Into these considerations we may not en- stitution, instead of being commanding and | prohibitive, would merely be precatory or advisory. We are also clearly of the opinion that the act of 1880, in its essential nature and effect, in whatever form couched, was intended to be and necessarily operated as an amendment to the charter of the company created by the act of 1854. Such being its essential nature and necessary effect, we think it plainly came within the provisions of the Constitution of 1867, and was therefore subject to repeal, alteration, *JOHN H. EVANS, as Receiver, Plff. in Err.,[2711 or amendment. It is strenuously, however, insisted that this case should not be controlled by the reasons previously stated because of the following considerations: The decision of the court of appeals of Maryland under the act of 1854 (44 Md.), it is urged, was not unanimous. There was an elaborate dissent. For this reason, and because the case was open to review in this court on the question of the impairment of the obligations of the contract, it is said there was necessarily grave doubt as to the rights of the parties. In view of the foregoing conditions and of such doubt, the act of 1880 embodied but an honest effort by way of contract and compromise to close the doubtful controversy in the interest of both parties, the state on the one hand and the corporation on the other; [270]hence the act of 1880 was *not subject to re peal, alteration, or amendment. Conceding, arguendo, the premise upon which the above deduction is based, the conclusion itself is devoid of foundation. It but reiterates in another mode of statement the argument that the form in which a contract is couched, and not its substance and necessary effect, is the criterion by which to ascertain whether it is controlled by the constitutional provision forbidding irrepealable contracts. Moreover, it disregards the elementary principle that the power to grant an irrepealable right by a compromise agreement depended on the existence of the authority to make such grant by original action. The power to compromise on the subject was as limited as the power to contract originally. District of Columbia v. Bailey (1897) 171 U. S. 161, 43 L. ed. 118, 18 Sup. Ct. Rep. 868. Indeed, the entire argument upon this branch of the case, reiterated in many forms, amounts but to the contention, when ultimately considered, that because the act of 1880 is asserted to have been enacted with the view of settling what was honestly deemed to be a pending and serious controversy, it was unwise, and it may be unjust to repeal it. Pretermitting the infirmity in the proposition which naturally is suggested by the fact that shortly after the decision in 44 Md. this court decided that the possession of the rights and privileges of a former corporation did not endow a new corporation with an exemption from taxation enjoyed by the old (Morgan v. Louisiana [1876] 93 U. S. 217, 23 L. ed. 860), and putting out of view the other cases to the same effect, decided by this court prior to 1880, the proposition is untenable. It but invokes reasons of expediency or policy. v. ANDREW J. NELLIS. (See S. C. Reporter's ed. 271-280.) Corporations-enforcement of stockholder's liability-Federal courts-enforcement of remedy created by state statute-construction of statute by state courts. 1. 2. The receiver of the assets of a corporation is not authorized to maintain an action to enforce the liability of a stockholder, by Kan. Gen. Stat. 1868, §§ 32, 44, since that act made the liability of the stockholder, not an asset of the corporation, but an asset which a creditor of the corporation alone could recover for his individual benefit to the extent required to pay a judgment obtained by him against the corporation. The remedy against a stockholder of an in solvent corporation, given to the receiver of its assets by Kan. Laws 1899, chap. 10, cannot be enforced until such receiver has first brought suit against the corporation and all resident stockholders, in order to fix the sum required to pay the corporate debts. 3. A Federal court cannot enforce the statutory liability of a nonresident stockholder of a foreign corporation at the suit of a receiver of its assets, where the latter has not first taken the steps which the statutes of the state, as construed by its courts, make a prerequisite to any action against an individual stockholder. [No. 66.] Argued and Submitted November 4, 1902. 0 States Circuit Court of Appeals for the NA CERTIFICATE from the United Statement by Mr. Justice White: The questions to be answered and the case on which they arise are shown in the statement of facts and resulting questions of law constituting the certificate of the court below, which is as follows: "Statement of facts. "That the Inter-State Loan & Trust ComNOTE. On the right to enforce stockholder's liability outside of the state of incorporationsee note to Cushing v. Perot (Pa.) 34 L. R. A. owner of 602 shares of the capital stock thereof of the par value of $100 a share, and has ever remained a stockholder and the owner of said shares. At the time when the defendant became a stockholder of said corporation, and from that time ever since, it was provided by the Constitution of the state of Kansas (art. 12, § 2), as follows: Dues from corporations [organized and ex sas] shall be secured by individual liability of the stockholders to an additional amount. equal to the stock owned by each stockholder, and such other means as shall be provided by law; but such individual liabilities shall not apply to railroad corporations nor corporations for religious or charitable purposes.' At the time the defendant became a stockholder of said corporation it was provided by the General Statutes of Kansas of 1868 (chap. 23, §§ 32, 44) as follows: "Sec. 32. If any execution shall have been issued against the property or effects of a corporation, except a railway or a religious or charitable corporation, and there cannot be found any property whereon to levy such execution, then execution may be issued against any of the stockholders, to an extent equal in amount to the amount of stock by him or her owned, together with any amount unpaid thereon; but no execution shall issue against any stockholder, except upon an order of the court in which the action, suit, or other proceeding shall have been brought or instituted, made upon motion in open court, after reasonable notice in writing to the person or persons sought to be charged; and, upon such motion, such court may order execution to issue accordingly; or the plaintiff in the execution may proceed by action to charge the stockholders with the amount of his judg. ment.' pany is a corporation created and organized under and by virtue of the general laws of the state of Kansas, July 22, 1885, and as such was authorized to transact business as a land-mortgage company; that in or about the month of November, 1897, E. B. Crissey commenced an action against the said the [272]Inter-State Loan & *Trust Company in the United States circuit court for the district of Kansas, first division, to which court ju-isting under the laws of the state of Kanrisdiction in that behalf duly appertained; that said action was duly commenced by the issue of a summons to said company; that said summons was duly served upon the said company, and that said company duly appeared in said suit by attorney and defended the same, and that such proceedings were afterwards had in said action that on the 31st day of December, 1897, a judgment was duly given and made in and by said court in said action in favor of the said plaintiff and against the said company, in and by which judgment it was decided, adjudged, and decreed that there was due and owing to the plaintiff therein from and by the said company the sum of $6,792.20 and $56.45 costs, and that the plaintiff therein have and recover said sum from the said company, with interest thereon from said date at the rate of 6 per cent per annum, and that the said plaintiff have execution therefor against the said company; that thereafter an execution against the property of the said the Inter-State Loan & Trust Company was duly issued out of the said court upon said judgment for the said sum of $6,792.20 and the costs as aforesaid, directed to the United States marshal for the district of Kansas, and that thereafter the said marshal duly returned said execution wholly unsatisfied for the reason that no property, real or personal, belonging to said company could be found whereon to levy the same; that thereafter and on or about the 9th day of June, 1898, upon the application of the "Sec. 44. If any corporation, created unsaid E. B. Crissey, the plaintiff herein was der this or any general statute of this state, [274] duly appointed receiver of the said the except railway, or charitable or religious Inter-State Loan & Trust Company by the corporations, be dissolved, leaving debts uncircuit court of the United States for the paid, suits may be brought against any perdistrict of Kansas, first division, to which son or persons who were stockholders at the said court jurisdiction therein duly apper- time of such dissolution, without joining tained, and has duly qualified and acted as the corporation in such suit; and if judg such; that thereafter and on or about the ment be rendered, and execution satisfied, 9th day of February, 1899, an order was the defendant or defendants may sue all duly given and made in and by said circuit who were stockholders at the time of dissocourt of the United States for the district lution, for the recovery of the portion of of Kansas, first division, by which order it such debt for which they were liable, and was considered, adjudged, ordered, and de- the execution upon the judgment shall dicreed that the said John H. Evans, as re-rect the collection to be made from property ceiver, proceed against all or any of the of cach stockholder, respectively; and if any stockholders of the Inter-State Loan & number of stockholders (defendants in the Trust Company from whom, in his judg-case) shall not have property enough to [273]ment, a recovery *can be had to collect all of satisfy his or their portion of the execution, their liability as stockholders in said com- then the amount of deficiency shall be dipany, a copy of which order is hereto an- vided equally among all the remaining nexed and marked exhibit A, and which stockholders, and collections made accordcopy the plaintiff herein prays may be con-ingly, deducting from the amount a sum in sidered as part of his complaint as if here- proportion to the amount of stock owned in set forth in full; that the defendant is a by the plaintiff at the time the company citizen of the state of New York, and prior dissolved.' to the month of November, 1897, became a stockholder of said corporation and the "By a law of Kansas enacted January 11, 1899, §§ 32 and 44 aforesaid were repealed, and by § 14 and 15 it was provided as follows: liability of the stockholders of corporations, ""Sec. 14. That section 32, chapter 23, of the General Statutes of 1868, be and the same is hereby amended to read as follows: Sec. 32. If any execution shall have been issued against the property or effects of a corporation, except a railway or a religious or charitable corporation, and there cannot be found any property upon which to levy such execution, such corporation shall be deemed to be insolvent, and upon application to the court from which such execution was issued, or to the judge thereof, a receiver shall be appointed to close up the affairs of said corporation. "In accordance with the provisions of § Such receiver shall immediately institute 6 of the act of March 3, 1891, establishing proceedings against all stockholders to col courts of appeals, etc., the foregoing queslect unpaid subscriptions to the stock of tions of law are by the circuit court of apsuch corporation, together with the addi-peals for the second circuit hereby certified tional liability of such stockholders equal to the Supreme Court." [26 Stat. at L. to the par value of the stock held by each. 828, chap. 517, U. S. Comp. Stat. 1901, p. All collections made by the receiver shall be 549.] held for the benefit of all creditors, and shall be disbursed in such manner and at such times as the court may direct. Should the collections made by the receiver exceed the amount necessary to pay all claims against such corporation, together with all [275] costs and expenses of the receivership, the remainder shall be distributed among the stockholders from whom collections have been made, as the court may direct; and in the event any stockholder has not paid the amount due from him the stockholders making payment shall be entitled to an assignment of any judgment or judgments obtained by the receiver against such stockholder, and may enforce the same to the extent of his proportion of claims paid by "2d. Do §§ 14 and 15 aforesaid contravene the Constitution of the United States by impairing the contractual liability of the defendant previously existing as a stockholder of a corporation of the state of Kansas? *"3d. Is the plaintiff, as a receiver ap-[276] pointed as aforesaid, entitled to maintain an action in the circuit court of the United States for the northern district of New York? them. "Sec. 15. That section 46, chapter 23, of the General Statutes of 1868 be and the same is hereby amended to read as follows: Sec. 46. The stockholders of every corporation, except railroad corporations or corporations for religious or charitable purposes, shall be liable to the creditors thereof for any unpaid subscriptions, and, in addition thereto, for an amount equal to the par value of the stock owned by them, such liability to be considered an asset of the corporation in the event of insolvency, and to be collected by a receiver for the benefit of all creditors." [Kan. Gen. Stat. 1901, 88 1302, 1315, pp. 293, 296.] "The present action was brought in the circuit court of the United States for the northern district of New York by the receiver of the said the Inter-State Loan & Trust Company, appointed as aforesaid, against the defendant to recover the sum of $60,200, alleging his liability as a stockholder and the owner of the said 602 shares of the said corporation. "Upon the foregoing facts this court desires instructions upon the following ques tions: "Questions of law. "1st. Are §§ 14 and 15 of the laws of Kansas of 1899 valid legislation in view of the provision of the Constitution of the state of Kansas respecting the individual Mr. Stephen B. Stanton submitted the cause for plaintiff in error. Messrs. L. A. Stebbins, C. J. Evans, and P. Tecumseh Sherman were with him on the brief. A receiver may maintain an action in a jurisdiction other than that in which he was appointed. Hawkins v. Glenn, 131 U. S. 319, 33 L. ed. 184, 9 Sup. Ct. Rep. 739; Glenn v. Liggett, 135 U. S. 533, 34 L. ed. 262, 10 Sup. Ct. Rep. 867; Glenn v. Marbury, 145 U. S. 499, 36 L. ed. 790, 12 Sup. Ct. Rep. 914; Great Western Teleg. Co. v. Purdy, 162 U. S. 329, 40 L. ed. 986, 16 Sup. Ct. Rep. 810; First Nat. Bank v. Hawkins, 174 U. S. 364, 43 L. ed. 1007, 19 Sup. Ct. Rep. 739. A foreign receiver will be permitted to sue and defend as a foreign receiver in all courts of other states than that in which he was appointed, on the principle of comity, except where the rights of citizens of the state of the forum are prejudiced thereby, or where it would be in contravention of the policy of such state. Smith, Receivership, p. 167. The business relations between the citizens and institutions of the several states are so intimate that to deprive those competent to sue in one jurisdiction from suing in another, without special reasons, is manifestly absurd and out of harmony with the trend of events. Howarth v. Angle, 162 N. Y. 179, 47 L. R. A. 725, 56 N. E. 489; Howarth v. Ell175 Mass. 570, 49 L. R. A. 301, 56 N. E. wanger, 86 Fed. 54; Howarth v. Lombard, 888; Relfe v. Rundle, 103 U. S. 222, sub nom. Life Asso. of America v. Rundle, 26 L. ed. 337; Hale v. Hardon, 37 C. C. A. 240, 95 Fed. 747. See also, to the same effect, Runk v. St. John, 29 Barb. 585; Pugh v. Hurtt, 52 How. Pr. 22; Stoddard v. Lum, 159 N. Y. 265, 45 L. R. A. 551, 53 N. E. 1108; Winans v. Gibbs & S. Mfg. Co. 48 Kan. 780, 30 Pac. 163; Robertson v. Staed, 135 Mo. 139, 33 L. R. A. 203, 36 S. W. 610; Castleman v. Templeman, 87 Md. 546, 41 L. R. A. 367, 40 Atl. 275; Hurd v. Eliza 175 beth, 41 N. J. L. 2; Swing v. Bentley & G. | Castleman v. Templeman, 87 Md. 546, 41 L. A very liberal rule now prevails in this court as to the scope and extent of the doctrine of comity in proceedings to enforce contractual liabilities. Whitman v. National Bank, 176 U. S. 559, 44 L. ed. 587, 20 Sup. Ct. Rep. 477. Mr. Andrew J. Nellis in propria persona argued the cause and filed a brief for defendant in error: Under the law in question (chapter 10 of 1898), the proceeding to collect from stockholders of a corporation a judgment previously obtained against the corporation is an equitable proceeding, and all stockholders within the jurisdiction must be made parties, to the end that all debts of the corporation may be adjudged, and assessments made sufficient to satisfy such debts. Waller v. Hamer (Kan.) 69 Pac. 185. The receiver has no extra-territorial jurisdiction or power of official action, and cannot, as a matter of right, go into a foreign state or jurisdiction, and there institute an action for the recovery of demands or debts due to the person or estate subject to his receivership. Wyman v. Eaton, 107 Iowa, 214, 43 L. R. A. 695, 77 N. W. 865; Booth v. Clark, 17 How. 322, 15 L. ed. 164; Winans v. Gibbs & S. Mfg. Co. 48 Kan. 777, 30 Pac. 163. An order of appointment of a receiver which gives him authority to bring suits in other states is without efficacy to create such right, without sanction in the states where the suits are brought. Wyman v. Eaton, 107 Iowa, 214, 43 L. R. A. 695, 77 N. W. 865. A receiver of a corporation appointed in another state should not be allowed by an exercise of comity to sue for the enforcement of the liability of stockholders, when it would be in contravention of the rights of the citizens of the state and operate to their injury. Ibid. River Lumber Co. 91 Wis. 517, 65 N. W. Mr. Justice White delivered the opinion of the court: The third question lies at the threshold, and requires to be answered before approaching the consideration of the first and second questions. This becomes apparent when it is seen that if the first and second be answered in such a manner as to sustain the cause of action, the question would yet remain whether the receiver, appointed as stated, had authority to prosecute the suit, whilst, on the other hand, if the conclusion be reached that the receiver was without power to bring the suit-irrespective of what might be the reply to the first two questions-these questions become irrelevant and the case is disposed of. The judgment against the corporation in the circuit court of the United States for the district of Kansas was rendered on December 31, 1897, prior, therefore, to the enactment of the Kansas statute of 1899. So, also, the execution was issued and the receiver appointed prior to the passage of that act. After the receiver had been appointed, however, and subsequent to the passage of the act of 1899, the court entered an order, directing the receiver to proceed against "all or any of the stockholders of the Inter-State Loan & Trust Company, from whom, in his judgment, a recovery can be had to collect all of their liability as stockholders in said company." Now the authority to so direct the receiver must rest upon either the statute of *Kansas of 1868,[277] referred to in the certificate, or upon the statute of 1899. But the right of the receiver of the assets of the corporation to sue under the Kansas law to recover the liabilthe act of 1868, since that act made the liaity of a stockholder, cannot be evolved from bility of the stockholder, not an asset of the corporation, but an asset which the creditor his individual benefit, to the extent required of the corporation alone could recover for to pay his judgment obtained against the corporation. In Abbey v. W. B. Grimes 426, 427, it was said, referring to the liaDry Goods Co. 44 Kan. 415, 418, 24 Pac. bility under the act of 1868: A receiver cannot take charge of any proceeding in a foreign jurisdiction by commencing an action, or defending an existing "The nature of this liability is peculiar; action, without the express authority of the it seems to have been created for the exclu court whose officer he was, so as to bind any sive benefit of corporate creditors. The liaproperty or effects in his hands as receiver.bility rests upon the stockholders of the corPendleton v. Russell, 144 U. S. 640, 36 L.poration to respond to the creditors for an ed. 574, 12 Sup. Ct. Rep. 743; Booth v. amount equal to the stock held by each, and Clark, 17 How. 322, 15 L. ed. 164. Leave to bring this particular action should have been obtained, both of the court appointing the receiver, and of the court in which the action was brought. General leave to bring any action is improper. Witherbee v. Witherbee, 17 App. Div. 181, 45 N. Y. Supp. 297; Fogg v. Supreme Lodge, U. O. of G. L. 159 Mass. 9, 33 N. E. 692; it has been held that the action to enforce this liability can only be maintained by the The nature and extent of the liability un- was with referring to that case as conclusively | poration and as between themselves might demonstrating the proposition previously be had. To this plea in abatement the stated. Tested, then, by the Kansas act of plaintiff demurred, which demurrer 1868, it is manifest that the receiver had no sustained. Thereafter, upon leave of court, authority to bring this suit even in the the defendant demurred to the petition for courts of the state of Kansas, and he clear the reasons: (1) That the plaintiff had no ly, therefore, had no power to prosecute legal capacity to institute and maintain the such action in the courts of another juris- present action; (2) that the petition did diction. Indeed, it is manifest that the not state facts sufficient to constitute a suit brought by the receiver which is now cause of action against the defendant; (3) under consideration was not deemed by him that there is a defect of parties plaintiff; [279] to be a suit under the Kansas act of 1868, (4) that there is a defect of parties defendsince the recovery which he seeks was not ant. This demurrer was overruled, and the amount of the judgment rendered in fa- thereafter the defendant answered." In re vor of the creditor in the particular suit viewing the action of the trial court the suwherein the receiver was appointed, but the preme court of Kansas said: whole sum of the stockholder's double liability, which could only be upon the theory that the receiver was entitled to take such liability as the receiver of the corporation and as a corporate asset to pay the debts generally. In fact, the foregoing propositions might have been taken as conceded, since in the argument at bar the right of the receiver to sue was upheld, not on the ground that he was acting under the act of [278] 1868, but that he was proceeding in furtherance of and in supposed conformity to the act of 1899. This contention being in effect rested on the proposition that although the judgment was rendered and the receiver appointed before the passage of the act of 1899, the order of the court empowering him to enforce the liability of stockholders was entered after the enactment of the act of 1899, and therefore conferred upon the receiver the authority which it is in the argument assumed he would have had a right to exercise if appointed under that act. The question then is, Conceding arguendo, the proposition that the receiver was appointed under the act of 1899 and in supposed conformity to it, was he authorized to prosecute this suit by virtue of the act of 1899? The import of the Kansas act of 1899 and the extent of the powers which it called into being, were decided by the supreme court of Kansas in Waller v. Hamer (June 7, 1902), not yet reported in the official reports, but found in the advanced sheets of the 69th Pacific Reporter, p. 185. In that case two creditors obtained judg ment in a Kansas court against a corporation. Execution having been issued and returned no property found, one of the creditors moved for the appointment of a receiver to close up the affairs of the corporation, which motion was allowed. The receiver thus appointed brought suit against a stockholder to recover his unpaid subscription and statutory liability. The defendant filed an answer and a plea in abatement, which, among other things, we quote from the opinion of the Kansas court, asserted "that the receiver should not be permitted to further prosecute the action against him until all the stockholders were brought into court, to the end that a final ascertainment of the debts of the corporation and an adjustment and settlement of the liabilities of the stockholders to the cor "Prior to the enactment of chapter 10, Laws of 1899, the creditor of a business corporation, other than a railway or bank, might proceed against the individual stockholders only (1) by motion after judgment and execution against the corporation returned nulla bona; (2) by action after dissolution, either by expiration of time, judgment of dissolution, or suspension of business for more than one year, as provided in §§ 32, 46, corp. act 1868. Chapter 10 of the Laws of 1899 repealed said §§ 32 and 46, and substituted therefor §§ 14 and 15." The sections of the act of 1899 referred to are those set out in the certificate of the court below. The court then further said that it was obvious that the act of 1899 created an "entirely different remedy from that provided by the act of 1868," and declared, referring to the act of 1899, that "there exists no other statute by which the creditor of an insolvent or dissolved corporation may proceed against its stockholders. It follows, therefore, that if a creditor desires to make a stockholder respond for the debts of the corporation, he must proceed against him in the mode thus prescribed, and no other." Proceeding, then, to test the right of the receiver to sue, by the act of 1899, the court held that, as he had not brought a suit against the corporation and all the resident stockholders, in order in such suit to fix the sum required to pay the corporate debts, he, the receiver, was wholly without authority under the statute to make any demand whatever against a stockholder, as the previous suit to fix the sum required to pay the debts was an essential prerequisite under the statute to any action by a receiver appointed under the act of 1899 against a stockholder. Summing up its view of the act of 1899, the court said: 12 "This act provides a complete system for collecting the assets and paying the debts of an insolvent corporation, and of adjusting the liabilities of the stockholders between themselves. To do this the receiver must bring in all stockholders that are within the jurisdiction of the court, that in one proceeding the court may ascertain and deter-[280] mine the indebtedness of the corporation, the amount each stockholder should pay, and, if one has paid more than his proportion, award him such relief against the other stockholders as may appear just. The 177 |