Powers v. C. H. Hamilton Paper Co.

• Decision Date: 08 January 1884
• Parties: POWERS v. C. H. HAMILTON PAPER CO. AND ANOTHER, IMPLEADED, ETC.
• Court: Wisconsin Supreme Court

60 Wis. 23

18 N.W. 20

POWERS

v.C. H. HAMILTON PAPER CO. AND ANOTHER, IMPLEADED, ETC.

Supreme Court of Wisconsin.

Filed January 8, 1884.

Appeal from county court, Milwaukee county.

This action was brought in the Milwaukee county court under section 3216, Rev. St., against an insolvent corporation and its three directors, who, it is alleged, are the owners of all the capital stock of such corporation. The complaint alleges the recovery of a judgment by the plaintiff against the defendant corporation; the issuing of an execution thereon; the return thereof on March 10, 1883, by the sheriff, unsatisfied, for want of property of such corporation on which to levy the same; the large indebtedness of the corporation to various persons, and its insolvency; and that the action is brought on behalf of all creditors who may exhibit their claims and become parties to the action. It is further alleged that the corporation has property, or equitable interests in things in action or other property in its possession or under its control, or held by others in secret trust for it, exceeding $500 in value, which the plaintiff has been unable to discover, and concerning which the defendants refuse to disclose; and that the defendant stockholders have paid in but a small portion of their stock subscriptions, and each is indebted to the company for the unpaid balance of his subscription. The complaint further states that on or about March 1, 1882, the corporation made a voluntary assignment for the benefit of its creditors (some of whose demands are preferred therein) to one Henry F. Hamilton, of all its property and effects of every description. The proceedings preliminary to such assignment, and those taken pursuant thereto, are stated at length, and are in form in accordance with the requirements of the statute in that behalf. Rev. St. p. 497, c. 80. It is charged that such assignment was made with the intent on the part of the corporation and its directors to hinder, delay, and defraud the plaintiff and other creditors of the corporation, and for the purpose of securing to the directors thereof illegal and inequitable preferences. It is also charged that a debt of $1,800, preferred in the assignment, is in fact the individual debt of two of the directors.

The assignee is not made a party to this action, and no specific relief is demanded against him. The demand for judgment is (1) that the defendant corporation be declared insolvent; (2) that all its property and effects be sequestered, and a receiver appointed with the usual powers; (3) that each of the defendant's stockholders be required to pay to such receiver the sum unpaid on his stock subscription; (4) for distribution of the proceeds of such property and effects among the creditors; (5) for costs; and (6) for general relief. To this complaint the corporation and the defendant Charles S. Hamilton interposed separate demurrers, assigning substantially the same grounds of demurrer in each. These are: (1) The court has no jurisdiction of the defendant corporation; (2) it has no jurisdiction of the subject of the action; (3) there is a defect of parties, in that the assignee named in the complaint--Henry F. Hamilton (who is not made a party)--is a necessary party to the action; (4) several causes of action are improperly united; and (5) that the complaint does not state facts sufficient to constitute a cause of action against the defendants so demurring thereto. The county court overruled the demurrers, and the defendants who interposed them have taken separate appeals from the order overruling their respective demurrers.Finches, Lynde & Miller, for respondent, Lewis J. Powers.

Davis, Riess & Shepard, for appellants, C. H. Hamilton Paper Co. and another, impleaded, etc.

LYON, J.

1. The complaint in this action was framed under section 3216, Rev. St., and the sections following, and contains all the averments necessary to show a cause of action under that statute, if the allegations concerning the voluntary assignment by the defendant corporation be rejected. This is freely conceded by the learned counsel for appellants. Hence, the only question on the general demurrer is, does the complaint with those allegations in it fail to state a cause of action, when, were those allegations omitted, it would state a cause of action. The basis of the argument of the learned counsel for the appellants in support of an affirmative answer to this question seems to be that all of the property, effects, and rights of the corporation has already passed to and is vested in the assignee, and hence there is nothing left to sequester, and a receiver can do nothing to aid the plaintiff and other creditors of the corporation in the collection of their debts. This argument assumes, not only a valid assignment, but that the powers and functions of the receiver are no broader than those of the assignee. In the first place, the facts stated in the complaint show that the assignment is fraudulent as against the unpreferred creditors of the corporation, (the plaintiff being one of them,) and is therefore invalid as against such creditors. It matters little whether it is absolutely void or only voidable. Surely, no more flagrant fraud upon creditors could be committed in a voluntary assignment made in view of insolvency, than to prefer debts owing by a third party, and provide for paying the same out of the insolvent estate before the creditors of the insolvent would be entitled to receive anything. The complaint charges that this was done in the assignment made by the corporation. In the next place, the ordinary powers and functions of a receiver appointed in an action against an insolvent corporation, brought under section 3216, Rev. St., are far more extensive than those of an assignee in a voluntary assignment. Such an action is a substitute for the ordinary creditor's bill, and may afford a larger and more complete remedy, in that it necessarily inures to the benefit of all the creditors. Indeed, until an action is brought under section 3216, by some creditor, any judgment creditor, after execution returned unsatisfied, may maintain an ordinary creditor's suit in his own behalf against the corporation, and may prosecute the same until some other judgment creditor brings an action under section 3216, and obtains an injunction under section 3227, restraining...