Mieyr v. Federal Surety Co. , 97 Mont. 503 ( 1934 )

The Supreme Court of the United States has directed us to determine whether there is any local policy in this state 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. In its discussion before reaching that direction, the Supreme Court said: "No statute or decision brought to our notice from Montana removes the question from the field of doubt. True, there are the statutes heretofore referred to whereby suit may be maintained against foreign corporations after dissolution on the same basis as against domestic ones. Nothing in those provisions declares the existence of a policy to allow the assets of an insolvent corporation to be torn to pieces at the suit of rival creditors when they could be distributed equally and without sacrifice at the hands of a receiver."

I do not know of any such policy announced by statute or decision in this state, and determine the question in the negative.

The Supreme Court agrees with the statement in the original opinion of this court promulgated April 1, 1933, that the judgment of the respondents against the Federal Surety Company is valid, but does not agree that the levy of execution was valid. To make its decision upon that point certain, it declared, "the decree should be vacated in so far as it adjudges the validity and priority of the respondents' execution, * * *" taking the view that before the respondents were in a position to issue execution, the situation had been complicated by the suit filed by Mieyr for the purpose of obtaining an ancillary receivership to preserve the local assets.

I think it is unnecessary to discuss the question whether in the circumstances the appointment of Crichton on March 25, 1932, was valid, whether made under section 9301 or 9303, Revised Codes 1921. It seems to me that when Clark on August 3 served and filed an answer and cross-petition in the action wherein he pleaded the dissolution of the Federal Surety Company, and his appointment as "receiver and/or liquidator" under the laws of Iowa and that title to all the surety company's property passed to him, alleging that the assets should be distributed ratably to all creditors "subject to any liens and rights of creditors acquired on or prior to September 25, 1931, in or to specific property," and wherein he asked that Crichton be retained as receiver, the district court of Cascade county then had authority to appoint, or reaffirm, the appointment of Crichton as receiver.

The Supreme Court has declared that this court denied full faith and credit to the statutes and judicial proceedings of Iowa in holding that Clark was a receiver deriving title through a judicial proceeding, and not through the charter of Federal Surety Company's being and the succession there prescribed.

After a careful consideration of the authorities I am satisfied that the action of the district court of Cascade county on August 25, 1932, wherein that court held that the existence of the Federal Surety Company was terminated by the proceedings in Iowa, and that the title to all its property passed to Clark as receiver (charter liquidator), and should be distributed ratably to all creditors "subject to any liens and rights of creditors acquired on or prior to September 25, 1931, in or to specific property," was correct. The court then confirmed the appointment of Crichton as ancillary receiver and directed that he receive proof of claims of all Montana creditors by requiring the claims to be filed with the clerk of the court in Cascade county, and provided further that when the claims allowed by its order were allowed by the Iowa court as entitled to share with the other claims of similar rank, Crichton should transmit and remit to the clerk all money and property in his hands as receiver, except such as were determined by the district court of Cascade county to be subject to specific lien, and such as might be necessary to pay the costs of proceedings in Montana, including the compensation of Crichton. It also provided that in the event claims allowed by the district court of Cascade county were not allowed in such manner as to permit claimant to share ratably with all other creditors of the surety company, then the money and property in the hands of Crichton should be retained by Crichton for distribution to creditors whose claims were allowed by order of the district court of Cascade county. The decree directed all persons to deliver to Crichton all money and property belonging to the surety company. It also revoked the order of May 24, 1932, granting permission to Williard, Wheaton and Hay, as trustees, to levy their execution. (Mieyr v.Federal Surety Co., 94 Mont. 508, 23 P.2d 959.)

Of course, attachments existing upon specific property or judgments being a lien upon real estate prior to the dissolution of the Federal Surety Company would have been preferred claims and payable as such, but the judgment of Williard, Wheaton and Hay, as trustees, was not a preferred claim. This judgment was not a lien on the property of the surety company when Mieyr began his action.

In the absence of preferred claims, I think it is the rule, sustained by the great weight of authority, that "during the winding-up proceedings after dissolution, no creditor will be permitted by legal process or otherwise to acquire priority, or to enforce his claim against the property held for distribution as against the rights of other creditors." (8 Thompson on Corporations, sec. 6567 (6611); Engineering Co. v. PerrymanElec. Co., 113 N.J. Eq. 255, 166 A. 461.) Rohr v. StantonTrust Savings Bank, 76 Mont. 248, 245 P. 947, while relating to the liquidation of a bank pursuant to statute, recognizes the principle above set forth.

Furthermore, as I understand the opinion of the Supreme Court of the United States, there being no local policy expressed in statute or decision whereby judgments and attachments, secured after the title to the property of the corporation has passed to a charter liquidator, have preference over his title, we should affirm the orders and judgment of the district court of Cascade county, from which the appeals in this case originated.