Martyne v. . American Union Fire Ins. Co. , 216 N.Y. 183 ( 1915 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This action is brought against a corporation that has ceased to exist as such. The defendant corporation was dissolved by a court of competent jurisdiction in the state where it was incorporated and pursuant to the statutes of the state in which it obtained its corporate life.

Justice STORY, in Mumma v. Potomac Company (8 Peters, 281, 286), said: "There is no pretense to say, that a scire facias can be maintained, and a judgment had thereon against a dead corporation, any more than against a dead man." (People v.American Loan Trust Co., 172 N.Y. 371, 377; Bonaffe v.Fowler, 7 Paige, 576, 578.) The plaintiff does not deny that the corporation has been dissolved. He admits that as the corporation has been dissolved a judgment in personam cannot be obtained against it, but he insists that he is entitled to maintain the action quasi in rem, for the purpose and only for the purpose as a diligent creditor of securing to himself, to the extent of his claim, the assets of the defunct corporation which he asserts have their situs in this state.

It could not be successfully claimed that a New York creditor could maintain an action against the dissolved corporation for the purpose of obtaining a judgment in personam in view of the many decisions in this state which hold that such an action cannot be maintained after dissolution. (People v. Knickerbocker Life Ins. Co., 106 N.Y. 619;Sturges v. Vanderbilt. 73 N.Y. 384; Matter of Stewart,39 Misc. Rep. 275; Rodgers v. Adriatic F. Ins. Co., 148 N.Y. 34. )

The American Union Fire Insurance Company was organized in Pennsylvania, and during the times mentioned in the record in this case there was in existence in Pennsylvania a statute approved June 1, 1911, which authorized the insurance commissioner of Pennsylvania upon the happening of certain things or the existence of certain conditions therein specified, to apply to the Court of Common Pleas of Dauphin county or the court of any county in which the principal office of such corporation is located for the liquidation of the business of the corporation, and that statute expressly provides that "The order of liquidation shall unless otherwise directed by the court provide that the dissolution of the corporation shall take effect upon the entry of such order in the office of the clerk of the county wherein such corporation had its principal office for the transaction of business." It also expressly provides that the liquidation shall be made by and under the direction of the insurance commissioner, and that he "shall be vested by operation of law with title to all the property, contracts and rights of action of such corporation as of the date of the order so directing him to liquidate."

The statutes of this state in regard to the liquidation and dissolution of insurance corporations are similar and in substantial accord with the statutes of Pennsylvania. There is no statute in this state that expressly affects or interferes with the right and duty of the insurance commissioner of Pennsylvania to take possession of the assets of said corporation in this state in accordance with said statute and the order of the court.

The insurance commissioner of Pennsylvania is a statutory liquidator and as such took the title to all of the corporate property of the dissolved corporation. The title of foreign statutory assignees is recognized and enforced where it can be without injustice. (Matter of Waite, 99 N.Y. 433; Relfe v.Rundle, 103 U.S. 222. See 237 U.S. 531.)

Counsel for the parties herein concede that a voluntary transfer of the title to property in the ordinary course of business or by voluntary assignment for the benefit of creditors in one state is valid and effectual to transfer the title of such property of a corporation in another state as against alleged subsequent liens thereon by attachment or otherwise. It is also conceded that the title of a receiver or assignee to property obtained by order of a court pursuant to insolvent or bankruptcy laws of a foreign state has no extraterritorial force or authority and will not be sustained outside the limits or boundaries of a state as against a valid attachment levied upon such property. The question then arises whether the statutes of Pennsylvania together with the order of the Court of Common Pleas of Dauphin county by which the corporation was dissolved, and the title of all of its property became vested in the insurance commissioner for the purpose of its division among the creditors of such corporation shall be treated as binding upon the creditors of such corporations in other states or whether its effect is confined to the state of Pennsylvania.

In determining this question effect must be given not alone to the order of the court but specially to the statutes under which the insurance corporation was organized and by which title to its property thereafter became vested in the insurance commissioner.

The American Union Fire Insurance Company did business here by consent of this state as provided by our statutes. In giving such consent this state did not impose upon it any special condition. The legislature could doubtless prescribe the terms and conditions upon which a foreign insurance company can do business in this state. No statute in this state, however, provides that the assets of a foreign corporation in this state are subject in case of dissolution to claims of local creditors.

Since a corporation can have no existence aside from the law which creates it, much of the statute law of the corporate domicile may be said to accompany it into the foreign jurisdiction and enter into, influence and control its transactions. (Hoyt v. Thompson's Exr., 19 N.Y. 207; Murphee on Foreign Corporations, § 5.)

The statutes of Pennsylvania immediately affecting the existence of the corporation are binding upon creditors in New York. (Ellsworth v. St. Louis, A. T.H. R.R. Co., 98 N.Y. 553;Relfe v. Rundle, supra; Matter of Stewart,39 Misc. Rep. 275.) Every person dealing with the defendant corporation did so with knowledge of its charter and its charter rights. In case of insolvency it was at all times subject to dissolution, and in such case title to its property by virtue of the statute became vested in the insurance commissioner.

We do not think that there is anything in the provisions of section 63 of our Insurance Law to prevent the recognition by the courts of this state of the title of the insurance commissioner of Pennsylvania as the statutory liquidator of the defendant company.

If the American Union Fire Association had been a domestic corporation and had become insolvent and its assets had been taken by the superintendent of insurance in this state for the purpose of liquidation and the corporation had been dissolved, the plaintiff could not have sustained this action even as an action quasi in rem, but he would have been compelled to accept his pro rata share of the assets of the corporation in liquidation.

The commercial relations between corporations and citizens of the different states are constantly increasing in extent. They are not only more and more extended, but more and more intimate and interdependent. The transactions of a corporation of a foreign state doing business in this state are dependent upon our statute law and generally in the absence of a statutory rule upon the rule of comity. The reasons for extending the rule of comity between the states are constantly increasing. It should when practicable be extended, and not curtailed. (2 Bolles on Banking, 828; Vanderpoel v. Gorman,140 N.Y. 563.) It may be assumed that if the rule of comity is not recognized in this state, and creditors in this state are given preference so far as assets in this state formerly belonging to a foreign corporation are concerned, the legislature and perhaps the courts of other states may adopt a similar policy. The rule in this state seems to be so thoroughly established that the title of an assignee or receiver under involuntary or bankruptcy proceedings in a foreign state will not be upheld as against an attachment obtained and served by a resident of this state, that perhaps it should not be changed except by an act of the legislature.

To hold, however, in this case that the title which vested by the statutes of Pennsylvania in the insurance superintendent of that state as a statutory liquidator does not extend to property in this state as against an attaching creditor here, would be to extend the rule which permits a local creditor to ignore the laws of a foreign state. We are of the opinion that the plaintiff and those from whom he received assignments of claims against the dissolved corporation have no equity that should prevent enforcing the general rule of comity in this case.

The title of a foreign statutory liquidator was considered inRelfe v. Rundle (p. 225, supra), and in that case the court say: "Relfe is not an officer of the Missouri state court, but the person designated by law to take the property of any dissolved life insurance corporation of that State, and hold and dispose of it in trust for the use and benefit of creditors, and other parties interested. The law which clothed him with this trust was, in legal effect, part of the charter of the corporation. He was the statutory successor of the corporation for the purpose of winding up its affairs. As such he represents the corporation at all times and places in all matters connected with his trust. He is the trustee of an express trust, with all the rights which properly belong to such a position. He is an officer of the State, and as such represents the State in its sovereignty while performing its public duties connected with the winding up of the affairs of one of its insolvent and dissolved corporations. His authority does not come from the decree of the court, but from the statute. He appeared in Louisiana not by virtue of any appointment from the court, but as the statutory successor of a corporation which the court had in a legitimate way dissolved and put out of existence. He was, in fact, the corporation itself for all the purposes of winding up its affairs. We are aware that * * * a receiver appointed by a state court has no extraterritorial power; but a corporation is the creature of legislation, and may be endowed with such powers as its creator sees fit to give. Necessarily it must act through agents, and the State which creates it may say who those agents shall be. One may be its representative, when in active operation, and in full possession of all its powers, and another if it has forfeited its charter and has no lawful existence except to wind up its affairs. No State need allow the corporations of other States to do business within its jurisdiction unless it chooses, with perhaps the exception of commercial corporations; but if it does, without limitation, express or implied, the corporation comes in as it has been created. Every corporation necessarily carries its charter wherever it goes, for that is the law of its existence. It may be restricted in the use of some of its powers while doing business away from its corporate home, but every person who deals with it everywhere is bound to take notice of the provisions which have been made in its charter for the management and control of its affairs both in life and after dissolution."

The language quoted is general and is not confined to mutual insurance corporations.

In Wulff v. Roseville Trust Company (164 App. Div. 399,404) it was held that the courts of this state will hold under the principle of comity that under the law of New Jersey which is similar to the law of this state the property of the insolvent bank became impressed with a trust in favor of all its creditors and that the property of the insolvent in this state is not subject to an attachment by the assignee of foreign depositors whereby he would obtain a preference.

The court say: "As commerce and commercial transactions between the citizens of the different States have increased, the tendency has been to extend the rule of comity where not incompatible with our own laws and with the rights of the citizens of our state. * * * It will not, I think, conflict with any controlling authority to hold that by comity all of the property of the defendant became impressed with a trust in favor of its creditors, upon the commissioner of banking and insurance taking possession; * * * it contravenes no statutory law, or public policy, of this State to accord this effect to the statutory law of a sister State, the business of whose citizens is so intimately interwoven with that of our own state. * * * I am of opinion, therefore, that we should by comity apply the same rule that we apply in similar circumstances with respect to banks and trust companies in our own jurisdiction, which precludes one creditor from obtaining a preference by attachment, or otherwise, after the superintendent of banks has taken charge."

We have recently held in Sinnott v. Hanan (214 N.Y. 454,458) that where a statute relates to and regulates corporate existence and power it has extraterritorial operation and effect even as had the statute under which the corporation was created and which was a part of its charter and the law of its existence.

The court say: "The existence and the powers of any foreign corporation coming into this state to do business are at all times subject to the law of its creation and of its domicile and, additionally, to our laws relating to it, and the terms laid down by our legislature as conditions of allowing it to transact business here."

The cases specially relied upon by the appellant are HiberniaNational Bank v. Lacombe (84 N.Y. 367); Hammond v. NationalLife Insurance Company (58 App. Div. 453, 455); Willitts v.Waite (25 N.Y. 577, 581), and Kelly v. Crapo (45 N.Y. 86,90).

In the Hibernia Nat. Bank case the commissioners appointed were simply receivers in an action by a creditor or auditor of public accounts and not persons designated by the statute to take over the title of the corporate property as statutory liquidators. And it also appears (21 Hun, 166) that the action in New York was commenced before the assets of the debtor bank were delivered to the commissioners even in Louisiana.

In the Hammond case the prevailing opinion, from which Justice INGRAHAM dissented in an opinion, does tend to sustain appellant's contention, but the decision of the Appellate Division is also placed upon the ground, as stated in the prevailing opinion, that the receiver who made the motion therein was appointed in this state on July 28, while the judgment of the Connecticut court was entered July 7. The court say: "If the corporation was dead on the 7th of July, 1899, so that no action could be brought against it in this state by the creditor on the 15th of July, 1899, it is difficult to see why it was not also dead on the twenty-eighth of July and how the court had any more jurisdiction to appoint an ancillary receiver of the corporation in one action than to issue a warrant of attachment in another. For this reason the appellant is not aggrieved by the denial of his motion, because he has shown no title to the property of the corporation in this state and, therefore, he has no right to ask for the reversal of this order."

It will be noted that the corporation was not dissolve in an action in which statutory liquidators were appointed pursuant to the statutes of the state where the corporation obtained its charter.

In the Willitts case, which related to an insolvent Ohio bank, the court say: "The Ohio statutes does not declare, nor do I see any ground upon which it can be said, that its insolvency and the consequent transfer of its property was, or should be, deemed a dissolution of the corporation. It is plain to me that, notwithstanding its insolvency and the consequent transfer of its property, it continued to have a name and existence as a corporation, so far, at least, as to be capable of being sued as such."

In the Kelly case the defendants claimed as assignees in proceedings instituted under the insolvent laws of Massachusetts. In such case as we have seen and as stated in the opinion in that case the rule is fixed and settled "that a title acquired under foreign bankrupt or insolvent proceedings will not prevail against the rights of attaching creditors under the laws of the state where the property is actually situated."

The order should be affirmed, with costs. The first question certified should not be answered, the second, third and fifth questions should be answered in the affirmative, and the fourth question in the negative.

WILLARD BARTLETT, Ch. J., HISCOCK, CUDDEBACK, HOGAN, CARDOZO and SEABURY, JJ., concur.

Order affirmed.