Benjamin N. Cardozo

“ Inequality and waste are to be avoided in special measure when banks or insurance companies, unable, as we have seen, to have the protection of courts of bankruptcy, are in course of liquidation. The Supreme Court of Montana has been mindful of this need, at all events in respect of banks, and has stated it with force and clarity. Thus, in Rohr v. Stanton Trust & Savings Bank, supra, a creditor brought suit in the hope of gaining a preference for his deposit out of the assets of a bank in the hands of a receiver. ”

“ The Supreme Court of Montana will determine 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. ”

“ If the law were clear beyond debate, as counsel for the respondents has contended that it is, our duty might be to dispose of the entire controversy now instead of remanding it to the state court for further action there. We are mindful of the practice whereby domestic corporations dissolved by the Montana law may be wound up by the directors as trustees in dissolution. Revised Codes, § 6011, formerly Civil Code 1895, § 561. We understand also that, while the assets are so held, claims may be reduced to judgment, and attachments and executions levied. ”

“ At the most we should announce the correct rule with the reasons therefor and send the cause back to the Supreme Court of Montana for further proceedings not in conflict with our determination. But this Court is neither called upon nor can it, without impropriety, discuss mere questions of state law which may hereafter be presented for decision by the courts of Montana. It is not our function to suggest to state courts how they should interpret their own laws. ”

“ 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.' Section 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. ”

“ 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 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 ”

“ 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 foreign corporation, represented by a foreign liquidator, may be subjected to the same restraints. If supplementary directions are thought to be appropriate to the end that local assets may be kept within in Montana till local creditors are paid their share of all the assets everywhere, there is power in a court of equity to assure the requisite equality. ”

“ 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 alowed clerical and other expenses necessary for the conduct of such receivership.' Code of Iowa 1931, § 8613-c 1. ”

“ Our jurisdiction to issue the writ is challenged on the ground that the decree to be reviewed is without the requisite fanality. Judicial Code § 237, 28 U.S.C. § 344 (28 USCA § 344) . The challenge should not prevail. The decree of the Montana court is final to the extent that it confirms the respondents' execution and permits a levy that will override the liquidator's title. ”

“ 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. ”

“ Upon the sole petition of Clark, receiver, a writ of certiorari issued from this court. We have no jurisdiction unless the judgment of the state court was final; and only federal questions are open for our consideration.
The formal judgment of the Supreme Court directed: 'For reasons stated in the opinion the judgment and orders appealed from are reversed and the cause remanded for further proceedings in accordance with the views expressed in the opinion.' Upon its face this is not final within the meaning of the statute governing our jurisdiction. ”

“ The vast majority of the Montana cases on the subject of receivers are grounded on another section (9301) , under which the tests are very different. There is hardly a word in any of them as to the meaning of section 9303 and the remedy thereunder. Thus, in Forsell v. Pittsburg & Montana Copper Co., 42 Mont. 412, 113 P. 479, a creditor obtained a judgment against a foreign corporation, not dissolved, and execution was issued and returned unsatisfied. The creditor then applied for a receiver, but without alleging that there was any property within the state. ”

“ Business corporations may have their assets equally distributed through involuntary proceedings. But insurance corporations, like banks, are excluded from bankruptcy altogether (11 U.S.C. § 22 b) , and must submit to dismemberment, however great the waste or inequality, unles receivers are appointed. The respondents would have us say that submission to such consequences is exacted by an unbending rule of law. ”

“ Thereupon the court appointed D. A. Crichton receiver of the Montana assets, with powers as prayed: he duly qualified. Clark appeared specially and asked that Crichton's appointment be annulled because the court lacked jurisdiction. This motion was denied May 24th. On the same day Williard, Wheaton, and Hay, appearing by petition, asked and received approval of their action in procuring levy of the Fergus county execution upon the corporation's property. ”

“ Adden, 136 U.S. 348, 10 S.Ct. 843, 34 L.Ed. 360, a case of insolvency proceedings in invitum against a natural person, and Zacher v. Fidelity Trust Co. (C.C.A.) 106 F. 593, an enforced assignment to the receiver of a corporation which retained its corporate life. Bankruptcy or insolvency proceedings, whether the debtor is a natural or a juristic person, confer upon the receiver or assignee a title which, generally speaking, is without recognition outside of the state of his appointment except in subordination to the claims of local creditors. Security Trust Co. ”

“ E. S. Greeley & Co. (C.C.A.) 88 F. 130; Receivers Middlesex Banking Co. v. Realty Investment Co., 104 Conn. 206, 132 A. 390; Buswell v. Supreme Sitting of Order of Iron Hall, 161 Mass. 224, 36 N.E. 1065, 23 L.R.A. 846; Fawcett v. Supreme Sitting of Order of Iron Hall, 64 Conn. 170, 29 A. 614, 24 L.R.A. 815; People v. ”