Patterson v. Lynde

• Decision Date: 31 March 1885
• Citation: 1884 WL 13856,112 Ill. 196
• Parties: JAMES PATTERSON et al.v.CORNELIUS LYNDE et al.
• Court: Illinois Supreme Court

112 Ill. 196

1884 WL 13856 (Ill.)

JAMES PATTERSON et al.

v.CORNELIUS LYNDE et al.

Supreme Court of Illinois.

Filed at Ottawa Nov. 17, 1884.Rehearing denied March Term, 1885.

OPINION TEXT STARTS HERE

APPEAL from the Appellate Court for the First District;--heard in that court on appeal from the Circuit Court of Cook county; the Hon. MURRAY F. TULEY, Judge, presiding.

Mr. C. M. HARRIS, for the appellants:

Unpaid stock of a corporation is a fund for the payment of its debts, and the liability of stockholders is joint and several. Hatch v. Dana, 101 U. S. 210; Ogilvie v. Insurance Co. 22 How. 380; Bartlett v. Drew, 57 N. Y. 287.

A creditor of a corporation will not be stayed until all the stockholders can be made to contribute their proportionate share of their liability. Heath v. Burroughs, 1 Woods' C. C. 66; Munger v. Jacobson, 99 Ill. 349.

There is an element of trust in the case, which always confers jurisdiction in equity, ( Oelrichs v. Spain, 15 Wall. 228, Rader v. Neal, 13 W. Va. 386,) although the remedy was ample at law, ( Spitland v. Higginbotham, 6 Munf. 614, Coffman v. Layston, 21 Gratt. 263,) or the agency partakes of a fiduciary character, or there is a fiduciary relation. Dobbs v. Nugent, 11 Jur. 943; Badger v. McNamara, 123 Mass. 117. Any creditor may prove his claims under a decree rendered in this case. 2 Daniells' Ch. Pr. (5th ed.) 1209; Adams' Eq. 258.

As to jurisdiction, see Hurd's Stat. 1881, p. 348; Life Association v. Fassett, 102 Ill. 315; 22 Id. 9; Railway Co. v. Packet Co. 108 Id. 317; Insurance Co. v. Bank of Bristol, 68 Id. 348; Pennoyer v. Neff, 95 U. S. 733; Harris v. Pullman, 84 Ill. 20.

The situs of the indebtedness of demurrants is here, and would be had it been made payable elsewhere, regardless of the residence of the payee, which of itself confers jurisdiction of the subject matter. Wyman v. United States ex rel. 12 Wash. Law Rep. 35; Plympton v. Bigelow, 93 N. Y. 592; Miln v. Merton, 6 Binn. 361.

Want of jurisdiction of the person may be waived, and is waived, because no objection is made by a non-resident defendant, or the corporation. Insurance Co. v. Cohen, 9 Mo. 417; Redmond v. Hoge, 10 N. Y. 174; Hunt v. Insurance Co. 55 Maine, 297.

The power to appoint a receiver is of the same nature as that to grant an injunction. Beverly v. Burke, 4 Gratt. 187; Smith v. Butcher, 28 Id. 151; Penn v. Whitebanks, 12 Id. 82.

As to grounds for appointing a receiver, see 2 Story's Eq. Jur. sec. 832; Jenkins v. Jenkins, 1 Paige, 243.

A receiver may make an assessment upon parties liable for unpaid and unassessed losses. Thomas v. Whalen, 31 Barb. 178.

A receiver may be appointed to preserve property whenever an attachment would lie, if the matter was cognizable at law. Todd v. Lee, 15 Wis. 365; Penn v. Whitebanks, 12 Gratt. 82.

It is not a sufficient objection to the bill for the want of parties that all the creditors or stockholders are not sued. If necessary, the court may, at the suggestion of either party that the corporation is insolvent, administer its assets by a receiver, and thus collect all the subscriptions or debts to the corporation. Ogilvie v. Insurance Co. 22 How. 380.

A receiver may be appointed without notice to the opposite party, where irreparable injury would be sustained by the delay, or the defendant is out of the jurisdiction of the court, so that he can not be served with a subpœna. People v. Norton, 1 Paige, 17; Gibbins v. Mainwarring, 8 Sim. 77; Malcomb v. Montgomery, Molloy, 500.

The powers of a receiver are coëxtensive only with the jurisdiction of the court appointing him, and a foreign receiver will not be permitted, as against the claims of creditors resident in this State, to remove from this State the assets of the debtor, it being the policy of every government to retain in its own hands the property of the debtor until all domestic claims against it have been satisfied. Railway Co. v. Packet Co. 108 Ill. 317; Insurance Co. v. Bank of Bristol, 68 Id. 348.

Mr. SAMUEL M. OSBORNE, and Mr. SAMUEL A. LYNDE, for the appellees:

A court of equity has not the power to take the necessary accounts and make distribution of the assets of a foreign corporation among its creditors, and to enforce, at suit of its creditors, the trust upon which it holds its property. Such proceedings must be had in a court that has jurisdiction over the corporation. Barclay v. Tallman, 4 Edw. Ch. 128; Bank of Virginia v. Adams, 1 Pars. Eq. 534.

As long as the corporation exists, the creditor must have a judgment before he can proceed in equity to enforce the payment of subscriptions. Terry v. Anderson, 95 U. S. 636; Adler v. Brick Co. 13 Wis. 57.

The stockholder is not a trustee for the creditors of the corporation. There is no privity of contract between stockholders and creditors of corporations. Patterson v. Lynde, 106 U. S. 521; Terry v. Anderson, 95 Id. 636; Ladd v. Cartwright, 7 Ore. 329. The liability of stockholders is that of debtors of the corporation. Ogilvie v. Insurance Co. 22 How. 380; Henry v. Railroad Co. 17 Ohio, 187.

The remedy of creditors is, to be subrogated in place of the indebted corporation. Hatch v. Dana, 101 U. S. 210; Hickling v. Wilson, 104 Ill. 63.

The trust upon which a corporation holds its property is for all its creditors. The bill should be in behalf of all the creditors, and the court should distribute its entire assets among the parties entitled to share in them. It should make the corporation and all its stockholders parties defendant. Patterson v. Lynde, 106 U. S. 521; Adler v. Brick Co. 13 Wis. 57; Wetherbee v. Baker, 35 N. J. Eq. 506.

Such a bill can only be filed in the courts of the State where the corporation exists. Barclay v. Tallman, 4 Edw. Ch. 128; Murray v. Vanderbilt, 39 Barb. 147; Bank of Virginia v. Adams, 1 Pars. Eq. 534.

A receiver appointed in another State may sue here in his own name. Dayton v. Borst, 31 N. Y. 435; Mann v. Cooke, 20 Conn. 178; Chandler v. Siddle, 3 Dill. 477; Biddock v. Mason, 11 C. E. Green, 230; National Trust Co. v. Miller, 33 N. J. Eq. 155.

This is so when the claims of home creditors upon the property do not conflict. Taylor v. Insurance Co. 14 Allen, 354; Hunt v. Insurance Co. 55 Maine, 297; Runk v. St. John, 29 Barb. 587.

A creditor's bill can not be maintained by the holder of a judgment of another State. Claflin v. McDermott, 12 Fed. Rep. 375; Walser v. Seligman, 13 Id. 415; McLune v. Benceni, 2 Ired. Eq. 513; Tarbell v. Griggs, 3 Paige, 207; Davis v. Bruns, 23 Hun, 648; Steere v. Hoagland, 39 Ill. 264; Farned v. Harris, 19 Miss. 366; Berryman v. Sullivan, 21 Id. 65; Bullitt v. Taylor, 34 Id. 708; Brown v. Bates, 10 Ala. 432; Freeman on Executions, sec. 427; Greenway v. Thomas, 14 Ill. 271. The only exception to this rule is when the corporation has ceased to exist. Terry v. Anderson, 95 U. S. 636; Walser v. Seligman, 13 Fed. Rep. 417.

A court of equity has no power to appoint a receiver of a foreign corporation. Verplank v. Insurance Co. 6 Paige, 503.

Mr. CHIEF JUSTICE SCHOLFIELD delivered the opinion of the Court:

This was a bill in equity, by James Patterson and Thomas J. Brown, against the Malheuer and Burnt River Consolidated Ditch and Mining Company, and Ransom R. Cable and Cornelius Lynde, and others, stockholders in that company, to compel them to pay the amount of a debt owed by the company to the complainants, because of their respective indebtedness to the company on unpaid subscriptions to its capital stock. The circuit court sustained a demurrer to the bill, and the Appellate Court for the First District affirmed that ruling.

The Malheuer and Burnt River Consolidated Ditch and Mining Company is a corporation created under the laws of the State of Oregon, for the purpose of constructing and using ditches, and conducting mining operations, etc., in that State, only. It is alleged that the corporation commenced doing business in 1863; that in 1870 it assumed its present name, and increased its capital stock to $1,000,000, which was all subscribed; that between March, 1871, and April, 1873, the corporation became indebted to the complainant Patterson in the amount of $50,394.36, for which, on the 4th of June, 1873, it gave him its note, payable one day after date, with interest at one per cent per month, and attorney's fees; that on the 2d of August, 1873, complainant Patterson, under a statute of Oregon then in force, procured a judgment to be entered in his favor, against the corporation, for the amount due on such note, by the clerk of a court in one of the counties in Oregon, in vacation of the court; that execution was issued on such judgment, which was afterwards returned unsatisfied, and that complainant Brown subsequently obtained an interest in that judgment, by assignment. It is further alleged, that there are large sums due the corporation from the defendants upon the capital stock of the corporation by them, respectively, subscribed, and that some of the defendants reside in Oregon, some in Illinois, and some in other States; that by the constitution of Oregon it is provided that “the stockholders of all corporations and joint stock companies shall be liable for the indebtedness of the corporation to the amount of their stock subscribed and unpaid, and no more;” and that by the statute of that State “all sales of stock, whether voluntary or otherwise, transfer to the purchaser all rights of the original holder or person from whom the same is purchased, and subject such purchaser to the payment of any unpaid balance due or to become due on such stock; but if the sale be voluntary, the seller is still liable to existing creditors for the amount of such balance, unless the same be duly paid by such purchaser.” It is further alleged, that on January 20, 1873, two of the defendants, Lynde and Cable, who are residents of this State, caused their stock to be transferred on the books of the company to one M. Johnson, but that the transfer was not for a valuable consideration, and was merely...