« ForrigeFortsett »
It appears also from the transcript accompanying the intervening petition that the Evening Post Company and the individual defendants on May 23, 1903, filed an answer to the petition in the state court, in which they expressly denied many of its material allegations, and, contesting the rights claimed by the plaintiffs, among other things urged, and at the argument they insisted, that the purpose of the plaintiffs was to acquire information which would benefit their own publications, viz., the Courier-Journal and the Times, at the expense of their competitor, the Evening Post, but, while the last-named matter could be given such weight as might be thought to be proper by the state court to which it was addressed, it seems to be quite immaterial upon any issue before this court. It also appears from the transcript that the Columbia Finance & Trust Company on May 23, 1903, filed its answer in the state court proceeding, and much significance seems to be attached to the fact that it therein states that it submits itself to the jurisdiction of the court, and that it will, of course, obey all its orders, although at the same time it protests that it will be burdensome and unnecessary to subject the corporation to the costs and expenses of winding up its affairs in a judicial proceeding. Undue importance should not be given to this submission to the jurisdiction of the court by the answer of the liquidator, because, at last, its general language must be confined and limited to the scope of the plaintiffs' petition, when fairly ascertained.
Upon a preliminary hearing the learned judge of the state court ruled that the plaintiffs were entitled to inspect the books, etc., of the corporation, and on the 4th day of June, 1903, appropriate orders to that end were made to enforce that right. However, when the persons against whom those orders were directed were applied to, it was developed that they no longer had any control over the books, because previously thereto, viz., on May 28, 1903, they had all been turned over to the receiver of this court pursuant to its orders. On the 27th day of June, 1903, on the motion of the executors of W. N. Haldeman, the state court appointed the receiver who has made the motion we are now considering, for an order requiring this court's receiver to turn over to the state court's receiver all the assets, etc., of the corporation, not at all for the inspection of the books, but altogether for the purpose of having those assets administered and distributed by the state court. I have been at pains to state accurately the averments of the petition in the state court suit, including even its repetitions, in order that we might certainly get its full scope, and give it effect accordingly. While the prayer of the petition is much broader, the real scope of the pleading-the subject-matter of the suitmust be determined by such of its averments as present a valid basis for the relief asked, for it cannot be that any relief can be properly granted, except such as may logically follow if the averments of the pleading are true-that is to say, such as may be appropriate to the case made by the petition.
Upon an application of this character, the proceedings in the state court, upon which its receiver bases his claim, are certainly open to inquiry so far as it may be necessary for the court applied to, to ascertain the merits of the application, for, if it acted upon mere sug
gestion only, it might do palpable injustice to the rights of litigants. Proceeding upon this view, and industriously endeavoring to ascertain the full scope of the litigation in the state court, I have not been able to find such averments in the petition of Haldeman's executors as would authorize any relief, except that of an inspection of the books, papers, and affairs of the Evening Post Company. That relief seems to be absolutely all that the plaintiffs therein could legitimately obtain on the case made by their pleading. With the claim to that relief this court has neither disposition nor right in the slightest degree to interfere. It is only because it is asked to surrender property in its possession, and which has been seized at the suit of creditors, to the end that it may be subjected to their demands, that we look into the proceedings of the state court at all, for otherwise our examination of them might be unauthorized. While, as I think, the scope of the petition in the state court was limited to the claim of the plaintiffs to examine the books, etc., it is insisted that the prayer broadens that scope; but it seems to be a sufficient answer to this to say that the rights of a litigant must be measured not alone by his prayer for relief, but by the case made by the facts stated in his pleading.
It is also insisted that the petition shows that the resolutions appointing the liquidator created a trust, and the liquidator a trustee, and that the petition, to the end that the trust should be enforced and the affairs of the corporation wound up, called upon the defendants and all others who are creditors to prove their debts, so that the affairs of the company might be settled in that suit. Do these matters afford any grounds for surrendering the corporate assets to the state court receiver?
While the capital stock and property of a corporation are regarded as a trust fund for the payment of its debts, it can hardly be maintained that they are a trust fund for the payment of stockholders. Their right is ownership, and the trust-fund doctrine does not reach them. It is to be remembered that the plaintiffs in the case in the state court are stockholders, and nothing more; that they own 8 per cent., and no more, of the capital stock; that they do not allege that the corporation is insolvent; and that their petition does not claim that they are entitled to the appointment of a receiver, nor to a seizure of the corporate assets, upon any ground whatever. Their demand-possibly a most reasonable one-was to inspect the hooks, etc., so that they could understand the condition of the company in which they had an interest. The corporate existence of the company was on the eve of expiration, and a very large majority of the shareholders desired either to reorganize so as to continue the business, or else in some way to secure as large a price for its assets as possible. While the 25 years expired May 1, 1903, yet section 13 of chapter 56 of the General Statutes of Kentucky, and section 561 of the Kentucky Statutes, which is an amendment thereof, fully authorize the corporation to continue to act, though only for the purpose of closing up its business. No precise mode for doing this is prescribed, and probably was not at all desirable; but all corporations, in all stages of their existence, must act by agents, and in this instance,
in order that the business of the corporation might be closed, it, at a full meeting of its stockholders, adopted the plan of having it done by a responsible trust company as an agent, called a "liquidator," selected by themselves. This company was an agent merely to perform the legitimate work and duty of closing up the business of the corporation. While, in a general way, all agents are trustees, an appointment of one does not make the corporate assets a trust fund in this case, any more than would the appointment every day of corporate agents constitute them trustees, in such a sense as to put all the corporate assets into the shape of trust funds, to be administered in equity, unless other most material circumstances arise. Ninety-two percent. of the stock was voted in favor of the plan adopted in this case, while only 48 shares, owned by Haldeman's executors, voted against it. The authorities all agree that when one buys the stock of a corporation he impliedly agrees to submit to the rule of the majority, and that, if the acts done by a majority are intra vires and without fraud, they are binding. Dudley v. Kentucky High School, 9 Bush, 576; Cook on Corporations, § 684; Clark & Marshall on Private Corporations, § 628. Hence we can see no reason why, as between the shareholders in this case, the plan adopted was not entirely permissible, especially as it was evidently supposed to be an expeditious and inexpensive way of accomplishing the desired result. To permit 8 per cent. of the shareholders to defeat this plan would be to give control to a small minority, rather than to a large majority; and that, too, in a case where, at least on its face, no perceivable wrong to any one appeared to inhere in the plan adopted. Of course, the chancellor may well be applied to by any shareholder, whether in a minority or not, to prevent the destruction or injury of any of his rights by wrongdoing, but no right of his is violated by merely outvoting him upon a matter fairly within the rights of those who do it. An appeal to the courts in such a case can generally only be made when fraud or some violation of law or of the rights of some person in interest can be alleged. As nothing of that sort can be fairly said to be charged in this instance either against the liquidat-. ing agent or the corporation, unless it be the refusal of inspection of the books, it seems too clear for further argument that there is nothing charged in the petition of Haldeman's executors which would in any way entitle them to have the state court seize the corporate assets. It might be that under some circumstances a court of equity could remove an unfaithful trustee by a direct proceeding for that purpose, but while it might do that, and appoint another in his stead, it would not necessarily follow that it could seize the corpus. of the trust fund because an agent has been unfaithful. Nor could such seizure be justified by any mere failure or refusal to allow an inspection of books. But here there can be no claim, and there is none, that the liquidating agent was corrupt or unfaithful. As before remarked, no express mode for closing the business of corporations is prescribed by the statute. That matter is wisely left to those most interested to do it in such way as may suit them, subject, of course, to the right of any one to go into court if his rights are violated.
But I conclude that there is no fact alleged in the state court
proceeding which would give that court any right to seize the propeity of the Evening Post Company, nor to give any relief except that of inspecting the books, etc.—à right of the executors of Mr. Haldeinan, which that court alone, in the then aspects of the case, could determine. And it is certain that nothing else was attempted, and that no seizure was made until after the property of the corporation Iwas all in the hands of the receiver of this court.
But even if these views be unsound, the case goes far beyond this phase of it. The complainant in the creditors' bill filed in this court was not a shareholder, but a judgment creditor. Creditors are to be cared for before the stockholders who owe them. The complainant creditor, a citizen of Missouri, on behalf of himself and all other creditors of the corporation, exercising a right plainly given him by the laws of the United States, in the regular way, applied to this court for the protection and enforcement of his rights before it appeared that any stockholder was doing more than seeking to obtain information as to the status of the affairs of the corporation. In due and orderly course, and by the proper and legitimate processes of the court, the property of the debtor was seized for the purpose of satisfying the demands of its creditors one month before the state court appointed its receiver, and this court has ever since had it in due course of administration.
As already indicated, the petition filed in the state court, even if we disregard the answer thereto, and assume its averments to be true, does not state facts which would authorize a court of equity to seize the corporate assets at the instance of a stockholder, nor did the pendency of that suit per se create a lien thereon, nor, indeed, was anything done or attempted in the state court which brought the assets of the corporation within the grasp of the law, either actually or potentially, within the meaning of those terms as used in cases where there is a conflict of jurisdiction, until some weeks after those assets had been placed in the hands of the receiver of this court. After that was done, though no receiver had been asked for in plaintiffs' petition, the state court receiver was appointed on their motion.
Stated broadly, the question to be determined is this: Which of the two courts, under the facts stated, first acquired jurisdiction over the assets of the Evening Post Company? I mean over the assets, and not merely over the corporation, for the purposes of securing the relief to which the stockholder was entitled on the facts stated in the petition-a distinction most important to be remembered. Was it the state court, in the stockholders' suit, where no receiver was originally asked for, and where the real relief sought by a mere stockholder was the right to look at the books, or was it this court, wherein a judgment creditor in a direct proceeding first caused a judicial seizure to be made of the property itself in order to subject it in due course to the corporate debts? Put in another form, the question might be this: Does anything appear from the record of the proceedings in the state court which would, notwithstanding the undisputed facts appearing from the record in this court, entitle the stockholder to insist that the rights first obtained by a judgment creditor
It is in
should be subordinated to those of the mere stockholder? sisted that the authorities unanimously hold that, where the same subject-matter is brought before different courts of concurrent power, the court which first acquires jurisdiction, and especially the first which either actually or potentially acquires jurisdiction or control over any property which may be involved or seized, is entitled to decide every question, and that comity requires the other court to yield. Undoubtedly this general proposition is as true as it is eleinentary, but it has frequently occurred to me, in investigating this and similar questions, that in no class of cases is it more necessary to remember what was said by Chief Justice Marshall in Cohens v. Virginia, 6 Wheat. 264, 5 L. Ed. 257, and cited by Chief Justice Fuller in delivering the opinion of the court in Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 15 Sup. Ct. 673, 39 L. Ed. 759. The language referred to was this:
"It is a maxim not to be disregarded that general expressions in every opinion are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit when the very point is presented for decision. The reason of this maxim is obvious. The question actually before the court is investigated with care, and considered in its full extent. Other principles which may serve to illustrate it are considered in their relation to the case decided, but their possible bearing on all other cases is seldom completely investigated."
In Peck v. Jenness, 7 How. 612, 12 L. Ed. 841, an attachment issued from the state court had been levied on property of a defendant some time before he went into bankruptcy, and the assignee in bankruptcy afterwards applied to the state court to turn over to him the property thus levied upon; but the Supreme Court held that he was not entitled to have it done, because before the bankruptcy proceeding was instituted another court had seized the property by its processes, and then had it in its custody. It may be observed that the bankruptcy law then in force was different from the present statute, but the same result would necessarily still follow if an attachment should be levied more than four months before an adjudication. Orton v. Smith, 18 How. 263, 15 L. Ed. 393, was a case where there were conflicting claims of title to certain lands in Wisconsin, and some of those claims were being litigated in the state court, when the complainant filed a bill in equity in the federal court to quiet his title to the land, and enjoin one of the defendants from proceeding in his case previously pending in the state court about the same land. The Supreme Court held that this could not be done. It is rarely the case that one court can enjoin proceedings in another. In Taylor v. Carryl, 20 How. 586, 15 L. Ed. 1028, a vessel had been seized under an attachment issued from the state court, when a libel was filed against it in the federal court by seamen who claimed wages, and the vessel was sold under the judgment of each court. When the question was brought before the Supreme Court, it held that, as the state court first seized the vessel, it could not be divested of its power over it by the subsequent proceedings in the federal court, even if the case was one in admiralty, and that the purchaser at the sale under the judgment of the state court acquired the title