Source: https://caselaw.findlaw.com/us-supreme-court/198/561.html
Timestamp: 2019-04-22 18:58:35+00:00

Document:
'The receiver represents that he has ascertained from the books and records of the Great Western Mining & Manufacturing Company, in his possession, that, in connection with [198 U.S. 561, 567] the floating of the loan of $300,000 in the year 1889, upon the property of the Great Western Mining & Manufacturing Company, situate in Lawrence county, Kentucky, certain stockholders and officers of said company combined to obtain for themselves, and did so obtain, proceeds resulting from the sale of said bonds in the sum of $75,000, which money belonged to, and should have been paid into, the treasury of said company.
'Your receiver says that he finds shares of capital stock of the Great Western Mining & Manufacturing Company were issued at the instance of, and through the action of, certain of said stockholders and officers of said company, to the amount of $150,000, which said stock was distributed among said stockholders and officers; that, as your receiver is informed and believes, there was no consideration for the issue and distribution of said stock; that the said stock was sold by said stockholders, so as aforesaid receiving it, to the defendant, The Great Western Mining & Manufacturing Company, and, by means of said sale, moneys to the amount of $75,000 were abstracted from the treasury of said company; that the issue and distribution of said capital stock was, as your receiver believes, a mere device or instrumentality to abstract said moneys from the treasury of said company; that said company, as your receiver believes, has a valid claim against said persons to recover said moneys; that some of said parties are solvent and able to repay said moneys, and proceedings should be taken to recover it for said company and its creditors.
'Your receiver further says that he has discovered from the books of the company that apparently, by reason of the inattention and negligence of the board of directors of the said Great Western Mining & Manufacturing Company, and apparently by reason of the mismanagement and misappropriation of the funds of the company, by certain members of said board, that the said company has been greatly damaged, and its assets depreciated in value in a large amount, the exact sum of which is unknown to your receiver, and that said losses [198 U.S. 561, 568] should now be made part of the said company's assets; and that the same is, in the opinion of your receiver, a valid claim against the said board of directors, and that proceedings should be taken to recover the same for the said company and its creditors.
'This cause coming on to be heard upon the application of L. C. Black, receiver herein, asking for instructions as to his duty in the matters and things set forth in the said application, and wherein said receiver represents to the court that, in certain transactions connected with the floating of a loan of $300,000 upon the property of the Great Western Mining & Manufacturing Company, apparently $75,000 was withdrawn by certain stockholders and officers of the said company, whereas the same should have been paid into the treasury of the said company; and wherein said receiver further represents that apparently certain stock was issued to the stockholders and officers of the said company without consideration, and that apparently, by reason of the inattention and negligence and mismanagement of the board of directors of the said company, and the misappropriation of the funds of the said company, said company has been greatly damaged and its assets depreciated.
Mr. Harlan Cleveland for petitioner.
[198 U.S. 561, 570] Messrs. Brainard Tolles and Julien T. Davies for respondents.
It will thus be seen that the decision in Booth v. Clark rests upon the principle that the receiver's right to sue in a foreign jurisdiction is not recognized upon principles of comity, and the court of his appointment can clothe him with no power to exercise his official duties beyond its jurisdiction. The ground of this conclusion is that every jurisdiction, in which it is sought, by means of a receiver, to subject property to the control of the court, has the right and power to determine for itself who the receiver shall be, and to make such distribution of the funds realized within its own jurisdiction as will protect the rights of local parties interested therein, and not permit a foreign court to prejudice the rights of local creditors by removing assets from the local jurisdiction without an order of the court, or its approval as to the officer who shall act in the holding and distribution of the property recovered. In Quincy M. & P. R. Co. v. Humphreys, 145 U.S. 82 , 36 L. ed. 632, 12 Sup. Ct. Rep. 787, the powers of a receiver were under consideration, and the following language was quoted with approval (p. 98, L. ed. p. 637, Sup. Ct. Rep. p. 792): 'The ordinary chancery receiver, such as we have in this case, is clothed with no estate in the property, but is a mere custodian of it for the court, and by special authority may become an officer of the court to effect a sale of the property, if that be deemed necessary for the benefit of the parties concerned.' There are exceptional cases, such as Relfe v. Rundle (Life Asso. of America v. Rundle), 103 U.S. 222 , 26 L. ed. 337, in which the entire property of the insolvent company was vested in the superintendent of insurance of the state, where his authority did not come from the decree of the court, and his right to sue was maintained. In Hawkins v. Glenn, 131 U.S. 319 , 33 L. ed. 184, 9 Sup. Ct. Rep. 739, it appeared that Glenn had derived title by assignment and deed, and he was permitted to sue. In the case now before us it does not appear that the receiver had any other title to the assets and property of the company than that derived from [198 U.S. 561, 577] his official relation thereto as receiver under the order of the court. In such a case we think the doctrine of Booth v. Clark is fully applicable. It is doubtless because of the doctrine herein declared that the practice has become general in the courts of the United States, where the property of a corporation is situated in more than one jurisdiction, to appoint ancillary receivers of the property in such separate jurisdictions. It is true that the ancillary receiverships are generally conducted in harmony with the court of original jurisdiction, but such receivers are appointed with a view of vesting control of property rights in the court in whose jurisdiction they are located. If the powers of a chancery receiver in the Federal courts should be extended so as to authorize suits beyond the jurisdiction of the court appointing him, to recover property in foreign jurisdictions, such enlargement of authority should come from legislative, and not judicial, action.
Nor do we think the jurisdiction is established because the action is authorized to be instituted by the receiver in the name of the corporation. Such actions subjecting local assets to a foreign jurisdiction and to a foreign receivership would come within the reasoning of Booth v. Clark. If a recovery be had, although in the name of the corporation, the property would be turned over to the receiver, to be by him administered under the order of the court appointing him.
It is urged that jurisdiction in this case is sustained by the case of Great Western Teleg. Co. v. Purdy, 162 U.S. 329 , 40 L. ed. 986, 16 Sup. Ct. Rep. 810, in which it was held that the assets and affairs of an insolvent corporation being in the hands of a receiver, the court might direct the calls or assessments upon delinquent shareholders who had not paid for their shares, thereby using the authority the directors might have exercised before the appointment of the receiver. In that case, a receiver appointed by the circuit court of Cook county, in Illinois, under the direction of that court brought an action in the name of the Great Western Telegraph Company, an Illinois corporation, by its receiver, against Purdy, a citizen of Iowa, to recover a sum alleged to [198 U.S. 561, 578] be due from him upon an assessment upon his stock subscription, and it was held that the Illinois court might make the assessment and calls necessary to collect the stock which would be binding in another court. The jurisdiction of the Iowa court was not called in question in the state court of Iowa, where the original action was brought, nor was the question of jurisdiction raised in this court, or passed upon in deciding the case. While not detracting from the authority of that case as to the matter decided, we see nothing in it to indicate that, had the question herein presented been made, it would have been decided otherwise than herein indicated.
There are numerous and conflicting decisions in the state courts as to the rights of a receiver to sue in a foreign jurisdiction upon principles of comity, which it is not necessary to review here. In this court, since the case of Booth v. Clark, 17 How. 338, 15 L. ed. 170, we deem the practice to be settled, and to limit a receiver who derives his authority from his appointment as such, to action, either in his own name or that of an insolvent corporation, such as may be authorized within the jurisdiction wherein he was appointed.
We think the Circuit Court of Appeals was right in holding that the Circuit Court had no jurisdiction of this action.
This view of the case renders it unnecessary to consider the other questions made in the record.
Mr. Justice Brewer concurs in the decree.

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