Eames v. Doris

1. Stockholders—remedy to enforce their liability—whether at law or in equity. It has been held by this court that an action at law by a single creditor will lie against any stockholder of an insolvent corporation, to enforce an individual liability created by its charter;—but these rulings are not to be taken as a denial of the right to seek relief in a court of equity when there are equitable grounds therefor. The right to sue at law does not necessarily exclude the jurisdiction of a court of equity. 2. So where the personal liability of stockholders of a corporation is made, by statute, a common fund for the benefit of depositors of trust and savings funds, and the debts due such depositors greatly exceed the assets and such personal liability combined, so that the funds will be insufficient to discharge all of the claims upon it, a court of equity may, at the suit of a part of the creditors, on their own behalf and that of all other such creditors, take jurisdiction, and bring before it all the stockholders and depositors, and determine the several rights and liabilities, and adjust equities, marshal the fund, and distribute it pro rata, and in.such case enjoin the prosecution of suits at law by individual creditors against stockholders, seeking to appropriate the entire and unequal benefit of such security. The securing of a ratable distribution of such fund among all the creditors entitled to share, is a proper ground for equitable jurisdiction, and so is the avoidance of a multiplicity of suits.

Appeal from the Appellate Court for the First District;— heard in that court on appeal from the Circuit Court of Cook county; the Hon. Murray F. Tuley, Judge, presiding. This is a joint appeal, prosecuted hy Lucius B. Otis, as receiver of the State Savings Institution, and Melville C. Eames and others, creditors of that institution, from a decree dissolving an injunction which had been granted to restrain Elizabeth J. Doris, with other creditors of the institution, from prosecuting actions at law against its shareholders to enforce the stock liability under section 9 of its charter, and sustaining the demurrer to the bill and petition for such injunction, and to enforce such liability. The State Savings Institution was incorporated under an act approved February 21, 1861, and since 1863 had been doing business" as a savings bank, in Chicago. On September 1, 1877, Eames and other savings depositors filed their bill in chancery, in the circuit court of Cook county, for the appointment of a receiver over the institution, alleging its failure, a fraudulent assignment of its effects to Abner Taylor, the absconding of its officers, and the abandonment by-them of the banking institution. On September 18, 1877, Lucius B. Otis was appointed receiver thereof. On September 25, 1877, an amended and supplemental bill was filed by Eames and his co-complainants, and a petition in the same cause was also filed by the receiver, the relief sought by both being the enforcement of the stock liability under section 9 of the charter of the institution, for the benefit of all the creditors interested, and to enjoin individual creditors from prosecuting actions at law in their own behalf against such stockholders. On November 21,1877, a decree was entered pro confesso, upon the amended and supplemental bill, against the institution, and on December 10, 1877, an injunction was granted restraining the prosecution of suits at law for the enforcement of such stock liability. On March 14, 1881, in pursuance of. leave given, the complainants filed a second amended and supplemental bill, and the receiver an amended and supplemental petition. This bill averred that complainants were depositors in the institution, suing for themselves and all others similarly situated;. that on August 25, 1877, the institution assigned its effects to Abner Taylor; that shortly before such assignment many of its stockholders had transferred their shares to the institution, amounting to about 2000 shares; that the assets were delivered to Taylor, and thereupon its officers and trustees abandoned their trust, and its president and cashier departed; that for a long time prior thereto there had been great mismanagement and waste of assets and deposits; that Spencer, the president, had converted to his own use $479,-177.40 of assets, besides interest; that the capital stock was 5000 shares, of $100 each, Spencer holding about 2700 shares; that the transfer of their stock by the trustees, being stockholders, to the institution, was made shortly before the assignment, and when they knew that their gross mismanagement had rendered it insolvent, and that under color of such transfer by such trustees and stockholders, they took out of the assets either their own notes or other obligations or securities, in fraud of the creditors. The bill further averred, that by section 9 of the charter of the institution it was provided as follows: “Each stockholder of this corporation, hereby created, shall, as to the trust funds and saving funds deposited therewith, be individually liable, to the amount of his share or shares of the capital stock, for all losses or deficiencies that may occur while he was such stockholder, which individual liability shall continue for six months after transfer of his said stock. ” The hill averred that the stockholders should pay into court a sum equal to the par value of their stock for the benefit of the trust and saving funds, or that the receiver receive the same for the benefit of those interested; that the losses and deficiencies of the trust funds and saving funds exceed §1,000,000; that complainants are depositors interested in such trust and saving funds, and entitled to share equally, with others so interested, in any moneys recovered from such stockholders under section 9; that the number of savings depositors similarly interested is more than 13,000; that since filing the original bill many persons claiming to be interested as creditors in such trust and saving funds have commenced their several actions at law against stockholders, to enforce the liability under section 9 for their individual benefit, seeking to obtain priority over complainants and others interested in the trust and saving funds. The bill prayed that the liability under section 9 be decreed to be. in favor of- the trust funds and saving funds, as such; that the stockholders pay into court, or to said receiver, the sums due by them under section 9, in order that the same be distributed equally; that the persons interested in and entitled to such trust and saving funds be ascertained, and the sums recovered from the stockholders be distributed pro rata among them; that the receiver be continued, and the creditors be enjoined from prosecuting their actions against the stockholders under section 9. The amended and supplemental petition of Otis, receiver, avers his appointment September 18, 1877, and continuance in the discharge of his duties since, with substantially the same averments as to the mismanagement and failure of the institution and fraud of its officers, and otherwise as contained in the amended and supplemental bill, avers his right to enforce the liability under section 9, and prays the same relief as the amended and supplemental bill. To this second amended and supplemental bill, and to the receiver’s amended and supplemental petition, appellee, one of the creditors who had brought such actions at law, filed a general demurrer for want of equity, which the court sustained, dissolved the injunction granted on the first amended and supplemental bill, and on the receiver’s petition, as to appellee, and dismissed both such bill and petition, as to appellee, for want of equity, which order was affirmed on appeal to the Appellate Court for the First District, and the complainants and the receiver appeal from such order of affirmance.