Case ID: ohio-st_40/html/0575-01.html
Source: Caselaw Access Project
Author: {"author": "Nash, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Monitor Furnace Co. et al. v. Isaac Peters et. al.
    In March, 1876, the Monitor Furnace Company, a corporation, was dissolved by a decree of the court of common pleas of Lawrence county, and J. P. S. was appointed and qualified as receiver, to administer the estate under the direction of the court, for the benefit of creditors and stockholders. Before that time the furnace company made a sale of its real estate and other property for the alleged purpose of defrauding its creditors. In August, 1878, the receiver having taken no steps to have the sale declared void, L. B., a judgment creditor, commenced an action for that purpose in the same court that dissolved the corporation and appointed a receiver. The corporation and its stockholders, the receiver, the creditors and all persons interested were made parties defendant. — Held: That this action was substantially an application to the court to direct the receiver appointed by it to do his duty in the case stated.
    Error to the District Court of Lawrence County.
    The Monitor Furnace Company was organized as a corporation in 1868. On April 18, 1875 (the company before that time having become insolvent), a majority of its board of directors by resolution determined to offer the real estate, leases and privileges belonging to the company, for sale at public auction on the- 20th day of May following, if not sold before that time at private sale. On that day the property was sold to the Lawrence Furnace Company for §45,000. Subsequently an action was commenced under the statute by stockholders for an order dissolving the corporation, the Monitor Furnace Company, and winding up its business, and on the 24th of March, 1876, this order was made and J. P. Shaw was duly appointed and qualified as receiver.
    At the May term, 1877, Isaac Peters recovered a judgment against the Monitor Furnace Company for $9,447.54. An execution was issued thereon in November, 1877, and levied upon the real estate formerly owned by the Monitor Furnace Company, and by it sold to the Lawrence Furnace Company.
    At the February term, 1877, Damarin & Co. obtained a judgment against the Monitor Furnace Company for $2,906.50, and upon this judgment an execution was issued and levied upon the same real estate on the 19th of January, 1878.
    No steps were taken by the receiver to set aside the sale of the real estate so made by the Monitor Furnace Company ; nor to recover the same or avail himself in any way of the property so disposed of.
    No order of the court was made or applied for, directing the receiver to institute any suit to recover the possession of the real estate, or make the same available for the benefit of the creditors. Nor was any application made to the receiver to institute any such suit, nor did he decline or refuse to commence such suit, or avail himself in any way he could, of the property referred to, as a fund for the benefit of the creditors of the company.
    Without application to the court for leave to commence suit to set aside the sale and recover the property, or permission to sue the receiver or make him a party to any suit touching the property of the Monitor Company, Isaac Peters commenced an action in his own name as a judgment creditor against the Monitor Gompany, the Lawrence Furnace Company, George N. Gray, as trustee of the Lawrence Company, Joseph P. Shaw, receiver, etc.; John T. Wilson as the mortgagee Of the Lawrence Furnace Company’s lands, including those bought from the Monitor Company, and the creditors and stockholders of the Monitor Furnace Company. This action was commenced in 1878, and was based upon the judgment recovered and lien claimed by virtue of the levy of the execution under the judgment upon the real estate so sold by the Monitor Company.
    On the 8th day of August, 1878, the plaintiff filed his amended petition, making in substance the following averments :
    1st. The plaintiff had recovered a judgment against Monitor Furnace Company, on liabilities of that company* which existed long prior to the pretended sale of its property, and the dissolution of the corporation.
    2d. That the officers and owners were, at the date of said pretended sale, in control of both the Lawrence and Monitor Furnace Companies.
    Bd. That said pretended sale was authorized by and for themselves, and the sale was to themselves.
    4th. That said pretended sale was without authority and without the consent of all the stockholders or directors thereof.
    5th. That said pretended sale was a fraud and made for the purpose of cheating and defrauding the plaintiff, and for the purpose of appropriating the said property to their exclusive benefit.
    6th. That no consideration was ever paid or agreed to be paid therefor.
    7th. That said pretended sale took from said corporation its entire property, and thereby destroyed it for all purposes for which it had been incorporated.
    8th. That said sale so made was illegal, null and void.
    Damarin & Co. filed their answer and cross-petition setting up their judgment, levy, etc., and making substantially the same averments as in the petition filed by Peters — touching the transfer of the property. And there was an additional averment to the effect that the receiver had “ neglected, and still neglects,” to prosecute an action to set aside the sale and subject the property to the payment of the debts of the Monitor Company.
    
      To the petition of Isaac Peters and the answer and cross-petition of Damarin & Co. answers were filed by John Peters, Sr., and by Gray as trustee of the Lawrence Furnace Company, in which it was claimed in substance that Isaac Peters, Damarin & Co., and other creditors who had filed cross-petitions, had no right to the relief sought, but that such right was vested exclusively in Shaw, the receiver. To these answers demurrers were filed and sustained by the common pleas court, at the March term, 1880.
    Thereupon the Lawrence Furnace Company and John Peters each asked leave to amend their answers, and also leave to answer the answer and cross-petition of Shaw, the receiver. This leave was not granted, the court finding that no sufficient showing had been made therefor.
    An appeal was taken to the district court. On the 20th day of April, 1881, a motion was filed asking leave to file answers for the Lawrence Furnace Company and the Monitor Furnace Company. This motion was overruled. The demurrers hereinbefore referred to were also heard and sustained by the district court. Thereupon the district court made the following order:
    “ It is therefore considered by the court that the sale and conveyance of said lands and premises, as in the plaintiff’s petition described, from said Monitor Furnace Company to said Lawrence Furnace Company be, and the same hereby is set aside and held for naught. And the sheriff of Lawrence county is directed and required to proceed and appraise, advertise and make sale of said real estate and premises, so sold and conveyed, as described in the plaintiff’s petition and amended petition, as upon execution at law, and the proceeds arising from such sale he bring into the court of common pleas of said Lawrence county to be paid over to the receiver of said Monitor Furnace Company, or to such other officer as that court may direct, to be applied in favor of the creditors of said Monitor Furnace Company under such order as to priority of liens and other rights of parties as may be determined by said court in this cause and in said cause now pending in said court relating to the dissolution of Monitor Furnace Company and the settlement of its affairs. And the said Joseph P. Shaw, as such receiver, is required to demand and receive from the said Lawrence Furnace Company and the said George N. Gray all rents received from said property, or for which they or either of them are chargeable since the date of said conveyance from said Monitor Furnace Company to said Lawrence Furnace Company, as aforesaid: and he is also directed and required to collect from the said Newcomb & Witman, and from any and all other persons, all rents due, or that may become due, on account of the possession or use of said real estate and property, not heretofore collected and received by said Lawrence Furnace Company and the said George N. Gray, as aforesaid : and the said Lawrence Furnace Company and the said George N. Gray and the said Newcomb & Witman, and any and all other parties owning or being chargeable for, or on account of rents received, or for which any of them may be chargeable on account of the use of said real estate since the date of said conveyance, are directed and required to pay the same to the said Shaw, as such receiver, forthwith.”
    
      O. F. Moore and R. Leete, for plaintiffs in error.
    Peters had no right to maintain his action. The title to all the property and effects of a dissolved corporation becomes vested in the receiver so appointed, so far as it or its beneficiaries can have title. It is all of its property and effects, wherever or however situated, in or out of the possession of the corporation, subject to its immediate control, or simply recoverable. His title and right in respect to the property is co-extensive with any right or title that the corporation, through its board of directors or officers, has, or any that any one, either creditor or stockholder, could, either in law or equity, assert. Being by force of the statute the trustee of both the corporation and all of the beneficiaries of the corporate fund, it would seem to follow incontestably, that the right to maintain an action, if any is necessary, in order to obtain the absolute control of any of the property or effects of the corporation, belonged to the receiver exclusively.
    Upon principle, then, we maintain that no one but the receiver, or at most, possibly, one expressly empowered and ordered by the court in the particular case, can maintain an action either for the purpose of subjecting the corporate property to the payment of the debts of the corporation, or of bringing it under the control of the receiver, so that it can be made available in his hands for that object.
    No one doubts the right of creditors to see that the property of the corporation is gathered up and made available ; and to see that it is properly distributed; but that right is one to be worked out in the case pending, and through the auxiliaries of the court in that case, and not by him in his own name and in an independent proceeding.
    The doctrine maintained is not only right upon principle and supported by reason, but is fully established by the authority of adjudicated cases. McDonald et al. v. Aten, 1 Ohio St., 298; Western B. B, Oo. v. Nolan, 48 N. Y., 517.
    The judgment recovered by Peters and Damarin & Co., and the levy of an éxecution upon the real estate, illegally or fraudulently, as alleged, transferred by the Monitor to the Lawrence Company, furnished no warrant or reason for the bringing of the suit; for while the judgments were valid, perhaps, the levies' after the dissolution of the corporation and the appointment and qualification of the receiver, were an absolute nullity.
    If the transfer were valid the property belonged to the Lawrence Furnace Company, and of course was not subject to levy; or if invalid or even voidable, the title to, or interest in, the property, whatever it was, was in the receiver by operation of law, and could not be levied upon. At all events, whatever there was in the property that belonged to the Monitor Company or that could be made available to its creditors or stockholders, was already,, by virtue of the suit pending, under the jurisdiction and cgntrol of the court, and was therefore not only not subject to levy, but any interference with it was in contempt of the court. Coe v. Columbus JR. JR. Co., 10 Ohio jSt., 403; Spinning §• Brown v. O. L. Ins. T. Co., 2 Disney, 336.
    
      Neal §• Cherrington, for defendants in error,
    claimed that Peters could maintain his action, and relied upon 2 S. & 0., 364, § 2; Id., 366, § 2; Revised Statutes, §§ 5680-5684.
    The plaintiffs claim that the care, custody and distribution of property is to be worked out through the receiver appointed, just as the business of a deceased person is settled * * * and are analogous in principle. The decisions in respect to the latter should apply by analogy to the former.
    This is a correct exposition of the law and does not leave the question undecided in this state, that a judgment creditor may maintain such a suit to recover property fraudulently conveyed away by the deceased. Sampson’s Adm’rs v. Summers et al., 18 Ohio, 444; McDonald v. Aten, 1 Ohio St., 293, 296, 297; Watson v. Clap’s heirs, 8 Ohio, 248.
    Iu Insurance Co. v. Jones, 35 Ohio St., 351, the receiver was there made a party and joined with the plaintiff in the relief asked. No objection seems to have .been here made to either Ms presence or position in this case.
    
      W. A. Sutchins, and W. S. Enochs, also for defendants in error.
    The general rule, no doubt, is that a receiver, as to Ms possession, cannot be disturbed by suit, without permission of the court appointing him. The possession of the receiver is the possession of the court, but that is not this ease. The object of this suit is to put the receiver in possession of property of which he never had possession. No attempt is being made to take funds or property from his hands, but to the contrary. This suit is to increase the property in his hands to be administered by him for the benefit of creditors of the insolvent. Why should any creditor complain of one of their number carrying on a suit at his own expense, for the equal benefit of all who join him in the suit ? It is not important what such vigilant creditor claims; the court determines what relief he is entitled to. The record here shows as soon as this property was recovered and under the control of the receiver, he was ordered by the court to sell it for the benefit of the trust.
    Independent of the statutes, the plaintiff has the right to maintain this suit, as brought by him. It is not important as to who is plaintiff or who is defendant, so that all parties interested are brought before the court, so as to be bound by the decree; and equity is in general satisfied, if parties are thus brought before the court either as plaintiffs or defendants. Remedies and Remedial Rights (Pomeroy), § 248, and cases there cited.
    As before stated, the law applicable to insolvent debtors is the law governing dissolved corporations. In the case of Haskins v. Aloot and Horton, 13 Ohio St., 210, this court decided that an assignment for the benefit of creditors, did not bar the creditors of the remedies formerly open to them for the collection of their debts. The bare appointment of a receiver does not of itself suspend or destroy the right of a judgment creditor, through an equity action, to recover estates and property fraudulently conveyed away; and the rights of judgment creditors are in no way affected or abridged thereby. Edwards on Receivers, in Equity, (2d ed.), 396; High on Receivers, § 318 and cases cited in note.
   Nash, J.

The plaintiffs in error claim — 1. That the courts below abused their discretion in refusing to permit the amended answers of the Lawrence Furnace Company and the Monitor Furnace Company to be filed. 2. That there was error in sustaining the demurrer to the answers of John Peters, Sr., and Gray, trustee.

It is sufficient reply to the first complaint to say that the answers sought to be filed by the Lawrence and Monitor Furnace Companies, did not constitute a defense to the case made by the petition and by the answers and cross-petitions.

In sustaining the demurrer, the district court held that Isaac Peters had the right to maintain this action and that this right did not rest exclusively in the receiver. It is the right and duty of the receiver of a dissolved and insolvent corporation, to pursue after and recover property which has been fraudulently conveyed before the dissolution. We do not, however, agree with the plaintiffs in error in their proposition that he is the only party who can do this.

In March, 1876, the Monitor Furnace Company, as a corporation, was dissolved, and Shaw was appointed its receiver to administer its estate under the direction of the court for the benefit of the creditors and stockholders. On the 20th day of May, 1875, it is claimed that the company sold and conveyed all its valuable property for the purpose of defrauding creditors. More than two years passed without any steps being taken by the receiver, looking towards the setting aside of this sale and the saving of this property for the benefit of creditors. In 1878, Isaac Peters, a judgment creditor of the Monitor Furnace Company, commenced a proceeding to set aside the alleged fraudulent sale and conveyance, and in the court having control and direction of the receiver. To this proceeding the receiver and all parties in interest were made parties defendant and were brought into court. In such an action as this, the court could make the proper order as effectively and justly as if it had been instituted by the receiver. The proceeding was in substance and effect an application to the court to direct the receiver to do his duty, and we think can be maintained.

We do not determine any question in regard to the priority of liens that has been or may be raised in these proceedings.

Judgment affirmed.