Court Opinion

ID: 3544365
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:55:48.60136+00
Date Added: 2024-06-11T14:22:19.219163
License: Public Domain

I find myself unable to concur in the opinion written by MR. JUSTICE ANDERSON. The single question left for this court to pass upon under the mandate of the United States Supreme Court, is "whether there is any local policy whereby an insolvent foreign corporation in the hands of a liquidator with title must submit to the sacrifice of its assets or to their unequal distribution by writs of execution." The United States Supreme Court in considering this question said that it "is involved in confusion with decisions pro and con." But it also said: "The tendency in most of the states is to give priority to the title unless a contrary policy is expressed with reasonable clarity." It cited in support of the rule, Martyne v. American Union Fire Ins.Co., 216 N.Y. 183, 110 N.E. 502, Kinsler v. Casualty Co.,103 Neb. 382, 172 N.W. 33, Bockover v. Life Association ofAmerica, 77 Va. 85, and Cogliano v. Ferguson, 245 Mass. 364,139 N.E. 527. To those may also be added the case of EngineeringCo. v. Perryman Elec. Co., 113 N.J. Eq. 255, 166 A. 461,462, where the court said: "It is a well-established *Page 520 
rule of law that all creditors of a corporation, wherever residing, are entitled, in case of its insolvency, to have its general assets distributed among them upon principles of perfect equality, and that the courts of one state have no right to favor domestic creditors; therefore, this court cannot apply the assets in possession of its receivers to the payment of claims of creditors who are residents of this state in disregard of the rights of creditors who are residents of other states. Distribution must be made upon the principle that equality is equity." Such is the rule stated by Thompson in his work on Corporations, section 6566, third edition. That author also said: "During the winding-up proceedings after dissolution, no creditor will be permitted by legal process or otherwise, to acquire priority, or to enforce his claim against the property held for distribution as against the rights of other creditors." (8 Thompson on Corporations, p. 758.)
Sections 6011 and 9303, Revised Codes 1921, and the cases cited and quoted from in the majority opinion interpreting these sections, have no application here. They do not deal with insolvent corporations. The cases of Gilna v. Barker,78 Mont. 357, 254 P. 174, and Gilna v. Barker, 78 Mont. 343,254 P. 169, were cases where the statutory trustees of a corporation whose charter life had expired were sued on contracts made by them after they became such trustees. The case of Ames Frost Co. v. Heslet, 19 Mont. 188, 47 P. 805, 61 Am. St. Rep. 496, simply holds that a corporation, while a going concern, may, when insolvent, prefer one creditor over another. It does not aid us in the question here under consideration. The rule is otherwise where, as here, the corporation is both insolvent and has suspended business. (8 Thompson on Corporations, sees. 6188 and 6198.) We so held in Cabot, Inc., v. Gas Products Co.,93 Mont. 497, 19 P.2d 878. That a creditor of either a foreign or domestic insolvent corporation, dissolved by order of court, may thereafter obtain a preference over other creditors by execution on the funds of the corporation held in trust by the liquidator for the benefit of creditors seems to me preposterous. *Page 521 
In those cases holding that the title of the statutory receiver on dissolution of a foreign insolvent corporation is subject to execution, it is only so held in favor of creditors residing in the state where the execution is sought. This is the rule in Iowa. (Shloss v. Metropolitan Surety Co.,149 Iowa, 382, 128 N.W. 384; Watts v. Southern Surety Co., (Iowa)248 N.W. 348.) Emphasis is placed upon the Iowa decisions by my associates in the foregoing opinion. Iowa does not recognize the right of a foreign liquidator even by way of comity, when to do so would relegate local creditors to a foreign jurisdiction to obtain the relief to which they are entitled.
We are here dealing with the rights of local creditors by virtue of an execution. But to avoid the force and effect of the case of Blake v. McClung, 172 U.S. 239, 19 Sup. Ct. 165,43 L. Ed. 432, Id., 176 U.S. 59, 20 Sup. Ct. 307, 44 L. Ed. 371, which prohibits a state from favoring resident creditors over nonresident ones, the majority of my associates are announcing the startling policy, unheard of elsewhere, that any creditor, whether resident or foreign, may obtain such a preference. This policy, I venture to say, this court will hasten to reverse when a foreign creditor seeks its benefit to the prejudice of local creditors.
Under the sweeping policy announced in the opinion by Mr. Justice Anderson, a vigilant foreign creditor will be permitted to levy execution upon property in this state of a dissolved, insolvent foreign corporation and obtain a preference over Montana creditors, as against property situated in Montana. From this position this court will certainly retreat when a case is presented where a foreign creditor seeks by execution to obtain a preference over domestic creditors. Moreover, this is not a case where we can properly announce a policy on grounds of reciprocity. The majority think that, since Iowa would not recognize a Montana liquidator, we should not recognize an Iowa liquidator. It should be borne in mind that no Iowa creditors are here involved. The policy announced by this court may not affect Iowa creditors at all. It may affect Idaho creditors, and creditors from other states wherein a *Page 522 
different rule prevails from that established in Iowa. However desirable it might be to prefer resident creditors over nonresident ones, this may not be done without violating the Federal Constitution. (Blake v. McClung, supra.)
On one other ground I think the conclusion announced by the majority is erroneous. I think this court erred in the interpretation of our statutes on the former hearing in this case (94 Mont. 508, 23 P.2d 959), wherein it is held that the corporate life of the dissolved corporation was continued by our statutes for the purpose of obtaining judgment and execution. My reasons for so thinking are set forth in my dissenting opinion in that case. The Supreme Court of the United States could not, of course, consider that question. It was bound by the interpretation placed upon our statutes by this court. That is elementary law. That court only considers federal questions. At the very outset of the opinion of the United States Supreme Court, when reaching the merits of the case, it said: "We assume in accordance with the decision of the Montana court that the respondents' action against the surety company did not abate on dissolution, but was lawfully pursued to judgment." There was nothing else for that court to do, for under its repeated decisions it is bound by the interpretation placed by a state court upon its own statutes.
For the reasons stated in my dissenting opinion on the former appeal, I think the judgment and execution were ineffectual, and that the claim here involved stands only upon an equality with the claims of other creditors wherever residing. I also think this should be the policy to be announced by this court if it be assumed that the judgment against the dissolved corporation be valid. I think the judgment entered by the trial court gave the creditors here complaining all the protection to which they were and are entitled, and that it should be affirmed.
Petition of E.W. Clark, receiver of Federal Surety Company, respondent in above cause, for writ of certiorari, granted by Supreme Court of the United States October 15, 1934. *Page 523