Case Name: Gilman, Administrator, Appellant, vs. Ketcham, Respondent
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1893-01-10
Citations: 84 Wis. 60
Docket Number: 
Parties: Gilman, Administrator, Appellant, vs. Ketcham, Respondent.
Judges: 
Reporter: Wisconsin Reports
Volume: 84
Pages: 60–70

Head Matter:
Gilman, Administrator, Appellant, vs. Ketcham, Respondent.
December 9, 1892
January 10, 1893.
Inter-state comity: Dissolution of foreign corporation: Rights of receiver.
Proceedings in a New York court_for_the voluntary dissolution of a °Q1iFSSli2£.YfJb^t-sfeite._in which creditors- were35jNned from" bringing actions against the corporation and it was declared dissolved and the titleto all its p£operty1_efifgptsi_and..credits was ves.tacL in a recaver, are_given Jull..for.ce-.anegfcJa_this. state, on the ground of comity, asjigainst a^ci^itor__residing_m New York and boundFy sScTproceedings.JbntAzlKiJiaaJiro.ught an action against" the corporation in this state and garnished residents of this state.
APPEAL from the Circuit Court for Milwaukee County. The case was that the plaintiff, in his representative capacity as administrator of the estate of Winthrop W. Gil-man, deceased, on the 24th day of September, 1891, was a creditor of the Hudson River Boot & Shoe Manufacturing Company, a corporation created and existing under the general laws of the state of New York, in which state the plaintiff also resided, in the sum of $941.81, and commenced an action in the circuit court of Milwaukee county, in which Hubbard & Baker, of West Superior, Wis., were garnished as being indebted to the said corporation, September 2.6, 1891; and on the 14th of the following month they filed their answer, admitting an indebtedness to the defendant of $545.41, and paid that sum into court.
On the 8th of February, 1892, by stipulation between the plaintiff’s attorneys and the attorneys for William M. Ketcham, the interpleading claimant, he was allowed to in-terplead in respect to his claim to said money, and serve his answer within twenty days thereafter. In his answer he alleged that he was a resident and citizen of New York, and that on and prior to the 29th of July, 1891, the de fend ant, the Hudson Eiver Eoot & Shoe Manufacturing Company, was a corporation, organized and existing under the laws of that state, and the garnishees were indebted to it in the sum stated in their answer and so paid into court; that on the 28th of July, 1891, proceedings were commenced in the supreme court in the state of New York in and for Dutchess county, in a case entitled “ In the matter of the application' of a majority of the trustees of the Hudson Eiver Boot & Shoe Manufacturing Company for a final order dissolving said corporation,” for the purpose of effecting a voluntary dissolution of the corporation and the distribution of its effects, which proceedings, were carried on under and in pursuance of title XI of the Code of Civil Procedure, ch. 17, secs. 2419-2430, entitled “ Proceedings for the voluntary dissolution of a corporation'” (3 Bliss’ N. Y. Code, sec. 2413); that a petition had been presented to the supreme court, in substance as required by the statute, by a majority of the trustees, stating, among other things, that the stock, effects, and other property of the corporation were not sufficient to pay the just demands for which it was liable, or to afford a reasonable security to those who might deal with it, and that the petitioners deemed it beneficial for the interests of the stockholders that it should be dissolved,— a schedule being annexed thereto containing a true account of all the creditors of the corporation and unsatisfied engagements, a statement of the name and place of each creditor, etc., a statement of the sum owing to each creditor or other person, etc., a statement of the true cause and consideration of the indebtedness to each creditor, a full, just, and true inventory of all the property, etc., of the corporation, a statement of each incumbrance upon its property, and a full, just, and true account of the capital stock of the corporation, specifying the name of each stockholder, which was duly verified; that the court made an order July 29,1891, requiring all persons interested to show cause before the court, at special term to be held October 31, 1891, why the said corporation should not be dissolved; that on the same day, upon notice and verified petition of the president of the corporation, served upon the attorney general of the state of New York, he consented that the motion be granted, and the court appointed the claimant, William M. Ketcham, temporary receiver of the property of said corporation, with the powers and duties specified in sec. 1788 of the Code of Civil Procedure of that state, and he qualified as such; that on the same day, upon motion and consent of the attorney general thereto, the said supreme court ordered that the creditors of the said corporation, and each and every one of them, be, and they were thereby, restrained from bringing any action against the corporation for the recovery of any sum of money, and they were thereby enjoined from taking any further proceedings on any such actions theretofore commenced; that this order was served personally upon .the plaintiff on the 5th of August, 1891, in New York; that on the 31st of October, 1891, pursuant to the order to show cause, and due notice thereof given to each of the creditors, stockholders, and persons interested in said corporation or its affairs, the court ordered and adjudged that the said corporation be, and it was thereby, dissolved, and that William M. Ketcham, the interpleading claimant, was appointed permanent receiver, and qualified as such; and by virtue of such proceedings he became vested with the right and title to all the property, effects, and credits of every description belonging to said corporation, and became entitled to receive the said sum of $539.45, so admitted by said garnishees to be due, and theretofore paid into court; and that the plaintiff, at the time of the service upon him of said injunctional order, was and still is a resident of the state of New York, and prior to the time when said garnishees made and filed their answer they had notice of the appointment of the claimant41 as such receiver. The claimant demanded judgment that the clerk pay over said sum to him, and for his costs.
The plaintiff demurred to the petition on the ground that it did not state facts sufficient to constitute a cause of action or claim to the fund disclosed and paid into court, and for that the claimant had no legal capacity to maintain the petition. Motion was made to strike out the demurrer as frivolous, and the court so ordered, with $10 costs, and that the claimant have judgment, with leave to the plaintiff to take issue upon said claimant’s intervening petition, or such other proceedings as he might be advised, within twenty days. Plaintiff appealed from the order.
Eor the appellant there was a brief by Rietbrock <& Halsey, and oral argument by L. W. Halsey.
They contended, inter alia, that the receiver has no power which he can exercise in this state. The New York court could not transfer to him any property outside of its territorial jurisdiction. The proceedings in the New York court have no extra-territorial effect. Filkins v. Nunnemacher, 81 Wis. 91; MeOlure v. Campbell, 71 id. 350; Ilxmt v. Colum-bian Ins. Co. 55 Me. 290 ; Pond v. Cooke, 45 Conn. 126; In re Waite, 99 N. Y. 433; Pierce v. O’Brien, 129 Mass. 314; Peterson v. Chemical Bank, 32 N. Y. 21; WilUtts v. Waite, 25 id. 577; Rhawn v. Pearce, 110 Ill. 350; Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367; Booth v. Clark, 17 How. 322; Farmers’ & M. Ins. Co. v. Needles, 52 Mo. 17; High, Receivers, sec. 239; Parsons v. Charter Oak L. Ins. Co. 31 Red. Rep. 305; Relfe v. Randle, 103 U. S. 222; Taylor v. Columbian Ins. Co. 14 Allen, 353. The question is not affected by the fact that the plaintiff is a resident of New York, where the proceedings wrere had appointing the receiver. His right to sue in our state courts stands upon the same plane as that of a resident creditor. McClxire v. Campbell, 71 Wis. 350; Hibernia Nat. Bank v. Lacombe, 84 N. T. 367; Story, Confl. of Laws, sec. 414; Rhawn v. JPearoe, 110 Ill. 350; Const, of U. S. art. IT, sec. 2; Demis v. Pierse, 7 Minn. 13; Lemmon v. People, 20 N. Y. 607; Ward v. Maryland, 12 Wall. 418; Cor field v. Coryell, 4 Wash. 0. C. 371; Williams v. Bruffy, 96 U. S. 176; Ducal v. Chicago, 48 Ill. 172.
For the respondent there was a brief by Williams & Robinson, and oral argument by O. T. Williams.
They argued, among other things, that as a matter of comity a foreign receiver is permitted to take property as against attaching creditors who reside within the jurisdiction of the court appointing the receiver. High, Receivers, 193; Bagby v. A., M. & O. R. Co. 86 Pa. St. 291; Hurd v. Elizabeth, 41 N. J. Law, 1; Bcmk v. McLeod, 38 Ohio St. 174; Hunt v. Columibicm Lns. Co. 55 Me. 290, 297, 298; Pa/radñse v. Farmers’ <& M. Bank, 5 La. Ann. 710; McAl-pin v. Jones, 10 id. 552; Gray don v. Church, 7 Mich. 36; Lycoming F. Lns. Co. v. Wright, 55 Yt. 526; Finer v. Beste, 32 Mo. 240; Thurston v. Rosenfield, 42 id. .474; Green v. Gross, 12 Neb. 117; Chafee v. Fourth Hat. Bank, 71 Me. 514; Boulware v. Davis, 90 Ala. 207; Runk v. St. John, 29 Barb. 585; Peters v. Foster, 10 N..Y. Supp. 389; Dyer v. Power, 14 id. 873. The receiver is entitled to the fund as a matter of absolute right. The judgment vesting in him all the property of the corporation was rendered by a court of competent jurisdiction, in a suit to which the plaintiff was a party, and the plaintiff resided within the jurisdiction of that court. Under sec. 1, art. IY, Const, of U. S., providing that full faith and credit shall be given in each state to the judicial proceedings of every other state, this judgment is conclusive in this case. Dobson v. Pearce, 12 N. Y. 156; Folger v. Columbiaiv Lns. Co. 99 Mass. 267; Ln re Waite, 99 N. Y. 433; Williams v. Hintermeister, 26 Fed. Rep. 889.

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.