1. A judgment for a fine imposed in a criminal case is
enforceable, like a civil judgment, by execution (Rev.Stats., §
1041), and by creditor's bill. P.
255 U. S.
401.
2. A corporation against which an indictment was pending for
taking rebates in violation of the Elkins Act divested itself of
its assets by distributing them among its stockholder, who were
also its officers and had notice of the prosecution.
Held
that the United States, having secured a conviction a year later
upon which a fine
Page 255 U. S. 399
was imposed, was entitled to pursue the assets by creditor's
bill against the stockholders to satisfy the judgment. P.
255 U. S.
402.
3. The United States, to satisfy a judgment recovered and upon
which execution has been returned unsatisfied in one district, may
bring a creditor's bill in another district in another state,
without a preliminary issue of execution and return of
nulla
bona there. So
held where it was agreed that the
judgment debtor had no property out of which the judgment could
have been satisfied at law. P.
255 U. S.
404.
4. A corporation against which an indictment was pending under
the Elkins Act sold all its property to another corporation, which
assumed its "debts, obligations, and liabilities" as part of the
purchase price.
Held that, assuming the second corporation
thus became liable to satisfy a judgment for a fine imposed upon a
subsequent conviction in the criminal case, the existence of such
legal remedy did not operate to debar the United States from
seeking satisfaction of the judgment in equity by a creditor's bill
against the stockholders of the first corporation, nor did the
institution by the United States of a suit against the second
company to subject land, part of the property purchased, to its
judgment amount to an election of remedies. P. 404.
5. Inasmuch as a judgment in favor of the United States may be
made the basis of an execution in any state and district
(Rev.Stats. § 986), the objection that a corporation against which
the United States has a judgment in one district is a necessary
party to a creditor's bill brought by the government in another
state and district to obtain satisfaction from the stockholders is
purely technical and, if not made in the circuit court of appeals,
cannot be availed of in this Court as a ground for attacking a
decree against the stockholders. P.
255 U. S.
405.
6. Under Rule 24 of the Circuit Court of Appeals for the Eighth
Circuit, a plain error may be noticed though not assigned or
specified.
Held that such an error, refused consideration
in that court because first called to its attention by petition for
rehearing, was assignable and reviewable here. P.
255 U. S.
405.
7. A judgment recovered by the United States as a fine in a
prosecution by indictment does not bear interest, since interest is
statutory, and Rev.Stats. § 966, the provision most nearly
applicable, applies only to judgments recovered by civil process.
Id.
257 F. 514 modified and affirmed.
Appeal from a decree of the circuit court of appeals affirming a
decree of the district court in favor of the
Page 255 U. S. 400
United States in a creditor's suit brought by the government
against stockholders to satisfy a fine recovered from their
corporation.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
In 1907, the Waters-Pierce Oil Company, a Missouri corporation,
was indicted in the district court of the United States for the
Western District of Louisiana under the Elkins Act (Act Feb.19,
1903, c. 708, § 2, 32 Stat. 847) for receiving rebates. In 1913,
the company sold and transferred all its property to the Pierce Oil
Corporation, all the proceeds were paid to Henry S. Priest and Clay
Arthur Pierce as trustees, and they distributed the same among the
stockholders. Of these Henry Clay Pierce and the Pierce Investment
Company received millions in cash and stock and Clay Arthur Pierce
a small amount. In 1914, the case under the Elkins Act was tried.
The company was convicted and sentenced to pay a fine of $14,000,
and in the following year the judgment was affirmed by the circuit
court of appeals.
Waters-Pierce Oil Co. v. United States,
222 F. 69. An execution issued thereon to the marshal for that
district, and was returned
nulla bona. Thereafter, this
bill in equity was brought by the United States in the federal
District Court for the Eastern district of Missouri against the
Waters-Pierce Oil Company, the trustees, and these three
stockholders to obtain satisfaction of the judgment out of the
money remaining in the hands of the trustees and that received by
these stockholders. The district court entered a decree dismissing
the bill as against the Waters-Pierce Company and the trustees, but
granted, as against the stockholders
Page 255 U. S. 401
named, the relief prayed by the government. The decree was
affirmed by the Circuit Court of Appeals for the Eighth Circuit,
one judge dissenting. The case is brought here by these defendants,
under § 241 of the Judicial Code. Reversal is sought on several
grounds.
First. The ground for reversal most strongly urged is
that the judgment imposing a fine on the Waters-Pierce Company is
not a debt on which a creditor's bill will lie. The argument is
that a judgment for a definite sum of money does not necessarily
endow the holder with all the rights of a creditor; that a court
will look behind a judgment and will grant or deny relief according
to the nature of the original cause of action, as it did in
Wisconsin v. Pelican Insurance Co., 127 U.
S. 265,
Louisiana v. New Orleans, 109 U.
S. 285, and
Wetmore v. Markoe, 196 U. S.
68, and that, since liability for a penalty is criminal
in its nature and not strictly a debt, a creditor's bill cannot be
brought upon a judgment for a penalty. It is true that to the
liability for penalties imposed by the United States certain
incidents of a criminal proceeding attach.
See Boyd v. United
States, 116 U. S. 616;
United States v. Stevenson, 215 U.
S. 190,
215 U. S. 199.
But the liability is often enforced by civil proceedings, and
specifically by the action of debt.
Lees v. United States,
150 U. S. 476.
See Adams v. Woods,
2 Cranch 336,
6 U. S. 340. And
then certain incidents of civil proceedings attach.
Hepner v.
United States, 213 U. S. 103.
By § 1041 of the Revised Statutes, it is provided (in addition
to the power existing by general usage to commit a defendant to
jail until his fine has been paid,
see Ex parte Barclay,
153 F. 669) that judgments for penalties "may be enforced by
execution against the property of the defendant in like manner as
judgments in civil cases are enforced." The statute applies to all
judgment for penalties, whether recovered by civil or criminal
proceedings. A judgment creditor's bill is in
Page 255 U. S. 402
essence an equitable execution comparable to proceedings
supplementary to execution.
See Ex parte Boyd,
105 U. S. 647. The
law which sends a corporation into the world with the capacity to
act imposes upon its assets liability for its acts. The corporation
cannot disable itself from responding by distributing its property
among its stockholders and leaving remediless those having valid
claims. In such a case, the claims, after being reduced to
judgments, may be satisfied out of the assets in the hands of the
stockholders.
* There is no good
reason why the rule should be limited to judgments arising out of
civil proceedings. To the contention that the statute has not made
this process available for the government in enforcing a penalty,
it may be answered as was done by the King's Bench a hundred years
ago, in
King v. Woolf, 2 B. & Ald. 609, 611, when it
was insisted that a fine due to the crown was not a judgment debt
for which execution could be levied:
"mischievous consequences would ensue to the crown and the
regular administration of justice, from a delinquent's withdrawing
all his property from the effect of a judgment, and the preventing
that will not be a mischievous consequence to any one but himself.
Here, there is a judgment that the defendant do pay to the King a
fine of a certain sum. By that judgment, the debt becomes a debt to
the king, of record, and it is payable to the king
instanter. . . . If we were to say that the crown shall
not be at liberty to issue an immediate execution for its own debt,
we should place the crown in a worse situation than any
subject."
Second. It is contended that the right to bring a
creditor's bill did not exist, because the judgment against
Page 255 U. S. 403
the company was not entered in the trial court until a year
after the company had divested itself of the property sought to be
reached in this suit, and the government did not become a creditor,
at all events, until after its claim for penalties had ripened into
judgment. But when a corporation divests itself of all its assets
by distributing them among the stockholders, those having
unsatisfied claims against it may follow the assets although the
claims were contested and unliquidated at the time when the assets
were distributed. It is true that the bill a reach and apply the
assets distributed among the stockholders cannot, as a matter of
equity jurisdiction and procedure, be filed until the claim has
been reduced to judgment and the execution thereon has been
returned unsatisfied.
Hollins v. Brierfield Coal & Iron
Co., 150 U. S. 371.
But, as a matter of substantive law, the right to follow the
distributed assets (
See Railway v.
Howard, 7 Wall. 392,
74 U. S. 409;
Northern Pacific Ry v. Boyd, 228 U.
S. 482;
Kansas City Ry. v. Guardian Trust Co.,
240 U. S. 166)
applies not only to those who are creditors in the commercial
sense, but to all who hold unsatisfied claims. A corporation
cannot, by divesting itself of all property, leave remediless the
holder of a contingent claim or the obligee of an executory
contract (
Baltimore & Ohio Tel. Co. v. Interstate Tel.
Co., 54 F. 50) or the holder of a claim in tort (
Hastings
v. Drew, 76 N.Y. 9;
Jahn v. Champagne Lumber Co., 157
F. 407), and there is no good reason why the United States, with a
claim for penalties, should be in a worse plight. Here, the
stockholders receiving the assets are in the position of
volunteers, and there is not even the excuse that they were
ignorant of the government's claim. They were officers of the
corporation, and the indictment was pending when the transfer of
the assets was made.
See Baltimore & Ohio Tel. Co. v.
Interstate Tel. Co., supra.
Page 255 U. S. 404
Third. It is contended that the bill should have been
dismissed because the execution issued to the marshal for the
Eastern District of Missouri was not returned unsatisfied until
after the commencement of the suit. It has been held that, in
litigations between private parties, a creditor's bill cannot be
maintained in a federal court upon a judgment recovered in a state
other than that in which suit is brought,
National Tube Works
v. Ballou, 146 U. S. 517,
146 U. S. 523,
and that a return unsatisfied of the execution issued on the
judgment sued on is held essential to the maintenance of the
creditor's suit,
Taylor v. Bowker, 111 U.
S. 110. But this strict rule is not applicable where the
United States is the judgment creditor. Under § 986 of the Revised
Statutes, an execution issued in favor of the United States by any
of its courts runs in every part of the United States, just as,
under § 985, an execution on a judgment obtained in favor of any
party in a district court where the state is divided into two or
more districts may run and be executed in any part of the state.
Toland v.
Sprague, 12 Pet. 300,
37 U. S. 328.
Here, the execution issued to the Louisiana marshal had been
returned
nulla bona before this suit was brought, and it
is agreed that, when this suit was begun, the Waters-Pierce Oil
Company had no property in Missouri or elsewhere out of which the
judgment could be satisfied at law. To hold that, under such
circumstances, the suit must fail because the return of
nulla
bona was not made by the marshal for the Eastern district of
Missouri until after the filing of the original bill would apply a
well settled rule to a case not within its scope.
Fourth. It is contended that the bill should have been
dismissed because the government had an adequate remedy by suing
the Pierce Oil Corporation, and, indeed, had commenced such a suit.
That corporation assumed, as part of the purchase price of the
Waters-Pierce Oil Company, its "debts, obligations and
liabilities." Before
Page 255 U. S. 405
commencing this suit, the government had brought, in a federal
district court for Louisiana, a suit against the Pierce Oil
Corporation to subject to the satisfaction of its judgment certain
parcels of land conveyed to the corporation by the Waters-Pierce
Oil Company. But, in the Louisiana suit, the Pierce Oil Corporation
denied liability, insisting that the government was not a creditor
of the Waters-Pierce Oil Company. The United States could not have
been required to accept in lieu of its claim against the judgment
debtor even an admitted obligation of the new corporation to pay
it. The existence of that possible remedy did not bar the
government from following by a creditor's bill the assets of the
corporation into the stockholder's hands. Nor did the suit against
the Pierce Oil Corporation amount to an election of remedies which
should have led the lower courts to dismiss this bill. The two
remedies were consistent.
See Zimmerman v. Harding,
227 U. S. 489,
227 U. S.
494.
Fifth. The contention is faintly made that the decree
should be reversed because the district court dismissed the bill as
against the Waters-Pierce Oil Company, a necessary party, citing
Swan Land & Cattle Co. v. Frank, 148 U.
S. 603,
148 U. S. 610.
The argument ignores the fact that this judgment, being in favor of
the United States, is, under § 986 of the Revised Statutes,
effective, and may be made the basis of an execution running in a
state and district other than that in which the judgment was
rendered. It was doubtless for this reason that the district judge
concluded that it was unnecessary, if not improper, to enter in
this suit judgment against Waters-Pierce Oil Company. The objection
is purely technical. Since it was not set up among the many errors
assigned in the court of appeals and in this Court, it cannot be
availed of here.
Sixth. It is urged that the district court erred in
allowing interest on the penalty ($14,000) from the date
Page 255 U. S. 406
of the indictment, January 29, 1907. This was not assigned as
error in the circuit court of appeals, and for this reason that
court refused to consider it on a petition for rehearing. In the
assignment of errors filed in this Court, the objection was
properly raised. Under Rule 24 of the Circuit Court of appeals for
the Eighth Circuit, the court may "notice a plain error not
assigned or specified," and we think it should have done so in this
case. In allowing interest from January 29, 1907, the district
court was clearly under the misapprehension that that was the date
of the judgment, for the decree so recites, whereas in fact
judgment was not entered until March, 1914. But interest was not
even allowable from that time. At common law judgments do not bear
interest; interest rests solely upon statutory provision.
Perkins v.
Fourniquet, 14 How. 328;
Washington &
Georgetown R. Co. v. Harmon, 147 U. S. 571,
147 U. S.
584-585. The only applicable statute of the United
States is § 966 of the Revised Statutes, which provides that
"interest shall be allowed on all judgments in civil causes. . . ."
Since the penalty was not recovered by civil process, but by
judgment in a proceeding initiated by a criminal indictment, it
obviously does not fall within the terms of the statute. Interest
therefore is allowable only on the judgment from the date when it
was entered against the defendants in this case -- namely March 11,
1918.
The judgment of the circuit court of appeals, as modified,
is
Affirmed.
*
Wood v. Dummer, 3 Mason, 308;
Railroad
Co. v. Howard, 7 Wall. 392;
Northern P. Ry. Co.
v. Boyd, 228 U. S. 482,
228 U. S. 502;
Kansas City Ry. Co. v. Guardian Trust Co., 240 U.
S. 166;
Johnson v. Canfield-Swigart Co., 292
Ill 101;
Hastings v. Drew, 76 N.Y. 9.