Olmstead v. Distilling & Cattle-Feeding Co.

• Decision Date: 24 June 1895
• Citation: 73 F. 44
• Court: U.S. District Court — Northern District of Illinois
• Parties: OLMSTEAD v. DISTILLING & CATTLE-FEEDING CO. GRAVES v. SAME. BAYER v. SAME.

73 F. 44

OLMSTEAD v. DISTILLING & CATTLE-FEEDING CO. GRAVES v. SAME. BAYER v. SAME.

United States Circuit Court, N.D. Illinois.

June 24, 1895

Moran Kraus & Mayer and John P. Wilson, for petitioners.

Walker & Eddy, Dupee, Judah, Willard & Wolf, and Runnells & Burry contra.

SHOWALTER Circuit Judge.

Certain stockholders of defendant company now petition the court to sell certain distilleries, being part of the estate of the defendant corporation in the hands of the receiver heretofore appointed in said consolidated causes. They offer to buy said property, bidding therefor the sum of $9,800,000, on terms and conditions which will be spoken of presently. Certain other stockholders and creditors of said defendant company oppose said sale. They contend: (1) That the court has no jurisdiction to order such sale; (2) that it would be error for the court to order such sale, at the present stage of the litigation, and before the claims have been ascertained; (3) that the petitioners ought not to be permitted to buy, or that the property in question ought not in any event to be alienated to said petitioners.

The jurisdiction of the court over the property, and the interests therein of the litigants, may be referred to any one of the three consolidated causes. In the Olmstead bill which was the first proceeding, it is set forth that Olmstead, a citizen of New York, is a stockholder of the defendant company, which is an Illinois corporation; that defendant has a large amount of property in Illinois and other states, including the distilleries in question, which are going concerns; that defendant has a great number of creditors and outstanding contracts; and its affairs are greatly involved; that it is much embarrassed financially and will be unable in future to meet its pecuniary obligations; that, pursuant to a quo warranto proceeding commenced in the circuit court of Cook county, Ill., against defendant, to deprive it of its charter, a judgment of ouster had been lately rendered; that an appeal was perfected in said quo warranto proceeding from said circuit court to the supreme court of Illinois; that said appeal is still pending and undetermined; that said judgment of ouster remains in full force and effect; that divers creditors of defendant threaten and are about to commence suits, by attachment and otherwise, against defendant, in Illinois and in other states; that by reason of executions and attachments in such suits the property of defendant will be wasted and destroyed to such a degree as to make the same inadequate and insufficient to pay its debts; that, if a receiver be appointed by this court, to take and conserve and distribute the estate of defendant, and if said creditors be in the meantime enjoined from such proceedings at law, said estate will pay all the creditors of defendant in full, leaving a balance to be divided among its stockholders,-- and an injunction and receiver are thereupon prayed for. Said Olmstead filed this bill, to which the said Distilling & Cattle-Feeding Company was made sole defendant, on behalf of himself and all other stockholders who might choose to join with him in that behalf. On the filing of this bill a receiver was, or rather receivers, to whom the present receiver is successor, were, appointed by the consent of the defendant corporation. Said receivers took possession, and their successor now holds all the assets and property of the defendant corporation in the state of Illinois, and all its property in other states by force of judicial proceedings in such states ancillary to this proceeding. This court thereupon commenced, and has thenceforward and up to the present time proceeded with, the administration of the estate of the defendant; and claims against the property in the hands of the receiver have been filed with the master pursuant to the order in that behalf of this court, by some 3,000 claimants.

It is now said that there is no jurisdiction, meaning that there is not, and never was, any power in this court to make any order or do anything whatever in the matter of this estate. The appeal bond in the quo warranto suit, suspended all such further proceedings as were authorized in enforcement by the said circuit court of Cook county of its judgment in said suit. No execution could rightly issue for the costs, or a fine, if one were adjudged in said quo waranto proceeding, pending the appeal. But I am unable to find anything in any statute of Illinois which in any manner annulled or suspended the effect of Judge Gibbon's judgment in the (state) circuit court, so far as it fixed, as from the date of its rendition, the status of the defendant corporation. The statute concerning quo warranto proceedings (chapter 112 of the Revised Statutes of Illinois) provides that, in such proceedings, appeals and writs of error may be taken and prosecuted in the same manner and upon the same terms and with like effect as in other civil cases. The pleadings and procedure in such cases are also analogous to pleadings in other cases at law. Within the rules touching the effect of appeals, as stated in Oakes v. Williams, 107 Ill. 156, the judgment of the circuit court, so far as it declared the status of the defendant corporation, went into effect as soon as rendered, subject, merely, to possible reversal by the supreme court.

Section 10 of chapter 32 of the Revised Statutes of Illinois, on the subject of corporation, is in words following:

'All corporations organized under this law whose powers may have expired by limitation or otherwise, shall continue their corporate capacity during the term of two years for the purpose only of collecting the debts due said corporation and selling and conveying the property and effects thereof.'

Section 11 is in words following:

'Such corporations shall use their respective names for the purpose aforesaid and shall be capable of prosecuting and defending all suits in law or equity.'

Section 12 is in words following:

'The dissolution for any case whatever of any corporation created as aforesaid shall not take away or impair any remedy given against such corporation, its stockholders or officers for any liabilities incurred previous to its dissolution.'

The corporation in question was organized under the general corporation law of the state of Illinois, from which the foregoing sections were quoted. The effect of the quo warranto judgment, in view of said enactments, was to make of the defendant corporation a trustee. I do not think, as was argued here, that the directors of said corporation became trustees. It seems to be that, within the sense of the statute, the corporation itself became at trustee as soon as the judgment of ouster was rendered. The property of said corporation thereupon became at once a...