L.t.ltE sUPBBIoamoN 00.". BIWWN,' BOJlNELL "' CO.
SUPERIOR IRON Co.
!I. BROWN, BONNELL
& CO. et ala
(Circuit ·Court, N. D. Ohio, E. D.6eptembtlr 5,1800.)
AllATEMENT OJ!' ACTION-DISSOLUTION OJ!' CORPORATION-REVIVOR.
Under Re\'. St, Ohio, 55 5679.5680, which provide that no pending action against a corporation shall abate by its and that execution on a judgment obo tallied i.n such action may issue against the trustees of the dissolved corporation in its corporate name, a suit in equity in a federal court, wherein the corporation has been declared insolvent, and a, receiver appointed to administer its property as a trust fund for the benefit of creditors, need not be revived as against a receiverappointed by a state court, which has dissolved the corporation during the pendency of the proceedings in tb.e federal court. On general principles of equity jurisprudence, a federal circuit court, which has obtained possession of the property of an insolvent corporation in proceedings instituted against it by its creditors, and whicb. has been directed by the United States supreme court to make a distribution of such property among the creditors in a specified manner, does not lose its jurisdiction by the dissolution of the corporation and the appointment of a receiver by a state court i nor do such proceedings in the state court necessitate a revival of the suit in the Iederal court.
JUDICIAL SALEs-ApPRAISERS-DISINTERESTIm FREEHOLDERS.
Rev. St. Ohio, 5 5389, which requires. three "disinterested freeholders" to appraise lands before a judicial sale thereof, does not disqualify a distant relative of one of the creditors of a corporation, whose claim represents onlyI' smail portion of its aggregate indebtedness, from acting as an appraiser on a judicial sale of its prop" erty for tb.e benefit of all its creditors. A judicial sale of the property of a corporation is not rendered invalid by the reoeiver's announcement at such sale that the purchaser would also b.ave the right, at his election, to take certain land, not covered by the order of sale, and acquired by the receiver during bis administration of the, corporate property. The mere fact that the receiver, on taking possession, inventoried the property at a sum considerably greater than that fixed by the appraisers on a judicial sale thereof eight years aftel'wards, is not a ground for lI6ttillg aside the sale for quaoy of price. .
SDIE-PURCHASER'S OPTION TO TAKE ADDITIONAL PROPERTY.
II. SAME-INADEQUACY OJ!' PRICE.
In EqUity. Henry Orawford, for exceptions. C. C. Baldwin' and Hine &: Cw:rk, for creditors and purchasers. Frank Wing, for receiver.
RICKS, J. At the October term, 1889, of the supreme court of the United States, (10 Sup. Ct. Rep. 604,) a decree was entered affirming the decree of this court rendered in this case at the February term, 1886; and on the 26th day of May, 1890, a mandate of said court was received directing this court to enforce it'! decree. In pursuance to said direct,ion, an order of sale was issued out of the clerk's office on the 3d day of June, 1890, directing the special master commissioner therein named to appraise: advertise, and sell the property described in the decree and order of sale as upon a judgment at law. On tlie 23d day of July, 1890, the master commissioner returned the order of sale, reporting that on the 22d day of July he had sold the said property to William McCreery, Henry '1'od, Charles C. Baldwin, and Cecil D. Hine, as trustees for the sum of$700,000, said sum being more than two-thirds of the appraised value thereof. On the 22d day of August exceptions to the report of
said master were filed by the Leadville Coal Company and Charles S. Wor"den,on behalf of themselves. aod such other creditors as might choose to join therein. A motion was also filed on. behalf of the purchasers, to corifirm said sale. .The case is now before the court upon these exceptions and upon the motion to confirm. The exceptions filed may be briefly stated as follows: (1) Appraisal void because not made on actual view. (2 and 3) Appraisal void because two, of the appraisers related to or em ployed by creditors. (4 and 5) Appraisal void because cel'tainofreceiver's contracts for sales and supplies" not appraised. (6) Appraisal void for inadequate price. (9) Order of Rale void because corporation dissolved by state court, and suit thereby abated, and for other exceptions noted in the opinion. . The exceptions and the objections are stated in inverse order to their importance. It will be well to consider the last exception first, because, if well taken, there will be no need to spend time considering the others. . The ninth ,and last exception is: "That this act ionabated on the.dlssolution of such corporation by jUdicial decree,qand said Taylor, the receiver. who now, under the statute, is vested witllthe title to all the corporate assets, has not been made a party to this suit in any way." Postponing, for the time, a consideration afthe question whether in an equity suitoI this character, after a final decree adjusting all the rights of a dissolution of a defendant corporation, independent of any statutory prOVision, would make a revivor necessary, we pass to the of the Ohio statutes prescribing the procedure necessary to dissolve a corporation created by authority of the state. After a car1:)ful examination-nf theseveral.sections of the statute on this subject, it seems fully saves and excepts from the general effects clear that this of dissolution all rights of parties in suits "pending in any court in favor of or against any corporation," and speciaUyprovides that no such action "shall be disqontinuedor abate by the dissolution· of the corporation, whether the dissolution occur by the expiration of its charter or otherwise; but all such actions may be prosecuted to final judgment by the creditors, assignees, receivers, or trustees, having the legal charge of the assets of the corporation, in corporate name." 1 The statute provides 8tiJl further that final relief by execution shall not be delayed by such dissolution, but that "execution may be had, and Elatisfaction or performance of the same enforced by the creditors, assignees, or trustees, having the legal charge of the assets of the dissolved corporAtion, in the corporate name of the dissolved corporation."2 Now; if we apply these provisions to the case before us, ,they relieve the court of all difficulty in speeding the. suit to a final decree of confirmation and settlement. The jurisdiction of the 'court from the time the supplemental bill was filed has proceeded upon· the well-settled principle in equit.y that the property and assets of this insolvent defendant corporation was a trust fund, to be distributed for the benefit of its creditors as their
i. !. :.
'Rev. St. Obio, S 5679.
lRev:S£Ohio, § 5680:
co. tJ. BRQWN, BQNNELL &
rights and equities should he finally determined. In order to cate those rights, the creditors were allowed and required to become parties to this suit. Their claims have been filed, the amounts due them have been determined, and their priorities fixed by final decree. Every person interested in the assets of this insolvent corporation is before the The court has 00mcourt, and his rights have been fully plete jurisdiction both of the funds and of the parties, and is ready to make distribution of the trust fund j but is now, after seven years of litigation, asked to relinquish jurisdiction, turn the property and funds that have accumulated by judicious management over to another court, and require creditors to renew litigation in another forum. Such an extraordinary abandonment of creditors to such a harsh fate would bejustifiedonly by a clear andundou bted want of jurisdiction. The Ohio statutes, and the general principles controlling equity cedure,furnish abundant reasons for retaining jurisdiction and giving parties final and complete relief in these proceedings. The provisions of the statute quoted make it plain that, after final decree of dissolution in the state court, these proceeding,s could still have been prosecuted against the defunct corporation in its corporate name, and without revivor, as was done in this case. By the express provision of the statute before quoted, "execution may be had, and satisfaction or performance of the same enforced, * * * in the corporate name of the dissolved corporation." If such unembarrassed relief was provided for enforcing a judgment at law, how much more liberal a construction might be claimed for such a provision when applied to a suit in equity, where the well-established plinciple controls that the equitable rights of the creditors of a corporation survive its dissolution, although their remedy at faw is exting!lished.. A Gourt of chancery will furnish a remedy to protect and enforce their equitable rights against any assets belonging to thl;l ;coIHpany at the time of its dissolution. At the time the proceeding to procure a decree of dissolution was instituted in the Ohio tribunal, court had control of all the property of the defendant, and was operating its mills by a receiver. It had adjudged the defendant insolvent, and ,had reached out its long arms to bring all parties, resident and non-resldent, before it, to adjudge their rights to the property and fund it had seized. It had impressed upon the fund and property the character of a trust, and had undertaken to convert them, so as to make an equitable distribution thereof among the beneficiaries entitled to share therein. This afforded a sufficient basis for the equitable jurisdiction claimed. It was, in most respects, in the nature of a proceeding in rem, and its jurisdiction of the property and assets was incontestable. The mandate of the supreme court specifically directed this court to enforce the decree which it had affirmed. This affirmance was made after the decree of dissolution in the state court. Under that mandate, this court had no discretion as to how, or when, or upon what terms, thl;l defendant's property should be sold. We are directed to enforce the decree as affirmed, and in that decree the provisions for its executinu are definitely prescribed. We do not assume to modify or annul any
Theprovisionl'l:Of the Ohio statutes have been carefuUy 'col1sidered, not because wehtJld that our jurisdiction to proceedwitbout"revivorcan be aided by this statute, for it is wen settled that the equity jurisdiction of this court can neither he restrioted nor enlarged by state legislation. But, iDflsnll'lch as all the authority and rights claimed by the receiver appohted inithe state .court are conferred by the Ohio statutes, I have under all carefully considered them, in order to ascertain the power thereby. conferred upon said receiv,er, a revivor as to him was necessary."; The saving exceptions made by said statutes, as hereinbefore quoted,make it plain that even under their provisions it was not. The court which decreed dissolution and appointed him did not contemplate that he should assume the right to claim the title to the property or fund. In its decree it expressly directed that he should" not interfere with the possession of the receiver appointed by the federal court of the effects and assets of said corporation." It is therefore clear that, evert. if we concede to the state statutes all that'is claimed. the decree of dissolution of the state court' neither ousted this court of its jurisdictionnor made revivor proceedings necessary. Neither under the general equity jurisdiction of this court could such decree of dissolution affect its jurisdiction or make revivor necessary. 'As before stated, the court had possession and control of this defendant's pr.operty and assets as a trUt:lt fund, to be converted and distributed to thebenefieiaries der said trust. Its' jurisdiction thereof' had been finally fixed by the supreme court,and the manner in which that trust fund should be converted for distribution had been prescribed, and this court was directed to carry out the decree. We are now' asked to disregard this mandate, assume the right to annul its provisions by relinquishing jurisdiction, and transfer the fund and property to a new tribunal, for further litigation. There is no equity in such a claim. The ninth exception is therefore overruled. The eighth exception involves substantially the same question. The contract therein referred to was nofofa nature to affect the rights of the parties thereto, and the decree of dissolution, for the reasons above given, did not supersede or make invalid any decree or any order in the proceedings in this case. .Said exception is therel'ore overruled. The remaining exceptions are based upon objections to the sale because one of the appraisers, Caleb B. Wick, was related to some of the creditors, and becanseanotherappraiser, James Neilson, was at the time in the employ of O. Ii. Andrews, one of the creditors, and a party to this suit; and that, because of such relationship, these appraisers were not "disinterested freeholders," as prescribed by the Ohio statutes,! and beC/l.use of such want of proper qualification this sale should be. set aside. There.is nothing in the'affidavit in support of these exceptions, or in anything appeating on the record in this case, toshdW that these appraisers were not in every other respect well qualified and fitted for their
of its proVisions, but have undertaken to:execufe it as literally IisJ!1ossihle.
Rev. at-Ollio,. 5889.
LAKE SUPERIOR IRON CO. '!I. RROWN, BONNELL &
duty. The court is entirely satisfied that the property was appraised at a fair valuation, and that, therefore, the appraisers discharged their duty intelligently. and impartially. It appears from affidavits in the case that Caleb B. Wick, one of the appraisers, was a nephew of Hugh B. Wick, who died in 1880, and a nephew of Paul Wick, who died in June. 1890. The heirs of said two uncles, together with John C. Wick, a cousin of said appraiser. comprise the firm of Wick Bros. & Co., who are creditors in this case. Caleb B: Wick. the appraiser, is not shown to have any interest in this firm or their claim. The only ground upon which it is claimed that he. is not a disinterested freeholder is that he is related in the degree above stated. It further appears from affidavits that John C. Neilson, the other appraiser, was not at the time he acted in that capacity in the employ of C. H. Andrews, a creditor in this case. to the court whether the fact that The question is therefore Caleb;;B. Wick was a distant rellltive of some of the creditors disqualified him to act as an appraiser. Various cases have been cited. in which. under ;the statutes of other states, an appraiser related to some of the parties in the case has been held .to be disqualified; but in all these cases the relationship existed as to parties who were more directly and more extensively, interested in the result of the sale. In this case, the interest of the creditors with whom these appraisers are connected by relationshfp or business is so small a portion of the aggregate/claims of overJl,OQO,OOO that it would be straining the application of the statthat for such reason these appraisers were disqualified to act. ute The court, being entirely satisfied that the appraisal was just and fair, and that the property sold for a full and satisfactory consideration. claims the right aQdprivilege to look to the result reached; and, if that is satisfactory, andthe.court is persuaded that upon the whole proceedings. the Ell;lle should be confirmed, it will not subject the parties interested to the delay or expense of a resale because of any such technical objPction. Another exception urged goes to the irregularity of the sale, because the decree expressly required that the property should be appraised and sold in,connection with pending and unfinished contracts of the receiver. and that such contracts were of great valu.e, in addition to the tangible property itself; and that the master commissioner and appraisers imprope,rly ignored that provision of the decree, and did not include in their appraisals the value of such. contracts. By an examination of the decree it will be found that the court ordered the master commissioner "to cau!!e the real and personal property herein described, except ma,terials and and products manufactured or in process of manufacture,to be appraised, advertised, and sold," etc.; and, by another provision of the decree, it was ordered" that the receiver herein be. and he isrereby,empowered to sell at sale all the materials and suppUes!J.,Dd· product manufactured, or in process of manufacture, in his hands,. for such reasonable price, and at such time, as in hisqiscretion he sllould deem best." Thil:!was a plain dire<;:tionto the master to property describe<i in ,the decree. 'i'his property con"
sisted of real estate and personal property therein described ,bllt did ,not include pending contracts between the receiver and pui-coasers of material, or parties to contracts for the delivery of ore or other products used by the receiver in the mill!'. It is further plear that, by the provisions of said decree, this court ,has full control to direct the receiver in such sales as he may hereafter make of manufactured products in his hands to sell such intertlst as he may have in pending contracts which will be of value, and add to the sum to be distributed to the creditors in this case. , :Another objection to such sale is stated to be that the receiver, before 'said sale, under the instructions of the court, gave notice that:llly purchaser of the property thim offered for sale would have the right to buy from the receiver certain real estate purchased from and conveyed to him by Arms,'Bell & Co., on notice to the receiver of an eledion to bUYi and after the accepted bid of said purchasers they did notify the receiver of their election to buy such rtlal estate. This refers to real estate that had beeil purchased by the receiver, under orders of the court, from time to time during his 'receivership. This real estate comprised small parcels that were offered to the receiver from time to time by parties who owned them, because they were more valuable to the plant operated by the receiver than they were to the owners. It seemed to the court at the time the orders were made to be of advantage tothe receiver and the creditors that such property should be purchased, and in every case it was done with t,he consent of the creditors, and at their request. The title to such property was vested in the receiver for the' benefit of creditors. It was not included in the property described in the decree, which the master commissioner was ordered to sell, and was not therefore appraised as a part thereof. It appeared to the court fali' 'and just to whoever might become the purchasers of the property, as well as to the interest ofthe creditors; that the purchaser should have tbe privilege of buying this property from tbtl receiver at the price paid therefor. The receiver Was therefore authorized to make such anilounceinent at the sale. It did not in any way relate to the property deseribed ill the and ordered tberein to be sold,could not affect the regularity of the sal'e,and is' a matter fairly within the discretion of the court. << , It is further objecfedthat the property sold for a grossly inadequate price, as sbown by tbereport of the receiver. Under this objectiori, it is claimed that, when the receiver tobkpossession of this property , be made an inventory tbereof, and returned'tne same into the co.urt<.Frolll this report it appears that the property was valued at a sum: comiide1'll.bly greater than that fixed by the appraisers ullder the,< order o(sale now under consideration. But it must be remembered that this plant has been operated by the receiver for nearly eight years. During tbat time he has been authorized· to keep the property in repair,' bht' hEi has not been permitted to expend any considerable sum in the pilrchaseofnew machinery. It is a matter within the kriowledgepf all that dUring the past eight years there have been manyehanges and improvements in machinery in such mi1ls.While the property has been· preserved in
LAKE SUPERIOR IRON CO. fl. BROWN, BONNELL & CO.
good repair, the mill is not now equipped with the most approved and valuable machinery. There has been likewise a general depreciation of such property throughout the country. The appraisers undoubtedly considered all these circumstances. The court is satisfied, from the qualifications of these appraisers, their knowledge of mill machinery, and their familiarity with the value of such property. that the same was appraised. as before stated, at a fair price, and sold for a reasonable· sum. The price can certainly.not be claimed as inadequate. No affidavits have been filed by persons qualified to judge, clniming that the same was sold for an inadequate price. No offer is now made to advance the bid, and no misconduct is alleged on the part of the purchasers. The exception is based entirely upon the difference between the appraised value and the value as inventoried by the receiver, as above stated; and, for the reasons stated, this is not sufficient to show inadequacy of price. The tenth exception is that the five coal leases in the name of Ralph J. Wick, trustee, cannot now be legally sold and conveyed, beca use said Wick is not a party hereto, and said property is out of. the territorial jurisdiction. It is now too late to entertain the objection that Wick, as trustee, is not a party to this case even if it be true. The leaseholds are personal property. and are described ,in the decree as the property of the defendant, and were properly appraised, advertised, and sold as part of the personalty, and within the jurisdiction of the court. If there should be any contention hereafter between Wick, trustee, and the as to the title to these leaseholds acquired by this sale, because of the alleged failure to make him a party thereto, such contention can be settled elsewhere. It is no reason for setting aside this sale. In thus finally disposing of this protracted litigation, it seems proper, and due to my predecessor and his associates, the circuit judges· who have aided him in the management of this vast property, to direct attention t.o the satisfactory results that have followed its seizure and operatioL The property has not only been preserved intact for the protection of creditors, but, by the wise management of the receiver and his principal agents and officers, under the general direction of' the court, a and exfuud of over 8700,000 has been accumulated, so that, after pensive proceedings, it seems assured that every creditor will be paid the principal sum due him in full. But for the appointment of a receiver, the property would have been dissipated, and largely wasted in hostile litigation, to the prejudice of all concerned. It is not often that Bu<;h beneficial results follow such long litigation, and it is proper subject of congratulation to all concerned.
JACKSON, J., concurs in this opinion.
. I'&DEBAL REPORTER;
DARTMOUTH SAV · BANK fl. BATES
(Olil'cuUOourt, D. Kansal.
Pr.or to 11:188 the lien of judgments in the federal courts was clI-extenslve with their territorial jurisdiotion.,Aot Cong. Aug. Id888, ('Z5 U. S. St.&>7,) P"OVlUllS that lobe judgmentB of the federal courts within any state shaltbe liens on property tbl'OUlfhout suohBtate in lobe same manner as the judgments of oourts of general junltdlction ,of tbe state: ProVided.',tha.t If the .state. laws. require judgments of tbe state courts to be recorded in other oounties befo"e they become liens on lands sitoatetberein, this aot shall only be applicable in oase provision is made fur recording of federal oourt Juclgmonts also. Geo. St. Kan. 11S6&. o. 'SO, § 419, proVides that Judgments of state and federal courts shall be lieus on the debtor's lands in the .county Where rendered, and that" any judgment" may be reoorded in other counties! ,and become a lien ,from that time on the I!md,of the debtor in such county. Bela that., nnder.tbese two. aots. a judgment in a federal CO.urt in Kansas was a lien only on the bind of the debtor in lone county in wbiob tb,e court. was beld, but that lobe lien might be extellded byreeol'ding the judgment under the state law.
OJ' JC:»GMBNT-RECORDINI;t-TERRITORIA.L JTTRISnICTION. . '
Frederick D. Puller, for plaintiff.
, Bill fodnjunction.
O"M. Welch,for defenqants. CALDWEl.L and FOSTER, JJ.
CALDWELL, J. At the threshold of this case we are .met with the question whether a judgment rendered in the circuit court of the United States for the district of Kansas is a lien on the lands of the judgment debtor outside of the county in which the court was held and the judgment rendered. The judgment gave rise to this suit was rendered ip thft eircuit court of the United States at Topeka, in Shawnee county, and the lands of the ;judgment debtor upon which it is claimed the judgment was a lien are situated inWabaunsee county: Land was not liable to,be sold on execution at common law, aod, asa consequence of this, at common law a judgment created no lien on the' land of the judgment debtor. , The lien was created in England by the statute of Westminster 2, (13 Edw. 1.) c. 18.. This statute gave the elegit or writ.ofexecution, which subjected real estate to the payment'of debts. This statute did not, in. terms, declare that a judgment should be a lien on the lands of the debtor, but the courts held that the effect ofa statute subjecting lands to. sale on execution was to make the judgment a. lien on .the lands of the debtor; and in this coun.t,ry'state statutes subjectingland to sale on execution received theBaIne construction, a,nd were held to make judgments liens on the landS of the debtor within the territorial jurisdiction of the court rendering the judgment. Massingill v. Downs, 7 How. 766, and cases cited. The laws of theseveral states on the su bject of judgment liens are ,and neyer have been, uniform. By the laws of some states a judgment is not a lien on lands; in others it is a lien co-extensive with the territorial jurisdiction of the court. In some the lien takes effect from one date, and in others from another, and the duration of the lien is different in different states. No act of congrt:88 was ever passed declaring, in terms, that judgments'