Broderick v. Rosner
Decision Date | 01 April 1935 |
Docket Number | No. 528,528 |
Citation | 294 U.S. 629,100 A.L.R. 1133,79 L.Ed. 1100,55 S.Ct. 589 |
Parties | BRODERICK, Superintendent of Banks, v. ROSNER et al |
Court | U.S. Supreme Court |
Messrs. Carl J. Austrian, of New York City, and James D. Carpenter, Jr., of Jersey City, N.J., for appellant.
[Argument of Counsel from page 630 intentionally omitted] Mr. Walter J. Bilder, of Newark, N.J., for appellees Mary Rosner and others.
[Argument of Counsel from pages 631-632 intentionally omitted] Mr. David Friedenberg, of Hoboken, N.J., for appellees Charles P. Anderson and others.
[Argument of Counsel from pages 633-635 intentionally omitted] Mr. J. H. Harrison, of Newark, N.J., for appellees Bobdon Co. and others.
Pursuant to article 8, § 7, of the Constitution of New York, its Banking Law (Consol.Laws, c. 2) provides, section 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.'
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 State of 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 section 94b 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 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 4, § 1, of the Federal Constitution, which provides that, 'Full 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. Broderick v. Rosner, 55 S.Ct. 218, 79 L.Ed. —-.
First. The conditions imposed by section 94b 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 the decisions of the New Jersey courts 'necessary parties' means those whose presence in a suit is essential as a jurisdictional prerequisite to the entry of judgment, so that no decree can be made respecting the subject-matter of litigation until they are before the court, Wilkinson v. Dodd, 40 N.J. Eq. 123, 130, 3 A. 360; In re Martin, 86 N.J. Eq. 265, 98 A. 510; McBride v. Garland, 89 N.J.Eq. 314, 104 A. 435; and that to secure jurisdiction personally over those who are not residents of New Jersey, or engaged in business there, is impossible. Pen- noyer v. Neff, 95 U.S. 714, 24 L.Ed. 565; Wilson v. American Palace Car Co., 65 N.J.Eq. 730, 55 A. 997; Papp v. Metropolitan Life Insurance Co., 113 N.J.Eq. 522, 530, 167 A. 873. The corporation has no place of business in New Jersey; only a few of the many stockholders and creditors have either residence or place of business there.
Moreover, even if it were legally possible to satisfy the statutory condition by making substituted service by publication upon nonresident stockholders and creditors (compare Kirkpatrick v. Post, 53 N.J.Eq. 591, 594, 32 A. 267; Id., 53 N.J.Eq. 641, 33 A. 1059), the cost would be prohibitive. The number of the stockholders is 20,843; the number of depositors and other creditors exceeds 400,000; and the amounts assessed against the individual defendants are relatively small—against some only $50. The aggregate of sheriff's fees alone as to the nonresident defendants, aside from expenses of publication and mailing, would exceed the aggregate amount due from the New Jersey stockholders.1 The suggestion, in the opinion of the Supreme Court, that leave might be granted to file a bill in equity is, therefore, without legal significance.
Second. But for the statute, the action would have been entertained. Compare Young v. Masci, 289 U.S 253, 53 S.Ct. 599, 77 L.Ed. 1158, 88 A.L.R. 170. New Jersey has provided courts with jurisdiction of suits of like nature and procedure otherwise appropriate for their determination. McDermott v. Woodhouse, 87 N.J. Eq. 615, 620, 101 A. 375; Graham v. Fleissner, 107 N.J. Law, 278, 153 A. 526; Western Nat. Bank v. Reckless (C.C.) 96 F. 70. Compare Cochrane v. Morris, 157 A. 652, 10 N.J.Misc. 82. The plaintiff is not, as in Booth v. Clark, 17 How. 322, 15 L.Ed. 164, a foreign receiver. He sues as an independent executive in whom has been vested by statute the cause of action sued on. Converse v. Hamilton, 224 U.S. 243, 257, 32 S.Ct. 415, 56 L.Ed. 749. The complaint is in conformity to the state practice (see 112 N.J. Law, 309, 310, 170 A. 214; Beatty v. Lincoln Bus Co., 169 A. 286, 11 N.J.Misc. 938), and it sets forth the facts essential to a recovery against the stockholder under the law of New York. It shows that the requirements of a valid assessment and of the right to enforce the same by action at law have been complied with, alleging, among other things: That, on December 11, 1930, Broderick pursuant to section 57 of the New York Banking Law, took possession of the Bank's business and property; that since May 6, 1931, he has been engaged in liquidating the same; that prior to July 1, 1932, he determined, pursuant to sections 80 and 120, that the reasonable value of the assets of the Bank was not sufficient to pay the creditors in full and that there was due them $30,000,000 in excess of such reasonable value; that the deficiency then fixed and determined has continued ever since; that upon the Superintendent of Banks is imposed the duty of making assessment upon the stockholders and enforcing the liability of stockholders for the benefit of the creditors and that actions to enforce the liability are to be brought in the name of the Superintendent;2 that prior to July 1, 1932, he determined that an assessment of $25 against each stockholder for each share of stock held by him was required for the payment of the Bank's indebtedness; that he duly made upon each stockholder a demand for the payment thereof on August 8, 1932; and that among the stockholders upon whom such demand was made and who failed to pay are the several defendants.
Third. The power of a State to determine the limits of the jurisdiction of its courts and the character of the controversies which shall be heard therein is subject to the limitations imposed by the Federal Constitution. McKnett v. St. Louis-San Francisco Ry., 292 U.S. 230, 233, 54 S.Ct. 690, 78 L.Ed. 1227. A 'State cannot escape its constitutional obligations (under the full faith and credit clause) by the simple device of denying jurisdiction in such cases to Courts otherwise competent.' Kenney v. Supreme Lodge, 252 U.S. 411, 415, 40 S.Ct. 371, 372, 64 L.Ed. 638.3 It is true that a State can legislate only with reference to its own jurisdiction, Bonaparte v. Tax Court, 104 U.S. 592, 26 L.Ed. 845; Olmsted v. Olmsted, 216 U.S. 386, 30 S.Ct. 292, 54 L.Ed. 530, 25 L.R.A.(N.S.) 1292; and that the full faith and credit clause does not require the enforcement of every right which has ripened into a judgment of another state or has been conferred by its statutes. See Bradford Electric Light Co. v. Clapper, 286 U.S. 145, 160, 52 S.Ct. 571, 76 L.Ed. 1026, 82 A.L.R. 696; Alaska Packers Association v. Industrial Accident Commission, 294 U.S. 532, 55 S.Ct. 518, 79 L.Ed. 1044. But the room left for the play of conflicting policies is a...
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