Hale v. Hardon

Citation89 F. 283
Decision Date13 September 1898
Docket Number685.
PartiesHALE v. HARDON.
CourtUnited States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts

H. M Boutelle and J. C. Coombs, for plaintiff.

Nichols & Cobb, for defendant.

PUTNAM Circuit Judge.

This suit was brought by the plaintiff, describing himself as receiver, and in his capacity as receiver, against the defendant, who is admitted to be a stockholder of the Northwestern Guaranty Loan Company, a corporation organized under the laws of Minnesota, to recover of the defendant, as such stockholder, an amount equal to the par of his stock, in accordance with the liability imposed on the stockholders of corporations of this class by the constitution and statutes of Minnesota. The declaration sets out that on the 20th day of May, 1893, the Northwestern Guaranty Loan Company was insolvent, and that on the same day, on proceedings duly instituted in a local court of Minnesota, it was so adjudged and a receiver therefor was appointed, which receiver, it is alleged, was 'invested with, all and several, the rights assets, properties of every kind and description, wheresoever situate, of said corporation,' 'all under and in accordance with certain statutes of Minnesota' which are set out. It is further alleged that this receiver duly qualified, and has ever since continued, and at the time of the filing of the declaration was still acting, as such. It is to be noted that the receiver appointed on the adjudication of insolvency is not the plaintiff at the case at bar, and that he was vested by the court with all the usual powers of trustees appointed to wind up insolvent corporations, and with all the assets of the corporation, and was authorized to adjust and close its affairs. The declaration further alleges that a judgment was duly obtained against the Northwestern Guaranty Loan Company, on which an execution was returned unsatisfied; that afterwards the creditor in that judgment, in behalf of himself and all other creditors of the corporation, commenced a suit in a local court of Minnesota against it, and against 'all and several the stockholders therein at the time of said adjudication of insolvency as aforesaid, for the purpose of enforcing and collecting the liability of stockholders provided by the laws of the state of Minnesota'; that process was served on the corporation and on the stockholders resident within the state; and that on the 8th day of February, 1897, a final decree was rendered in behalf of the plaintiff and the intervening creditors against the defendants, which decree is substantially set out in the declaration, as follows:

'First. The several sums due and owing to said several creditors by the defendant Northwestern Guaranty Loan Company, which said indebtedness, as therein adjudged and decreed, aggregated three million three hundred and seven thousand three hundred and ninety-four and 34/100 dollars. Second. That the value of the total assets and properties of said Northwestern Guaranty Loan Company in any wise applicable to the payment of such indebtedness was four hundred and fifty thousand dollars, and no more. Third. That the total capital stock issued by said Northwestern Guaranty Loan Company, all of which said stock was issued and outstanding at the time of the contracting of the said indebtedness, and the date of adjudication of the insolvency of said Northwestern Guaranty Loan Company, to wit, May 20, 1893, was twelve thousand five hundred shares, of the par value of one hundred dollars per share. ' 'Fifth. That each of said stockholders was liable upon such stock, to said creditors therein ascertained, for an amount equal to the par value of the stock held by him. Sixth. That plaintiff and said intervening creditors, so ascertained, recover, accordingly, from each of the several stockholder defendants within said state of Minnesota, a sum equal to the par value of the stock held by such stockholder. Seventh. That W. E. Hale be appointed receiver for collecting and enforcing, for and in behalf of said ascertained creditors, said judgments against such Minnesota stockholders, and for the purpose of collection, by such proceedings as might be proper, the liability of nonresident stockholders of said Northwestern Guaranty Loan Company, over whom the court, by reason of nonresidence, had not acquired jurisdiction for purpose of rendering personal judgment. Eighth. That said funds, so collected, be held by said receiver for the purpose of equal and pro rata distribution amongst said ascertained creditors, and subject to the further order of the court. Ninth. That the court retain jurisdiction of said cause for the purpose of making such other and further orders and decrees in the matter of distribution as might be necessary to protect the rights of the several creditors in the premises.'

In order to thoroughly understand the case, it is necessary to observe,--First, that there has been no dissolution of the corporation, and therefore no possibility of the vesting of its assets in any person or corporation as its successor in law; and, second, that by virtue of the insolvency proceedings in the first suit the title to all the assets of the corporation passed by an assignment, or quasi assignment, to the receiver named in that suit, who is in effect a trustee, and who is no party to the present litigation; and, third, that the suit in which the present plaintiff was appointed a so-called receiver related entirely to enforcing the liability of the stockholders, and in no way superseded the insolvency proceedings, or affected the title of the receiver previously appointed.

The nature of the second proceeding will be better understood on an examination of the constitutional and statutory provisions applicable to the case, although the latter are exceedingly crude and obscure. This fact has rendered the administration of the statute so complicated-- as shown by Harper v. Carroll (Minn.) 69 N.W. 610, 1069, and Hanson v. Davison (Minn.) 76 N.W. 254, and by other decisions in Minnesota-- so as to make it very difficult, if not practically impossible, for any foreign judicial tribunal to work out fragmentary proceedings in reference thereto. The constitution (article 10, Sec. 3) provides as follows:

'Each stockholder in any corporation (excepting those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him.'

The only provisions found in the statutes of Minnesota for enforcing this liability are contained in Gen. St. 1894, c. 76, Secs. 5905-5911, which, except section 5911, which is unimportant in this case, are as follows:

'Sec. 5905. Whenever any creditor of a corporation seeks to charge the directors, trustees, or other superintending officers of such corporation, or the stockholders thereof, on account of any liability created by law, he may file his complaint for that purpose in any district court which possesses jurisdiction to enforce such liability.
'Sec. 5906. The court shall proceed thereon as in other cases, and, when necessary, shall cause an account to be taken of the property and debts due to and from such corporation, and shall appoint one or more receivers.
'Sec. 5907. If, on the coming in of the answer, or upon the taking of any such account, it appears that such corporation is insolvent, and that it has no property or effects to satisfy such creditors, the court may proceed, without appointing any receiver, to ascertain the respective liabilities of such directors and stockholders, and enforce the same by its judgment, as in other cases.
'Sec. 5908. Upon a final judgment in any such action to restrain a corporation, or against directors or stockholders, the court shall cause a just and fair distribution of the property of such corporation, and of the proceeds thereof, to be made among its creditors.
'Sec. 5909. In all cases in which the directors or other officers of a corporation, or the stockholders thereof, are made parties to an action in which a judgment is rendered, if the property of such corporation is insufficient to discharge its debts, the court shall proceed to compel each stockholder to pay in the amount due and remaining unpaid on the shares of stock held by him, or so much thereof as is necessary to satisfy the debts of the company.
'Sec. 5910. If the debts of the company remain unsatisfied, the court shall proceed to ascertain the respective liabilities of the directors or other officers, and of the stockholders, and to adjudge the amount payable by each, and enforce the judgment, as in other cases.'

The proceeding in the local court of Minnesota instituted by virtue of these statutory provisions was evidently of an equitable character, analogous to a creditors' bill. Although the distinction between suits at law and in equity does not exist in Minnesota, yet it must be maintained in the federal courts; and therefore the first objection urged on us is that, as the proceedings were of an equitable nature, and the distinction between law and equity must be maintained in this court, we cannot take jurisdiction of anything which flows out of them. Of course, if the pending suit involved an accounting, or was in any way in the nature of a creditors' bill, it would clearly fall within Cattle Co. v. Frank, 148 U.S. 603, 13 Sup.Ct. 691, and the litigation would necessarily be dismissed. This is also explained by Judge Colt in Bank v. Sayward, 86 F. 45. But the suit is at law, and therefore these considerations, which relate to a proceeding in equity, need not be followed further. On the other hand, it does not result that, because the parent proceeding was of an equitable nature, actions at law may not flow out of it. This was plainly shown in Hawkins...

To continue reading

Request your trial
5 cases
  • Hale v. Coffin
    • United States
    • United States District Courts. 1st Circuit. United States District Court (Maine)
    • 5 Marzo 1902
    ...of the group of cases growing out of the same receivership, and having its origin in the same circumstances as those shown in Hale v. Hardon (C.C.) 89 F. 283; Id., 37 C.C.A. 240, 95 F. 747; and in Hale v. (C.C.) 104 F. 757. The present case, however, is in equity, in order to reach the asse......
  • Strout v. United Shoe Machinery Co.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • 30 Marzo 1912
    ...of a different character who were allowed to bring suits outside of the jurisdiction of their appointment. In this circuit, in Hale v. Hardon (C.C.) 89 F. 283, Judge Putnam designated the different classes of receivers: First, those who are true successors in title, as in Relfe v. Rundle. S......
  • Hale v. Tyler
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • 25 Julio 1900
    ...1899, reversing the judgment of the circuit court of this district, whose opinion was passed down on September 13, 1898, and is reported in 89 F. 283. The present case comes before court on demurrer, containing, under the Massachusetts practice, 50 different assignments of alleged defects i......
  • Wigton v. Bosler
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • 28 Mayo 1900
    ...... 252. . . Furthermore,. I am of opinion that this receiver has no right to maintain. the present action in this jurisdiction. In Hale v. Hardon (C.C.) 89 F. 283; Id., 37 C.C.A. 240, 95 F. 747,-- the cases of Booth v. Clark, 17 How. 322, 15. L.Ed. 164, and Relfe v. Rundle, 103 ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT