Gilman v. Ketcham

23 L.R.A. 52, 54 N.W. 395, 84 Wis. 60, 1893 Wisc. LEXIS 39

Opinion

PiNNBY, J.

It is not disputed but that the proceedings in the supreme court of New York were properly instituted and conducted, and the dissolution of the corporation regularly adjudged, upon the voluntary application of its trust-oes, and the respondent appointed receiver of all its property, assets, and estate according to the statute of that state, with a view of applying the proceeds equally to the payment of all its creditors, and the distribution of any residue equally to and among its stockholders. The plaintiff in this action wras at the time, and still is, a resident and citizen of the state of New York, of which state the corporation was a citizen, and he was served with an injunction in that proceeding restraining him, as a creditor of the corporation, from commencing any suit against it to enforce the collection of his debt, in order that the property and assets of the corporation might be properly and judiciously administered and applied by the receiver under the authority of the court appointing him, and in the regular and orderly administration of its estate. The proceeding did not-" contemplate'a discharge of the debtor as upon the surrender and application of his property under insolvent laws, but the property of the corporation was passed and vested, pursuant to the statute, in the respondent as its receiver, and the corporation was dissolved, so that no other than the receiver had a right to assert or maintain any title to it thereafter, and he could do so only for the purpose of its equal and just application to the payment of its creditors, and the just division of any residue to and among its stockholders. The effect of such voluntary dissolution was to. place all its property and assets in custodia legis lo be col-l lected and applied by the receiver. There is nothing in the statute of New York, or in this proceeding under it, in conflict with or in contravention of the laws or public policy of this state, as declared by its statutes and the decisions of its courts, nor does the present proceeding interfere, or tend to interfere, with or prejudice the rights of any citizen of this state. The case concerns citizens of New York alone, the garnishees having paid the fund into court and been discharged. The case is therefore free from all objections which, by the general current of authority, might prevent or induce the courts of Wisconsin to refrain from giving, in a spirit of just inter-state comity, the same force and effect here to the proceedings in the supreme court of the state of New York in question as would be accorded to them there. There are many cogent reasons, in our judgment, why we should accord to them such effect upon principles of comity.

The situation, in brief, is that after the plaintiff had been enjoined, by a competent court of the jurisdiction in which he resided, from bringing any action against the corporation, his debtor, for the recovery of any sum of money, so that he should not obtain any undue preference over its other creditors, in violation of the purpose and policy of the law of New York and the proceeding thus instituted, and after an adjudication absolutely dissolving the corporation had been made, and after the title to its property, effects, and credits had been vested in the claimant as such receiver, the plaintiff came into the circuit court of this state, and commenced an action to recover his demand against a dissolved corporation. The question is one wholly between parties residing in New York and bound by the proceedings in question, neither of whom is in any position to invoke the assistance of the courts of this state to defeat or deny full effect to the proceeding in New York, or the title resulting from it. It is clear that the adjudication of dissolution, and the appointment of the receiver vesting in him the title to the chose in action in question, were binding on these parties, and the courts of New York would have enforced the receiver’s title bad this controversy originated there. The plaintiff asks us to aid him in vio lating the law of Ms own state and evading the process of its courts. Our own citizens, in a proper case, would no doubt be protected against the effect of such extra-territorial act and adjudication, if injurious to their interests or in conflict with the Jaws and public policy of Wisconsin, and effect would not'be giyen to it at the expense of injustice to our own citizens. The transfer of this debt, valid in New York, must, we think, be held valid on principles of comity here. When, therefore, the garnishee process was served, there was no debt due to the corporation upon which it could act, and the money that has been paid into court belongs to the receiver claimant; and, no principle of public policy or rights of citizens of Wisconsin intervening, by a fair and liberal spirit of comity our courts ought to give the same force and effect to the proceedings in question as they would have in the courts of New York.

The tendency of modern adjudications is in favor of a liberal extension of inter-state comity, and against a narrow and provincial policy, which would deny proper effect to judicial proceedings of sister states under their statutes and rights claimed under them, simply because, technically, they are foreign and not domestic. In the recent case of Cole v. Cunningham, 133 U. S. 107, the subject was very fully considered, and the various cases were cited; and it was there held that a creditor who is a citizen and resident of the same state with his debtor, against whom insolvent proceedings have been instituted in said state, is bound by the assignment of the debtor’s property in such proceedings, and if he attempts to attach or seize the personal property of the debtor, situated in another state.and embraced in the assignment, he may be restrained by injunction by the courts of the state in which he and his debtor reside; that every state exercises, to a greater or less extent, as it deems expedient, the comity of giving effect to the insolvent proceedings of other states, and where the transfer of the debtor’s property is the result of a judicial' proceeding, as a general rule, no state will carry it into effect to the prejudice of its own citizens. Reynolds v. Adden, 136 U. S. 353, 354. In Bagby v. A., M. & O. R. Co. 86 Pa. St. 291, it was held that, where a receiver of a corporation has been appointed by a court of competent jurisdiction in another state, a creditor who resides in that state and is bound by the decree of its court appointing the receiver cannot, in an attachment or execution, recover the assets of the corporation in another state, which the receiver claims. In Bacon v. Horne, 123 Pa. St. 452, 453, speaking to this point, the court said: “’As before observed, both of these parties, plaintiffs and defendant, are residents of New York. They come into this state to obtain an advantage by our law which they could not obtain by their own. They are seeking to nullify the law of their own state, and ask the aid of our court to do so. This they cannot have. If for no other reason, it is forbidden by public policy and the comity which exists between the states. This comity will always be enforced when it does not conflict with the rights of our own citizens.” To the same effect is the case of In re Waite, 99 N. Y. 433, 439, 448, and also Phelps v. McCann, 123 N. Y. 641. In Toronto General Trust Co. v. C., B. & Q. R. Co. 123 N. Y. 37, 47, it was said that “ foreign receivers and assignees, taking their title to property by virtue of foreign laws or legal proceedings in foreign courts, may come here and maintain suits in our courts when they do not come in conflict with the rights or interests of domestic creditors; ” and the general rule laid down in Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367, must be considered as qualified by these cases. The same doctrine is laid down in Woodward v. Brooks, 128 Ill. 222, where it is held that if an assignment is valid in the state where made it will be enforced in another state as a matter of comity, but not to the prejudice of the citizens of the latter, who may have demands against the assignor; that while it is contrary to public policy to allow the property of a nonresident debtor to be withdrawn from the state, and thus compel creditors to seek redress in a foreign jurisdiction, yet for all other purposes between the citizens of the state where the assignment is made, if valid by the lex loci, it will be carried into effect by the courts of Illinois ; and this rule is held not to be in conflict with Rhawn v. Pearce, 110 Ill. 350. The assignment in this case was voluntary, it is true, and not by proceedings in invitum. We are unable to see upon what substantial ground it can be maintained that the title of the receiver in this case, founded upon the voluntary dissolution of the corporation, does not stand on equally as favorable ground as that of an assignee for the benefit of creditors. Parsons v. Charter Oak L. Ins. Co. 31 Fed. Rep. 305; Relfe v. Rundle, 103 U. S. 222, 225; Williams v. Hintermeister, 26 Fed. Rep. 889. In Bank v. McLeod, 38 Ohio St. 174, it was held that a receiver appointed under the authority of the court of one state, and vested with the title to property temporarily in another, might, under the comity between states, by an action brought in the latter state in his own name, assert his right to the possession of it, where such right was not in conflict with the rights of the citizens of the latter state, nor against the policy of its laws; nor is there anything in the case of McClure v. Campbell, 71 Wis. 350, in conflict with this conclusion. Mr. Justice Lyon had in view in that case the question of giving effect to foreign insolvency proceedings resulting in a discharge of the debtor prejudicially to the interests of citizens of the state wherein the assignee attempted to enforce the assignment. In Filkins v. Nunnemacher, 81 Wis. 91, the question was whether judicial comity would allow a receiver, appointed in a creditors’ suit in another s.tate, to maintain a suit in Wisconsin to set aside an alleged fraudulent conveyance, from the debtor to the defendant, of property within the latter state, and presented an entirely different question from the one in this case, which is whether a foreign receiver can be heard to assert in the courts of this state a title to property which he claims by an assignment valid and binding against all the parties to the litigation, and is more nearly analogous to the question involved and decided in Cook v. Van Horn, 81 Wis. 291. The question is not materially different from that involved in Smith v. C. & N. W. R. Co. 23 Wis. 267, where it was determined that effect would be given by the courts of this state, subject to the qualifications here stated, to an assignment made in another state by a party in order to avoid imprisonment in proceedings supplemental to execution for refusal to apply rights in action — corporate stocks — to the payment of a judgment; and it is evident that, if the title depended wholly upon the coercive power of the court, the result would have been the same. The principle is uni versal that the' assets of insolvent corporations are to be regarded as a trust fund for the benefit of all the creditors, and “that kind of diligence by which one creditor of an insolvent corporation secures to himself a prior right to its property, and an unequal advantage over the other creditors, is without merit, and more selfish than just.” Ballin v. Loeb, 78 Wis. 404. The public policy of Wisconsin and New York in this respect are in accord.

For these reasons we are of the opinion that the claim of the receiver, as stated in his intervening petition, to the fund in court, must be sustained, and that the circuit court properly overruled the plaintiff’s demurrer thereto.

By the Court.— The order of the circuit court is affirmed.