Court Opinion

ID: 9299439
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:06:00.848233+00
Date Added: 2024-06-11T17:13:37.681995
License: Public Domain

McKENNAN, Circuit Judge.
The first assignment of error relates to the admission in evidence of a record of proceedings in bankruptcy in the district court for the Northern district of Illinois, against the Republic Insurance Company of Chicago, as assignee of which the defendant in error brought this suit. It was objected to on the ground that it does not purport to be a copy of the whole record, but it was admitted to show, 1st, an assignment to the plaintiff below, and 2d, an assessment by the authority of the bankrupt court upon the stock of the bankrupt company to pay losses. There can be no doubt of the admissibility of this record to show the assignment, because the 14th section of the bankrupt act [of 1867 (14 Stat. 522)] expressly provides, that a copy thereof, duly certified by the clerk of the court, under the seal thereof, shall be conclusive evidence of the assignee’s title to sue for the bankrupt’s property. But was it properly admitted for the additional purpose for which it was offered? The bankrupt act, while it enacts that the proceedings in all cases in bankruptcy shall be deemed matter of record does not treat these proceedings as constituting an integral record, for it declares that they shall not be recorded at large, but shall be filed, kept, and numbered, in the office of the clerk of the court, and copies of such record, duly certified by that office, under the seal of the court, are made presumptive evidence of all the facts therein stated. It would therefore, seem to be the intent of the act, that in so far as any of these proceedings might be used as evidence, copies of them are to be authenticated as separate records, and so are competent presumptive evidence of the facts stated in them. The certificate of the clerk of the court authenticates the copies of the papers and proceedings contained in the record “as true copies of all the papers filed, proceedings had, and record and docket entries made in said case, and of the whole thereof, in any way relating to an assessment upon the stockholders of said company,” etc. It is an exemplification of all “matters of record” touching the assessment, and, as such, was properly admitted to show that fact.
The second assignment is founded upon the rejection of the offer to prove, by the plaintiff in error, certain representations made by the agent of the insurance company to him, when he made his subscription of stock, touching the establishment of a branch in Philadelphia, of which the subscriptions made there were to be the capital which was to be under the control of a local board of directors, and was to be set apart for losses in Philadelphia risks, accompanied by further proof that this local office had been withdrawn, and the assurances given had not been fulfilled. While it did not appear that any loss or injury whatever could result to the plaintiff in error from the partial non-fulfillment of these representations, it is at least questionable whether such evidence could have the effect of relieving the plaintiff in error from the payment of any part of his subscription. But in this suit it is altogether unavailable to him. Like a creditor’s bill in equity, this suit is a proceeding by the constituted representative of a bankrupt corporation to collect its assets, that they may be applied to the payment of its debts. The plaintiff in error is a subscriber to its stock, of which subscription he has paid only twenty per cent. The remaining eighty per cent, is part of the assets of the corporation, indispensably required for the payment of its debts, and its creditors may lawfully insist that it shall be so appropriated. Now, it is plain that the plaintiff in error cannot gainsay this right of the creditors, unless he can show such an equity as would entitle him to a preference over them, if he had paid up his stock subscription in full. But he took and held a certificate for the full amount of the stock subscribed for by him, and received dividends upon it, and upon the basis of his subscription and that of others, the company was enabled to create its indebtedness. Surely, as against those who became creditors of the corporation upon the faith and security of its stock subscriptions, *261his equity is subordinate and unavailing, and was rightly so treated by the court below.
The only remaining question which requires notice, relates to the legal sufficiency of the assessment upon the stockholders, which this suit was brought to recover By virtue of the adjudication of bankruptcy and the appointment of an assignee, not only was the control of the bankrupt corporation over its assets, of every kind, superseded, but complete domain over them was conferred upon the assignee. He alone can sue for and recover them, and whatever rights the bankrupt had in reference to their collection, he can claim and enforce. He is also the representative of the creditors, for they can make the assets of their debtor available only through his agency. As Mr. Justice Dillon has well said: “However it might have been before, creditors cannot, since the supervention of bankruptcy, bring bills in equity or other actions in their own names directly against the stockholders, to enforce their liability with respect to their unpaid stock.” It was one of the unquestionable faculties of the bankrupt corporation to assess ratably upon its unpaid stock a sum sufficient to pay its debts, and the exercise of this power the creditors might have compelled. But by the proceedings in bankruptcy, the power of the directors and the direct remedies of the creditors, in reference to the assets of the corporation, were superseded, and the assignee was constituted the representative of both these interests. In the exercise of all his functions in this twofold character, he is subject to the control and direction of the court in which the bankruptcy proceedings were instituted. It has exclusive jurisdiction of the administration of the bankrupt’s assets, and of their distribution among creditors. Any adjudication which it may make in the exercise of this jurisdiction is unquestionable in a collateral proceeding in another forum. The assessment in question was directed and sanctioned by the court, which has authority so to adjudge, and for any excess-in it redress must be sought in that tribunal. The record then shows a valid assessment upon the stockholders of the bankrupt, and the instruction given to the jury, in reference to it and to the right of the plaintiff below to recover, was correct.
The judgment is therefore affirmed.