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own constitution and by-laws, became members of the company, and if, in any court, they are creditors, (as no doubt they are in one sense,) they cannot ignore the fact that they are creditors of a pecul. iar kind, and subject to all the equities or obligations that exist as between themselves and all the other policy-holders of the company. They are creditors in a very remote grade, perhaps, as it is possible their claims for premiums paid would be postponed till all other creditors have been satisfied. Dean's Appeal, 14 Cent. Law J. 196. What is it that gives the members of this mutual company of policy. holders whose policies had not matured by death or otherwise when the company failed, the right to disturb the principle of equality in the distribution of its assets by a race of diligence with attachments ? They are only creditors as members of the company; they are mutually debtors as well as mutually creditors in their relative obligations to each other to share equally or according to their scheme in this enterprise. I do not mean to say that as individuals they are debtors instead of the corporation, for this is not so; but in their relation as members of a mutual company, and only in that relation, are they creditors. They derive all their rights through the laws of Missouri; and their contracts with each other, namely, their policies, are governed by these laws and the contract itself. They can. not, when the storm of insolvency comes, separate themselves from this peculiar relation, and claim as creditors in the ordinary accepta
tion of the term; treat their co-members as other creditors, and the · corporation as an independent entity, and run a race for an inequi
table preference in the assets on any notion that, as citizens of this state and creditors, they may have all the assets here. Their being citizens of Tennessee does not release them from their mutual obli. gation as incorporators and as policy-holders in this company. For purposes of federal jurisdiction they would be treated conclusively as citizens of Missouri; and while I do not intimate that for the purposes of this case they are to be so treated, I cite that anomalous fiction as showing how intimately a citizen of one state, who is a member of a corporation in another, is bound to that corporation. Our own state court has established that we will give effect to the laws of another state regulating its corporations whenever the rights of the litigants before the court depend upon them, as they clearly do in this case, Talmadge v. American Co. 3 Head, 337. None of the exceptions mentioned by Dr. Wharton in his text above cited apply here. We have a statute authorizing foreign receivers to sue in
our courts, and without it they may where no policy of our own is contravened. Act 1879, c. 135, p. 173; Cagill v. Wooldridge, 8 Bax. 580; Booth v. Clark 17 How. 322.
I do not think, therefore, that the attachment in this case gives the parties any priority of lien. Very much has been said in the argument about the rights these parties had in the state court under state statutes and state laws, and the wrong done to deprive them of these rights by removal to this court. It is familiar law here that the federal courts of equity administer only the general equity law, and that state statutes and state decisions cannot change the principles or rules of decision by which they are governed. Payne v. Hook, 7 Wall. 425, and numerous other cases cited everywhere; Bump, Fed. Proc. 126. Citizens of other states have a right to invoke the benefit of general principles of equ ty prevailing in the federal courts of equity by a removal of their controversies to this court, and I know of no principle which requires the federal courts to decide the cause in cases removed according to the statutory or judicial rules of equitable decision prescribed by the states any more than in original cases. If the state statutes referred to were required to give state equity courts jurisdiction to wind up foreign corporations in insolvency, it does not follow that these statutes can confer that jurisdiction on this court. If a statute gives a lien or creates a trust it becomes a rule of property, which we enforce and possibly state statutes may enlarge—they certainly cannot restrict-equitable remedies in such a way that federal courts of equity will administer them. I do not think this case presents that question. I have not the least doubt that the chancellor and the supreme court of Tennessee would decide the questions I am now considering just as I do here. There is nothing in the statutes that gives the creditor, who files the bill to wind up a corporation, priority over other creditors; and when the court comes to administer the assets they are distributed pro rata, or according to the liens or preferences existing by contract, or such other liens as exist upon them, and thus to all creditors alike, resident and non-resident. Marr v. Bank of West Tennessee, 4 Cold. 471. The object of the attachment is to secure the assets by impounding them, but it cannot be claimed that in proceedings to wind up an insolvent corporation or an insolvent estate priority is to be given to the creditor filing the bill, or to one residing at home, in preference to one residing in another state. No case so decides. The courts do not tolerate attempts to acquire such preferences. Yonley v. Lavender, 21 Wall. 276. Sometimes, in a
race of diligence among creditors, liens may be acquired by judgments or attachments before the insolvent bill is filed, which are enforced when the claim is presented; but in these statutory proceedings to wind up corporations the statute itself says that the fund shall be distributed pro rata. Tenn. Code, $$ 4294, 4295, 3431.
The cases of Smith v. St. Louis, etc., 6 Lea, 564; S. C. 3 Tenn. Ch. 502; and Liepold v. Marony, 7 Lea, 128, only establish that the state courts may, under these statutes, wind up an insolvent foreign corporation; they do not decide that the home creditors would have any priority; that question is reserved. And if foreign creditors share pro rata in winding up a domestic corporation, there would seem to be no substantial reason for giving home creditors a preference on the winding up of a foreign corporation. It is a preference that is not given in settling insolvent estates of decedents, nor in any other insolvency proceeding; such, for example, as an insolvency assignment made within this state. Why, then, should the distinction be made here? The claim for it is founded on a misapprehension of the effect of these statutes and the doctrine of insolvency in its interstate or international relations. Because our courts will seize the property of an insolvent debtor, whether an individual or a corporation, situated within this state, and, treating it as a trust fund, which means nothing more than that creditors and not the stockholders are entitled to subject it in a court of equity to the payment of their claims-satisfy creditors here rather than permit the property to be carried out of the jurisdiction to be distributed according to laws existing elsewhere, non constat that they will prefer home creditors to the exclusion of others in its distribution. A right to wind up an insolvent corporation, and distribute its assets equally among all creditors, on the theory that after insolvency the assets constitute a trust fund for distribution among creditors, instead of belonging to the stockholders or the first taker, does not become a rule of property in the sense that the creditors in this state have a lien on it or a preference to it any more than a right to sue to judgment and take out execution, becomes a rule of property. Possibly a state might, by law, adopt such a policy and give such a lien, but this state has never done it, and it would be antagonistic not only to the equitable doctrine of equality, but to all our other insolvency laws. And I do not doubt that state courts of equity, administering these assets under these statutes and decisions, would give full force and effect to the laws of Missouri, governing the members of this company inter sese as we would here. Talmadge v. North Am. Co., supra. Tennessee
at one time had a distinct policy of requiring foreign insurance corporations to deposit bonds, or otherwise secure our home people, as a condition precedent for a license to do business here; but that has been repealed. In such case, of course, there would be an equitable or legal right to funds so deposited, but it would grow out of the positive statute, and not the international or interstate law of insolvency.
The only other claim for priority is that based upon the departmental mode of doing business by this company. It is claimed as a contract, or as an implication of one, arising from the constitution and by-laws of the company, and its mode of doing business. I do not think this claim deserves serious attention. If a policy should mature while this company was in business, the holder would certainly look to the general funds for payment. It would be an anomalous scheme of insurance if he could not. It would, instead of distributing the loss throughout a large area and among great numbers, restrict it to a single state or less subdivision, and thus impair the system of extended averages on which successful insurance depends. Losses occurring in department A, if not finding there sufficient assets to pay them, would find in all the other departments priorities com. pelling the holders to go to some department where there was a sur. plus over the priorities there existing; and in this struggle for payment the whole scheme would be wrecked. Nothing less than apt and certain words in the contract, or statutes and by-laws, should bind policy-holders to so disastrous and anomalous a scheme of insurance. There are no such words in the policies, the charter, the constitution, or the by-laws of this corporation. It was evidently only a scheme to extend and invite business by requiring a certain proportion of the funds of the company to be loaned or invested within the limits of the department under local boards of directors or trustees, instead of confining the investments, as most great companies do, at or near the centers of capital and trade. In one sense this scheme affords security to the local policy-holders in having assets at home, the value of which they could secure by their own supervision of investments, and, if occasion required, subject by judgment and execution in local courts; but, doubtless, the main attraction of the scheme, and that upon which reliance was placed to extend business, was the feature which afforded an opportunity to borrow the money of the company and keep it in circulation here, instead of sending it away for investment. The witnesses in this case speak of an understanding derived from the representations by the agents, and in the advertisements and circulars, that they would have the assets in this state as a security
for their policies. There is nothing in these representations to justify such an understanding in any other sense of security than that just mentioned; but if there were, it could not prevail over the contract contained in the policies as interpreted by the laws, constitution, and regulations governing the business of the company; and, as before remarked, there is in none of these, in my judgment, a line, word, or syllable indicating that the policy-holders in this department were to have any lien, preference, or priority of payment out of the assets of the company invested here.
Irrespective of any right to a lien or preference of payment out of these assets, it was my own judgment that, in the absence of a uniform system of bankruptcy established by congress, we are relegated to the wretched and disastrous system of separate aud independent insolvency laws in each state; that each state could claim to administer according to its own laws all the assets of an insolvent found within its jurisdiction; that while, for the purposes of taxation, transfer of title, etc., the situs of a debt is the domicile of the creditor, for the purposes of seizure and administration in insolvency the forum of the debtor would be taken as its situs, because there it must ordinarily be collected, particularly where, as in this case, it was secured by liens on real estate; and therefore it was my opinion that, ruinous as it is to have repeated administrations of the assets of this corporation in each state of the union, we could not deny the right of the plaintiffs to administer those in this state by this bill; and this, whether the rights of the parties were to be governed by the laws of Missouri or not, whether they had liens and preferences or not, and whether or not they were to be paid first, or the distribution was to be made to all creditors everywhere, of which I have no doubt. It was and is my judgment that to prevent this ruin the constitution confers on congress the power to establish a uniform system of bankruptcy, and that the only remedy is to be there found. Whart. Conf. Laws, (2d Ed.) $$ 386–390. Story, Confl. Laws, $$ 403 et seq., 550 et seq. But it was said at the bar that, in a case in the district of Kentucky against this corporation, the learned circuit judge dismissed a bill like this. He informs me that this is true, and that he proceeded on the ground that, where the plaintiffs had no specific lien acquired by attachment or otherwise before the proceedings in Missouri were commenced, and no right of preference, the bill should be, upon principles of comity, dismissed, and the parties left to file their claims in the proceedings in Missouri. I cheerfully yield my judgment to his, as it is my duty to