294 U.S. 629 (1935), 528, Broderick v. Rosner

Docket Nº:No. 528
Citation:294 U.S. 629, 55 S.Ct. 589, 79 L.Ed. 1100
Party Name:Broderick v. Rosner
Case Date:April 01, 1935
Court:United States Supreme Court
 
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Page 629

294 U.S. 629 (1935)

55 S.Ct. 589, 79 L.Ed. 1100

Broderick

v.

Rosner

No. 528

United States Supreme Court

April 1, 1935

Argued February 15, 1935

APPEAL FROM THE COURT OF

ERRORS AND APPEALS OF NEW JERSEY

Syllabus

A statute of New Jersey (Corporation Act, § 94(b)) provides that no proceeding may be maintained in the courts of that State to enforce a stockholder's statutory personal liability arising under the laws of another State except suits in the nature of

an equitable accounting for the proportionate benefit of all parties interested, to which such corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties.

The Superintendent of Banks of New York brought an action in a New Jersey court against 557 New Jersey stockholders of a New York bank to recover unpaid assessments levied upon them pursuant to the banking laws of New York. The bank had altogether 20,843 stockholders and more than 400,000 depositors and other creditors, many of whom resided elsewhere than in New Jersey. The court held the action barred by the New Jersey statute; suggested that leave might be granted to file a bill in equity pursuant thereto.

Held:

1. The New Jersey statute, as here applied, effectively denies to the Superintendent the right to resort to the courts of that State to enforce the liability of stockholders residing there; the complaint conformed to the New Jersey practice, and the action would have been entertained but for the statute. Pp. 639-640.

2. The nature of the cause of action brings it within the scope of the full faith and credit clause; the subject matter is not such as permits considerations of local policy to dominate rules of comity. P. 643.

3. That the assessment was made under statutory direction by an administrative officer does not preclude the application of the full faith and credit clause. P. 644.

4. That the administrative determination of the assessment made in New York may be subject to collateral attack does not justify the New Jersey court in refusing to take jurisdiction of the Superintendent's suit. P. 646.

Page 630

5. Question whether Superintendent's determination as to the propriety and amount of the assessment are conclusive not decided. P. 646.

6. The full faith and credit clause require that the action of the Superintendent in this case be entertained. P. 647.

113 N.J.L. 305; 174 A. 507, reversed.

Appeal from a judgment affirming a judgment sustaining a motion to strike out the complaint in an action brought in the Supreme Court of New Jersey by the Superintendent of Banks of New York to enforce an assessment levied on stockholders pursuant to the banking laws of New York.

Page 637

BRANDEIS, J., lead opinion

MR. JUSTICE BRANDEIS delivered the opinion of the Court.

Pursuant to article VIII, § 7, of the Constitution of New York, its Banking Law (Consolidated Laws, Chapter Two) provides, § 120:

The stockholders of every bank will be individually responsible, equally and ratably and not one for another, for all contracts, debts and engagements of the bank to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares.

Page 638

The Bank of the United States is a corporation organized under the Banking Law of New York, and had its places of business in New York City. Its outstanding capital stock is $25,250,000, represented by 1,010,000 shares of $25 par value. On November 17, 1933, Joseph A. Broderick, as Superintendent of Banks of the New York, brought, in the Supreme Court of New Jersey, this action against 557 of its stockholders who are residents of New Jersey, to recover unpaid assessments levied by him upon them pursuant to law.

The defendant moved to strike out the complaint on the ground, among others, that, by reason of § 94(b) of the Corporation Act of New Jersey (2 Comp. St. 1910, p. 1656), it failed to set out a cause of action enforceable in any court of that State. The section, first enacted March 30, 1897, provides:

No action or proceeding shall be maintained in any court of law in this state against any stockholder, officer, or director of any domestic or foreign corporation by or on behalf of any creditor of such corporation to enforce any statutory personal liability of such stockholder, officer, or director for or upon any debt, default, or obligation of such corporation, whether such statutory personal liability be deemed penal or contractual, if such statutory personal liability be created by or arise from the statutes or laws of any other state [55 S.Ct. 591] or foreign country, and no pending or future action or proceeding to enforce any such statutory personal liability shall be maintained in any court of this state other than in a nature of an equitable accounting for the proportionate benefit of all parties interested, to which such corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties.

Broderick seasonably claimed that to sustain the asserted bar of the statute would violate article IV, § 1, of the Federal Constitution, which provides that "Full

Page 639

Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State," and the legislation of Congress enacted pursuant thereto. The trial court sustained the motion to strike out the complaint, Broderick v. Abrams, 112 N.J.Law, 309, 170 A. 214, on the ground that the statute of the state constituted a bar to the action. Judgment against the plaintiff, with costs, was entered in favor of each of the defendants, and the judgment was affirmed by the Court of Errors and Appeals "for the reasons expressed in the opinion" of the trial court. 113 N.J.Law, 305, 174 A. 507. An appeal to this Court was allowed.

First. The conditions imposed by § 94(b) of the New Jersey statute upon the bringing of suits to enforce such assessments, as here applied, deny to the Superintendent the right to resort to the courts of the State to enforce the assessment of liability upon the stockholders there resident. The requirement that the proceeding be by bill in equity, instead of by an action at law, would, if standing alone, be no obstacle. But, by withholding jurisdiction unless the proceeding be a suit for an equitable accounting to which the "corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties," it imposes a condition which, as here applied, is legally impossible of fulfillment. For it is not denied that, according to...

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