Gill v. Balis

• Decision Date: 31 October 1880
• Citation: 72 Mo. 424
• Parties: GILL v. BALIS et al., Appellants.
• Court: Missouri Supreme Court

72 Mo. 424

GILL

v.BALIS et al., Appellants.

Supreme Court of Missouri.

October Term, 1880.

Appeal from Jackson Circuit Court.--HON. S. L. SAWYER, Judge.

AFFIRMED.

John B. Hale, H. M. Pollard and F. M. Black for appellants.

1. The board had power to pass and carry out the resolution of February 17th, 1871. Dorr v. Stockdale, 19 Iowa 269; Hyde v. Lynde, 4 N. Y. (4 Comst.) 387; Slee v. Bloom, 19 Johns. 456: s. c., 5 Johns. Ch. 366; Cooper v. Frederick, 9 Ala. 741; Taylor v. Miami Export. Co., 6 Ohio 177, 218; City Bank v. Bruce, 17 N. Y. 507; Farmers, etc., Bank v. Transfer Co., 18 Vt. 131; Miller v. Great Republic Ins. Co., 50 Mo. 55.

2. The surrender made by the stockholders being binding on the company, is binding on the receiver. Hyde v. Lynde, 4 N. Y. 387, 392.

3. Suit by the receiver is not authorized by law. High on Receivers, § 288; Atty. Gen. v. Utica Ins. Co., 2 John. Ch. 371. Receivers appointed by statutory authority possess such powers as are given by the statute, and none other. Hannah v. Moberly Bank, 67 Mo. 678; Runyon v. Farmers, etc., Bank, 4 N. J. Eq. 480. Our statute confers no such authority. 1 Wag. Stat., 774, § 32; Curtis v. Leavitt, 15 N. Y. 42; 2 Wag. Stat., 1048, §§ 52, 53; 1 Ib., 187, § § 30, 31, 32; Ib., 606, §§ 20, 21. The general scope and object of the insurance law is to ascertain whether or not the company is on a sound basis, and if not to stop it from doing business, and to protect the property in the meanwhile. The rights of creditors and others are left to the general course of the law. In this case no order of dissolution has ever been made, and no final hearing had, and if such an order were made, the directors would become trustees to sue and be sued, and to do all needful acts to wind up the affairs of the company. 1 Wag. Stat., 293, § 21.

J. Brumback and T. A. Gill for respondent.

1. It is very clear that under section 32 the court may enjoin the further continuance of the business of unsound companies, appoint a receiver, dissolve the corporation, and wind up their affairs. The section, it is true, in terms provides, that the court “may appoint a receiver to take possession of the property of said company,” but that special language refers to what may be done, before the court on final hearing of the petition decides to wind up the affairs of the company. Winding up the affairs of a company is very comprehensive language, and certainly includes the conversion into money by sale of the property in possession of a company, and the collection of what may be owing to it, and with funds thus obtained discharging its liabilities on policies or otherwise, and ascertaining and determining such liabilities for that purpose. To this end it is certainly proper for the court to use a receiver, as was done by the circuit court in this instance.

2. The formal surrender by defendants of their certificates of stock and transfer of their shares, as provided by the resolutions of February 17th, 1871, were acts utterly void, and ineffective in law to release them from liability as stockholders. Bedford R. R. Co. v. Bowser,48 Pa. St. 29; Mann v. Pentz, 2 Sandf. Ch. 257, 270; Osgood v. Laytin, 42 N. Y. (3 Keyes) 521; Story Eq. Plead., § 69; State Savings Association v. Kellogg, 52 Mo. 591; Com. Bank v. Chambers, 8 Smedes & M. 48; Porter v. Williams, 9 N. Y. (5 Seld.) 149.

3. This stock subscription was a trust fund, held by the company, first for the payment of its debts, and the stockholders have no rights till these creditors are satisfied. Angell & Ames on Corp., §§ 599 to 604; Wood v. Dummer, 3 Mason 308, 311, 312; Nathan v. Whitlock, 9 Paige 152; Upton v. Tribilcock, 91 U. S. 45; Sawyer v. Hoag, 17 Wall. 610.

NORTON, J.

The Superintendent of the Insurance Department, on the 24th day of March, 1871, instituted a suit in the circuit court of Jackson county against the Kansas City Fire & Marine Insurance Company, the purpose of which was, among others, to enjoin it from carrying on its business as an insurance company, and to wind up its affairs. On the 9th day of August, 1871, a decree was rendered in said cause enjoining and restraining said company from conducting business, and with a view to winding up its affairs. L. C. Slavens was appointed receiver, and was directed to take possession of all the assets and property of every nature and description, including moneys, and all books, records and papers belonging to said company. On the 10th day of May, 1872, said Slavens tendered his resignation as receiver to said court, which was accepted, and on said day said court, by its order and decree, and in furtherance of its purpose of winding up the affairs of said company, appointed Turner A. Gill, the plaintiff in the present suit, receiver, and devolved upon him the performance of all duties required of the former receiver, Slavens.

By the further order of said court made in June, 1873, the said receiver, Gill, was required and directed to join in an action prosecuted in his own name all parties liable in any way for and on account of subscriptions to the capital stock of said insurance company, now unpaid, and for balances unpaid on stock or subscriptions therefor. In obedience to this order, plaintiff Gill, as such receiver, instituted the present suit in his own name against all the defendants as stockholders of said company for the purpose of recovering forty per cent of the par value of each share of the capital stock of said company. The trial of the cause resulted in a judgment for the plaintiff, from which the defendants prosecute their appeal to this court. The principal grounds of error relied upon by defendants as touching the merits of the case are, first, that the plaintiff, as receiver, could not institute or maintain a suit in his own name, and second, that if he could do so, they were in no way liable as stockholders, each of the defendants claiming exemption from liability as such by reason of their having surrendered their stock to said company, whereby they insist they ceased to become stockholders thereof.

1. INSURANCE: suit by receiver of an insurance company in his own name

It will be observed that the receiver in this case derives his power and right to sue from an order of the Jackson county circuit court; and the question presented, whether or not he can maintain this suit in his own name, is dependent upon a construction of section 32, page 772, Wagner's Statutes. The above section is found in a law entitled “Insurance,” which, among other things, provides for the creation of an Insurance Department, which shall be charged with the execution of all laws in relation to insurance and insurance companies in this State, and also provides for the appointment of a Superintendent of the Insurance Department as the chief officer thereof. Section 32 of this law makes it the duty of the Superintendent, when, upon an examination of the affairs of any insurance company, it shall appear that such company is insolvent, or that its condition is such as to render its further proceedings hazardous to the public, to file, in the office of the circuit court of the county in which it has its principal office or place of business, a petition setting forth the condition of the company, and praying for a writ of injunction to restrain said company, in whole or in part, from further proceeding in its business. At any time after such petition is filed the court in which it is pending is charged with the duty of appointing agents or receivers to take possession of the property of said company, and upon final hearing, with the further duty of making such orders and decrees as may be needful to suspend, restrain and prohibit the further continuance of the business of said company, or any part thereof, or for the dissolution of the company and the winding up of its affairs.

By virtue of this section, when the Superintendent of the Insurance Department files his petition, the court or judge may, upon inspection of the petition, before answer filed or any hearing had upon the merits, appoint a receiver to take charge of the property of the delinquent company; and if no other power than this had been conferred upon the court, the position taken by appellants that the receiver could not prosecute a suit in his own name, for the recovery of a debt due the company, would be maintainable. But the section goes further and authorizes the court on a final hearing to make such orders and decrees as may be needful “in winding up the affairs of such company.” It is difficult to conceive how the court could perform the duty enjoined upon it of winding up the affairs of the company, if it could not employ agencies to enforce the collection of the debts owing to said company. The settlement or winding up the affairs of a delinquent corporation can only be accomplished by the application of its assets to the payment of its debts, and the distribution to the stockholders of what may remain after the debts are paid. Ordinarily, before the assets, when they consist in property and debts due the company, can be thus applied, it is necessary to convert the property into cash and to collect the debts, and until this is done, its affairs cannot be settled, and the duty enjoined upon the court of winding up its affairs would remain unperformed.

The duty of settling up the affairs of the company being thus devolved upon the court, no reason is perceived why it might not (without any statutory provision) resort to such methods as would enable it to perform the duty. But we think that section 32, supra, sets this question at rest by expressly authorizing the court to make all orders and decrees needful for winding up its affairs. The statute invests the court in which the proceeding is pending, with the power to determine the necessity of the orders and decrees it may make in respect to the end to be attained; and if, in order to the attainment of the end, it appears to the court that a necessity exists for the...