Hammond v. Cline
| Decision Date | 26 May 1908 |
| Docket Number | 21,090 |
| Citation | 84 N.E. 827,170 Ind. 452 |
| Parties | Hammond, Receiver, v. Cline et al |
| Court | Indiana Supreme Court |
From Hancock Circuit Court; E. W. Felt, Judge.
Action by Walter H. Hammond, as receiver of the Equitable Insurance Company of Indiana, against David Cline and others. From a judgment for defendants, plaintiff appeals.
Affirmed.
William J. Whinery, Pickens, Cox & Kahn and William Ward Cook for appellant.
Jameson Joss & Hay, James P. Baker, Howe & Batchelor and W E. Hackedorn, for appellees.
Appellant, as receiver of the Equitable Insurance Company of Indiana, an insolvent corporation organized under a special charter granted in January, 1850 (Local Laws 1850, p. 30), and which, as claimed, has existed and done business to the present time under various corporate names, brought this action against appellees to enforce a liability which, it is alleged, accrued against them as stockholders by virtue of section eleven of the charter act, expressed in these words:
"The stockholders in said company shall be liable, in their individual capacity, to pay all contracts by it made, which shall not be paid by it, in its corporate capacity, and the legislature reserves the right to alter, amend or repeal this charter when the company shall violate any of its provisions, or so use its powers as to become oppressive to the citizens of this State."
The complaint is long, and is challenged by a demurrer for insufficiency of facts, which leads to many important questions; but the conclusion at which we have arrived, from a consideration of the initial one, renders it unnecessary and unprofitable to set out the complaint further than already suggested. The demurrer was sustained, and, the plaintiff refusing to amend, judgment was rendered against him on the demurrer, from which he appeals.
The question for decision may be stated thus: Can a receiver, in the absence of statutory authority, maintain an action against stockholders of an insolvent corporation, to enforce a statutory liability for the benefit of creditors? The demurrer calls in question the right of the plaintiff to maintain the action. American Trust, etc., Bank v. McGettigan (1899), 152 Ind. 582, 586, 71 Am. St. 345, 52 N.E. 793; Farris v. Jones (1887), 112 Ind. 498, 14 N.E. 484.
It is alleged in the complaint that the plaintiff was appointed receiver in an ordinary creditors' suit against the corporation for insolvency; that there were 400 creditors of the corporation; that its indebtedness was $ 250,000, and its assets less than $ 20,000; that at the time of the appointment the receiver was ordered and fully authorized to bring this action. In passing it may be remarked that the court's order to bring the action will not strengthen the plaintiff's right to maintain it, if the law does not authorize the court to make such order.
There is no statutory warrant for this action; and none is claimed. A receiver, under his appointment, takes over all the property of the corporation for the benefit of its creditors. He takes over nothing but what belongs to the corporation except, in certain cases, where the corporation is estopped by its fraud, he takes the right to prosecute an action for an avoidance of the transaction for the use of the general creditors. In all things else he stands in the shoes of the corporation to administer its assets. His trust embraces only the assets of the corporation. It does not include anything the corporation never had. A statutory liability, such as we are considering, is not an asset of the corporation. It was created for the exclusive benefit of the creditors. The corporation has no right in or power over it. The corporation cannot release it, nor can it assess or assign it for the benefit of creditors. It is a credit or pecuniary resource that accrues to the corporate creditors by operation of law. It is a...
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