Case ID: dc_19/html/0575-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Hagner", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THE UNITED STATES ELECTRIC LIGHTING COMPANY vs. LEVI LEITER, A. A. WILSON, MARSHAL, and THE BRUSH-SWAN ELECTRIC COMPANY.
    Corporations, Dissolution of ; Confession of Judgment by ; Practice; .Attorney’s Entry of Appearance; Effect of Enjoining Execution. ■
    1. A corporation is dissolved neither by its failure to elect trustees, nor by its insolvency; in either case it may still sue and be sued; it loses its franchise only by a surrender by the shareholders, or through forfeiture by the State in a suit instituted for that purpose.
    2. When the fact of incorporation has been shown, the burden of showing a dissolution is thrown upon the other side.
    3. A corporation may confess judgment for a debthonestly due, and may employ an attorney for that purpose.
    4. The authority of the attorney to confess such a judgment cannot be questioned in a collateral proceeding.
    •5. Attorneys at law are officers of the court, and are presumed to act ■ under high professional obligations, for the faithful discharge of which they are summarily responsible. When their appearance is entered in a case, it is presumed to be done by the authority of their principals, and whatever is done in the progress of the cause, is esteemed as the act ,of, and binding on, their clients.
    3. On a suit brought against a corporation a decree for the payment of a sum of money was entered against it by consent of its attorney. Execution having been shortly afterwards issued upon this decree, a bill was Sled to enjoin the same because the attorney was not authorized to consent to the decree: Held, that no fraud having been shown in obtaining the decree, the execution would not be enjoined.
    Equity.
    No. 10,197.
    Decided November 7, 1887.
    The Chief Justice and Justices Hagner and James sitting.
    Apheal from a decree dismissing a bill filed for an injunction, etc.
    
      Decree affirmed.
    
    Statement of the case by Mr. Justice Hagner :
    This bill, filed on September 26, 1886, prays (1) the appointment of a receiver to take charge of the books and property of the Brush-Swan Electric Company, and hold the same subject to the orders of the court; (2), that a decree passed in Equity Cause No. 9949, in which Lei ter was complainant and the Brush-Swan Company and others were defendants, should be re-opened and set aside, and the amended bill which had been filed therein should be dismissed; and (3), for an injunction to restrain the marshal from collecting the amount due on the decree. It seems better to state here the substance of Leiter’s bill, which was filed in April, 1886, against the present complainant and Conger, Iiayes, Norment and others, as co-defendants with the Brush-Swan Company. Leiter therein charged that in 1884, he had subscribed for fifty shares of the capital stock of the BruslnSwan Company, at $100 per share, and had paid to the said, company $1,000, being 20 per cent, of his subscription; that said company had expended large sums in preparing to carry on its business, and had acquired a large amount of property; that an unsuccessful effort had been made to consolidate it with the United States Electric Company, and thereupon the defendant Conger, as agent of the United States Company, had persuaded a majority of the stockholders in the Brush-Swan Company, (among whom was its vice-president,) to relinquish their interest therein and receive in lieu a proportionate amount of stock in the United States Company ; that the vice-president and others representing the Brush-Swan Company, delivered a large amount of its property to the United States Company, upon the agreement that the latter should pay for it, but no payment had been made; that the Brush-Swan Company was virtually insolvent, as a result of the conspiracy between its said officers and the United States Company; which latter company held a large amount of the receipts or certificates purchased by its agent, Conger, from the subscribers to the Brush-Swan Company; and the bill prayed for a receiver to take charge of the affairs of the Brush-Swan Company, and that the United States Company might be deemed to be a debtor of the Brush-Swan Company, in respect of the property so delivered to it, and for the use thereof, and for damages, &c.
    To that bill (No. 9949) the United States Company filed its answer, as did Conger and several others of the defendants, but no answer was filed thereto by the Brush-Swan Company.
    On September 8,1886, the defendants, who had answered, notified Leiter’s counsel they would move to dismiss the bill as to themselves, for want of prosecution; and on September 26 Leiter dismissed his bill as to all the defendants except the Brush-Swan Company, with the knowledge of, and without objection if not’by the consent of the parties defendant -who had served the notice referred to.
    On the same day Leiter filed a motion to amend his bill, then pending only against the Brush-Swan Company, by adding this averment:
    19. “ Your complainant further avers that at the time of the subscription to the stock of the said Brush-Swan Company, as set forth in paragraph 12, it was made with the distinct understanding and agreement, and upon the consideration that the company would proceed and exercise its corporate functions, but your complainant avers that this it has failed to do; that it has allowed and permitted the United States Electric Lighting Company to take possession of its entire plant, and use the same for its own benefit,, and without rendering any consideration whatever for its-use ; that such action amounts to'an absolute failure of the-consideration moving to your complainant for the said subscription, and the United States Electric Lighting Company does not intend to permit any further business to be done by the said Brush-Swan Company; and your complainant avers that, for the acts complained of, your complainant is entitled to have his subscription to the stock of the said Brush-Swan Company cancelled, and to be re-imbursed the said sum of one thousand, dollars paid as aforesaid, and also the following prayer:
    “ That the subscription of the complainant to the Brush-Swan Company be cancelled, annulled and set aside, and that the said company be perpetually enjoined from asking, demanding or collecting from complainant any of the balance of the said unpaid subscription, or incurring any debt or obligation on the faith thereof; that they be decreed to refund the said sum of one thousand dollars, and that the complainant have execution as at law for the same.”
    On the same day leave as prayed was granted, and a decree was passed in that cause, No. 9949, upon the written consent of the Brush-Swan Company, in accordance with the amendments, declaring that Leiter’s subscription should he set aside and annulled, as void; that he should recover against the company the $1,000 already paid, and should have execution therefor; and that the Brush-Swan Company should be perpetually enjoined from collecting any further part of the subscription. Leiter issued an execution upon this decree, and the marshal of the District was made a defendant to the present bill (No. 10,197), to enjoin its collection.
    The present hill then charges that the amendments allowed were not germane to the original bill; that the United States Company should have been made a party to the amended bill; that the Brush-Swan Company was never legally organized, and whether under the laws of West Virginia or of the District of Columbia is uncertain ; that it virtually ended its operations at the last meeting of the stockholders held some time before the second decree; that the attorney who consented to the decree in behalf of the company was never legally authorized to appear for it; that the United States Electric Company holds $20,300 of the receipts given to the subscribers to the Brush-Swan Company for payment on their subscriptions out of $23,000 the entire amount of those subscriptions; that Leiter having no judgment against the Brush-Swan Company, had no better right to have a return of what he had paid on his subscription than the other subscribers and the United States Company as their assignee; and that the assets of the Brush-Swan Company should be divided among the subscribers proportionately.
    The answer of Leiter to the present bill avers the decree was passed against the Brush-Swan Company upon the consent of Mr. Boutwell, its counsel; denies that the United States Company was a necessary party to the amended bill; that the United States Company, by connivance with some of the officers of the Brush-Swan Company, obtained possession of its plant and station with intent to wreck that company, and crush out all opposition to the United States Company, and employed Conger, who obtained from the subscribers their receipts or certificates, by agreeing to give other certificates of the United States Company to such subscribers as would pay Conger one-half of their subscriptions, but offering nothing to such subscribers as refused to accede to this proposal, among whom was the defendant Leiter. And he insisted that the certificates held by the United States Company were not bona fide, but were obtained for the purpose of crushing out the Brush-Swan Company ; and insisted, that after the United States Company had thus endeavored to suppress the Brush-Swan Company, it should not be allowed to share in the distribution of the assets with the bona fide subscribers.
    The cause came on to be heard upon testimony, and the court below dismissed the bill with costs.
    Mr. J. J. Johnson for complainants.
    Messrs. McDonald, Bright & Fay for defendants.
   Mr. Justice Hagner

delivered the opinion of the Court:

Several of the objections, of the appellants to the decree passed in No. 9949 are based upon the idea that at the time it was passed the Brush-Swan Company was really not in existence as a corporation, and therefore had no capacity to. employ counsel or assent to" the decree.

The charges relied upon to establish the dissolution of that company at the date of the decree are, first, that although the company was incorporated in December, 1883, under the laws of West Virginia, yet in July, 1884, it was reorganized under the laws of the District of Columbia. But the proof does not sustain this assertion, and there is nothing to show that Leiter was a subscriber to or had any Connection whatever with the pretended organization in the District. His subscription was made under the West Virginia organization ; and the new project was never in fact organized into a corporation. The company which was made a defendant in Leiter’s bill was the Brush-Swan Company, incorporated under the laws of West Virginia, and its charter as a West Virginia corporation was filed with that.bill. No attempt to incorporate another company here, even if it were accomplished under the same name (which it is averred was not the case) could destroy the incorporation under the laws of West Virginia.

2d. It is claimed that as there had been no-meeting of the Brush-Swan Company since October 27, 1885, and the company then decided to dispense with many of its servants and officers, and was without the mpans of performing its projected work of lighting the streets and houses of the city, and was practically insolvent, this state of facts amounted in law and fact to a dissolution of the corporation.

It is replied in proof that the inability of the Brush-Swan Company to perform its work was due to the refusal of the District authorities to allow it to introduce its wires throughout the city, although the privilege was given to the United States Company; and that its embarrassments throughout resulted from the conspiracy of the United States Company with some of the agents of the Brush-Swan Company to wreck or crush it out; but that its then embarrassed condition resulted in nothing more than a temporary inactivity on its part, and cannot be considered as working a dissolution of the corporation.

We do not think the complainant has made good its -contention that the Brush-Swan Electric Company, when the decree was rendered against it on the 20th of September, 188G, was not then an existing corporation, capable in law of suing and being sued, and of exercising the usual powers of a corporation. A corporation does not become dissolved or cease to exist by failure to elect trustees. In such a case its franchise would only be suspended. State vs. Trustees Vincennes University, 14 How., 268 : “A corporation can be dissolved and its existence wholly terminated only by extinguishment of the corporate franchise conferred by the State upon the body of the corporators; for so long as this franchise exists the company continues to be a corporation in legal contemplation, and may sue and be sued in that capacity.” Morawitz on Private Corporations, Sec. 1005. The insolvency of a corporation does not dissolve it. Boston Glass Manf. vs. Langdou, 24 Pick., 53 ; Coburn vs. Boston Papier Mache Co., 10 Gray, 245 ; 14 Wall., 383 ; Bank of Bethel vs. Bank.

A corporation, like a natural person, may become insolvent, but this misfortune does not, of itself, accomplish the death of either.

When the fact of incorporation has been shown, the burden of showing a dissolution is thrown upon the other side. And this can only take place by a surrender by the shareholders, or through a forfeiture by the State in a suit for the purpose; and there are two modes of proceeding judicially to ascertain and enforce the forfeiture of a charter ; the one by scire facias, the other by quo warranto. Regents vs. Williams, 9 G. & J., 426; Town vs. Bank, 2 Doug., Mich., 550.

But this contention of the present complainant is strangely inconsistent with his present bill, in which the Brush-Swan Company is impleaded as a party defendant, and the effort is made to obtain a decree against it as an existing corporation. If the company was an existing corporation in September, 1886, it clearly had the right to confess a judgment for a debt honestly due, and necessarily it possessed the authority to employ an attorney for that purpose. 1 Morawitz on Private Corporations, Sec. 430.

And the authority of the attorney to act is not to be questioned in this form by third persons. “Attorneys at law are officers of courts of justice, presumed to act under high professional obligations, for the faithful discharge of which they are summarily responsible. When their appearance is entered, it is presumed to be done by the authority of their principals, and whatever is done in the progress of the cause is esteemed as the act of and binding on their clients.” McCauley vs. State, 21 Maryland, 569 ; Henck vs. Todhunter, 7 H. & J., 275; Thornburg vs. McCauley, 2 Md. Chancery, 425.

Such would be the legal presumption arising out of the unexplained act of the attorney; but there is superadded here the testimony of Mr. Boutwell, the attorney, who swears he was authorized to confess the judgment by the president of the Brusli-Swan Company; and no complaint is made from that source that he exceeded his authority in the least.

We do not intend to intimate that in a proper case an application like th\e present to vacate a decree would not be entertained by a court of equity. When presented in a reasonable time after the rendition of the decree complained of, as was certainly the case here, the court will listen with interest to the application, and hasten to undo whatever wrong itself had done to suitors because it had been imposed upon by the successful party. But the proper constituents of relief must be presented and established on such an application,, and we do not perceive those features in the present suit. In Fletcher vs. Missouri Pacific Railway, 111 U. S., 520, referred. to by the complainants, the decree assailed was impugned as having been procured by fraudulent conduct on the part of the solicitor and directors of the defendant corporation, which prevented the company from making its just defense. As stated by Mr. Justice Miller in U. S. vs. Throckmorton, 98 U. S., 62, it must appear that by reason of something done by the successful party to a suit, there was in fact no adversary trial or decision of the case, because of fraud or deception practiced; “ or where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; or where the attorney regularly employed corruptly sells out his client’s interest to the other side.” “ In all these cases, and many others, relief has been granted, on the ground that by some fraud practiced directly upon the party seeking relief against the judgment or decree, that party has been prevented from presenting all his case to the court.”

But among the allegations in the present bill, there is no suggestion of fraud on the part of Leiter or of the defendant’s attorney who assented to the decree. True, it is averred the attorney was without authority to act in the case because of the dissolution of the company (which, as we have seen, had not taken place); and of his non-employment; but we have shown that this is negatived by the proof. It is also averred that Leiter had no better right to obtain a decree than other subscribers situated as he was. But this is very different from 'an imputation of fraud against Leiter. And deprived, as the case is, of the indispensible ground for interference that 'the decree was obtained by fraud, the case only presents the action of a vigilant creditor who has obtained a decree while others claiming to be similarly circumstanced were waiting for some one else to make them move. Those who put their own shoulders to the wheel without waiting for help from Hercules generally succeed; and 'when their promptness has secured success they can claim from the courts the benefits of the maxim: “Vigilantibus non dormientibus jura subveniunt.”

The petitions of the two intervening subscribers are not before us on this appeal; if they were they could not be sustained, as there is no proof whatever of their averments.

We think the decree below dismissing the bill should be affirmed, and it is so ordered.