Court Opinion

ID: 8756598
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:49:12.724724+00
Date Added: 2024-06-11T17:01:17.420088
License: Public Domain

GROSSCUP, Circuit Judge,
after stating the facts, delivered the opinion:
The bill and answer taken together, show that the moneys received from the Kewanee Company went into a personal joint venture of Laughlin and appellee. Independently of the other facts shown, this would entitle the Kewanee Company to recover in an action at law from Laughlin or appellee, severally, as it might choose. Such was the purpose of the action enjoined by the interlocutory decree.
It is contended, however, by appellee, that such action was rightfully enjoined because (a) All the stock of the Kewanee Company, except that held by Laughlin, has been surrendered, thus making Laughlin the sole owner of the company; wherefore appellee ought to be permitted to set up his equitable set off against Laughlin. (b) That the money taken from the Kewanee Company, was to pay for the Kewanee Company’s indebtedness to Laughlin, wherefore it was Laughlin’s money, and the appellee does not owe the Kewanee Company. And (c) at the time of the transaction, the Kewanee Company owed Laughlin fifteen thousand dollars; wherefore, Laughlin equitably owing appellee his proportion of the money advanced for the mining venture, appellee ought to be permitted, equitably, to set off such proportion against the Kewanee Company’s claim.
The difficulty with the first contention—that Laughlin is now the owner of all stock of the Kewanee Company, wherefore appellee should be permitted to equitably set off his claim against Laughlin—is, that while the bill simply charges that the books and records of the company show that the stock, other than that held by Laughlin, has been marked “surrendered,” the answer avers that such surrender was simply a turning in of the stock for the purpose of endorsing, upon the certificates thereof, the distributive dividends which had been made from time to time to the shareholders out of the assets of the company. These averments, taken together, show no transfer of title either legal or equitable, or of the beneficial interest, from the other shareholders to Laughlin.
The second contention—that the money involved in the suit was taken by Laughlin to pay the Kewanee Company’s indebtedness to him—reduces itself to this: That the Kewanee Company has, in fact, no title to the money on which the action at law was based. But this is a defense clearly available to appellee in the action at law.
The third defense—that the Kewanee Company is in fact indebted to Laughlin, wherefore appellee should be permitted to set off Laughlin’s equitable liability on the moneys advanced against this indebtedness—necessarily rests on this proposition: That a defendant in an action at law, severally liable with another not made a defendant for the moneys had and received from the plaintiff, may show that the other defendant has a complete set-off against the claim, thereby defeating the action, and leaving it to defendants to settle between them*62selves, and according to their own equities, the accounts. But this implies, first, that before the Kewanee Cpmpany can enforce its plain demand against one of its several debtors, it must litigate the state of the accounts between it and another debtor—one not insolvent. Also that the creditor must wait until the state of account between the several debtors be adjusted; otherwise the extent of the set off could not be determined. This, of course, cannot be. Whatever may be the equities between appellee and Taughlin, and whatever may be the right of appellee to brush aside the corporate entity behind which Laughlin is an individual owner, the rights of the other stockholders holding five-seventeenths of the stock cannot be thus hindered, delayed and jeopardized. Their right is, that the corporation shall recover what is due to it; and from either of the persons who severally owe the debt; and that such recovery shall be without entanglement, on account of the personal affairs of some other stockholder with the debtor sued. That appellee might, upon a proper showing, acquire through a court of equity, a hold upon the proportion of the judgment going to Taughlin, is not denied; but the case under consideration does not involve that situation, or that character of equitable remedy.
The interlocutory decree was, in our judgment, improvidently entered, and is reversed.