Hammond v. Cline

• Decision Date: 26 May 1908
• Docket Number: No. 21,090.,21,090.
• Citation: 84 N.E. 827,170 Ind. 452
• Parties: HAMMOND v. CLINE et al.
• Court: Indiana Supreme Court

170 Ind. 452

84 N.E. 827

HAMMOND

v.CLINE et al.

No. 21,090.

Supreme Court of Indiana.

May 26, 1908.

Appeal from Circuit Court, Hancock County; R. L. Mason, Judge.

Action by Walter H. Hammond, receiver, against David Cline and others. From a judgment sustaining a demurrer to the complaint, complainant appeals. Affirmed.

Wm. J. Whinery, for appellant. Howe & Batchelor, for appellees.

HADLEY, J.

Appellant, as receiver of the Equitable Insurance Company of Indiana, an insolvent corporation organized under a special charter granted in January, 1850, and which, as claimed, has existed and done businessto the present time under various corporate names, brought this suit against appellees to enforce a liability which, it is alleged, accrued against them as stockholders by virtue of section 11 of the charter act, expressed in these words: “The stockholders of 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 challenged by a demurrer thereto 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. Bank v. McGettigan, 152 Ind. 582, 586, 52 N. E. 793, 71 Am. St. Rep. 345;Farris v. Jones, 112 Ind. 498, 14 N. E. 484. It is alleged in the complaint that the plaintiff receiver was appointed in an ordinary creditors' suit against the corporation for insolvency; that there were 400 creditors of the corporation, and its indebtedness $250,000, its assets less than $20,000, and at the time of appointment the receiver was ordered and fully authorized to bring this suit. In passing it may be remarked here that the court's order to bring the suit 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 suit, 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...