White v. Ewing

This case arose upon a certificate of the court of appeals for the Sixth circuit, based upon the following facts:

The Cardiff Coal & Iron Company, a corporation of Tennessee, becoming insolvent, a creditors' bill was filed in the circuit court for the Eastern district of Tennessee by George F. Bosworth, a citizen of Massachusetts, and a judgment creditor of the company, setting forth the insolvency of the company, the wasting of its assets, etc., and praying for a sale of the property, the collection of its choses in action, the appointment of a receiver, and for an injunction. In pursuance of the prayer of this bill, the appellee, Ewing, was appointed receiver of the company, ordered to take possession of its assets, and to manage and protect the same for the benefit of the creditors under orders from the court. All creditors were ordered to file their claims.

Subsequently the receiver filed a petition stating that a large proportion of the company's assets consisted of promissory notes, amounting to about $225,000, given for land purchased from the company, upon which liens had been retained to secure their payment. These notes were executed by 130 different persons, and were for various amounts, many of them for less than $2,000. The receiver petitioned for authority from the court to institute suits for the collection of such notes, stating that, in order to save costs and expense, he had been advised that it was proper, if it might be done, to bring in all the debtors by bill or petition, and join them as defendants in one suit; that he was requested by the creditors to proceed in this manner; and that to sue the debtors separately would require more than 100 suits, with the enormous expense incident thereto.

In compliance with this petition, the court made an order that the receiver be directed to institute suit by proper bill or petition in the pending case against all persons indebted to the defendant company (the Cardiff Coal & Iron Company), by note or account, as set forth in his petition.

In pursuance of this order, the receiver filed his bill in the circuit court against 130 persons, of whom 30 were alleged to be citz ens of Tennessee, and the remainder citizens of other states, all of whom were joined as defendants, and the amounts alleged to be due from them, respectively, were in most cases less than $2,000. It was also alleged that special liens were retained in each case in the deed to the purchaser, to secure the deferred payments of the purchase money, and the court was asked to enforce such liens by sale of the lands, for the satisfaction of the balance of the purchase money due separately from each and all said defendants, upon their respective notes.

The resident defendants were personally served with subpoena, and an order of publication made against the nonresident defendants. No exception was taken to the form of the bill by demurrer or otherwise; and the defendants nearly all answered, denying their liability. The case was referred to a master, and on his report decrees were entered against those found to be indebted; such decrees being in a majority of instances for sums less than $2,000. The lots were ordered to be sold to pay the amounts so found due. Appeals from these decrees were duly taken to the circuit court of appeals (13 C. C. A. 276, 66 Fed. 2), and perfected by the appellants in this case.

Upon this statement of facts, the circuit court of appeals certified the following question to this court for its determination:

'Had the circuit court of the United States in a general creditors' suit properly pending therein, for the collection, administration, and distribution of the assets of an insolvent corporation, the jurisdiction to hear and determine an ancillary suit instituted in the same cause by its receiver, in accordance with its order, against debtors of such corporation, so far as in said suit the receiver claimed the right to recover from any one debtor a sum not exceeding $2,000?' Tully R. Cornick and Heber J. May, for appellants.

Robert Prichard and Foster V. Brown, for appellee.

Mr. Justice BROWN, after stating the facts in the foregoing language, delivered the opinion of the court.