Hale v. Coffin

• Decision Date: 05 March 1902
• Docket Number: 524.
• Citation: 114 F. 567
• Parties: HALE v. COFFIN.
• Court: U.S. District Court — District of Maine

114 F. 567

HALE v. COFFIN.

No. 524.

United States Circuit Court, D. Maine.

March 5, 1902

[Copyrighted Material Omitted]

M. H Boutelle and Eben Winthrop Freeman, for complaint.

Locke &amp Locke, for respondent.

PUTNAM Circuit Judge.

This is one of the group of cases growing out of the same receivership, and having its origin in the same circumstances as those shown in Hale v. Hardon (C.C.) 89 F. 283; Id., 37 C.C.A. 240, 95 F. 747; and in Hale v. Tyler (C.C.) 104 F. 757. The present case, however, is in equity, in order to reach the assets of the estate of a deceased stockholder which have been distributed to one of the legatees. Hale v. Hardon was at law, in the district of Massachusetts, and, of course, so far as parties were concerned, governed by sections 721 and 914 of the Revised Statutes. Therefore the result of that case can be accepted as in all respects authoritative within the district of Massachusetts only. The case at bar arose in the district of Maine, and therefore, for at least some purposes, may be governed by the peculiar laws of that state. Although in equity, it is based, as we will see, on a common-law right.

The complainant sues, in his capacity as so-called receiver,-- constituted as such by one of the courts of the state of Minnesota,-- on a certain proceeding brought by a judgment creditor of the Northwestern Guaranty Loan Company, a corporation organized under the laws of Minnesota, in behalf of himself and other creditors, solely for the purpose of enforcing against the stockholders thereof a peculiar liability imposed by the constitution of that state. The corporation became insolvent, and, in a proceeding in one of the courts of Minnesota prior to that in which the present complainant was appointed receiver, all its assets were sequestered and administered for the benefit of its creditors, so that in the proceeding in which the complainant was appointed receiver there were no remaining assets to be administered. The statutes of Minnesota provide that when, in a suit for enforcing the liability of a stockholder, there is found to remain corporate property, the court shall appoint one or more receivers, but that, if it appears that the corporation has no property, the court may proceed without appointing any receiver.

Therefore, under the constitution and laws of Minnesota, so far at least as this case is concerned, the mere right to proceed against stockholders originates and vests in the creditors, and not in any officer or other person appointed or to be appointed, or authorized or to be authorized by force of any statute or by any executive or judicial proceeding. Consequently no right of action against any stockholder of the corporation in question ever arose or vested in the complainant; and he has no title by virtue of any assignment, sequestration, executive or judicial action, or in any other way, and he is in fact only a master in chancery, appointed by the court to assist it in effectuating its decrees. Under these circumstances, if this were a suit at common law, brought within the district of Maine, where the rule has always prevailed, by virtue of which no action can be brought except by some party having a title, no suit could be maintained by the complainant in his own name, although, under the statutes of this state, if he were an assignee, an action might lie, and although, also, according to the rules of the common law, an action would lie in his name if the right of proceeding against the stockholders originated in him, instead of in the creditors. Moreover, although the right of action arose in another state, the courts in Maine would be compelled to enforce them, not on the ground of comity, which word can be properly used and applied by courts of common law only in its conventional and limited sense (Dicey, Confl. Laws, 14, 15), but because the constitution of the United States requires it (Stewart v. Railroad Co., 168 U.S. 445, 18 Sup.Ct. 105, 42 L.Ed. 537; Whitman v. Bank, 176 U.S. 559, 20 Sup.Ct. 477, 44 L.Ed. 587; Bank v. Farnum, 176 U.S. 640, 20 Sup.Ct. 506, 44 L.Ed. 619). So if, on any account, a failure of remedy is at any time threatened, it is for the courts to await the action of the legislature. That the remedy involves a matter of absolute law, not reached by any international rules, is illustrated by following the conclusion Hawkins v. Glenn, 131 U.S. 319, 9 Sup.Ct. 739, 33 L.Ed. 184. That suit was brought by an assignee in a jurisdiction where an assignee may bring any action in his own name, but as soon as the same assignee attempted to proceed in a jurisdiction where the common law prevailed the supreme court refused him relief. Glenn v. Marbury, 145 U.S. 499, 508, 12 Sup.Ct. 914, 36 L.Ed. 790.

Childs v. Cleaves, 95 Me. 498, 50 A. 714, is understood to assert in this district a different rule with reference to parties plaintiff; but, if so, it would be so clearly contrary to the law of Maine as it has existed from the origin of the state, adduced from the common law of England through the common law of Massachusetts, that it could not receive the assent of this court, and could not bind it. If it were of the character claimed for it in this particular, we would be obliged to stand to the uniformity of the law, regarding Childs v. Cleaves as concerning some oversight which the court at some future time would remedy. That such is the rule which governs us, even with reference to the construction of statutes, was made especially clear by Burgess v. Seligman, 107 U.S. 20, 2 Sup.Ct. 10, 27 L.Ed. 359. But Childs v. Cleaves does not necessarily go to the extent claimed for it. It is apparent that the court proceeded with reference to a receiver who was supposed to be of a different class from the one at bar. It is to be borne in mind that, while we take judicial notice of the statutes of Minnesota, they are made known to the courts of Maine only as pleaded or proven. Childs v. Cleaves went to the court in bench on a demurrer, and in what way the court was advised or ascertained with regard to the laws of Minnesota, and how fully it was advised, the case does not clearly show.

The judicial proceedings in Minnesota resulting in Childs v. Cleaves were of an apparently different character from those out of which grew the case at bar. With reference to the latter, the assets of the corporation had been sequestered and administered in a prior proceeding in Minnesota, and the present suit arose out of a subsequent proceeding, in which no remedy was sought except the enforcement of the stockholders' liability. It appears, however, from the opinion in Childs v. Cleaves, at page 502, 95 Me., and page 714, 50 Atl., that the receiver, who was the then plaintiff, was appointed in the same case in which the assets of the corporation were administered. In that proceeding, as there were assets, the statute required the appointment of a receiver, as we have already shown. The statutory provision applicable thereto was peremptory: 'and shall appoint one or more receivers. ' Childs v. Cleaves, 95 Me. 505, 50 A. 715. It is stated at page 502, 95 Me., and page 714, 50 Atl., that the administration of the estate by the receiver first appointed was completed in July, 1897, but that meanwhile, and pending that administration, an order was issued by the court in the same case, one intervention of creditors, for the enforcement of the stockholders' liability, and that thereupon, in the same month of July, a decree was entered against the stockholders in favor of the interveners, and Childs was appointed receiver for enforcing against stockholders the judgment rendered for the net balance of indebtedness. Whether he was appointed such by virtue of the powers vesting on the ordinary rules of equity, or as the successor of the receiver expressly required by statute, is not clear.

In any event, the court appears to have assumed that the right to sue stockholders originated, or at least vested, in Childs, as receiver, and not in the creditors. Indeed, this follows, apparently, from the reliance it placed on Relfe v. Rundle, 103 U.S. 222, 26 L.Ed. 337,-- a case of very narrow application. It involved the rights of the superintendent of insurance for Missouri, who was as said at page 225, 103 U.S., 26 L.Ed. 337, 'the statutory successor of the corporation for the purpose of winding up its affairs. ' The opinion was careful to observe that his authority did not come from the decree of the court, but from the statute, and it added, 'He was in fact the corporation itself, for all the purposes of winding up its affairs. ' Indeed, so far as the law is concerned, he stood the same as a corporation created by the legislature, as the successor of one or more old corporations, receiving the assets and charged lith the liabilities, as in the case of Maine Cent. R. Co. v. Maine, 96 U.S. 499, 24 L.Ed. 836. Under such circumstances, no foreign tribunal has ever questioned the proper joinder of the new corporation as a party, either plaintiff or defendant, with reference to the transactions of its statutory predecessor. Thus the reliance placed on Relfe v. Rundle in Childs v. Cleaves leads to the belief that the court did not intend to subvert the common law with reference to parties and rights as always known in Maine, and that therefore that decision has no necessary application to the case at bar.

Childs v. Cleaves emphasizes, at pages 508 and 509, 95 Me., and page 717, 50 Atl., Bank v. Farnum, 176 U.S. 640, 20 Sup.Ct. 506, 44 L.Ed. 619 and Whitman v. Bank, 176 U.S. 559, 20 Sup.Ct. 477, 44 L.Ed. 587; but those cases touch no question involved here, as there was nothing in them regarding parties or title. They only went to the effect that, where a right of this general nature is given by the...