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CLARK v. WILLIARD ET AL.

decided: April 2, 1934.

CLARK, RECEIVER
v.
WILLIARD ET AL., TRUSTEES, ET AL.



CERTIORARI TO THE SUPREME COURT OF MONTANA.

Hughes, Van Devanter McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Cardozo

[ 292 U.S. Page 113]

 MR. JUSTICE CARDOZO delivered the opinion of the Court.

The question is whether full faith and credit has been given by the courts of Montana to the statutes and judicial

[ 292 U.S. Page 114]

     proceedings of the State of Iowa. United States Constitution, Art. IV, § 1.

The petitioner, the official liquidator of an Iowa insurance company, declares himself the universal successor of the corporation (Keatley v. Furey, 226 U.S. 399, 403, 404), the representative of its personality and powers after its life has been extinguished. Relfe v. Rundle, 103 U.S. 222; Martyne v. American Union Fire Ins. Co., 216 N. Y. 183; 110 N. E. 502; Deschenes v. Tallman, 248 N. Y. 33, 37; 161 N. E. 321. The Supreme Court of Montana has held that his title to the assets, if he has any, is derived, not from any statute, but from an involuntary assignment under a judgment of a foreign court. A title traced to such a source is subject in Montana to attachment and execution at the suit of local creditors. The question has been left unanswered whether attachments and executions are enforcible to the same extent in derogation of the title of a statutory successor.

Federal Surety Company was organized as an insurance corporation under the laws of Iowa, and thereafter received authority to do business in Montana. In September, 1931, the State of Iowa sued it, alleging its insolvency and praying for a decree of dissolution and the distribution of the assets. A statute of Iowa provides that "the commissioner of insurance henceforth shall be the receiver and/or liquidating officer for any insurance company, association or insurance carrier, and shall serve without compensation other than his stated compensation as commissioner of insurance, but he shall be allowed clerical and other expenses necessary for the conduct of such receivership." Code of Iowa, 1931, § 8613-c1. See also Code of Iowa, 1931, §§ 8402, 8964. On September 25, 1931, a decree in favor of the state was entered by default, and an amended decree on December 22 of the same year. By these decrees the corporation was adjudged to have been dissolved on September 25, 1931;

[ 292 U.S. Page 115]

     the Commissioner of Insurance, E. W. Clark, was adjudged to be "the successor to said corporation," and as such to hold "title to all property owned by Federal Surety Company at the time it so ceased to exist"; and liquidation was decreed in accordance with the statute.

We have said that the corporation had authority to do business in Montana. The grant was subject to conditions. A statute of Montana provides that the dissolution of a 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." § 6013, Montana Revised Codes of 1921. The preservation of existing remedies is not confined to domestic corporations. It applies to foreign corporations also. This results, in the view of the Montana court, from a provision of the state constitution as well as from a supplementary statute. By Article XV, § 11, of the Montana constitution, "no company or corporation formed under the laws of any other country, state or territory, shall have, or be allowed to exercise, or enjoy within this state any greater rights or privileges than those possessed or enjoyed by corporations of the same or similar character created under the law of the state." And by a supplementary statute (§ 6659, Revised Codes, 1921): "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." Construing that statute, the Supreme Court of Montana has written in the case now under review: "Suits against domestic corporations do not abate upon the entry of a decree of dissolution, and the same rule, by virtue of this statutory provision, must apply to a foreign corporation."

Long before the dissolution of the Federal Surety Company the respondents Williard and Wheaton, as trustees

[ 292 U.S. Page 116]

     of a syndicate, brought suit in a Montana court to recover from the surety company the damages due upon a bond. The first trial resulted in a non-suit, which was reversed upon appeal. 91 Mont. 465; 8 P. 2d 633. After the decree of dissolution the case came on for a second trial, and on May 10, 1932, judgment in favor of the plaintiffs was entered by default. The Supreme Court of Montana has held that the dissolution of the surety company did not abate the suit. There was thus a final judgment, valid under the Montana practice and effective according to that practice to liquidate the claim.

To say that there was such a judgment is not to dispose of the whole case. A judgment existing, the remedies available to enforce it are still to be determined. Before the respondents were in a position to issue execution, the situation had been complicated by a suit for the appointment of a receiver begun in a Montana District Court. On March 25, 1932, Mieyr, a simple contract creditor, brought suit against the surety company and Clark, the foreign liquidator, praying an ancillary receivership to preserve the local assets. A temporary receiver (Crichton) was appointed the same day. While that suit was pending, the respondents filed a petition on May 24, 1932, for leave to issue an execution against securities and moneys which had been discovered in Montana, the levy to have the same effect as if no receiver had been appointed. An order to that effect was granted, subject, however, to a later motion to vacate it. Within due time thereafter, Clark filed a cross petition and an answer, asserting his title as successor to the dissolved corporation, opposing the demands of the judgment creditors, and setting up his rights and privileges under Art. IV, § 1, of the Federal Constitution. On August 25, 1932, the District Court of Montana entered a final decree adjudging that Clark was the successor to the personality and title of the Iowa corporation, that the assets should be liquidated

[ 292 U.S. Page 117]

     and ratably distributed subject only to the liens existing at the date of dissolution, that Crichton should be continued as an ancillary receiver to assist the foreign liquidator, that the assets in Montana should be retained in that state until local creditors had received their ratable proportion of assets there and elsewhere, and that the execution upon the respondents' judgment and any preference thereby created, as well as the earlier order sanctioning the levy, should be set aside and cancelled.

From that decree, and from an order denying a motion to vacate or modify it, the judgment creditors, who are the respondents in this court, appealed to the Supreme Court of Montana. After argument and reargument, the decree and order were there reversed, two members of the court dissenting. Mieyr v. Federal Surety Co., 94 Mont. 508; 23 P. 2d 959. The court held that the respondents' judgment had been lawfully recovered though the defendant was dissolved; that the ancillary receivership was void for the reason that a simple contract creditor (Mieyr) was without standing to maintain the suit; that Clark, the foreign liquidator, was not the successor to the corporate personality with a title derived from the statutes of the domicile, but was a chancery receiver with a title (if any) created by the Iowa decree; that as against such a receiver, creditors in Montana were at liberty to levy attachments and executions, irrespective of their right to enforce such a levy against a statutory successor; and hence that the respondents' execution should be reinstated, and the cause remanded for further proceedings in accord with the opinion. A writ of certiorari brings the case here.

Our jurisdiction to issue the writ is challenged on the ground that the decree to be reviewed is without the requisite finality. Judicial Code, § 237; 28 U. S. C., § 344. The challenge should not prevail. The decree of the Montana court is final to the extent that it confirms the respondents'

[ 292 U.S. Page 118]

     execution and permits a levy that will override the liquidator's title. A final order results where a court denies a petition by an intervening creditor to establish a prior lien (Gumbel v. Pitkin, 113 U.S. 545, 548), or a petition by a municipal corporation intervening in a foreclosure suit to enforce a lien for taxes superior to the mortgage (Savannah v. Jesup, 106 U.S. 563, 564, 565), or one by a chancery receiver appointed by a state court for the delivery of property in the possession of another court. Ex parte Tiffany, 252 U.S. 32, 36. Cf. Hovey v. McDonald, 109 U.S. 150, 155; Williams v. Morgan, 111 U.S. 684, 689; United States v. River Rouge Co., 269 U.S. 411, 414; Dexter Horton National Bank v. Hawkins, 190 Fed. 924, 927. The doctrine of those cases is applicable here. Further judicial proceedings may be necessary between the liquidator and others not before us. As between the liquidator and the respondents claiming as judgment creditors the suit is at an end. They came into court pro interesse suo with a petition to establish the priority of their judgment. The petition has been granted and priority decreed. Not only that, but an order vacating the execution has been reversed, and the levy reinstated. So far as these respondents are concerned, there is nothing more to be decided. "The property of the Federal Surety Company within the state of Montana at the time of the levy of the execution by Williard et al., not being in possession of the Iowa receiver, was subject to levy, and the levy made under the execution in May, 1932, is good and valid." By that opinion, which by reference was incorporated in the judgment (Metropolitan Water Co. v. Kaw Valley District, 223 U.S. 519, 523; Gulf Refining Co. v. United States, 269 U.S. 125, 135), nothing was left to the discretion of the trial court in respect of the priority of the execution or of the respondents' rights thereunder. The intervening petition has been finally disposed of, and no longer is a pending proceeding, whatever may be said

[ 292 U.S. Page 119]

     of the suit in which the claimants intervened. Cf. Forgay v. Conrad, 6 How. 201, 202, 203; United States v. River Rouge Co., supra.

Jurisdiction being here, the case will be considered on the merits.

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. McGoon v. Scales, 9 Wall.23; cf. Sinnott v. Hanan, 214 N. Y. 454, 458, 459; 108 N. E. 858; Marstaller v. Mills, 143 N. Y. 398, 400; 38 N. E. 370. Cases such as Remington & Sons v. Samana Bay Co., 140 Mass. 494; 5 N. E. 292, and others cited in the margin*fn1 are not at war with this conclusion. They express the rule to be applied when there is no statute or public policy to the contrary in the state where the foreign corporation has been licensed to do business. They do not delimit the capacity of a state, when granting such a license, to subject it to conditions. Complications might exist if there had been no one within the state upon whom process could be served. Here the action was begun, and the company had appeared and answered, before the date of dissolution. Moreover, a power of attorney was on file, pursuant to the Montana law (Revised Codes, 1921, § 6212), whereby process might be served on the Insurance Commissioner of the state, the power to remain in force so long as any policy or liability of the company was outstanding in Montana. Cf. American Railway Express Co. v. Kentucky, 273 U.S. 269, 274; Washington v. Superior Court, 289 U.S. 361, 364, 365. Complications also might exist if there were no one

[ 292 U.S. Page 120]

     in being with authority to continue the defense. Here there had been the designation of a liquidator who was competent to represent the corporation if he had chosen to intervene. Cf. Oklahoma Natural Gas Co. v. Oklahoma, 273 U.S. 257. We are not to be understood as intimating that such complications would be fatal if they existed, but merely to exclude them. In such circumstances the judgment is at least effectual to liquidate the claim as a charge upon the local assets. But this, as we have seen, is only a partial statement of the problem. To ascertain the procedure by which the charge is to be enforced, whether by the levy of execution or by a ratable division, other considerations must be weighed. In particular it must be known whether superior interests or titles have developed between the summons and the judgment, and whether the quality or operation of those interests affects the method of distribution. Something did intervene here, the appointment of a liquidator under the statutes of the domicile. That much is undisputed. Did the Supreme Court of Montana misjudge the quality and operation of this intervening interest, and in so doing did it deny to the statutes and decrees of Iowa the faith and credit owing to them under the Constitution of the United States?

In our judgment the statutes of Iowa have made the official liquidator the successor to the corporation, and not a mere receiver. State ex rel. Attorney-General v. Fidelity Loan & Trust Co., 113 Iowa 439; 85 N. W. 638. His title is not the consequence of a decree of a court whereby a corporation still in being has made a compulsory assignment of its assets with a ...


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