In re People's Live Stock Insurance Co.

• Decision Date: 12 January 1894
• Docket Number: No. 8397.,8397.
• Citation: 56 Minn. 180
• Parties: <I>In re</I> PEOPLE'S LIVE STOCK INSURANCE CO., in liquidation.
• Court: Minnesota Supreme Court

56 Minn. 180

In re PEOPLE'S LIVE STOCK INSURANCE CO., in liquidation.

No. 8397.

Supreme Court of Minnesota.

Argued December 19, 1893.

Modified January 12, 1894.

Appeal by R. J. Mendenhall and A. C. Paul, stockholders in the People's Live Stock Insurance Company, from an order of the District Court of Hennepin County, Charles M. Pond, J., made June 26, 1893, in the proceedings to wind up its affairs, denying their motion for a new trial of the question of their liability.

The People's Live Stock Insurance Company was organized at

Minneapolis June 2, 1890, as a corporation under 1878 G. S. ch. 34, title 2, to insure owners of live stock against loss by death of such stock. Its authorized capital was $100,000 divided into shares of $100 each. Only 300 shares were issued and on these only eight per cent. was paid. Elias Moses subscribed for twenty five shares, and on August 4, 1891, sold to Mendenhall fifteen of them and they were on that day transferred to him on the books of the corporation. F. W. Earle subscribed for one hundred and fifty shares and on December 30, 1890, sold to Paul seventy five of them and they were on that day transferred to him on the books of the corporation. Paul afterwards paid five per cent. more on his stock. On the petition of a majority in number and interest of the stockholders, the corporation was on January 25, 1892, dissolved under 1878 G. S. ch. 34, §§ 415, 417, and Walter J. Marson appointed receiver. Under an order of Court the creditors of the corporation proved their claims against it amounting to $1,855. Among them was James Spilman who held a judgment against it for $591.08. The corporation was insolvent and had no assets. On the application of the creditors, the Court on June 26, 1893, made an order in the proceedings directing the stockholders to pay to the receiver the balance due for their stock. Paul was required to pay $87 on each share of the stock held by him and Mendenhall and the other stockholders $92 on each share of their stock. The Court further ordered that from the proceeds the expenses and fees of the receiver should be paid and $200 to the attorney of the creditors for his services in obtaining the order. The Court also ordered that in case the receiver was unable to collect of the holder of the stock, then the assignor of it should be liable to the extent necessary to pay all debts contracted before his assignment of it and directed that judgment be entered in favor of the receiver, against the stockholders severally for the sums so ordered paid, and reserved all other matters for further consideration. Mendenhall and Paul moved the Court to vacate this order and to grant a rehearing, but were denied and they appeal. A case was made containing the proofs given on the hearing and a copy of it and of all the proceedings was transmitted to this Court.

Benton, Roberts & Brown, for appellants.

Gilfillan, Belden & Willard and Benton & Molyneux, for respondents.

GILFILLAN, C. J.

This corporation was incorporated in June, 1890, and transacted business till January, 1892. On the 22d of the latter month, Spilman recovered judgment against it, and on the 25th, on the petition of a majority in number and interest of the stockholders, an order or decree was entered in the District Court of Hennepin county, in which county the corporation had its principal place of business, dissolving the corporation, and appointing a receiver, under 1878 G. S. ch. 34, §§ 415, 417. September 17, 1892, the court made an order fixing the time and manner in which creditors should prove their claims, which order being served as directed, certain creditors, among them Spilman, appeared, and proved their claims, and they were allowed. The court below found as a fact that those who so appeared were all of the creditors of the corporation, and, prima facie, at least, this was so.

On the subscriptions to stock, only eight per cent. had been paid, except as to the stock held by Paul, on which thirteen per cent. had been paid. To pay the claims allowed, it was necessary to resort to these unpaid subscriptions. The receiver taking no action to enforce the liability of the stockholders, Spilman, by leave of the court, filed a complaint in the proceeding, in behalf of himself and all others of like interest, against the stockholders, asking, in substance, that their liability on the subscriptions, and also their constitutional or "double" liability, as it is sometimes called, be enforced. The stockholders named as defendants in the complaint were, as directed by the court, brought in to answer the complaint, by service of summons, as required in civil actions. The various parties named as defendants in the complaint, and others who were or had been stockholders, and who were admitted as defendants against the complaint, came in and answered.

After a trial, the court filed its findings of fact and conclusions of law, directing judgment in favor of the receiver, marshaling, so to speak, the liabilities of the stockholders, — first their liability on stock subscriptions, and then their constitutional or double liability, — and directing that the judgment be enforced by execution, so far as necessary to pay the claims proved, in the order in which the liabilities were so marshaled.

Mendenhall and Paul moved for a new trial, and from an order denying it they appeal to this court.

The principal questions raised in the case require a consideration of the nature of the proceeding begun by the filing of the stockholders' petition for a dissolution of the corporation. The statutory provisions in regard to the proceedings are contained in 1878 G. S. ch. 34, §§ 415 to 420, inclusive. Section 415 authorizes the dissolution of a corporation on the application of stockholders. Section 416 authorizes the corporation, for three years after dissolution, to do what may be necessary to gradually close up and settle its concerns. Section 417 authorizes the appointment of a receiver to do what the corporation might do under section 416. Of course, the appointment of a receiver necessarily suspends the power of the corporation to proceed under section 416. From the time of such appointment, the affairs and concerns of the corporation, its property and assets, are in custodia legis. Section 418 suggests modes of procedure in the most general terms; thus: "Said court shall have jurisdiction in equity of the application, and of all questions arising in the proceedings thereon; and may make such orders, injunctions and judgments therein as justice and equity may require." This undoubtedly gives complete control of the proceeding, and authority to employ all usual powers and processes of courts in similar cases to accomplish the purposes of the proceeding, but not to enlarge such purposes beyond what the statute indicates. Section 419 requires the receiver to pay all debts of the corporation if the funds in his hands are sufficient therefor, and, if not, then to distribute the same ratably among the creditors who prove their debts in the manner directed by the court; and section 420 provides that, if there be a balance remaining after the payment of debts, the receiver shall distribute it among those justly entitled to it, as having been stockholders, or their legal representatives.

The proceeding is entirely different from that provided by 1878 G. S. ch. 34, §§ 9, 10, and 11, which is an action by a single creditor against a live and operating corporation, in which the creditor may join a stockholder as codefendant in order to enforce, for payment of his debt, the liabilities of the...