Source: https://supreme.justia.com/cases/federal/us/294/629/
Timestamp: 2019-04-23 14:53:52+00:00

Document:
"an equitable accounting for the proportionate benefit of all parties interested, to which such corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties."
The Superintendent of Banks of New York brought an action in a New Jersey court against 557 New Jersey stockholders of a New York bank to recover unpaid assessments levied upon them pursuant to the banking laws of New York. The bank had altogether 20,843 stockholders and more than 400,000 depositors and other creditors, many of whom resided elsewhere than in New Jersey. The court held the action barred by the New Jersey statute; suggested that leave might be granted to file a bill in equity pursuant thereto.
1. The New Jersey statute, as here applied, effectively denies to the Superintendent the right to resort to the courts of that State to enforce the liability of stockholders residing there; the complaint conformed to the New Jersey practice, and the action would have been entertained but for the statute. Pp. 294 U. S. 639-640.
2. The nature of the cause of action brings it within the scope of the full faith and credit clause; the subject matter is not such as permits considerations of local policy to dominate rules of comity. P. 294 U. S. 643.
3. That the assessment was made under statutory direction by an administrative officer does not preclude the application of the full faith and credit clause. P. 294 U. S. 644.
4. That the administrative determination of the assessment made in New York may be subject to collateral attack does not justify the New Jersey court in refusing to take jurisdiction of the Superintendent's suit. P. 294 U. S. 646.
5. Question whether Superintendent's determination as to the propriety and amount of the assessment are conclusive not decided. P. 294 U. S. 646.
6. The full faith and credit clause require that the action of the Superintendent in this case be entertained. P. 294 U. S. 647.
113 N.J.L. 305; 174 A. 507, reversed.
Appeal from a judgment affirming a judgment sustaining a motion to strike out the complaint in an action brought in the Supreme Court of New Jersey by the Superintendent of Banks of New York to enforce an assessment levied on stockholders pursuant to the banking laws of New York.
"The stockholders of every bank will be individually responsible, equally and ratably and not one for another, for all contracts, debts and engagements of the bank to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares. "
The Bank of the United States is a corporation organized under the Banking Law of New York, and had its places of business in New York City. Its outstanding capital stock is $25,250,000, represented by 1,010,000 shares of $25 par value. On November 17, 1933, Joseph A. Broderick, as Superintendent of Banks of the New York, brought, in the Supreme Court of New Jersey, this action against 557 of its stockholders who are residents of New Jersey, to recover unpaid assessments levied by him upon them pursuant to law.
"No action or proceeding shall be maintained in any court of law in this state against any stockholder, officer, or director of any domestic or foreign corporation by or on behalf of any creditor of such corporation to enforce any statutory personal liability of such stockholder, officer, or director for or upon any debt, default, or obligation of such corporation, whether such statutory personal liability be deemed penal or contractual, if such statutory personal liability be created by or arise from the statutes or laws of any other state or foreign country, and no pending or future action or proceeding to enforce any such statutory personal liability shall be maintained in any court of this state other than in a nature of an equitable accounting for the proportionate benefit of all parties interested, to which such corporation and its legal representatives, if any, and all of its creditors and all of its stockholders shall be necessary parties."
Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State," and the legislation of Congress enacted pursuant thereto. The trial court sustained the motion to strike out the complaint, Broderick v. Abrams, 112 N.J.Law, 309, 170 A. 214, on the ground that the statute of the state constituted a bar to the action. Judgment against the plaintiff, with costs, was entered in favor of each of the defendants, and the judgment was affirmed by the Court of Errors and Appeals "for the reasons expressed in the opinion" of the trial court. 113 N.J.Law, 305, 174 A. 507. An appeal to this Court was allowed.
v. Neff, 95 U. S. 714; Wilson v. American Palace Car Co., 65 N.J.Eq. 730, 55 A. 997; Papp v. Metropolitan Life Insurance Co., 113 N.J.Eq. 522, 530, 167 A. 873. The corporation has no place of business in New Jersey; only a few of the many stockholders and creditors have either residence or place of business there.
Moreover, even if it were legally possible to satisfy the statutory condition by making substituted service by publication upon nonresident stockholders and creditors (compare Kirkpatrick v. Post, 53 N.J.Eq. 591, 594, 32 A. 267; 53 N.J.Eq. 641, 33 A. 1059), the cost would be prohibitive. The number of the stockholders is 20,843; the number of depositors and other creditors exceeds 400,000, and the amounts assessed against the individual defendants are relatively small -- against some, only $50. The aggregate of sheriff's fees alone as to the nonresident defendants, aside from expenses of publication and mailing, would exceed the aggregate amount due from the New Jersey stockholders. [Footnote 1] The suggestion, in the opinion of the Supreme Court, that leave might be granted to file a bill in equity is therefore without legal significance.
Second. But for the statute, the action would have been entertained. Compare 289 U. S. Masci, 289 U.S.
prior to July 1, 1932, he determined that an assessment of $25 against each stockholder for each share of stock held by him was required for the payment of the Bank's indebtedness; that he duly made upon each stockholder a demand for the payment thereof on August 8, 1932, and that among the stockholders upon whom such demand was made and who failed to pay are the several defendants.
"State cannot escape its constitutional obligations [under the full faith and credit clause] by the simple device of denying jurisdiction in such cases to Courts otherwise competent."
adopt such system of courts and form of remedy as it sees fit. It may, in appropriate cases, apply the doctrine of forum non conveniens. Anglo-American Provision Co. v. Davis Provision Co. No. 1, 191 U. S. 373. But it may not, under the guise of merely affecting the remedy, deny the enforcement of claims otherwise within the protection of the full faith and credit clause, when its courts have general jurisdiction of the subject matter and the parties. Christmas v. Russell, 5 Wall. 290, 72 U. S. 300. Compare Atchison, T. & S.F. Ry. v. Sowers, 213 U. S. 55; Tennessee Coal, Iron & Railroad Co. v. George, 233 U. S. 354. For the States of the Union, the constitutional limitation imposed by the full faith and credit clause abolished in large measure the general principle of international law by which local policy is permitted to dominate rules of comity.
"that no other state properly can be said to have any public policy thereon. And what the law of Wisconsin [New Jersey] may be respecting the relative rights and obligations of creditors and stockholders of corporations of its creation, and the mode and means of enforcing them, is apart from the question under consideration."
looks to and must be governed by the law of the State granting the incorporation."
Modern Woodmen of America v. Mixer, 267 U. S. 544, 267 U. S. 551. Compare Supreme Council of Royal Arcanum v. Green, 237 U. S. 531; Hancock National Bank v. Farnum, 176 U. S. 640; McDermott v. Woodhouse, 87 N.J.Eq. 615, 618, 619, 101 A. 375. [Footnote 4] Obviously recognition could not be accorded to a local policy of New Jersey, if there really were one, of enabling all residents of the State to escape from the performance of a voluntarily assumed statutory obligation, consistent with morality, to contribute to the payment of the depositors of a bank of another which they were stockholders.
and because the residents of Wisconsin had, by becoming stockholders of a Minnesota corporation, submitted themselves, to that extent, to the jurisdiction and laws of the latter State. Where a State has had jurisdiction of the subject matter and the parties, obligations validly imposed upon them by statute must, within the limitations above stated, be given full faith and credit by all the other States.
"the written statement of the superintendent, under his hand and seal of office, reciting his determination to enforce the individual liability, or any part thereof, of such stockholders, and setting forth the value of the assets of such corporation and the liabilities thereof, as determined by him after examination and investigation, shall be presumptive evidence of such facts as therein stated."
the manner of pleading. [Footnote 5] But with such matters we have here no concern. It is enough, for present purposes, that a complaint alleging the stock ownership of the defendants, the assessment, the demand, and failure to pay, together with the determination of the value of assets and liabilities referred to in § 80, sets forth a good cause of action. [Footnote 6] Broderick v. Aaron, 147 Misc. 854, 264 N.Y.S. 15; Broderick v. Betco Corp., 149 Misc. 245, 267 N.Y.S. 139; Broderick v. American General Corp., 71 F.2d 864; compare Broderick v. Stephano, 314 Pa. 408, 171 A. 582; Broderick v. McGuire, 119 Conn. 83, 174 A. 314. Even if the administrative determination of the assessment made in New York is subject to attack in a suit brought there or in any other State, that fact would not justify New Jersey in denying to the Superintendent the right to bring this suit.
affords relief against administrative orders. He argues that his powers and duties in respect to the assessment of stockholders, and the proceeding to enforce liability therefor, are substantially the same as those imposed by the National Banking Act on the Comptroller of the Currency, Van Tuyl v. Scharmann, 208 N.Y. 53, 63, 101 N.E. 881; Matter of Union Bank of Brooklyn, 176 App.Div. 477, 485, 163 N.Y.S. 485; Broderick v. Aaron, 151 Misc. 516, 523, 272 N.Y.S. 219, and that, as to these, it has been settled by an unbroken line of authorities beginning with Kennedy v. Gibson, 8 Wall. 498, 75 U. S. 505, that the Comptroller's determination is conclusive in an action at law to enforce the stockholders' liability, being subject, like other administrative orders, only to a direct attack for fraud or error of law by appropriate proceedings in equity. [Footnote 7] United States v. Knox, 102 U. S. 422, 102 U. S. 425. Whether this contention is sound we have no occasion to consider now. See Broderick v. Adamson, 148 Misc. 353, 369-371, 265 N.Y.S. 804. It is sufficient to decide that, since the New Jersey courts possess general jurisdiction of the subject matter and the parties, and the subject matter is not one as to which the alleged public policy of New Jersey could be controlling, the full faith and credit clause requires that this suit be entertained.
MR. JUSTICE CARDOZO is of the opinion that the judgment should be affirmed.
It is stated by counsel without contradiction that, under the New Jersey practice, before substituted service can ever be made, the sheriff must have made as to each nonresident defendant a return non est inventus. New Jersey Public Laws 1922, c. 88, entitles the sheriff to a fee of $1.50 for making an affidavit of nonresidence as to each defendant. After such affidavit, the plaintiff, it is said, would be required to make applications for leave to effect substituted service on each of the absent defendants and to present the essential facts showing the necessity therefor, setting forth residence and place of business of each. Besides notice sent to each, it would be necessary to publish the notice once a week during four consecutive weeks in some newspaper. N.J.P.L. 1912, c. 155, § 13; N.J. Chancery Rules, 36-38. It is estimated that the 420,000 names of nonresident defendants would fill at least 80 newspaper pages of 8 columns each.
"In case any such stockholder shall fail or neglect to pay such assessment within the time fixed in said notice, the superintendent shall have a cause of action, in his own name as superintendent of banks, against such stockholder, either severally or jointly with other stockholders of such corporation, for the amount of such unpaid assessment or assessments, together with interest thereon from the date when such assessment was, by the terms of said notice, due and payable."
Chambers v. Baltimore & Ohio R. Co., 207 U. S. 142, is not to the contrary; there, no claim was made under the full faith and credit clause.
See too Canada Southern Ry. v. Gebhard, 109 U. S. 527, 109 U. S. 537-538; Hawkins v. Glenn, 131 U. S. 319, 131 U. S. 329; Nashua Savings Bank v. Anglo-American Co., 189 U. S. 221, 189 U. S. 229-230; Harrigan v. Bergdoll, 270 U. S. 560, 270 U. S. 564.
Compare Broderick v. McGuire, 119 Conn. 83, 101-103, 174 A. 314.
Before the adoption of § 80 by Laws 1914, c. 369, the Superintendent was required to allege and prove the facts necessitating the assessment. Cheney v. Scharmann, 145 App.Div. 456, 129 N.Y.S. 993; see Matter of Empire City Bank, 18 N.Y.199, 211-213. By Laws N.Y. 1934, c. 494, further changes, of no importance here, have been made in this section.
Casey v. Galli, 94 U. S. 673, 94 U. S. 681; Germania National Bank v. Case, 99 U. S. 628, 99 U. S. 634-635; Deweese v. Smith, 106 F. 438, 445, aff'd, Smith v. Brown, 187 U.S. 637; Murray v. Sill, 7 F.2d 589; Crawford v. Gamble, 57 F.2d 15; B. V. Emery & Co. v. Wilkinson, 72 F.2d 10; see Studebaker v. Perry, 184 U. S. 258, 184 U. S. 266; Rankin v. Barton, 199 U. S. 228, 199 U. S. 232. Compare Bushnell v. Leland, 164 U. S. 684; Korbly v. Springfield Savings Institute, 245 U. S. 330; Aldrich v. Campbell, 97 F. 663.

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