108 Mich. 170 | Mich. | 1895
Lead Opinion
After a full argument upon the rehearing of this cause, we are satisfied that we were in error in reversing the judgment. The testimony was not returned, and the case is before us on findings of fact and law, to which no exceptions were taken. The sole question, therefore, is, do the facts found support the judgment ?
We are not dealing with a case where a stockholder is interposing the defense of payment, or any other defense which was not passed upon in the original' suit against the corporation. In such a case there is no judgment or decree of the court of a sister State which other courts must recognize. But the very point now urged as a defense was involved and determined by the Illinois court. This was an Illinois contract. These notes were choses in action, were first in possession of the company in Illinois, were turned over by it to the receiver, and were under the direct control of the Illinois court. That court entered a decree, upon evidence placed before it, determining the amount of assets and debts, and the amount of the assessment necessary to liquidate its liabilities. If every stockholder may now contest this decree, the difficulty thus thrown in the way of an orderly and practical settlement of the affairs of the insolvent corporation is
In the latter case two points "were raised: First, that the receiver in Illinois could not sue in the courts of Wisconsin; and, second, that the assessment was inequitable and unjust, and hence should not be enforced. The distinction between the rights of property situated in other States, and those of choses in action, is there very clearly pointed out. Upon the first point the court say:
! ‘ There is no question here of a transfer of property in this State. No such transfer was attempted. The property in question — that is, the defendant’s note and its liability to pay assessments — was in Illinois, at the office of*175 the company. They were choses in action, and their situs was at the residence of the company.”
Upon the second point the court say:
‘ ‘ If a judgment is conclusive in the State where rendered, it is conclusive here. The decree by which the assessment in question was made was undoubtedly conclusive on the members or policy holders of the defunct company, unless attacked in a direct proceeding, notwithstanding they were not present when it was rendered. * * * We can come to no other conclusion than that we are bound, under the constitutional requirement of ‘full faith and credit,’ to hold that the decree making the assessment in question, being conclusive in Illinois upon all members and policy holders, unless attacked by direct proceeding, is conclusive here, and not open to collateral attack.”
The point appears to be expressly decided in Hawkins v. Glenn, 131 U. S. 319. The proceedings in that case were substantially the same as in this. The defense was that the stockholder was not a party to the suit, that the cause of action was barred by the statute of limitations, that he was not responsible on 150 shares, and that interest should not have been allowed. The stockholder was sued in North Carolina. A decree had been rendered in a court of chancery in Virginia, which had ascertained the
The learned counsel for the defendant cite Chandler v. Brown, 77 Ill. 333, and Lamar Ins. Co. v. Gulick, 102 Ill. 41. These cases are distinguished from a case like the present in Great Western Tel. Co. v. Gray, 122 Ill. 630. The two former cases were based upon a statute which provided that stockholders should be made parties to the suit. Rev. Stat. Ill. 1891, chap. 32, §§ 1-49. The decree of the Illinois court in this case was based upon an act in regard to the dissolution of insurance companies. Rev. Stat. Ill. 1891, chap. 73, §§ 103-111. This does not provide for any service upon or notice to the stockholders
Mr. May, in his work on Insurance (vol. 2, § 557), says “the receiver of an insolvent company stands upon no better footing” than would the directors in making an assessment; and cites Jackson v. Roberts, 31 N. Y. 304; Embree v. Shideler, 36 Ind. 423. If these decisions sustain the rule contended for, we could not follow them, as we think they are opposed to the clear weight of authority. The New York statute is clearly different from that in the present case. It reads as follows:
“In case the corporation, in regard to which a receiver has been or shall hereafter be appointed, is or shall be a mutual insurance company, such receiver shall have full power, under the authority and sanction of the court appointing him, to make all such assessments on the premium notes belonging to such corporation as may be necessary to pay the debts of such corporation, as by the charter thereof the directors of such corporation have authority to make; and the notice of such assessment may be given in the same manner as is provided in the charter of said company for the directors of said company to give; and the said receiver shall have the like rights and remedies upon and in consequence of the nonpayment of such assessments as are given to the corporation or the directors thereof, by the charter of such corporation.” Laws 1852, chap. 71, § 2.
It thus appears- that the power of the receiver was expressly limited to the power of the board of directors, and to the modus operandi of collecting the assessments.
In Embree v. Shideler, it appeared, upon the face of the complaint, that neither the receiver, nor the court to which he had reported his action, had examined and determined upon the validity of the claims against the company. This was expressly required by the charter of the company. It was therefore said that “the assessment is the act of the receiver, and in and with him is the authority to act in the premises.”
The judgment must be affirmed.
Dissenting Opinion
(dissenting). After reargument of this cause, I see no good reason for a change of opinion upon the main issue involved. The case presents two questions: First, whether the decree of the Illinois court is res judicata as to the amount of the assessment directed; and, second, whether we are bound, under the constitutional requirement of “full faith and credit,” to regard that decree as conclusive. •
1. There are a number of authorities which hold that, in a proceeding against a stockholder under a statute which makes him liable to creditors, and based upon a judgment against the corporation, such judgment is prima facie evidence of the indebtedness of the corporation. Grand Rapids Sav. Bank v. Warren, 52 Mich. 557; Hoagland v. Bell, 36 Barb. 57; Hastings v. Drew, 76 N. Y. 9; Schaeffer v. Insurance Co., 46 Mo. 248. Other authorities hold that the judgment is conclusive, and cannot be attacked, except for fraud. Corse v. Sanford, 14 Iowa, 235; Grund v. Tucker, 5 Kan. 70; Coalfield Co. v. Peck, 98 Ill. 139; Conklin v. Furman, 8 Abb. Prac. (N. S.) 161; Milliken v. Whitehouse, 49 Me. 527; Henry v. Railroad Co., 17 Ohio, 187; Wilson v. Coal Co., 43 Pa. St. 424: Merchants’ Bank v. Chandler, 19 Wis. 434; Marsh v. Burroughs, 1 Woods, 463; Stephens v. Fox, 83 N. Y. 313. There is still another class of cases which holds that a stockholder, in the absence of a
“There can be no doubt of the rights of the stockholders in this action to set up any available defense that goes to the question of their liability upon the note upon which judgment has been obtained against the company. The defendants in this action were not, as individuals, parties to the action in which judgment was recovered. That suit was against the corporation, which, in law, is a distinct person from the individual members which compose it. The ground of the liability of the company may not prevail against the stockholders. For it is only when a judgment is obtained against the company upon debts of a certain description, and upon which suits have been brought within a specified time, that the stockholders are liable. In this action it is, therefore, necessary to establish that the conditions of the liability of the stockholders exist. To do this necessarily involves an inquiry in this action into the grounds of the stockholders’ liability. Of course, then, it is competent for these defendants to interpose any defense that goes to the ■ question of their liability upon the notes upon which the judgments were obtained.”
In Marsh v. Burroughs, supra, it was contended that the unpaid subscriptions of capital stock were not assets for the payment of debts, either legal or equitable; that they existed merely as possibilities; that they were not a debt due, having never been called in; that no one could call them in but the directors, and in them it was a mere discretionary power, which could not be exercised either by the assignee, the receiver, or the court itself, and could not be assigned; that said unpaid subscriptions were no part of the capital stock of the bank; and that the real capital stock was what had been called in. The court held, however, that the amount subscribed, and not the sums actually paid in, was the capital stock; that the authority to make calls was not a mere power vested in the bank, to be exercised or not, in its discretion, but that it was aright; that the mode of calling it in prescribed by the charter was a mere form of remedy given to the bank to enforce the subscription, and that unpaid sub
In Sanger v. Upton, supra, it was held that the order of the bankruptcy court as to the right of the assignee to bring suit was conclusive. The court refer to the application of the rule to an order made by the comptroller of the currency, citing Kennedy v. Gibson, 8 Wall. 505, wherein the court say:
“ It is for the comptroller to decide when it is necessary to institute proceedings against the stockholders to enforce their personal liability, and whether the whole or a part, and, if only a part, how much, shall be collected. These questions are referred to his judgment and discretion, and his determination is conclusive. The stockholders cannot controvert it. It is not to be questioned in the litigation that may ensue. He may make it at such time as he may deem proper, and upon such data as shall be satisfactory to him.”
The court then say:
“It was competent for the court to order payment of the stock, as the directors, under the instruction of a majority of the stockholders, might, before the decree in bankruptcy, have done. The former is as effectual as the latter would have been.”
Other questions affecting the liability of the stockholders were raised, and the court determined them.
In Hall v. Insurance Co., 5 Gill, 484, the question arose upon the admissibility in evidence of the equity proceeding in which the order directing the call had been made, and the court held that the order for the institution of the suit was conclusive.
In Glenn v. Williams, supra, it was held that the chancery court of Richmond had power and jurisdiction to make assessments upon the unpaid subscriptions to the capital stock to raise funds with which to pay the debts of the corporation, and that the decree of the court determining and making an assessment upon the capital stock for such purpose was binding and effective upon stockholders not parties to that cause.
In Hawkins v. Glenn, supra, Mr. Chief Justice Fuller thus states the issues involved:
“ Counsel for plaintiff in error contend that the decree of the Richmond chancery court making the call and assessment was void as against him, because he was not a party to the suit; that the cause of action was barred by the statute of limitations; that he was not responsible upon .150 shares of the stock; and that interest should not have been allowed from the date of the call, but only from the time of the filing of the complaint.”
While the learned chief justice does say, as to the determination of the Richmond chancery court, that the court may have erred in its conclusions, but its decree cannot be attacked collaterally, the court does not rest its decision upon the adjudication referred to, but proceeds to discuss the question at length, holding that, as between creditor and stockholders, the latter could not protect themselves from paying what they owed by setting up the default of their own agents.
It must be borne in mind that that case was one for an unpaid subscription to stock. It was a sum which was a part of the capital stock of the company,- — a trust fund, held for the benefit of creditors, and the obligation to pay which could not be discharged, as against creditors, by the corporation itself. The contract to pay the sum sought to be recovered was one arising under the charter at the outset. It could not be affected, as to creditors, by the acts or laches of the corporation. In the present case the limit of the liability of the defendant member is not only expressed in the note upon which suit is brought, but in the charter of the corporation as well. No act of the corporation could extend that liability. Defendant pleads
2. In view of the conclusion reached, it is unnecessary to discuss the question as to whether the finding of facts supports plaintiff’s contention that the note in question is. an Illinois contract. No attempt was made to show that the charter and by-laws of the plaintiff corporation enlarged the defendant’s liability. The adjudication which, it is insisted, is binding upon us, was not one involving the validity of a contract, or the validity or construction of a local charter, statute, or constitution; nor was it a question of construction, depending upon the intent of the parties, as affected, at the inception of the contract, by any fixed local rules of law; nor did it involve a rule of property.
The federal judiciary act provides that the laws of the several States, except in given cases, shall be regarded as rules of decision in trials at common law in the courts of the United States; yet, at an early day, the Supreme Court of the United States held that this provision did not apply to the decisions of the State courts in the construction of ordinary contracts or on questions of general commercial law. Swift v. Tyson, 16 Pet. 1. And it has been held that the Federal courts were not bound by decisions of the State courts construing and determining
The question here presented is whether the determination of the Illinois court, made after the insolvency of the corporation, as to the legal effect of defendant’s promise, is conclusive upon the defendant and binding upon us. I think not. There was no law of place that attached to and formed a part of the contract at its inception.
The judgment should have been for defendant, with costs of both courts.