Minneapolis Baseball Co. v. City Bank

• Court: Supreme Court of Minnesota (US)
• Citation: 69 N.W. 331,66 Minn. 441
• Parties: MINNEAPOLIS BASEBALL CO. v CITY BANK ET AL. (WHITALL ET AL., INTERVENERS).
• Decision Date: 16 December 1896

66 Minn. 441

69 N.W. 331

MINNEAPOLIS BASEBALL CO.vCITY BANK ET AL. (WHITALL ET AL., INTERVENERS).

Supreme Court of Minnesota.

Dec. 16, 1896.

(Syllabus by the Court.)

A receiver appointed in an action for the sequestration of the assets of an insolvent corporation, under the provisions of Gen. St. 1894, c. 76, has no authority, except in cases where it is otherwise provided by statute, to enforce the individual liability of the stockholders for the debts of the corporation.

Appeal from district court, Hennepin county; Robert Jamison, Judge.

Action by the Minneapolis Baseball Company against the City Bank, in which C. D. Whitall and F. R. Sidall, co-partners as Whitall & Sidall, intervened. From an order denying the motion of the interveners to bring in the stockholders to answer the interveners' cross bill, and an order directing the stockholders to be made parties on application of the receiver of the baseball company, interveners appeal. Reversed.

Millard F. Bowen, and John Hay, for appellants.

Harlan P. Roberts, Welch, Hayne & Conlin, Victor J. Welch, and Geo. R. Robinson, for respondents.

START, C. J.

This action was originally commenced against the defendant bank alone, on January 15, 1896, under the provisions of Gen. St. 1894, c. 76, for the sequestration of its assets, and the appointment of a receiver. On the following day, the appellants herein filed their cross bill or complaint, as creditors of the bank, seeking thereby to enforce the double liability of its stockholders for its debts, alleging therein a cause of action against them, and naming them as parties defendants. The appellants then moved the court for an order joining the stockholders as defendants, and requiring them to answer the cross bill. The trial court denied the motion, without prejudice, and with leave to renew it, upon the ground that it was not advisable to proceed against the stockholders until it became apparent that the assets of the corporation would not pay its debts in full. On January 23, 1896, David C. Bell was appointed receiver of the property and assets of the defendant corporation, and to take charge of its property and effects, with power to collect, sue for, and recover the debts and the property that belonged to the defendant. On March 30, 1896, it was apparent that the assets of the corporation were insufficient to pay its debts, and the appellants renewed their motion to bring in the stockholders to answer their cross bill. Thereupon the court made its order requiring the bank and the receiver to show cause on the 4th day of April, 1896, why the motion should not be granted. On April 3, 1896, the receiver filed what is designated as a “supplemental complaint” (it is difficult to classify it), asking that the stockholders be made parties to the action, and to answer his complaint wherein he sought to enforce their individual liability. Upon the hearing of the motion of the appellants, on the next day, the receiver opposed it, and claimed that the stockholders should be made parties, and required to answer his complaint, and not that of the creditors. The court thereupon made its order denying the motion of the appellants, and its further order directing the stockholders to be made parties on the application of the receiver, and to answer his complaint. The appellants appealed from each order. Their motion was denied, on the sole ground that the receiver was the proper party to enforce the personal liability of the stockholders. If such is the case, and he is authorized by law to enforce the liability of the stockholders for the debts of the corporation, then the order should be affirmed. We say “order,” because, practically, there was but one; for the refusal to bring the stockholders in on the appellant's cross bill, and ordering them joined on the receiver's petition or complaint, might properly have been included in one order. The only question, then, in this case, is: Has a receiver of a corporation appointed in sequestration proceedings under Gen. St. 1894, c. 76, authority to enforce the personal liability of stockholders for the debts of the corporation? We answer the question in the negative. This is not a mere question of practice, which does not affect the substantial rights of the appellant, as claimed by the respondents. While it is true, as claimed, that the time when, and upon whose cross bill or complaint, stockholders shall be brought into the action, where the plaintiff has omitted to make them parties, rests largely in the discretion of the trial court, and that when stockholders are once legally made parties, and required to answer a complaint stating a cause of action against them on account of their individual liability, no other creditor or party is entitled to file such cross bill, yet each creditor has the legal right, where the corporate assets are insufficient to pay the debts, to have the stockholders made parties to the action, upon a complaint which they are bound to answer. Therefore, if the receiver is not authorized to enforce the liability of the stockholders, they are not bound to answer his complaint, and may demur or move to dismiss it, and have judgment accordingly.

We do not deem it necessary to enter upon any extended general discussion in support of our conclusion, that the receiver in this case was not empowered to enforce the personal liability of stockholders for the debts of the defendant bank, for the reason that such conclusion necessarily follows from the previous decisions of this court. It is clear that the provisions of chapter 76 do not expressly or impliedly confer upon receivers the power here in question. On the contrary, the language used as to the powers of receivers and the rights of creditors unmistakably indicates that the liability of stockholders for the corporate debts cannot be enforced by the receiver, and that it must be enforced on the application of creditors, or by one in behalf of all; and such has been the practice in all former cases reaching this court.

In the case of Allen v. Walsh, 25 Minn. 543, it was held that the stockholders' liability was for the equal benefit of all creditors, and all had an equal right to enforce it, and that Gen. St. c. 76, provided an efficient and sole remedy for such enforcement, in a single action in which all persons interested should be joined, and their respective rights, equities, and liabilities finally settled and determined. This case was followed in Johnson v. Fischer, 30 Minn. 173, 14 N. W. 799, wherein it was held that the liability could only be enforced by or in behalf of all creditors, and against all of the stockholders upon whom the liability rested. The case of Manufacturing Co. v. Langdon, 44 Minn. 37, 46 N. W. 310, which holds that the right to recover capital withdrawn and...