Partan v. Niemi

• Citation: 288 Mass. 111,192 N.E. 527
• Parties: PARTAN v. NIEMI.
• Decision Date: 24 October 1934
• Court: United States State Supreme Judicial Court of Massachusetts

288 Mass. 111

192 N.E. 527

PARTAN

v.NIEMI.

Supreme Judicial Court of Massachusetts, Worcester.

Oct. 24, 1934.

Appeal from Superior Court, Worcester County; Dillon, Judge.

Suit in equity by Toivo A. Partan, as trustee in bankruptcy of the Eastern Publishing Company, Inc., against Walter A. Niemi, who filed a plea in bar. From a final decree sustaining the plea and dismissing the bill, plaintiff appeals.

Reversed, and plea adjudged insufficient.

A. S. Allen and R. H. Willard, both of Boston, for appellant.

A. Z. Goodfellow, S. M. Salny, and P. Salny, all of Fitchburg, for appellee.

RUGG, Chief Justice.

This suit in equity is brought by the plaintiff, alleging that he is trustee in bankruptcy of the Eastern Publishing Company, Inc., to set aside as fraudulent and unauthorized certain mortgages and conveyances by it to the defendant, who was a director of that corporation. The defendant filed a plea in bar of this tenor: ‘That this plaintiff is not entitled to prosecute this action against this defendant, because the order of the United States District Bankruptcy Court purporting to appoint him trustee in bankruptcy of the Eastern Publishing Co. is a nullity, since said court did not have jurisdiction to adjudicate said Eastern Publishing Co. a bankrupt.’ This plea was submitted for decision on the following facts: The Eastern Publishing Company, Inc. (hereafter called the corporation) was organized under the business corporation laws of this Commonwealth; the corporation was dissolved by St. 1932, c. 139, which became operative as of March 31, 1932; the corporation was adjudicated a voluntary bankrupt by the District Court of the United States for the District of Massachusetts on February 7, 1933, upon a petition in bankruptcy filed by it on the same day; subsequently to February 7, 1933, and prior to the bringing of this suit, the plaintiff was appointed trustee in bankruptcy of the corporation; the dissolution of the corporation is the basis of the alleged lack of jurisdiction of the District Court of the United States to adjudicate the corporation a bankrupt and to appoint the plaintiff its trustee in bankruptcy. A decree was entered sustaining the plea and dismissing the bill, from which the plaintiff appealed.

It is assumed for the purposes of this decision that want of jurisdiction by the bankruptcy court can be raised in this suit. Hersey v. Hersey, 271 Mass. 545, 553, 171 N. E. 815, 70 A. L. R. 518;Old Dominion Copper Mining & Smelting Co. v. Bigelow, 203 Mass. 159, 206, 210, 89 N. E. 193,40 L. R. A. (N. S.) 314; (sub nomine Bigelow v. Old Dominion Copper Mining & Smelting Co.) 225 U. S. 111, 134, 135, 32 S. Ct. 641, 56 L. Ed. 1009, Ann. Cas. 1913E, 875;In re Goodfellow, Fed. Cas. No. 5,536, 1 Lowell, 510;In re Garneau (C. C. A.) 127 F. 677;Stuart v. Aumiller, 37 Iowa, 104, 105. The proper way to raise the issue of legal incapacity of the plaintiff to sue is a plea in bar. Whiton v. Balch, 203 Mass. 576, 578, 579, 89 N. E. 1045;White v. E. T. Slattery Co., 236 Mass. 28, 31, 127 N. E. 597.

The right of the plaintiff to bring this suit depends upon the question whether the United States District Court of Massachusetts had jurisdiction to appoint him as trustee upon the voluntary petition in bankruptcy of the corporation. The corporation was dissolved by St. 1932, c. 139, operative on March 31, 1932, by section 1 of which it was provided in substance that the dissolution should be subject to the provisions of G. L. (Ter. Ed.) c. 155, §§ 51, 52, 56. By section 51 of the latter chapter it is provided that a corporation thus dissolved ‘shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established; provided, that the corporate existence of such a corporation, for the purposes of any suit brought by or against it within said period of three years, shall continue beyond said period for a further period of sixty days after final judgment in the suit’; by section 52 a receiver may be appointed in such cases ‘to do all other acts which might be done by such corporation, if in being, which may be necessary for the final settlement of its unfinished business. The powers of such receivers and the existence of the corporation may be continued as long as the court finds necessary for said purposes'; by section 56 provision is made for the revival of such corporations in specified circumstances. Examination of the provisions of these sections makes it clear that the dissolution of the corporation was conditional. Its corporate existence was not immediately extinguished but continued for three years after the operative date of St. 1932, c. 139, with special reference to the prosecution and defence of suits by or against it and the settlement of its affairs. The only positive prohibition is that the business for which it was incorporated shall not be continued. It is a necessary conclusion from the statutory words that something in the nature of a corporation must continue and remain in being to enable it to sue and to be sued. Action and suit import by their very terms the existence of persons capable of being and actually made parties thereto. Brooks v. Boston & Northern Street Railway Co., 211 Mass. 277, 278, 97 N. E. 760. A nonexistent corporation can hardly be a party to a suit or to an action. Persistence of corporate entity...