Peterson v. Darelius
| Decision Date | 06 August 1926 |
| Docket Number | 25,208 |
| Citation | 210 N.W. 38,168 Minn. 365 |
| Parties | ELSA PETERSON AND OTHERS v. A. B. DARELIUS AND ANOTHER |
| Court | Minnesota Supreme Court |
Application by stockholders to compel the receiver of the Mortgage Security Company to refund certain moneys. From an order granting the application, Montgomery, J., the receiver and the corporation appealed. Reversed.
Order of court directing receiver to refund money to stockholders construed.
1. An order directing the receiver of an insolvent corporation to refund money to certain stockholders from whom he had collected it, does not have the effect of annulling proceedings in other courts, by virtue whereof he obtained the money. It merely directs how funds under the control of the court shall be disbursed.
Court has power to order receiver to refund money paid voluntarily.
2. The rule that money paid voluntarily cannot be recovered by the payer does not prevent the court from ordering the receiver to refund money so paid.
As officer of court whatever receiver does under its order regarding money is act of the court.
3. A receiver is an officer of the court and subject to its control. His possession is the possession of the court. Whatever he does under the order of the court regarding property or money in his hands is the act of the court.
As representative of creditors of insolvent corporation he may appeal from order prejudicing rights of its creditors.
4. As the representative of the creditors of the corporation, a receiver may enforce their rights against stockholders and appeal from an order disposing of money in his custody, if there are corporate creditors whose rights are prejudiced thereby.
After issue of bonus stock only subsequent creditors of corporation have right to compel payment for bonus stock from stockholders.
5. Only those who became creditors of a corporation after bonus stock was issued have a right to require the stockholders to pay for the stock, if payment is necessary to provide funds for the satisfaction of their debts.
Stockholders who seek refund of money paid by them on account of bonus stock have burden of proving there are no subsequent creditors.
6. Stockholders who seek to recover money they paid to a receiver in satisfaction of liability of bonus stock have the burden of proving that there are no subsequent creditors.
Appeal and Error, 3 C.J. p. 654 n. 13; p. 655 n. 23.
Corporations, 14 C.J. p. 1000 n. 17; 14a C.J. p. 1011 n. 8 New.
Receivers, 34 Cyc. 187 n. 61; p. 236 n. 72; p. 247 n. 28; p. 250 n. 50; p. 270 n. 41; p. 391 n. 82 New.
See 23 R.C.L. p. 8; 3 R.C.L. Supp. p. 1308; 4 R.C.L. Supp. p. 1488; 5 R.C.L. Supp. p. 1227.
Paul J. Marwin, for appellant.
W. L. Hursch, for respondents.
The Mortgage Security Company of Minnesota is an insolvent corporation, now in the hands of a receiver. The respondents are stockholders, or the representatives of stockholders, seeking to compel the receiver to refund moneys they had paid to him. Their application for an order directing him to refund was granted, and the receiver and the corporation appealed.
In June, 1921, the district court levied an assessment of 100 per cent upon the stockholders. The basis of the assessment was their alleged constitutional liability to creditors. In August, 1921, the stockholders applied to the court for the vacation of the assessment. The application was denied, an appeal taken and the order reversed. See 154 Minn. 453, 192 N.W. 348. The receiver then asked the court to make another assessment, but the request was refused. Before the appeal was determined, the receiver had commenced actions against the stockholders to enforce the assessment and to recover for bonus stock. In some instances judgments were obtained and settled at a discount: In other instances settlements were made out of court. In one or two instances the personal representative of a deceased stockholder settled at a discount, In other instances settlements were made out of court. In one or two instances the personal representative of a deceased stockholder settled at a discount, with the approval of the probate court.
The complaints in the receiver's actions combined the cause of action based on the assessment with those for the recovery of the amounts due for bonus stock. In some instances a lump sum was paid in settlement of both causes of action; in others a specific sum was paid to satisfy the claim for bonus stock. In no case did the total payment exceed the amount claimed on account of the bonus stock.
In February, 1925, the court ordered the receiver to refund the money the stockholders had paid in satisfaction of the assessment, but did not direct him to refund money received in payment for bonus stock. The names of the respondents were omitted from the order and none of the money they paid has been refunded.
Counsel for the appellants contends that the order appealed from is erroneous: (1) Because in effect and without cause it sets aside and avoids the settlements made by the respondents; (2) because the money was paid voluntarily; (3) because it was paid in whole or in part to release respondents from their liability for bonus stock.
The order does not annul other orders or judgments or set aside compromise agreements made between the respondents and the receiver. It merely directs how funds under the control of the court shall be disposed of.
There is nothing in the point first mentioned.
The rule that money voluntarily paid with knowledge of the facts if paid to a person under a claim of right, cannot be recovered back, is not applicable here. The reasons for the rule are best stated in Preston v. Boston, 12 Pick. 7, and in Boston & S.G. Co. v. Boston, 4 Metc. 181, and may be thus summarized: If a party would resist an unjust demand, he must do so at the threshold. If he can only be reached by a proceeding at law, he is bound to make his defense in the first instance and cannot postpone the litigation by paying the demand and afterwards suing to recover the amount paid. If the rule were otherwise, the privilege would be left to him of selecting his own time and convenience for litigation and he might wait until the evidence on which his adversary relied was lost. See also Dickerman v. Lord & Smith, 21 Iowa 338, 89 Am. Dec. 579. Moreover the rule should be confined to litigant parties, it being held by courts of equity that if, by mistake of law, money comes into the hands of an officer of the court, he will be ordered to repay it when the mistake is discovered, for the courts ought to set an example to the world by refusing to withhold money from a...
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