Washington-Alaska Bank v. Dexter Horton Nat. Bank

GILBERT, Circuit Judge

(after stating the facts as above).

The appellant contends that there remained due only $4,510.67 of the appellee’s original claim after applying the $25,000 payment of August 6, 1912, and the net amount which was realized on the foreclosure sale, and that the remainder of the appellee’s claim, as allowed by the court below, represents interest, which the appellee was not entitled to receive out of the estate in the hands of the receiver. The court below applied the rule established in Merrill v. National Bank of Jacksonville, 173 U.S. 131, 19 S.Ct. 360, 43 L.Ed. 640, that the creditor can prove for and receive dividends upon the full amount of his claim, regardless of any sums received from his collateral after the transfer of the assets from the debtor in insolvency. *880provided that he shall not receive more than the full amount due him, and held that any doubt as to the applicability of the rule was dissolved when consideration was had of the terms of the contract between the receiver and the appellee, a contract which was made with the approval of the court below, and the fact that at the time when the contract was made the value of the Gold Bar stock was considered both by the appellee and the receiver to be far in excess of the appellee’s claim against the Washington-Alaska Bank, and the fact that the validity of thé contract was established in the suit in the Washington state court, judgment in which was affirmed on appeal to the Supreme Court. Dexter Horton Nat. Bank v. Wash.-Alaska Bank, 86 Wash. 452, 150 P. 1176.

We are not convinced that the court below was in error in so ruling. A pledge which secures an interest-bearing debt secures the interest as much as the principal of the debt. In Richmond & I. Const. Co. v. Richmond, N. I. & B. R. Co., 68 F. 105, 116, 15 C.C.A. 289, 300 (34 L.R.A. 625), Judge Lurton said: “If interest is properly due, as between creditor and debtor, the interest is just as much a part of the principal claim as the principal thereof.”

In Chemical Nat. Bank v. Armstrong, 59 F. 372, 378, 8 C.C.A. 155, 161 (28 L.R.A. 231), Judge Taft, after reviewing the authorities, said: “The exact point which is common to all the foregoing authorities, and which they all sustain, is that a creditor who has proved his claim against an insolvent estate under administration can collect his dividends without any deduction from his claim as proven for collections made from collateral after his proof of claim is filed.”

Cases of similar import are Hitner v. Diamond State Steel Co. (C.C.) 176 F. 390; New York Security & Trust Co. v. Lombard Invest. Co. (C.C.) 73 F. 537; Savings Bank v. Robert H. Jenks Lumber Co. (C.C.) 194 F. 732.

The appellant’s principal contention is that the payment to the appellee was prohibited by a law of the state of Nevada, which gave priority to the claims of “depositors for deposit” and the claims of “holders of exchange” over all other claims, except taxes, and declared such claims to be a first lien on all of the assets of banking *881corporations at the time of closing the bank. Act March 24, 1909 (Laws Nev. 1908-1909, p. 251). We are unable to agree that the said banking law of Nevada has any bearing upon the question of distribution of assets here involved, notwithstanding that the bank was incorporated under the general incorporation law of Nevada. A marked distinction is observed between the laws of the state which became a part of the charter of the corporation and those laws of the state which regulate corporations in their manner of doing business in the state. The former will follow the corporation when it engages in business in another state. The latter will not. In Jesson v. Noyes, 245 F. 46, 157 C.C.A. 342, this court held that the Washington-Alaska Bank was bound by the provisions of the general incorporation laws of Nevada prescribing the powers of directors of corporations. We so held on the ground that that law entered into the charter of the bank and controlled the action of its directors in whatever state they might go to do business. But the act of the Legislature of Nevada of March 24, 1909, was enacted after the incorporation of the Washington-Alaska Bank, and its purppse was to regulate corporations engaged in the banking business in the state of Nevada, and to protect depositors in such banks. In 12 R.C.L. p. 25,' it is said: “A corporation created by the laws of another state, therefore, does not bring into every state where it transacts business the general legislation or judicial decisions of the state in which it is organized, but such general laws and regulations or the decisions of the courts of a sister state are controlling only within its own limits, and such state has no power to give them force or effect in other jurisdictions.”

In 2 Mor.Priv.Corp. § 967, it is said: “The charter contract alone is recognized. It is the charter alone which is recognized by the laws of comity, and not the general legislation of the state in which the corporation was formed. The general laws and regulations of a state are intended to govern only within the limits of the state enacting them, and a state would have no power to give them extraterritorial force.”

In Guilford v. Western Union Tel. Co., 59 Minn. 332, 61 N.W. 324, 50 Am.St.Rep. 407, the court held: “It is only the charter of the corporation, constituting the agree*882ment between it and its stockholders,' which will be recognized as binding in other states, and not the general laws of the foreign state, affecting merely the remedy, which govern only within the state enacting them.”

In Warren v. First Nat. Bank of Columbus, 149 Ill. 9, 38 N.E. 122, 25 L.R.A. 746, it was held that the charter alone of a foreign corporation, and not the general legislation of the state in which it was created, will have effect to limit its powers outside of the state, and that a New York statute prohibiting assignment or transfers by insolvent corporations has no extraterritorial force and does not affect the validity of an assignment by an insolvent corporation executed in Ohio of a transfer of funds in Illinois. In Ohio Life Ins. Co. v. Merchants Ins. Co., 11 Humph. (Tenn.) 1, 53 Am.Dec. 742, it 'was held that the general law of a state prohibiting corporations from engaging in the banking business, unless expressly formed for that purpose, has no force beyond the limits of the state, but that it is otherwise if such a restriction is contained in the charter. In Borton v. Brines-Chase Co., 175 Pa. 209, 34 A. 597, it was held that — “A general assignment or confession of judgment may be made by a foreign insolvent corporation in Pennsylvania, though the laws of its own state prohibit insolvent corporations from doing so.”

Of similar import is Pairpoint Mfg. Co. v. Phila. Optical Co., 161 Pa. 17, 28 A. 1003.

In East Side Bank v. Columbus Tanning Co., 170 Pa. 1, 32 A. 539, it was held that the statute of New York forbidding preferences by insolvent corporations did not render void a preference judgment taken in Pennsylvania against an insolvent corporation organized under the laws of New York, but holding its entire property in Pennsylvania. In Franklin Trust Co. v. State of New Jersey, 181 F. 769, 104 C.C.A. 629, where a corporation organized under the laws of New Jersey, but whose business interests and all of its property were in another state, had become insolvent and was being wound up in that state, it was held that a franchise tax imposed upon it under the law of New Jersey, after the commencement of the insolvency proceedings, could not be enforced in the court of the foreign jurisdiction, and given priority of payment over the claims of bona fide local creditors. In United States Mortgage *883Co. v. Sperry (C.C.) 24 F. 838, Judge Gresham heid that a New York corporation doing business in Illinois was not bound by the New York statute which provided that no loan should be made at a rate of interest exceeding the legal rate, which in New York was 7 per cent. In Boehme v. Rall, 51 N.J.Eq. 541, 26 A. 832, the court held that, where a foreign corporation executes in New Jersey a mortgage on property within that state to resident creditors to secure payment of debts contracted and payable there, the mortgage will not be held invalid because the execution thereof was contrary to the general statute of the state in which the corporation was incorporated. There are numerous other decisions sustaining the doctrine above declared by the text-writers and announced by the courts, notably White v. Howard, 38 Conn. 342; Hannis Dis. Co. v. Baltimore, 114 Md. 678, 80 A. 319; Castle’s Adm’r v. Acrogen Coal Co., 145 Ky. 591, 140 S.W. 1034; Fowler v. Bell, 90 Tex. 150, 37 S.W. 1058, 39 L.R.A. 254, 59 Am.St.Rep. 788; Com. Nat. Bank v. Motherwell Iron & S. Co., 95 Tenn. 172, 31 S.W. 1002, 29 L.R.A. 164.

In brief, the Washington-Alaska Bank, as its name indicates, was incorporated in Nevada for the purpose of engaging in business elsewhere than in that state. As to its corporate powers it was governed by its charter, but when it engaged in the banking business in Alaska it became subject to the local laws. Depositors and others who dealt with it as a bank were not required to'search the statute of Nevada to ascertain what their rights were. They were entitled to rely upon the laws of the territory where the bank was engaged in business. The act of March 24, 1909, was, as its title indicates, a general act to define and regulate the business of banking, and to create a state banking board and a bank examiner. In the body of the act are found numerous expressions of the purpose to regulate banking “in this state.” It contains no indication of the intention of the Legislature to inject any of' its provisions into the charters of banking corporations theretofore or thereafter to be incorporated. Two years later the Legislature passed a new act “to regulate banking and other matters relating thereto” (St.1911, p. 291), which expressly repeals all prior acts and parts of acts in conflict with its provisions. It gives no preference to claims of *884depositors or others.' That it was the intention to repeal the act of 1909 in totO is further shown in the Revised Laws of Nevada of 1912, where the law of 1911 is restated, and a note in volume 1, p. 209, declares that the latter act supersedes the act approved March 24, 1909.

The appellant contends that the judgment in the foreclosure proceeding is void, for the reason that no permission was obtained from the court below to bring the suit against its receiver, and Barton v. Barbour, 104 U.S. 126, 26 L.Ed. 672, is cited as holding that consent to sue a receiver is jurisdictional. This contention was not made in the court below, and it is not embraced in any of the assignments of error. It is based upon the proposition that the judgment of foreclosure is absolutely void for want of jurisdiction. In Barton v. Barbour a plea to the jurisdiction was interposed, and the question before the Supreme Court was the sufficiency of that plea. In the foreclosure suit in question here, not only’ was there no plea- to the jurisdiction, but the court beiow directed its receiver to appear and answer the suit, which he did without raising the defense that prior permission had not been given to bring the suit. In 3 Street’s Fed.Eq.Prac. 2676, it is said: “It is a general principle of equity practice that a suit cannot be brought against a receiver, in his capacity as such, to recover any property in his hands, or to recover on any debt, demand, or claim whatever against him, unless upon previous leave first duly obtained. This rule applies to suits brought either in that court or in any other court; and if an unauthorized suit be brought against the receiver, he may successfully plead the disability of the plaintiff.”

We think the instruction which the Alaska court gave to its receiver is in effect an order permitting the institution of the foreclosure suit, and the fact that the receiver in compliance therewith appeared in the suit and defended the same, and acquiesced in the course of the plaintiff in prosecuting the same, should be held to have cured the informality which attended, the commencement of the proceeding, and that the judgment in the foreclosure suit cannot be regarded as absolutely void. Elkhart Car-Works Co. v. Ellis, 113 Ind. 215, 15 N.E. 249; Mulcahey v. Strauss, 151 Ill. 70, 37 N.E. 702; Flentham v. Steward, *88545 Neb. 640, 63 N.W. 924; In re Young (D.C.) 7 F. 855; Naumberg v. Hyatt (C.C.) 24 F. 898, 901.

The decree is affirmed.