Townsend v. St. Louis & Sandoval Coal & Mining Company/Opinion of the Court

Our examination of this case has not been aided by any findings of fact or law by the court below. It has, hence, been necessary to make a very full statement of the facts, as disclosed in the pleadings and evidence. That statement, when made, however, does not disclose a case calling for extended treatment.

The present bill of complaint filed in the circuit court of the United States, as finally amended, was met by answers in which, among other matters of defense, it was alleged that in proceedings instituted in the circuit court of Marion county, Ill., on June 27, 1878, by Isaac Main and others against the St. Louis & Sandoval Coal & Mining Company and against Ozias Townsend, the appellant in the present case, and which proceedings resulted in a final decree on August 9, 1883, in favor of the complainants, which final decree was affirmed by the supreme court of Illinois on January 25, 1886 (5 N. E. 370), the same claims and matters of controversy set up in the present bill were litigated, and adjudicated in favor of the appellees and against the appellant in the present case.

Of course, if this were so, such final judgment of the courts of Illinois would be a conclusive bar, when pleaded to the present bill; and it is so conceded, as necessarily it must be, by the counsel of the appellant, in his argument and brief in this case.

It is, however, contended that the issues involved in this suit were not the same with those involved and adjudicated in the state courts. The first question, then, for our determination, is whether the matters tried and adjudged in the state courts were the same with those which the appellant sought to have considered in the circuit court in the present case.

This question is readily determined by an inspection of the records in the respective cases.

As above stated, the bill, as originally filed in the circuit court of Marion county, Ill., alleges the insolvency of the St. Louis & Sandoval Coal & Mining Company, and that Ozias Townsend's claim against that company was without consideration and fraudulent, and asked for the appointment of a receiver, and for a sale of the company's property. Upon a decree pro confesso, a receiver was appointed, and a sale ordered. This decree was, on appeal, reversed by the supreme court of Illinois, for want of proper service of process, and the cause was remanded for further proceedings, h e receiver being continued. In the court below, when the cause came back, a supplemental bill was filed, making the Sandoval Coal & Mining Company a party defendant. The latter company then filed an answer admitting all the allegations in the original and supplemental bills filed by Main and others, and also filed a cross bill, in which were recited the facts of the organization and insolvency of the St Louis & Sandoval Coal & Mining Company, and alleging that it had, in good faith, bought the coal property and fixtures of the old company from Isaac Main, who had purchased them under the original decree of sale; that Ozias Townsend and his assignees were not bona fide stockholders in the old company, and praying the court to so decree, and that the complainants in the original bill were the only valid and legal stockholders in said old company, and that the original complainant be ordered to convey, in the name of the St. Louis & Sandoval Coal & Mining Company, by valid conveyance, to the said Sandoval Coal & Mining Company, the tract of land on which the shaft was sunk, and all mining rights held by said first-named company, and also praying that the St. Louis & Sandoval Coal & Mining Company should be restrained from prosecuting an ejectment suit and a trespass suit that had been brought against the Sandoval Coal & Mining Company. As already stated, this litigation terminated in a decree declaring that the material allegations in the cross bill were true; that Isaac Main and the other appellees in the present case were the only stockholders in the St. Louis & Sandoval Coal & Mining Company who had paid anything on their stock, and that they were the only parties or stockholders who had any interest in, or right to determine, how the assets of said company, which had been dissolved by the decree of the court, should be disposed of, to whom, and for what consideration The decree further declared that Ozias Townsend and his assignees, defendants in the cross bill, never had paid anything for their supposed stock in said St. Louis & Sandoval Coal & Mining Company, and that if any such stock had been issued to them, it was wrongfully and fraudulently done, and that neither of them had any interest in the assets of said company, nor any right to interfere with the disposition of such assets. The decree further adjudged that Isaac Main had bought the property of the St. Louis & Sandoval Coal & Mining Company, at the instance and request of all the valid stockholders therein, for the purpose of selling the same for enough to pay off the indebtedness of that company, which then amounted to over $2,000, and that Main afterwards, at their instance and request, sold and conveyed all said property in consideration of the sum of $2,465, paid by the complainants in the cross bill, which sum was all the property was worth; and it was further decreed that a deed of conveyance, in the name of the St. Louis & Sandoval Coal & Mining Company, should be made of said property.

As already stated, Ozias Townsend and others appealed from this decree to the supreme court of Illinois, where the same was affirmed.

To escape from the conclusive effect of this decree, the complainant in the present bill asserts that his claims for services and for money expended by him for the St. Louis & Sandoval Coal & Mining Company were not in issue in said cases, and that, as a creditor, he can now assert such claim against the assets of that company now in the possession of the new company.

It may not be said that in no case, or in no circumstances, can a creditor of a company dissolved by legal proceedings assert a claim against its assets in the hands of a new company organized on its ruins, but it is clear that this complainant is in no condition to maintain such a claim in the present instance. Not only did the original bill against Townsend and others allege that the stock held by him and by others to whom he had caused stock to be issued had been fraudulently issued, but the r oss bill directly charged that the credit of $10,000, for which said stock had been issued on account of said Townsend, was fraudulently voted for pretended labor and money furnished and performed by him, when no such labor had ever been performed by him, nor any money furnished or expended by him, for such company. These allegations were traversed by answers denying that the company 'fraudulently acknowledged an indebtedness to the said Townsend, or issued paid-up stock to him without a sufficient consideration, or anybody else.'

In the present bill Townsend alleges that, by his agreement with the St. Louis & Sandoval Coal & Mining Company, he was to have a right to be credited on stock with $10,000 for his services; and in his testimony he says that he gave, of this paid-up stock, $5,000 worth to his wife, $4,000 worth to George Wharton, and $1,000 worth to True W. Blackman. This stock so issued by Townsend to his wife, Elizabeth Townsend, to Wharton, and Blackman, was part of the very stock declared by the circuit court of Marion county, in its decree sustaining the cross bill, to have been invalid, as issued without consideration.

The manifest purpose and aim of the present bill are to go back of this decree, and to assert his original claim for services against the new company. We are of opinion that the invalidity of his claim for services was substantially established by the decree that the stock issued therefor was invalid, because issued without anything having been paid for it; and we are also of opinion that even if Townsend's original claim for services had not been merged in stock, but had remained as a valid and unsatisfied claim, no ground has been shown upon which the court below could have declared that such claim could be asserted at law or in equity against the Sandoval Coal & Mining Company or its stockholders. Even if the complainant's claim had been a conceded and bona fide claim against the St. Louis & Sandoval Coal & Mining Company, yet, as it had accrued to him, according to his own showing, on January 1, 1878, it could not be successfully asserted in a court of equity against purchasers at a judicial sale made in August, 1878, by a bill filed November 30, 1885. If, as he now is obliged to contend, Townsend did not assert his claim for personal services during the long litigation in the state courts, such claim, if not barred by the statute of limitations, was too stale to receive favor from a court of equity.

The decree of the court below is affirmed.