnett & Whittaker, of Kansas City, Mo., for plaintiffs.

Robert L. Stearns, Cass E. Herrington, Cass M. Herrington, Mason A. Lewis, and James B. Grant, all of Denver, Colo., for defendants.

SYMES, District Judge.

On March 31, 1933, the complainants suggested the death of defendant Fred G. Bonfils on February 2, 1933. Thereupon a writ of scire facias was issued directing the executors of the last will and testament of said Bonfils to show cause why they should not be made parties defendant herein. The executors, "appearing specially * * * and for no other purpose," moved to quash the writ. The motion has been argued and exhaustively briefed. Although appearing for the purpose of the motion only, they raise questions of law open only to parties to the suit. In order to expedite the cause, we have considered them.

A little history is in order. The bill was filed July 17, 1930, by Florence Gaskins, a resident of Cincinnati, Ohio, "on behalf of herself and all other judgment creditors of the Post Printing and Publishing Company, a corporation of Missouri," against Fred G. Bonfils, F. G. Bonfils Foundation, the Boma Investment Company, the Dome Investment Company, and the Post Printing & Publishing Company, all Colorado corporations.

It alleges that the defendant Fred G. Bonfils (now deceased), and one H. H. Tammen, organized the Post Printing & Publishing Company, under the laws of Missouri; that they owned all but three shares of the capital stock. The name of this company was later changed to the Star Printing & Publishing Company; that in 1925 she filed a suit in the federal court for the Western district of Missouri against said Post Printing & Publishing Company of Missouri to recover $50,000 for an alleged libel published by the Kansas City Post, a newspaper published in Kansas City by the said Post Printing & Publishing Company, and that after a jury trial, and on the 15th day of December, 1926, she recovered a judgment of $32,500, which has become final; that execution was issued in Missouri and returned nulla bona, and that no part of the judgment has been paid.

On September 25, 1930, Frank C. Seested, a citizen and resident of Kansas City, Mo., filed his intervening petition herein, alleging that in the year 1921 he filed a suit in the state court of Kansas City, Mo., against said Post Printing & Publishing Company of Missouri on account of an alleged libelous publication in the said Kansas City Post, and defendant appeared; that after a jury trial, and on November 18, 1926, he recovered judgment for $200,000. An execution was issued thereon in Missouri and returned nulla bona. Thereafter said judgment was affirmed, after being reduced to $125,000, by the Supreme Court of Missouri. 326 Mo. 559, 31 S.W. (2d) 1045. Said Seested asked to be allowed to prosecute as an intervener in this cause.

The complaint and petition are identical in charging that Bonfils and Tammen were the sole stockholders, officers, and directors of said Post Printing & Publishing Company of Missouri; in absolute control at the time of the publication of the libels complained of; and that after the commencement of the said libel suits in Missouri, the Missouri corporation, through the said Bonfils and Tammen, as officers and directors, sold the assets of the corporation, consisting of the newspaper business, for $1,250,000 cash paid, and that thereafter the said Fred G. Bonfils, in collusion with the other officers and directors, wrongfully took the said proceeds to Colorado and distributed them to himself, the other stockholders and the defendant corporations, of which, it is alleged, the said Bonfils and his family owned and controlled the great majority of the stock; in short, converted said fund to their own use and benefit, in violation of the rights of creditors of the Post Printing & Publishing Company of Missouri, including complainants. All of which was to prevent the creditors of the Missouri publishing corporation from following said funds and subjecting the same to the payment of their claims and the judgments. That ever since the said sale the Missouri corporation has had no property, money, or estate in Missouri or elsewhere, subject to judgment or legal process; and that it immediately ceased to maintain any office or to carry on business in Missouri or elsewhere, and that there is no officer or director in Missouri or Colorado upon whom service can be obtained; that there is no adequate remedy at law available for satisfying said judgments.

The chancellor is asked to find that the defendants have received and hold funds belonging to the Missouri corporation which should be applied to the payment of the complainants' judgments, and the claims of other creditors who may join, etc.

The defendants, before the death of Bonfils, answered on the merits, alleging, among other things, that the Gaskins alleged libel was published June 18, 1918, suit filed thereon April 22, 1925, and judgment recovered December 15, 1926; that the Seested libel was published November 2, 1921, suit thereon filed November, 1921, and judgment recovered November 16, 1926. The sale of the assets of the Missouri corporation was made on May 17, 1922.

The first point is: "No judgment against the Post Printing and Publishing Company of Missouri was obtained in Colorado and no service thereon was had in Colorado with the return unsatisfied. Consequently, the necessary foundation for the creditors' bill is lacking and the action must fail."

This defense was not raised in the answer. Nevertheless we will consider it.

The argument briefly is: That a Missouri judgment is insufficient to support a creditors' bill in the federal court in Colorado, unless or until the Missouri judgment is reduced to a Colorado judgment and an execution returned nulla bona. This statement is good law, according to the authorities cited, of which it is only necessary to notice National Tube Works v. Ballou, 146 U. S. 517, 13 S. Ct. 165, 36 L. Ed. 1070, and 15 C. J. 1394, §§ 36 and 37. In the Ballou Case, supra, a Massachusetts corporation filed suit in the federal court in New York (C. C.) 42 F. 749, against a citizen of that state on a judgment obtained in the state court of Connecticut, upon which an execution had there been issued and returned unsatisfied. The plaintiff sought to compel the defendant to pay what he owed on his subscription to stock in a Connecticut corporation, and have it applied to the debts of the latter. Mr. Justice Blatchford, speaking for the Supreme Court, after noting that the bill did not allege any judgment in New York, or any effort to obtain it, or that it was impossible to obtain one, said, page 523 of 146 U. S., 13 S. Ct. 165, 166, 36 L. Ed. 1070: "Where it is sought by equitable process to reach equitable interests of a debtor, the bill, unless otherwise provided by statute, must set forth a judgment in the jurisdiction where the suit in equity is brought, the issuing of an execution thereon, and its return unsatisfied, or must make allegations showing that it is impossible to obtain such a judgment in any court within such jurisdiction."

See, also, Scott v. Neely, 140 U. S. 106, 11 S. Ct. 712, 35 L. Ed. 358; Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371, 14 S. Ct. 127, 37 L. Ed. 1113, and Pusey & Jones Co. v. Hanssen, 261 U. S. 491, 43 S. Ct. 454, 67 L. Ed. 763. The latter case, after pointing out that the creditor has no right whatever in equity until he has exhausted his legal remedy, holds (page 497 of 261 U. S., 43 S. Ct. 454, 67 L. Ed. 763) he may, by a creditors' bill, remove any obstacle to satisfying his execution at law, may reach assets equitable in their nature, or by means of an injunction or receiver, protect his debtor's property from misapplication or waste in order to preserve property which may ultimately be applied toward the satisfaction of substantive rights.

Counsel for the executors correctly anticipated that the question would turn upon the exception to this rule, recognized in the Ballou Case, supra, and elsewhere; so point out that the bill contains averments that Fred G. Bonfils was an officer, director, and stockholder of the Missouri corporation; that he was a resident and physically present in Colorado for many years, and that service was made upon him personally in the instant case; that service could have been had on him in an action brought in Colorado against the Missouri corporation, citing section 2254, Comp. Laws of Colo. 1921, and section 40 of the Code of Civil Procedure, Colo., as amended by the Session Laws of Colorado 1927 (page 671).

This latter provision, providing a method for service on foreign corporations, presumes that the latter is doing business within Colorado, a fact not present in the instant case. This question, however, is settled by the federal decisions, holding that the mere presence of an officer, director, or stockholder in a foreign state does not render such corporation liable to service, where it is not doing business, maintains no office, etc., therein; that is to say, a traveling officer or stockholder does not take the corporation with him beyond the jurisdiction of the state of its creation. Rosenberg Bros. & Co. v. Curtis Brown Company, 260 U. S. 516, 43 S. Ct. 170, 67 L. Ed. 372. Bank of America v. Whitney Central National Bank, 261 U. S. 171, 43 S. Ct. 311, 312, 67 L. Ed. 594, holds that jurisdiction "flows from the fact that the corporation itself does business in the state or district in such a manner and to such an extent that its actual presence there is established."

James-Dickinson, etc., Co. v. Harry, 273 U. S. 119, 47 S. Ct. 308, 71 L. Ed. 569. See, also, Toledo Rys. & Light Co. v. Hill, 244 U. S. 49, 37 S. Ct. 591, 61 L. Ed. 982. There the summons was served upon a vice president...