Case Name: Jones v. Bank of Leadville
Court: Colorado Supreme Court
Jurisdiction: Colorado
Decision Date: 1887-10
Citations: 10 Colo. 464
Docket Number: 
Parties: Jones v. Bank of Leadville.
Judges: 
Reporter: Colorado Reports
Volume: 10
Pages: 464–481

Head Matter:
Jones v. Bank of Leadville.
1. Courts have no jurisdiction to appoint a receiver except in a suit pending in which the receiver is desired.
3. The appointment of a receiver does not dissolve a corporation either in law or in fact.
S. The surrender of the franchise of a corporation is not an official act, but to be effectual must be the act of the stockholders as such.
4. In the absence of equity jurisdiction, properly invoked, the assets of an insolvent corporation do not constitute atrust fund for pro rata distribution among all its creditors, nor in such case does any superior equitable lien exist as against a prior attaching creditor.
Error to District Court, Lake County.
On the 25th day of July, 1883, the defendant in error was, and had been, a bank doing a general banking business in the city of Leadville, and on that date presented to the Hon. L. M. Goddard, judge of the fifth judicial district of Colorado, its petition in the words and figures following:
“In the matter of the application of the Bank of Lead-ville to the court to dissolve its corporate existence, close up the business thereof, and for the appointment of a receiver.
“ To the Hon. L. M. Qodclard, Judge of the District Court:
“The petition of the Bank of Leadville respectfully shows to the court: That heretofore on, to wit, the 21st day of August, 1878, the above-named petitioner became and was duly incorporated under the laws of the state, as a banking corporation, and thereupon, upon the filing of its said articles in the proper offices, entered upon the transaction of a general banking business.
“That since said time your petitioner has been largely engaged in said business, and to-day has upon its books, as due to depositors, upward of the sum of $200,000.
“That said petitioner is also indebted to divers and sundry parties in large amounts, upon divers lai'ge and sundry amounts in the sum of upwards of $50,000. Schedule of which several indebtednesses will be hereafter filed in court and furnished to any receiver appointed herein.
“That in the transaction of such hanking business heavy losses have been sustained by your said petitioner.
“That the nominal assets of the bank are very large, and are upwards of $350,000, but of said assets a large proportion and a very considerable percentage is of no present value, and quite a considerable percentage of no value whatever if collection is to be forced.
“ That a large percentage of the assets and all the capital stock of said bank has been lost in the carrying on said banking operations, and that the losses have been so great that the said bank is no longer able to carry on its said banking business, and that the funds of said bank are so far exhausted that the business of the bank, under its incorporation, can no longer be carried on.
“That the said corporation is wholly and entirely insolvent; that your petitioner desires to wind up its affairs, close its business, and secure the ratable and equitable distribution of its assets among its creditors; to retire from business, surrender.its franchise, and be dissolved, and to that end seeks the appointment of a receiver.
“Wherefore your petitioner prays that by decree of this court, duly entered, the said corporation, the Bank of Leadville, may bo dissolved, that its business and affairs may, under the direction of this court, be duly closed and wound up, and that to that end a receiver of its affairs may by the court be duly appointed, and for such other relief as to the court may seem meet, and your petitioner will ever pray.
“J. B. Bissell,
“Attorney for Petitioner.”
Was sworn to by George R. Fisher as follows:
“State of Colorado, ) “Lake County. )
“I, George R. Fisher, being duly sworn, on oath say • that I am the cashier and principal stockholder of the petitioner;- that I have read said petition and know its contents, and that the same is true of my own knowledge. George B. Fisher.”
On the same day the said judge made the following order:
“In the matter of the application of the Bank of Lead-ville for a receiver, etc.
“ Upon the reading and filing of the verified petition of said corporation, and upon the application of counsel for said corporation, it is ordered that George W. Trimble be, and he is hereby, appointed receiver of all the estate, effects and property, both real and personal, of the said Bank of Leadville, of every shape, form and description, and wheresoever situated, with full power and authority to sue for, collect and receive any and all sum or sums due to the said bank, and to collect and reduce to cash all the estate and assets of said bank, and in so far as the same may be sufficient to pay off, liquidate and discharge the obligations of said corporation. .
“That said receiver is appointed upon his executing and filing with the clerk of the court a bond in the penalty of $50,000, with two or more sureties, each qualifying in such sum as to the total shall be double the above amount, such sureties to be approved by the clerk according to the statutes and according to the practice of this court.
. “ Done at chambers, at Leadville, July 25, 1883.
“L. M. Goddard,
“Judge Fifth Judicial District.”
On the 3d day of-November following, Jones, plaintiff in error, filed his complaint against the said bank, claiming $44,222.98 as due him from said bank; and on the 27th day of the same month caused summons to issue upon his complaint, which was served on the same day upon George B. Fisher as cashier, secretary and stockholder of said bank. On the same 27th day of November Jones made and filed his affidavit in attachment, and on the same day filed his attachment bond in the penal sum of $90,000, executed by himself and ten sureties, which is in the following form:
“Whereas, the above-named plaintiff has commenced, or is about to commence, an action in the district court of the fifth judicial district of the state of Colorado, in and for said county of Lake, against the above-named defendant, upon a contract for the direct payment of money, claiming that there is due to the said plaintiff from said defendant the sum of $44,222.98, lawful money of the United States, besides interest, and said plaintiff is about to apply for an attachment against the property of said defendant, as security for the satisfaction of any judgment that may be recovered therein: .
“Now, therefore, we, the undersigned, residents of the state of Colorado, in consideration of the premises and of the issuing of said attachment, do jointly and severally undertake iu the sum of $90,000, and promise to the effect that if the said defendant recovers judgment in said action, or if the said court shall finally decide that the said plaintiff was not entitled to an attachment, the said plaintiff will pay all costs that may be awarded to the said defendant, the Bank of Leadville, ánd all damages which it may sustain by reason of the wrongful suing out of the said attachment, not exceeding the sum of $90,000.
“Dated this 26thday of November, 1883.
“C. A. Jones. [seal.]
“F. N. Pierce. [seal.]
“C. F. Daily. [seal.]
“N. P. Seeley. [seal.]
“I. W. Chatfield. [seal.] “L. E. Tucker. ' [seal.]
“ Nelson Hallack. [seal.]
“ Conrad Hanson, [seal.]’
“ Chas. B. Wing. [seal.]
“ Eobert B. Estey. [seal.]
“ G-eo. H. Taylor.” [seal.]
There seems to have been no justification by, the sureties, or any of them, nor any indorsement on said bond éxpressive of the clerk’s approval thereof.
The writ of attachment was issued on November 27th, and was served the next day by delivering copies thereof to George R. Fisher as cashier, to George W. Trimble as receiver, and S. J. Warfield as a stockholder. Under the writ of attachment, divers persons were garnished as debtors of the said bank, and certain property was levied upon as the property of the defendant.
On the 28th day of November, George W. Trimble, as assignee and receiver of said bank, filed his motion to dissolve the attachment and discharge the garnishees thereunder, and release the property levied upon, for the following reasons:
“Now comes George W. Trimble, assignee and receiver of the said defendant, and named and proceeded against by the plaintiff as garnishee of said plaintiff, and as having in his possession property and assets belonging, by Thomas & Lyles and J. B. Bissell, his attorneys, appearing specially for the purposes of this motion, and moves that he be discharged as garnishee and as attachment debtor, and in all other respects and positions, and that all property levied on in his possession or standing in his name be relieved and discharged of such levy, and that the return of the sheriff as to such levy be wholly quashed and held for naught; and for reason of said motion tho following is alleged:
“First. The bond or undertaking, with the sureties thereon, has never been approved by the clerk of this court.
“ Second. ' The sureties on said undertaking have never qualified as required by section 414 of the code.
“ Third. The said Trimble is, and since the 25th day of July, A. D. 1883, has been, the assignee of the Bank of Leadville aforesaid, and in charge of its property and effects, real and personal.
“Fourth. The said Trimble has since the 26th day of July, 1883, been the receiver of the said Bank of Lead-ville, and as such has been in possession, and has been and is entitled to the charge and custody, of the property, effects and assets, real and personal, of the said Bank of Leadville.
“Fifth. The said property and effects, being so as aforesaid in the custody of the said Trimble, are not subject to levy by writ of attachment or by execution.
“ And in support of the third and fourth reasons assigned as hereinbefore, the affidavit of the said Trimble herewith filed is referred to.
“By J. B. Bissell,
“Thomas & Lyles,
“Attorneys for G. W. Trimble, specially appearing.”
This motion was supported by the affidavit of said Trimble, which was in words and figures following:
“Ohas. A. Jones, Plaintiff, ) vs. [• The Bank op Leadville, Defendant. )
“ George W. Trimble, first duly sworn on oath, deposes and says that he is the assignee of the Bank of Lead-ville, by virtue of a deed of assignment made and executed by the said Bank of Leadville on the 25th day of -, A. D. 1883, said deed of assignment being made by George R. Fisher, the cashier of said bank, pursuant to instructions of the board of directors to the end, at a meeting by them held for that purpose. That said deed of assignment transferred to this affiant, in trust for the benefit of the creditors of said Bank of Leadville, all and singular its property, real and' personal, and was duly-recorded in the office of the recorder of deeds of said county on the 26th day of July, 1883, in book 103, page 189, of the records of said county.
“This affiant further alleges that on, to wit, the 26th day of July, 1883, he was by the Hon. L. M. Goddard, judge of the district court, appointed receiver of all the estate, effects and property, both real and personal, of the said Bank of Leadville, of every description, wherever situate, and with full power and authority to collect or receive any and all sums due the said bank, and to collect and reduce to cash all the estate and assets of the said bank, and, in so far as the same might be sufficient to pay off, liquidate and discharge the indebtedness of the said Bank of Leadville. . And this affiant further alleges that he did file the bond required by the order of said court, and according to the statutes of the state of Colorado in that behalf provided, and did immediately, and on, to wit, the 26th day of July, 1883, as such assignee and receiver of said Bank of Leadville, take full and complete possession of all and singular the property, real and personal, of the said bank into his custody and possession, and the same has so remained in accordance with the limit expressed in the said deed of assignment and the said appointment of himself as receiver; and for the purpose of both, that on, to wit, the 28th day of November, A. D. 1883, the annexed copy of a writ of attachment and copy of the writ of garnishment were served upon him by the sheriff of Lake county, both entitled in this cause and marked exhibits “ A ” and “ B ” respectively, and that the said sheriff, in virtue of the same, has levied upon the real estate in the custody of this affiant, and the title to which is, by virtue of said assignment and receivership, in this affiant, and is ordered by the plaintiff and his attorneys to take possession of all and singular the personalty in the custody of this affiant as such receiver and assignee, and contrary to the terms of said deed of assignment and the said receivership.
“ That this affiant’s possession of said property, and all and singular thereof, was long prior to the beginning of this suit and to the making of said levy, and that unless the said plaintiff is restrained from making further levies upon said property, this affiant will be harassed and put to trouble and expense and his possession of said prop erty seriously interfered, with, to the detriment and disadvantage of the creditors of said Bank of Leadville, by means whereof the fund out of which their claims against the bank are to be satisfied in whole or in part will be materially diminished and reduced.
“And affiant further states that the said 0. A. Jones is not and has not been a judgment creditor of the said Bank of Leadville, either by virtue of any claim directly due him from said bank or by virtue of any claim which he holds as assignee or otherwise.
(Signed) “Geo. W. Trimble.
“Subscribed and sworn to before me this 28th,day of November, A. D. 1883.
“Charles A. Hinckley, “Notary Public Lake County, Colo.”
On the 16th of February, 1884, this motion was sustained by the court, the attachment quashed, the garnishees discharged and the property levied upon released. To which ruling Jones excepted, and afterwards, on the same day, judgment was given for plaintiff against the defendant bank for $45,242.50.
Plaintiff sued out a writ of error to review the judgment of the district court in dissolving the attachment.
Messrs. Taylor and Bickford, for plaintiff in error.
Messrs. J. B. Bissell and C. S. Thomas, for 'defendant in error.

Opinion:
Macon, C.
Of the eleven assignments of error, four challenge the judgment of the district court in dissolving the attachment, and seven the validity of the appointment of the receiver. Plaintiff in error contends that such appointment was void, and no control over the property of defendant ever vested in the receiver, and that the court in its action on the motion to dissolve the attachment went solely upon the ground that George W. Trimble was a legal receiver and that through him the property of the defendant bank was in custodia legis; while defendant in error as strenuously claims that the writ of attachment was void for want of sufficient and formal bond, and because the sureties thereon did not justify and the clerk did not approve the bond; and also that the appointment of the receiver was legal and valid and he was entitled to the possession of all property of the bank, and the issuance of the attachment was a contempt of court and void. Whether the attachment, because of the irregularities insisted upon by the defendant in error, was or was not voidable upon motion of the defendant, may be passed for the present, to inquire whether Trimble, in his assumed character of receiver, could be heard to object to the validity of the writ and bond. For if he could not, it was error to dissolve the attachment on his motion. If he was not a legal receiver, then he was a mere stranger to the suit and had no standing in court.
This brings us to the examination of the propriety and legality of his appointment as receiver, and requires a construction of the provisions of subdivisions 1 and 3, section 144 and section 145, Code of Civil Procedure. Subdivision 1 provides that a receiver may be appointed "before judgment, provisionally, on application of either party, when he establishes a prima facie right to the property, or to an interest in the property which is the subject of the action, and which is in possession of an adverse party, and the property or its rents and profits are in danger of being lost or materially injured or impaired."
Subdivision 3, that a receiver may be appointed " in such other cases as are in accordance with the practice of courts of equity jurisdiction." Section 145 provides that "the application for the appointment of a receiver shall be made by filing a petition at any time in the action in which a receiver is desired, setting forth the facts upon which the application is based, which petition shall be verified as complaints are required to be by this act. And the party opposing the appointment of a receiver shall do so by filing an answer to the petition verified as answers to complaints are required to be by this act."
If these provisions are anything more than a codification of the law and practice governing the appointment of receivers 'before this enactment, it is difficult to perceive where the difference lies; and to determine to what facts the court will apply this statute, we are compelled to look to the practice and law as it was heretofore.
Hitherto it has been the universally accepted opinion that courts have no jurisdiction to appoint a receiver except in a suit pending in which the receiver is desired — unless in cases of idiots, lunatics and infants, which, as Lord Hardwicke says in Ex parte Whitfield, 2 Atkins, 315, is "a particular jurisdiction." The doctrine is applied in Baker v. Backus, Adm'r, 32 Ill. 95; Davis v. Flagstaff Co. 2 Utah, 92; Hardy v. McClellan, 53 Miss. 507; Hugh v. McRea, Chase's Dec. 466; The French Bank Case, 53 Cal. 550; Kimball v. Goodburn, 32 Mich. 10; The People v. Jones, 33 id. 303; and High on Receivers, sec. 17, and cases cited in note. Our statute certainly contemplates the same thing. Its plain intent is that there shall be a controversy between two or more adverse parties moved in the court, involving some conflicting and hostile claims to property that is, at least in part, the subject-matter of the litigation. It is evident that in the mind of the legislature it was necessary to this jurisdiction that there should be some party in all these proceedings who was adverse to the defendant, and whose rights to certain property were to be protected and adjudicated. It is impossible by any process of reasoning to construe the statute so as to make it apply to any case in which an action (in the ordinary definition of the term) is not pending. To hold that courts of equity can entertain jurisdiction to appoint a receiver of property as the substantive ground and ultimate object and purpose of the suit, on the petition of the owner of the property to be controlled and protected, would be to make them the administrators of every estate where the owners thereof were incapable or unwilling to administer them themselves.
When Trimble was named by the court as receiver of defendant in error, no suit was pending against the bank; no one claimed to own or have any interest in the specific property of the bank except the bank itself; no one was before the court claiming the right to have the assets of the bank protected and preserved until he could establish a right thereto, adverse to that claimed by the bank; so far as is disclosed by the record, every one admitted the full and complete ownership of all the property claimed by the defendant in error to be in it. But apparently fearing suits and attachments, defendant asked the court to become the custodian of its effects and property, in fact its assignee for creditors. The court accepted the trust through Trimble as receiver. This it could not do. Such jurisdiction is not found in either the general powers of a court of equity, nor in the statute referred to. If, therefore, there is no other warrant for this action of the court, the appointment of Trimble as receiver was void, and he had no authority in the premises, and no right to be heard to object to the attachment proceedings in this case.
Defendant in error, however, claims that section 258 of the incorporation act is warrant for the appointment of this supposed receiver. This section is as follows: "If any corporation, or its authorized agent, shall do any act which shall subject it to a forfeiture of its charter or corporate powers, or shall allow any execution or decree of any court of record for a payment of money, after demand made by the officer, to be returned no property found, or to remain unsatisfied for ten days after such demand, or shall dissolve or cease doing business, leaving debts unpaid, suits in equity may be brought against all persons who were stockholders at the time or liable in any way for the debts of the corporation, by joining the corporation in such suit, and each stockholder may be required to pay such debts or liabilities to the extent of the unpaid portion of his stock; and courts of equity shall have full power, on good cause shown, to dissolve or close up the business of any corporation; to appoint a receiver therefor, who shall have authority, by the name of the receiver of such corporation (giving the name), to sue in all courts, and to do all the things necessary to close up its affairs as commanded by the decree of the court."
We are unable to see how this statute can be made to authorize this action. In it is found an extension of the ordinary jurisdiction of courts of equity, which it is well known have no inherent power to dissolve corporations, and never exercise such jurisdiction unless it has been conferred by statute. The first part of the section provides a remedy for creditors and specifies the contingencies upon which the remedies may be enforced, and then proceeds to give the jurisdiction alluded to. But this enlarged jurisdiction to dissolve corporations is to be exercised only for "good cause," and upon such dissolution a receiver may be appointed, if there is any good cause for one.
But what is good cause for dissolving a corporation? The statute is silent on this subject, and we must go to some other source of information for an answer to this inquiry. We do not find in our statute on corporations any specific grounds enumerated for a dissolution of a corporation. But it is unnecessary to go into that question here, for the district court did not dissolve, nor attempt to dissolve, the defendant corporation. The decree leaves the existence of the corporation untouched and intact, and makes the appointment of the supposed receiver the end and sole purpose of its decree. The position attempted to be maintained by defendant in error, that the appointment of a receiver is ipso facto and de jure a dissolution of the corporation, is utterly unsound. The appointment of a receiver does not dissolve a corporation either in law or fact. Taylor v. Columbian Ins. Co. 14 Allen, 353. Nor does the mere insolvency of a corporation, or placing it in insolvency under the statutes for that purpose, dissolve it. A. & A. Corp. sec. 770; Cohen v. B. P. N. M. Co. 10 Gray, 243.
If even it should be granted that the appointment of a receiver was a virtual dissolution of the corporation, we are brought back to the original proposition that such appointment must be made in a suit pending, and unless so made is without jurisdiction and void.
The case is not affected by the fact that defendant in error applied to the court for a decree for its own dissolution. It is seen that the court did not so decree, nor can the petition of defendant be treated as a surrender of its franchises and extinguishment of its corporate existence; because, from the facts as shown in the case, no one attempted to make the surrender except Geo. B. Fisher in his official capacity in the company as cashier.
The surrender of the franchises of a corporation .is not an official act, but to be effectual must be the act of the stockholders as such. A. & A. Corp. sec. 772; Smith v. Smith, 3 Desaus. 575. In this case it is said:
"Among the methods by which corporations may be dissolved, that of a surrender is enumerated in the law books, and doubtless when the whole body of the corporation choose to surrender its rights, it is at liberty to do so, and it will be valid; but a majority must concur who. have an interest or right; and officers of a corporation, or an integral portion of it, as we have before stated, are not the corporation; they have no right to make the surrender; and if they make the attempt by an act or declarations, it is an inefficient act; it is not obligatory on the corporation, which retains its full rights, existence and legal character."
The same doctrine is affirmed in N. O. & Jack. R'y Co. v. Harris, 27 Miss. 517, and Keen v. Johnson et al. 9 R. J. Eq. 401.
It nowhere appears in the record that any other member of the corporation- than Fisher proposed a dissolution of this corporation. If, however, every member of the defendant company had joined in the petition to the district judge in this case, he could not have granted the prayer thereof, for the obvious reason that neither has the chancellor nor a court of equity in this state any jurisdiction to accept the surrender of corporate franchises, and administer on the estate of such decedents. Such a jurisdiction would leave the courts of the country no time to attend to the other business for which they were created.
If there was any defect in the proceeding for the writ of attachment, such defect made the writ voidable only, and the order of the court should have allowed such amendments as would have cured the defects. The bond is, in our opinion, sufficient, and the failure to take the justification of the sureties was at most but a misprision of the clerk, which by rule upon him could .have been corrected. We do not think the omission of the clerk to indorse on the bond his approval was fatal. Civil Code, sec. 121.
The judgment should be reversed and the cause remanded, with directions to proceed in the case according to law.
Rising, 0., concurs; Stallcup, C., dissents.
Reversed.
For the reasons assigned in ihe opinion of Commissioner Macon the judgment is reversed and the cause remanded.