By the WHOLE COURT.
LAND, J.
During the year 1907 W. Tur-' ner Bailey, who was an employee of the Louisiana & Northwest Railroad Company, .was injured by the train of the Athens Lumber Company, which it was operating over the line of said railroad company, under a contract by the terms 'of which the said Athens Lumber Company obligated and [21]*21•bound itself to be responsible for all damages that may occur in consequence' of its operating its locomotives or trains Over tbe tracks of said railroad company.
Bailey instituted suit against the railroad company and the Athens Lumber Company for said injuries received by him, and prayed for judgment in solido against both defendants for the sum of $10,000. A judgment was rendered in Bailey’s favor in the lower court against both defendants in solido for the sum of $3,500 with costs, and was affirmed by this court on appeal. See Bailey v. La. & Northwest R. R. Co. et al., 129 La. 1029, 57 South. 325.
The receiver of said railroad company, alleging in his petition that said judgment has been paid by the Athens Lumber Company, the same being a debt of the Athens Lumber Company, for which under its contract it alone is responsible as between the railroad company and itself, has instituted the present suit to have said judgment canceled, and removed from the records, as it operates as a judicial mortgage against the property of the railroad company.
Petitioner alleges that the Athens Lumber Company is a subsidiary of the Chicago Lumber & Coal Company; that the officers and stockholders of the latter company own and control a majority of the stock of the said Athens Lumber Company; that said companies entered into a fraudulent agreement to procure the National Bank of Commerce, of Kansas City, Mo., to advance the money and pay off the Bailey judgment against the railroad company and the Athens Lumber Company, and to take an assignment of said judgment in their name, and to hold the same until such time as the Chicago Lumber & Coal Company instructed them to transfer the same to whomever they stated. Petitioner alleges that in order to carry out said fraudulent scheme the National Bank of Commerce caused.one Fred D. Whiting to take an assignment in his name, which was done for the benefit of said ■ bank, in accordance with the fraudulent agreement between said Chicago Lumber & Coal Company and the Athens Lumber Company. Pe^ titioner alleges that the Chicago Lumber & Coal Company paid the said bank, and the said amount paid was the proceeds of the Athens Lumber Company’s output of its mill plant, which the Chicago Lumber & Coal Company, its officers and stockholders owned, and operated, and that for this judgment of Bailey they were both liable by virtue of said Chicago Lumber & Coal Company owning and controlling the Athens Lumber Company.
Petitioner alleges that the acts of the said Chicago Lumber & Coal Company, the Athens Lumber Company, the National Bank of Commerce, and Fred D. Whiting was a fraudulent simulation entered into by all of said parties to shield and protect thes said Athens Lumber Company and its property from paying the judgment for which it was responsible, and thereby force the Louisiana & Northwest Railroad Company to pay same.
Petitioner alleges that the Chicago Lumber & Coal Company allowed said assignment to Whiting to remain in his name until the said Chicago Lumber & Coal Company and the Athens Lumber Company could dispose of all the Athens Lumber Company’s property of every kind and nature, and dissolve its corporate capacity, the .Chicago Lumber & Coal Company receiving the benefits of the proceeds of said. Athens. Lumber Company’s property and assets well knowing that the Louisiana & Northwest Railroad Company was making every effort to locate and prove the payment of this Bailey judgment, and that they knew that it instituted a suit against the Athens Lumber Company to declare this judgment the debt of the Athens Lumber Company and to decree it [23]*23paid. Petitioner alleges that they also knew that the National Bank of Commerce and Whiting refused as witnesses in said cause to state anything connected with said assignment of said judgment, or to give any statement of the entries on their bank books wherein the payment or assignment appeared, and declined to give a statement of the account of the Chicago Lumber & Coal Company with said bank. Petitioner alleges that they also knew that the lower court in said suit of Louisiana & N. W. R. R. Co. v. Athens Lumber Co., 134 La. 788, 64 South. 714, L. R. A. 1915B, 856, decreed that the Athens Lumber Company was responsible for the Bailey judgment, and ordered them to pay the court expenses, which the railroad had incurred and paid in defending said Bailey.
Petitioner alleges that the Chicago Lumber & Coal Company now claims that it is the owner by purchase and assignment of the Bailey judgment, and that said claim of ownership is a fraudulent simulation as stated above.
Defendant company denies, of course, any fraudulent simulation, scheme, or agreement of any sort; alleges its good faith in purchasing said judgment, and its subrogation by the said Bailey to his rights to enforce the said judgment against either or both of the parties thereto, precisely as the said Bailey might have done. Defendant denies that the amount which it paid to Bailey for the purchase of the said judgment was the proceeds of the Athens Lumber Company’s output of its mill plant, and defendant denies that it owned or operated the Athens Lumber Company or controlled the same. Defendant company prays that plaintiff’s suit against it be rejected at its costs, and that there be judgment recognizing the defendant as the holder and owner of the original judgment in favor of W. Turner Bailey against the Athens Lumber Company and the Louisiana & Northwest Railroad Company in solido, subrogated to all of the rights of the said Bailey and entitled.to enforce the said judgment precisely as he might have done.
The defendant the Chicago Dumber & Coal Company would have it appear to the court that said company is and always has been a distinct and separate corporate entity from the Athens Lumber Company, and that the latter corporation was organized in good faith, and operated by its officers arid stockholders as a distinct and separate corporation, and that the only relation that has existed'between defendant company and the Athens Lumber Company has arisen in the usual course of dealings between such companies, defendant company alleging that it is in the business of jobbing lumber, i. e., of purchasing the output of mills, advancing money thereon, and selling such output to other dealers in lumber, and that in this way defendant company established business connections with the Athens Lumber Company, which became a debtor to the defendant -company to a large amount.
While defendant company denies in its answer that it has owned any stock at any time in the Athens Lumber Company, yet it admits in said answer that it is true that individuals who hold stock in the Chicago Lumber & Coal Company also hold a majority of the stock in the Athens Lumber Company. But Itobt. W. Fullerton, a stockholder, a member of the board of directors, and the secretary of the Chicago Lumber & Coal Company, places a very different aspect upon the relations existing between said company and the Athens Lumber Company in the testimony given by him and found in his depositions filed in this suit. .
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By the WHOLE COURT.
LAND, J.
During the year 1907 W. Tur-' ner Bailey, who was an employee of the Louisiana & Northwest Railroad Company, .was injured by the train of the Athens Lumber Company, which it was operating over the line of said railroad company, under a contract by the terms 'of which the said Athens Lumber Company obligated and [21]*21•bound itself to be responsible for all damages that may occur in consequence' of its operating its locomotives or trains Over tbe tracks of said railroad company.
Bailey instituted suit against the railroad company and the Athens Lumber Company for said injuries received by him, and prayed for judgment in solido against both defendants for the sum of $10,000. A judgment was rendered in Bailey’s favor in the lower court against both defendants in solido for the sum of $3,500 with costs, and was affirmed by this court on appeal. See Bailey v. La. & Northwest R. R. Co. et al., 129 La. 1029, 57 South. 325.
The receiver of said railroad company, alleging in his petition that said judgment has been paid by the Athens Lumber Company, the same being a debt of the Athens Lumber Company, for which under its contract it alone is responsible as between the railroad company and itself, has instituted the present suit to have said judgment canceled, and removed from the records, as it operates as a judicial mortgage against the property of the railroad company.
Petitioner alleges that the Athens Lumber Company is a subsidiary of the Chicago Lumber & Coal Company; that the officers and stockholders of the latter company own and control a majority of the stock of the said Athens Lumber Company; that said companies entered into a fraudulent agreement to procure the National Bank of Commerce, of Kansas City, Mo., to advance the money and pay off the Bailey judgment against the railroad company and the Athens Lumber Company, and to take an assignment of said judgment in their name, and to hold the same until such time as the Chicago Lumber & Coal Company instructed them to transfer the same to whomever they stated. Petitioner alleges that in order to carry out said fraudulent scheme the National Bank of Commerce caused.one Fred D. Whiting to take an assignment in his name, which was done for the benefit of said ■ bank, in accordance with the fraudulent agreement between said Chicago Lumber & Coal Company and the Athens Lumber Company. Pe^ titioner alleges that the Chicago Lumber & Coal Company paid the said bank, and the said amount paid was the proceeds of the Athens Lumber Company’s output of its mill plant, which the Chicago Lumber & Coal Company, its officers and stockholders owned, and operated, and that for this judgment of Bailey they were both liable by virtue of said Chicago Lumber & Coal Company owning and controlling the Athens Lumber Company.
Petitioner alleges that the acts of the said Chicago Lumber & Coal Company, the Athens Lumber Company, the National Bank of Commerce, and Fred D. Whiting was a fraudulent simulation entered into by all of said parties to shield and protect thes said Athens Lumber Company and its property from paying the judgment for which it was responsible, and thereby force the Louisiana & Northwest Railroad Company to pay same.
Petitioner alleges that the Chicago Lumber & Coal Company allowed said assignment to Whiting to remain in his name until the said Chicago Lumber & Coal Company and the Athens Lumber Company could dispose of all the Athens Lumber Company’s property of every kind and nature, and dissolve its corporate capacity, the .Chicago Lumber & Coal Company receiving the benefits of the proceeds of said. Athens. Lumber Company’s property and assets well knowing that the Louisiana & Northwest Railroad Company was making every effort to locate and prove the payment of this Bailey judgment, and that they knew that it instituted a suit against the Athens Lumber Company to declare this judgment the debt of the Athens Lumber Company and to decree it [23]*23paid. Petitioner alleges that they also knew that the National Bank of Commerce and Whiting refused as witnesses in said cause to state anything connected with said assignment of said judgment, or to give any statement of the entries on their bank books wherein the payment or assignment appeared, and declined to give a statement of the account of the Chicago Lumber & Coal Company with said bank. Petitioner alleges that they also knew that the lower court in said suit of Louisiana & N. W. R. R. Co. v. Athens Lumber Co., 134 La. 788, 64 South. 714, L. R. A. 1915B, 856, decreed that the Athens Lumber Company was responsible for the Bailey judgment, and ordered them to pay the court expenses, which the railroad had incurred and paid in defending said Bailey.
Petitioner alleges that the Chicago Lumber & Coal Company now claims that it is the owner by purchase and assignment of the Bailey judgment, and that said claim of ownership is a fraudulent simulation as stated above.
Defendant company denies, of course, any fraudulent simulation, scheme, or agreement of any sort; alleges its good faith in purchasing said judgment, and its subrogation by the said Bailey to his rights to enforce the said judgment against either or both of the parties thereto, precisely as the said Bailey might have done. Defendant denies that the amount which it paid to Bailey for the purchase of the said judgment was the proceeds of the Athens Lumber Company’s output of its mill plant, and defendant denies that it owned or operated the Athens Lumber Company or controlled the same. Defendant company prays that plaintiff’s suit against it be rejected at its costs, and that there be judgment recognizing the defendant as the holder and owner of the original judgment in favor of W. Turner Bailey against the Athens Lumber Company and the Louisiana & Northwest Railroad Company in solido, subrogated to all of the rights of the said Bailey and entitled.to enforce the said judgment precisely as he might have done.
The defendant the Chicago Dumber & Coal Company would have it appear to the court that said company is and always has been a distinct and separate corporate entity from the Athens Lumber Company, and that the latter corporation was organized in good faith, and operated by its officers arid stockholders as a distinct and separate corporation, and that the only relation that has existed'between defendant company and the Athens Lumber Company has arisen in the usual course of dealings between such companies, defendant company alleging that it is in the business of jobbing lumber, i. e., of purchasing the output of mills, advancing money thereon, and selling such output to other dealers in lumber, and that in this way defendant company established business connections with the Athens Lumber Company, which became a debtor to the defendant -company to a large amount.
While defendant company denies in its answer that it has owned any stock at any time in the Athens Lumber Company, yet it admits in said answer that it is true that individuals who hold stock in the Chicago Lumber & Coal Company also hold a majority of the stock in the Athens Lumber Company. But Itobt. W. Fullerton, a stockholder, a member of the board of directors, and the secretary of the Chicago Lumber & Coal Company, places a very different aspect upon the relations existing between said company and the Athens Lumber Company in the testimony given by him and found in his depositions filed in this suit. . This witness states that he has served as the secretary of the Chicago Lumber & Coal Company for the last 7 or 8 years; that the Athens Lumber Company was organized about 15 years ago; that at the time of his depositions the Athens Lum[25]*25ber Company had been in liquidation for several years; that he was one of the liquidators, and was appointed in October, 1913; that the officers of the Athens Lumber Company, at the time it went into liquidation, consisted of R. W. Fullerton, president, J. T. Burlingame, vice president, E. J. Robbe, secretary, and Frank Goebel, treasurer; that E. J. Robbe, at the time he was appointed liquidator of the Athens Lumber Company, was a stockholder, a director, and secretary of said company, and auditor of the Chicago Lumber & Coal Company; that the officers ,of the Chicago Lumber & Coal Company at the time the witness Robt. W. Fullerton was appointed liquidator for the Athens Lumber Company consisted of S. H. Fullerton, president, Robert Fullerton, vice president, Frank Goebel, treasurer, and himself, Robt. W. Fullerton, secretary; that Robert Fullerton, Jr., had joined the army, and that witness Robt. W. Fullerton, secretary of the Chicago Lumber & Coal Company, was a son of S. H. Fullerton, its president. The testimony of this witness shows that at the time he and Robbe took charge of the assets of the Athens Lumber Company no inventory was made; that the liquidators took possession of all the assets of the Athens Lumber Company and converted same into cash, amounting to $15,000; that the amount of the claim of the Chicago Lumber & Coal Company against the Athens Lumber Company was $75,000; that the moneys that came into the hands of the liquidators were paid out, and that neither cash or assets of any kind remained on hand, and that the liquidation was entirely closed. It shows that the liqui: dation was conducted out of court, and that the stockholders of the Athens Lumber Company, composed of the witness Robt. W. Fullerton, B. J. Robbe, J. E. Kennedy, and J. A. Cleaton, appointed Robt. W. Fullerton and E. J. Robbe as liquidators, and the witness Robt. W. Fullerton did not pay for the stock in the Athens Lumber Company that stood in his name. The testimony of this witness further shows that out of the assets of the Athens Lumber Company, he first paid the pay roll in full, and then paid the current bills, “and,” to quote the language of the witness, “that left the Chicago Lumber & Coal Company as the only remaining creditor, and whatever then remained on hand I turned over to it (the Chicago Lumber & Coal Company).”
This witness is rather vague in some of his answers. He states that the pay roll amounted to $2,000 or $3,000, and that the current bills were about the same. As he admits that the assets of the Athens Lumber Company when converted into cash, realized about $15,000; then, deducting from this sum the amount of the pay roll and the current bills, i. e., from $4,000 to $6,000, the Chicago Lumber & Coal Company, defendant in this case, received out of said assets a sum amounting to $9,000 at the least and to $11,000 at the highest calculation.
The witness R. W. Fullerton, when recalled for direct examination, stated that the Chicago Lumber & Coal Company purchased the Bailey judgment because Bailey had threatened to attach the property of the Athens Lumber Company and the Athens Lumber Company owed the Chicago Lumber & Coal Company money, and that it was natural that, “we did not want any attachment served on the property, because we knew that there was not sufiicient property to pay our debt as it stood.” J. W. Perry, president of the National Bank of Commerce, Kansas City, states in his deposition that about the middle of March, 1912,-the Chicago Lumber & Coal Company requested him to purchase the Bailey judgment;' that he did so, and the sum paid by the bank was reimbursed a short time thereafter by the Chicago Lumber & Coal Company, and that the assignment was taken in the name of Fred D. Whiting, as was usually done in such transactions.
[27]*27The above testimony of Fullerton and Perry sounds very plausible, but its weight is seriously impaired by the letter of Frank Goebel, treasurer of the Chicago Lumber & Coal Company, of date March 15, 1912, addressed to J. W. Perry, president of the National Bank of Commerce of Kansas City:
“There has been a judgment rendered against the Athens Lumber Co., a subsidiary of this company, by the Supreme Court of Louisiana, to the amount of $3,500.00. This judgment was rendered in solido with the Louisiana & Northwest R. R. Go. We want an outside person to purchase this judgment and would like very much to have you help us to this end. Our Mr. H. E. Swartz will' call upon you and explain fust how our attorneys recommend this matter be handled. The amount of money necessary for the purpose of the judgment — that is $3,-500.00 and perhaps interest, we will ask you to advance and charge to our account for the time being. You will appreciate the necessity of this method of handling this. We, of course, expect to stand between you and any loss through this transaction.” (Italics ours.)
On March 16, the day after the letter was written, Mr. Perry, the president of the National Bank of Commerce, wrote Mr. Goebel, treasurer of the Chicago Lumber & Coal Company, from Kansas City:
“Your favor of the _15th received this morning and I also had a call from Mr. Swartz. We háve complied with Mr. Swartz’s request and will be glad to follow the matter up.”
Frank Goebel, treasurer of the Chicago Lumber & Coal Company, who engineered this deal, says that this transfer was put in the name of Whiting, “because we did not care to be known at the time, and I know of no other object.”
, The reasons why the assignment of the judgment was taken in the name of Whiting given by Frank Goebel, treasurer of the defendant concern, “because we did not care to be known at this time, and I know of no other object,” flatly contradicts the reason given by E. W. Fullerton, the secretary of the defendant company, for taking the assignment of the judgment in the name of Whiting, “we did not want any attachment served on the property, because we knew that there was not sufficient property to pay our debt as it stood.”
The reason for the simulated assignment to Whiting is apparent. The testimony shows conclusively that the Athens Lumber Company had about exhausted its supply of timber, and Bailey was demanding payment of his judgment. This transfer was made on March 20, 1912, and, according to the testimony of Mr. Fullerton, it not only hag! exhausted its supply of timber, but had sold its lumber and principal assets and its mill had burned, and liquidators were appointed during the following year.
The assets were all handled by the Chicago Lumber & Coal Company, and the purpose of the transfer of this judgment was to hold it until the entire assets of the subsidiary had been pocketed by the principal corporation, and then to go after the railroad company.
Even if the Chicago Lumber & Coal Company was a purchaser of this judgment, and if the Athens Lumber Company was not a subsidiary of the Chicago Lumber & Coal Company, still, having taken charge of and appropriated the assets of the Athens Lumber Company, it could not be in a better position than the latter company itself, had it paid the judgment.
It is not denied by plaintiff in his brief that the Athens Lumber Company is entitled to bring this suit against the r.ailroad company as cosolidary debtor to fix the status of the indebtedness as between themselves, and of course the Chicago Lumber & Coal Company has the same rights and remedies, but none other.
The judgment of the lower court decreeing that the Bailey judgment has been paid by the Athens Lumber Company and ordering the cancellation of said judgment on the [29]*29judicial and mortgage records is correct, and is affirmed.
PROVOSTY, C. J., and O’NIELL, J., dissent.
ST. PAUL, LECHE, and THOMPSON, JJ., take no part, as they were not members of the court when the ease was argued and submitted.