Young v. . Rollins ( 1881 )

By virtue of the act of the general assembly passed on March 13th, 1879, the corporate existence of the Western Division of the Western North Carolina railroad was terminated, and its property and effects vested in the Western North Carolina railroad company, of which it was the offshoot, to be collected and administered in trust for the benefit of the creditors and stockholders. The validity of the enactment and its force and operation were declared in the action brought by the legislative representative appointee against the late president of the defunct organization on an appeal from the judgment of the superior court of Buncombe, rendered at fall term, 1879, heard and determined at January term following by this court. W. N.C. R. R. Co. v. Rollins, 82 N.C. 523.

While the cause was pending in the court on February 10, 1880, the present suit was commenced by summons against the several directors, by name, of the said Western Division, the Western Division itself (as a still existing corporation,) and the said Western North Carolina railroad company, issuing from the same superior court, on behalf of the plaintiff and other stockholders, for the purpose of withdrawing the funds of the said Western Division from the said directors, and placing them for the greater security under the control and management of a receiver, in order to their ultimate disposition among the parties entitled thereto. On the same day a preliminary motion for the appointment of a receiver and an injunction was made, which after successive postponements protected by a temporary restraining order, during which the cause was removed to McDowell, was heard at Chambers on June 15th, and allowed, an injunction directed to operate until the hearing, and Benjamin Long designated as receiver to take charge of and manage the property of the extinct corporation. From this interlocutory judgment the defendants appeal. In the mean time G. M. Roberts, an alleged judgment creditor on March 31st, 1880, also brings suit against the said Western Division for the like purpose of securing its assets by the appointment of receivers, the summons issued in which is returnable to fall term of Buncombe superior court, and was served on the next day on W. W. Rollins, its late president. The complaint put in on April 5th, was followed immediately by an answer in the name of the said Western Division, filed by him and signed by C. M. McLoud, attorney, both director and defendants in the preceding suit, and on the 9th of that month an interlocutory order was made by the judge appointing those two directors receivers with the usual and necessary powers for the effectual discharge of the duties of their offices, upon their entering into the bond with surety which has been give. The general assembly by another act passed March 29th, 1880, appointed commissioners on behalf of the state in and to the railway, stock, property and franchises of the Western North Carolina railroad company," on certain terms and conditions therein set out, to certain persons named as grantees, who on compliance therewith were required to form and "reorganize the company as a new corporation by the name of the Western North Carolina railroad company, the details whereof are specified and set out in the act, and the holders of private stock in the former were to be allowed a pro rata share of the capital stock in the new and substituted corporation. This enactment has been accepted and its provisions were carried into effect by the formation and organization of the new company without dissent from the private stockholders, as appears from the evidence of S. McD. Tate, previous to the making the order and appointment now under review.

With this brief narrative of the material facts, it is quite unnecessary to look into the voluminous testimony and exhibits, accompanying the transcript, for the purpose of ascertaining the past management of the affairs of the Western Division, since its extinction puts an end to the function of its board of directors and other officers, and renders imperative the duty of providing a proper person to take possession of the resources and to manage then in the interest of creditors and stockholders, and this is done in the act dissolving the corporation.

But the effect of subsequent legislation is also to destroy the administering corporation itself, by its absorption with all its property, effects and franchises into the successor company of the same name, formed under the act, and the consequent extinction of the corporate life of the former.

So then at the time when the order under consideration was made, there was no receiver or representative in existence, and it was both necessary and proper that one should be appointed.

We thus meet the question of the effect of the prior action of the court in making the appointments for a similar purpose in the subsequent suit brought by Roberts, upon the power of the court to make the order in the present case. We have no hesitancy in declaring it inoperative to affect the present proceedings and for reasons we shall briefly assign.

1. The order was ex parte, the corporation defendant having ceased to exist, and no one being competent to act in its behalf and represent it.

2. The living trustee, the Western North Carolina railroad company in whom the rights of the Western Division were then vested, was not a partyand yet a necessary party at the attempted action.

3. The prior jurisdiction over the subject matter acquired by the preset action and the pending and undecided motion for an injunction and a receiver, exclude the interference of the court in another, and especially at the instance of one who is competent to become a party in the first and to obtain adequate redress in that. The authorities are decisive on the point, and the conflicts and perplexities attending the prosecution of several actions having the same object in view, are an ample vindication of the principle.Childs v. , Martin, 69 N.C. 126; Haywood v. Haywood, 79 N.C. 42.

4. The receivers attempted to be appointed are defendants in this case, and will not be allowed to frustrate and defeat the present action of the court.

Without recurring to the unseemly haste with which the suit of Roberts is instituted and prosecuted without showing the defence of the previous acquired jurisdiction, and the inferences which might be thence drawn of collusion, it is sufficient to say it cannot be allowed to impair the full exrcise [exercise] of that jurisdiction or affect the legal proceedings thereunder.

I. An objection appearing on the record is interposed by the defendants to the competency of the two officers before whom, in the District of Columbia, on two separate occasions, the verification of the complaint is made by the plaintiff, to administer the oath and to the sufficiency in form of the verification of the plaintiff's attorney before the judge who entertained the motion. The plaintiffs swear to the truth of the allegations contained in the compliant, used as an affidavit to support them, put in on February 7th, 1880, before a notary public, and then on March 19th, following, before a duly appointed commissioner of the state for the district. It is supported by the oath of his attorney before the presiding judge on February 11th, and again more fully on 16th of that month.

Without pausing to inquire whether the same strictness in the form of verifications required in an affidavit to be used in obtaining some ancillary protection or relief in the progress of the cause, which may or may not be met by opposing evidence at the will of the other party, as in a complaint which entitles the plaintiff to a discovery of the facts charged, which are known to the defendant, or on information believed to exist, (and the written statement here, though in form a compliant, is in legal contemplation an affidavit only for the purposes it is intended to subserve in obtaining the order) we are of opinion that the oath before the state commissioner is fully sufficient, authenticated as it is with his official signature and seal. Bat. Rev., ch. 20 § 3; Page v. Price, 78 N.C. 10. Hence it is needless to consider the affidavits of the attorney.

II. The defendants also except to the admission of further proofs additional to the affidavit offered in support of the motion, in response to the numerous proofs and exhibits introduced by themselves in opposition to the motion. We do not see the force of the objection, nor any just reason for excluding what the plaintiff proposed to show in rebuttal, upon an inquiry in which the acts material to the judgment ought to be fully developed and understood, under the exercise of a sound discretion in the premises, and in order that His Honor may be thus intelligently advised and enabled to act upon the whole case presented by both parties, and this is consistent with the practice under the Code.

III. It is also insisted that the plaintiff is not a stockholder by virtue of the assignments of shares, until the transfer is made upon the corporation books, and has no status on which, as such assignee, to prosecute the suit. We shall not enter into a discussion of the question raised by this exception, whether such assignment, previous to and without a transfer by the surrender of the old and the issue of a new certificate (a mode necessary to enable a corporation to know who are its share-holders, and may participate, as such, in its management) does not vest in the assignee, as between the assignor and himself, an interest which will be recognized and protected in the exercise of its equitable jurisdiction by the court, since the law is well settled by authority and numerous adjudication. 1 Potter Corp., 342, 260; Angell and Ames Corp., 564, 565; Thomp. Liab. Stock., § 217; Duke v. Catawba Nav. Co., 10 Ala. (N.S.). 82; Johnson v. Underhill, 52 N.Y. (Ct. Appeals), 203; Bank v.Bank, Cir. Ct. U.S., decided May, 1881; Dickinson v. Bank, 129 Mass. 279.

We have felt some difficulty in sustaining the judgment on account of the absence of the present Western North Carolina railroad company, as a party to the cause, since the assets of the Western Division, or some of them, may have been recovered by the legislative appointee during its subsequent life, and thence passed to the successor corporation, and an order may become necessary for the surrender of such to the receiver.

But as it does not appear that any assets were recovered and reduced to possession under the judgment in the case first referred to in the opinion, and no suggestion to this import is made, we assume, in determining this appeal that the assets remain with the late directors and other officers, who are defendants, and the order can thus reach them and be made effectual without the presence of the new corporation in the record.

The judgment below must therefore be affirmed, there being no error in the ruling. This will be certified for further proceedings in the court below.

No error. Affirmed.