St. Louis & Sandoval Coal & Mining Co. v. Sandoval

• Decision Date: 25 January 1886
• Citation: St. Louis & Sandoval Coal & Mining Co. v. Sandoval, 116 Ill. 170, 5 N.E. 370 (Ill. 1886)
• Court: Illinois Supreme Court
• Parties: ST. LOUIS & SANDOVAL COAL & MINING CO. and others v. SANDOVAL

116 Ill. 170

5 N.E. 370

ST. LOUIS & SANDOVAL COAL & MINING CO. and others

v.SANDOVAL

Supreme Court of Illinois.

Filed January 25, 1886.

Error to Marion.

Upton M. Young, for plaintiffs in error.

Greene & Gilbert, for defendants in error.

MAGRUDER, J.

The property involved in this controversy is a coal mine and its appurtenances, situated at Sandoval, in Marion county, Illinois. In St. Louis & Sandoval Coal and Min. Co. v. Sandoval Coal & Min. Co., 111 Ill. 32, we decided that the legal title to the property was in the St. Louis & Sandoval Coal & Mining Company, (called the ‘Old Company,’) and that the sale by the receiver in this cause to Isaac Main was void, and, by consequence, that the Sandoval Coal & Mining Company, (called the ‘New Company,’) which held under a conveyance from Main, had no legal title to the property. The new company bought the property in good faith, supposing that its title was good. As a consideration for its purchase, it paid off the debts of the old company, amounting to about $2,400. It went into possession of the property upon getting its deed from Main, and has spent $28,145.74 in improvements upon the two acres upon which the coal shaft is located, and, besides this, has paid out $6,835 for railroad chutes, tramways, scales, revolving screens, elevators, engine, elevator building, and steam connections; making a total expenditure of $34,980.74. The old company sank the shaft to a depth of 114 feet, and then abandoned the enterprise for want of means. The new company continued the sinking of the shaft, at a cost to themselves of $9,000, until they reached coal at a depth of 650 feet. To take the property away from the new company after this immense outlay of money and labor will be a great hardship, and ought not to be done unless its equities, as a bona fide purchaser, are necessarily overborne by the inexorable rules of law.

The decision in St. Louis & Sandoval Coal & Min. Co. v. Edwards, 103 Ill. 472, reversed the decree rendered in this cause on August 15, 1878, for want of proper service upon the old company. After such reversal, the old company came in, and filed its answer on August 15, 1882. Thereafter, on August 7, 1883, the court rendered a decree, finding that the old company had ‘ceased doing business, leaving debts unpaid,’ and decreeing that it be dissolved, and continuing the cause for further report from the receiver, who had, by a previous order, been directed to take measures to collect money enough from the stockholders to pay the debts. A motion was made to set aside the decree of August 7, 1883, which was continued from term to term, and finally overruled at the February term, 1885. We think that this decree was warranted by the facts in the case. The evidence shows that the old company had ceased to do business, and had left debts unpaid, and was insolvent, and unable to prosecute the work for which it was organized. Under the twenty-fifth section, of the corporation act, the court had power to dissolve it.

After the decision of the ejectment suit, already referred to, in 111 Ill. 32, the complainants in the original bill filed a supplemental bill, setting up the sale by the receiver, and that it had been declared void; that the new company had advanced money to pay off the debts of the old company, and had taken possession of the property, and expended some $34,000 on it, and asking that the ejectment suit be enjoined, and that the equitable claims of the new company be adjusted. The latter filed its answer, and also a cross-bill, setting up all the previous proceedings in this cause, alleging that the sale to it and its improvement of the property had been approved and sanctioned by all the legal stockholders of the old company, and praying that such stockholders be required to deliver to it a deed in the name of the old company conveying the two acres it had purchased. The old company and five of the defendants to the original bill claimingto be stockholders, filed a demurrer to the cross-bill, which was overruled; but, without standing by the demurrer, they answered. On August 25, 1885, a decree was finally entered in accordance with the prayer of the cross-bill, finding that the complainants in the original bill were the only legal stockholders of the old company, and that the defendants to the original bill were not stockholders, and entitled to no voice in the distribution of the assets; that the sale by the receiver to Main, a stockholder and director, had been made to enable him to raise money to pay the debts, and that the new company had paid the debts, and that its purchase and improvements had been made with the knowledge and approval of all the stockholders, and decreeing that the legal stockholders execute to it a deed of the property in the name of the old company. The record presents the question of the propriety and correctness of this decree.

The old company was before the court, for the purpose of having its business closed up, under the twenty-fifth section of the corporation act. Its corporate existence was extended by the statute in order that there might be, under the direction of the court, a just and equitable distribution of its assets. Substantially the only asset which it possessed was the two acres of ground in question. It held the legal title to these two acres in trust for the creditors and stockholders. ‘In equity, the corporation is regarded as a trustee, holding the corporate property for the benefit of its creditors and shareholders, which, upon its dissolution or civil death, a court of chancery will lay hold of as a trust fund and distribute for their benefit.’ Life Ass'n of America v. Fassett, 102 Ill. 315. The creditors have a lien or priority of payment, in preference to the stockholders. Hastings v. Drew, 50 How. Pr. 254. The stockholders are the owners of the franchise, property, and assets of the company, which remain after its debts and liabilities are discharged. Chetlain v. Republic Life Ins. Co., 86 Ill. 220. The old company, whose dissolution had been already decreed, stood before the court in the attitude of a mere trustee, holding the naked legal title to a piece of land which the court had the power to dispose of and distribute among the creditors in the first place, and, in the event of a surplus, among the stockholders, in the second place. The creditors as a prior class,...