Streight v. Junk

• Citation: 59 F. 321
• Decision Date: 09 December 1893
• Docket Number: 112.
• Parties: STREIGHT v. JUNK et al.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

59 F. 321

STREIGHT v. JUNK et al.

No. 112.

United States Court of Appeals, Sixth Circuit.

December 9, 1893

Statement by RICKS, District Judge:

The bill of complaint in this case was filed by John Streight, a citizen and resident of the state of Ohio, and suing on his own behalf, and all others interested as stockholders and creditors of the Junk Bros. Lumber & Manufacturing Company against that company, S. C. Junk, and George W. Stainback assignee under a general assignment for the benefit of creditors made by said company and S. C. Junk. All of said defendants are citizens of the state of Tennessee and district aforesaid.

The material averments in the bill are that the defendant company is a Tennessee corporation carrying on the business of the sale and manufacture of lumber; that during the year 1890 and other years the defendant S. C. Junk was president, and at times also general manager, of said company, and that as such officer he had charge and control especially of its financial affairs, and a general supervision of its business; that said Junk, as such officer of the company, without the knowledge or consent of or notice to any other stockholder or officer did execute and issue corporate paper in the form of notes and bills of exchange for the purpose of 'swapping' the same for similar paper made by the firm of G. W. & W. H Bliss, when he knew said firm to be insolvent; that the complainant, being advised of said illegal acts for the first time about August, 1890, and being a stockholder and a director, did address the defendant Junk a protest in writing against such unlawful acts on his part and on behalf of the company, but that, notwithstanding such protest, said Junk continued the unlawful exchange of negotiable paper with Bliss & Co. until the fall of 1890, when said firm failed, and upon said failure, as the paper issued by complainant's company to Bliss, and by Bliss to the former company, matured, the said Junk, as president, paid off the same with the money of said corporation, the amount of the illegal paper so paid aggregating some $18,000; that because of such losses the complainant's company, after a struggle of some 18 months, viz. in May, 1892, finally succumbed, and made a general assignment under the laws of Tennessee to the defendant Stainback, as assignee of all its property for the benefit of its creditors. The bill further avers that the making and exchanging of the corporation paper by Junk with the Bliss Company paper was ultra vires, that the payment of such paper out of the funds of the corporation was wrongful, and that Junk is liable for such wrongs, for which he sues on behalf of himself and other stockholders. He further alleges that he requested said assignee to institute proceedings for the benefit of said corporation, its stockholders and creditors, against the defendant Junk, but he refused so to do unless a majority of the stockholders requested him to do so. Complainant alleges that this proceeding is not a collusive one to confer upon the court a jurisdiction which it otherwise would not have.

John Ruhm & Son and James Trimble, for appellant.

Steger, Washington & Jackson, Tillman & Tillman, and A. N. Grisham, for appellees.

Before TAFT and LURTON, Circuit Judges, and RICKS, District Judge.

RICKS District Judge, after stating the facts, .

The first contention necessary to consider and determine is the first ground of demurrer relied upon by the assignee of the insolvent corporation and the defendant Junk,--that the complainant cannot maintain his suit because he is not a judgment creditor. It is well settled that, when a complainant institutes a suit to subject the assets of an insolvent corporation to the payment of debts due to him and other creditors in whose behalf he sues, he must be a judgment creditor. He must have reduced his claim to a judgment, and have exhausted his remedy at law as a creditor before he can resort to the equitable remedies of a creditors' b...