In certain instances the receiver of a corporation appointed by the courts of one State becomes so vested with title to the property of the corporation and stands toward it so in the position of an assignee or statutory successor that he may not constitutionally be denied the right to sue in the courts of another State; but unless his appointment carries with it these incidents, he is entitled to maintain such an action only by virtue of the principles of comity existing among the several States. If an action by a foreign receiver would result to the disadvantage of the just claims of the citizens of this State, comity does not require that he be permitted to prosecute it. In 1913, the A Co., a New Jersey corporation, was voluntarily dissolved, its directors acting as trustees, and its assets were transferred to the B Co. which later consolidated with the C Co. to form the D Co., all three being corporations organized under the laws of Connecticut. In 1924, the Court of Chancery of New Jersey, upon the application of a stockholder of the A Co. who had not surrendered his original shares of stock in the successor corporations, appointed the plaintiff receiver of the A Co. under a statute authorizing such procedure in order to secure the settlement of the affairs of corporations in dissolution. The plaintiff then brought the present action, alleging maladministration in the dissolution of the A Co. and the transfer of its properties to the Connecticut corporation, and claiming a reconveyance of its assets to himself as receiver, an accounting and other relief. The trial court found that the action was not brought in good faith, that its maintenance would disrupt and bankrupt the Connecticut corporation and result prejudicially to the interests of local creditors and stockholders, and concluded that the plaintiff had no standing in the courts of this State. Held: 1. That the New Jersey statute, under which the plaintiff was appointed, was not such as to give him an absolute right to sue in this State; and that the privilege to do so, resting upon comity, was, in view of the facts found, properly denied him by the trial court. 2. That under the established rule in this State (which could not be changed by the plaintiff's "admission" to the contrary upon the trial), an equitable right such as that asserted by the plaintiff would, if sustained, take precedence over the claims of local creditors who had not relied upon the property sought to be impressed with the trust.
MALTBIE, J.
The plaintiff in his appeal attacks the finding of the court last recited, but as he has taken no steps to bring the evidence before us, we are in no position to review it. Viewed from the standpoint of the other facts found, the conclusion of the trial court would seem to be entirely reasonable.
The plaintiff contends that he has a right to bring and prosecute the action which the courts of this State may not deny to him. It is true that in certain instances the receiver of a corporation appointed by the courts of one State becomes so vested with title to the property of the corporation, stands toward it so in the position of an assignee or statutory successor, that he may not be denied the right to sue in the courts of another State. Converse v. Hamilton, 224 U.S. 243, 32 Sup. Ct. 415. By § 65 of the Corporation Act of New Jersey, as amended, a receiver of a corporation may be appointed for various reasons, including its insolvency; by § 66, such a receiver is granted certain general powers; and by § 68, all the property of an insolvent corporation is expressly vested in its receiver, and the corporation is divested of it. 2 Comp. Stat. of New Jersey, pp. 1640, 1643, 1644; Laws of New Jersey, 1912, Chap. 300. The New Jersey courts have decided that a receiver, though appointed under the provisions of § 65, is not by the statutes, and may not be by the court, vested with title to the property of the corporation unless it is insolvent. Morse v. Metropolitan Steamship Co., 88 N.J. Eq. 325, 102 A. 524. Section 56 of the Corporation Act authorizes the appointment of a receiver to settle the affairs of a corporation in dissolution, and provides that he shall take charge of the estate and effects of the corporation, collect its debts and property, prosecute and defend suits, and appoint agents, and do all other things the corporation might do, if in existence, for the final settlement of its unfinished business. 2 Comp. Stat. of New Jersey, p. 1636. These powers are certainly no more extensive than, if as extensive as, those granted to receivers of corporations under § 65, and if a receiver appointed under that section is not vested with title to the property of the corporation unless it is insolvent, certainly a receiver appointed under § 56 is not. In Sterrett v. Second National Bank, 248 U.S. 73, 39 Sup. Ct. 27, the Supreme Court of the United States denied to a receiver appointed by an Alabama Court the right to prosecute an action in a District Court of the United States, although the statutes of Alabama granted him powers almost identical with those enumerated in § 56, the court holding that title was not so vested in him as assignee or statutory successor of the corporation as to authorize a recovery by him in a foreign jurisdiction.
If the plaintiff is entitled to prosecute the action in our courts at all, it is only by virtue of the principles of comity existing among the several States. Upton v. Hubbard, 28 Conn. 274, 284; Howarth v. Lombard, 175 Mass. 570, 572, 56 N.E. 888; Matter of Accounting of Waite, 99 N.Y. 433, 2 N.E. 440; 2 Tardy's Smith on Receivers (2d Ed.) p. 1932. But where the maintenance of an action by a receiver in the court of a foreign State will result to the disadvantage of the just claims of the citizens of that State, comity does not require that he be permitted to prosecute it, and the privilege to do so should be denied to him. Paine v. Lester, 44 Conn. 196, 204; Kurd v. City of Elizabeth, 41 N.J.L. 1; Runk v. St. John, 29 Barb. (N. Y.) 585, 587; Catlin v. Wilcox Silver-Plate Co., 123 Ind. 477, 24 N.E. 250; Ward v. Pacific Mutual Life Ins. Co., 135 Cal. 235, 67 P. 124; 1 Wharton on Conflict of Laws (3d Ed.) p. 838.
The trial court finds that the successful prosecution of the suit by the plaintiff will not merely be prejudicial to the rights of local stockholders and creditors of the Winona Mills Company, but will result in the bankruptcy of the company. It is true that at the trial plaintiff's counsel "admitted" that all creditors who have dealt with that corporation without notice of the claims set up in the complaint, would take precedence in right over the plaintiff; but the plaintiff is seeking to impose a trust upon the property of the corporation, and we have held that creditors who have not extended credit upon the strength of the property to be charged, are not entitled to precedence as against such an equitable right as he asserts; Waterman v. Buckingham, 79 Conn. 286, 64 A. 212; and he as receiver cannot by his admissions give priority to them. Caulfield v. Green, 73 Conn. 321, 324, 47 A. 334; Isaacs v. Stevens, 13 Conn. 499, 506. The successful prosecution of the action would necessarily result in the removal from the State of assets of the Winona Mills Company, to which its creditors are looking as security for the payment of its debts, and its bankruptcy would in all probability result in loss to them. Local stockholders of the Winona Mills Underwear Company, which merged with the Winona Mills Hosiery Company to from the Winona Mills Company, cannot be assumed to have participated in the acts by which the last-named company became possessed of the assets of the Columbia Hosiery Company; yet the interest acquired by them in the Winona Mills Company through the merger by which it was constituted, will be destroyed by its bankruptcy. There are no creditors of the Columbia Hosiery Company to be protected by the receivership, nor does it appear that any of its former stockholders, except possibly Sariol, are in a position to question the formation of the Connecticut corporation and the transfer of assets to it, in view of their participation in the proceedings, or that they desire to press the claims made by the receiver. Sariol alone seeks to benefit by the appointment of the receiver and the prosecution of the suit, and he is a resident of New York. The trial court has found that he has been offered the privilege of converting the stock held by him into stock of the Winona Mills Company, and no doubt that opportunity is still available to him. If he is not willing to take that course, our courts are open to him, and in them he may seek redress for any injury he has suffered, thereby affording to creditors and other interested parties here resident the opportunity to claim the protection of their own jurisdiction. In such a situation comity does not require that our courts accord to the receiver the privilege of prosecuting his action in them, and the trial court soundly exercised its discretion in refusing him permission to do so.