William Hale v. Edward Allinson

• Decision Date: 19 January 1903
• Docket Number: No. 77,77
• Citation: 23 S.Ct. 244,47 L.Ed. 380,188 U.S. 56
• Parties: WILLIAM E. HALE, as Receiver, etc., v. EDWARD P. ALLINSON et al
• Court: U.S. Supreme Court

188 U.S. 56

23 S.Ct. 244

47 L.Ed. 380

WILLIAM E. HALE, as Receiver, etc.,

v EDWARD P. ALLINSON et al.

No. 77.

Argued November 6, 7, 1902.

Decided January 19, 1903.

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 Fed. 790. The judgment was affirmed by the circuit court of appeals for the third circuit. 45 C. C. A. 270, 106 Fed. 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 $25,000 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.

Messrs. M. H. Boutelle, William E. Hale, Charles C. Lister, and A. L. Pincoffs for petitioner.

Mr. John G. Johnson for respondents.

Mr. Heman W. Chaplin as amicus curiae.

Mr. Justice Peckham, after making the foregoing statement of facts, delivered the opinion of the court:

Of the several grounds of demurrer to the bill herein, only two need be specially noticed. They are (1) that this complainant (receiver) has no right to sue in the courts of a state foreign to that in which he was appointed; and (2) that, even if he had the right to sue, there was no ground of equitable jurisdiction set forth in the bill, and the complainant's remedy, if any he had, was at law.

The circuit court sustained the demurrer on the ground that no case for equitable relief was stated, and dismissed the bill without prejudice. The circuit court of appeals sustained that view of the case, and affirmed the judgment, but also intimated that it was strongly inclined to the opinion that the complainant's appointment as receiver by the Minnesota court did not entitle him to sue as such in a foreign jurisdiction.

In our judgment both grounds of demurrer were well taken.

First. As to the right of the receiver appointed in the Minnesota action to sue in a foreign state. The portions of the Constitution and laws of Minnesota which are applicable are set forth in the margin.

Constitution of Minnesota, article 10, § 3, provides:

The Constitution of Minnesota, it will be seen, simply imposes a double liability upon the stockholders. The statutes of the state provide the only means of there enforcing that liability.

The supreme court of Minnesota has decided that the liability of the stockholder is to the creditor, and that the receiver of the company cannot enforce it. It was held, as far back as 1879, in Allen v. Walsh, 25 Minn. 543, that the only remedy to enforce the liability of stockholders was laid down in the General Statutes of Minnesota, chapter 76 (the one in question), and that the statute contemplated a single action, in which all persons having or claiming any interest in the subject of the action should be joined or particularly represented, and their respective rights, equities, and liabilities finally settled and determined. The receiver of an insolvent corporation was not a proper party to bring such action.

In Palmer v. Bank of Zumbrota, 65 Minn. 90, 67 N. W. 893 (decided in 1896), the court referred to Allen v. Walsh as holding that a receiver could not maintain an action to enforce the liability of the stockholders, and held that the direction in the decree then under review, ordering the receiver to sue the stockholders on such liability, was a harmless error which had been corrected before it was assailed.

Again, in Minneapolis Baseball Co. v. City Bank, 66 Minn. 441, 38 L. R. A. 415, 69 N. W. 331 (decided in 1896), it was once more distinctly held that a receiver could not, under chapter 76, maintain in the courts of that state an action to enforce such liability of stockholders. The supreme court of Minnesota has, however, in a very late case,—Hanson v. Davison, 73 Minn. 454, 76 N. W. 254 (decided in July, 1898),—somewhat limited or explained Allen v. Walsh, 25 Minn. 543, and, in the course of his opinion, the Chief Justice expressed views as to the right of a receiver to sue in an- other state under the facts which he rehearsed. The case does not, however, overrule the prior cases above referred to. The point as to the right of a receiver to sue in a foreign jurisdiction was not in issue or involved in the case. The material facts were, as stated in the opinion, that a creditor of the Citizens' Bank, which was an insolvent concern, brought an action (Harper v. Carroll, reported in 66 Minn. 487, 69 N. W. 610, 1069), in behalf of himself and all other creditors against all of the resident stockholders thereof, pursuant to the provisions of chapter 76, supra. The creditors of the bank intervened and proved their claims against it, and judgment was duly rendered in the action against the bank and all of its stockholders within the jurisdiction of the court, in favor of each of the creditors, of whom the complainant herein was one, for the amount of their claims respectively, as adjudged in that action. Executions were issued on each of these judgments, which were returned, and there still remained unpaid upon them the sum of forty odd thousand dollars, exclusive of interest. The defendant in the Hanson v. Davison action was named as a defendant in the other, or Harper v. Carroll, action, but being a nonresident, the court in the latter case did not acquire jurisdiction to render a judgment against her. In the opinion in Hanson v. Davison the court, after referring to the fact of nonresidence, continues:

'She was, however, a stockholder of the bank at the time it became insolvent and made its assignment, and ever since has been, and now...