CAMPBELL V. ARGENTA GOLD & rILVER MIN. CO.
9
property embraced in the mortgage from raising the issue that the gage was not duly authorized by a vote of the stockholders at a meeting duly called. When a contract made by a corporation is only voidable, the corporation and stockholders can be estopped by their conduct from avoiding the same. Kent v. Mining Co., 78 N. Y. 185, 186. In the case of Railway Co. v. J1cCarthy, 96 U. S. 258, the supreme court !lay: "The doctrine of ultra Vi1'es, when invoked for or against a corporation, should not be allowed to prevail where it would defeat the ends of justice OJ;' work a legal wrong." ' This doctrine is ably ae:serted in Whitney Arms Co. v. Barlow. 63N. Y. 62. It is but proper to remark, however, that the decisions in courts of New York, and that of the supreme court, upon the doctrine of ultra'vire8, are not always in harmony. The courts of New York generally follow the rule expressed by COMSTOCK, J., in Bissell v. RailJ. roadCQ.,22 N. Y.259, while the views expressed by SEWEN,J., in t,hat case are morein accordance with those which have been maintained in the federal' courts; yet upon this point the courts of that state and the supreme court seem to have united. It is difficult to see upon what,: principleacontra<:t, whicQis void as in violation of public policy, as an actpf'a corporation is decided to be in Pittsburgh, C. « St. L .. By. Co. v. Keokuk & H. Bridge Co .· supm, and which is not authori2ed' by its charter or the law under which it is organized, can be maintained, because it might work a wrong or injustice. But this conrt1'ee18' botind by the rule expressed in Railway Co. v. McCarthy, lind in accordance with it would have to hold that even the corporation and' stockholders· in this case would be estopped from asserting that the mortgage waf' void,althbugh it might be held that it was beyond the power of 'the corporation to execute the same. But holding, as I do, that the gage was only a voidable contract. I have no difficulty in maintaining that theeorporation and stockholders in this case would be estopped from denying its validity. The bonds sued on in this case were the consideration for the property em braced in the mortgage; neither the corporation nor the stockholders have ever expressed any desire to disaffirm that contract. The contract was entered into with the knowl. edge ·of the stockholders; the corporation have held and enjoyed the property ao obtained; hence it would be a wrong to allow the corpora. tion to disaffirm this mortgage, and, if neither the stockholders 1101' the corporation could now object to this mortgage, much less could the credo itors of the Argenta Company object to the validity thereof. For the reasons assigned the demurrer is overruled.
10
FEDERAL REPORTEB,
vol. 51.
PuLUJ:AN d
aZ.v.
STEBBINsetaZ.
(OirouftClJurt, D. Montana. May 2, '1892.) 1. CBBDl'1'OBS' :BrLL.....,DrssoL,VIl;D:
2.
SAMIl-PROCIlDURIl.'
Where, in consequence of the dissolution of a corporation. no action at law can be,maintained against it by creditors a,t lar,ge for the recovery, of judgments, they a: c/:,editors'J)il1 nnsnp}>Qrtlldby judgments. to reach th(lQ,ssets of the int4e,handsot,thir4;persons. ,', , , ,.
AT LARGE.
&8AME-PRA:OTJOE.
The assets in question having been fraudulently assigned to trustees. who bad notice.·of the fraud, one of whom was iqterellted in maintaining it, plaintiffs were !l6manding that their suit should be brought by the trustees. ,",' , .. ,'.:'
A bill i,n :substancea bUl, but which ,fails to state that .it ,1.8 brought as well on behalf of all creditors who will 00me in and make themselves partics on plailiti1fs' behalf. is'fatally defective. . . '- SA.ME,-P.&:RTJEs.· ,
a..
Suit was brougbt by creditors of the C·. to subjeot real estate fraudulently cenveya!); to B.· and by S. cOll,v"eyed with warranty to the M. Co., to the payment of plailltiffll" olaims. There:we.a no prayer that these oonveyances !be' set aside, the to have tllell! 'declw;ed void asto,plaintilYs. Held, object Of, the bill thatS. ,was ndt a necessa"l party .to the suit. A. but to .subjellt, :property conveyed 10 sepal'ate parcels to different perIQne. bu.t chw;ging that ea\lh. and; all of the transaotions were parts of scheme to deprIve plaintiffs of the power to collect theirclaims, with the knowledp and and all the defendants, Is n!lt'multifarious. I
EquiTY-PLllfADJNG"';;YtJJJrJPA.RIOU8NIlSS.
In Equity. Suit by:,Sltmuel C. Pullman.and others against Charles H. Stebbins: others.' Heard on demurrer to the bill. Demurrer austained,in pa.rt. :, ." , Savage&-.o.ayand John 'P. Smith, for complainants. A. J. Campbell, OuUen, Sanders &- Shelton, and B. P. Caryenter, for de'fendants. K:NOWLES, District Jlldge. The complainants filed their bill of complaint in the nature,ofacreditors' bill in this court, having for its purpose'the reaching of certain assets of the Carver Mercantile Company, a corporationorganiied under the laws of Montana. This corporation, however, had been disincorporated before this action was commenced by virtue ora decree of' the district court of the eighth judicial district of tbe state of Monttma, in and for Park county. This decree was entered on the 17th day of January, 1891. The complainants are all what is termed "creditors at large;" none of them have obtained judgments at law an their claims. .The first poinHaised by the demurrer to the bill is that it cannot be maintained by such creditors. The general rule is tbat only judgment creditors can institute an action in the nature of a bill. Smith v. Railroad 00., 99 U. S. 398; Day v. Washburn, 24 How. 352; J0'M8 v. Green, 1 Wall. 330. But in this ('ase the corporation had been disincorporated, and had ceased to exist. No action at law could then be maintained against it. If it is necessary, under such circumstances, to still apply the rule that a judgment must first be obtained against the corporation at law, plaintiffs are without remedy, and
PULLMAN
v.
STEBBINS.
11
a frau<l by means of a decree of court has been wrought successfully against them. Section 489, Compo St. Mont., div. 5, provides that"Upon the dissolution of any corporati()n formed under this chapter the trustees at the time of the dissolution shall be the trustees of the creditors and stockholders of the corporation dissolved, and shall have full power and authority to sue for and recover the debts and property of the corporation by the name of trustees of such corporation. coUect and pay the outstanding debts, settle all its affairs, and divide among the stockholders the money and other property that Shall remain after the payment of the debts and necessary expenses. " I In the case of HfYl'ne:t v. (brier, 11 Fed. Rep. 362, the circuit court of the United States for the district of Missouri considered a statute of that state almost identical with the one above set forth, and held that the statut.e contemplated "a procp.eding in equity for the settlement of the trust in the first instance" against such trustees. After their liability is determined in equity, an action at law might be maintained against them. As a general rule it may be said that a trustee can be reached only in equity by the cestui que trust when property rights between them are involved in a dispute. Pom. Eq. Jur. § 100. There is no power given in the above statute to creditors to sue at law these trustees; and even after a decree in equity they could be sued thereon only for a judgDlent to the amount of assets that had come into their hands as such trustees. The bill sets forth that flbout the 1st day of December, 1890, the Carver Mercantile Company, "by its trustees, the suhl Stebbins, Angus, and Smith, transferred all of the stock of goods, fixtures, and aU other personalty of whatever kind and character belonging to the said Carver Mercantile Company to the Stebbins Mercantile Company, except what is hereinafter named,"-that is, in the bill named. "That prior to its dissolution, on the 27th day of January, 18\H, the Carver Mercantile Company conveyed, by deed duly executed and delivered, all its reatestate to Charles H. Stebbins; that on the 24th day of January, 1891, the said C. H. Stebbins and Charles Angus, pretending to act as president and secretary, respectively, of said Car\'er Company, by an instrument in writing assigned all the book accounts, notps, mort· gages, chattel mortgages, judgments, and credits of every form, and against any persons whomsoever. belonging to the said Carver Mercantile Comp:my, to the National Park Bonk of Livingston." Taking these allegations and others in the complaint together, I think it clearly appears that the Carver Mercantile Company, before it was dissolved, had conveyed away all of its property, and that there was no property to which it had title as between it and its grantees in its posses::don, or in any manner held by it, which could pass to the possession of the statutory trustees. Certainly, then, neither an action or a suit at law would lie against them at the instance of the creditors of the Carver Met'cantile Company. The reason an,action at law is required, and judgment obtained and execution issued, and a return unsatisfied, be/ore a creditors' bill will uRually lie, is because a creditors' bill is treated generally as an aid to an action at law. Until it appears that the action at law has
FEDERAL
fa;iled,ol' would be without avail, to give the relief to which a party is entitled, a court of. equity has no jnrisdiction. The best evidence of these facts is the judgment, execution, and return nulla bona thereon; hut there are ,exceptions to the rule that a judgment at law must be first obtllined. This is recognized in the last clause of the opinion of the supreme court in the case of Smith v. Railroad Co., 99 U. S. 398. In the case ·of Pendleton v. Perkins, 49 Mo. 565, the supreme court of the state Of Missouri held that a creditors' bill would lie when a debtor had abalthough the creditor had obtained no judgment at law against the debtor. In the case of Scott v. McMillen, 1 Litt. (Ky.) 302, it was 9",ld that such a bill would lie although no judgment had been obtained at,law, when a debtor was absent from the state, with the view of discovering his aSsets. To the same effect are Greenway v. Thornas, 14 Ill. 27,1; FaJ"l'ar v. Haselden, 9 Rich. Eq; 331. In the case of Hogan v. Walker, 14 How. 29,s creditors' bill was allowed where a creditor had obtained a judgJllleot against his debtor; the debtor died; the judgment became atalf3,so that no execution could issue on the same; before his death, libe debtor had conveyed away his property by conveyance absolute. in fprm, but retaining a secreUrust in his favor, which made the same '(oid as to creditors; the administrator had failed to take any steps to this conveyance set .aside, although it was held he represented the <neditofs :as. well as the next of kin. This doctrine has been approved decisions of the supreme court. Bessele v. Clark, 7 Cranch, 69. Kennedy \T. Or68WeU, 101 U. S. 641, the bill was maintained where was a creditor at large, and not a judgment creditor. If a bill can he maintained for the purpose of discovering the ass,ets ,of an' absconding or absent debtor, and for the discovery of the assetil of a .deceaseddebtor, without first having obtained against either judgment ,at law, ,or where a judgment cannot be enforced without being revived, it would appear that it o\1ght to be maintained when a corppmtiouhas become dissolved by a decree of court, and where it had pr.operty which it conveyed away before its dissolution, in fraud of its Of ld,itors. .The reasoning that applies to the former cases applies to this. in this case would appear to have rights which cannot in be enforced at law; that they have 110 adequate remedy at law apparent liS if judgment had been obtained, and execution returned "No property fOQud." I do not think the case of Sturgea v, Vanderbilt, 73,N. y. 384, applicable to this case. In that 'it affirmatively appears E)nough property passed to the trustees to liquidate the debts of the oom.pany I and, the court thought that should have been' exhausted becreditors could follow certain moneys into the hands of one of thest9ckbolders. LJt is said,however, that there should have been a demand upon the to bring this action. It is not certain they could have b+Pl1ght-this action.' But if they could, it appears in the bilUhat they had,: !:?eeJ:lthQ agents throughwhicbthe very fraud complained of by plaintiffs bad been conducted, and one of them has an interest in mainand all except perhaps one had conspired to commit the
13
fraud. In the case of Hogan v.Walker, BUpra, Justice CURTIS expressed some doubt as to whether a creditor could sue a third person with the administrator to discover assets of a deceased debtor without first ing made a demand upon the administrator. He said: "If this bill bad contained an allegation that the administrator had been requested to 8ue, and had refused, the case would be free from all doubt, and upon the facts averred in the bill we do not think Buch a requel'lt necessary, because it does appear that aLout two years elapsed after the death of Levy Pope before this bill was filed, :md the administrator ,took no steps to reduce these assets to possession; because when this bill was filed he resisted it by demurrer, relying upon the statute of limitations; because it must be ad. mitted to have been doubtful bow far he bad a remedy without the concurrence of any creditor." There are cases, then, which will excuse the demand upon the torv trustees. The facts in this case are such as would induce a court to "hold that such a demand was not necessary. While I do not think the creditors can claim any specific lien upon the property alleged to have been fraudulently conveyed by the dissolved corporation, I do think the case it'! one which shows that the plaintiffs have rights for which the law affords no adequate remedy, and that a court of equity is the only forutp in which' they can be asserted. For these reasons I think the point that the bill would not lie in this case is not well taken. The next point presented is that the bill of complaint is defective, because brought for the benefit of the plaintiffs named in the bill only . The bill should be classed as a -creditors' bill, and the rule is that such a bill should be brought for the benefit of the complainant alid all other creditors similarly situated, who may come in and become parties to the cause, and present their rights. Story's Equity Pleadings lays this rule: "But a few creditors will not be permitted to bring a bill of this sort for an accounting and administrlition of the assets without saying in the bill that it is brought on behalf of themselves and all the rest of the creditors." Page 104. § 99. This doctrine is fully supported in Brown v. Ricketts,3 Johns. Ch; and Hornor v. Benning, 93 U. S. 233. It will be seen by consulting the above authorities that one of the objects of such a bill is the administering upon and distributing of the discovered assets of the debtor the creditors. Noone creditor or set number of creditors has the right to have these assets applied solely to the payment of his or their claims. Equity treats every creditor as entitled to an, equal distribution of thm,e assets; hence it will not be proper for acou.rt of equity'to turn the assets of the debtor over to a portion of the creditors and exclude others; heneeit is necessary for the complainants to bring the action for the benefitdf all creditors. Ofcburse no creditor will be required to become a party to the action, and ask for his share of the distribution. With this view of the nature of the bill I think the rule must'be cOllsidered as a. commeridable one, which requires the bill to state that it lsfor the benefit of all the creditors of the debtor whose HSsetaara sought. It is argued, however; that it does not appear but that
14
FED;ERAL BEPQBTER,
vol-51.
are tm,;,' 'There,may be atl, {rom, li,ne in the bill that. other creditors" but I apprehend that thatit affirmatively appear tbat the plaintiffs are all the creditors of the corporation. If the court is req,\lired to presume Jhat such is,thecflse, as no others are named, the, same presumption would be called into use if there was, only one plaintiff. A court, when it comes'to pleadingll, does not act upon pre.sumptions; it looks to allegations. " The point is that the bill should affirmatively shciw, it is for the benefitbf'all the creditors, and, if the al· legations do not show this, the court will not presume it.. The party holding thea/ilset;f; of the' dE!btor, if all the patties to be benefited are not allowed to come in and share in one suit, might be 10 an ac· tion at the handeof eayhcreditor, and thus be vexeci with a multiplicity of suits, which would not be countenanced in equity. Story, Eq. PI. § 99. In this particular the complaint is defective, and upon this point the demurrer should bE! sustained. The defendants that there is a nonjoinder of parties derendan't in this: that itjs sOllght in the bill to set asille a conveyance to M. Stebbins of, re/-ll which he afterwards conveyed by a warranty deed to the the MOJ:ltana Inveatmert Company, and tpe said, Charles M. is not a party to the, suit. There is no prayer in the bill asking to have these conveyances set aside. The ob· J,'16Ct,:,.Qf, the bill is not t0 13et,'a,'s,id, e these. cop",veyances b,etween the parties, hutto declare the property which was.conveyed by said deeds to said and by him to ,said investm lpt the property of the Carver Mercantile Company, as Jar as creditors are concerned. As. between the parties to these transfers, it is 110t the purpose to cancel them, but to declare them void as to the creditors of said Carver Company, which w!ls not a party thereto. Jf this is established, the Mcmtaua Investment Compal1Y wO,uld benome a trustee of the property of said Carver Company Jor the henefit of its credito'rs until the claims of such creditors are satistied. Under such a view it wns not necessary to make the snid Charles M. Stebbins apnrty to the bill; Bump, Fraud. Cony. 549, whendisc1l8sjnp;p/lrties to a bill,8aYs: "If tbegrantee, bowever. has parted with his intf'I'l!st in the pl'opl'rty. he part,I'. ... ... ... A persoll through whom til.. title lias Is nQt a passt'9}rom the dtlutOl' to the gr.antee i,;R llr0Ptll', but nuli a Iltlcessary. party." Id. (2.d Ell.) 550. This view is fully supported by the authorities: Jackman v. .Mo. .staId v. Stout, 77 Ind. 537. Tpe,pext point presented, that the bi,ll is multi:'arious in this: ,that it p,r;es,entsagainst several dQfenclants dJliltiuct and independent matters ,which have no relation t9 ellchother, and it,) all of whichall ofthedaare not cpncemedi· The gropnl), ,here urgeclamou.nts to this,: 1.'bq 9arver .Mercantile Compllny conveyed. .. portiqD qf it& property to the $teb),>ins.Mercantile and apoJ'tion of its prqperty to. Charles this was conveyed by said StE'b.H. Stebbins. A bins tohi$ M.Stebbins,anu portion to.¥. H. Talcott.
CENTRAL TRUST CO. OF NEW YORK
MARIETTA: &: N. G. RY. CO.
15
It is claimed that these were .separate transactions; in which only the parties to each were interested,and hence allonght not to be litigated in the same action. At first impression this ground would seem to be well taken. The bill, h<;>wever, charges "that each and all of these transaCtions were part and parcel of one scheme to deprive the creditors of,the Carver Company of the power tocolleet their claims against the said company, and to'8.ppropriate the assets of said company to the use of the said bank and Charles H. Stebbins, and were each and all done with the knowledge and consent of each and all of the defendants." Under such an allegation, there is no donbthut the bill is not multifarious, and I should be inclined to think, under the authorities, the bilhvortl'd. not be subject to that objection if this allegation bad not been made. Fellm.tJ8' Y. -FeUows, 4 Cow. 682, 15 Amer. Dec. 413, and note; BO:IJr!- v. Hoyt, 5 Paige, 65; Brinke:rhoff v. Brown, 6 Johns. Ch, 139; Hamlin v. Wright, 23 Wis. 491; Chase v. Searles, 45 N. H. 511; New York &N. H. R. C,o. v, Schuyle:r, Cross, etc., 17 N Y. 592. For the reasons named the denmrrer is overruled upon all the points eontail1ed in the same, save as to theorie that the bill should show that it is for the benefit of all of the creditors of the Carver Mercantile Conipany ,and 8B to this it is sustained.'
CENTRAL TRUST Co. OF NEW YORK tI. MARIETTA & N. (BLUE RIDGE MARBLE Co., INTERVENER.) (O-!reuit Court, N. D. Georgfa. June 22,1899.)
G.· Ry. Co.,
1.
RBOBIVEn-CONTRA.CT FOR TRANSPORTATION-SPECIll'IC PERll'ORMANOB.
and then reshipped and carried to M. without extra charge, the entire charge for freight being paid in advance. HeLd, that. a receiver appointed in a suit by the bolldho\ders to foreclose a mortgage on the railroad could not be compelled to transponmarble from N. to M;, although the freight had been paid for such transportationbefore.the appointment of the receiver. Express CO·. v. Rai/n'oaa Co., 99 U. . S. 191, followed. :Specific enforcement of such· contract would be eq,uivalent to requiring the reo . .paym,en of the freight, .and this could not be done, Inasmuch as the complainant . had,DQ hen for such freIght. . SUolX..;..LIEN.
to M., aDd anow same to be stopped over at N., an intermedialie point, tp be drellsed,
A railroad company contraoted. with a marble compauyto carry marble from T.
In Equity. Bill to foreclose a railway mortgage. Heard demurrer to the intervening petition of the Blue Ridge Marble Company. Demurrer sustained. On January 19,1891, there was an existing contract between the Blue Company and the M'arietta"& North Georgia Raihvay Compliny, by which the railway company agreed to paul marble from the at Tates station to"Marietta; Ga., and allo}V said freight to be stopped over, cut, and dreSlied at !in intermediate station called wNelson." Oil said date, under this contract, there was considerable marble at Nelson, being dre!:ised andwol'ked,thefreight on whi<:hhad been prepaid
on