Case Name: L. R. Baird, Receiver, Appellee, v. Eli Cole, Appellant
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1929-02-12
Citations: 207 Iowa 664
Docket Number: 
Parties: L. R. Baird, Receiver, Appellee, v. Eli Cole, Appellant.
Judges: Albert, G. J., and De Grape, Morling, and Wagner, JJ., concur. • ‘ '•
Reporter: Iowa Reports
Volume: 207
Pages: 664–667

Head Matter:
L. R. Baird, Receiver, Appellee, v. Eli Cole, Appellant.
February 12, 1929.
Mi Cole, for appellant.
Kenline, Roedell, Hoffmann & Tierney, for appellee.

Opinion:
Stevens, J. —
I. The petition, to which a demurrer was-filed, contains all necessary formal allegations. The material statutes of -the state of North Dakota, in which the insolvent banking corporation is located, are set out in the pleading.
The demurrer challenges the sufficiency of the petition to state a cause of action, upon three grounds: (a) That a copy of the alleged judgment of the North Dakota court, determining the necessity for an assessment upon stockholders, and ordering the same made, is not attached to the petition; (b) that a nonresident receiver of a state banking corporation may not maintain an action-in this state, to enforce the statutory liability of a stockholder, either as a matter of right or comity;.and (c) that he was not served with notice of the proceeding for the assessment.
The petition sets out what purports to be a copy of Section 5168, Compiled Laws of 1913 of the state of North Dakota, relating to banking corporations, as follows:
' ' The shareholders of every association organized under this chapter shall be individually responsible, equally and ratably and not one for another, for all contracts, debts and engagements of such association made or entered into to the extent of the amount of his stock therein at the par value thereof, in addition to. the amount invested in and due on such shares. Such individual liability shall continue for one year after any transfer or sale of stock by any stockholder or stockholders."
It is'also alleged .that, upon a hearing had before the district court of Burleigh County, North Dakota, a court of competent jurisdiction, and having jurisdiction of the receivership of the insolvent banking corporation, on March 4,1926, it was held and determined by the court that an assessment of 100 per cent on the shares of the capital stock of such insolvent corporation was necessary, and same was ordered. This finding and order followed a showing of assets and liabilities of the insolvent--bank, and no question is raised by the demurrer as to the regularity of the proceedings. It is not alleged in the petition that notice of the hearing or proposed assessment was served upon appellant or other stockholders. It does not appear from'the allegations of the petition that a judgment was, or could be, entered by the court- against stockholders in any of the proceedings mentioned. The superadded .liability of a stockholder- created by the statute is, under the laws of North Dakota,-. as well as the .laws of this state, contractual in character. Carrington v. Crosby, 54 N. D. 614 (210 N. W. 342) ; Hirning v. Hamlin, 200 Iowa 1322.
The action is not, therefore, based primarily upon a judgment) but is an action to recover upon a statutory liability contractual in character. So far as-appears upon the face of the petition, the laws of North Dakota do not provide for • making stockholders. a party to the . . , , proceeding for the assessment- against them upon . . their statutory liability, or .for the rendition of a judgment in such proceeding. The action is not, therefore, upon a judgment, and it was not necessary that a- copy of the finding and order of the court in the proceedings for the assessment be' incorporated in or attached to the petition. Proof thereof was all that is required.
II. It is, and has long been, the rule- in this state that a mere chancery receiver of an insolvent corporation appointed in another state may not maintain an action in the courts of this state, either as a matter of right or comity. Wyman v. Eaton, 107 Iowa 214; Hirning v. Hamlin, supra. An exception to this rule has been recognized in this state, and prevails in the United States courts, and in many, if not all, state jurisdictions. It is that a receiver appointed by the courts of a .foreign state in which the law imposes upon him the duty of enforcing the statutory liability of stockholders will be permitted, as a matter of comity, to sue- stockholders - resident in another jurisdiction. This-rule is subject to some modifications and exceptions not here material. . The theory upon which the rule is based is that title to the right'of action and the assets to be recovered passes to-the-receiver;-as quasi- assignee. Hirning v. Hamlin, supra; King v. Cochran, 76 Vt. 141 (56 Atl. 667); Homer v. Barr Pumping Engine Co., 180 Mass. 163 (61 N. E. 883); Howarth. v. Lombard, 175 Mass. 570 (56 N. E. 888) ; Shipman v. Treadwell. 208 N. Y. 404 (102 N. E. 634) ; Murtey v. Allen, 71 Vt. 377 (45 Atl. 752) ; Goss v. Carter, 84 C. C. A. 402 (156 Fed. 746) ; Bernheimer v. Converse, 206 U. S. 516 (51 L. Ed. 1163) ; Converse v. Hamilton, 224 U. S. 243 (56 L. Ed. 749); High on Receivers (4th Ed.), Sections 241a and 317c.
It is alleged in the petition that' it is provided- by Chapter 53, Laws of 1915 of the state of North Dakota, that-it shall be the duty of the receiver of an insolvent state banking corporation to enforce the superadded statutory individual liability of stockholders, and to make proper distribution Of-the'assets received by him which are for the benefit of creditors and do not, under the laws of North Dakota or of this state, beiong to the insolvent. Carrington v. Crosby, supra; Andrew v. Farmers Tr. & Sav. Bank, 204 Iowa 243. To permit- this -action-to be-maintained as a matter of comity in no respect violates the public policy or laws of this state.
III. It is true' that, in a proceeding in this state for the assessment of a stockholder's liability, it is necessary.'that he be made a party thereto. This requirement is, however, statutory, and necessarily -relates only to proceedings in the courts of this state for that purpose, . , . -
Prior to the.enactment of Chapter 208,.Acts, of the Eighteenth-General Assembly (Code Section 1882 of-the.. Code of 1897), which requires the parties interested to be brought-into court, stockholders were not necessary parties to such proceedings. Elson v. Wright, 134 Iowa 634.
The law of the state of North Dakota must control in the determination of the rights and obligations of stockholders in this case, and the procedure to be followed in fixing such liability. Hirning v. Hamlin, supra. The liability, being contractual in character,'although created by statute, is transitory, and an action may be maintained thereon after the necessity for an assessment is determinéd by the court having jurisdiction, in pursuance of the laws of the state in which the receivership is pending.
Manifestly, there is nothing in the record of this case to . indicate that creditors of the insolvent corporation residing in this state-will be in any way .prejudiced by this action. The judgment is affirmed. — Affirmed.
Albert, G. J., and De Grape, Morling, and Wagner, JJ., concur. • ' '•