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Kansas City, states in his deposition that timber, and Bailey was demanding payment about the middle of March, 1912, the Chicago of his judgment. This transfer was made Lumber & Coal Company requested him to on March 20, 1912, and, according to the purchase the Bailey judgment; that he did testimony of Mr. Fullerton, it not only had so, and the sum paid by the bank was re-exhausted its supply of timber, but had sold imbursed a short time thereafter by the its lumber and principal assets and its mill Chicago Lumber & Coal Company, and that had burned, and liquidators were appointed the assignment was taken in the name of during the following year, Fred D. Whiting, as was usually done in The assets were all handled by the Chicago such transactions.

Lumber & Coal Company, and the purpose The above testimony of Fullerton and of the transfer of this judgment was to hold Perry sounds very plausible, but its weight it until the entire assets of the subsidiary is seriously impaired by the letter of Frank had been pocketed by the principal corporaGoebel, treasurer of the Chicago Lumber & tion, and then to go after the railroad comCoal Company, of date March 15, 1912, ad- pany. dressed to J. W. Perry, president of the Na Even if the Chicago Lumber & Coal Comtional Bank of Commerce of Kansas City: pany was a purchaser of this judgment, and

“There has been a judgment rendered against if the Athens Lumber Company was not a the Athens Lumber Co., a subsidiary of this subsidiary of the Chicago Lumber & Coal company, by the Supreme Court of Louisiana, Company, still, having taken charge of and to the amount of $3,500.00. This judgment was appropriated the assets of the Athens Lumrendered in solido with the Louisiana & North. ber Company, it could not be in a better posiwest R. R. Co. We want an outside person to tion than the latter company itself, had it purchase this judgment and would like very paid the judgment. much to have you help us to this end. Our Mr. H. R. Swartz will call upon you and explain that the Athens Lumber Company is entitled

It is not denied by plaintiff in his brief just how our attorneys recommend this matter be handled. The amount of money necessary to bring this suit against the railroad comfor the purpose of the judgment—that is $3,- pany as cosolidary debtor to fix the status 500.00 and perhaps interest, we will ask you of the indebtedness as between themselves, to advance and charge to our account for the and of course the Chicago Lumber & Coal time being. You will appreciate the necessity Company has the same rights and remedies, oj this method of handling this. We, of course, but none other. expect to stand between you and any loss

The judgment of the lower court decreethrough this transaction." (Italics ours.)

ing that the Bailey judgment has been paid On March 16, the day after the letter was by the Athens Lumber Company and orderwritten, Mr. Perry, the president of the Na- ing the cancellation of said judgment on the tional Bank of Commerce, wrote Mr. Goebel, judicial and mortgage records is correct, treasurer of the Chicago Lumber & Coal and is affirmed. Company, from Kansas City:

PROVOSTY, C. J., and O'NIELL, J., dis“Your favor of the 15th received this morn

sent. ing and I also had a call from Mr. Swartz. We have complied with Mr. Swartz's request take no part, as they were not members of

ST. PAUL, LECHE, and THOMPSON, JJ., and will be glad to follow the matter up.”

the court when the case was argued and Frank Goebel, treasurer of the Chicago submitted. Lumber & Coal Company, who engineered this deal, says that this transfer was put in

On Rehearing. the name of Whiting, “because we did not

By the WHOLE COURT. care to be known at the time, and I know of no other object."

O'NIELL, C. J. This is a suit to cancel The reasons why the assignment of the judgment as having en paid. The judg. judgment was taken in the name of Whiting ment was rendered in favor of one W. Turgiven by Frank Goebel, treasurer of the de- ner Bailey against the Louisiana & Northfendant concern, “because we did not care west Railroad Company and the Athens to be known at this time, and I know of no Lumber Company, in solido, for $3,500, and other object,” flatly contradicts the reason was affirmed by this court in January, 1912. given by R. W. Fullerton, the secretary of Two months later the Chicago Lumber & the defendant company, for taking the as-Coal Company, defendant in this suit, being signment of the judgment in the name of a stockholder and creditor of the Athens Whiting, “we did not want any attachment Lumber Company, bought the judgment from served on the property, because we knew Bailey, to prevent execution against the that there was not sufficient property to pay Athens Lumber Company, and took an asour debt as it stood."

signment 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 LumCompany had about exhausted its supply of ber & Coal Company had bought the Bailey

(100 So.) judgment, and nearly two years after the gave judgment for the railroad company judgment had been affirmed, the stockholders against the Athens Lumber Company for $57 of the Athens Lumber Company voted to court costs, but rejected the demand for liquidate the corporation. The stockholders' cancellation of the judgment. On appeal, meeting was preceded by a publication of the this court affirmed the judgment. In the call for the meeting for the purpose of liqui- course of the opinion it was said that by dating, published in a newspaper in the the terms of the contract between the railparish where the Athens Lumber Company | road company and the Athens Lumber Comhad its domicile and principal business, pany, inasmuch as the train that caused the where the Bailey judgment had been render- accident had' authority from the railroad ed, and where the chief counsel for the rail. company's trainmaster to be out on the road company then resided.

track, the question whether it was the lumThe liquidators converted the assets of the ber company or the railroad company that Athens Lumber Company into cash, amount was liable primarily, or as principal obliing to approximately $15,000, and disbursed gor, depended upon which one of them was the proceeds. They paid the labor pay rolls, more at fault than the other; and it was approximately $2,500, and the current bills, held that the railroad company had no right approximately $5,000, and turned over the to have that question decided until the railbalance, approximately $7,500, to the Chi-road company had actually paid the judg. cago Lumber & Coal Company. That left ment. See Louisiana & N. W. Railroad Co. the Chicago Lumber & Coal Company a cred V. Athens Lumber Co., 134 La. 788, 64 South. itor of the Athens Lumber Company for ap 714, L. R. A. 1915B, 856. With regard to the proximately $70,000, besides the amount of railroad company's allegation that the judg. the Bailey judgment.

ment had been paid by the Athens Lumber Plaintiff contends that the Athens Lumber Company, the court said: 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. Plaintiff has not been "fraudulent simulation,” and had the effect subrogated to any of the rights of parties. If of paying and extinguishing the debt. The the judgment has been paid by the Athens district court so held, and the defendant | Lumber Company, it will simplify the issues Chicago Lumber & Coal Company has ap- very much. If it has been assigned and is now pealed.

held by a third person, as contended by the The judgment which the Chicago Lumber lumber company, it is not possible legally to

order that the judgment is satisfied and that & Coal Company bought from Bailey was the judicial mortgage must be canceled. That given for personal injuries suffered by him can only be done contradictorily with all parby being run down by a train operated by ties concerned." the Athens Lumber Company on the tracks of the railroad company while Bailey was This case is therefore a repetition of the operating a hand car as section foreman in suit of the railroad company against the the employ of the railroad company. In de- Athens Lumber Company, with the proper fending the suit, the railroad company claim- parties before the court. ed that under the contract between it and the

Opinion. lumber company for the operation of the lumber company's trains on the railroad com The Athens Lumber Company was a "subpany's tracks the lumber company was liable sidiary” corporation, only in the sense that as an indemnitor to the railroad company a majority of its capital stock-about 77 per for any damages that the latter might have cent.—was held by the Chicago Lumber & to pay. But in afirming the judgment in Coal Company. The latter owned 650 of the favor of Bailey this court merely reserved 840 shares of the Athens Company's stock, to the railroad company whatever rights the Of the remaining 190 shares 50 shares were latter had against the Athens Lumber Com- owned by a man who had no connection with pang. See Bailey v. Louisiana & Northwestor interest in the Chicago Lumber & Coal Railroad Co. et al., 129 La. 1029, 57 South. Company, and 140 shares were owned by one 325. Thereafter the railroad company sued who owned about $600 out of the total of apthe Athens Lumber Company to have it de proximately $4,000,000 of the common stock creed that the judgment in favor of Bailey of the Chicago Lumber & Coal Company. bad been paid by the Athens Lumber Com [1] The fact that the Chicago Company pany, and that the payment had extinguished owned the controlling stock in the Athens the debt entirely, because of the alleged Company did not destroy the identity or contract of indemnity. The allegation that the latter as a distinct legal entity. Some the judgment had been paid by thé Athens of the best authors on the subject go so far Lumber Company had reference to the trans as to maintain that it makes no difference in action now in contest, by which the Chic principle if the one corporation owns all of cago Lumber & Coal Company bought the the capital stock of the other. See 1 Fletcher Judgment in the name of Fred D. Whiting. on Corporations, $ 22, and the decisions cited. In the suit referred to, the district court The doctrine was recognized by this court

in Mercer v. Natchez Ball & Shreveport Rail- , wrong nor invalid per se. Chief Justice way Co., 141 La. 539, 75 South. 234, viz: Nicholls, for the court, said:

"The fact that the lumber company and the “It is no unusual occurrence for parties to railway company are interlocking corporations, place their property and rights in the name engaged in a common enterprise, owned and and under the control of others, without any. controlled by the same stockholders, and man- consideration whatever, and without the inten. aged by the same individuals, does not make tion of ownership being actually transferred. them one corporation with two names." Such acts are permissible, and cannot be gain.

said, unless they carry injury to some one. A The principle had been recognized in the simulation is not necessarily a fraud. It is Matter of John D. Belton, 47 La. Ann. 1614, only so when injury to third persons is in18 South. 642, in the ruling that the fact tended. "Gravier's Curator v. Carraby's Ex'r, that all of the shares of stock in a corpora-held that simulated transfers may be for a

17 La. 118, 36 Am. Dec. 608. Our court has tion, after it was created, were owned by a lawful purpose-as, for instance, to enable the less number of stockholders than the law transferee to bring suit; to raise money, etc. required as a condition for the organization See Emswiler v. Burham, 6 La. Ann. 710;. of such a corporation, did not destroy the Dosson v. Bieller, 10 La. Ann. 570; Stewart v. corporation as a legal entity.

Newton, 12 La. Ann. 622. Parties opposing [2] A stockholder who becomes also a such acts must allege and show wherein they creditor of the corporation has the same

are aggrieved thereby. Hen. La. Dig. 180. rights that its other creditors have; and, if This doctrine finds expression in repeated adhe pays a debt of the corporation, in excess judications of this court in matters of bills of his liability as a stockholder, he has the the 'holder of negotiable paper, indorsed in

and notes, under a syllabus to the effect that same rights and remedies for recovering the blank, may sue, though only agent, in his own amount that any other creditor would have: name, or he may sue as holding the legal title Fletcher on Corporations, p. 6852; Guerney for the use of the real owner. Defendant has v. Moore, 131 Mo. 650, 32 S. W. 1132; La no right to inquire whether plaintiff, in whom Salle Street Trust & Savings Bank v. Topeka the legal title appears to be vested, be an agent Milling Co., 101 Ka 446, 167 Pac. 1036, of the real owner, unless by a fictitious assignL. R. A. 1918A, 574; Blalock v. Kernersville ment, it be attempted to deprive him of subMfg. Co., 110 N. C. 99, 14 S. E. 501; 7 R. stantial grounds of defense which he may have

against the true owner.'” C. L. 306. [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 the only reason for taking the assignment Lumber Company. Even if the railroad 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 judgmentLumber & 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.

[4] The point on which this case turns in In Viguerie v. Hall, 107 La. 767, 31 South. favor of the defendant is that the railroad 1019, this court considered and discussed at company was not injured by the Chicago great length the question whether it was Lumber & Coal Company's buying the Bailey essentially wrong for the purchaser of a judgment, or by the assignment of the judge chose in action-even of a litigious right-ment to Whiting. The Athens Lumber Comto disguise the transaction as a purchase pany was insolvent. But the situation in in the name of a third person, interposed for that respect was not made worse for the rail. the purpose; and the ruling was that the road company by the Chicago Lumber & Coal disguising of such a transaction was neither Company's buying the judgment-or by its

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(100 So.) being assigned to Whiting. This case is 3. Trial Om68(3)-Reopening of case after argoverned by the rules which govern the ac gument to permit filing of charter of corpora. tion by a creditor to annul a transaction made tion not an abuse of discretion. between his debtor and a third person in Where corporate existence of corporation fraud of the creditor's rights. Rev. Civ. was attacked in suit by it, held, that it was not Code, arts. 1968–1994. The creditor, in such an abuse of discretion at conclusion of argucase, has no right or cause of action unless ment to reopen case to permit charter to be

filed. the transaction complained of is both fraudulent and injurious to him. Article 1978 de- 4. Corporations on 28(1)-De facto corporaclares:

tion shown by filing of charter and admission

of corporate existence. "No contract shall be avoided by this action but such as are made in fraud of creditors, existence was attacked, filing of charter and

Where, in suit by corporation, its corporate and such as, if carried into execution, would admission of corporate existence established have the effect of defrauding them. If made existence of at least de facto corporation. in good faith, it cannot be annulled, although it prove injurious to the creditors; and al- 5. Brokers 86(1)-Evidence held to support though made in bad faith, it cannot be rescind

judgment. ed, unless it operate to their injury."

In action to recover brokerage commissions Even if the Athens Lumber Company had for selling real estate, evidence held to sustain been adjudged to be under obligation to

a judgment for plaintiff. indemnify the railroad company for the railroad company's liability under the Bailey

Appeal from Civil District Court, Parish of judgment, the railroad company would be Orleans; H. O. Cage, Judge. in no better position than that of a creditor Action by Gerth's Realty Experts, Incorof the Athens Lumber Company. In that porated, against Thomas W. Kracke and the position the railroad company would have Gulf Coast Orchard & Products Company. no right to complain of the transfer or as- Judgment for plaintiff, and defendants apsignment of the Bailey judgment, without a peal. Reversed as to Company, and affirmed showing that the transfer or assignment de as to individual defendant. prived the railroad company of some right

Eugene S. Hayford, of New Orleans, for or advantage.

appellants. The judgment appealed from is annulled,

George Montgomery, of New Orleans (F. and the plaintiff's demand is rejected, and

F. Teissier, of New Orleans, of counsel), for its suit is dismissed at its cost.

appellee. ROGERS, LAND, and LECHE, JJ., dis By Division A, composed of O'NIELL, O. sent.

J., and ROGERS and BRUNOT, JJ. THOMPSON, J., recused.

BRUNOT, J. This is a suit in personam against the Gulf Coast Orchard & Products

Company and Thomas W. Kracke, in solido, (156 La.)

for $3,400, with legal interest thereon from No. 24516.

May 7, 1919.

From a judgment in favor of plaintiff as GERTH'S REALTY EXPERTS, Inc., V.

prayed for, both defendants have appealed. KRACKE et al.

The petition alleges that the sum sued for (Supreme Court of Louisiana. March 24, 1924. is the commission due plaintiff on the actual Rehearing Denied by Division B

selling price of certain real estate. April 30, 1924.)

The Gulf Coast Orchard & Products Com

pany is a Mississippi corporation. Thomas (Syllabus by Editoriol Staff.;

W. Kracke is the president of the corporation 1. Corporations Ewa 668(15)-Service on pres- and the owner of a controlling interest there ident of foreign corporation not doing busi. in. He has been a resident of Louisiana for ness in state held not to confer jurisdiction. many years. For the past four years he has

In an action against foreign corporation resided about half the time in Mississippi, not doing business in the state, service on pres- but it is admitted that he lives at 861 St. ident at bis domicile did not confer jurisdiction ratione personæ; Act No. 149 of 1890 be- Charles street. ing superseded by Act No. 54 of 1904.

Citation upon the Gulf Coast Orchard &

Products Company was made upon Thomas 2. Corporations Cm 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 persona.

Company excepted to the citation. The ex. Exception to citation on foreign corporation was not waived because it concluded with ception is as follows: words "that this court is without jurisdiction “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

ratione personæ."

Mississippi, and having its legal domicile at | pears that the exception was, overruled and Pascagoula, Jackson county, Miss., and that leave was granted the defendant to flle anothsaid corporation has no office in this state, and

er exception. Thereupon plaintiff filed a sup conducts no business in Louisiana, and that the plemental petition together with the contract service herein is not a good and valid service, sued upon, and defendant filed an exception and defendant excepts to same. "That this court is without jurisdiction ra

of no right or cause of action as to both the tione personæ.”

original and supplemental petitions. The ex

ception was overruled, and defendant an[1] After a hearing thereon the lower court swered, denying the corporate existence of overruled the exception, and we think this the plaintiff and the authority of Charles S. ruling was erroneous. In support of its con- Gerth, its general manager, to represent it in tention that the citation was valid plaintiff this proceeding, denying any indebtedness to relies upon the decisions of this court ren- the plaintiff or the existence of any contract dered prior to 1904. Act No. 149 of 1890 was with the plaintiff, but admitting that, as the superseded by Act 54 of 1904. Jackson v. representative of the Gulf Coast Orchard & Waters-Pierce Oil Co., 136 La. 764, 67 South. Products Company, he entered into the con822.

tract sued upon with Charles S. Gerth person. [2] It was contended in the argument that ally. The defendant denies that the contract because the exception concludes with the was altered or changed by oral agreement, words "that this court is without jurisdic- or that Charles S. Gerth carried out his part tion ratione personæ" the defendant has of the agreement. The answer concludes coupled with its exception to the citation a with a charge of bad faith, in that Charles S. plea to the jurisdiction of the court, and, as Gerth represented both the purchaser and this plea is not made in the alternative with the seller in the negotiations, without the reservation of defendant's rights under the knowledge of defendant. exception, the plea waives the exception to

During the progress of the trial the plainthe citation. We do not concur in this view. tiff offered to introduce in evidence the origThis is a suit in personam against non- inal charter of Gerth's Realty Experts, Inc., resident corporation that does no business in together with the certificate of the recorder this state, has no agent or designated repre- of mortgages, the newspaper clipping atsentative here, and owns no property in tached to the charter showing the publication Louisiana.

thereof, and the certificate of the Secretary "It is well settled that those who are absen- of State, with leave to substitute a certified tees without property here, whether they are copy for the original. When this offering was persons or corporations, must be sued at their made counsel for the defendant entered the domicile, in all actions in personam.” Gouner following admission : v. Missouri Valley Bridge & Iron Co., 123 La. 964, 49 South. 657.

"I will admit that that is the charter, and

that it is a corporation." Transcript, p. 81. In the Gouner Case this court says: “When a petition cannot legally be served on

In view of this admission, the documents a defendant, the court can exercise no juris- tendered were not filed. Thereafter Mr. diction over him. The service defines the George Montgomery, plaintiff's counsel, was court's jurisdiction. * * The leading case called as a witness, and counsel for defend. of Pennoyer v. Neff, 95 U. S. 714, 24 L. Ed. ant asked and obtained from him answers to 565, is admirably clear. It lays down the rule the questions as follows: with precision. * * That case has been affirmed and reaffirmed by the Supreme Court "Q. What is your connection with Gerth's of the United States. The state courts have Realty Experts Company, Inc.? invariably accepted it."

"A. President and stockholder.

"Q. Have you always been president of that The exception in this case is to the citation, corporation ? and because there was not a good and valid

"A. Yes. service it is alleged in the exception that the

"Q. Are you a stockholder of that corpora

tion? court is without jurisdiction ratione personæ.

"A. Yes. We cannot consider this reference to the

"Q. To what extent? court's lack of jurisdiction as an independent

"A. To the extent mentioned in the charter; or alternative plea, or as waiving any right 20 shares. of the defendant.

"Q. Have you paid for your stock? Thomas W. Kracke excepted to the peti- A. Yes. tion as disclosing no right or cause of action. "Q. In what form ?" Pending a hearing on this exception a prelim'inary default was entered against this de At this point the witness addressed the fendant. On motion of counsel for defend-1 court as follows: ant a rule was issued to show cause why the

"Of course, I am giving this testimony subdefault should not be set aside. The minuteject to your honor's rule, that, in order to atentries do not disclose what hearing, if any, tack the charter, he must make a direct allegawas had on the rule to show cause, but it ap- tion."

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