Hilliker v. Hale

PER CURIAM.

Out of the many questions which have been argued here two only need be considered.

Concededly the guaranty company was a “moneyed corporation.” It was held by this court in Hobbs v. Bank, 37 C. C. A. 513 , 96 Fed. 396 , 41 C. C. A. 205 , 101 Fed. 75 , that the three-years statute of limitations (Code Civ. Proc. N. Y. § 394) applied to suits like this against stockholders in such corporations; and it was intimated by part of the court that that period might be reduced, when there was a shorter statute of limitations in the home state. The statute of limitations in this state still remains three years; the statute of limitations in Minnesota for like actions is six years. Gen. St. 1878, p. 707. This action was begun September 16, 1899. As appears from the statement of facts, the guaranty company was adjudged to be insol *223 vent May 20, 1893. If the cause of action against the defendant arose then, it would be barred by either statute. In courts outside of Minnesota there is conflict as to when such cause of action arose; but we are of the opinion that such question should be decided in conformity with the decisions of the Minnesota courts, and they speak with no uncertain sound.

In Olsen v. Cook, 57 Minn. 552 , 59 N. W. 635 , an action was brought under this very statute (section 17) to enforce the statutory liability of stockholders of a bank. The plaintiff was a judgment creditor, with execution returned unsatisfied. The bank had made an assignment under the insolvent law (Act 1881). Defendants demurred on the grounds that there was another action pending (to wit, the insolvency proceedings under Daws 1881, c. 148), and that the complaint did not state a cause of action, on the theory that stockholders can be held to their statutory liability “only after the corporate assets have been fully administered and found to be insufficient,” and that a stockholder is not liable to action for such liability “where it does not appear that the corporate assets proper have been fully administered and a deficiency ascertained,” and that the action was “prematurely brought.” The court overruled the demurrers, holding that:

“Chapter 76, §§ 17-23, inclusive, authorize an action by creditors to enforce the statutory liability of officers, directors, and stockholders; and while, in such an action, it would be required of the complaint to show a necessity to resort to that liability in order to satisfy the corporate debts (which the complaint in this ease does) it certainly would not be required of it to show to what extent such resort is necessary, or to show that the corporate assets have been exhausted without satisfying the debts. Section 18 reads: ‘The court shall proceed thereon [on the complaint filed under section 17] as in other eases, 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 19: ‘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 20 provides that upon final judgment in such an action 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 21 provides that, if the property of the corporation is insufficient to satisfy its debts, the court shall enforce the payment of anything unpaid on the shares of stock, or so much thereof as is necessary to satisfy the corporate debts; and section 22, that if the debts 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 23 provides for calling in creditors other than those bringing the action. It is apparent from these sections that, where resort to the statutory liability is shown to be necessary, the creditor need not, before bringing the action, exhaust his remedies against the corporate property. That may be done in the action itself.”

The court held that the pendency of insolvency proceedings to sequester, convert, and apply on the corporate debts the proceeds of the corporate assets was no bar to the bringing of an action to enforce statutory liability under section 17, although the amount required to make up the deficit is not yet ascertained.

*224 “In such a case [says the court] there -would he nothing to prevent the court determining at once the maximum liability of each officer, director, and stockholder, as it might do if it also appointed a receiver to administer the corporate assets. It is true that before determining how much should, within that maximum, be collected from each, it would have to await the result of the other proceeding. But, if it appointed a receiver to administer corporate assets, it would, for the same purpose, have to await the result of the proceedings of its own receiver. We think such an action may be brought pending the insolvency proceeding, that this is such an action, and that consequently it was not prematurely brought.”

We have not been referred to nor have we been able to find any decision by a Minnesota court which in any way modifies the views expressed in Olsen v. Cook, supra. Under the statute as thus construed, action might have been brought to enforce statutory liability of any and every stockholder of the guaranty company at any time subsequent to May, 1893. The cause of action then arose, and, inasmuch as this action was not begun until more than six years later, it is barred equally by the New York and by the Minnesota statute, whichever applies.

We are further of the opinion that the plaintiff cannot maintain this action. He sues as receiver. , His rights, if any, rest wholly upon the order and decree in the Rogers Case. Without regard to the nature of the claim asserted against the defendant, the plaintiff has no relation to that claim otherwise than through such order and decree. He is not the assignee of all or any of the creditors. He has' no title to anything, so far as appears, except to his office of receiver. The order and decree, in terms, make him a mere agent of the Minnesota court. That court undertook to authorize him to sue nonresidents in other jurisdictions; moneys collected to be “held by him subject to the further order of this court (the Minnesota court) in the premises.” The Minnesota court thus- attempted to send its agent to collect money by suit outside of its jurisdiction, and bring it back to be disposed of as it might direct. If it had had power to transfer the claim against the defendant to the plaintiff, and had in fact so transferred it,.he could assert the title thus acquired and sue upon such claim here in accordance with the principles stated in Association v. Rundle, 103 U. S. 222 , 26 L. Ed. 337 . Apparently the court had no such power. Whether it had or. not, it did-not attempt to exercise it. It transferred nothing to the plaintiff. It merely appointed him its own agent to collect and hold subject to its order. He was made an arm of the court, with which the court attempted to reach outside of its territorial jurisdiction, and the. attempt, it seems to us, was- futile. The court could not reach beyond the limits of its jurisdiction through a receiver any more than it could’ through a marshal or a sheriff. The authority which it sought to give to the plaintiff became-a-t dead- letter when he passed-beyond’the boundaries of the state. This is substantially what was- held in Booth v; Clark, 17 How. 322 , 15 L. Ed., 164 ,. which has. never been- reversed, There a- statutory receiver, appointed.in New, York, was. authorized by the court; to gp into, another jurisdiction, to collect, a claim. The court held that hp could- not, there* maintain am action!- at. lawn and, said as follows:

*225 “Tie [the receiver] has no extra territorial 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 or another jurisdiction, as the judgment creditor himself might have done, where his debtor may be amenable to the tribunal which the creditor may seek.”

The rule in this circuit, as laid down in Sands v. Greeley, 31 C. C. A. 424 , 88 Fed. 130 , is as follows:

“When a foreign receiver is obliged to invoke the aid of the court of another state in asserting his title to assets within its jurisdiction, such court will not, in the exercise of comity, recognize his title to the prejudice of the citizens of its own state, who have fairly acquired title to the assets, either by purchase, attachment, or other legal process, or whose claims are entitled to priority as equitable liens. * * * This is because he is appointed by a court which derives its jurisdiction from state laws which have ex proprio vigore no extraterritorial force, and the effect of which in other states depends wholly on the comity of the state in which their application is invoked. But by the comity extended by the several states of the Union to one another, not only from motives of respect but from consideration of mutual convenience, the right of a receiver to possess himself of assets located in a state other than that of his appointment is everywhere recognized and enforced, subject to the qualification mentioned.”

Association v. Rundle, supra, which concerns the powers of an official vested by statute with title to corporate assets, simply emphasizes the distinction made in Booth v. Clark between one who, under any name, is given by statute a title which he can assert anywhere, and one who is appointed receiver under the ordinary power in equity, and is a mere agent or officer of the court. Of the receiver in Booth v. Clark the court says:

“He is a representative of tlm court, and may, by its direction, take into his possession every kind of property which may be taken in execution, and also that which is equitable if of a nature to be reduced into possession.”

The court cannot take in execution property not within its legal jurisdiction. A creditors’ bill, by which equitable assets can be reached, is a substitute for the common-law execution, and can be brought only in the same jurisdiction. Tubeworks Co. v. Ballou, 146 U. S. 517 , 13 Sup. Ct. 165, 36 L. Ed. 1070 . That the court cannot send its marshal or sheriff outside of its jurisdiction to seize property cannot be disputed. Upon the same principle, it can send no other officer or agent to collect moneys outside of its territorial limits. By force of statute, a court may in a particular case vest in a person called a receiver—or called by any other name—title to a chose in action, and that title may be asserted elsewhere; but an officer acting merely as an arm of the court cannot sue beyond the jurisdiction of the court. Brigham v. Luddington, 12 Blatchf. 237 , Fed. Cas. No. 1,874; Bank v. Francklyn, 120 U. S. 747 , 7 Sup. Ct. 757, 30 L. Ed. 825 ; Huntington v. Attrill, 146 U. S. 657 , 13 Sup. Ct. 224, 36 L. Ed. 1123 ; Lynde v. Lynde, 162 N. Y. 405 , 56 N. E. 979 , 48 L. R. A. 679, 76 Am. St. Rep. 332 , 181 U. S. 186 , 21 Sup. Ct. 555, 45 L. Ed. 810 ; Barnes v. Wheaton, 80 Hun, 8 , 29 N. Y. Supp. 830 , approved in Marshall v. Sherman, 148 N. Y. 27 , 42 N. E. 419 , 34 L. R. A. 757, 51 Am. St. Rep. 654 ; Railway Co. v. Kent, 87 Hun, 329 , 34 N. Y. *226 Supp. 427 , approved in Stoddard v. Lum, 159 N. Y. 274 , 53 N. E. 1108 , 45 L. R. A. 551, 70 Am. St. Rep. 541 .

The plaintiff was not appointed receiver in the Rogers Case under the authority of any statute. His appointment was only a method adopted by the court under its general powers as a court of equity, upon the theory that it was necessary in order to enable it to grant the relief to which the parties to that suit seemed to it to be entitled. Whatever authority was given to the plaintiff was given to him as a mere agent of the Minnesota court. See Hanson v. Davison (Minn.) 76 N. W. 254 . It would seem, therefore, under the decisions of the federal courts, that this plaintiff could not maintain an action at law in a foreign jurisdiction.

The judgment of the circuit court is reversed.

. See Corporations, vol. 12, Cent. Dig. §§ 1090, 1092.