Case ID: ohio-st_66/html/0094-01.html
Source: Caselaw Access Project
Author: {"author": "Burket, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Geurinck v. Alcott.
    
      A corporation cannot be a member of a partnership — Credit due two corporations united for joint business not partnership assets — Of money in hands of third person for two such corporations — Half belongs to each corporation — Law of garnishee — Illegality of combination to regulate prices — Money belonging to such combination not tainted with illegality, when.
    
    
      2. Where two corporations by agreement contribute capital to carry on a joint business in an assumed name, the net profits to be equally divided, such combination is not a partnership, and credits due thereto are not partnership assets, but belong to the two corporations.
    3. Where money is held by a third person for such two corporations, and the same is garnisheed to pay the individual debt of one of them, and, the disclosures being unsatisfactory, an action is brought against such third person and the other corporation as garnishees, both answer, and both fail to claim that such other corporation has any interest in the money, and the cause is tried upon the pleadings and testimony, it is not error of law for the court to find that one-half of such money belongs to the debtor corporation, and render judgment accordingly.
    4. While a combination to regulate prices and control output, may be against public policy and illegal, ihe money arising as the fruits of such combination, when placed in the hands of a third person for one of the members thereof, ceases to' be tainted by such illegality, and becomes honest money, subject to seizure and sequestration by garnishee process, in favor of a creditor of such member.
    (Decided March 18, 1902.)
    Error to the Circuit Court of Cuyahoga county.
    The plaintiff in error, also plaintiff below, brought his action in the court of common pleas against the Ellwood Gas Stove & Stamping Company, a Pennsylvania corporation located at Ellwood City in that state, hereinafter known as the Stamping Company, for the recovery of over fifteen hundred dollars on contract, and caused an attachment and garnishee process to be issued upon proper affidavit, and the same was duly served upon said Frank L. Alcott, defendant in .error, and service made on the corporation by publication. The disclosure of Mr. Alcott not being satisfactory, the said Bernard A. Geurinck brought an action against said Alcott under Sec. 5551, Rev. Stat., and alleged in his petition that said Alcott had certain sums of money in his hands at the time the three several writs were served upon him, belonging to said defendant corporation, and prayed that full disclosure be made, and for judgment against said Alcott for whatever money might be found in his hands belonging to said defendant corporation. The Vapor Stove Manufacturers’ Association of the United States, the Cleveland Co-operative Stove Company, hereinafter known as the Stove Company, W. W. Baldwin and M. B. Clark were also made defendants and duly served, but as they claimed no interest in the money held by Mr. Alcott, they were afterward dismissed out of the case by the plaintiff below.
    A joint answer was filed by the defendants, and after admitting, that said Alcott is a resident of Cuyahoga county, that said Stove Company is an Ohio corporation, and some other immaterial admissions, the answer is as follows:
    “They deny that said Frank L. Alcott at any time had in his possessions under his control, or anybody else had in their possession or under their control belonging to said Gas & Vapor Stove Company and the Cleveland Co-operative Stove Company jointly credited to them under the name of the Ellwood Gas & Vapor Stove Company, and they deny every other allegation of the plaintiff’s petition not herein admitted.
    “Further answering the defendants say that said proceedings as set out in plaintiff’s petition was an attempt to find in this state in the hands of somebody, the funds of a corporation not doing business in this state, incorporated under the laws of another state, and that all proceedings in such attempt were illegal and irregular, and of no binding force and effect, and were proceedings for which there is no authority under the laws and statutes of the state of Ohio.- That said Vapor Stove Manufacturers’ Association so far as it exists at all in the state of Ohio, is not a legal entity and is not authorized to transact any business and it is incapable of being sued under the provisions of the laws of the state of Ohio.
    “Defendants say that whatever money is in the possession, or ever has been, of the Ellwood Gas & Vapor Stove Company, that the same was in its hands as its own, and is not the property of anybody else, and the said Ellwood Gas Stove & Stamping Company has no interest whatever therein, and having fully answered the defendants ask to go hence with their costs.”
    A jury was waived and the cause submitted to the court upon the issues and evidence, and the court made special findings of fact separate from its conclusions of law in substance as follows: In February, 1895, the said Stamping Company and said Stove Company, an Ohio corporation doing business at the city of Cleveland, entered into a written contract to continue to July, 1900, whereby the Stamping Company was to contribute its plant, and the Stove Company an amount of capital equal to the value of the plant, and the two companies under the assumed name of the Ellwood Gas and Vapor Stove Company, hereinafter known as the Vapor Company, were to carry on a joint business at the plant in Ell wood, each company to have one-half the net profits.
    That about the twenty-first day of September, 1895, the said Stamping Company and Stove Company, under the said name of the Vapor Company, entered into a pool with a large number of other companies to regulate prices and output, and this last named combination appointed said Alcott as its commissioner, and reports were made to him each month for one year, and he received and had in his hands, the funds of the combination, and apportioned to each member its amount each month.
    That when the first writ was served, May 4, 1896, Mr. Alcott had in his hands for said Vapor Company under said combination agreement, the>sum of $1,359.-75, one-half of which was the property of the said Stamping Company, and one-half the property of the Stove Company. That on June 30, 1896, when the second writ was served, he had in his hands upon the same terms, the sum of $1,268.64, and on August 7, 1896, when the third writ was served, he had in his hands $200.95, making a total of $2,829.34, one-half of which, $1,414.67, was the property of the Stamping Company, and was in the hands of Mr. Alcott for that company.
    Judgment having been rendered in favor of the plaintiff below in the original action, the court rendered judgment against Mr. Alcott as garnishee for the amount so found in his hands, with interest and costs.
    The circuit court reversed the judgment, and rendered final judgment in favor of Mr. Alcott upon the findings of fact. Thereupon the plaintiff below filed his petition in error in this court, seeking to reverse the judgment of the circuit court, and for an affirmance of the common pleas.
    
      Messrs. Preusser & Wennemann, for plaintiff in error.
    The question now in this court is: Can the Ellwood Gas Stove & Stamping Company., a Pennsylvania corporation, and the Cleveland Co-operative Stove Company by contract form a new firm, which absorbs for the time from February 2, 1895, to July 1, 1900, the entire plant or the use thereof of the Ellwood Gas Stove & Stamping Company, also all its other “property of every kind and description,” and to which the Cleveland Co-operative Stove Company contributes capital equal to the value of the plant, machinery, etc., the management of which new concern is in the hands of the latter company, and thus prevent an Ohio creditor from collecting a debt which the Pennsylvania corporation owes him.
    As a matter of law we claim that cannot be done. If the money found due at the several times from Alcott to the Ellwood Gas & Yapor Stove Company, was due to a partnership, the case of Myers v. Smith, 29 Ohio St., 120, would seem to settle that the garnishee cannot be held, where the proceeding is purely in rent and the members of the partnership are not within the jurisdiction of the court. Langdon v. Conklin et al., 10 Ohio St., 439; Railway Co. v. Volkert, 58 Ohio St., 362; Ford v. Dry Dock Co., 50 Mich., 358.
    We claim that the Cleveland Co-operative Stove Company having answered in this case, and claiming no interest in the funds in Alcott’s possession, in a suit which it might bring against Alcott for having paid the fund in his hands to Geurinck, could not re-coyer against him if Alcott plead in his answer an estoppel on the part of the company, by its appearance in this case and non-claimer of any interest in the funds. Kunneke v. Mapel, 60 Ohio St., 1.
    Corporations are endowed with such powers only as are conferred upon them by their charters, or such as are reasonably nfecessary to carry into execution the powers granted. The enumeration of certain powers implies the exclusion of all others. There is no authority to form a partnership conferred upon the Cleveland Co-operative Stove and Hollow Ware Foundry Company.
    The formation of a partnership implies the giving of control over the affairs of the corporation to others than their legally constituted officers and board of directors. Sec. 3248, Rev. Stat.
    The common law never allowed corporations to form partnerships, and in the absence of anything to the contrary, the Ellwood Gas Stove & Stamping Company is presumed not to have such power.
    Again the formation of partnerships by corporations, subjects the stockholders to additional risks, which they cannot be presumed to have contemplated,, and it is furthermore void as against public policy.
    While the precise question has not been passed upon in our Supreme Court, it is held in Bank v. Bank, 36 Ohio St., 350, and Railway Co. v. Iron Co., 46 Ohio St., 44, that one corporation cannot subscribe for stock in another corporation. State v. Standard Oil Co., 49 Ohio St., 137, sustains the contention. In Pearce v. Railway Co., 62 U. S. (21 How.), 441; Railway Co. v. Railway Co., 131 U. S., 371; Central Transport Co. v. Pullman Car Co., 139 U. S., 24; Bank v. Kennedy, 167 U. S., 362.
    
      In the light of the above decisions it is plain that the contract between the two corporations conld not be enforced by the one against the other, and if at any time either disaffirmed the contract, either may bring suit against the other to recover as on a quantum memit the value of which it actually has received the benefit. Louisiana City v. Wood, 102 U. S., 294; Parkersburg v. Brown, 106 U. S., 487; Chapman v. Douglas Co., 107 U. S., 348; Salt Lake City v. Hollister, 118 U. S., 256; Railway Co. v. Railway Co., 118 U. S., 290.
    So the argument that Alcott owes the funds in his hands to the Ellwood Gas & Vapor Stove Company as a partnership, falls, because the two corporations cannot form a partnership.
    Suppose Alcott refused to pay to the Ellwood Gas & Vapor Stove Company the respective amounts he reported as due them as provided in the contract with the Vapor Stove Manufacturers’ Association of the United States, the result would have been that the Ellwood Gas & Vapor Stove Company would have to resort to a suit and in such suit the. Ellwood Gas & Vapor Stove Company could not appear as plaintiff in Ohio, in view of the decision of Jackson v. Brick Assn., 53 Ohio St., 303; Schuler v. Israel, 120 U. S., 506; Drake on Attachment, Sec. 528, 521; Ohio Statutes, 4993 (real party in interest must bring suit).
    The legal effect of service of garnishment process upon Alcott in the original attachment suit between this plaintiff in error and the Ellwood Gas Stove & Stamping Company was an assignment of all the interests said company had in the funds in Alcott’s possession credited to the name of the Ellwood Gas & Vapor Stove Company. Alsdorf v. Reed, 45 Ohio St., 653, and Alcott is charged with the knowledge of the assignment. The property right thus acquired by Guerinck, the plaintiff in the attachment suit and now plaintiff in error, is enforcible. It is not in the power of Alcott, after knowledge of the assignment to settle for the fund in his hands in the name of the Ellwood Gas & Vapor Stove Company, and pay over to it the full amount; for*in reality it is paying the fund to the two corporations, one of which is the defendant in the attachment suit, under an assumed name; Alcott could thus defeat Geurinck’s claim. It has been so held substantially in Railway Co. v. Volkert, 58 Ohio St., 362; McBlair v. Gibbes, 58 U. S. (17 How.), 232.
    To the proposition that the fund in hands of Alcott arose out of an illegal contract (the pooling contract) and could therefore not be collected from him we cite: Planters Bank v. Bank, 83 U. S. (16 Wall.), 483; Kinsman v. Parkhurst, 59 U. S. (18 How.), 289; Armstrong v. Bank, 133 U. S., 433.
    If the circuit court decision is to stand, it means that a corporation can transfer all of its property to a joint venture or partnership and its creditors are remediless; but as has been held in Andres v. Morgan, 62 Ohio St., 236, where a partnership was changed, into a corporation and all of the firm property transferred to the corporation; held, that the debts of the: partnership became the debts of the corporation and. it is liable therefor. In this case the property of the.corporation was transferred to the partnership or the new combination; the court of common pleas so found. Rouse, Trustee, v. Bank, 46 Ohio St., 493.
    If such is the policy of the law in Ohio in regard to Ohio corporations, the defendant Alcott cannot shield himself by saying the Ellwood Gas Stove & Stamping Company is a Pennsylvania corporation, for reason would tell us that a foreign corporation cannot enjoy greater privileges in Ohio than a local one.
    
      Mr. Orestes C. Pinney, for defendant in error.
    There are two reasons why this plaintiff could not garnishee on a claim against the Stamping Company any money in Alcott’s hands.
    First — The defendant is a foreign corporation, at Ellwood, Pennsylvania, and the credit due a foreign corporation cannot be garnisheed, the situs of the debt being in Pennsylvania and to garnishee the credit would be assuming extraterritorial jurisdiction.
    Second — The Stamping Company did not have such an interest in the fund in Alcott’s hands as that it would have had a right at the time when garnishment process was served, to bring a suit for any part of the fund, because:
    (a) No title to the fund or to a credit producing the fund existed until the money was paid into Alcott’s hands.
    (b) When paid in, the title was in Alcott as trustee until an actual proportionment had been made.
    (c) When the apportionment had been made the title to no part of it became in the Stamping Company, but was in the Vapor Company.
    (d) - The Stamping Company, against whom the plaintiff’s claim existed, had no title to any part of the fund belonging to the Vapor Company until a division had been made between it and the Cooperative Stove Company. .
    (e) Neither the Stamping Company nor the Cooperative Stove Company had any title to or right to or interest in, any of this fund in Alcott’s hands coming to the Vapor Company until all the debts of the Yapor Company had been paid, and there was shown to have been created a net profit.
    None of these events had occurred at the time when any of the processes of garnishment were served.
    The first proposition seems to have been decided adversely in the case of Owen v. Miller, 10 Ohio St., 136; Swearingen v. Morris, 14 Ohio St., 424; Root v. Davis, 51 Ohio St., 29.
    The court in this case, in applying our attachment statutes, seems to make a difference between the right to garnishment of a credit in an action against a resident of another county and one against a resident of another state. The authorities cited by this decision seem to sustain this doctrine, as do also Cole v. Cunningham, 133 U. S., 107; 138 Mass., 179; Cunningham v. Butler, 142 Mass., 47, and Goldey v. Morning News, 156 U. S., 518; Bank v. McLeod, 38 Ohio St., 174.
    This court held an attachment issued in Cincinnati against property of a Kentucky corporation would not hold the property as against a proceeding in the Kentucky court against the corporation, wherein the property, of the. corporation was being sought to satisfy creditors and trustees had been appointed to take possession of the property of the corporation. This does not decide the above question, but it shows that in principle the courts in this state cannot exercise extraterritorial jurisdiction and obtain control of the property of a foreign corporation temporarily in this state.
    But it is further urged that under the facts of the case there was nothing in the hands of Alcott, the garnishee, which could be made applicable to the payment of the claim of the plaintiff in his suit in the attachment case. The facts in that regard were found and stated by the court of common pleas, and we think the court was justified in finding the facts as found. Ford v. Dry Dock Co., 50 Mich., 358; Harris v. Miller, 71 Ala., 32; Roly v. Labuzan, 21 Ala., 60; 19 Ala., 138; 30 Ala., 68; 42 Ala., 370; Hassie v. Congregation, 35 Cal., 378; May v. Baker, 15 Ill., 89.
    The statute of Illinois provides for the attachment and garnishment of “lands, tenements, goods, chattels, moneys, choses in action, credits and effects.” Ill. Statute, page 932, par. 7. 35 Conn., 310; 83 Ill., 55; Smith v. Davis, 1 Wis., 447; Drake on Attachments, Sec. 463; 31 Ala., 552; 42 Ala., 370; 75 Ala., 530; 2 Wade on Attachments, Sec. 407; Swann v. Sommers, 19 W. Va., 115.
   Burket, J.

'In the unreported case of Merchants’ National Bank v. Standard Wagon Company, 65 Ohio St., 559, this court held, after full argument by counsel and consideration by the court, that it was not competent for two or more corporations to unite and form a partnership, and with that holding we are still content. The same question was again considered in this case, and the same conclusion reached. Of course two or more corporations, or a corporation and an individual, as was the case in Cleveland Paper Company v. Courier Company, 34 N. W. Rep., 556, may purchase goods for the use of both, and both be liable therefor, but the liability is not as partners, but individually, and that is as far as the above case goes. It is not within the corporate scope of business of a corporation to be a member of a partnership with all the rights and liabilities of a partner.

The combination formed by the agreement between the Stamping Company and the Stove Company, did not therefore have the legal effect of forming a partnership under the assumed name of the Vapor Company, and that contract does not pretend to constitute such partnership. Each corporation agrees to furnish the same amount of capital, the business to be for the mutual benefit of the two concerns. Each to be entitled to one-half of the profits of the joint business, the net profits to be determined annually in August, and such portions as may be thought advisable to be equally divided between them.

The above provisions look very much like a partnership agreement, but nothing is said in the contract about a partnership, and the parties seem to have understood that corporations could not legally enter into a partnership, and therefore they speak of it as a “joint business,” “for the mutual benefit of the two concerns.”

The combination entered into by the. Stamping Company and Stove Company under the name of the Vapor Company, and a number of other corporations, to regulate prices and control output, may have been void as against public policy; but certain funds came into the hands of Mr. Alcott as commissioner for that combination, and was by him apportioned to the several members thereof, among others the so-called Vapor Company, which was the Stamping Company and the Stove Company, and each of which companies was entitled under their agreement to one-half of the fund so placed into his hands for both. While the money so in the hands of Mr. Alcott may have been the fruits of an illegal combination, the money itself was not tainted by the illegality, but as to creditors of the Stamping Company, was honest lawful money, subject to seizure and sequestration by garnishee process.

It was the fund so in his hands that was garnisheed, and he answered that he had no funds belonging to the Stamping Company, because that company was entitled to one-half of the net profits only, and that no one could tell what the net profits would be until the joint business should be settled up, and Myers v. Smith, 29 Ohio St., 120, is cited by his counsel. In that case a claim due to a partnership was attempted to be reached to pay the debts of one of the partners, and it was held that firm credits could not be applied by garnishment to the payment of the debts of one of the partners. Here there is no partnership, but a joint venture. Section 5551 provides that “judgment may be- rendered in favor of the plaintiff for the amount of property and credits of every kind of the defendant in possession of the garnishee, and for what may appear to be owing by him to the defendant, and for the- costs of the proceedings against the garnishee.”

In this case Mr. Alcott now claims that he had no credit in his hands belonging to the Stamping Company and owed that company nothing, all the money owed by him being to the two corporations, the Stamping Company and the Stove Company; but he and the Stove Company were both made parties defendant, and neither one claimed in the answer filed that the Stove Company had any interest in the fund either jointly with the Stamping Company, or individually in its own right. The claim was set up in the joint answer that the fund belonged to the Yapor Company; but it could not belong to that company, because it had no existence, it was a fictitious person, a myth. This left the way open for the court to determine and find on the trial, to whom the fund belonged, and whether each company was the owner of and entitled to one-half thereof. The court found that the Stamping Company owned one-half of the fund, and that Mr. Alcott owed that half, fl,414.67, to that company, and this court will not weigh the evidence to see whether that finding is correct or not. The circuit court seems to have regarded that finding as a conclusion of law rather than a finding of fact, and on that ground reversed the judgment, and entered final judgment in favor of Mr. Alcott upon the findings of fact-

As the pleadings stood, no interest being claimed in the fund by the Stove Company, nor by Mr. Alcott in its behalf, the court could well find as a fact that one-half of the fund belonged to the Stamping Company, and was therefore subject in law to sequestration by garnishee process against it.

The other questions argued are so fully and clearly settled by former decisions of this court, that they need no further notice here.

Upon the record so made by the pleadings and finding of facts, the circuit court erred in reversing the judgment of the common pleas.

The judgment of the circuit court will be reversed, and the common pleas affirmed.

Judgment reversed.

Williams, C. J., Spear, Davis, Shatjck and Price, JJ., concur.