1. As construed by the highest court of Minnesota, the statutes
of that state do not provide that a receiver of an insolvent
corporation can recover the amount of the added liability of
nonresident shareholders of the corporation, nor do they provide
that such liability shall be an asset of the corporation, to be
recovered by the receiver and payable to its creditors when such
liability is enforced and the money recovered.
A receiver, appointed by a Minnesota court of equity, in the
exercise of its general jurisdiction, of the assets of an insolvent
Minnesota corporation, who has no title to the fund, but simply
acts as the arm of the court, cannot by virtue of his appointment,
or of directions contained in the decree appointing him, maintain
an action in equity in a foreign state against nonresident
stockholders of a corporation to enforce their double liability,
nor can be maintain such an action in a circuit court of the United
States in a district outside of Minnesota.
The question of comity cannot avail in a case where the courts
of the state in which the receiver was appointed hold that an
action similar to the one brought in the foreign jurisdiction
cannot be maintained by him in the courts of the state of his
appointment.
2. A single action in equity cannot be maintained in the circuit
court of the United States in Pennsylvania by such receiver against
all of the Pennsylvania stockholders of an insolvent Minnesota
corporation for the statutory liability of each defendant as a
stockholder on the ground that a single action would prevent a
multiplicity of suits, nor can such an action be maintained on the
ground that it is an ancillary or auxiliary proceeding brought in
aid of, and to enforce, an equitable decree in an action brought in
Minnesota in which the Pennsylvania stockholders bad been named as
defendants with all the other stockholders, the receiver contending
that such decree was conclusive as to the amount of indebtedness
and the assets of the corporation, and the defendants were
concluded as to the necessity of a resort to the stockholders'
liability, and the only question left open was the special
liability of each stockholder (the Pennsylvania stockholders,
however, not having been served, and not having appeared).
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
Page 188 U. S. 57
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 F. 790. The
judgment was affirmed by the Circuit Court of Appeals for the Third
Circuit. 106 F. 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,
Page 188 U. S. 58
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 twenty-five thousand dollars 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
Page 188 U. S. 59
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.
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.
*
Page 188 U. S. 60
The Constitution of Minnesota, it will be seen, simply imposes a
double liability upon the stockholders. The statutes of the
Page 188 U. S. 61
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, (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 Company v. City Bank, 66
Minn. 441 (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 (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 another
Page 188 U. S. 62
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), 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 is, the owner of the capital stock thereof of the par value
of $1,500, and now has property within this state to satisfy her
liability to the creditors of the bank as a stockholder therein.
The existence of such property within the jurisdiction of the court
was discovered after the entry of the judgment in the
Harper-Carroll case. Upon the discovery of such property,
the plaintiff herein obtained leave of court to bring this action
against the defendant, to the end that her statutory liability
might be collected and paid to the receiver in the original action,
and by him distributed to the judgment creditors of the bank. The
defendant's property was attached. Thereupon, she appeared in this
action."
The trial court dismissed the complaint, and the supreme
Page 188 U. S. 63
court affirmed the dismissal on the ground that, the property of
the stockholder having been found within the jurisdiction of the
court either before or after judgment in the original action
(
Harper v. Carroll), a separate suit against her to reach
the property was neither necessary nor proper, for it could be
attached or sequestered in the original action.
It was contended by the defendant in the
Hanson v.
Davison case that, as there had been a former action
(
Harper v. Carroll) brought for the purpose of enforcing
the liability of the stockholders, which action was, as prescribed
by the statute, the exclusive remedy, that no further suit could be
maintained. The court, in commenting upon the contention, said
that, if it were correct, then, as the court could only acquire
jurisdiction of the resident stockholders in a corporation, all
nonresident stockholders would have absolute immunity from such
liability, while their associates who happened to be within the
jurisdiction of the court would have to respond to the last cent of
their liability. Continuing, the court said:
"Inequitable as such a conclusion would be, still it must be
admitted that there are expressions in the opinion in the case of
Allen v. Walsh, 25 Minn. 543, relied upon by the
defendant, which, if taken literally and without reference to the
actual point decided by the court, justify the contention. A
decision upon this claim of the defendant involves a consideration
of the nature of the liability of stockholders for the debts of the
corporation, the method of enforcing it, and just what was decided
by the case of
Allen v. Walsh. In that case, which was an
action at law by a creditor, for his sole and exclusive benefit,
against a single stockholder to enforce his individual liability,
it was correctly held that the action could not be maintained and
that the plaintiff's remedy was an equitable action in behalf of
himself and all other creditors against the corporation and its
stockholders wherein the debts of the corporation must be
determined, and, after exhausting the corporate assets, the
liability of stockholders for the deficiency might be adjudicated
and enforced pursuant to the provisions of Gen.Stat. 1878, c. 76
(Gen.Stat. 1894, c. 76). It was not, however, decided in that case
that if a stockholder was omitted from such
Page 188 U. S. 64
original action because the court could not acquire jurisdiction
of him or for any other cause, the liability could not be
subsequently enforced against him by bringing him or his property
into the original action, if found within the jurisdiction of the
court, or by proceeding against him alone, in an action ancillary
to the original action, in any other jurisdiction where he might be
found, if the comity of the sister state would permit it."
The particular attention of the court was directed to the
objection that but one action could ever be maintained against the
stockholders over whom the court had jurisdiction, who must all be
joined therein, and that the rest could not thereafter be made
liable. The action, it will be noticed, was not brought by a
receiver, the plaintiff in the action being a creditor of the
corporation, and no question arose in regard to the right of a
receiver appointed under chapter 76 to maintain an action, either
inside or outside of the state, to enforce the liability of
stockholders to the creditors of an insolvent corporation. Whatever
was said in the opinion regarding the possible right of a receiver
to maintain such an action as the one now before us was not
necessary to the decision of the case, and cannot be regarded as
overruling the prior cases.
The opinions in
Minneapolis Baseball Company v. Bank,
66 Minn. 441, and in
Hanson v. Davison, 73 Minn. 454, were
written by the same judge, and in the latter case, he does not
refer to the earlier one decided but two years before, and which
held that a receiver, under the state statute, could not maintain
such an action as this. There was a strong dissent by Mr. Justice
Canty from the remarks of the Chief Justice as to the right of the
receiver to maintain an action in a foreign state. Referring to the
earlier cases, he said:
"This court has several times held that a receiver appointed
under chapter 76 has no authority to enforce the stockholders'
superadded liability.
See Minneapolis Baseball Company v. City
Bank, 66 Minn. 441;
Palmer v. Bank of Zumbrota, 65
Minn. 90. I am unable to see how this Court can lay down a rule or
edict to govern proceedings in courts of other states contrary to
the rule it lays down to govern proceedings in the courts of this
state. "
Page 188 U. S. 65
We can ourselves see the difficulty in holding that such an
action may be maintained by the receiver in a foreign jurisdiction,
while at the same time holding that such receiver could not
maintain a like action in the Minnesota courts. If a receiver
cannot maintain this kind of an action in the courts of his own
state, because its statute provides another in the name of a
creditor or permits it only after the performance of conditions
precedant which he has not performed, he cannot, although appointed
in the state, maintain such action in a foreign jurisdiction. This
we have decided at this term in
Evans v. Nellis,
187 U. S. 271. In
that case, it was said the receiver was appointed under the statute
of that state of 1868 or 1899. It was shown that the act of 1868
made the stockholder liable to the creditor, and that the receiver
could not maintain the action thereunder. It also appeared that,
under the statute of 1899, which made the stockholder's liability
an asset of the corporation, to be collected by the receiver, no
such action could be maintained except by complying with the
statute, and, as the receiver had not done so, it was held he could
not maintain the action outside the state.
This would seemingly be enough to compel the affirmance of the
judgment herein when we see that the Minnesota Supreme Court has
held that a receiver cannot maintain such an action as this in the
courts of that state.
An examination of the opinion of the Chief Justice, however, in
the
Hanson v. Davison case, shows that it is not based
upon the proposition that such an action is provided for by the
Minnesota statute, but that the statute failed to say anything
forbidding it, and this failure the judge thought left the matter
open to the general rules governing in such cases, for he says at
page 461:
"The remedy for enforcing the liability must, in the first
instance, from the nature of the liability, be an equitable action.
Gen.Stat. 1878, c. 76 (Gen.Stat. 1894, c. 76), indicates and
regulates to some extent the remedy, leaving to the court the duty
of making the remedy effectual by an application of the principles
of equitable procedure. This statute prescribes the exclusive
remedy only to the extent that an equitable action of the
Page 188 U. S. 66
character therein indicated must be first instituted for the
enforcement of the liability of stockholders. Such an action,
though provided by statute, is essentially an equitable proceeding,
and the rules of equity are to be followed, unless inconsistent
with the statute. If chapter 76 were repealed, equity would find an
adequate remedy for the enforcement of the liability. . . . There
is nothing in the statute which justifies the conclusion that, if a
stockholder's liability is not enforced in the original action
because he is a nonresident, an ancillary action may not be brought
against him alone after the amount for which stockholders are
individually liable has been determined in the original
action."
This language would seem to indicate that there is nothing in
the statute which prevents a receiver from maintaining an action in
a foreign state. There is no holding that the statute itself
provides in terms for such an action, or empowers a receiver to
maintain it, or that it transfers any title in the fund to him. We
should not, therefore, be justified in following the remarks made
in this case, in opposition to those cases which had already been
decided by the same court years before and up to and including the
Minneapolis Baseball Company v. Bank, supra, especially
when it appears, as in this case, that all the facts had occurred
prior to the declaration of the Chief Justice of the court. The
suit now before us was commenced in November, 1898. The corporation
failed in May, 1893, and in November of that year, proceedings were
commenced in Minnesota which ended in the final decree in 1897,
months prior to the last decision, July 26, 1898.
It seems also entirely clear that the receiver provided for in
section 5906 of above quoted statute, while not the receiver
mentioned in section 5897, is yet simply one to be appointed in aid
of the court to work out the provisions of the section, if the
court choose to appoint him, and by section 5907, the court, if it
appear that the corporation is insolvent, may proceed, without
appointing any receiver, to ascertain and enforce the liabilities
of stockholders in the creditors' action. The receiver, if he be
appointed, is not given power to represent the creditors or to
maintain, as representative owner or trustee, an action,
Page 188 U. S. 67
inside or outside the state, to enforce the liability spoken of.
That is the right of the creditors themselves, and the statute
provides for their action against the stockholders.
Assuming the contractual character of the subscription to the
stock of the corporation, the right of the receiver to maintain
this suit is not thereby made plainer. The contract may have been
to pay, in the event of its insolvency, to the creditors of the
corporation the amount for which the shareholder might be liable up
to the par value of his stock. That was a contract in behalf of the
creditor, with which the corporation had nothing to do, and the
statute did not make this liability assets of the corporation, or
confer upon any receiver appointed in the case the right to proceed
to enforce it. The cases of
Whitman v. Oxford National
Bank, 176 U. S. 559, and
Hancock National Bank v. Farnum, 176 U.
S. 640, do not bear upon the question, as the plaintiff
in each case was a creditor of the corporation.
We are of opinion, following the decisions of the highest court
of Minnesota, that the statutes of that state do not provide for
the appointment of a receiver to recover as such the amount of the
added liability of the nonresident shareholders to creditors of an
insolvent corporation. They do not provide that such liability
shall be assets of the corporation, to be recovered by the receiver
and payable to its creditors when such liability is enforced and
the money recovered. There is no transfer of any right or title to
a receiver to enforce the liability (certainly not as to
nonresident stockholders), nor is it a case where any assignment of
such right by the creditors has been made, so that the receiver is,
in fact an assignee of the persons interested in the recovery from
the stockholders.
We are thus brought to the fact that this is a plain and simple
case of the appointment, authorized by statute, of a receiver by a
court of equity in the exercise of its general jurisdiction as such
court, with no title to the fund in him, and where such receiver
acts simply as the arm of the court without any other right or
title, and the question is whether, in these circumstances, a
receiver can maintain this suit in equity in a foreign state by
virtue of his appointment, and the direction
Page 188 U. S. 68
to sue contained in the decree in the case in which he was
appointed a receiver? We pursue the subject after the decision of
Evans v. Nellis, supra, only because of the argument made
by counsel for appellant, that such a receiver as in this case is
not prevented by the statute or decisions of Minnesota from
maintaining such an action as this, and that, if the statute do not
prevent it, he may maintain an action of this nature
notwithstanding the former decision of this Court in
Booth v.
Clark, 17 How. 322, which, it is claimed, has been,
if not overruled at least shaken in principle by the decisions as
to the comity which is said to prevail among the different states
to permit such an action by a receiver outside the jurisdiction of
the state of his appointment. We do not think anything has been
said or decided in this Court which destroys or limits the
controlling authority of that case.
It was there held that an ordinary receiver could not sue in a
foreign jurisdiction, and an elaborate examination was made by Mr.
Justice Wayne of the principles upon which the decision was
founded. In speaking of the right of a receiver appointed under a
creditors' bill in New York, to bring an action in a foreign state,
it was said, in the course of the opinion, as to such a
receiver,
"whether appointed as this receiver was, under the statute of
New York, or under the rules and practice of chancery, as they may
be, his official relations to the court are the same. A statute
appointment neither enlarges nor diminishes the limitation upon his
action. His responsibilities are unaltered. Under either kind of
appointment, he has at most only a passive capacity in the most
important part of what it may be necessary for him to do, until it
has been called by the direction of the court into ability to act.
He has no extraterritorial power of official action; none which the
court appointing him can confer, with authority to enable him to go
into a foreign jurisdiction to take possession of the debtor's
property; none which can give him, upon the principle of comity, a
privilege to sue in a foreign court of another jurisdiction, as the
judgment creditor himself might have done, where his debtor may be
amenable to the tribunal which the creditor may seek."
This statement has not been overruled or
Page 188 U. S. 69
explained away by any subsequent decision of this Court to which
our attention has been called.
In
Relfe v. Rundle, 103 U. S. 222, it
was held that a final decree dissolving an insolvent life insurance
company of Missouri, and vesting, as provided by the statutes in
force, for the use and benefit of creditors and policyholders, the
entire property of the company in the superintendent of the
insurance department of the state, made him the statutory successor
of the corporation for the purpose of winding up its affairs: as
such, he represented the corporation at all times and places in all
matters connected with its trust; he was the successor of the
state, and represented the state in its sovereignty, and as his
authority did not come from the decree of the court, but from the
statutes, he was, in fact the corporation itself for the purpose
mentioned. The superintendent of insurance, being the successor of
the corporation, had the right to represent it, and he became a
party to the suit commenced against it in Louisiana, and, being a
citizen of Missouri, and appearing in time, had the right to remove
the case into the United States court. The suit had been commenced
against the company in Louisiana, and it having been dissolved by
the decree of a court of competent jurisdiction, it was dead, and
if the representative appointed pursuant to the laws of the state
and holding the title to the property could not be substituted in
place of the original defendant it would follow that no defense
could be made by anyone. The case is no authority for the
maintenance of this action.
In
Hawkins v. Glenn, 131 U. S. 319,
Glenn was the trustee of the corporation, which by its deed
assigned and transferred to three trustees, for whom he was
afterwards substituted, all the property and effects of the
corporation, in trust, for the payment of its debts. Glenn
subsequently brought a suit in another jurisdiction against a
stockholder, Hawkins. The right of Glenn was through an assignment,
and he derived title to the property and to the rights of the
corporation through a deed. No question was decided in that case
which is material to be here considered.
There has been some contrariety of opinion in the lower
Page 188 U. S. 70
federal courts in regard to the right of a receiver situated as
the complainant is in this suit, to maintain an action outside of
the state of his appointment. In
Hazard v. Durant, 19 F.
471, in the Circuit Court, District of Massachusetts, before Judges
Lowell and Nelson, it was held that a receiver appointed in one
jurisdiction to take charge of a fund cannot sue in another in his
own name, though expressly authorized by the decree to maintain
actions in his own name.
In
Hale v. Hardon, 89 F. 283, Putnam, Circuit Judge,
held that the plaintiff, as receiver appointed in Minnesota, who
had commenced an action at law in the federal circuit court in
Massachusetts to enforce the liability of a stockholder in this
same corporation of Minnesota, could not maintain such action in
another jurisdiction from that in which he was appointed. That
judgment was reversed by the circuit court of appeals in 95 F. 747,
in which district judge Aldrich delivered the opinion, which was
concurred in by district judge Webb, while Circuit Judge Colt
delivered a dissenting opinion. The judges were thus divided, two
district judges in favor of the right of the plaintiff to maintain
the action, and the two circuit judges denying it.
In
Hilliker v. Hale, 117 F. 224, the right of such
receiver to maintain his action in a foreign jurisdiction was
denied by the Circuit Court of Appeals of the Second Circuit.
In
Wigton v. Bosler, 102 F. 70, 73, Dallas, one of the
circuit judges of the Third Circuit, took the same view as Colt and
Putnam, Circuit Judges, in 89 and 95 Fed., and made a decree in
accordance with such views.
In
Hale v. Tyler, 104 F. 757, Judge Putnam, regarding
himself bound by the decision of the circuit court of appeals in
his own circuit, in
Hale v. Hardon, supra, follows the
authority of that case, but he added some further views to show
that the receiver in
Hale v. Hardon was constituted such
under the general equity powers of the court, and merely as its
hand to assist it in realizing rights of action which vested, not
in the receiver, but in the creditors. He referred also to the case
of
Hayward v. Leeson, decided by the Supreme Judicial
Court of Massachusetts, June 15, 1900, and reported in 176
Mass.
Page 188 U. S. 71
310, in which that court held that, as none of the proceedings
in Tennessee operated as an assignment to the receiver of the
choses in action in litigation in Massachusetts, and as the utmost
effect of the appointment of a receiver is to put property into his
custody as an officer of the court, but not to change the title,
nor even the right of possession, the receiver could not sue in his
own name in Massachusetts.
The question of comity cannot avail in a case where the courts
of the state in which the receiver was appointed hold that an
action similar to the one brought in the foreign jurisdiction
cannot be maintained by him in the courts of the state of his
appointment.
Second. The other ground of demurrer is that, whatever remedy
may exist in favor of the complainant is at law, and that no case
is made which gives a court of equity jurisdiction.
It appears from the bill and the record annexed to and forming a
part thereof that there were in all somewhere about five hundred
stockholders of the loan company, twenty-three of whom, living in
Minnesota, had been made parties to the Rogers creditors' suit, and
judgments had been obtained against them in that suit. Forty-seven
of the remainder resided in Pennsylvania and were made parties to
this suit, and the balance lived in different states. The
indebtedness of the corporation was so great that the liability of
the stockholders was up to the full amount imposed by the statutes
of Minnesota. The theory of the bill was that the Minnesota decree
was conclusive (even upon nonresident stockholders not served with
process and not appearing in that suit) as to the amount of the
indebtedness of the corporation and the amount of its assets,
thereby concluding the parties as to the necessity of a resort to
the stockholders' liability in favor of creditors, leaving open the
question of the special liability of each particular shareholder,
and whether, if once liable, his liability had ceased, wholly or
partly, by reason of facts pertaining to such stockholder. No
accounting was asked for, but simply a judgment against each
stockholder for the amount of the par value of his stock.
The jurisdiction of a court of equity over the subject matter is
placed by the complainant upon the two grounds, among
Page 188 U. S. 72
others that to sustain such jurisdiction prevents a multiplicity
of suits, and also that this suit is an ancillary or auxiliary
proceeding brought in aid of and to enforce an equitable decree of
another court.
1. Upon the first ground, the cases are various in which the
court has either taken or refused jurisdiction, but one cannot
adduce from them a plain and uniform rule by which to determine the
question. The application of the principles upon which jurisdiction
has been suggested or denied has been various, both in England and
in this country, and it is difficult, if not impossible, to
reconcile the cases. The subject is discussed at length in 1
Pomeroy's Equity Jurisprudence, 2d ed., p. 318, sections 243
et
seq. It is therein shown that the foundation of the
jurisdiction, or perhaps the earliest exercise of it upon this
ground, was in so-called "bills of peace," where in one class of
such bills the suit was brought to establish a general right
between a single party and numerous other persons claiming distinct
and individual interests; the second class being where the
complainant sought to quiet his title and possession of land, and
to prevent the bringing of repeated actions of ejectment against
him. The ground was that the title could never be finally
established by indefinite repetitions of such legal actions. And
again the question has arisen whether the defendants in a suit by
one complainant to establish his right against them all must be
connected by some kind of privity among themselves, or can they
hold their rights wholly separate and distinct from each other. The
question has been answered differently by different courts, and
while assuming that there was not always a necessity to show a
common interest or privity between the members of the same class of
defendants, the courts have also differed in regard to the
jurisdiction of a court of equity in particular cases, even upon
such assumption. Numerous cases are cited by Mr. Pomeroy, showing
both sides of this question. In any case where the facts bring it
within the possible jurisdiction of the court, according to the
view taken by it in regard to such facts, the decision must depend
largely upon the question of the reasonable convenience of the
remedy, its effectiveness, and the inadequacy of the remedy at law.
To sustain the right to bring
Page 188 U. S. 73
the suit where the separate defendants have no privity among
themselves, two early and leading cases in the English courts are
cited, viz.:
City of London v. Perkins, 3 Brown's
Parl.Cas.Toml. ed. 602, decided in 1734, and
Mayor of York v.
Pilkington, 1 Atk. 282 (decided in 1737).
In the first case, the city claimed to be entitled to, and that
it had received time out of mind, from all masters of ships
bringing cheese eastward of London Bridge to the Port of London to
be sold, a certain duty per ton on such cheese. The defendants,
being great importers of cheese, refused to pay the duty, and it
was shown by the complainant that the right of the city had been
proved at law in other cases, and a verdict given for the city in
favor of its right, and the city therefore claimed there was no
reason why the question should be sent to law to be tried over
again. The real point decided in the case was that depositions of
witnesses taken in former causes relating to the same matter for
which a new suit is instituted against another party ought to be
permitted to be read as evidence upon the hearing of such new
cause, although the witnesses themselves are not proved to be dead.
The depositions being regarded as proper evidence, and the right at
law having been maintained, the judgment was for the recovery of
the toll.
The second case was a bill filed by the Mayor of York, who
claimed in behalf of the city to have been in possession of a
fishery in the River Ouse, the city claiming the sole right of
fishery, and the court held that the mayor might bring a bill to be
quieted in the possession, although he had not established his
right at law, and that it was no objection, upon a demurrer to such
bill, that the defendants had distinct rights, for upon an issue to
try the general right they may at law take advantage of their
several objections and distinct rights. The bill is described as a
"bill of peace," and it is assumed that there would be an issue
sent to a court of law for trial as to the sole right of the
complainant and where the defendants might show their distinct
rights. The Lord Chancellor said:
"Here are two causes of demurrer, one assigned originally and
one now at the bar, that this is not a proper bill, as it claims a
sole right of fishery against five lords of manors, because
Page 188 U. S. 74
they ought to be considered as distinct trespassers, and that
there is no general right that can be established against them, nor
any privity between the plaintiffs and them. . . . But there are
cases where bills of peace have been brought, though there has been
a general right claimed by the plaintiff, and yet no privity
between the plaintiffs and defendants, nor any general right on the
part of the defendants, and where many more might be concerned than
those brought before the court. . . . I think, therefore, this bill
is proper, and the more so because it appears there are no other
persons but the defendants who set up any claim against the
plaintiffs, and it is no objection that they have separate
defenses; but the question is whether the plaintiffs have a general
right to the sole fishery, which extends to all the defendants;
for, notwithstanding the general right is tried and established,
the defendants may take advantage of their several exemptions, or
distinct rights."
The demurrer was therefore overruled.
On the other hand, in
Bouverie v. Prentice, 1 Brown's
Ch. 200, decided in 1783, it was held that a bill would not lie
against several tenants of a manor for quit rents, the plaintiff's
remedy being at law, and the suit also multifarious as to the
different tenants. The Lord Chancellor said:
"Upon what principle two different tenants, of distinct estates,
should be brought hither to hear each others rights discussed I
cannot conceive. The court has gone great lengths in bills of this
sort, and taking the authority for granted, I cannot conceive on
what ground such a suit can stand."
The Chancellor also remarked that, where a number of persons
claimed one right in one subject, such a bill may be entertained to
put an end to litigation. Here, no one issue could have tried the
cause between any two of the parties.
See also Ward v. Duke of
Northumberland, 2 Ans. 469, decided in the Exchequer in 1794.
The court in that case held that the suit could not be maintained
in equity on the ground of preventing a multiplicity of suits where
the demands against each of the defendants, although of the same
nature, were entirely distinct from and unconnected with any other
defendant. In
Page 188 U. S. 75
such case, each defendant had a right to object to the joining
of any distinct and unconnected causes of action.
To the same effect is
Birkley v. Presgrave, 1 East,
220, 227 (decided in the King's bench in 1801). In that case, the
court said:
"But, generally speaking, a court of equity will not take
cognizance of distinct and separate claims of different persons in
one suit, though standing in the same relative situation."
In
Weale v. West-Middlesex Waterworks, 1 Jac. &
Walk.Ch. 358 (decided in 1820), the Lord Chancellor, in holding
that the suit would not lie, referred to the case of
York v.
Pilkington, and said:
"For where the plaintiffs stated themselves to have the
exclusive right, it signified nothing what particular rights might
be set up against them, because it they prevailed, the rights of no
other persons could stand, and it has been long settled that if any
person has a common right against a great many of the King's
subjects, inasmuch as he cannot contend with all the King's
subjects, a court of equity will permit him to file a bill against
some of them, taking care to bring so many persons before the court
that their interests shall be such as to lead to a fair and honest
support of the public interest, and when a decree has been
obtained, then, with respect to the individuals whose interest is
so fully and honestly established, the court, on the footing of the
former decree, will carry the benefit of it into execution against
other individuals who were not parties."
In
Marselis v. Morris Canal &c. Company, 1 N.J.Eq.
31 (decided in 1830), it was held that the plaintiff could not
maintain an action against several defendants to recover matters of
different natures against them. It was a suit in equity by several
landowners of different lands not coming under a common title,
against the defendant for taking their lands for the purposes of
its incorporation, and not paying or compensating the owners
therefor. It was alleged that the company was insolvent, and it was
prayed that an account might be taken and damages awarded to the
complainants for the injuries already sustained, and for
compensation, and an injunction restraining the company from
occupying the land was
Page 188 U. S. 76
asked for. The court held the bill could not be maintained, as
the same was multifarious, and said the fact that the plaintiffs
had a common interest in the question, and that to sustain the
jurisdiction would relieve the necessity of a number of suits at
law brought by the separate plaintiffs, would not confer
jurisdiction on the court upon any principle of equity.
In
Demarest v. Hardham, 34 N.J.Eq. 469 (decided in
1881), several persons owning distinct parcels of land, or
occupying different dwellings, and having no common interest,
sought to restrain a nuisance in consequence of the special injury
done to each particular property, and it was held that each must
bring a separate suit and obtain relief, if at all, upon his own
special wrong. It was said that several persons might join to
restrain a nuisance which is common to all and effects each in the
same way -- instancing slaughter houses in a populous part of the
town, and the offensive and deleterious odors there generated being
allowed to diffuse themselves throughout the neighborhood. In such
cases, all injuriously affected by them may join in the same suit,
for in such a case the injury is a common one, and the object of
the suit is to give protection to each suitor in the enjoyment of a
common right. To the same effect is
Rowbotham v. Jones, 47
N.J.Eq. 337, 20 A. 731 (decided in 1890).
Then there were cases arising by reason of the so-called
Schuyler frauds, such as
New York & New Haven R.
Company v. Schuyler, 17 N.Y. 592, 602, on demurrer, decided in
1858; again reported on appeal from the judgment on the merits, in
34 N.Y. 30 (decided in 1865). These were very complicated questions
arising by reason of the frauds referred to, and jurisdiction was
maintained upon what might be termed general principles of
necessity for the purpose of quieting what would otherwise have
been endless litigation, and as stated by Davis, J., in 34 N.Y.,
the case was not decided upon any one head of equity
jurisdiction.
In
Railroad Company v. Mayor &c., 54 N.Y. 159,
defendants had commenced seventy-seven actions to recover penalties
for violation of a city ordinance. The company commenced this
action to restrain their prosecution until the right could be
determined in one of the actions, and the suit was maintained
Page 188 U. S. 77
on the ground of thereby preventing vexatious litigation in a
multiplicity of suits.
In
Supervisors v. Deyoe, 77 N.Y. 219, questions of the
indebtedness of the county upon certain certain certificates
wrongfully issued by its treasurer were complicated with questions
of the liability of the county to various holders of the
certificates, and the court held a suit in equity could be
sustained, making all the holders of the different certificates
parties, because a multiplicity of suits would thereby be avoided
and the whole question more conveniently and properly disposed of,
all the defendants having in fact a common interest.
In
Meyer v. Phillips, 97 N.Y. 485, the suit was
sustained as one to quiet the title of plaintiff, the acts
threatened by various defendants being under a claim of right, and
being of exactly the same nature, the issue being the same in
all.
Cases in sufficient number have been cited to show how divergent
are the decisions on the question of jurisdiction. It is easy to
say it rests upon the prevention of a multiplicity of suits, but to
say whether a particular case comes within the principle is
sometimes a much more difficult task. Each case, if not brought
directly within the principle of some preceding case, must, as we
think, be decided upon its own merits and upon a survey of the real
and substantial convenience of all parties, the adequacy of the
legal remedy, the situations of the different parties, the points
to be contested and the result which would follow if jurisdiction
should be assumed or denied; these various matters being factors to
be taken into consideration upon the question of equitable
jurisdiction on this ground, and whether within reasonable and fair
grounds the suit is calculated to be in truth one which will
practically prevent a multiplicity of litigation, and will be an
actual convenience to all parties, and will not unreasonably
overlook or obstruct the material interests of any. The single fact
that a multiplicity of suits may be prevented by this assumption of
jurisdiction is not in all cases enough to sustain it. It might be
that the exercise of equitable jurisdiction on this ground, while
preventing a formal multiplicity of suits, would nevertheless be
attended with more and deeper inconvenience to the defendants
than
Page 188 U. S. 78
would be compensated for by the convenience of a single
plaintiff, and where the case is not covered by any controlling
precedent the inconvenience might constitute good ground for
denying jurisdiction.
We are not disposed to deny that jurisdiction on the ground of
preventing a multiplicity of suits may be exercised in many cases
in behalf of a single complainant against a number of defendants,
although there is no common title nor community of rights or
interest in the subject matter among such defendants, but where
there is a community of interest among them in the questions of law
and fact involved in the general controversy.
Is there, upon the complainant's theory of this case, any such
common interest among these defendants as to the questions of fact
that may be put in issue between them and the plaintiff? Each
defendant's defense may, and in all probability will, depend upon
totally different facts, upon distinct and particular contracts,
made at different times, and in establishing a defense, even of
like character, different witnesses would probably be required for
each defendant, and no defendant has any interest with another.
In this case, from the complainant's own bill, the amount
demanded is the full amount of the par value of the shares held by
each defendant. In
Kennedy v.
Gibson, 8 Wall. 498,
75 U. S. 505, a
receiver brought suit to recover from the stockholders of an
insolvent national bank the statutory liability imposed upon them,
and in the course of the opinion it was stated by the court:
"Where the whole amount is sought to be recovered the proceeding
must be at law. Where less is required, the proceeding may be in
equity, and in such case an interlocutory decree may be taken for
contribution, and the case may stand over for the further action of
the court, if such action should subsequently prove to be
necessary, until the full amount of the liability is
exhausted."
In
Bailey v. Tillinghast, 99 F. 801, this statement of
the law was recognized, and the cases of
Casey v. Gelli,
94 U. S. 673, and
United States v. Knox, 102 U. S. 422,
were referred to as recognizing the same rule. In
United States
v. Knox, the Court approved and reaffirmed the rule laid
Page 188 U. S. 79
down in
Kennedy v. Gibson, and one of those rules was
that, when the whole amount was sought to be recovered, the
proceeding must be at law.
The facts surrounding the present case and the reasons for
holding that they do not bring it within the principle of
preventing a multiplicity of suits are so well stated in the
opinion of McPherson, District Judge, in this case, 102 F. 790,
that we quote the same. After speaking of the alleged
conclusiveness of the Minnesota decree upon the question therein
decided, the judge continued:
"Thereafter a different question arose for determination,
namely, can the assessment be lawfully enforced against the
individuals charged therewith? And in this question the interest of
each stockholder is separate and distinct. The bill asserts the
conclusiveness of the Minnesota decree upon the defendants, so far
as the necessity for the assessment and the amount charged against
each stockholder are concerned.
Bank v. Farnum,
176 U. S.
640. Assuming that position to be sound (and, if I do
not so assume it -- if these questions are still open for
determination, so far as the Pennsylvania stockholders are to be
affected -- the bill must fail for want of necessary parties), it
is clear that only two classes of questions remain to be decided:
the first is whether a given stockholder was ever liable as such,
and the second is whether, if he were originally liable, his
liability has ceased, either in whole or in part. Manifestly, as it
seems to me, the defendants have no common interest in these
questions, or in the relief sought by the receiver against each
defendant. The receiver's cause of action against each defendant
is, no doubt, similar to his cause of action against every other,
but this is only part of the matter. The real issue, the actual
dispute, can only be known after each defendant has set up his
defense, and defenses may vary so widely that no two controversies
may be exactly or even nearly alike. If, as is sure to happen,
differing defenses are put in by different defendants, the bill
evidently becomes a single proceeding only in name. In reality, it
is a congeries of suits with little relation to each other, except
there is a common plaintiff who has similar claims against many
persons. But as each of these persons
Page 188 U. S. 80
became liable, if at all, by reason of a contract entered into
by himself alone, with the making of which his codefendants had
nothing whatever to do, so he continues to be liable, if at all,
because he himself, and not they, has done nothing to discharge the
liability. Suppose A to aver that his signature to the subscription
list was a forgery; what connection has that averment with B's
contention that his subscription was made by an agent who had
exceeded his powers?, or with C's defense that his subscription was
obtained by fraudulent representations?, or with D's defense that
he has discharged his full liability by a voluntary payment to the
receiver himself?, or with E's defense that he has paid to a
creditor of the corporation a larger sum than is now demanded?
These are separate and individual defenses, having nothing in
common, and upon each the defendant setting it up is entitled to a
trial by jury, although it may be somewhat troublesome and
expensive to award him his constitutional right. But even if the
ground of diminished trouble and expense may sometimes be
sufficient, I should still be much inclined to hesitate before I
conceded the superiority of the equitable remedy in the present
case. Such a bill as is now before the court is certain to be the
beginning of a long and expensive litigation. The hearings are sure
to be protracted. Several, perhaps many, counsel will no doubt be
concerned, whose convenience must be consulted. The testimony will
soon grow to be voluminous. The expense of printing will be large.
The costs of witnesses will not in any degree be diminished, and,
if some docket costs may be escaped, this is probably the only
pecuniary advantage to be enjoyed by this one cumbersome bill over
separate actions at law."
We are in accord with the views thus expressed, and we therefore
must deny the jurisdiction of equity, so far as it is based upon
the asserted prevention of a multiplicity of suits.
2. There remains the further question of maintaining the suit on
the ground that it is ancillary or auxiliary to the decree of the
Minnesota court, and aids in its enforcement. We think this
contention cannot be sustained.
In the first place, all the nonresident stockholders were but
nominal parties in the Minnesota suit. Their names were merely
placed in its title. No service of process was ever made
Page 188 U. S. 81
on one of them, and as the suit was not one in which service by
publication of process could be ordered, there was nothing in the
nature of the court to give them notice or to enable the court to
give judgment against them without their appearing. The court did
not assume to give any such judgment. Indeed, the complainant
averred there were no means of obtaining jurisdiction over the
nonresident stockholders, and the court assumed that it had no
jurisdiction over them, and, on account of such lack of
jurisdiction, it only gave judgment against those resident
stockholders who were parties to the suit. The complainant claims
that the nonresident stockholders are bound because the corporation
was a party, not because they were parties to the suit. There is no
decree or judgment, therefore, against the stockholders who were
nonresidents. The claim that they are bound by certain findings of
fact by the court, because of the corporation's being a party and
in law representing them to that extent, assuming it for this
purpose to be well founded, is far from transforming a decree
against resident stockholders into one against nonresidents who
were not parties to the action. Even assuming that the decree
concludes them upon certain facts found in that action, where there
was no decree against them, still, another action in another
jurisdiction to enforce their liability as originally created by
statute cannot within any reason be said to be one to enforce the
former judgment. Indeed, it is because of the very fact that no
judgment was or could be obtained against the nonresident
stockholders in the Minnesota suit that the Pennsylvania federal
court is asked to exercise its jurisdiction and give judgment
against the defendants on their statutory liability. This does not
make the Pennsylvania suit ancillary to the Minnesota decree for
the purpose of enforcing it, for there is no decree against them to
be enforced. There is only a claim that they are bound by certain
facts found in another action to which they were not parties in any
but a merely formal and nominal sense.
We think that, upon grounds discussed herein, the judgments of
the courts below were right, and they are therefore
Affirmed.
MR. JUSTICE BREWER dissented.
* Constitution of Minnesota, article 10, sec. 3, provides:
"Each stockholder in any corporation (excepting those organized
for the purpose of carrying on any kind of manufacturing or
mechanical business) shall be liable to the amount of stock held or
owned by him."
"The General Statutes of Minnesota of 1894, chapter 76, p. 1595,
provide, among other matters, for the method of enforcing the
liability of stockholders, as follows:"
"Section 5897. Whenever a judgment is obtained against any
corporation incorporated under the laws of this state, and an
execution issued thereon is returned unsatisfied in whole or in
part upon the complaint of the person obtaining such judgment or
his representative, the district court within the proper county may
sequestrate the stock, property, things, in action, and effects of
such corporation, and appoint a receiver of the same."
"Section 5905. Whenever a creditor of a corporation seeks to
charge the directors, trustees, or other superintending officers of
such corporation, or the stockholders thereof on account of any
liability created by law, he may file his complaint for that
purpose in any district court which possesses jurisdiction to
enforce such liability."
"Section 5906. The court shall proceed thereon as in other cases
and, when necessary, shall cause an account to be taken of the
property and debts due to and from such corporation, and shall
appoint one or more receivers."
"Section 5907. If, on the coming in of the answer or upon the
taking of any such account, it appears that such corporation is
insolvent and that it has no property or effects to satisfy such
creditors, the court may proceed, without appointing any receiver,
to ascertain the respective liabilities of such directors and
stockholders, and enforce the same by its judgment, as in other
cases."
"Section 5908. Upon a final judgment in any such action to
restrain a corporation, or against directors or stockholders, the
court shall cause a just and fair distribution of the property of
such corporation and of the proceeds thereof to be made among its
creditors."
"Section 5909. In all cases in which the directors or other
officers of a corporation, or the stockholders thereof, are made
parties to an action in which a judgment is rendered, if the
property of such corporation is insufficient to discharged its
debts, the court shall proceed to compel each stockholder to pay in
the amount due and remaining unpaid on the shares of stock held by
him or so much thereof as is necessary to satisfy the debts of the
company."
"Section 5910. If the debts of the company remain unsatisfied,
the court shall proceed to ascertain the respective liabilities of
the directors or other officers and of the stockholders, and to
adjudge the amount payable by each, and enforce the judgment, as in
other cases."
"Section 5911. Whenever any action is brought against any
corporation, its directors, or other superintending officers or
stockholders, according to the provisions of this chapter, the
court, whenever it appears necessary or proper, may order notice to
be published in such a manner as it shall direct, requiring all the
creditors of such corporation to exhibit their claims and become
parties to the action, within a reasonable time, not less than six
months from the first publication of such order, and, in default
thereof to be precluded from all benefit of the judgment which
shall be rendered in such action, and from any distribution which
shall be made under such judgment."