Court Opinion

ID: 8654381
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:14:24.745421+00
Date Added: 2024-06-11T16:56:38.271003
License: Public Domain

Hart, District Judge,
after stating the facts, delivered the opinion of the court.
The principal question to be decided in this case, is whether a special receiver, appointed as set forth above, can recover the statutory liability of a stockholder of an insolvent banking corporation above the amount due the corporation in payment of his stock. The decision of this court in the case of Steinke v. Loofbourow, 17 Utah 252, 54 Pac. Rep. 120, decided since the judgments for plaintiff were rendered in the cases at bar, goes far toward determining the question here involved. It was decided in that case that a general receiver of a banking corporation could not maintain suit against stockholders for their statutory liabilities. The only material difference between that case and the one at bar is that *262there tbe plaintiff was the general receiver of the bank and its assets, appointed at the suit of a stockholder; while here the plaintiff is a special receiver appointed at the suit of a judgment creditor in behalf of himself and all other creditors for the purpose of collecting the fund due upon the statutory liabilities of the shareholders. In the Steinke case, this court said: “There appears to be no necessity for thrusting the bank or its receiver between the creditors and the stockholders *' * * When it becomes necessary to resort to the individual liability of the stockholders above the amount of their stock, under a statute similar to the one quoted, the decided weight of authority is to the effect that the suit should be brought by the creditors, though there is a substantial conflict which cannot be reconciled; but we think the more reasonable and better rule is as we have stated it.”
In addition to the above mentioned case and the authorities there referred to, the following may be cited as sustaining the same rule: Cook, Stock. & S. Sec. 218; Zang v. Wyant, (Colo.) 56 Pac. 565; Thompson, Corp. Sec. 3560; Runner v. Higgins, (Ind.) 46 N. E. 580; Morse on Banks and Banking, Sec. 696 (3d ed.)
Since this court has chosen to adopt the rule that the creditors and not the general receiver of the insolvent company are the proper parties to collect the statutory liabilities of the stockholders, we do not' think it would be wise to fritter away the rule by making exceptions based upon finely drawn distinctions as to the name by which the receiver is called, the form of the order appointing him, or whether he is appointed in a suit brought by the creditor' or the stockholder. To adopt such distinction would be to add perplexing uncertainties to a rule which should remain fixed and absolute unless changed by the legislature. There is no case cited to this point by counsel that is not *263squarely met by the decision of this court above referred to. It is urged that a distinction should be made where a receiver is appointed in a creditor’s suit, and not in a suit brought by one of the stockholders. We do not think it would be either logical or expedient to make such a distinction.
The principal reason why the courts have not permitted receivers of insolvent corporations to recover the statutory liabilities of stockholders, over and above the amount due the corporation as assessments on their stock is, that this additional statutory liability of stockholders is not an asset of the corporation which the receiver is authorized to take into his possession, but belongs to creditors in the event that their claims cannot be paid out of the corporate assets. But even this obvious truth, that the statutory liability is not a corporate asset, is disregarded in such cases as Wilson v. Book (Wash.) 43 Pac. 959; Watterson v. Masterson, (Wash.) 46 Pac. 1041; and Cushing v. Perot, 175 Pa. St. 66. The doctrine of these cases this court has declined to adopt. The fact that the general receiver is appointed in a suit brought by a creditor and not a stockholder should be considered a mere incident. The receiver stands in the same representative capacity in the one case as in the other. If appointed at the suit of a creditor, to collect and take possession of the corporate assets, he represents all the parties interested — the creditors, stockholders and the corporation. If appointed in a suit by the stockholders to wind up the affairs of the corporation, he likewise represents the same parties.
The case of State v. Union Stock Co., (Iowa) 70 N. W. Rep. 752, is decided upon the statute of that state, and also upon what appears to be a misapprehension of the case of Story v. Furman, 25 N. Y. 214. That the latter case was decided under a special act of that state *264passed in 1852 for the dissolution of a corporation organized under the law of 1811 is clear from the decision itself. That the case is so understood in the jurisdiction rendering the same is shown in Farnsworth v. Wood, 91 N. Y. 303. Although the case of Story v. Furman is beyond all question decided by reason of the statute, there are certain obiter dicta in the case which have sometimes been quoted and relied upon as though an essential part of that case.
Admitting that it would be a convenient and desirable remedy for the receiver of a corporation to collect for the creditors their dues from the stockholders, the relief is to be sought at the hands of the legislature and not the court.
In the case at bar, a general receiver is appointed at the suit of a creditor. The same creditor, after reducing his claim to judgment, brings suit against the corporation represented by the receiver he has had appointed seeking nothing against the corporation, the relief sought being against the stockholders. The stockholders are not made parties to the suit except as they are represented through the receiver. The creditors are only parties to the suit by the same being brought by one creditor in .behalf of all. No time is given either to the other creditors or to the stockholders to come in and directly participate in the proceedings for the appointment of the special receiver, but on the same daj*- that the suit is filed the general receiver consents to the. appointment of himself as the special receiver, and then as special receiver he brings the suit at bar. There was no judicial determination of who were the creditors, the amounts of their claims, nor of the exact amount due the creditors after exhausting the assets of the corporation. The recital in the order appointing the general receiver that there will be a deficiency in the payment of the corporate indebtedness exceeding $50,000.00. *265the amount of the capital stock of the corporation, must be considered purely as an ex parte order. If a special receiver appointed under such circumstances should be allowed to sue in behalf of the creditors for the statutory liabilities of stockholders, why would not a special receiver, appointed in the first suit by the creditors against the corporation, have the same powers ? If so, and it is difficult to see how any material distinction can be made between the two instances, then the question would have to turn upon the particular powers that the court purported to confer upon the receiver in its order appointing him.
If the court has the power to confer such special power upon the receiver, why not confer them upon the general receiver at the time of his appointment, and direct him to sue stockholders on their statutory liabilities in the event that the corporate assets are insufficient to pay the corporate creditors ? The remedy sought in this case would be a convenient one, no doubt, if the statute had authorized it, as the statutes in some states have done; but if the receiver has no such authority under the law by virtue of his office as receiver, as this court has determined, what authority has the court to confer this power upon him ? There is no fund in the possession of the court which this special receiver is to take charge of, neither is he to collect assets belonging to the corporation, the general receiver having been appointed for that surpose'.' Section 3114 of Revised Statutes of Utah, 1898, subdivision 6 enacts: “A receiver may be appointed by the court in which an action is pending or has passed to judgment, or by the judge thereof * * * (6). In all other cases where receivers have been appointed by the usages of courts of equity.” Is it the usage of courts of equity to appoint a receiver under such circumstances and with such powers as in this *266case ? If so, no such case has been called to the attention of the court. Simply because there are a large number of persons each having a claim against one or more persons, should the court in the absence of a statute, on motion of one or more persons having a claim, appoint a receiver to bring suit as such in behalf of all the creditors? If so, there would be scarcely any limit to which the courts would not be burdened in doing for individuals what they should do for themselves.
A receiver is but “the hand of the court.” Unless the necessities of the occasion require, individuals and not the officers of the court should bear the responsibility of litigating their own claims. If a receiver should be appointed in such a case, where can the line be drawn, unless drawn by the statute ? If several creditors are entitled to a receiver to collect their dues from several stockholders, a receiver could be appointed in any other cause where several plaintiffs are seeking recovery against several defendants. While perhaps not quite so convenient a remedy, the creditor has means of complete relief in a creditor’s suit against the stockholders. This is the relief pointed out in the decision of - this court heretofore referred to, and is the remedy that would have doubtless been followed had not these proceedings been instituted and trial had before the decision rendered in the causes referred to.
It is ordered that these causes respectively be remanded to the trial court with instructions to dismiss the same at the costs of the respondent.
Baskin, J., and McCarty, District Judge, concur.