Case Name: Railway Co. v. Jewett
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1882-01
Citations: 37 Ohio St. 649
Docket Number: 
Parties: Railway Co. v. Jewett.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 37
Pages: 649–659

Head Matter:
Railway Co. v. Jewett.
1. A railroad company may be sued in any county through or into which its road passes, without regard to the nature of the cause of action.
2. The appointment of a receiver to take from the defendant the possession of his property, cannot be lawfully made without notice, unless the delay required to give such notice will result in irreparable loss.
3. In an action to prevent the consolidation of railroad companies, the election of directors for the new company, at a meeting of the stockholders held under section 3383 of the Revised Statutes, will not justify such an appointment against either of the companies, on the ground that part of the stockholders participating in the meeting have been inhibited from doing so by injunction.
Error to tbe Court of Common Pleas of Franklin County.
The original petition was filed in the court of common pleas of Franklin county, on October 19, 1881, by Hugh J. Jewett and R. Suydam Grant, who sue in their own behalf as stockholders in the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, and in behalf of other stockholders who might come in and contribute to the expenses of the action. The defendants are the said railway company, the Cincinnati, Hamilton and Dayton Railroad Company, J. H. Devereux, George H. Russellj F. H. Short and Stevenson Burke.
The petition is founded upon the attempted consolidation of the two companies named, and sets out the steps taken to effect such consolidation. The material facts are found stated in the case of State ex rel. Attorney-General v. Vanderbilt, decided at this term, ante.
The case last named was instituted after the bringing of this action, and it was therein adjudged that the attempted consolidations of said corporations was unauthorized and invalid.
The object of the petition in this case was to prevent the election of a board of directors of the consolidated company, known as the Ohio Railway Company, at a meeting of the stockholders to be held at Cleveland on October 20, 1881. The petition avers that Devereux is a stockholder, director and the president of both companies, and that, said Burke is vice-president of the first-named company, that said Russell is the secretary of the first named company, and said Short is secretary of the last named company.
The petition also contains the following averment: “ That not only is the said pretended consolidation illegal by reason of the matters and things hereinbefore set forth, but also the interests of these plaintiffs, as stockholders aforesaid in the said defendant, the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, will be greatly prejudiced and irreparably injured by reason of the furthering and completing of said pretended consolidation. That under the said agree ment of consolidation, it is intended to consolidate or unite the two corporations defendant into one pretended corporation, with a single management of the said corporations, to keep but one set of books of the earnings of the two lines of railway and thereby to confuse the earnings and expenses, respectively, of the said corporations defendant, and to make the property and earnings of each of the said corporations liable for tin?' debts and obligations of the other’. That the debts and obligations of the defendant, the Cincinnati, Hamilton, and Dayton Railroad Company, are actually much greater than those of the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, and that it will be greatly to the damage of these plaintiffs to have the stock of the two corporations consolidated, and the earnings of the properties of the respective corporations amalgamated and confused.” And asks that the said corporations defendant, and their respective directors, stockholders and officers, be forever enjoined and restrained from doing any act toward the completion of the said pretended consolidation, or any consolidation of tlie said corporations defendant, or for the election of any board of directors of the said pretended Ohio Railway Company, and from surrendering the possession of the railways and properties, books, papers and records of the said corporations, or either of them, to the said alleged Ohio Railway Company, or to any board of directors or officers pretending or claiming to represent the same.
And the defendants, J. II. Devereux, Stevenson Burke, George II. Russell and F. H. Short be, and each of the same be forever enjoined and restrained from in any way furthering, aiding, promoting or participating in the said meetings, called as aforesaid. An exporte temporary injunction was allowed, as prayed'for, at the time of filing the petition. And on the same day service was made on Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, at Franklin county, and on the other defendants on the morning of the 20th of October in Cuyahoga county, before the meeting for the election of directors.
On October 22, 1881, the plaintiffs, by leave of the court, filed a supplemental petition, in which it was stated in substance that notwithstanding the injunction and service thereof, the meeting for the election of directors of the Ohio Railway Company was held at tlie time and place appointed for that purpose in which the said Devereux, Burke, Russell and Shori participated. Tjiat all the stockholders assembled at said meeting were notified of the filing of said petition and the allowance of said injunction before proceeding to such election. That directors were elected at such meeting for the Ohio Railway Company whose names are set forth and who are asked to be made defendants.
It is also averred: “ that said pretended directors and officers of said pretended new corporation intend to, and unless stopped by the effective intervention of this court, will take control and management of the property, franchises, and assets of every kind, of the two railroad companies, defendants in this case, in the name of said pretended new corporation, and will abandon and cause to be dissolved the two railway companies, defendants in this case. Plaintiffs say that by reason of facts stated in the original petition, the said two railroad companies, defendants, have not been consolidated, nor can they be ; that the meeting stated in the original petition, wherein their stockholders voted to ratify the agreement for consolidation, and the votes there given, as well as the votes cast at the meeting on October 20, 1881, at Cleveland, hereinbefore described, were without legal validity or effect, either to dissolve the old companies or to create a new one.” ,
The appointment of a receiver was prayed for, to take possession and control of the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company’s road, and of all Other roads leased or held by it, and of all of its property of every kind and nature whatsoever, and to hold and operate said roads under the direction of the court until further ordered; and for such orders of injunction as would enable the receiver to fulfill the duties of his appointment.
At the time of the filing of the supplemental petition an appointment ex parte of a receiver was made as prayed for, and such orders entered as would enable him to take control of all the property and rights of the said company, and to fully perform the duties of his appointment.
The receiver gave bond and Avas duly qualified as required by the court.
On application to this court leave was granted to the plaintiffs in error to file the present petition i£ error to reverse the order appointing the receiver, and all orders founded upon and in execution of said appointment; and the execution of the duties of said appointment, and of said orders, were stayed until the petition in error could be heard.
Harrison, Olds & Marsh, for plaintiff in error:
The court had no jurisdiction of the persons named as defendants in either the original or supplemental petition. The action Avas not “rightly brought” in the county of Franklin, according to the provisions of cli. 5, div. 2, tit. I. Rev. St. It was one which “ must be brought in the county in which a defendant resides or may be summoned.” Section 5031. None of tbe defendants reside in the county of EranMin, and none of them could be summoned therein. True, two summonses were issued against the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, directed to the sheriff of Franklin county ; one of which was returned served upon “ a regular freight agent,” and the other upon “ an agent ” of the company. Rut if, when the action was commenced, said company was still a railroad corporation for all purposes (which we controvert), and its road passed into Franklin county, and it had a “ a regular freight agent ” therein, upon whom summons was served, these facts did not entitle the plaintiffs to bring their action in that, county, for two reasons : 1. Section 5026 provides that “ an action other than one of those mentioned in the first four sections of this chapter, [of which the action below was not one], against a corporation created under the laws of this State, may be brought in the county in which 'such corporation is situate, or has or had its principal office or place of business.” Section 5027 qualifies the foregoing general provision of section 5026, to a certain extent only; that is to say, it authorizes an action to be brought against a railroad company “ in any county through or into which such road passes,” only when the action is “for an injury to the persons or property upon the road or line, or upon a liability as carrier.” This qualification was intended for the convenience and protection of persons in whose favor rights of action accrue against a railroad company in operating its road and carrying on its business. It certainly was not intended to authorize an action to be brought jointly against natural persons and such company, on other causes of action than those enumerated, in any other county than that in which such other person “resides or may be summoned” (section 5031), or in the county where the company resides, and service can be made on it under section 5026. Sections 5027 and 5031 must be construed together. When an action is brought against two or more defendants, and neither of them reside in the county in which the action is brought, and the summons cannot be legally served upon either of them in that county, the court does not acquire jurisdiction over either of the defendants. The court had no jurisdiction to make the order appointing a receiver, until all persons who would be directly and legally affected by it were before the court. But the order in question was made before the persons who were made defendants to the supplemental petition were served with process, and even before process was issued against them. As to them at least, the action was not then actually pending. Robinson v. Orr, 16 Ohio St. 284, 288; Bennett v. Williams, 5 Ohio, 461.
The order in question is void also for the reason that no notice was given to the defendants, or either of them, that an application would be made for the appointment of a receiver. The order was made before any of the parties were required to appear in an action; and before any process at all had been issued against some of them. This precise question has not been, so far as we are aware, decided by this court. But the court has recognized and established principles which are decisive of the point. Lessee of Patterson v. Prather, 11 Ohio, 35. The following cases decide that such a proceeding as that now under review is not within the judicial power of any one, and is a pure usurpation. People v. Simonson, 10 Mich. 201; Sailing v. Johnson, 25 Mich. 489 ; People ex rel. v. Judge of St. Clair, 31 Mich. 456 ; Barry v. Briggs, 22 Mich. 456; Gravenstein's Appeal, 49 Penn. St. 310; Whitehead v. Wooten, 43 Miss. 523 ; Hyslop v. Hoppock, 5 Ben. 447. A motion for the appointment of a receiver is special, and, therefore, notice of it must be given to all necessary and interested parties. Tibbals v. Sargeant, 14 N. J. Eq. 449 ; 2 Brown Ch. Pr. 883; Buxton v. Moukhouse, Coop. 41; Devoe v. Ithaca, &c. R. R. Co., 5 Paige, 521; 2 Daniell Ch. Pr. 1735 ; High on Receivers, § 111. The code has not altered the practice' in the appointment of receivers so far as notice to the parties to be affected is concerned. The appointment must still be made according to -the principles and practice of courts of chancery, as established and existing when the code took effect. So held under the New York code. Kemp v. Harding, 4 How. Pr. 178. The usages of courts of equity, both as to the manner of appointing and discharging a receiver, where it is not otherwise provided by statute, are applicable to cases arising under the code. C., S. & C. R. R. Co. v. Sloan, 31 Ohio St. 1. It is apparent that the court below made the order appointing a receiver solely because it was supposed that the original restraining order had been violated by the stockholders of the Ohio Railway Company holding an election for directors thereof. And this, too, when the directors of the C., C., C. & I. Ry. Co. were not defendants in the action; and when it is not even alleged, much less made to appear that they did anything in disobedience of the original restraining order, or that they intended or contemplated surrendering the possession, management and control of the road until the controverted right of the Ohio Railway Company should be judicially determined. This latter fact, of itself, shows that the order of the court below was wholly unauthorized.
Converse, Booth & Keating, for defendant in error:
I. On October 22, the date of the orders complained of, there was an action pending. The plaintiffs had commenced their action by filing a petition, and causing writs of summons to be issued thereon, which were duly served on the several defendants named in the petition, on the 19 th and 20th of October. The provisions of the code, relating to the commencement of civil actions, had been fully complied with. Rev. Stat. §§ 4987, 5035, 5037, 5038, 5040, 5044, 5577. The statutory provisions now in force, determining when personal actions may be brought against domestic corporations are Rev. Stat. §§ 5026, 5027.
II. "Was the court warranted in appointing the receiver, and allowing the restraining order of October 22, without notice ? 1. Notice of the application for an injunction is not required in this state; on the contrary, the power to allow an order of injunction without notice to adverse parties is clearly recognized by our statute law. Rev. Stat. §§ 5574, 5575, 5578; High on Injunctions (2 ed.) §§ 1575, 1578, 1579. 2. Notice of the application for the appointment of a receiver is generally required, but courts may, in their discretion, in cases of grave emergency and under circumstances rendering such a summary proceeding necessary, make the appointment without notice. High on Receivers, §§ 106, 111; People v. Norton, 1 Paige, 17; Gibson v. Martin, 8 Paige, 481; Verplanck v. Ins. Co., 2 Paige, 438; Johns v. Johns, 23 Ga. 31. On October 19, tbe court of common pleas rightly held that the Ohio Railway Company had not yet succeeded to the rights, privileges and franchises of the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, and the Cincinnati, Hamilton and Dayton Railway Company. Railroad Co. v. Brown, 26 Ohio St. 224, 239. Rut on October 22, on the showing made in the affidavits and supplemental petition, it clearly appeared that the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company no longer claimed the right to control its large property interests, assets and valuable franchises, and was about to surrender possession thereof to the pretended new company. It would not have been reasonable in such an emergency to require the j>laintiffs below to notify the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, a corporation that, through its officers and agents, denied their own existence, of the application for the appointment of a receiver. The doctrine is well settled that a receiver may be appointed without notice, when the party to be affected thereby is beyond the jurisdiction of the court, or in case of great emergency, even if the adverse party be within the jurisdiction of the court. The showing made to the court of common pleas, on October 22, was sufficient to justify that court in appointing a receiver, without notice to the company which had attempted to commit suicide, and, through its officers, claimed that its purpose had been accomplished. A strong probability, amounting almost to a certainty, that, unless a receiver be appointed, a corporation will, within a few hours, in violation of law, surrender complete possession and control of property worth millions of dollars, is, we submit, a “ grave emergency.” If the emergency was, as we claim, sufficient to justify the appointment without notice to the corporation itself, then it was not error to mate .such appointment without notice to the other parties defendant.
III. Did the petition and supplemental petition state facts sufficient to authorize the appointment of a Receiver % The plaintiffs below claimed relief, by injunction, and the appoint ment of a receiver, on the ground that the proposed consolidation was not authorized by law, and, if consummated, would cause irreparable injury to the stockholders of the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company. On the showing made in the common pleas, the plaintiffs below, were entitled to the appointment of a receiver. The corporation had ceased to act. The president and chief officers and a majority of the stockholders assumed that the property and franchises of the company had vested in another corporation and were proceeding, without authority of law and in violation of the order of the court, to surrender to strangers the property of the defendant company, to the irreparable injury of its stockholders. It is a well established rule of law that where a corporation ceases to act as such, and there are no persons authorized to conduct its affairs and preserve its property, a receiver will be appointed for that purpose; and on reason the duty of the court to appoint a receiver is even more imperative where a corporation ceases to act as such, and its officers, who are charged with the duty of conducting its affairs and preserving its property, betray their trust and neglect and refuse to perform their duty. And a court will act more promptly in granting such relief when the adverse parties are in contempt of court for violating its orders. High on Receivers, §§ 15, 366; 2 Redfield on Railways, 360, 361; Conro v. Gray, 4 How. Pr. 166; Penn v. Whitehead, 12 Gratt. 74-83; Stevenson v. Davidson, 18 Watt, 819.
IY. Did the petition and supplemental petition state facts sufficient to authorize the allowance of the restraining order of October 22? The order allowed against the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, its trustees, directors, officers, managers, attorneys, agents, servants and employes, restraining them from collecting or paying out moneys, and from delivering the property of the company to any person except the receiver, was a proper order to be made in connection with the appointment of the receiver. The facts were such as to justify a court of equity in interfering, by injunction, to protect the interests of complaining stockholders. The relief granted was clearly within the doctrine stated in the following authorities: Pierce on Railways, 73, 520; High on Injunctions (2 ed.), §§ 605, 1203, 1207 ; Ang. & Ames on Corp. § 391; Ward v. Society of Attys., 1 Collyier, 370; Wright v. Oroville, 40 Cal. 20; Rev. Stats. of Ohio, § 5006; Green’s Brice’s Ultra Vires, 653.
E. A. Ferguson, also for defendant in error.

Opinion:
White, J.
The only question before us for determination relates to the order appointing the receiver, and the orders made in aid of such appointment.
Whether the service of process upon the original defendants, Devereux, Burke, Short and Russell, in Cuyahoga county, was •effective to subject them to the jurisdiction of the court issuing the process, is not before us for consideration; that branch of the case is still in the court of common pleas. The only parties interested in the question of the appointment of the receiver, are the Cleveland, Columbus, Cincinnati and Indianapolis Railway Company, and the original plaintiffs Jewett and Grant. The company, for any cause of action against it, was brought into court under the last clause of section 5027 of the Revised Statutes, which provides, that " an action against a railroad company may be brought in any county through or into which such road or -line passes."
The meeting held at Cleveland was a meeting of the stockholders only. The corporations had no corporate duty to perform at the meeting. The object of the meeting was to comply with section 3383 of the Revised Statutes. The section provides for a meeting of the stockholders of the original companies, at a time and place to be fixed by themselves, to elect directors and other officers of the new company formed by the consolidation; and it is declared that the " election shall be conducted in such a manner as may be prescribed by the stockholders at such meeting."
The ground of action stated in the petition was the invalidity of the consolidation. This invalidity arose from the incapacity of the corporations, under the statute, to effect such consolida tion. There being no power to consolidate, the original corporations continued to exist in their integrity, with all their rights of property and franchises. As such corporations they were respectively enjoined, under the original petition, " from surrendering the possession of the railways and properties, books, papers and records of the said corporations, or either of them, to the said alleged Ohio Railway Company, or to any board of directors or officers pretending or claiming to represent the same."
The alleged violation at the meeting, of the injunction, by the defendants, Deverenx, Burke, Short and Russell, did not constitute ground against the corporation of which they were stockholders, for the appointment of the receiver; and it was only in the capacity of stockholders that they acted or had any authority to act at the meeting.
It does not appear who constituted the other directors of, the defendant company; nor is it averred that the company or any of the directors were intending, in violation of the injunction against the company, to surrender or transfer its property to the alleged Ohio Railway Company, its directors or officers. No such transfer 'could be effected by operation of the statute; for the consolidation was not authorized by the statute.
There was no obstacle to giving notice to the company before acting on the appointment of a receiver. No fraud or insolvency was charged against any of the parties; nor that the property of the company was in danger of removal beyond the jurisdiction of the court, or of otherwise being lost. The controversy was solely as to the effect of the attempted consolidation.
Under the circumstances of the case, the appointment of the receiver was an unwarranted exercise of judicial power, which it is the duty of this court to reverse and set aside. Railroad Co. v. Sloan, 31 Ohio St. 15; Varplank v. Insurance Co., 2 Paige, 438.
Judgment accordingly.