O'NIELL, C. J. This is a suit to cancel a judgment as having been paid. The judgment was rendered in favor of one W. Turner Bailey against the Louisiana & Northwest Railroad Company and the Athens Lumber Company, in solido, for $3,500, and was affirmed by this court in January, 1912. Two months later the Chicago Lumber & Coal Company, defendant in this suit, being a stockholder and creditor of the Athens Lumber Company, bought the judgment from Bailey, to prevent execution against the Athens Lumber Company, and took an assignment in the name of Fred D. Whiting. The reason for the simulated assignment Several months later the sawmill of the to Whiting is apparent. The testimony Athens Lumber Company was destroyed by shows conclusively that the Athens Lumber fire. Nearly a year after the Chicago Lum

(100 So.)

judgment, and nearly two years after the judgment had been affirmed, the stockholders of the Athens Lumber Company voted to liquidate the corporation. The stockholders' meeting was preceded by a publication of the call for the meeting for the purpose of liquidating, published in a newspaper in the parish where the Athens Lumber Company had its domicile and principal business, where the Bailey judgment had been rendered, and where the chief counsel for the railroad company then resided.

The liquidators converted the assets of the Athens Lumber Company into cash, amounting to approximately $15,000, and disbursed the proceeds. They paid the labor pay rolls, approximately $2,500, and the current bills, approximately $5,000, and turned over the balance, approximately $7,500, to the Chicago Lumber & Coal Company. That left the Chicago Lumber & Coal Company a creditor of the Athens Lumber Company for ap proximately $70,000, besides the amount of the Bailey judgment.

gave judgment for the railroad company against the Athens Lumber Company for $57 court costs, but rejected the demand for cancellation of the judgment. On appeal, this court affirmed the judgment. In the course of the opinion it was said that by the terms of the contract between the railroad company and the Athens Lumber Company, inasmuch as the train that caused the accident had ́authority from the railroad company's trainmaster to be out on the track, the question whether it was the lumber company or the railroad company that was liable primarily, or as principal obligor, depended upon which one of them was more at fault than the other; and it was held that the railroad company had no right to have that question decided until the railroad company had actually paid the judgment. See Louisiana & N. W. Railroad Co. v. Athens Lumber Co., 134 La. 788, 64 South. 714, L. R. A. 1915B, 856. With regard to the railroad company's allegation that the judg ment had been paid by the Athens Lumber Company, the court said:

Plaintiff contends that the Athens Lumber Company was a "subsidiary" of the Chicago "It is contended by plaintiff that this judgLumber & Coal Company, and that the buy-ment has been paid. The contention is not ing of the judgment by the latter was a sufficiently sustained. "fraudulent simulation," and had the effect of paying and extinguishing the debt. The district court so held, and the defendant Chicago Lumber & Coal Company has appealed.

The judgment which the Chicago Lumber & Coal Company bought from Bailey was given for personal injuries suffered by him by being run down by a train operated by the Athens Lumber Company on the tracks of the railroad company while Bailey was operating a hand car as section foreman in the employ of the railroad company. In defending the suit, the railroad company claimed that under the contract between it and the lumber company for the operation of the lumber company's trains on the railroad company's tracks the lumber company was liable as an indemnitor to the railroad company for any damages that the latter might have to pay. But in affirming the judgment in favor of Bailey this court merely reserved to the railroad company whatever rights the latter had against the Athens Lumber Company. See Bailey v. Louisiana & Northwest Railroad Co. et al., 129 La. 1029, 57 South. 325. Thereafter the railroad company sued the Athens Lumber Company to have it decreed that the judgment in favor of Bailey had been paid by the Athens Lumber Company, and that the payment had extinguished the debt entirely, because of the alleged contract of indemnity. The allegation that the judgment had been paid by the Athens Lumber Company had reference to the transaction now in contest, by which the Chicago Lumber & Coal Company bought the judgment in the name of Fred D. Whiting. In the suit referred to, the district court

Plaintiff has not been subrogated to any of the rights of parties. If the judgment has been paid by the Athens Lumber Company, it will simplify the issues very much. If it has been assigned and is now held by a third person, as contended by the lumber company, it is not possible legally to order that the judgment is satisfied and that the judicial mortgage must be canceled. That can only be done contradictorily with all parties concerned."

This case is therefore a repetition of the suit of the railroad company against the Athens Lumber Company, with the proper parties before the court.

Opinion.

The Athens Lumber Company was a "subsidiary" corporation, only in the sense that a majority of its capital stock-about 77 per cent.-was held by the Chicago Lumber & Coal Company. The latter owned 650 of the 840 shares of the Athens Company's stock. Of the remaining 190 shares 50 shares were owned by a man who had no connection with or interest in the Chicago Lumber & Coal Company, and 140 shares were owned by one who owned about $600 out of the total of approximately $4,000,000 of the common stock of the Chicago Lumber & Coal Company.

[1] The fact that the Chicago Company owned the controlling stock in the Athens Company did not destroy the identity of the latter as a distinct legal entity. Some of the best authors on the subject go so far as to maintain that it makes no difference in principle if the one corporation owns all of the capital stock of the other. See 1 Fletcher on Corporations, § 22, and the decisions cited. The doctrine was recognized by this court

in Mercer v. Natchez Ball & Shreveport Rail-1 wrong nor invalid per se. way Co., 141 La. 539, 75 South. 234, viz:

"The fact that the lumber company and the railway company are interlocking corporations, engaged in a common enterprise, owned and controlled by the same stockholders, and managed by the same individuals, does not make them one corporation with two names."

The principle had been recognized in the Matter of John D. Belton, 47 La. Ann. 1614, 18 South. 642, in the ruling that the fact that all of the shares of stock in a corporation, after it was created, were owned by a less number of stockholders than the law required as a condition for the organization of such a corporation, did not destroy the corporation as a legal entity.

[2] A stockholder who becomes also a creditor of the corporation has the same rights that its other creditors have; and, if he pays a debt of the corporation, in excess of his liability as a stockholder, he has the same rights and remedies for recovering the amount that any other creditor would have: Fletcher on Corporations, p. 6852; Guerney v. Moore, 131 Mo. 650, 32 S. W. 1132; La Salle Street Trust & Savings Bank v. Topeka Milling Co., 101 Kan. 446, 167 Pac. 1036, L. R. A. 1918A, 574; Blalock v. Kernersville Mfg. Co., 110 N. C. 99, 14 S. E. 501; 7 R.

C. L. 306.

Nicholls, for the court, said:

Chief Justice

It is

"It is no unusual occurrence for parties to place their property and rights in the name and under the control of others, without any consideration whatever, and without the intention of ownership being actually transferred. Such acts are permissible, and cannot be gainsaid, unless they carry injury to some one. A simulation is not necessarily a fraud. only so when injury to third persons is intended. Gravier's Curator v. Carraby's Ex'r, 17 La. 118, 36 Am. Dec. 608. Our court has held that simulated transfers may be for a lawful purpose-as, for instance, to enable the transferee to bring suit; to raise money, etc. See Emswiler v. Burham, 6 La. Ann. 710; Dosson v. Bieller, 10 La. Ann. 570; Stewart v. Newton, 12 La. Ann. 622. Parties opposing such acts must allege and show wherein they Hen. La. Dig. 180. are aggrieved thereby. This doctrine finds expression in repeated adjudications of this court in matters of bills and notes, under a syllabus to the effect that the 'holder of negotiable paper, indorsed in blank, may sue, though only agent, in his own name, or he may sue as holding the legal title Defendant has for the use of the real owner. no right to inquire whether plaintiff, in whom the legal title appears to be vested, be an agent of the real owner, unless by a fictitious assignment it be attempted to deprive him of substantial grounds of defense which he may have against the true owner.'

[3] The fact that the assignment of the The liquidation of the affairs of the Athens judgment was taken in the name of Fred D. Lumber Company was conducted openly and Whiting, instead of being taken in the name above board. The attorney for the railroad of the Chicago Lumber & Coal Company, company knew that the liquidation was going is a matter of no consequence. Such transac- on. The railroad company could have asked tions are often made in the name of an agent for a judicial liquidation, or a receivership, acting for an undisclosed principal; and there if the railroad company had desired that the is nothing intrinsically wrong in the agent's holder of the Bailey judgment should reacting as if for himself. Frank Goebel, treas- ceive his pro rata of the funds to be disurer of the defendant company, testified that tributed by the liquidators of the Athens Even if the railroad the only reason for taking the assignment Lumber Company. in Whiting's name was that the company company or its attorney did not know that desired to be not known in the transaction. the Bailey judgment had been assigned to That was not at all contradictory of the Whiting, or bought by the Chicago Lumber statement of R. W. Fullerton, secretary of & Coal Company, the railroad company and the company, that the purpose in buying the its attorneys did know that the judgment judgment was to prevent an attachment-remained outstanding and uncanceled. And meaning a seizure of the Athens Lumber the railroad company was not put to any Company's property, which was not suffi- disadvantage whatever by the Chicago Lumcient to pay the debt then due to the Chicago ber & Coal Company's buying the judgment— Lumber & Coal Company. The witness Ful- or by the assignment in the name of Whiting. lerton was not asked why the judgment was There is no reason to believe that Bailey bought in Whiting's name. The witness was would not have issued execution against the merely explaining why the Bailey judgment railroad company if somebody had not was bought by the Chicago Lumber & Coal promptly bought the judgment. Company.

In Viguerie v. Hall, 107 La. 767, 31 South. 1019, this court considered and discussed at great length the question whether it was essentially wrong for the purchaser of a chose in action-even of a litigious rightto disguise the transaction as a purchase in the name of a third person, interposed for the purpose; and the ruling was that the

[4] The point on which this case turns in favor of the defendant is that the railroad company was not injured by the Chicago Lumber & Coal Company's buying the Bailey judgment, or by the assignment of the judgment to Whiting. The Athens Lumber ComBut the situation in pany was insolvent. that respect was not made worse for the railroad company by the Chicago Lumber & Coal

(100 So.)

gument to permit filing of charter of corporation not an abuse of discretion.

being assigned to Whiting. This case is 3. Trial 68(3)-Reopening of case after argoverned by the rules which govern the action by a creditor to annul a transaction made between his debtor and a third person in fraud of the creditor's rights. Rev. Civ. Code, arts. 1968-1994. The creditor, in such case, has no right or cause of action unless the transaction complained of is both fraudulent and injurious to him. Article 1978 declares:

"No contract shall be avoided by this action but such as are made in fraud of creditors, and such as, if carried into execution, would have the effect of defrauding them. If made in good faith, it cannot be annulled, although it prove injurious to the creditors; and although made in bad faith, it cannot be rescinded, unless it operate to their injury."

Even if the Athens Lumber Company had been adjudged to be under obligation to indemnify the railroad company for the railroad company's liability under the Bailey judgment, the railroad company would be in no better position than that of a creditor of the Athens Lumber Company. In that position the railroad company would have no right to complain of the transfer or assignment of the Bailey judgment, without a showing that the transfer or assignment de prived the railroad company of some right or advantage.

The judgment appealed from is annulled, and the plaintiff's demand is rejected, and its suit is dismissed at its cost.

ROGERS, LAND, and LECHE, JJ., dis

sent.

THOMPSON, J., recused.

(156 La.)

No. 24516.

GERTH'S REALTY EXPERTS, Inc., v.
KRACKE et al.

(Supreme Court of Louisiana. March 24, 1924.
Rehearing Denied by Division B
April 30, 1924.)

(Syllabus by Editorial Staff.j

1. Corporations ~668(15)—Service on president of foreign corporation not doing business in state held not to confer jurisdiction. In an action against foreign corporation not doing business in the state, service on president at his domicile did not confer jurisdiction ratione persone; Act No. 149 of 1890 being superseded by Act No. 54 of 1904.

Where corporate existence of corporation was attacked in suit by it, held, that it was not an abuse of discretion at conclusion of argument to reopen case to permit charter to be filed.

4. Corporations 28(1)-De facto corporation shown by filing of charter and admission of corporate existence.

existence was attacked, filing of charter and Where, in suit by corporation, its corporate admission of corporate existence established existence of at least de facto corporation.

5. Brokers 86(1)—Evidence held to support judgment.

In action to recover brokerage commissions for selling real estate, evidence held to sustain a judgment for plaintiff.

Appeal from Civil District Court, Parish of Orleans; H. C. Cage, Judge.

Action by Gerth's Realty Experts, Incorporated, against Thomas W. Kracke and the Gulf Coast Orchard & Products Company. Judgment for plaintiff, and defendants appeal. Reversed as to Company, and affirmed as to individual defendant.

Eugene S. Hayford, of New Orleans, for appellants.

George Montgomery, of New Orleans (F. F. Teissier, of New Orleans, of counsel), for appellee.

By Division A, composed of O'NIELL, C. J., and ROGERS and BRUNOT, JJ.

BRUNOT, J. This is a suit in personam against the Gulf Coast Orchard & Products Company and Thomas W. Kracke, in solido, for $3,400, with legal interest thereon from May 7, 1919.

From a judgment in favor of plaintiff as prayed for, both defendants have appealed.

The petition alleges that the sum sued for is the commission due plaintiff on the actual selling price of certain real estate.

- The Gulf Coast Orchard & Products Company is a Mississippi corporation. Thomas W. Kracke is the president of the corporation and the owner of a controlling interest therein. He has been a resident of Louisiana for many years. For the past four years he has resided about half the time in Mississippi, but it is admitted that he lives at 861 St. Charles street.

Citation upon the Gulf Coast Orchard & Products Company was made upon Thomas 2. Corporations 668 (1)-Exception to ci- W. Kracke, in person, in the city of New Ortation held not waived by objection to juris-leans. The Gulf Coast Orchard & Products diction ratione personæ. Company excepted to the citation. The exception is as follows:

Exception to citation on foreign corporation was not waived because it concluded with words "that this court is without jurisdiction ratione personæ."

"That exceptor is a Mississippi corporation doing business under the laws of the state of

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

Mississippi, and having its legal domicile at | pears that the exception was. overruled and Pascagoula, Jackson county, Miss., and that said corporation has no office in this state, and conducts no business in Louisiana, and that the service herein is not a good and valid service, and defendant excepts to same.

[1] After a hearing thereon the lower courtswered, denying the corporate existence of overruled the exception, and we think this ruling was erroneous. In support of its contention that the citation was valid plaintiff relies upon the decisions of this court rendered prior to 1904. Act No. 149 of 1890 was superseded by Act 54 of 1904. Jackson v. Waters-Pierce Oil Co., 136 La. 764, 67 South.