NEW ENGJ.,AND SHOE
MORROW SHOE MANUF'G CO. T. NEW ENGLAND SHOE CO. et at (Circuit Court of Appeals, Seventh CircuIt. March 9. 1894.) No. 71.
CREDI')'OR'S BILL-EQUI'l'Y JURISDIC'l'ION-CORPORA'l'IONS.
Rev. St. TIL 1893, c. 32, § 25, which authorizes a suit In the nature of a credItor's bill to be brought agaInst corporations illl certain cases by simple contract creditors, does not gIve federal courts jurisdiction to entertaIn such a suit where the creditor has not first exhausted his legal remedy, since the equitable jurisdiction of federal courts cannot be enlarged by state legislation.
Appeal from the Circuit Court of the United States for Northern District of illinois. On petition for rehearing. For former opinion, see 6 C. C. A. 508, 57 Fed. 685. Peckham & Brown and Miller & Starr, for appellant. Flower, Smith & Musgrave, for appellees. A. B. Jenks and W. A. Foster,for Peabody. BAKER, District Judge. The appellees have filed petitions for a rehearing, which they have supported by elaborate briefs. We have given their petitions and briefs attentive consideration, and find no error pointed out which would justify the court in granting them a rehearing. The grounds upon which our decision is rested are fully stated in the opinion heretofore filed, to which we still adhere, and no good purpose will be subserved by adding anything to what is there stated. The petitions of the appellees are· therefore over· ruled. The appellant has filed a petition for a rehearing and a modi· fication of the opinion of the court by striking out of the same the following:
''The bill fails to allege that the piaintilf had prosecuted Its claim to judgment, and had Issued an execution thereon, and had the same returned nulla bona. For this reason the bill Is insufficient within the doctrine of Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, and Cates v. Allen, 149 U. S. 451, 13 Sup. Ct. 883, Q77."
The appellant further asks that the order of the court be modi· . fied to read as follows:
"That the decrees herein entered respectively on the 28th day of April, 1892, the bill of complaint as to the defendants Gore, Prouty, and Heimerdinger, and on the 9th day of May, 1892, dismissing the said bill as to Hiram B. Peabody, be reversed at the costs of saId appellees, and that said cause be remanded to the court below for further proceedings not inconsistent with this opinion, and with leave to complainant to amend Its bill it· may be advised within thirty days after the judgment herein shall be .certified to said court,"
Counsel for the appellant insist that the suit is brought under Rev. St. ill c. 32, § 25, and that under this section it is unnecessary to the maintenance of. the suit that the claim should have been reo duced into judgment and an execution issued thereon and returned nulla bona. This section provides that:
.llJlY act which shall subject it to forfeiture of its charter or corporated pow-
"If any corporation, or its authorized agents. shall do, or refrain from doing
en, or sbaU allow any execution or decree of any court ofreeord, for a pay· ment.'Gf1monetyafter demandmlifle;by the t6be returned no property found, 0r..Wremaln unsatlsfted (or no.t. less tllauten days after sU()h demand. or shall dissolve or cease dolnlfbnsiness leaving debts unpaid, suits in equity may be brought against all persons 'who are stockholders at the time, or liable in any way for the debts of the corporation, by joining the corporation Insu;cll,.'w,ts; .· · · and cour:t.S pf equltyshidll;tavefull power, on good caUSe to dissolve or closeup the bUlJlness of anY-corporation,' to aptherefor, etc."
;Itifftrpllysettled tinder'this section it is not necessary to the: mllmtenance of a suit in equity in the courts of the state that the clain!: of. the creditor should have been reduced into judgment, and ·((it issued there6n and returned nulla bona. A suit in may be maintained in a court of the state by a simple creditor, who holds neither a general' nor a specific lien against a corporation which is insolvent and has ceased to do busi· ness, leaving .debts unpaid,for the pUrp9se of· winding up its af· fairs. Mining Co. v. Edw8,l'd$,. 103 Ill. 472; St. Louis, etc., Min. Co. v. Sandoval, etc., Min. Co" U1 m. 32;. Id., 116 m. 170, 5 N. E. 370; Alling v. Wenzel, 133 m. 264, 24 N. E. 551; Hunt v. Rink 32 N, E. ,525; Mellen v. Iron Works, 131 U. S. 352, .781. As a where a new right is created by of a state, ,federal courts will take cognizance of it,W-d"wiU enforce it accorqing to their methods of procedure. Wheme:rit )Villbe enforced at law or in equity depends upon its ·. When it is rem,eqialin essentially of an it y,rill. be On the equity .side of the Clark, 13.4·.TJr S. 10 Sup. Ct 554; Davis v. 221; Will, 21 Wall. 503; Hol110 U. S. 15,3 Sup. Ct1 '495.; Frost v.Spitley, 121 U. R 552, 7 Sup. Ct. 1129. But every new right of an:equitable 1>1 of the state is not necessarily enthe the same facts and under the same'eil'CUDlStances as in thec()urts of the state. If the new right iaone not'within the rec6gnized eqtittable jurisdiction of the fed· el'lJ courts, It cannot be enforced by such courts in equity, although the statute of the state ,has 'declnredthat the new right shall be enf()i'ced in equity. The jurisdiction of the federal courts as eourts of equity (laqnot be by state legislatiO'D. New equitable rightb which fall within their accustomed jurisdiction can alone be by· the federa.1¢ourts in eqU1ty. . The case of Hollins v. Iron Qt.., 15QU. S. 371, 14 Sup. Ct.127, is decisive of this question. The. (l()ud; there say:
....t!he< pUidntltfs . simple contract creditors of Their claims haa not· been reduced to judgment, and they had no express lien by or,otlJ,e.rwise. It Is the settled law of this court that such come Into a court of equity to obtain a seizure of the propertY ,ref their debtor, and its application to the satisfaction of their claims" 11!nd.1.his notwithstanding a statute of the state may authorize such. a proceEl4IJUf. ill;!. O!f ,f:P.e state. The.line ,ot demarkation between eqWtable and legal remedies In thefederal courts cannot beobl1terated bY state legislation. Scott v. Neely, 140 U. S', 106, 11 Sup, Ct. 712; Cates v, Alleil, 149 U.'S; .451,13·.Snp.ot. 888j',977; nor Is It otherwise in ease the debtor Is a corpora1llon, p.ndan unpaid stock subscription is' sooghttO be reached. Tube
Co. v. Frank,
Works Co. v. Ballou, 146 U. S. 517,13 Sup.Ct. 165; 148 U. S. 603,13 Sup. Ct. 69L"
It is further contended by the appellant that a corporation debtor does not stand on the same footing as an individual debtor; tbat, while. the latter. has absolute dominion over his own property, an insolvent corporation is a mpre trustee, holding its property for the benefit of its creditors and stockholders, and that a federal court of equity may entertain jurisdiction to wind up its affairs in a suit. brought by a simple contract creditor. This contention is declared in the above-cited cases to be at war with the notions which were derived from the English law with regard to the nature of cor· porate bodies.
"A corporation is a distinct entity. Its affairs are necessarily managed by ofll.cers and agents, it is true; but in law it is as distinct a being as an individual is, and is entitled to hold property, if not contrary to its charter, as absolutely as an individual can hold it. Its estate is the same, its interest is the same, its possession is the same. Its stockholders may call the officers to .account, and may prevent any malversation of funds or fraudulent disposal of property on their .part. But that is done in the exercise of their corporate rights, not adverse to the corporate interests, but coincident with them.. When a COq/oration becomes insolvent, it is so far civilly dead that its proPerty may be administered as a trust fund for the benefit of its stockholders and creditors, and acoun of equity, at the instance of the proper parties, wUl then· make those funds trust funds which, under other circumstances, are as much the absolute property of the corporation as any man's property is bis." Graham v. Railroad Co., 102 U. S. 148, p. 160.
Under the settled law applicable to the federal courts, a simple contract creditor is not a proper party to invoke the aid of a court of equity to make the corporate funds trust funds, and to wind up the affairs of an insolvent corporation, unless the ordinary jurisdiction of the court has been enlarged by legislative authority. The jurisdiction of the court below had not been so enlarged, and it cannot be supported by an appeal to the state legislation in question. For these reasons the petition of the appellant for a rehearing is overruled. It wasdeterttlined by the court, and so announced, that, as the appellant had committed the first material error, the cause would be reversed at its cost. By mistake or oversight, the order as entered adjudged the costs against the appellees. The order of reversal heretofore entered will be so far modified as to adjudge the costs against the appellant, and in all other respects it will stand approved.
HAMNER v. SCOTT. (Circuit Court of Appeals, Eighth Circuit. February 12, 1894.) No. 336.
WHIT OF ERROR-FINAL JUDGMENT-ATTACHMENT.
order quashing an attachment, and leaving the action still pending in the trial court, cannot be reviewed by writ of error, since it is not a final .decision. Standley v. Roberts, 59 Fed. 836, distinguIshed.
In Error to the United States' Court in the Indian Territory. , Attachment by James B. Hamner against J. S. Scott. The at· tachment was quashed. fLD,d plaintiff brings error.