Source: https://www.legalcrystal.com/case/91298/converse-vs-hamilton
Timestamp: 2019-04-18 12:56:18+00:00

Document:
This Court looks to the constitution and statutes of a state and the decisions of its courts to determine the nature, extent, and method of enforcing the liability of stockholders of a corporation of that state.
stockholder becomes liable for the debts of the corporation in amount measured by the par value of his stock.
The liability of stockholders under the Minnesota Constitution is not to the corporation, but to the creditors collectively, is not penal but contractual, not joint, but several, and the means of its enforcement are subject to legislative regulation.
Under § 272 of the Laws of Minnesota, the receiver of a corporation, the stockholders whereof are subject to double liability, is invested with authority to sue for and collect the amount of the assessment established in the sequestration suit provided by the statute.
A receiver to collect the double liability of stockholders of a Minnesota corporation is more than a mere chancery receiver; he is a quasi -assignee, invested with the rights of creditors, and he may enforce the same in any court of competent jurisdiction.
As the statute of Minnesota providing for determining whether stockholders of a corporation of that state are subject to statutory double liability does not preclude a stockholder from showing that he is not a stockholder or from setting up any defense personal to himself, it is not unconstitutional as denying due process of law, but is a reasonable regulation, and the jurisdiction of the court is sustained by the relation of the stockholder to the corporation and his contractual obligation in respect to its debts.
While an ordinary chancery receiver cannot exercise his powers in jurisdictions other than that of the court appointing him, except by comity, one who is a quasi -assignee and invested with the rights of his cestuis que trustent may sue in other jurisdictions, and his right so to do is protected by the full faith and credit clause of the federal Constitution.
While there are certain well recognized exceptions to the full faith and credit clause, especially in regard to the enforcement of penal statutes, the right of a receiver of a Minnesota corporation to sue in the courts of another state to recover the double liability imposed on the stockholders is within the rule, and the courts of the latter state are bound to give full faith and credit to the laws of Minnesota and the judicial proceedings upon which the receiver's title, authority and right to relief are grounded.
to enforce double liability against the stockholders in the former state, are stated in the opinion.
the complete insolvency of the company, and of the necessity of resorting to the double liability of its stockholders for the payment of its creditors, and in orders levying upon its stockholders two successive assessments of 36 and 64 percent of the par value of their respective shares, requiring that these assessments be paid to the receiver within stated periods, and directing the receiver, in case any of the stockholders should fail to pay either assessment within the time prescribed, to institute and prosecute all such actions, whether within or without the state, as should be necessary to enforce the assessments. Some of the stockholders intervened in the suit and appealed from the order levying the first assessment, and the order was affirmed by the supreme court of the state. 90 Minn. 144.
The defendants here were stockholders in the company, and failed and refused to pay either assessment, although payment was duly demanded of them. But they were not made parties to the sequestration suit, and were not notified, otherwise than by publication or by mail, of the applications for the orders levying the assessments. Upon the expiration of the times prescribed in the orders, the receiver brought the present actions to enforce them. The complaints set forth the proceedings in the sequestration suit and the provisions of the Minnesota Constitution and statutes relating to the double liability of stockholders and its enforcement, with the interpretation placed upon those provisions by the Supreme Court of that state, and also made the claim that § 1, Article IV, of the Constitution of the United States, and § 905, Rev.Stat., required the courts of Wisconsin to give such faith and credit to those proceedings and provisions as they have by law or usage in the courts of Minnesota.
of that state in respect of the enforcement of the like liability of stockholders in its own corporations, and judgments of dismissal were entered accordingly. The judgments were affirmed by the supreme court of the state, 136 Wis. 589 and 594, and the receiver sued out these writs of error, alleging that he had been denied a right asserted, as before indicated, under the Constitution and laws of the United States.
The insolvent company, before mentioned, is within the general terms of this provision, not the excepting clause. Merchants' National Bank v. Minnesota Thresher Manufacturing Co., 90 Minn. 144; Bernheimer v. Converse, 206 U. S. 516 , 206 U. S. 524 . The provision is self-executing, and under it each stockholder becomes liable for the debts of the corporation in an amount measured by the par value of his stock. This liability is not to the corporation, but to the creditors collectively; is not penal, but contractual; is not joint, but several, and the mode and means of its enforcement are subject to legislative regulation. Willis v. Mabon, 48 Minn. 140; Minneapolis Baseball Co. v. City Bank, 66 Minn. 441, 446; Hanson v. Davison, 73 Minn. 454; Straw & Ellsworth Co. v. Kilbourne Co., 80 Minn. 125; London & Northwest Co. v. St. Paul Co., 84 Minn. 144; Bernheimer v. Converse, supra.
"If it be desirable, in order to secure a speedy, economical, and practical method of enforcing the liability, to invest the receiver with such power, it must be done by statute."
"SEC. 5. Said order and the assessment thereby levied shall be conclusive upon and against all parties liable upon or on account of any stock or shares of said corporation, whether appearing or represented at said hearing, or having notice thereof or not, as to all matters relating to the amount of and the propriety of and necessity for the said assessment. This provision shall also apply to any subsequent assessment levied by said court as hereinafter provided."
"SEC. 6. It shall be the duty of such assignee or receiver to, and he may, immediately after the expiration of the time specified in said order for the payment of the amount so assessed by the parties liable therefor, institute and maintain an action or actions against any and every party liable upon or on account of any share or shares of such stock who has failed to pay the amount so assessed against the same, for the amount for which such party is so liable. Said actions may be maintained against each stockholder severally in this state or in any other state or country where such stockholder or any property subject to attachment, garnishment, or other process in an action against such stockholder may be found. . . ."
jurisdiction in the state or elsewhere. Straw & Ellsworth Co. v. Kilbourne Co., supra; Bernheimer v. Converse, supra.
4. The constitutional validity of chapter 272 has been sustained by the supreme court of the state, as also by this Court, and this because (1) the statute is but a reasonable regulation of the mode and means of enforcing the double liability assumed by those who become stockholders in a Minnesota corporation; (2) while the order levying the assessment is made conclusive, as against all stockholders, of all matters relating to the amount and propriety of the assessment and the necessity therefor, one against whom it is sought to be enforced is not precluded from showing that he is not a stockholder, or is not the holder of as many shares as is alleged, or has a claim against the corporation which, in law or equity, he is entitled to set off against the assessment, or has any other defense personal to himself, and (3) while the order is made conclusive as against a stockholder, even although he may not have been a party to the suit in which it was made, and may not have been notified that an assessment was contemplated, this is not a tenable objection, for the order is not in the nature of a personal judgment against the stockholder, and as to him is amply sustained by the presence in that suit of the corporation, considering his relation to it and his contractual obligation in respect of its debts. Straw & Ellsworth Co. v. Kilbourne Co. supra; London & Northwest Co. v. St. Paul Co., supra; Bernheimer v. Converse, supra.
"Whether, aside from the federal considerations just discussed, the Wisconsin court should have permitted this action to be maintained because of the principle of comity between the states is a question exclusively for the courts of that state to decide."
"The question to be determined in this case was not what credit and effect are given in an action against a stockholder in the courts of Rhode Island to a judgment in those courts against the corporation of which he is a stockholder, but what credit and effect are given in the courts of Kansas in a like action to a similar judgment there rendered. Thus and thus only can the full faith and credit prescribed by the Constitution of the United States and the Act of Congress be secured."
"It is objected that the receiver cannot bring this action, and Booth v. Clark, 17 How. 322; Hale v. Allinson, 188 U. S. 56 , and Great Western Mining Co. v. Harris, 198 U. S. 561 , are cited and relied upon. But in each and all of these cases it was held that a chancery receiver, having no other authority than that which would arise from his appointment as such, could not maintain an action in another jurisdiction. In this case, the statute confers the right upon the receiver, as a quasi -assignee and representative of the creditors, and as such vested with the authority to maintain an action. In such case, we think the receiver may sue in a foreign jurisdiction. Relfe v. Rundle, 103 U. S. 222 , 103 U. S. 226 ; Howarth v. Lombard, 175 Mass. 570; Howarth v. Angle, 162 N.Y. 179, 182."
And in Converse v. First National Bank of Suffield, 212 U. S. 567 , where, in a similar action, the Supreme Court of Errors of Connecticut had given judgment against the receiver, this Court reversed the judgment on the authority of Bernheimer v. Converse, supra.
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.
Besides, it is not questioned that the Wisconsin court in which the receiver sought to enforce the causes of action with which he had become invested under the laws and proceedings relied upon was possessed of jurisdiction which was fully adequate to the occasion. His right to resort to that court was not denied by reason of any jurisdictional impediment, but because the supreme court of the state was of opinion that, as to such causes of action, the courts of that state "could, if they chose, close their doors and refuse to entertain the same."
In these circumstances, we think the conclusion is unavoidable that the laws of Minnesota and the judicial proceedings in that state, upon which the receiver's title, authority, and right to relief were grounded and by which the stockholders were bound, were not accorded that faith and credit to which they were entitled under the Constitution and laws of the United States.
The judgments are accordingly reversed, and the cases are remanded for further proceedings not inconsistent with this opinion.

References: § 272
 § 1
 § 905
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