People v. Mercantile Credit Guarantee Co.

The determination of the question here presented depends upon the effect that the courts of this state are bound to give to a judgment of a sister state rendered against a defendant, a domestic corporation» organized under the laws of this state, after it has been dissolved. , The Mercantile Credit Guarantee Company of New York, a corporation formed under the laws of this state, was dissolved by a final judgment of the supreme court entered on August 5, 1897. At the time of the dissolution of this corporation there was pending in the circuit court of Cook county, in the state of Illinois, a court of record of general common-law jurisdiction, an action in which Abraham Weil and Isaac Weil, copartners under the firm name of Weil Bros. & Co., were plaintiffs and the Mercantile Credit Guarantee Company of New York was defendant, to recover damages in the amount of $12,000. That action seems to have been commenced by the service of a writ issued out of the court upon the agent of the company on the 29th day of May, 1895, and on the 16th day of July, 1S95, the defendant duly appeared and answered. No further proceedings seem to have been taken in-such action until after the dissolution of the defendant corporation, when the attorneys who had appeared for the defendant served a notice upon the receiver appointed by the supreme court of this state that on the 30th of October, 1897, they would ask leave to withdraw

The question of the effect of this judgment must depend upon the jurisdiction that the Illinois court had over the corporation after its dissolution to render a judgment against it which is binding in this state. It is quite clear that the court of Illinois obtained jurisdiction _ over the defendant corporation by its appearance in the action in the state of Illinois, and that, had the judgment been entered prior to the dissolution of the corporation, no question could have, been presented as to its binding effect as establishing the claim sued on in that action. There can also, I think, be no question but that upon the dissolution of a corporation, as upon the death of a natural person, the jurisdiction of any court over such a corporation ends. As was said by Judge Danforth in People v. Knickerbocker Life Ins. Co., 106 N. Y. 623 , 13 N. E. 448 :

“As for the defendant of record, its dissolution put an end to the action; and at the time of the rendition of the judgment it had neither legal existence, capacity to be sued, nor any property against which a judgment could be enforced.”

There was, in effect, no defendant; the debtor had ceased to exist; its property had passed to others; its power of defending a suit or of doing any act was at an end; authority to attorneys and agents to act for it was revoked; and any judgment which purported to be against such a dissolved corporation, entered after its dissolution, was not a judgment against that corporation, because, when the judgment was sought to be entered, no such corporation existed. Whatever effect the law of the state in which an action against a corporation was pending would give to such a judgment as against the property of a corporation thus dissolved in that state would be a matter wdiich would relate simply to the enforcement of claims of creditors against the property of a dissolved corporation, and could have no extraterritorial effect. The question as to the effect of a judgment which, by a court of competent jurisdiction, has been entered nunc pro tune as of a date preceding the dissolution of a corporation or the death of a natural person, where the liability of the defendant had been determined by a verdict or decision prior to his death, it is not necessary to determine, as such a condition does not here exist. There was no attempt by the court of Illinois to enter a judgment nunc pro tune as of a date prior to the dissolution of this corporation. In this case the determination of the validity of the plaintiffs’ demand against the corporation took place after the dissolution of the corporation, and the judgment was entered as of the date of that determination. That a judgment entered on a verdict rendered after the dissolution of a corporation has no force out of the jurisdiction in which it was rendered seems

The case of People v. Knickerbocker Life Ins. Co., supra, was before the general term of the supreme court. 43 Hun, 574 - The referee in that case had disallowed a claim presented to the receiver of the defendant, and by the general term his action was reversed. It appeared that the claimant had obtained a judgment against the corporation in the circuit court of the United States for the Western district of Tennessee; that subsequently that case was removed to the supreme court of the United States by writ of error; that before it came on for hearing in the supreme court of the United States the corporation was dissolved, and a receiver appointed; that the receiver conducted the case in the supreme court of the United States, employed counsel to argue it there, and the judgment was reversed. Subsequently, upon a- new trial, the receiver did not appear, and the plaintiff in the original action again obtained a judgment. The general term of the supreme court held that the receiver had made himself a party to the proceeding by taking charge of the writ 6f error in the supreme court of the United States and employing counsel to appear and argue the case there, and that he could not, by subsequently abandoning the action, prevent the plaintiffs from bringing it to trial, and obtaining a judgment entitling them to participate in the distribution of the assets of the corporation. Upon appeal to the court of appeals this decision was reversed ( 106 N. Y. 623 , 13 N. E. 448 ), and the court held that the receiver had not been made a party to the action in which the judgment was recovered, and that the funds in his hands could not be affected by it, unless, by inference or otherwise, under the direction of the court appointing him, he had made himself responsible for the final result of the litigation between the parties; that the subsequent trial and judgment had nothing to do with the writ of error; that as to the cause of action the receiver had not been heard, nor had he the right or opportunity to be heard respecting it; that the object of the writ of error was solely to protect the property in his hands from an incumbrance; that with the proceedings upon the writ of error the court in Tennessee had nothing to do; that the receiver committed no act within its jurisdiction, nor was the property which he sought to protect ever under its control; that it at no time acquired jurisdiction over him, nor over the funds sought to be reached by force of its adjudication; and that there was no ground upon which the case could be made an exception to the general rule that a person is not estopped b}r a judgment to which he is not a party.

The question here presented was before the court of appeals in Rodgers v. Insurance Co., 148 N. Y. 34 , 42 N. E. 515 . It appeared that an action by the claimant against a dissolved corporation was pending in the state of Illinois at the time of the dissolution of the corporation. Subsequent to the dissolution of the corporation the court rendered judgment against the defendant. It was claimed there, as here, that such a judgment was conclusive upon an application to distribute the assets of the dissolved corporation; but that

“Under our law it is perfectly well settled that there can be no valid judgment against a dissolved corporation, unless one founded on a pending suit, which the order of dissolution itself preserves from abatement, or in some manner saved. That, concededly, was the common-law rule, outside of statutory modifications; but the contention now is that the statutes of Illinois have established a different doctrine, and made possible a valid judgment against a corporation, which thereafter other states, on principles of comity and under the constitution, are bound to treat as good and effectual. Two statutes of Illinois are cited for that purpose. One of them continues a dissolved insurance corporation for two years for the purpose of winding up its affairs and prosecuting suits by and against it; another contains a similar provision relating to corporations generally. Undoubtedly, these statutes operated upon foreign corporations doing business in Illinois, so far, at least, as their property within its boundaries was concerned, and the consequent judgments became valid and enforceable for that purpose and to-that extent. Such, only, is the effect claimed for the statutes by the courts of the sister state. They do not undertake to give them an extraterritorial obligation, but treat the foreign corporation, though civilly dead, as de facto alive for the purposes of a remedy within their own limits. That the foreign corporation, dissolved and dead in the domicile of its origin, should be-deemed alive in the foreign state so far as to save the remedies of .its own citizens against property within its own jurisdiction, is entirely possible, and not at all unreasonable. But to go further than' that, and insist that .by force of the foreign judgment, and through the comity of the states, the corporation, in its own jurisdiction, is at the same moment dead and alive,— dead as to our citizens, but alive as to foreign creditors,—is to throw the whole system into confusion, and make a complete dissolution and winding up-impossible.”

And this principle has received the approval of the supreme court of the United States in Pendleton v. Russell, 144 U. S. 640 , 12 Sup. Ct. 743 , 36 L. Ed. 574 , where it was expressly held that a judgment against a corporation dissolved before the judgment is entered was-invalid, and could be the basis of no relief in any state other than that in which the judgment had been entered, which but applied the principle established in Pennoyer v. Neff, 95 U. S. 730 , 24 L. Ed. 571 ,. where it is said:

“In all cases brought in the state and federal courts, where attempts have-been made under the act of congress to give effect in one state to personal judgments rendered In another state against nonresidents without service upon them, or upon substituted service by publication, or in some other form, it has been held without an exception, so far as we are aware, that such judgments were without any binding force, except as to property or interests in property within the state, to reach and affect which was the object of the action in which the judgment was rendered, and which property was brought under control of the court in connection with the process against the person.”'

The order appealed from is right, and should be affirmed, with costs. All concur.