MR. JUSTICE MILLER dissenting.
The rapid absorption of the business of the country of every character by corporations, while productive of much good to the public, is beginning also to develop many evils, not the least of which arises from their failure to pay debts and perform the duties which by the terms of their organization they assumed. One of the most efficient remedies for the failure to pay, when it arises from inability, is to place the corporation in the hands of a receiver, that its affairs may be wound up, its debts discharged, and the remaining assets, if any there be, distributerd among its stockholders. Of the beneficial results of this remedy there can be little doubt. When it is applied with despatch, and the effects of the insolvent corporation are faithfully used to meet its liabilities and its dead body is buried out of sight as soon as possible, no objection can be made to the procedure, and all courts and good citizens zens should contribute, as far as they may, to this sesirable object.
In regard, however, to a certain class of corporations,-a class whose operations are as important to the interests of the community and as intimately connected with its business and social habits as any other,-the appointment of receivers, as well as the power conferred on them, and the duration of their office, has made a progress which, since it is wholly the work of courts of chancery and not of legislatures, may well suggest a pause for consideration. It will not be necessary to any observing mind to say that I allude to railroad corporations. Of the fifty or more who own or have owned the many thousand miles of railway in my judicial circuit, I think I speak within limits in saying that hardly half a dozen have escaped the hands of the receiver. If these receivers had been appointed to sell the roads, collect the means of the companies, and pay their debts, it might have been well enough. But this was hardly ever done. It is never done now. It is not the purpose for which a receiver is appointed. He generally takes the property out of the hands of its owner, operates the road in his own way, with an occasional suggestion from the court, which he recognizes as a sort of partner in the business; sometimes, though very rarely, pays some money on the debts of the corporation, but quite as often adds to them, and injures prior creditors by creating a new and superior lien on the property pledged to them.
During all this time he is in the use of the road and rollingstock, and performing the functions of a common carrier of goods and passengers. He makes contracts and incurs obligations, many of which he fails to perform.
The decision which has just been announced declares that for these failures he cannot be used in a court of law; that by virtue of his receivership, he and all his acts, and the business of the road, are exempted from the operation of the common law, and that all parties deal with him on the implied understanding that they abandon the right to have their complaints tried by jury or by the ordinary courts of justice, and can only obtain such relief as may be had at the hands of a master in chancery of the court which appointed him.
When a receiver appointed to wind up a defunct corporation has no power to make new contracts,-when his sole duty is to convert the property into a fund for the payment of debts, and for distribution among those who are entitled to it,-a very strong reason exists why the court which appointed him should alone control him in the performance of his duty. In such cases, the Court of Chancery has the undoubted right to protect him by injunction against parties suing him in another court, and to punish them for contempt.
Wiswall v. Sampson (14 How. 52) and Peale v. Phipps (id. 368) recognize this principle. In the former case the court decided that a sale of property under a judgment of one court, which was in the actual possession of a receiver appointed by another court, did not confer a valid title as against the sale of the same property subsequently made under an order of the court whose receiver had held possession all the time. The court did not decide that he could not be used at law for any tort committed by him as receiver.
Peale v. Phipps carries the doctrine to an extent to which it had not been carried before, but it was based upon the proposition that Peale, as the trustee under the law of Mississippi, appointed by a court of that State to close out and distribute the assets of a broken bank, could not, as such trustee, be made amenable to the jurisdiction of a court of Louisiana. The reason being that the fund, out of which alone the plaintiffs could be satisfied, was in the control of the court in Mississippi. The debt sued for was created by the bank before it was placed in the hands of the receiver. When he was appointed, the bank in effect ceased to exist, and could neither do business nor contract debts. There remained solely the duty of realizing its assets and paying its debts.
In the case before us the plaintiff sues to recover damages for a personal injury, caused by an act done by the receiver or his agents in the transaction of business as a common carrier, in which he was largely and continuously engaged. Why should the receiver not be sued like any one else on such a cause of action in any court of competent jurisdiction?
The reply is, because he is a receiver of the road on which the plaintiff was injured, and holds his appointment at the hands of a Virginia court of chancery. If this be a sufficient answer, then the railroad business of the entire country, amounting to many millions of dollars per annum, may be withdrawn from the jurisdiction of the ordinary courts having cognizance of such matters, and all the disputes arising out of these vast transactions must be tried alone in the court which appointed the receiver. Not only this, but the right of trial by jury, which has been regarded as secured to every man by the constitutions of the several States and of the United States, is denied to the person injured, and though his case has no element of equitable jurisdiction he is compelled to submit it to a court of chancery or to one of the masters of such a court.
In an action for a personal injury, which has always been considered as eminently fitted for a jury, especially in the assessment of damages, this constitutional right is denied, because the receiver of a railroad and not its owners committed the wrong.
Before I can give my assent to such a doctrine I must be well assured that the law as heretofore expounded demands it.
So far from entertaining such a conviction, I think that the doctrine is at variance with the principles which govern the relations of common-law courts and courts of equity where, as in the courts of the United States, these jurisdictions have been kept separate.
In England, in the contests between these courts it was never claimed that the court of chancery could act directly upon the court of law, or that the latter was bound in any way to follow the decisions of the former. Nor could the Chancellor direct his writ to the common-law court or its officers; but if it was determined to give any equitable relief in the matter pending before the law court, the injunction or other chancery process was directed to the suitor. Upon him alone was the power of the court exercised. In such a case as this, if the Court of Chancery was of opinion that the plaintiff was improperly interfering with the functions of the receiver, it could restrain him by injunction or punish him by attachment for contempt. If, however, the plaintiff could not be reached by that court, it is no more than the evil of many other cases where a defendant cannot be found when he is wanted in a court of justice.
But I know of no principle or precedent whereby a court of law, having before it a plaintiff with a cause of action of which it has jurisdiction, and a defendant charged with an act also within the jurisdiction, is bound or is even at liberty to deny the plaintiff his lawful right to a trial because the defendant is a receiver appointed by some other court, and to leave the suitor to that court for remedy, where it is known that some of the most important guaranties of the trial to which he is entitled, and which are appropriate to the nature of his case, will be denied him.
Whatever courts of equity may have done to protect their receivers, or the fund in their hands, it is no part of the duty of courts of law to deny to suitors properly before them the trial of their rights, which justice requires and the Constitution and the law guarantee.
These views are well sustained by the authorities collected in the brief of the plaintiff's counsel, especially in Angel v. Smith, 9 Ves. Jr. 335; Hill v. Parker, 111 Mass. 508; Chautauque County Bank v. Risley, 19 N. Y. 369; Camp v. Barney, 4 Hun (N. Y.), 373; Sprague v. Smith, 29 Vt. 421.
The doctrine is stated with admirable precision by the Supreme Court of Wisconsin in the case of Kinney v. Crocker (18 Wis. 74), in the following language: 'But in all these cases it is not a question of jurisdiction in the courts of law, but only a question whether equity will exercise its own acknowledged jurisdiction of restraining suits at law under such circumstances and itself dispose of the matter involved. It follows that although a plaintiff in such case, desiring to prosecute a legal claim for damages against a receiver, might, in order to relieve himself from the liability to have his proceeding arrested by an exercise of its equitable jurisdiction, very properly obtain leave to prosecute; yet his failure to do so is no bar to the jurisdiction of the court of law, and no defence to an otherwise legal action in the trial. There can be no room to question this conclusion in all cases where there is no attempt to interfere with the actual possession of property which the receiver holds under the order of the Court of Chancery, but only an attempt to obtain a judgment at law in a claim for damages.'
It is asserted by counsel, whose brief shows the extent of his research, that no case can be found where such a plea has been sustained in an English court. I regret to say that in my opinion the judgment just rendered is unsupported by authority and unsound in principle.
Notes edit
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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