Jahn v. Champagne Lumber Co.

• Decision Date: 01 September 1906
• Docket Number: 124.
• Parties: JAHN v. CHAMPAGNE LUMBER CO. et al.
• Court: U.S. District Court — Western District of Wisconsin

147 F. 631

JAHN v. CHAMPAGNE LUMBER CO. et al.

No. 124.

United States Circuit Court, W.D. Wisconsin.

September 1, 1906

This is an action in equity in the nature of a creditors' bill in behalf of the complainant and any other creditor similarly situated who may come in and join in the proceeding. In substance it is charged that one Nyback, assignor of complainant, after a protracted litigation recovered certain judgments against the Champagne Lumber Company, a Wisconsin corporation, in the Circuit Court of the United States for the Western District of Wisconsin, for personal injury amounting, with costs, to something over $25,000. Pending such litigation it is alleged that the Champagne Lumber Company was wound up, and all its property and assets were fraudulently distributed among the stockholders who were the individual defendants herein. So that when the fi. fa. was issued on such judgments, the same was returned nulla bona that the defendants Stewart and Alexander were the stockholders of said corporation at the time of its disintegration, and fraudulently divided among themselves all such property and assets, which were alleged to be of greater value than the amount of such judgment; and that such proceedings were taken by the officers and stockholders of said corporation for the purpose of defeating any recovery upon such judgments at law; that after verdict and before judgment in such proceedings at law the cause of action therein was assigned and transferred to the complainant by an instrument in writing and under seal 'for sufficient and valuable consideration.' Annexed to the bill is a copy of such assignment, wherein the consideration for the transfer is stated as follows: 'That in consideration of the sum of fifteen dollars this day paid by the party of the second part to said party of the first part, the receipt whereof is hereby acknowledged and confessed, and for other sufficient and valuable consideration heretofore received by said party of the first part from the said party of the second part,' etc. It was further averred that the individual defendants originally subscribed for a large amount of the capital stock of said corporation, and that they had only paid in 50 per cent. of the amount of such subscription, and that 50 per cent. thereof was still due and owing from the said defendants to said corporation at the time it was wound up. The relief sought by the bill was a discovery and accounting of all the assets and property of said corporation which had been thus distributed and divided among the stockholders, also an accounting as to the amount due to the complainant and to any other creditors similarly situated who might join in the action; that, if such assets and property so misapplied by the stockholders should prove insufficient to pay the judgments of the complainant and to satisfy the claims of such other creditors as may come in and join in the action, then there be an accounting as to the amount due by the individual defendants, as stockholders, to the Champagne Lumber Company; and that said defendants be required to pay into court the amount so due upon said subscription to capital stock. There was also a general prayer for relief. To this bill the defendants interposed a general and several demurrer stating several grounds, but only two proposition were relied upon at the argument. First. It was objected that the bill is multifarious. Second. That it appears upon the face of the bill that the consideration for the assignment of the verdict and cause of action in such suit at law from Nyback, the original plaintiff, to the complainant, was so slight and inadequate that equity ought not to entertain this suit, or lend its aid to consummate what appears to be a mere speculative venture.

William F. Lennon (Julius J. Patek, of counsel), for complainant.

Reid, Smart & Curtis and Sanborn & Blake, for defendants.

QUARLES District Judge (after stating the facts).

The first proposition upon which the demurrer is predicated namely, that the bill is multifarious, is wholly without merit. Bates Fed. Equ. Pro. Sec. 195. It is the peculiar function of equity to protect creditors by treating the assets of a defunct corporation as a trust fund; to discover and assemble all the assets of the debtor corporation into a common fund, to be marshaled...