Receivers Middlesex Banking Co. v. Realty Inv. Co. , 104 Conn. 206 ( 1926 )

The service made upon the three nonresident respondents by sending to them by registered mail copies of the petition and other documents would not in itself subject them to the jurisdiction of the court in personam. Harris v. Weed, 89 Conn. 214, 221,93 A. 232. The matter does not, however, stop there. Under the allegation of the petition, the primary issue was as to the correctness of the account rendered to the respondents and the finality of the settlement claimed to have been made by the receivers with them, and the trial court, issue being made only upon its allegations, could not have restated the account between the parties, for to do so would have been to go beyond the scope of the facts alleged and farther than the relief sought. By their answers, however, the respondents laid the basis for, and prayed an order for, a new and correct account. They went beyond the point of resistance to the claims of the receivers, and sought affirmative relief for their own ends and purposes. The distinction between the claims under the petition and those under the answer is thrown into relief by the order of court, which directed that the issue of the correctness and finality of the settlement made with the respondents should first be tried and determined, before the others presented by the pleadings should be considered. Whether or not, by merely answering over to escape the penalty of a default where an adverse judgment has been rendered upon a plea to the jurisdiction in personam, a defendant waives his right further to contest the jurisdiction, is a matter upon which courts differ, and we have chosen as the better view that which holds that the defect is not waived. Coyne v. Plume, 90 Conn. 293,297, 97 A. 337. But where the defendant, after his plea is overruled, seeks affirmative and distinctive relief beyond the scope of the issues presented upon the complaint, he must be held to have subjected himself voluntarily to the court's jurisdiction. MerchantsHeat Light Co. v. Clow Sons, 204 U.S. 286,27 Sup. Ct. 285; Thompson v. Greer, 62 Kan. 522,64 P. 48; Chandler v. Citizens National Bank, 149 Ind. 601,49 N.E. 579. "A different conclusion would enable a litigant, while insisting that he is not in court, to demand affirmative relief, which can only be granted upon the theory that the court has jurisdiction of the cause and of the parties thereto. It would be obviously unjust to permit a party who has interposed an objection to the jurisdiction of the court over his person to avail himself of the chance to obtain a favorable affirmative judgment against the plaintiff by voluntarily pleading a counterclaim, and by obtaining a trial upon its merits, and, at the same time, preserving his right to reverse any judgment which might be rendered against him." Lower v. Wilson, 9 So. D. 252,254, 68 N.W. 545. The nonresident respondents must be held to have submitted themselves to the jurisdiction of the court in personam.

The two resident respondents, and the nonresident respondents as well, attack the jurisdiction upon the further ground that the subject-matter involved in the petition consisted of the returns from and the proceeds of cropping operations conducted upon lands located outside this State and the disposal of those returns, and that those returns and proceeds were assets of the respective receiverships in the various States in which the lands were located. In so far as this claim is concerned, the pleas were evidently designed to raise, and were treated in the trial court as raising, an issue of law upon the allegations of the petition, assuming them, for the purpose of the plea, to be true. Sanford v. Bacon, 75 Conn. 541, 544, 54 A. 204. The trial court sustained a demurrer to the pleas, and so held them insufficient. As the question was of the jurisdiction of the court over the res, the respondents might have raised the issue again upon the facts proven at the hearing upon the merits. Woodmont Association v. Milford, 85 Conn. 517, 524, 84 A. 307. The record does not indicate that this was done. But the respondents do in the writ of error directly challenge the jurisdiction of the trial court upon this ground; many of the considerations bearing upon the issue of jurisdiction are pertinent to the questions raised as to the right of the court to grant the particular relief it did; and the issue is one of the highest import because it involves the respective powers of our courts and those of another State. We shall therefore consider it, not upon the basis of the allegations of the petition, but upon the facts found by the judgment to have been proven. We are not so fully apprised of all the facts as we might wish, because the procedure adopted has not imported into the record any special finding, but, on the other hand, we may properly assume that the record as made presents the issues as favorably for the respondents as it would if all the facts were specially found. Lamenza v. Shelton, 96 Conn. 403,413, 114 A. 96.

We do not question the general principle, upon which the respondents base their contention, that where a court in one State, by appointing a receiver of a corporation, takes into its possession the property of the corporation in that State, it obtains a jurisdiction over that property which cannot be controlled by any other court, even the one where the receivership was first instituted. Reynolds v. Stockton, 140 U.S. 254, 271,272, 11 Sup. Ct. 773; Farmers Loan Trust Co. v.Lake Street Elevated R. Co., 177 U.S. 51, 61,20 Sup. Ct. 564; Sands v. E. S. Greeley Co., 31 C.C.A. 424, 88 F. 130; Low v. Pressed Metal Co., 91 Conn. 91,97, 99 A. 1; 2 Tardy's Smith on Receivers (2d Ed.) § 702. Our query is, does that rule operate to deprive the Superior Court of jurisdiction to render the judgment it did? That can only be determined by an examination of the nature and subject-matter of the controversy before the court.

To carry out the plan of that contract of necessity involved action by the receivers which they could take only as appointees of the courts of other States and for which they would be answerable to those courts. The lands were in their possession as such appointees, and could only be leased or cultivated by them in that capacity; and the crops or crop rentals from the lands would be held by them as such appointees. But clearly the parties contemplated that in other respects the receivers were to act under the contract in their capacity of appointees of the Connecticut court. That intent finds expression in the provisions requiring the approval of the contract by that court, and giving it authority to direct as to the form and provisions of the receipts to be given for the money loaned. So it follows from the recital that the receivers of the plaintiff corporation were parties to the contract only as they were appointees of the Connecticut court. So, while it does not definitely appear of record that the respondents had presented claims against the receivers in Connecticut, yet that is the only reasonable conclusion from the terms of the contract, particularly the provision that, after the sums loaned with interest had been repaid to them, the other amounts coming to them under the contract should be applied upon the notes held by them, and from the failure of the record to indicate in any way that the respondents had presented claims against the receivership in any other State; in fact, respondents' brief concedes that they had presented claims against the receivers in this State. Of more significance, however, in determining the intent of the parties, is this: The very necessities of the situation required action which could be taken only by the receivers in this jurisdiction; for the lands lay in several States, subject to the orders of several courts, but the loans were advanced in one lump sum, to be spent as the receivers thought best, on any or all of the lands, and the amounts to be repaid to the respondents were to be based upon the total crop rentals received by the receivers in all States. The provisions of the contract with reference to the "first and prior" lien to secure the amounts loaned and the interest on them, above quoted, and the provisions which specify the method by which the further amounts to be paid to the respondents should be determined, show that the payments were to be made, not from the proceeds of the crop rentals in the States where the lands lay, but from the aggregate of all such proceeds, regardless of the State of their origin, brought together into one fund. The respondents obviously were to have no claim or right to any part of crops produced on the lands as such or even to the proceeds of the sale of the crops in the hands of the receivers in the particular States where the lands lay. Without distinguishing between the capacity of the receivers as representatives of the plaintiff and of the defendant, and, as regards the latter, without designating the courts by virtue of whose appointment they were to act, the contract provides that they were to sell the crops which were realized from the rental or cultivation of the lands, were to bring into one fund the amounts received regardless of the location of the lands, were to make deductions for charges incurred, whether relating to particular lands, or chargeable to the cropping operations as a whole, and so were to determine and pay to each of the respondents the amount due to it. When we consider the nature of the duties which the receivers were thus called upon to perform, it becomes at once apparent that only in a capacity in which they could deal with and bring about cropping operations upon the lands in various States and could gather together into one fund the proceeds of them all, could they be in a position to carry on that part of the transaction which had to do with the borrowing of the money from the respondents and the payments to be made to them in return. The contract was in intent and of necessity, one with the receivers of the Connecticut court, and only that court was in a position to determine the amounts due to the respondents and to compel their payment.

For such part of the money loaned by the respondents as was used in cultivating the lands in that State and for such articles as were bought with that money and taken there for use, for the manner in which the receivers conducted the cropping operations there and sold the products therefrom, and for the use of the proceeds received, the South Dakota courts might require the receivers to submit to their orders, and the courts of this State could not in any way control those of South Dakota in the exercise of that power. A court in which a receivership is pending, though it be ancillary to one instituted elsewhere, will be sedulous to protect the rights of the citizens of its own State and those of others having claims which ought in equity to be brought under its own protection, and it may itself direct the final distribution of the assets in the hands of its receiver; but it may, and where there are no rights entitled to its peculiar protection it ordinarily will, direct its receiver to turn over to the receiver in the court of primary appointment the assets or funds in his hands; and the decision as to which of these two courses it will take rests in its sound discretion.Fawcett v. Iron Hall, 64 Conn. 170, 185,29 A. 614; Low v. Pressed Metal Co., 91 Conn. 91, 97,94 A. 1; Brooks v. Smith, 290 F. 33; Lewis v.American Naval Stores Co., 119 F. 391, 397; Kirker v. Owings, 98 F. 499, 511; Smith v. Taggert, 87 F. 94; Buswell v. Order of the Iron Hall, 161 Mass. 224,235, 36 N.E. 1065; Baldwin v. Circuit Judge,101 Mich. 119, 134, 59 N.W. 432.

Approval of the contract by the courts of the States in which the lands lay was no doubt proper, if not necessary; to effectuate its terms, use must be made of those lands, and the proceeds derived from crops raised upon them must be transmitted from the jurisdiction of those courts to that of our own; and the receivers could not properly make such use of the lands without that approval, nor justifiably proceed with the contract unless they were assured in advance that the proceeds might be transmitted to Connecticut when the cropping operations were ended, here to be disbursed as provided in the contract. The purpose of the transaction was to preserve the value of the lands in South Dakota as much as elsewhere; that end was of importance to the receivership there and was made possible by the funds to be secured under the contract. This would afford ample reason for the granting of authority by the courts of that State for the transmission of the proceeds of the crop rentals to this State. Paragraph fifteen of the petition alleges that "the funds or moneys and proceeds of said cropping operations have been transferred from the various States under proper authority by your receivers to Connecticut and deposited in banks in Connecticut"; and this allegation the judgment specifically finds to be true. We can only interpret this finding in the judgment as meaning that the receivers, as appointees of the courts in the several States and under authority of those courts, had transferred the proceeds of the cropping operations to themselves as receivers under appointment by our own court and had deposited them in banks in this State. Those proceeds being in this State, properly transmitted to and held by the receivers in their capacity as appointees of our court, in our court is the proper place to determine opposing claims as to them. Davis v. Holden, 92 Conn. 96,101 A. 485; Merritt v. American Steel-Barge Co., 79 F. 228, 231; McKinney v. Landon, 209 F. 300. The pleas to the jurisdiction were not well taken.

The trial court, having not only jurisdiction of the parties but also of the subject-matter, had the power to protect that jurisdiction, and its receivers, by an injunction against the prosecution of the litigation the respondents were instituting in South Dakota. Cole v. Cunningham, 133 U.S. 107, 10 Sup. Ct. 269; Stewart v. Laberee, 109 C.C.A. 351, 354, 185 F. 471, 474;Sercomb v. Catlin, 128 Ill. 556, 21 N.E. 606; Chafee v. Quidnick Co., 13 Rawle I. 442; Vermont C. R. Co. v.Vermont Central R. Co., 46 Vt. 792, 796. It is true that three of these respondents are banking institutions located out of the State, but, having jurisdiction over them in personam, whether the trial court should issue an injunction against them rested in its sound discretion;Frick v. Hartford Life Ins. Co., 98 Conn. 251, 256,119 A. 229; White v. Greene, 96 Conn. 265, 272,114 A. 112; and we cannot hold that it did not exercise that discretion wisely. Indeed, having voluntarily entered into a contractual relationship which could only be resolved in justice to them and the receivers by the courts of this State, it hardly lies with them to maintain that they are entitled to litigate their rights under the contract in other States. Chesapeake Ohio Ry.Co. v. Swayze, 60 N.J. Eq. 417, 424, 47 A. 28; Parsons v. Charter Oak Life Ins. Co., 31 F. 305, 309. The respondents' further contention, that the receivers had themselves submitted the matter to the South Dakota court, and so can hardly now be heard to deny its jurisdiction, is hardly borne out by the record before us; for it does not appear that they had gone or attempted to go further there than to make such an accounting to that court as was necessary to show to it a proper compliance with the duties owned to it by reason of its approval of the contract and such a performance of the terms of the contract as would justify their discharge from further obligation in that court for their conduct relating to it. But had they sought from that court a more sweeping approval of their acts under the contract, that would not in any way debar them from asking here an adjudication as to conflicting claims upon a fund which they had brought into this State by proper authority and were here holding.

The respondents question the right of the receivers to have an adjudication that the settlement they made with the respondents was final and conclusive. They say that that settlement could not be regarded as an accord and satisfaction, because there was no pending dispute between the parties, and hence that there can be no basis for a judgment that it so far bound them as to preclude them from claiming a larger amount, if that was their legal due. They fail to note the scope of the issues litigated under the petition and the answer to it. The petition alleged that the account submitted to the respondents showed the receipts and disbursements made by the receivers under the contract, and that the statement made with it to each of the respondents showed the amount it was entitled to receive. The answer denied the correctness of the amount, and, inferentially at least, the accuracy of the statement, and it then went on to allege errors in the account, made, as the original answer said, falsely and fraudulently, or, as the amendment to it said, by mistake; and it prayed an order directing the receivers to make a true and just account. The judgment not only finds the issues for the receivers, but specifically finds that they paid each of the respondents all that was due to it under the contract. The judgment establishes that the receivers had fully accounted to the respondents for all that was due to them and that the respondents have no further claim under the contract. Whether the receivers could properly claim that there had been an accord and satisfaction with each of the respondents is now of no consequence.

There is no error.

In this opinion the other judges concurred.