Hale v. Allinson, 188 U.S. 56 (1903)

Hale v. Allinson

Argued November 7, 1902
Decided January 19, 1903
188 U.S. 56

CERTIORARI TO THE CIRCUIT COURT OF

APPEALS FOR THE THIRD CIRCUIT

Syllabus

1. As construed by the highest court of Minnesota, the statutes of that state do not provide that a receiver of an insolvent corporation can recover the amount of the added liability of nonresident shareholders of the corporation, nor do they provide that such liability shall be an asset of the corporation, to be recovered by the receiver and payable to its creditors when such liability is enforced and the money recovered.

A receiver, appointed by a Minnesota court of equity, in the exercise of its general jurisdiction, of the assets of an insolvent Minnesota corporation, who has no title to the fund, but simply acts as the arm of the court, cannot by virtue of his appointment, or of directions contained in the decree appointing him, maintain an action in equity in a foreign state against nonresident stockholders of a corporation to enforce their double liability, nor can be maintain such an action in a circuit court of the United States in a district outside of Minnesota.

The question of comity cannot avail in a case where the courts of the state in which the receiver was appointed hold that an action similar to the one brought in the foreign jurisdiction cannot be maintained by him in the courts of the state of his appointment.

2. A single action in equity cannot be maintained in the circuit court of the United States in Pennsylvania by such receiver against all of the Pennsylvania stockholders of an insolvent Minnesota corporation for the statutory liability of each defendant as a stockholder on the ground that a single action would prevent a multiplicity of suits, nor can such an action be maintained on the ground that it is an ancillary or auxiliary proceeding brought in aid of, and to enforce, an equitable decree in an action brought in Minnesota in which the Pennsylvania stockholders bad been named as defendants with all the other stockholders, the receiver contending that such decree was conclusive as to the amount of indebtedness and the assets of the corporation, and the defendants were concluded as to the necessity of a resort to the stockholders’ liability, and the only question left open was the special liability of each stockholder (the Pennsylvania stockholders, however, not having been served, and not having appeared).

This case comes here by virtue of a writ of certiorari directed to the Circuit Court of Appeals for the Third Circuit. It is a suit in equity brought by a foreign receiver in the United States Circuit Court for the Eastern District of Pennsylvania to enforce the liability of stockholders, residing in Pennsylvania, of the Northwestern Guaranty Loan Company, a corporation of Minnesota.

Demurrers were filed setting up, among other grounds, that the receiver appointed under proceedings in Minnesota had no right to sue in any court of a foreign jurisdiction; also that, even if the receiver had the right to sue, there was an adequate remedy at law for whatever rights might exist in the receiver or any other person, and that no ground of equitable jurisdiction was stated. The circuit court sustained the demurrer on the ground that the remedy, if any the complainant had, was at law. 102 F. 790. The judgment was affirmed by the Circuit Court of Appeals for the Third Circuit. 106 F. 258.

The facts are these: in May, 1893, the loan company was adjudged insolvent in proceedings instituted, under the Minnesota statute in the District Court of Hennepin County, which court had jurisdiction, and the Minneapolis Trust Company was appointed a receiver of the corporate assets, and took possession thereof, and proceeded to the discharge of its duties. In November, 1893, one Arthur R. Rogers, who was the assignee of a judgment creditor of the corporation, whose execution against it had been returned wholly unsatisfied, filed a bill in equity in the Minnesota state court, in behalf of himself and all other creditors of the loan company, against that company and all its stockholders for the purpose of enforcing the stockholders’ liability to the creditors provided for by the statutes of Minnesota. Out of about five hundred stockholders, some twenty-three only resided in the State of Minnesota and were served with process.

The creditors of the loan company, as required by the court, came in and proved their debts against the company, but none of the nonresident stockholders had been served with process in the action, and not one of them appeared therein. It was adjudged that the defendants who were named as resident stockholders of the loan company, and over whom the court had acquired jurisdiction by the service of process upon them, were liable, to the extent of the par value of their stock, for the debts of the company. The decree also found a list of the creditors who had intervened and the amounts due to each of them from the loan company.

In addition to giving judgments against the resident stockholders of the loan company in favor of its ascertained creditors, the court also decreed as follows:

Tenth. That, for the purpose of enforcing and collecting said judgments and all thereof and any and all liability thereon or in anywise incident thereto, and any and all liability upon the part of nonresident stockholders of said Northwestern Guaranty Loan Company against whom no personal judgment for the ascertained liability is herein rendered, and disbursing the amounts so collected as hereinafter provided, W. E. Hale, Esq., has been by the order of this court appointed receiver, and has given bond in the sum of twenty-five thousand dollars and qualified as such receiver. That, by the terms of said order of appointment, said receiver was and hereby is authorized, empowered, and directed to take any and all appropriate or necessary steps or proceedings for the purpose of collecting the judgments herein rendered, and was and hereby is authorized, empowered, and directed to take any and all necessary or appropriate steps or proceedings against the nonresident stockholders of said defendant Northwestern Guaranty Loan Company against whom on personal judgment herein has been ordered, for the enforcement and realization upon their aforesaid stockholders’ liability, and, to that end, said receiver be and hereby is authorized, empowered, and directed to institute and prosecute all such actions or proceedings in foreign jurisdictions as may be necessary or appropriate to this end.

The decree also provided that jurisdiction of the cause should be retained until the adjustment of the several rights and liabilities of the respective parties.

Thereupon, the receiver thus appointed commenced this suit in equity to recover from the resident stockholders in Pennsylvania the full amount of the par value of the shares of stock held by them. Rogers, the assignee of the judgment creditor in the Minnesota action, was joined as complainant in this suit with the receiver, and a demurrer having been interposed on the ground, among others, of this joinder, the circuit court, upon the trial and upon the application of complainant, granted leave to dismiss the assignee as a party, and the case proceeded thereafter in the name of the receiver alone.