Lake Superior Iron Co. v. Brown, Bonnell & Co.

• Decision Date: 05 September 1890
• Citation: 44 F. 539
• Parties: LAKE SUPERIOR IRON CO. et al. v. BROWN, BONNELL & CO., et al.
• Court: U.S. District Court — Northern District of Ohio

44 F. 539

LAKE SUPERIOR IRON CO. et al. v. BROWN, BONNELL & CO., et al.

United States Circuit Court, N.D. Ohio, Eastern Division.

September 5, 1890

C. C Baldwin and Hine & Clark, for creditors and purchasers.

Frank Wing, for receiver.

RICKS J.

At the October term, 1889, of the supreme court of the United States, (10 S.Ct. 604,) a decree was entered affirming the decree of this court rendered in this case at the February term, 1886; and on the 26th day of May, 1890, a mandate of said court was received directing this court to enforce its decree. In pursuance to said direction, an order of sale was issued out of the clerk's office on the 3d day of June 1890, directing the special master commissioner therein named to appraise, advertise, and sell the property described in the decree and order of sale as upon a judgment at law. On the 23d day of July, 1890, the master commissioner returned the order of sale, reporting that on the 22d day of July he had sold the said property to William McCreery, Henry Tod Charles C. Baldwin, and Cecil D. Hine, as trustees for the sum of $700,000, said sum being more than two-thirds of the appraised value thereof. On the 22d day of August exceptions to the report of said master were filed by the Leadville Coal Company and Charles S. Worden, on behalf of themselves and such other creditors as might choose to join therein. A motion was also filed on behalf of the purchasers, to confirm said sale. The case is now before the court upon these exceptions and upon the motion to confirm.

The exceptions filed may be briefly stated as follows: (1) Appraisal void because not made on actual view. (2 and 3) Appraisal void because two of the appraisers related to or employed by creditors. (4 and 5) Appraisal void because certain of receiver's contracts for sales and supplies not appraised. (6) Appraisal void for inadequate price. (9) Order of sale void because corporation dissolved by state court, and suit thereby abated, and for other exceptions noted in the opinion.

The exceptions and the objections are stated in inverse order to their importance. It will be well to consider the last exception first, because, if well taken, there will be no need to spend time considering the others. The ninth and last exception is:

'That this action abated on the dissolution of such corporation by judicial decree, and said Taylor, the receiver, who now, under the statute, is vested with the title to all the corporate assets, has not been a party to this suit in any way.'

Postponing, for the time, a consideration of the question whether in an equity suit of this character, after a final decree adjusting all the rights of the parties, a dissolution of a defendant corporation, independent of any statutory provision, would make a revivor necessary, we pass to the consideration of the Ohio statutes prescribing the procedure necessary to dissolve a corporation created by authority of the state. After a careful examination of the several sections of the statute on this subject, it seems clear that this legislation fully saves and excepts from the general effects of dissolution all rights of parties in suits 'pending in any court in favor of or against any corporation, ' and specially provides that no such action 'shall be discontinued or abate by the dissolution of the corporation, whether the dissolution occur by the expiration of its charter or otherwise; but all such actions may be prosecuted to final judgment by the creditors, assignees, receivers, or trustees, having the legal charge of the assets of the of the corporation, in its corporate name. ' ^[1] The statute provides still further that final relief by execution shall not be delayed by such dissolution, but that 'execution may be had, and satisfaction or performance of the same enforced by the creditors, assignees, receivers, or trustees, having the legal charge of the assets of the dissolved corporation, in the corporate name of the dissolved corporation. ' ^[2] Now, if we apply these provisions to the case before us, they relieve the court of all difficulty in speeding the suit to a final decree of confirmation and settlement. The jurisdiction of the court from the time the supplemental bill was filed has proceeded upon the well-settled principle in equity that the property and assets of this insolvent defendant corporation was a trust fund, to be distributed for the benefit of its creditors as their rights and equities should be finally determined. In order to adjudicate those rights, the creditors were allowed and required to become parties to this suit. Their claims have been filed, the amounts due them have been determined, and their priorities fixed by final decree. Every person interested in the assets of this insolvent corporation is before the court, and his rights have been fully determined. The court has complete jurisdiction both of the funds and of the parties, and is ready to make distribution of the trust fund; but is now, after seven years of litigation, asked to relinquish jurisdiction, turn the property and funds that have accumulated by judicious management over to another court, and require creditors to renew litigation in another forum. Such an extraordinary abandonment of creditors to such a harsh fate would be justified only by a clear and undoubted want of jurisdiction.

The Ohio statutes, and the general principles controlling equity procedure, furnish abundant reasons for retaining jurisdiction and giving parties final and complete relief in these proceedings. The provisions of the statute quoted make it plain that, after final decree of dissolution in the state court, these proceedings could still have been prosecuted against the defunct corporation in its corporate name, and without revivor, as was done in this case. By the express provision of the statute before quoted, 'execution may be had, and satisfaction or performance of the same enforced, * * * in the corporate name of the dissolved corporation. ' If such unembarrassed relief was provided for enforcing a judgment at law, how much more liberal a construction might be claimed for such a provision when applied to a suit in equity, where the well-established principle controls that the equitable rights of the creditors of a corporation survive its dissolution, although their remedy at law is extinguished. A court of chancery will furnish a remedy to protect and enforce their equitable rights against any assets belonging to the company at the time of its dissolution. At the time the proceeding to procure a decree of dissolution was instituted in the Ohio tribunal, this court had control of all the property of the defendant, and was operating its mills by a receiver. It had adjudged the defendant insolvent, and had reached out its long arms to bring all parties, resident and non-resident, before it, to adjudge their rights to the property and fund it had seized. It had impressed upon the fund and property the character of a trust, and had undertaken to convert them, so as to make an equitable distribution thereof among the beneficiaries entitled to share therein. This afforded a sufficient basis for the equitable jurisdiction claimed. It was, in most respects, in the nature of a proceeding in rem, and its jurisdiction of the property and assets was incontestable.

The mandate of the supreme court specifically directed this court to enforce the decree which it had affirmed. This affirmance was made after the decree of dissolution in the state court. Under that mandate, this court had no discretion as to how or when, or upon what terms, the defendant's property should be sold. We are directed to enforce the decree as affirmed, and in that decree the provisions for its execution are definitely prescribed. We do not assume to modify or annul any of its provisions, but have undertaken to execute it as literally as possible. The provisions of the Ohio statutes have been carefully considered, not because we hold that our jurisdiction to proceed without revivor can be aided by this statute, for it is well settled that the equity jurisdiction of this court can neither be restricted nor enlarged by state legislation. But, inasmuch as all the authority and rights claimed by the receiver appointed in the...