Sherburne v. Miami Coal Co.

• Decision Date: 23 October 1941
• Docket Number: 16660.
• Citation: Sherburne v. Miami Coal Co., 109 Ind.App. 587, 37 N.E.2d 12 (Ind. App. 1941)
• Parties: SHERBURNE v. MIAMI COAL CO.
• Court: Indiana Appellate Court

37 N.E.2d 12

109 Ind.App. 587

SHERBURNE v. MIAMI COAL CO.

No. 16660.

Appellate Court of Indiana, in Banc.

October 23, 1941

Embree & Hall, of Princeton, and Chas. D. Hunt, of Sullivan, for appellant.

Cooper Royse, Gambill & Crawford, of Terre Haute, and Gallagher Rinaker, Wilkinson & Hall, of Chicago, Ill., for appellee.

BLESSING Chief Judge.

The Miami Coal Company is an Indiana corporation with its principal place of business in Chicago, Illinois.It owns coal lands and coal mines both in the state of Illinois and in the state of Indiana.Among the properties in Indiana are coal lands in Sullivan County of this state, in excess of 7,000 acres.

On the 22nd day of November, 1932, there was filed at Danville Illinois, in the United States District Court for the Eastern District of Illinois, a complaint against the Miami Coal Company, praying, among other things, the appointment of a receiver, the determination and adjudication of all claims against the company, and for an order restraining all creditors from prosecuting any suit or claim against the Miami Coal Company, or from prosecuting any suit, attachment garnishment, or other proceeding against the property of the Miami Coal Company.To this complaint an answer was filed in said proceeding admitting the truth of the allegations of the complaint and on the same day on which the complaint was filed said District Court of the United States entered an order appointing George F. Getz and Louis Clements joint receivers.The order of the United States District Court contained a paragraph restraining all persons from bringing or prosecuting any suit or proceedings against the Miami Coal Company or its properties, and likewise directed the receivers so appointed to take possession of all of the property and assets of the Miami Coal Company wheresoever located.Following the entry of this order, the receivers so appointed, after qualifying according to the terms and conditions of the order appointing them, and in compliance with Section 56 of the Judicial Code,28 U.S.C.A. § 117, filed with the clerk of the District Court of the United States for the Southern District of Indiana a certified copy of the bill of complaint as filed, together with a certified copy of the order of the District Court of the United States for the Eastern District of Illinois.There being no disapproval of the order of the United States District Court for the Eastern District of Illinois, under the provisions of said Section 56 of the Judicial Code, the filing of the certified copy of said bill of complaint and the certified copy of said order with the United States District Court for the Southern District of Indiana was effectual in placing the said coal lands in Sullivan County, Indiana, in the sole and exclusive jurisdiction of the United States District Court for the Eastern District of Illinois, both District Courts of the United States referred to being in the Seventh United States Judicial Circuit, and the coal lands being in the Southern District of the United States Court for Indiana.During the pendency of the receivership of the Miami Coal Company in said court, and on the seventh day of September, 1939, the appellant in this cause (plaintiff below) filed his complaint against the Miami Coal Company in the Sullivan Circuit Court at Sullivan, Indiana, in which he alleged that the Miami Coal Company was an Indiana corporation with a capital of $350,000, evidenced by 3,500 shares of common stock of the par value of $100 per share, 528 of which shares of common stock the appellant became the owner of in the year of 1923; that one John T. Connery and one James P. Connery, both deceased at the time of the filing of the complaint, were the joint owners of 1,846 1/2 shares of such common stock, and that members of the immediate families and parties closely associated with the Connery family were the owners of the remainder of such common stock in the Miami Coal Company; that in the month of June, 1923, the holders of such common stock executed an indenture of trust, whereby they assigned all of such common stock to the said John T. and James P. Connery as trustees with full and sole right of the assignees to vote said common stock and to exercise all the rights, powers and privileges of stockholders and continued in this right until after the purchase by the Miami Coal Company from the Connery Coal & Investment Company of the coal lands described in the complaint (said coal lands being the lands heretofore referred to as being in Sullivan County).Appellant's complaint in the Sullivan Circuit Court further charged in substance that the Connery Coal & Investment Company was chartered by the state of Illinois in the year of 1925, and that the said John T. and James P. Connery, at the time of the corporation's organization, owned all of the capital stock in equal shares except such shares as were necessary for the qualification of directors; and from the time of the organization of the Connery Coal & Investment Company, it and the appellee, Miami Coal Company, became and were, and ever since remained, completely interlocked as to officers, directors and stockholders, and both completely dominated by the same persons; that the Connery Coal & Investment Company purchased coal lands in Sullivan County(being the lands hereinbefore referred to) for the sum of $184,321.32; that on the 18th of July, 1927, and at a time when said corporations were completely interlocked and under the domination and control of the same parties, and during the existence of the trust indenture concerning the common stock, the Connery Coal & Investment Company sold and conveyed to the Miami Coal Company all of said coal lands situated in said Sullivan County at the rate of $100 per acre or in the aggregate sum of $724,287.78, leaving a profit to the Connery Coal & Investment Company of $75 per acre or the sum of $532,264.68.The appellant also charges in said complaint that said lands were paid for with earnings of the defendant, Miami Coal Company, and surplus and undivided profits in the Treasury of the latter company, and that said surplus and undivided profits used in said purchase were the property of the appellant in the proportion that his ownership of the shares in the Miami Coal Company bore to the whole of the common stock of said company.Then follows the allegation that the purchase of said coal lands was unlawfully, illegally and fraudulently made for the purpose of cheating and defrauding the Miami Coal Company, and of enriching the Connery Coal & Investment Company at the expense of the Miami Coal Company, and of enriching the said John T. and James P. Connery at the expense of the Miami Coal Company, and for the purpose and with the intent of cheating and defrauding the plaintiff of his share in the earnings, surplus and undivided profits of the Miami Coal Company.A lack of knowledge until within ninety days before the filing of the complaint was pleaded and it was charged that the facts of said transaction were purposely, wilfully, fraudulently and intentionally concealed from appellant by the directors and other stockholders of the Miami Coal Company, who had knowledge thereof; that by reason of the facts, plaintiff was defrauded in the sum of $79,839.70.Plaintiff also charged that the Miami Coal Company still owned the lands at the time of the institution of his suit, and that said coal company was without funds with which to pay his damages in the sum of $79,839.70, together with interest.Plaintiff further alleged that he was entitled to follow said sum, including the interest thereon, into the 7,000 acres of coal land and to have said real estate impressed with a lien in his favor in said sum; a foreclosure of the lien and a partition of the real estate, setting off his porportionate share thereof.The prayer of the complaint asked for judgment, and follows the allegations of the complaint with respect to the impression and foreclosure of a lien in his favor and a satisfaction of the lien through partition.

To appellant's action the Miami Coal Company entered a special appearance and filed its plea in abatement, which, after setting forth the names of the plaintiff and defendant in the receivership action, making the bill asking the appointment of a receiver a part of the said plea as Exhibit "A"; alleging that the Miami Coal Company in receivership and the defendant named in the complaint in Sullivan Circuit Court is one and the same corporation; the admission of the allegations of the bill by the defendant, Miami Coal Company, and the appointment of receivers with directions to take possession of all the property and assets of the Miami Coal Company in Sullivan County, Indiana, alleges further as follows:

"It was further ordered by said Court that all creditors of said Miami Coal Company be restrained from bringing or further prosecuting any suit, attachment, garnishment replevin or any other action or proceedings against said Miami Coal Company, and from attaching or levying upon any of its property until further order of the District Court of the United States, for the Eastern District of Illinois, a copy of which said decree is attached hereto, made a part hereof, and marked Exhibit B.

"That immediately after the appointment of said George F. Getz and Louis Clements as Receivers of said Miami Coal Company by the District Court of the United States, for the Eastern District of Illinois, said Receivers filed a duly certified copy of the Bill of Complaint and Order and Decree appointing said Receivers and restraining the prosecution of any actions against the Miami Coal Company in the office of the Clerk of the District Court of the United States, for the Southern District of Indiana, at Indianapolis,

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