Court Opinion

ID: 3543159
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:54:39.730591+00
Date Added: 2024-06-11T14:06:20.022810
License: Public Domain

I am unable to concur in the views of my associates. The majority opinion concedes that the Iowa decree worked a present dissolution of the surety company. With this I agree, and shall discuss the remaining questions on that basis.
The majority opinion, so far as it holds that whether an action may be commenced or continued against a foreign corporation *Page 526 
after its dissolution by decree of the court of its domicile depends upon the laws of the state in which the action is pending, is in my opinion erroneous. I realize that there isdictum in some cases sustaining that view, and that a few cases so hold. The overwhelming weight of authority and the better-reasoned cases hold that whether a dissolved corporation is continued in existence for the purpose of maintaining or defending actions for a personal judgment must be determined by the laws of its domicile, and that laws of the forum continuing the life of a corporation will not be extended to a foreign corporation dissolved by the laws of its domicile. (8 Thompson on Corporations, sec. 6518, note 7; Marion Phosphate Co. v.Perry, (C.C.A.) 74 Fed. 425, 33 L.R.A. 252; Kinsler v.Casualty Co. of America, 103 Neb. 382, 172 N.W. 33; Remington Sons v. Samana Bay Co., 140 Mass. 494, 5 N.E. 292; Fitts
v. National Life Assn. of Hartford, 130 Ala. 413, 30 So. 374;Oklahoma Natural Gas Co. v. State of Oklahoma, 273 U.S. 257,47 Sup. Ct. 391, 71 L. Ed. 634; Riddell v. Rochester GermanIns. Co., 35 R.I. 45, 85 A. 273; Hunt v. Columbian Ins.Co., 55 Me. 290, 92 Am. Dec. 592; Matson v. Kennecott MinesCo., 101 Wash. 12, 171 P. 1040; Harris-Woodbury Lumber Co.
v. Coffin, (C.C.) 179 Fed. 257, affirmed in (C.C.A.) 187 Fed. 1005; Robinson v. Mutual Reserve Life Ins. Co., (C.C.) 182 Fed. 850; Martyne v. American Union Fire Ins. Co., 216 N.Y. 183,110 N.E. 502; Atlantic Dredging Co. v. Beard, 145 A.D. 342,130 N.Y. Supp. 4; Gulledge Bros. Lumber Co. v.Wenatchee Land Co., 115 Minn. 491, 132 N.W. 992.)
The laws of Iowa do not continue the life of a corporation dissolved by decree of court. (State of Iowa v. Fidelity Loan Trust Co., 113 Iowa, 439, 85 N.W. 638.) No personal judgment could be taken against the surety company after its dissolution. (MacRae v. Kansas City Piano Co., 69 Kan. 457, 77 P. 94;First Nat. Bank of Selma v. Colby, 21 Wall. 609,22 L. Ed. 687; Combes v. Keyes, 89 Wis. 297, 62 N.W. 89, 46 Am. St. Rep. 839, 27 L.R.A. 369; Venable Bros. v. Southern GraniteCo., 135 Ga. 508, 69 S.E. 822, 32 L.R.A. *Page 527 
(n.s.) 446; Oklahoma Natural Gas Co. v. State of Oklahoma, supra; Morgan v. New York Nat. Bldg.  Loan Assn.,73 Conn. 151, 46 A. 877; Crossman v. Vivienda Water Co., 150 Cal. 575,89 P. 335; United States Truck Co. v. PennsylvaniaSurety Corp., 259 Mich. 422, 243 N.W. 311.)
When a corporation is dissolved according to the laws of its domicile, it becomes a dissolved corporation everywhere, dead in every other state as well as in the state of its domicile, and an action against such foreign corporation abates on its dissolution. (8 Thompson on Corporations, 3d ed., sec. 6518; 8 Fletcher, Cyc. Corporations, secs. 5810, 8582.) The decree of the Iowa court dissolving the surety company is entitled to full faith and credit in this state on that issue. (Cogliano v.Ferguson, 245 Mass. 364, 139 N.E. 527; Morgan v. New YorkNat. Bldg.  Loan Assn., supra; United States Truck Co. v.Pennsylvania Surety Co., supra.)
While there is a diversity of views on the question, the better-reasoned cases hold that a judgment obtained against a corporation after its dissolution is void and subject to collateral attack. (Crossman v. Vivienda Water Co., supra;Newhall v. Western Zinc Min. Co., 164 Cal. 380,128 P. 1040; Panzer-Hamilton Co. v. Bray, 96 Cal. App. 460,274 P. 769; Remington  Sons v. Samana Bay Co., supra; Garrett v.Pilgrim Mines Co., 47 Idaho, 595, 277 P. 567; MarionPhosphate Co. v. Perry, supra; 8 Thompson on Corporations, 3d ed., sec. 6519; 8 Fletcher, Cyc. Corporations, sec. 5811; 7 R.C.L. 739.)
And, while there is authority to the contrary, the weight of authority supports the view that, "if a corporation is dissolved pending an action against it, the action abates by operation of law without any plea in abatement, so that no valid judgment can be rendered for or against it, and the objection can be raised at any time." (1 C.J. 135, and cases cited, including that ofPendleton v. Russell, 144 U.S. 640, 12 Sup. Ct. 743,36 L. Ed. 574.)
Section 6013, Revised Codes 1921, is relied upon in the majority opinion. It provides, in part, that the dissolution *Page 528 
of any corporation does not "take away or impair any remedy given against any such corporation, its stockholders or officers, for any liability which has been previously incurred." Conceding, for the purpose of this discussion only, that the laws of Montana determine whether the action of appellants abated upon the dissolution of the company in Iowa, this section would be of no avail to them. Obviously it has application only to domestic corporations. It is only domestic corporations that may be dissolved by action taken under this and the preceding sections.
Section 6659 is also relied upon. It provides that "all foreign corporations licensed to do business in the state of Montana shall be subject to all the liabilities, restrictions and duties which are or may be imposed upon corporations of like character organized under the laws of this state, and shall have no other or greater powers." Its provisions, like those of section 6212, have no application to a corporation that has ceased to exist. (Robinson v. Mutual Reserve Life Ins. Co., (C.C.) 182 Fed. 850.) At most it is but a legislative declaration of the principle set forth in section 11 of Article XV of our Constitution. If section 6013 burdens a domestic corporation with life after its dissolution, the position of appellants in my opinion would not be affected by that fact. "The mere fact that a burden is placed upon domestic corporations from which foreign corporations are exempt does not operate to bring foreign corporations within the provisions of a law intended to apply solely to domestic corporations." (Uihlein v. CapliceCommercial Co., 39 Mont. 327, 102 P. 564, 568.)
If there be merit in the claim that section 6013, when construed as applicable to domestic corporations only, has the effect of conferring greater rights and privileges upon foreign than upon domestic corporations, its utmost effect would be to condemn the statute as applied to domestic corporations, and this question could be raised only by a domestic corporation thus discriminated against. (Uihlein v. Caplice Commercial Co., supra.) But the effect of construing section 6013 as applicable only to domestic corporations does not give foreign *Page 529 
corporations greater rights or privileges than domestic corporations. At most, it places creditors of a domestic corporation in a different position than creditors of a foreign corporation. Its provisions measure the rights and privileges of creditors, and not the corporation itself.
I fail to see, however, wherein it can be said that even domestic creditors of the surety company, because formed and dissolved under the laws of Iowa, are not enjoying the same rights and privileges as they would if the corporation had been created and dissolved under the laws of this state. Had it been created under the laws of Montana and here dissolved, the remedy preserved to a creditor by section 6013 and section 6659 would be nothing more than the right to proceed to judgment and have the judgment allowed as a claim in the receivership proceedings to share pro rata with other creditors. (8 Thompson on Corporations, sec. 6324, note 65; 53 C.J. 124; Riehle v. Margolies,279 U.S. 218, 49 Sup. Ct. 310, 73 L. Ed. 669; Martyne v. AmericanUnion Fire Ins. Co., 216 N.Y. 183, 110 N.E. 502.) That right is preserved to appellants here without the necessity of proceeding to judgment, and the dissolution in Iowa without continuance of the corporate life does not deprive them of any remedy which would be accorded to a creditor of a dissolved domestic corporation under like circumstances.
It is my opinion that the judgment of appellants is a nullity, and, in consequence, that no lien was obtained by virtue of the levy of execution. But, if the judgment of appellants be regarded as valid, I am still unable to subscribe to the conclusion announced in the majority opinion.
I think the court is in error in holding that an ancillary receiver may not be appointed at the instance of a general creditor. Our statute provides that a receiver may be appointed in an action "by a creditor to subject any property or fund to his claim, * * * where it is shown that the property or fund is in danger of being lost, removed, or materially injured." (Sec. 9301, Rev. Codes 1921.) *Page 530 
The complaint here is on behalf of all creditors, and charges that the foreign receiver is removing the assets, and that, unless a receiver be appointed, the funds would be dissipated and lost to the creditors.
We are here dealing with the appointment of an ancillary receiver in aid of the main receivership proceedings initiated in the Iowa courts. For the appointment of an ancillary receiver a creditor may make application. (53 C.J. 406; Popper v. SupremeCouncil, etc., 61 A.D. 405, 70 N.Y. Supp. 637; Brunner v.York Bridge Co., 78 W. Va. 702, 90 S.E. 233, 1 A.L.R. 643;Thornley v. J.C. Walsh Co., 200 Mass. 179, 86 N.E. 355.) "The better practice is for one who has an absolute right to sue in a foreign jurisdiction, such as a party to the original suit, or a creditor or a stockholder, to bring suit there, and ask for the appointment of an ancillary receiver." (Clark on Receivers, sec. 318, subd. (a).) More particularly should this be the rule where, as here, the creditor, Mieyr, had confronting him the decree of the Iowa court adjudging that the corporation had been dissolved on September 21, 1931. This was sufficient basis upon which to justify the allegation made in his complaint that the property in this state was not subject to attachment or execution (dissolution has that effect, 8 Thompson on Corporations, sec. 6520), and to justify the court in assuming jurisdiction to appoint the ancillary receiver on his application.
Nor does the case of Scholefield v. Merrill Mortuaries,93 Mont. 192, 17 P.2d 1081, 1084, militate against this view. In that case there had been no dissolution of the corporation, and no primary receiver appointed for the purpose of winding up the affairs of the corporation preliminary to dissolution. The primary receivership proceedings there involved did not look to the dissolution of the corporation, but had the effect of hindering and delaying creditors of a going concern. The proceedings in this state in that case were, as this court stated, "purely a matter of the appointment of a receiverpendente lite." *Page 531 
The fact that the assets had not yet come to the possession of the receiver when appellants made their levy, I think, is immaterial. The courts have the right to interfere summarily before property has passed to the possession of the receiver in order to aid the receiver in acquiring possession. (53 C.J. 116.) This is because the title of the receiver (8 Thompson on Corporations, sec. 6325) takes effect from the date of his appointment (Id., sec. 6326).
The trial court's function in a case of this kind was clearly expressed in Sands v. E.S. Greeley  Co., 88 Fed. 130, 132, 133, 31 C.C.A. 426, where the court said: "When the administration extends over assets located in several jurisdictions, it is often convenient to apply, in advance, for the assistance of the different courts; hence the practice has become common of applying for auxiliary or ancillary appointments. When such an application is made, the court to which it is addressed exercises its own original jurisdiction. The decree in the court of the domicile of the corporation is evidence in every other state that the corporation is insolvent, and that a proper case exists in that state for the appointment of a receiver, and it is to be respected accordingly, in obedience to the constitutional provision whereby full faith and credit is to be given in each state to the records and judicial proceedings of every other state in the Union. But it is for the court to which the application is made to decide what remedy it should extend in the particular case, and whether the proper administration of the assets requires the appointment of a receiver. Ordinarily, in comity to the proceeding of another court of coordinate jurisdiction, it will appoint an ancillary receiver, and assume administration in aid of the primary receiver. ([National] Trust Co. v. Miller, 33 N.J. Eq. 155. ) When it appoints a receiver, the officer becomes its officer, and is completely amenable to its control, and it matters not whether he is called an ancillary receiver or merely a receiver. His title to the assets within the jurisdiction is derived from its decree, and does not depend upon comity. The assets are in its custody, and are to be disposed of as equity and the orderly *Page 532 
administration of justice require. Its judgments and decrees in respect to these assets must be accepted as conclusive by all other courts. `Where a receiver, administrator, or other custodian of an estate is appointed by the courts of one state, the courts of that state reserve to themselves full and exclusive jurisdiction over the assets of the estate, within the limits of the state.' (Reynolds v. Stockton, 140 U.S. 254,11 Sup. Ct. 773 [35 L. Ed. 464].) It rests in the discretion of the court appointing the receiver whether the assets within its jurisdiction shall be distributed under its own direction or shall be transmitted to the primary receiver. (United States v.Coxe, 18 How. 105 [15 L. Ed. 299].) It is eminently proper that claimants residing within its jurisdiction should be relieved from the expense and inconvenience of proving their claims in other jurisdictions, and that provision should be made for securing to them equality of distribution in respect to the whole assets of the corporation; but there is no hard and fast rule to control the discretion of the court in making such distribution of the assets as shall be just to all creditors, and ultimately effect a ratable distribution of all the property of the corporation. (Buswell v. Supreme Sitting, etc.,161 Mass. 224, 36 N.E. 1065 [23 L.R.A. 846]; Baldwin v. Hosmer,101 Mich. 119, 59 N.W. 432 [25 L.R.A. 739].)"
Upon the appointment of the ancillary receiver, the property was brought in the custody of the court and was not subject to execution. (53 C.J. 131; 8 Thompson on Corporations, 3d ed., sec. 6324.) Nor does the fact that the court granted leave to make the levy alter the situation. That leave was granted only if Crichton's appointment should be revoked on appeal, and with the understanding that no preference over other creditors was given. The order granting leave was subsequently revoked.
The rule is that in the handling of the assets by the ancillary receiver "preference will be given to domestic creditors in the court appointing the ancillary administrator if it appears that there is danger of discrimination against them in the forum of the original receivership, but only so far as is *Page 533 
necessary to counteract such discrimination. A court in which ancillary receivership is pending will protect the rights of the citizens of its own state and those of other states having claims which ought in equity to be brought under its own protection, and it may direct final distribution of the assets in its hands, but where there are no rights entitled to the particular protection of the ancillary court, it ordinarily will direct its receiver to turn over to the primary or domiciliary receiver the assets or funds in its hands after proper expenses of receivership have been taken out, and such turning over of funds rests ordinarily within the discretion of the ancillary court." (Clark on Receivers, sec. 321, and cases cited.)
Here the decree complained of makes ample provision to guarantee the local creditors freedom from discrimination as against the foreign creditors and assures the local creditors their ratable share of their claims with others of equal rank, as shown by the facts stated in the majority opinion, and that is all they are entitled to receive. (Brunner v. York BridgeCo., 78 W. Va. 702, 90 S.E. 233, 1 A.L.R. 643.)
In my opinion, the judgment of the learned trial judge was correct, and should be affirmed.
Motion for rehearing argued by respective counsel on June 26, and denied on July 19, 1933.
MR. CHIEF JUSTICE CALLAWAY and MR. JUSTICE ANGSTMAN dissenting.
Cause taken to the Supreme Court of the United States by respondents Surety Company and E.W. Clark, Receiver, September 11, 1933. *Page 534