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HANCOCK NAT. BANK v. FARNUM, 176 U.S. 640 (1900)

U.S. Supreme Court

HANCOCK NAT. BANK v. FARNUM, 176 U.S. 640 (1900)

176 U.S. 640

HANCOCK NATIONAL BANK, Plff. inErr.
v.
JONATHAN W. FARNUM.
No. 89.

Argued December 21, 1899.
Decided March 12, 1900.

The facts of this case are these: The plaintiff in error, plaintiff below, a creditor of the Commonwealth Loan & Trust Company, a corporation duly organized under the laws of the state of Kansas, recovered a judgment on December 8, 1893, in the circuit court of the United States for the district of Kansas against the corporation for the sum of $16,136.76 debt, and $28.45 costs of suit. Thereafter, on April 27, 1894, an execution was issued on the judgment, and after due search and diligence no property of the corporation could be found to be taken in satisfaction thereof, and it was returned wholly unsatisfied. The corporation was not a railway, religious, or charitable corporation. The defendant is a stockholder in that corporation, holding ten shares of the capital stock of the par value of $100 each, and appearing as such stockholder on the books of the corporation. Setting forth these facts with further detail of the provisions of the Kansas Constitution and statutes, the plaintiff filed its declaration in the common pleas division of the supreme court of Rhode Island to recover a judgment for a sum equal to the amount of defendant's stock. To this declaration a demurrer was filed [176 U.S. 640, 641]   and sustained and judgment entered for the defendant (20 R. I. 466, -- L. R. A. --, 40 Atl. 341), to reverse which judgment the plaintiff sued out this writ of error.

Messrs. William Reed Bigelow, H. J. Jaquith, William J. Cronin, and John E. Conley for plaintiff in error.

Messrs. Walter F. Angell, Stephen O. Edwards, Seeber Edwards, and Albert Gerald for defendant in error.

Mr. Justice Brewer delivered the opinion of the court:

This case brings to our consideration the same constitutional and statutory provisions of the state of Kansas which were before us in Whitman v. National Bank, 176 U.S. 559 , 20 Sup. Ct. Rep. 477, 44 L. ed . --. In that case we decided that a plaintiff, after the recovery of a judgment against a Kansas corporation in the courts of Kansas, and the return of an execution unsatisfied, could maintain an action in any court of competent jurisdiction against a stockholder of the corporation to recover in satisfaction of his judgment an amount not exceeding the parvalue of the defendant's stock. It is unnecessary to rediscuss the questions there considered.

It remains to be determined whether the action of the supreme court of Rhode Island in failing to recognize the right which, in the case just referred to, we have held that the plaintiff possessed, is one which can be revised by this proceeding in error. In order to give this court jurisdiction of a case decided in the courts of a state there must be some question arising under the Constitution of the United States; some alleged denial of a right or immunity secured by that Constitution. The plaintiff says that the decision of the supreme court of Rhode Island denied it a right given by 1, article 4, of the Constitution of the United States, which reads: 'Full faith and credit shall be given in each [176 U.S. 640, 642]   state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof,' and the following statute passed in pursuance thereof, to wit, Revised Statutes, 905:

The plaintiff's contention that these Federal provisions required a decision different from that made by the state court was distinctly presented and ruled against. The jurisdiction, therefore, of this court, is clear. It may examine and inquire whether any right secured by these provisions was denied by the state court, though if it finds that no such right was denied, the judgment will have to be affirmed, no matter what may be the opinion of this court as to the correctness of the ruling as a question of general law.

The Constitution declares that full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state, and that Congress may not only prescribe the mode of authentication, but also the effect thereof. Section 905 prescribes such mode, and adds that the 'records and judicial proceedings, so authenticated, shall have such faith and credit given to them in every court within the United States as they have by law or usage in the courts of the state from which they are taken.' Such is the congressional declaration [176 U.S. 640, 643]   of the effect to be given to the records and judicial proceedings of one state in the courts of every other state. In other words, the local effect must be recognized everywhere through the United States.

What, then, is the faith and credit given by law or usage in the courts of Kansas to a judgment against a corporation? What is the effect of such a judgment as there established? This is a question not answered by referring to general principles of law, by determining what at common law was the significance and effect of a judgment, but can be answered only by an examination of the decisions of the courts of Kansas. The law and usage in Kansas, prescribed by its legislature and enforced in its courts, make such a judgment not only conclusive as to the liability of the corporation, but also an adjudication binding each stockholder therein. We do not mean that it is conclusive as against any individual sued as a stockholder that he is one, or if one, that he has not already discharged by payment to some other creditor of the corporation the full measure of his liability, or that he has not claims against the corporation, or judgments against it, which he may, in law or equity, as any debtor, whether by judgment or otherwise, set off against a claim or judgment, but in other respects it is an adjudication binding him. He is so far a part of the corporation that he is represented by it in the action against it. Ball v. Reese, 58 Kan. 614, 50 Pac. 875. In that case it was said, correcting an inference which was sought to be drawn from language in the case of Howell v. Manglesdorf, 33 Kan. 194, 5 Pac. 759, in respect to the effect of a judgment against a corporation (pp. 617, 618, Pac. p. 876).

This representative character of the corporation has been affirmed by this court in several cases. In Hawkins v. Glenn, 131 U.S. 319 , 33 L. ed. 184, 9 Sup. Ct. Rep. 739, it was held that 'in the absence of fraud, stockholders are bound by a decree against their corporation in respect to corporate matters, and such a decree is not open to collateral attack.' This was a case in which an assessment ordered by a court which had jurisdiction of the corporation was held binding upon stockholders residing in another state; and in the opinion, on page 329, L. ed. p. 191, Sup. Ct. Rep. p. 742, it was said by Chief Justice Fuller:

See also Glenn v. Liggett, 135 U.S. 533 , 34 L. ed. 264, 10 Sup. Ct. Rep. 867; Great Western Teleg. Co. v. Purdy, 162 U.S. 329, 337 , 40 S. L. ed. 986, 990, 16 Sup. Ct. Rep. 810.

Now, as the judgment rendered in the Kansas court is in that state not only conclusive against the corporation, but also binding upon the stockholder, it must, in order to have the same force and effect in other states of the Union, be adjudged in their courts to be binding upon him, and the only defenses which he can make against it are those which he could make in the courts of Kansas. The question to be determined in this case was not what credit and effect are given in an action against a stockholder in the courts of Rhode Island to a judgment in those courts against the corporation of which he is a stockholder, but what credit and effect are given in the courts of Kansas in a like action to a similar judgment there rendered. Thus and thus only can the full faith and credit prescribed by the Constitution of the United States and the act of Congress be secured.

In Crapo v. Kelly, 16 Wall. 610, 619, 21 L. ed. 430, 434, referring to the statute of Congress respecting the authentication of records, it was said:

The fact that this judgment was rendered in a court of the United States, sitting within the state of Kansas, instead of one of the state courts, is immaterial; for, as said in Crescent City L. S. L. & S. H. Co. v. Butchers' Union S. H. & L. S. L. Co. 120 U.S. 141, 147 , 30 S. L. ed. 614, 617, 7 Sup. Ct. Rep. 472, 475, citing Dupasseur v. Rochereau, 21 Wall. 130, 135, 22 L. ed. 588, 590; Embry v. Palmer, 107 U.S. 3 , 27 L. ed. 346, 2 Sup. Ct. Rep. 25.

See also Metcalf v. Watertown, 153 U.S. 671 -676, 38 L. ed. 861-863, 14 Sup. Ct. Rep. 947; Pittsburgh, C. C. & St. L. R. Co. v. Long Island Loan & T. Co. 172 U.S. 493 , 43 L. ed. 528, 19 Sup. Ct. Rep. 238.

We are of the opinion, therefore, that the supreme court of Rhode Island has failed to give to the judgment in the circuit court of the United States for the district of Kansas that force and effect which it has within the limits of the state of Kansas, and that the failure so to do is an error available in this court. The judgment of the supreme court of Rhode Island must therefore be reversed, and the case remanded for further proceedings not inconsistent with the views herein expressed.

Mr. Justice Peckham dissents.

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