Pendleton v. Russell/Opinion of the Court

The only question presented for our determination is whether the judgment of the circuit court of the United States for the western district of Tennessee, rendered on the 25th of January, 1886, was valid as a claim against the estate of the dissolved insurance corporation in the hands of its receiver, to be allowed in the distribution of its assets. The court of appeals, in affirming the order of the supreme court of New York at special term, disallowing the claim, held that the judgment was invalid, and placed its decision on the ground that the United States circuit court had not, at the time, jurisdiction of the defendant. The error alleged is that the court, in this ruling, failed to give that faith and credit to the judgment of the circuit court of the United States to which it was entitled. It is well settled that the judgments and decrees of a circuit court of the United States are to be accorded in the state courts the same effect as would be accorded to the judgments and decrees of a state tribunal of equal authority. It is within the jurisdiction of this court to consider and determine that question,-that is, whether such effect was given in any particular case, whenever properly presented. But in determining that question this court must, in the first instance, consider whether the federal court had jurisdiction to render the judgment or decree to which, it is contended, due effect was not given; for, as a matter of course, the jurisdiction of every court is open to inquiry when its judgments and decrees are produced in the give them effect. given them effect.

Looking at the judgment of the circuit court of the United States, we are satisfied that the ruling of the court of appeals was correct. That judgment purports to be against the insurance company, but that company, at the time, had no legal existence. It had been dissolved, and its franchises, rights, and privileges declared forfeited, by a decree of the supreme court of New York, in a proceeding brought by the attorney general of the state, in the name of the people, and a receiver appointed of the effects of the corporation. The judgment was therefore no more valid against a nonexisting corporation than it would have been if rendered for a like amount against a dead man. The receiver was not substituted in the place of the dissolved corporation. No process or citation was issued by that court to bring him before it, or any proceeding taken for that purpose. Nor would such a proceeding have any effect, for, the corporation having expired, the suit itself had abated. It ceased to be a pending suit; and, if it were otherwise, the receiver could not take charge of any proceeding in a foreign jurisdiction by commencing an action, or defending an existing action, without the express authority of the court, whose officer he was, so as to bind any property or effects in his hands as receiver. Booth v. Clark, 17 How. 322; Reynolds v. Stockton, 140 U.S. 254, 11 Sup. Ct. Rep. 773.

The only measures he took by the authority of that court was to employ counsel to argue a pending case in the supreme court of the United States, brought there to review a judgment rendered in the circuit court of the United States for the western district of Tennessee against the corporation. When appointed receiver he found that case pending in the supreme court upon writ of error to review that judgment against the corporation, and also that the company had mortgaged a portion of its property, and assigned a mortgage which it held of other property, together amounting to $21,000, to indemnify the sureties on a supersedeas bond given on suing out the writ of error. The judgment of reversal was rendered, not upon any substitution of the receiver, but upon the record as it stood in that court. By the reversal the incumbrances upon the property of the corporation were removed. The remittitur being sent the corporation was set aside as it stood one corporation was set aside as it stood on the records of that court. The case was then in the position of an ordinary action against a defunct corporation, and the connection of the receiver with it there ended. He did not make himself a party to the record from the fact that he may have sent the remittitur from the supreme court of the United States to the circuit court, and had it filed there. He could not have become a party, or in any way have bound the corporation in the foreign jurisdiction, without the express authority of the court which appointed him. Nor did his employment of counsel, by such authority, to argue the case in the supreme court of the United States, operate to make him a party, or substitute him in the case as a representative of the corporation. The counsel was permitted to appear in that court because of the incumbrances upon property in its hands, created by the mortgages given by the insurance company before its dissolution as security to the sureties on the bond. His relation to the property in his hands, in trust for the creditors of the corporation, rendered it his duty to call the fact of such incumbrances to the attention of the court, and ask permission to employ counsel to argue the case, and thus, if possible, to free the property from the charges; but when that was accomplished, and the remittitur was sent to the court below, his connection with the case ended. What was done here is no more than what is frequently allowed to persons who, as trustees, may be affected is discharging their duties by a decision of questions involved in cases to which they are not parties. He was allowed to present, through counsel, objections to the jugment under consideration. Had the original judgment of the circuit court of the United States been affirmed, instead of being reversed, it having been rendered when the insurance company was in existence, it would have stood as a valid claim against the assets of that company after its dissolution. He did not, in any respect, bind himself as receiver, or bind the assets in his hands, because, after the judgment was set aside in subsequent proceedings, the claimants recovered another judgment. He was not bound by the second judgment, nor precluded from showing it was invalid because rendered against a corporation which had, at the time, no existence, or capacity to be sued, and did not possess any property against which the judgment could be enforced.

In the condition in which the case in the circuit court of the United States was left after the reversal of its judgment it had no jurisdiction to proceed with the action beyond entering the order under the mandate of this court. The subsequent trial and judgment were but proceedings against a corporation which had no existence, and vitality could not be given by them to the artificial body which had become extinct. Judgment affirmed.