Court Opinion

ID: 9298667
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:05:10.184057+00
Date Added: 2024-06-11T17:13:35.745692
License: Public Domain

OADWALADER, District Judge.
Assuming the truth of the affirmative and negative allegations of the complainants, the relief to which they are entitled, in the proper court or courts, on behalf of thenlselves and the other creditors of the Northern Pacific Railroad Company, may be considered as twofold. There should be primarily a decree compelling this railroad company to make the necessary and proper assessments upon-the stock, and preventing the misuse by shareholders of any Active certificates which-indicate that stock has been fully, paid for. The secondary relief should be to compel the making and allowance of proof in the bankruptcy, of the amount primarily ascertained as due for the assessment on the shares of the stock which were held by the bankrupts. The twofold purpose may be attainable in *322two successive proceedings; the first, a suit in equity in the proper court of the state of New York, against the railroad company; the second, a suit by bill or petition in this court, or in the court of bankruptcy. The decree in such former suit may include an order to prove in the bankruptcy, or may simply make or direct the assessment.
If the railrodd company could be compulsorily made a party defendant in this court, the twofold relief might be attainable here,in two successive stages of one and the same suit in equity. But. the order of priority of the two stages could not properly be inverted. It is true, that under proper proceedings in equity, at the suit of a creditor of a corporation against stockholders, the circuity of compelling a formal preliminary assessment by the corporation upon the stock of every delinquent stockholder is not always necessary. In some cases the assessment may be made by the court. In other cases of simple ascertained right, where questions of contribution do not arise, or where they can be safely left open for subsequent adjustment among the proper parties, the form of an assessment may even be wholly dispensed wilh. In special cases a creditor may thus obtain direct relief. But in all such cases the corporation should be made a party.
In the present case, the railroad company would certainly not be a merely formal or nominal party. What amount of assessment upon the stock is necessary and proper may not be a simple question. If the answer to it were otherwise obvious, the subject may perhaps be complicated with inquiries whether certain bondholders are not themselves defaulting stockholders. The documents which have been exhibited with the affidavits may also suggest inquiries affecting the consideration of mortgage bonds. Whether delinquent stockholders are to any extent liable personally in addition to the forfeiture of their shares, which is provided for in the 10th section of the company’s charter, appears, moreover, to be a contestable question. Such a question may arise in either the primary or the secondary stage of litigation.
■ Now, the railroad company is not suable in this court, either under the 11th section of the judiciary act of 17S9 [1 Stat. 78], or under the 2d section of the bankrupt act of 18G7 [14 Stat. 517]; and if jurisdiction were otherwise exercisable here, the company could not be served with the process of the court. Therefore, the court has no proper cognizance of the primary subject. But the ulterior subject is peculiarly cognizable here; that is to say, after the debt for the assessment shall have been ascertained, by the decree of the court of competent jurisdiction, the debt will be provable in the court of bankruptcy. Whether the decree in the other court had or had not expressly ordered the corporation to make the proof of bankruptcy, might then be unimportant. This court would, I think, allow it to be made in the name of the corporation by any party interested. This would, in such ulterior stage of litigation, be very different from originally adjudicating the question here as between the corporation and the stockholders. The two subjects have been confounded indiscriminately in the argument for the complainants.
The court having, however, this prospective jurisdiction, the present question is -whether the complainants ought not to be allowed a reasonable time to obtain the decision of a court of competent jurisdiction establishing the primary right. If time should be thus allowed, it would seem to follow that an estimated ratable portion of the estate in bankruptcy ought to be set apart for the prospective dividend. If this ought to be done, there should be an injunction temporarily restraining the defendant from distributing more than the residue of the estate. Such an injunction would have been grantable under proper proceedings, instituted seasonably on the part of these bondholders. But the present application is unreasonably late. This might not prevent an injunction if the right of the creditors of the railroad company was clearly ascertained to any amount which could be provisionally liquidated now. But this, we have seen, is not the case. The point for decision, therefore, is whether, after the extraordinary and unexplained delay which has already occurred under this bankruptcy, any time can be reasonably allowed for the institution and prosecution of the primary judicial proceedings at the suit of these complainants in another jurisdiction. They may, perhaps truly, say that the other creditors have not done anything to expedite a dividend, and have not objected to past delay. This observation does not appear to me to furnish a reason for sanctioning further delay. It is said that the trustee is now ready and willing to take the responsibility of making a dividend without a judicial order on the subject. If so, this court may not be able to assist him; but it will not impede him at this late day.
It has been suggested, that although the general injunction asked for should be refused, the court may nevertheless restrain distribution as to the mortgage bonds of the estate in bankruptcy, and as to the shares of stock. So far as tne facts have been developed, there appears to be no reason for discriminating, in favor of the present complainants, between the mortgage bonds of the estate and any other assets. To the full extent of all that has been thus far stated, my opinion was definitely expressed at the close of the argument of counsel some days ago.
A single question has been since held under' advisement. This question is, whether to restrain the disposal by tne defendant of the shares of stock in the railroad company which are subjects of his trust? Upon re*323flection, I think he should be temporarily prohibited from disposing of the stock. The railroad company will, if any payments be hereafter assessed upon the shares, have a security upon them under the ICth section of the charter; and, whether this will prove to be the only security for the assessments or not, it should be retained for the present, at least. But no other interlocutory relief can be granted.