Irvine v. Bankard

Decision Date07 July 1910
Citation181 F. 206
PartiesIRVINE v. BANKARD.
CourtU.S. District Court — District of Maryland

J Morfit Mullen (W. Calvin Chesnut and Gans & Haman, on the brief), for plaintiff.

Joseph C. France, for defendant.

ROSE District Judge.

Seventeen years or more ago the defendant became the owner of 80 shares of the preferred and 25 shares of the common stock of the Columbus, Shawnee & Hocking Railroad Company. That corporation will be spoken of as the 'Shawnee Company.' In the summer of 1895 its stock had no market value. The defendant tried to sell his 105 shares for $400. No one would buy. He could not give up all hope of ever getting anything for them. He went into a reorganization scheme. He exchanged his 105 shares in the Shawnee Company for the same number of shares in the Columbus, Sandusky &amp Hocking Railroad Company, which will hereafter be called the Railroad Company. Receivers were appointed for the Railroad Company on June 2, 1897. On July 29, 1909, the present suit was brought. The plaintiff is a receiver appointed by the court of common pleas of Franklin county, Ohio. He seeks to make the defendant pay $2,625 principal as an assessment of 25 per cent. on the par value of the defendant's 105 shares. The plaintiff in addition asks for nearly $770 interest. These payments defendant does not want to make. He sets up various defenses. While some of these are substantial, others are technical. Whether technical or substantial they go to the right of the plaintiff now to recover in any form of action. No objection is made to anything which could be cured by amendment.

The defenses are of four kinds: First. The plaintiff has no right to sue in this court. Second. Limitations. Third. The defendant is not liable as a stockholder because he became such conditionally and the condition has not been fulfilled. Fourth. The defendant if liable at all is liable for a portion only of the debts for the payment of which the assessment in suit was levied.

These defenses will be considered in the order in which they have been stated.

First. Has the plaintiff a right to sue in this court? The defendant says he has not, and that for two reasons: (a) Because the plaintiff is a mere receiver of a chancery court of another state than Maryland, and has himself no title as assignee or quasi assignee of the claims in right of which he sues. (b) If he be an assignee at all, he is the assignee of the rights of the creditors. As such he cannot maintain this suit in a Circuit Court of the United States on the ground of diversity of citizenship between himself and the defendant, unless every one of the creditors in whose right he sues was at the time the suit was brought a citizen of a different state from Maryland, of which the defendant was then and still is a citizen. The defendant says it affirmatively appears that at least one of such creditors was at the time suit was brought and is now a citizen of Maryland. Are these reasons, or either of them, sound?

(a) Can the plaintiff as receiver sue in a court of the United States for any district outside the state of Ohio? If he is such a receiver as brought the case of Hale v. Allinson, 188 U.S. 56, 23 Sup.Ct. 244, 47 L.Ed. 380, he cannot. If he is such a receiver as was plaintiff in Bernheimer v Converse, 206 U.S. 516, 27 Sup.Ct. 755, 51 L.Ed. 1163, he can. Which is he? The Constitution of Ohio made stockholders liable to the creditors of an insolvent corporation to an amount equal to the par value of their stock. The law attempted to provide the machinery to enforce this liability. By its terms a suit in equity is brought by a creditor or creditors against the corporation and its individual stockholders. In that suit the insolvency of the corporation is ascertained and the amount by which its liabilities exceed its assets. The court determines who are stockholders liable to assessment. This determination is final as to those persons who have been personally summoned, or who have appeared to the suit. It is provisional only as to those nonresidents of Ohio who have neither been summoned in Ohio, nor have voluntarily appeared in the cause. Inquiry is made as to which of the stockholders are solvent and which are not. The court is then able to calculate how large an assessment must be imposed upon each share of stock to raise from the solvent stockholders a sum sufficient to pay the debts of the corporation and the costs and expenses of the proceeding. It thereupon makes such assessment. It decrees in dollars and cents the amount to be paid by each stockholder who was made a party to the proceedings either by service, appearance, or publication. This decree is a final judgment against all those who were summoned, or without summons voluntarily appeared. Execution against such persons may issue upon it. It is not a personal judgment against those who were made parties by publication only. To bind them suits must be brought against them in some jurisdiction in which service of process can be had upon them.

The Minnesota statute of 1894, under which the receiver in Hale v. Allinson was appointed, made no specific provision for the collection of assessments from nonresident stockholders. The Minnesota courts held that, in the absence of any statutory authority, they had the right in the exercise of their general chancery jurisdiction to authorize a receiver appointed by them to sue in the courts outside of Minnesota. The Supreme Court in Hale v. Allinson, 188 U.S. 56, 23 Sup.Ct. 244, 47 L.Ed. 380, said they had no such right. In the view of the Supreme Court that receiver took no title to the fund. No statute purported to vest any authority in him. He was the mere arm of the court, and nothing more. In the case at bar the Ohio courts acted under the authority given by section 3260d of the statutes of that state (Rev. St. 1908). It is there provided that the court may authorize and direct the receiver to prosecute such action in his own name as receiver as may be necessary in other jurisdictions to collect the amount found due from any officer or stockholder. In no other material respect is the Ohio law different from the Minnesota law of 1894 considered by the Supreme Court in Hale v. Allinson. Indeed, in large part the two statutes are even verbally identical. Defendant dwells on this identity. He points out many details in which the Ohio statute differs from the Minnesota act of 1899 which the Supreme Court held in Bernheimer v. Converse, 206 U.S. 516, 27 Sup.Ct. 755, 51 L.Ed. 1163, authorized a receiver appointed thereunder to sue in other jurisdictions. He says that the Supreme Court so held because in its view the Minnesota receiver there suing was a quasi assignee and representative of the creditors, and as such was vested with authority to maintain the action. He subjects the provisions of the Ohio law to a minute examination. He asserts that they do not either direct or make any assignment of title to the receiver. The answer is that neither does the Minnesota statute of 1899. One may ordinarily sue anywhere for the recovery of that to which he has title. Booth v. Clark, 17 How. 322, 15 L.Ed. 164. By the decree of December 22, 1906, the court of common pleas of Franklin county decreed that the receiver was thereby vested with the title and ownership of all and singular the goods, chattels, property, and assets, both real and personal, of the Columbus, Sandusky & Hocking Railroad Company wherever situated or held. Under the Minnesota act of 1899 and the Ohio law now before the court, the Legislature for the purpose of making available for creditors stockholders' liability provided for the appointment of a receiver. It empowered the court to authorize such receiver to sue in other jurisdictions. As I understand Bernheimer v. Converse, that receiver in virtue of such statutory appointment and judicial authorization thereunder is in the position of a quasi assignee and representative of the creditors. If he is such, he may sue.

Jurisdiction of a suit brought by this very receiver under the very decree sued on in this case has been upheld by the Circuit Court of the United States for the Southern District of California in Irvine v. Putnam, 167 F. 174, and in the case of Irvine v. Chicago, Wilmington & Vermillion Coal Co. by the Circuit Court of the United States for the Northern District of Illinois, a transcript of the record in which case has been furnished me. I do not know that it has been reported. [1]See, also, Howarth v. Lombard, 175 Mass. 577, 579, 56 N.E. 888, 49 L.R.A. 301; Howarth v. Angle, 162 N.Y. 185, 56 N.E. 489, 47 L.R.A. 725; Goss v. Carter (5th Circuit) 156 F. 746, 84 C.C.A. 402

(b) The defendant says that the jurisdiction of this court is invoked on the ground of diversity of citizenship. He is a citizen of Maryland. If the plaintiff, a citizen of Ohio, sues as the assignee of the creditors, he must allege that every one of those creditors is a citizen of a state other than Maryland. That he has not done. The record affirmatively shows that among the creditors is at least one Maryland corporation viz., the Baltimore & Ohio Railroad Company. The Ohio courts in considering the nature of the proceedings of a creditor under their law to enforce the individual liability of the stockholders have said that the order for the distribution of the fund is not a judgment in favor of creditors, but an order upon the receiver to distribute the fund in his hands, whatever that fund may be. Herrick v. Wardwell, 58 Ohio St. 306, 50 N.E. 903. The plaintiff in this case is not an assignee of the claims of the individual creditors. He is a quasi assignee of all of them, and is their representative. He sues in a representative capacity, and his citizenship, and not that of those whom he represents,...

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6 cases
  • Irvine v. Elliott
    • United States
    • U.S. District Court — District of Delaware
    • February 24, 1913
    ...or attachment against non-resident stockholders, not served with process nor appearing in the domiciliary proceedings. Irvine v. Bankard (C.C.) 181 F. 206. Affirmed 184 F. 986, 106 C.C.A. 664. The proceedings on Marriott and Kinsey petitions both before and after their consolidation appear ......
  • Irvine v. Baker
    • United States
    • U.S. District Court — Southern District of New York
    • July 30, 1915
    ...... stockholders by the Ohio court. The vesting of such authority. in the receiver by the statute seems to be all that is. required by the authorities. The right of this plaintiff, as. receiver, to sue, has been sustained in the cases of. Irvine v. Putnam (C.C.) 167 F. 174; Irvine v. Bankard (C.C.) 181 F. 206; Irvine v. Putnam. (C.C.) 190 F. 321; Irvine v. Elliott (D.C.) 203. F. 82; and Blackburn v. Irvine, 205 F. 217, 123. C.C.A. 405. If there were doubt of the plaintiff's right. to sue, it should be resolved in his favor by this court, in. view of these numerous ......
  • Blackburn v. Irvine
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • April 23, 1913
    ...action now before us was brought in June, 1910, it was in time. A similar conclusion has been reached in the Fourth Circuit in Irvine v. Bankard (C.C.) 181 F. 206, (C.C.A.) 184 F. 986. In some respects the opinion in that case pursues a different road, and (without intimating any dissent) w......
  • Shipman v. Willard
    • United States
    • U.S. District Court — District of Rhode Island
    • March 19, 1912
    ...206 U.S. 516, 532, 27 Sup.Ct. 755, 51 L.Ed. 1163; Hale v. Allinson, 188 U.S. 56, 81, 21 Sup.Ct. 946, 45 L.Ed. 1031; Irvine v. Bankard (C.C.) 181 F. 206, 209. form of the action is of special importance, because of the various questions raised as to which of several statutes of limitations i......
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