Lehr v. Murphy

MARSHALL, J. Only the first and. fifth grounds of demurrer are argued in the briefs of counsel for respondents. Therefore the other grounds will be regarded as abandoned, though we will say, in passing, that viewing the complaint as for a mere creditor’s action we are unable to perceive any — 97 — support for either of tbe grounds not argued. Regardless of the general nature of tire complaint and of tbe prayer for relief, tbe dominant purpose of tbe pleader is unmistakably stated in tbe allegation that the action is brought “for tbe sole purpose of compelling payment from tbe said defendant’s directors of tbe amounts that may be found due from them by reason of tbe matters and things hereinbefore set forth, and for satisfaction of tbe debts of all creditors of said defendant corporation.” Tbe main ground of demurrer on which respondents’ counsel rely is tbe fifth. Viewing tbe complaint only as an ordinary creditor’s bill, such ground is readily seen to be untenable. Tbe facts alleged amply show tbe existence of non-leviable corporate assets of various kinds to be recovered into tbe corporate treasury or some proper representative thereof for tbe benefit of creditors. There is tbe allegation that tbe defendant’s directors are possessed in secret trust of corporate property, tbe allegations to tbe effect that contrary to tbe law of Arizona such directors obtained large amounts of corporate stock from tbe corporation without rendering thereto any substantial consideration therefor, allegations to the effect that by connivance of the directors half of tbe stock was issued and turned out for property of no considerable value as compared with tbe par value of the stock, and further allegations to .the effect that by nonfeasance and misfeasance such directors squandered, lost, and misappropriated property of tbe corporation to tbe extent of over $100,000. Most of these wrongdoings are alleged to have been participated in by all of tbe directors. Tbe fact that two creditors, joined as plaintiffs, are not shown to have exhausted their remedy at law to collect their claims is referred to as a defect in tbe complaint. That is immaterial since the leading creditor who joined in initiating tbe litigation is shown to have exhausted bis such remedy and so was competent to commence tbe suit. Tbe rule is — 98 — that if in a suit of this sort, at the time of its commencement, there is an active party plaintiff so circumstanced as to be competent to maintain it, he may afterwards be displaced by another creditor, not so circumstanced, and made a defendant, or dropped out of the litigation altogether, or have other creditors, none of whom could have properly initiated the proceedings, joined with him as plaintiffs, without affecting the cause of action or the legal capacity of the parties to pursue the matter. Harrigan v. Gilchrist, 121 Wis. 127, 307, 99 N. W. 909. It is suggested as a defect that the complaint fails to show the receiver was regularly appointed. ’ On that it is sufficient to say that whether such be the case or not is immaterial to the cause of action. No receiver is necessary in order to commence an action of this sort. It is sufficient, as indicated, that there was a creditor competent to make the complaint, who was made a plaintiff. Harrigan v. Gilchrist, 121 Wis. 127, 271, 99 N. W. 909. It is further suggested that the complaint fails to show the issuance and return unsatisfied of a valid execution. The opinion of the court is otherwise. The allegation that an execution was duly issued and was duly returned wholly unsatisfied is ample. By reasonable inference that suggests that a transcript of the justice’s judgment was properly filed and the judgment docketed in the office of the clerk of the circuit court before the execution was issued. Under our practice many mixed matters of law and fact are properly pleadable according to the legal effect of the facts. Hyman v. Landry, 135 Wis. 598, 116 N. W. 236. The rule covers the case, that all facts necessary to sustain a complaint, reasonably inferable from the language used, are to be regarded as efficiently stated. Morse v. Gilman, 16 Wis. 504; Emerson v. Nash, 124 Wis. 369; 102 N. W. 921. The further point is made that the complaint is fatally defective for failure to allege in compliance with Circuit Court — 99 — Rule XX.VII, sec. 1, tbe true sum actually and equitably due on tbe judgment. That is ruled in favor of tbe appellants by Marston v. Dresen, 76 Wis. 418, 45 N. W. 110, and Faber v. Matz, 86 Wis. 370, 57 N. W. 39. Tbe complaint states that tbe execution upon tbe judgment was returned wholly unsatisfied; that there is no collusion between tbe parties, and that tbe action is prosecuted for tbe sole purpose of compelling payment of dues to tbe corporation for tbe sat-, isfaction of its debts. Such allegations were held in tbe cases cited to substantially comply with tbe rule; and further that tbe allegation required thereby is not of the substance of tbe cause of action, which fis complete without it, and that at best absence thereof is a mere irregularity to be remedied by motion; that it does not constitute any legitimate ground for a demurrer. In support of tbe contention that tbe circuit court has no jurisdiction of tbe subject of tbe action it is urged that tbe remedy in respect to dealing with, collecting, and distributing tbe effects of insolvent corporations in payment of its debts is governed by see. 3216, Stats. (1898), and its associate sections, and that as they relate only to domestic corporations the common law in respect to tbe matter does not apply; that there is no remedy by a creditor’s.bill as to a foreign corporation. That is a mistake. It was early decided by this court that tbe common law respecting creditors’ bills is supplemented, not displaced, by tbe statutes. Adler v. Milwaukee P. B. Mfg. Co. 13 Wis. 57; Harrigan v. Gilchrist, 121 Wis. 127, 245, 99 N. W. 909. In tbe last case cited tbe court reviewed at length tbe law on this subject, quoting, as tbe initial bolding here, from Adler v. Milwaukee P. B. Mfg. Co., supra, this language: “From this view of tbe general powers of cobrts of equity to manage and control tbe affairs of failing and bankrupt corporations it becomes a matter of very little practical importance whether . . . secs. 18 and 19 of ch. 148 of tbe Revision of 1858 [now sec. 3216, Stats. 1898] are operative or — 100 — not. If ojDerative, they are in affirmance of the law as it was previously understood; if inoperative, no substantial change is occasioned. If they can he enforced, they only go to strengthen the powers which courts of equity heretofore possessed, to remove doubts, and to render the rules by which such proceedings are governed more stable and undeviating.’7 Eurther it is contended in support of the demurrer that the circuit court is without jurisdiction of the subject of the action; that a winding-up action against a corporation can only be brought at the domicile of the corporation, referring to such cases as Hutchinson v. American P. C. Co. 104 Fed. 182; Stockley v. Thomas, 89 Md. 663, 43 Atl. 166; Condon v. Mut. R. F. L. Asso. 89 Md. 99, 42 Atl. 944; and that neither such an action nor one to regulate the internal affairs of a corporation organized under the laws of another state can be maintained except at the domicile of the corporation, referring to such cases as North State C. & G. M. Co. v. Field, 64 Md. 3 51, 20 Atl. 1039, which was essentially an action of that character. It is sufficient to say as to such contentions that the primary purpose, at least, of this action is merely to conserve corporate assets within the jurisdiction of the court for the benefit of creditors in, or that may come into, such jurisdiction. It is neither a winding-up action nor an action to regulate the internal affairs of the corporation. If there be any matters stated in the complaint appropriate to such actions they are merely incidental to the main purpose of the suit. As the court at present is not required to go further than to test the question of whether the complaint states facts sufficient for a creditor’s bill the two propositions suggested by counsel and argued at considerable length need not be discussed. A clear distinction is made in the authorities between an action of this sort and a general winding-up action or one to regulate the internal affairs of a corporation. In Hutchinson v. American P. C. Co., supra, confidently relied upon by counsel, it is distinctly held that any state may take control — 101 — of property lying within its jurisdiction independently of any question of domicile, and in 23 Am. & Eng. Ency. of Law (2d ed.) 1006, also relied on by counsel, though it is said that a court of one state will not, in general, take charge of the business of a corporation organized under the laws of another state, that the place for a general receivership or entire winding-up proceedings is at the domicile, it is further said, in the same connection, that a receiver may be appointed for the property of a foreign corporation found within the jurisdiction of the court. True, where there is a general receivership at the domicile of the corporation the foreign receiver would ordinarily be appointed as ancillary only, but that does not militate against the power of the court by virtue of its equity jurisdiction to deal with property within its reach belonging to the corporation, for the benefit of creditors invoking its authority, so far as necessary to protect the rights of such creditors. Our attention is called to N. W. Iron Co. v. Central T. Co. 90 Wis. 570, 63 N. W. 752, 64 N. W. 323, where the question was raised, but not decided, as to whether a credit- or’s action of this kind may be maintained, language being used well calculated to cast doubt upon whether such an action is maintainable. Notwithstanding what is there said it is now considered that by the weight of authority and upon reason and principle as well the action is maintainable. We refer to 5 Thomp. Oorp. §§ 6860, 6861; Smith v. St. Louis Mut. L. Ins. Co. 3 Tenn. Ch. 502, 505; Murray v. Vanderbilt, 39 Barb. 140, 147; Redmond v. Hoge, 3 Hun, 171; Nat. T. Co. v. Miller, 33 N. J. Eq. 155; Richardson v. Clinton W. T. Mfg. Co. 181 Mass. 580, 64 N. E. 400; De Bemer v. Drew, 57 Barb. 438; Tinkham v. Borst, 31 Barb. 407. It is not claimed that the above authorities are in all respects directly in point, but they clearly recognize or declare the principle that a court of equity has ample authority to — 102 — entertain a suit against a foreign corporation to conserve its property within its jurisdiction to enforce payment of a judgment at law therein, legal remedies for its collection having been exhausted, and to vindicate the rights of all other creditors to recover their claims, who come into or are made parties to the litigation, so far as equity requires it. Some other matters are discussed by counsel, hut they do not seem material and so we will omit special mention of them. The complaint at this time is sustained, limited to the purposes of a creditor’s action only. By the Court. — The order is reversed, and the cause remanded for further proceedings according to law.