Court Opinion

ID: 6238243
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:37:49.807637+00
Date Added: 2024-06-11T08:58:06.923104
License: Public Domain

Mr. Justice Paxson
delivered the opinion of the court, January 4th, 1886.
There are three suits pending against the defendants. The first in point of time is a bill in equity, in Common Pleas No. 2, of Allegheny County, No. 304, of July Term, 1884. This bill was filed by numerous creditors of the Penn Bank for themselves, and any other creditors of said Penn Bank who may join therein. The second is also a bill in equity filed in said Court, No. 370, of July Term, 1884. In this suit Henry Warner, assignee of said bank, is joined as a defendant. The third and last suit was an action at law, brought in the name of the Penn Bank to the use of Henry Warner, its assignee. To the plaintiff’s declaration in the latter suit the defendants pleaded specially in abatement, the pendency of the two prior equity suits, to which plea the plaintiffs demurred. The Court below, after argument, gave judgment on the demurrer in favor of the defendants, and that “plaintiff’s writ abate and be quashed.” It was to review this ruling that this writ of error was sued out.
The demurrer admits, and the fact is not denied, that the three suits are substantially for the same cause of action. Can they all be sustained and prosecuted at the same time ? The obvious test of this is to consider the effect of a final decree in the equity suit.. I say suit, because although two bills have been filed, they must eventually be consolidated and treated as one. Each bill is filed by creditors for themselves, and all other creditors who may join therein: the cause of action is the alleged negligence of the defendants as directors of the bank in not properly conducting its business and preserving its assets. The acts charged affects all the creditors alike. For such- a cause a single creditor could not maintain a suit at law. The remedy of the stockholders must be in a form to protect the interests of the corporation as the trustee for all the stockholders and the creditors: Craig v. Gregg, 2 Norris, 19. And by analogy, I apprehend a bill would not lie by a single creditor unless some special damage not common to other creditors was averred. The reason is that if each individual creditor could maintain his action, the directors might be bankrupted and nothing left for, the general creditors. The bills filed may be regarded as bills by and for the corporation: Chambers v. Waterman, 1 Legal Gaz. R., 60. The alleged acts of negligence complained of, were a wrong and injury to the corporation by means of which the creditors have been injured, and separate bills cannot be- sustained on behalf of creditors any more than by the corporation directly.
Had the creditors the right to file a bill? Of this we entertain no doubt. It was held in Watt’s Appeal, 28 P. F. S., *333370, that the shareholders are entitled to proceed by bill against the directors of a corporation for mismanagement of its affairs: Citing Spering’s Appeal, 21 P. F. S., 24, and Gavenstine’s Appeal, 13 Wr., 310. It is settled by numerous cases that the creditors have the same right. That the shareholders are not joined in this bill as complainants is of no moment. The corporation is hopelessly insolvent, and there will be nothing left for them in any event.
It was urged, however, that the liability of the directors is to the corporation, or its assignee ; that the latter having commenced a suit in the name of the corporation, he is entitled to proceed notwithstanding the equity suits. In other words, that the prior suits must abate, for this is precisely what it comes to. The suits cannot all go on to final judgment or decree, else the defendants might have three judgments against them for the same cause of action. This cannot be allowed. It may be that had the assignee been first in point of time with his suit, such suit could have been pleadable in abatement or suspension of the equity suits. But he did not do so. He neglected or delayed to bring his suit until after the bills hacl been filed. To one of these bills he has been made a defendant. The process and practice in equity is so pliable, that under the bill complete justice may be done. It is wholly immaterial whether he is a plaintiff or a defendant. He can change his position and become a plaintiff, an actor, and as such may press the bill although all the other plaintiffs should abandon it. It is said, however, that the assignee is thus compelled to ligitate in a forum not of his own choosing. But' it seems to have been overlooked that the same may be said with far more force as regards the creditors. The assignee is but a trustee, selected by the very men whose sins of commission or omission are the subject of this investigation. What superior equity has the assignee to select his forum over the heads of his cestuis que trustent who are the creditors, vitally interested in the proceeding? I cannot do better than to introduce here the remarks of the late Chief Justice Shabswood, in the case of Maish v. The Savings Fund, while President Judge of the District Court of Philadelphia: “As to the second objection, that the liability of the officers and directors is to the corporation or its assignee. No doubt the right to sue at law is in these parties. But then they are but trustees, and it seems plain that if the corporation is so constituted, as is this one, that the corporators or a majority of them are the very defendants, the cestuis que trustent may come immediately into court. A proceeding in equity is a very pliable process, and provided all the necessary parties are -before the Court, so that the decree may be binding upon all, it matters *334little whether they appear as complainants or defendants. Nothing is better settled, for example, that if an executor or administrator refuse to collect an outstanding debt or fund belonging to the estate, the creditors, legatees, or distributees may bring their bill against the person by whom such debt is due, making the delinquent trustee a defendant also: Lancaster v. Evors, 4 Beavan, 158. So a residuary legatee of a deceased member of a partnership, in a bill against the executors for an account, may join the surviving partners as parties defendant, in order to have a full account of all the personal assets taken at the same time, and that, says one case, even without any charge or proof of collusion : Bowsher v. Watkins, 1 Russ & Mylne, 277; though that is denied in a later case: Davies v. Davies, 2 Keen, 534. But surely no.charge of collusion between the corporation and the other defendants is necessary when the other defendants are the very corporators themselves. If, then, the corporation need not be plaintiff, how does their voluntary assignee stand in a better place? It would be to allow the defaulting corporators •to choose the hand which is to administer to them the chastisement they have incurred ; and however satisfactory might be the security given by the assignee, there would be a great difference in the mode in which the suit would be prosecuted in the hands of a friend, or in the hands of the defrauded eestuis que trustent.’"
It is said, however, that when the right of action is in the corporation or its assignee, a bill will not lie by creditors until after a demand upon, and a refusal by,the corporation to proceed, and that such demand and refusal must be averred in the bill.
This is true where the right of action is exclusively in the corporation, and where there has been neither neglect nor refusal to bring suit. Thus, where a corporation has neglected to call in instalments of stock, I apprehend a creditor’s bill would not lie to compel payment thereof until after a demand upon the corporation to call in and collect the same, and its refusal to do so. It seems equally clear both upon reason and authority that where the wrong complained of was perpetrated by the managers of the corporation themselves, the creditors may come immediately into Court with their bill: Morawetz on Private Corporations, § 386, and cases there cited. Why ask a board of directors to commence a suit against themselves? And if they should comply with such request, what confidenqe would the creditors have that it would be prosecuted with effect? The fact of the existence of a voluntary assignee does not change the rule. He stands upon the foot of his assignors, is selected by them, and may be pre*335snmed. to be a friendly assignee. We have no reason to sup pose that the assignee of the Penn Bank would not do his full duty, but we are speaking of general principles, not particular persons. He might have brought a suit before the bill was filed, but did not. The creditors had a right to file their bill; it covers the same ground as the suit at law, and we are of opinion that a decree under it would conclude all parties, and be a bar to any proceedings at law.
It remains to notice one or two technical matters. It is alleged, (1) That the plea is double; and (2) That the parties are not the same. The pleadings in this case do not indicate the highest degree of skill, and in this respect we do not think either side has much advantage over the other. If the plea was open to the objection of being double it might have been stricken off upon application made at the proper time: Pittsburgh & Conn. R. R. Co. v. Mt. Pleasant R. R. Co., 26 P. F. S., 481; Steph. on Pleading, 276. We are not disposed to rule the case at this stage upon grounds so purely formal. Nor is there any merit in the point that the parties are not the same. They are substantially the same. Each is an action by or for the corporation for the benefit of all its creditors, against the same defendants.
Judgment affirmed.