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In the case at bar, however, the equitable features are far more complicated than those involved in either of the above-mentioned decisions. The special nature of the liability incurred for injuries arising through negligent operation, under a receivership, has been fruitful of much discussion in judicial opinions and text-books; but no review of the various theories is needful for the present inquiry, as these propositions are well settled in the federal courts: (a) The receiver is not chargeable with personal liability for such injuries, not due to his personal negligence or conduct, but is chargeable as the representative of the property and funds in his custody within the limits of such property and of his possession or control. (b) "Actions against the receiver are in law actions against the receivership, or the funds in the hands of the receiver, and his contracts, misfeasances, negligences, and liabilities are official, and not personal, and judgments against him as receiver are payable only from the funds in his hands." McNulta v. Lochridge, 1.11 U. S. 327, 332, 12 Sup. Ct. 11, 35 L. Ed. 796. (c) Prior to the act of Congress of 1887 (Act March 3, 1887, c. 373, 24 Stat. 554, 1 Comp. St. 1901, p. 582), the receiver could not be sued without leave of the court having custody of the res, and all claims were subject to adjudication in such court. Davis y. Gray, 16 Wall. 203, 218, 21 L. Ed. 417; 7 Notes U. S. Rep. 980. In other words, no liability arises which is enforceable at law, except as authorized either under the terms of this statute or by the court administering the property. (d) With the termination of the receivership and transfer of property and funds, as disclosed in the declaration, the suit at law was not maintainable against the receivers. McNulta v. Lochridge, supra, and 12 Notes U. S. Rep. 30; Beach on Receivers (Alderson) SS 720, 725; Gluch & Becker on Receivers, § 82; 2 Elliott on Railroads, $ 587; Archambeau v. Platt, 173 Mass. 249, 251, 53 N. E. 816.

The defendant in error, as purchaser of the property and successor to the fund, having no part in the alleged tort, if chargeable for the damages, is chargeable alone through liability assumed in the purchase and circumstances of succession; and then only, under the facts averred, in conformity with the principles of equity, if governed by the general doctrines above referred to. In such aspect, however, the case is, as we believe, directly within and ruled by the decision of the Supreme Court in Texas & Pacific Railway v. Bloom, 164 U. S. 636, 643, 17 Sup. Ct. 216, 41 L. Ed. 580, supplementing the prior decision in Texas & Pacific Railway v. Johnson, 151 U. S. 81, 99, 14 Sup. Ct. 250, 38 L. Ed. 81. While the earlier case of Johnson arose upon writ of error to the Supreme Court of Texas, and the personal judgment against the corporation succeeding the receivership was affirmed upon the ground that the question of liability was one "of general law and for the state court to pass upon,” the Bloom Case arose in the Circuit Court of the United States, and was brought from the Circuit Court of Appeals on error to the Supreme Court. Both cases were identical in the circumstances upon which the liability of the corporation was predicated, and the opinion (151 U. S. 99, 14 Sup. Ct. 250, 38 L. Ed. 81) affirming the Johnson judgment thus summarizes the rule adopted by the state court for charging personal liability:

In the view of that court, a railway company might be held directly liable when a receiver is appointed in an amicable suit at the instigation of the company and for the company's own purposes, and, these purposes being accomplished, the property is returned to its owner, the rights of no third persons as purchasers intervening, upon the ground that the acts of the receiver might well be regarded as the acts of its own servant, rather than those of an officer of the court, which under such circumstances he would only be sub modo. But as the court did not feel authorized to entertain a conclusion which might carry the implication that this receivership would have been created or continued, although its object had only been to place the property temporarily beyond the reach of creditors until it could be augmented in value by improvements made from earnings under the protection of the court, that rule was not applied in tbis case. The company was held liable upon the distinct ground that the earnings of the road were subject to the payment of claims for damages, and that as, in this instance, such earnings to an extent far greater than sufficient to pay the plaintiff had been diverted into betterments, of which the company had the benefit, it must respond directly for the claim. This was so by reason of the statute (Laws Tex. 1887, p. 120, c. 131, $ 6), and, irrespective of statute, on equitable principles applicable under the facts.”

On examination of the statutory provision referred to under the title of “Receivers,” which mentions liabilities to be paid by a receiver out of moneys coming into his hands, we find no obligation imposed, either upon receiver or fund, not within the general rules of equity and well recognized as thus chargeable.

The subsequent case of Bloom, brought from the federal court, involved not only the question of liability, upheld in the prior decision when arising in a state court, but the further question of direct enforcement at law in the federal forum. Error was assigned upon the contention that the alleged cause of action was equitable and furnished no support there for a personal judgment at law; and thus presented, as in the present instance, the main question for review. In overruling this assignment, the opinion recognizes both the equitable nature of the liability there charged and the limited scope of the Johnson decision. It recites, however, the above-quoted review in that opinion of the premises and rule of the Texas decisions, and expressly approves and adopts them, as applicable in the federal court there sitting. In reference to the charge for betterments, the opinion is explicit in approval of direct liability, subject to the right of the company to "have the aid of a court of equity to restrict its liability to that amount,” upon showing that the claims exceeded the betterments. We understand that the decision, although not expressly so defined, rests upon this view: That the local law establishes the obligation assumed by the successor, who takes over the property and fund from a receivership with assumption of liabilities, to be one of direct liability, and not merely equitable, for payment of claims chargeable against the fund; and that the direct liability so affixed determines the nature of the cause of action in the federal court, and it becomes enforceable there at law. With the adoption of the direct liability rule of Texas, the remedy may be administered at law, within the settled principles of that jurisdiction; and if question is open as to the bearing or effect of the rule when arising in equity jurisprudence, it is not pertinent on this review.

These decisions are applicable, as we believe, both to the equitable state of facts averred in the present declaration-with their effect strengthened by the special admission on the part of this defendant in error, in paragraph 6 of its petition for possession of the railroad, “that it is legally liable for all the obligations imposed by said decree"-and to the lex fori, as settled by the Illinois decisions.

As before mentioned, it has long been the established law of Illinois that one person who contracts with another to assume an indebtedness of the latter to a third person becomes directly and primarily liable to such third person, who may sue at law upon the promise (Union Life Insurance Co. v. Hanford, supra, and cases cited); and such rule is general, not limited to mortgage indebtedness assumed by a grantee (Eddy v. Roberts, 17 Ill. 505, 508; Thompson v. Dearborn, 107 Ill. 87, 92).

In Bartlett v. Cicero Light Co. (decided in 1898) 179 Ill. 68, 73, 52 N. E. 339, 42 L. R. A. 715, 69 Am. St. Rep. 206, the question of the defendant's liability, in a suit at law, arose under circumstances singularly identical with those stated in the above-cited Texas cases, and the opinion cites and adopts the rulings of the Supreme Court of Texas thereupon, with special reference to Texas & Pacific Ry. Co. v. Johnson, 76 Tex. 421, 13 S. W. 463, 18 Am. St. Rep. 60, which was subsequently affirmed by the Supreme Court of the United States, as above referred to. Not only was direct liability upheld and rested on equitable considerations which would not support such liability under the general doctrine, and in no sense distinguishable in principle from those averred in the present case, but the decision is unmistakably brought within the rulings of the United States Supreme Court in both Texas cases. The opinion is well considered and unanimous. Its doctrine is reaffirmed in subsequent cases (see Knickerbocker v. Benes, 195 Ill. 434, 443, 63 N. E. 174, and its application in Wabash R. R. Co. v. Stewart, 41 Ill. App. 640, to facts like those involved here), and unquestionably settles the law of Illinois, as resting direct and personal liability upon grounds purely equitable under the general rule, and thus establishes the case at bar within the distinction upon which both the Bloom Case and Union Life Insurance Co. v. Hanford, supra, are understood to authorize recovery at law, na ely, enforcement of the direct liability created by the state law out of these equities, with no blending of procedure in law and equity thereby recognized.

In Thompson v. Northern Pac. Ry. Co., 93 Fed. 384, 35 C. C. A. 357, like suit at law was upheld against the purchaser alone, upon similar state of facts, with the exception that leave to sue was granted upon the equity side of the court, having ancillary jurisdiction of the foreclosure decree under which the sale was made. It was there contended: (1) That the complaint stated no cause of action at law; and (2) that writ of error did not lie, because in reality an equitable proceeding, "although in form an independent action at law.” The opinion, however, overrules both contentions, and expressly states that the proceeding was not equitable, but was an action at law, and was thus maintainable upon the obligation assumed by the purchaser. Whether jurisdiction at law rested on the leave so granted, local rule, or otherwise, is not discussed.

84 C.C.A.-26

The remaining objection of duplicity, assigned in the demurrer, is untenable. The twofold facts averred as grounds of liability, by way of express assumption, and in succession to improvements and betterments made by the receivers, are connected, not independent, and thus state, or tend to state, a single cause of action under the rules of pleading. 1 Chitty on Plead. (16th Am. Ed.) 249; Stephens on Pleadings (3d Am. Ed.) 248, 249.

The judgment of the Circuit Court is not in conformity with the foregoing view, and is reversed accordingly; and the case is remanded, with direction to set aside the judgment and overrule the demurrer to the amended declaration, for further proceedings in .conformity with law.

(156 Fed. 746.)

(Circuit Court of Appeals, Fifth Circuit. October 28, 1907.)



Under Neb. Const. art. 11b, § 7, which provides that every stockholder in a banking corporation shall be individually liable to its creditors over and above the amount of his stock to an amount equal to his stock, which, as construed by the Supreme Court of the state, is self-executing and enforceable only after the assets of the corporation have been exhausted, by means of a suit in equity in behalf of all creditors against the corporation and its stockholders, in which all equities shall be adjusted, the total liabilities of the corporation ascertained, and a receiver or trustee appointed to collect from each stockholder his pro rata share of such liabilities, the amount due from the stockholders when so ascertained constitutes a trust fund, the legal title to which is vested in the receiver or trustee appointed, and he may maintain an action to recover the amount due from a stockholder in a foreign jurisdiction.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, & 228014.

Stockholders' liability to creditors in equity, see notes to Rickerson Roller-Mill Co. v. Farrell Foundry & Machine Co., 23 C. C. A. 315; Scott



In such an equity suit, each stockholder is represented by the corporation, having contracted with reference thereto, and is bound by the decree therein, although a nonresident of the state and not personally served with process.

(Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, $


Limitation does not begin to run in favor of a stockholder against an action to enforce an assessment made against him under such constitutional provision until the entry of the decree fixing the amount of such assessment. In Error to the Circuit Court of the United States for the Southern District of Texas.

This is an action brought by Charles A. Goss, a citizen of the state of Nebraska, against 0. M. Carter, a citizen of the state of Texas. The plaintiff sued as receiver and trustee to recover from the defendant the amount of an assessment of 25.9 per cent. levied by the District Court of the Fourth Judicial District of the state of Nebraska upon $101.900 of stock alleged to be owned by the defendant in the American Loan & Trust Company, an insolvent bank organized under the Constitution and laws of Nebraska. In the Circuit Court a general demurrer with special exceptions to the petition was sustained, and the case is brought by the plaintiff to this court on writ of error. The general question presented to this court by the assignments of error is: Did the Circuit Court err in sustaining the demurrer to the plaintiff's pe tition? This involves three inquiries: (1) Has the plaintiff as a receiver appointed in Nebraska the right to sue in Texas? (2) Is the defendant subject to suit on the decree of the Nebraska court? (3) Is the right of action barred by the Texas statute of limitations of four years?

The allegations of the petition bearing upon the questions raised by the general demyrrer and special exceptions to it and by the assignments of error necessary to be decided are substantially as follows:

(1) The American Loan & Trust Company was a banking corporation organized under the laws of the state of Nebraska, and having an issued and fully paid capital stock of $400,000, divided into 4,000 shares of $100 each; and of these shares the defendant Carter owned 1,019. Said company became insolvent, and on May 10, 1894, a receiver was appointed by the Circuit Court of the United States for the District of Nebraska to liquidate its affairs. Such receivership was closed, and the suit wherein it was pending was terminated, September 28, 1898; the assets of the compavy having been exhausted without paying any portion of its indebtedness. The Circuit Court refused to entertain petitions in intervention offered by some of the five creditors hereinafter mentioned, having for their object the enforcement of the constitutional liability of the shareholders; but they were permitted to prove up their respective claims and to reduce the same to judgments, and they did so.

(2) Immediately upon the termination of the receivership suit in the United States Circuit Court for the District of Nebraska, the five creditors, Hamilton National Bank, Rutland County National Bank, Safety Fund National Bank, Gerard C. Tobey and New York Life Insurance Company, instituted in the District Court of the Fourth Judicial District of Nebraska a suit against American Loan & Trust Company and numerous persons alleged to be the stockholders, including the defendant Carter. By their amended petition filed in the suit October 4, 1898, the plaintiffs prayed that an order be made fixing a time within which other creditors of said American Loan & Trust Company might appear in said suit; that an account be bad of the amount due each of said plaintiffs by said American Loan & Trust Company ; that the several defendants sued as shareholders of said company be adjudged to be liable to the plaintiffs and to the other creditors of said company, over and above the amount of stock held by them, to a sum equal to the stock so held by them, for all the liabilities of said company accruing while they remained such stockholders; that the dates of the accrual of the debts due the several creditors be ascertained; that the amounts of stock held by the several defendants, and the periods of time during which such amounts were held, be determined ; that the entire amount of the indebtedness of said company, in so far as the same might be represented in said suit, and the dates of the accrual thereof, and the names of the several stockholders at such dates, together with the amounts of such holdings, be determined; that the plaintiffs and such other creditors as might join in said suit bave judgment against the several defendants to the extent of their liability; that a receiver be appointed to collect from said stockholders, under the authority and direction of the court, by execution or by other proper writ or process or by suit if necessary, or by such other proceedings as might be required fully to realize from said stockholders the amounts so found due said creditors, sufficient funds fully to pay and to satisfy the several amounts due to said creditors, with interest and costs, as well as the amounts due to such other creditors as might join therein; and they prayed for such other and further re. lief in the premises as might be just and equitable. No other creditors ever joined in said suit, or proved up their claims therein, or in any way became parties thereto.

(3) Process was served upon American Loan & Trust Company and upon several of the individual defendants, and the company and several individual de

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