Where a case turns upon the construction by a state court of a
statute of another state, and not upon the validity of such
statute, a decision on that question is not necessarily of a
federal character. It depends upon the particular facts of each
case and the manner in which they are presented, how far such
questions can be regarded as coming under the full faith and credit
clause of the Constitution.
As decided in
Hale v. Allinson, 188 U. S.
56, a receiver of an insolvent corporation appointed by
the courts of Minnesota under the statutes of that state then
existing cannot maintain an action outside of that state to enforce
the statutory double liability of the stockholders; in refusing to
allow such a receiver to maintain such an action, the courts of
Wisconsin did not fail to give full faith and credit to the laws
and judgments of Minnesota, under the federal Constitution.
Where the law of a foreign jurisdiction has been proved as a
fact, the evidence of a witness, stating such law and decisions as
to its meaning and effect, does not preclude the court from itself
consulting and construing such statute and decisions and deducing
its own opinion in regard thereto,
Eastern Building & Loan
Assn. v. Williamson, ante, p.
189 U. S. 122, nor
is the right and duty of the courts to themselves construe statutes
and decisions of a foreign jurisdiction altered because such law
and decisions are set forth in a pleading which is demurred to
instead of being proved as facts on a trial.
Whether, apart from federal questions, the courts of one state
should permit an action of this nature to be maintained on the
principle of comity is a question exclusively for the state court
to decide.
Page 189 U. S. 336
This action was commenced in the proper court of the State of
Wisconsin to enforce the shareholders' liability under a Minnesota
statute, in a corporation of Minnesota and doing business in that
state. The defendant demurred to the complaint on the ground, among
others, that it did not state facts sufficient to constitute a
cause of action. The demurrer was overruled by the trial court and
judgment given for the plaintiff, which was reversed by the supreme
court of the state, and the case has been brought here by plaintiff
to review the judgment of reversal.
The facts alleged in the complaint are in substance these: that
during all the times therein mentioned, the American Savings &
Loan Association, one of the plaintiffs herein, was a corporation
organized under the laws of the State of Minnesota, and on June 18,
1896, William D. Hale, another plaintiff in this action, was
appointed receiver thereof; that the Farmers' & Merchants'
State Bank was on June 6, 1888, a banking organization, by virtue
of the laws of the State of Minnesota, and doing business as such;
that the bank became insolvent in June, 1893, and the entire net
proceeds of the bank's assets amounted to the sum of $12,539.95,
all of which had been paid over to the State of Minnesota on
account of the indebtedness of the bank to the State of over
$28,000, which was a preferred claim under the laws of that state;
that its other debts amounted to the sum of more than $100,000, and
it had no property to satisfy the same; that the defendant, Mary A.
Guy, a resident of the State of Wisconsin, was the owner of three
shares of the capital stock of the bank in her own right, and that
she owned sixteen shares of the stock of the bank as executrix of
the will of her husband and as legatee thereunder.
It was then averred that suit had been commenced in Minnesota in
1894 to enforce the liability of the stockholders of the bank under
and by virtue of the laws and Constitution of the State of
Minnesota; that such suit had been commenced by the American
Savings & Loan Association, which was a creditor of the bank,
in behalf of itself and all other creditors who should come in and
make themselves parties to the suit and
Page 189 U. S. 337
prove their claims therein, and against all the stockholders of
the bank; process was, however, not served on this defendant, but
only on those residing within the state; that such proceedings were
had in the suit that judgment was duly rendered therein on April
28, 1897, in favor of the complainant, the American Savings &
Loan Association, for the amount of the indebtedness of the bank to
it, and also in favor of the other creditors of the bank, who had
duly intervened, for the various amounts due them from the bank. It
was also adjudged that the amount of the debts of said bank
aggregated the sum of $106,471.71.
It was then further averred in the complaint that Finney (one of
the plaintiffs herein) was appointed receiver in the Minnesota suit
for the purpose of collecting and enforcing the respective
liabilities of the defendant stockholders, and that an order had
been made authorizing and empowering him to proceed against those
of the defendant shareholders residing in such other jurisdictions
for the purpose of enforcing the liabilities of such shareholders,
and with full power and authority to distribute the proceeds of
such action among the parties entitled thereto, after final payment
in full, out of the proceeds, of the costs and expenses incurred,
etc. It was then averred that, pursuant to the instructions of the
Minnesota court, Finney, as receiver therein, commenced this action
against Mary A. Guy, and joined with him as plaintiffs all the
creditors of the bank who had proved their claims in the Minnesota
suit, and it was also averred that Mrs. Guy was liable to the
creditors of the bank in the sum of $3,800, double the amount of
the par value of the three shares owned by her individually and of
the sixteen shares formerly owned by her husband, and that she was
the only stockholder who was a resident of Wisconsin, and therefore
the only defendant in the case, and that the full amount of her
double liability, if recovered, would be wholly insufficient to pay
the indebtedness of the bank after applying everything that could
be collected from all the other stockholders, some of whom were
insolvent, some had been compromised with, and from others nothing
could be collected.
Page 189 U. S. 338
The complaint then set forth several sections of the General
Statutes of the State of Minnesota of 1878, among them being
sections 5905-5907 and 5911, and it was averred that this action
could be maintained by reason of such sections. They are the same
as are set forth in
Hale v. Allison, 188 U. S.
56. It was then averred that decisions in the courts of
the State of Minnesota had been rendered relating to the liability
of stockholders under those statutes, in corporations organized
under the laws of that state, as to the proper method of enforcing
such liability. The complaint then referred to some twenty
different decisions in the state courts of Minnesota by titles, and
gave a reference to the volumes in which they were reported, and it
then stated what the law of Minnesota was under those decisions and
statutes as to the liability of stockholders and the manner in
which that liability could be enforced, and the effect of a
judgment recovered in a state court by a creditor in his own behalf
and in behalf of all others similarly situated, and it averred that
a judgment such as was obtained in the Minnesota suit was
conclusive upon stockholders, even though they were not parties
thereto, as to all questions of indebtedness of the bank and who
were its creditors, and that defendant, though not served with
process in that suit, was concluded by the judgment as to her
liability as shareholder, except as therein stated. It also averred
that, after such a judgment had been obtained, the Minnesota
decisions held that, under those statutes, a suit could be
maintained in the courts of another jurisdiction, similar to the
one before us, and the complaint ended with a prayer for judgment
that the defendant should pay the plaintiff the sum of $3,800, with
interest thereon since April 28, 1897, and that A.C. Finney, one of
the plaintiffs, be appointed receiver herein, to collect the amount
and distribute the same
pro rata among the other
plaintiffs.
Page 189 U. S. 339
MR. JUSTICE PECKHAM, after making the foregoing statement of
facts, delivered the opinion of the Court.
The demurrer raises the question whether the complaint states
facts sufficient to constitute a cause of action. The plaintiffs
contend that their cause of action is based upon the decisions and
judgments of the courts of the State of Minnesota, and upon the
statutes of that state, and that the Wisconsin Supreme Court, in
sustaining the demurrer, has thereby failed to give that full faith
and credit to the laws and judgments of the State of Minnesota and
its courts which they receive in that state and which they are
entitled to under the Constitution and laws of the United States,
and that, by reason thereof, a federal right has been denied
them.
They urge that, under the judgment of the
American Savings
and Loan Association v. Farmers' & Merchants' State Bank,
which was recovered in the Minnesota court and is referred to in
the foregoing statement of facts, the defendant is concluded as to
her defense to the same extent she would have been had she appeared
and contested her liability in the Minnesota courts, and that, as a
consequence, the Wisconsin courts are bound to give the same effect
to that judgment in their courts that it has in the courts of
Minnesota; that if such effect had been awarded that judgment, then
this action could have been maintained, and the Wisconsin court, in
sustaining the demurrer, denied such effect to the judgment, which
was a violation of a right founded upon the federal
Constitution.
It is stated by the Supreme Court of Wisconsin that that state
for many years has had a statute for the enforcement of the
liability of stockholders in corporations similar to that which
exists in Minnesota, and that it had been frequently decided under
such statute that an action of the nature of the one at bar could
not be maintained in her courts, and also that it was against the
public policy of Wisconsin to permit it; that the remedy under the
Wisconsin statute was exclusive, and consisted in a suit in equity
at the home of the corporation, in the nature of a partnership
accounting, the parties to which would be all the creditors or a
creditor in his own behalf and in behalf of all
Page 189 U. S. 340
others similarly situated who would come in and make themselves
parties, and the stockholders who could be served with process in
the state.
Whether a cause of action is stated in a pleading is generally
to be decided with reference to the law of the state where the
action is pending. If the state court hold that no cause of action
is set forth in the pleading, and that it is against the public
policy of the state to permit an action for such a purpose, we
should generally hold that there was no federal question involved
in such determination. The plaintiffs, however, urge that there is
here an exception to that rule, founded upon the considerations
just stated, and that if, under the Minnesota law, this action
could be maintained, the courts of Wisconsin are bound to entertain
jurisdiction to the same extent. It is not, however, the case that
every decision regarding the proper construction of the statute of
another state involves a federal question. Where the case turns
upon the construction, and not the validity, of the statute, a
decision of that question is not necessarily of a federal
character.
Johnson v. New York Life Insurance Company,
187 U. S. 491,
187 U. S. 496.
Without precisely determining just how far questions of this kind
can in all cases be regarded as coming under the rule giving full
faith and credit to the public acts, records, and judicial
proceedings of another state, depending, as such questions must,
upon the particular facts of each case, and the manner in which
they are presented, we may, nevertheless, examine the contentions
of the plaintiffs in error to see how far they are justified in the
law.
After quite a full examination of the Minnesota decisions on the
question, we have just decided in
Hale v. Allison,
188 U. S. 56, that
a receiver appointed in Minnesota, under these same statutes, could
not maintain an action outside of that state to enforce the
liability of a stockholder, and it was said that the courts of
Minnesota had held the same thing for many years. An examination of
the decisions of the Minnesota courts shows that they had held that
the remedy provided by the statutes of the state for the
enforcement of stockholders' liability was a suit in equity in that
state by a creditor in his own behalf and that of all other
creditors, against all the stockholders of the
Page 189 U. S. 341
corporation, or so many of them as could be served with process,
and that it was exclusive, and no other remedy could be availed of
even within the jurisdiction of the courts of Minnesota. That being
the law of Minnesota, it would, of course, prevent an action
outside the state by a receiver, as well as by any other plaintiff,
to enforce the stockholders' liability. Hence, in the
Hale-Allison case, we held the receiver could not maintain
such an action in a foreign jurisdiction and in a federal
court.
The case of
Allen v. Walsh, 25 Minn. 543, has been
cited as sustaining this rule. Many other cases have been cited as
holding the same rule, an exclusive remedy under the statute, and
to be pursued only in the courts of the state.
Allen v.
Walsh does hold (and it has been followed by many others to
the same effect) that the only remedy is that created by the
statute, and that remedy is an action in equity in the home courts
wherein all the creditors and all the stockholders are parties, or
as many of the latter as can be served, and in that action all the
rights of the different parties can be adjusted. The remedy being
exclusive, the statute must be followed, and the result is that no
other action to enforce the liability can be availed of in another
state. This would call for an affirmance of the judgment but for
the claim now urged by counsel for plaintiffs, that the case of
Allen v. Walsh has been overruled by subsequent cases in
Minnesota, and that the law is correctly set forth in the
complaint. He calls attention to the fact that this case has not
gone to trial upon an issue of any question of fact, but the
questions to be determined have arisen on demurrer to the
complaint; that the complaint avers as a fact that, by the law of
Minnesota. such an action as this can be maintained in the courts
of a foreign jurisdiction after a judgment has been recovered in an
action in the state court, such as is referred to in the complaint,
and that the defendant by demurring admits that the law is as
stated in the complaint, and therefore the court is bound to give
effect to the law of Minnesota such as is set forth in that
pleading. This is too broad a claim to be maintained.
If the case had been on trial upon issues of fact, among
them
Page 189 U. S. 342
being one as to what the law of Minnesota was, and the statutes
as well as the decisions above mentioned had been proved, and a
witness learned in the law of Minnesota had testified what such law
was, as deduced by him from those statutes and decisions, his
testimony would not, even though uncontradicted, conclude the court
upon that issue. Although the law of a foreign jurisdiction may be
proved as a fact, yet the evidence of a witness stating what the
law of the foreign jurisdiction is, founded upon the terms of a
statute, and the decisions of the courts thereon as to its meaning
and effect, is really a matter of opinion, although proved as a
fact, and courts are not concluded thereby from themselves
consulting and construing the statutes and decisions which have
been themselves proved, or from deducing a result from their own
examination of them that may differ from that of a witness upon the
same matter. In other words, statutes and decisions having been
proved or otherwise properly brought to the attention of the court,
it may itself deduce from them an opinion as to what the law of the
foreign jurisdiction is, without being conclusively bound by the
testimony of a witness who gives his opinion as to the law, which
he deduces from those very statutes and decisions.
It was stated by MR. JUSTICE BREWER, speaking for the Court in
Eastern Building & Loan Association v. Williamson,
189 U. S. 122, a
case just decided and where the same question in substance was
before us, as follows:
"But it is contended that the construction of the New York
statutes as applicable to this contract was shown by the decisions
of the courts of that state and the opinion of one learned in its
laws; that there was no contradictory testimony, and therefore it
was the duty of the South Carolina courts to find as a fact that
such was the true construction."
This was the contention of the defendant, and then, after
referring to the construction of the contract as contended for by
the plaintiff, the Justice continued:
"It is said that the promise made in the certificate is
expressly based upon 'full compliance with the terms, conditions,
and bylaws printed on the front and back of this certificate;'
Page 189 U. S. 343
that one of the conditions expressed on the face of the
certificate is: 'The shareholder agrees to pay, or cause to be
paid, a monthly installment of seventy-five cents on each share
named in this contract, the same to be paid on or before the last
Saturday of each month until such share matures or is withdrawn;'
that it contained this further stipulation: 'Payable in the manner
and upon the conditions set forth in said terms, conditions, and
bylaws hereto attached,' and that these matters thus referred to
had the effect of changing the absolute promise to a conditional
one. All these were received in evidence, and when so received, it
became a matter of judicial construction to determine whether they
had such effect, and that was a question which, nothing else being
shown, was for the consideration of the courts in which the
litigation was pending. In like manner, after the decisions of the
courts of New York were received in evidence, their meaning and
scope became matters for the same consideration. While statutes and
decisions of other states are facts to be proved, yet, when proved,
their construction and meaning are for the consideration and
judgment of the courts in which they have been proved. Nor is the
rule changed by the testimony given in the deposition of
defendant's counsel, for, as he states, his opinion is based on the
statutes, the articles of incorporation, and the decisions admitted
in evidence, together with similar decisions of other states under
like statutes, articles of incorporation, and bylaws. No witness
can conclude a court by his opinion of the construction and meaning
of statutes and decisions already in evidence.
Laing v.
Rigney, 160 U. S. 531. The duty of the
court to construe and decide remains the same."
This right and duty of the courts to themselves construe the
statutes and decisions are not altered because the law of the
foreign state and the various decisions of its courts are alleged
to be as set forth in a pleading which is demurred to, instead of
being proved, on a trial.
In this case, the statutes, together with references to the
decisions of the state courts, are given in the complaint, and the
pleader, by making an averment in the form of a fact, assumes to
give a meaning to them such as he thinks to be correct; but
Page 189 U. S. 344
the duty still remains with the courts to themselves determine
from those statutes and decisions what is in truth the law of the
foreign jurisdiction. The courts are not concluded by an averment
of what is the law in a foreign jurisdiction, contained in a
pleading which is demurred to, any more than they would be by the
testimony of a witness to the same effect upon a trial -- certainly
not when the statute upon which the case rests is set forth and the
decisions under it are also referred to as evidence of the law. The
demurrer does not admit as a fact that the construction (in the
form of an averment of fact) which the pleader may choose to put
upon those statutes or decisions is the right conclusion to be
drawn from them. Notwithstanding the averments in the complaint, we
are brought to an examination of the statutes and decisions
referred to, in order to ourselves determine what the law of
Minnesota is.
We are unable to see that the case of
Allen v. Walsh,
25 Minn. 543, has been overruled upon the material point in this
case by
Hanson v. Davison, 73 Minn. 454, so as to call for
a different decision than would be made under
Allen v.
Walsh and the many similar cases. We have already referred to
the
Hanson case in
Hale v. Allison, 188 U. S.
56, and do not regard it as necessary to continue the
discussion here. It is enough to say that it is no authority for
the contention that the former cases are overruled further than the
issue presented in the case called for. The right to bring into the
original case in equity in the state court after judgment had been
obtained therein, a stockholder who was not served with process in
that suit, but who appeared after judgment and after his property
had been attached, was asserted in and decided by the state court,
but it did not decide that the remedy in the state court as
provided in the statute did not continue to be exclusive, nor did
the state court assume to decide that any further action could be
maintained in the courts of a foreign jurisdiction to enforce the
stockholders' liability. No such issue was involved in the
Hanson case, and the opinion regarding such question is
only the opinion of the very able judge who gave it, upon an
abstract proposition, as distinguished from an adjudication upon a
point actually in issue, and in that case, in
Page 189 U. S. 345
speaking to that point, the judge only said he saw nothing in
the statute to prevent such an action in the courts of another
state, provided such courts would permit it. We think the law of
Minnesota still remains upon this particular matter as stated in
the former cases which have not been overruled by
Hanson v.
Davison. This, in effect, has been held in the
Hale-Allison case, which we have just decided.
Nor is this case controlled or covered by
Whitman v.
National Bank, 176 U. S. 559, and
Hancock National Bank v. Farnum, 176 U.
S. 640. In the former case, the special provisions of
the Kansas statutes were referred to. It was stated to be the law
in Kansas that it only required a judgment against the corporation
and an unsatisfied execution returned, after which any creditor
could sue any shareholder wherever he could be found. There was no
suit in equity in the nature of a partnership accounting necessary.
The liability of the shareholder, although statutory in origin, was
held contractual in its nature, and under the statute the cause of
action was transitory, and could be maintained in any tribunal
having jurisdiction where process could be served upon the
individual shareholder, and in such an action the latter could set
off debts due him from the company. The Kansas cases expressing
these views were referred to in the opinion.
In the second case, it was again held that, under the statute
and the decision of the Kansas courts, after a judgment had been
obtained against the corporation and an execution returned
unsatisfied, the individual creditor could maintain an action
against a single stockholder in any court of competent
jurisdiction. Having the right to maintain such action, it was held
that, when it was commenced in another state and in a proper court
thereof, the judgment which was obtained in Kansas must have the
same faith and credit given it in the courts of another state that
was given it in Kansas. Neither case is applicable to the one
before us. The statutes are radically different, and no one
creditor can maintain the action under the Minnesota statute, and
if all unite, they must sue in the courts of that state.
Whether, aside from the federal considerations just
discussed,
Page 189 U. S. 346
the Wisconsin court should have permitted this action to be
maintained because of the principle of comity between the states is
a question exclusively for the courts of that state to decide. The
right to maintain it under the facts of this case is not founded
upon any provision of a federal nature, and we cannot supervise the
action of the Wisconsin court in this particular.
The judgment of the Supreme Court of Wisconsin must be
Affirmed.
MR. JUSTICE McKENNA did not hear the argument, and took no part
in the decision of this case.
MR. JUSTICE BREWER dissented.
