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MORRIS v. JONES

decided: January 20, 1947.

MORRIS
v.
JONES, DIRECTOR OF INSURANCE



CERTIORARI TO THE SUPREME COURT OF ILLINOIS.

Vinson, Black, Reed, Frankfurter, Douglas, Murphy, Jackson, Rutledge, Burton

Author: Douglas

[ 329 U.S. Page 546]

 MR. JUSTICE DOUGLAS delivered the opinion of the Court.

This case presents a substantial question under the Full Faith and Credit Clause (Art. IV, § 1) of the Constitution.

Chicago Lloyds, an unincorporated association, was authorized by Illinois to transact an insurance business in Illinois and other states. It qualified to do business in

[ 329 U.S. Page 547]

     Missouri. In 1934 petitioner sued Chicago Lloyds in a Missouri court for malicious prosecution and false arrest. In 1938, before judgment was obtained in Missouri, respondent's predecessor was appointed by an Illinois court as statutory liquidator for Chicago Lloyds. The Illinois court fixed a time for the filing of claims against Chicago Lloyds and issued an order staying suits against it. Petitioner had notice of the stay order but nevertheless continued to prosecute the Missouri suit. At the instance of the liquidator, however, counsel for Chicago Lloyds withdrew from the suit and did not defend it, stating to the Missouri court that the Illinois liquidation proceedings had vested all the property of Chicago Lloyds in the liquidator. Thereafter petitioner obtained a judgment in the Missouri court and filed an exemplified copy of it as proof of his claim in the Illinois proceedings. An order disallowing the claim was sustained by the Illinois Supreme Court against the contention that its allowance was required by the Full Faith and Credit Clause. 391 Ill. 492, 63 N. E. 2d 479.

The case was brought here by appeal. We postponed the question of jurisdiction to the merits. Under the rule of Roche v. McDonald, 275 U.S. 449, 450, the question whether full faith and credit should have been given the Missouri judgment does not present a ground for appeal. But treating the jurisdictional statement as a petition for certiorari (Judicial Code § 237 (c), 28 U. S. C. § 344 (c)), that writ is granted; and we come to the merits of the controversy.

The Full Faith and Credit Clause and the statute which implements it (R. S. § 905, 28 U. S. C. § 687) require the judgments of the courts of one State to be given the same faith and credit in another State as they have by law or usage in the courts of the State rendering them. The Illinois Supreme Court concluded that compliance with that mandate required that precedence be given to the

[ 329 U.S. Page 548]

     Illinois decree appointing the statutory liquidator. It held that title to all the property of Chicago Lloyds, wherever located, vested in the liquidator; that the liquidator was entitled to keep and retain possession of the property to the exclusion of the process of any other court; that although Missouri might give priority to Missouri creditors in the property of the debtor located there,*fn1 Clark v. Williard, 292 U.S. 112, the Missouri judgment could have no priority as respects Illinois assets; that if a liquidator had been appointed in Missouri, petitioner could not have obtained his judgment, or if he had obtained it, he could not have enforced it against the property in the hands of the Missouri liquidator, see McDonald v. Pacific States Life Ins. Co., 344 Mo. 1, 124 S. W. 2d 1157; and that to disallow the judgment in the Illinois proceedings is, therefore, to give it the same effect that it would have had under the same circumstances in Missouri.

First. We can put to one side, as irrelevant to the problem at hand, several arguments which have been pressed upon us. We are not dealing here with any question of priority of claims against the property of the debtor. For in this proceeding petitioner is not seeking, nor is respondent denying him, anything other than the right to prove his claim in judgment form. No question of parity of treatment of creditors, or the lack thereof (see Blake v. McClung, 172 U.S. 239), is in issue. Nor is there involved in this case any challenge to the Illinois rule, which follows Relfe v. Rundle, 103 U.S. 222, that title to all the property of Chicago Lloyds, wherever located, vested in the liquidator. Nor do we have here a challenge to the possession of the liquidator either through an attempt to obtain a lien on the property or otherwise. As pointed out in Riehle v. Margolies, 279 U.S. 218, 224, the distribution

[ 329 U.S. Page 549]

     of assets of a debtor among creditors ordinarily has a "two-fold aspect." It deals "directly with the property" when it fixes the time and manner of distribution. No one can obtain part of the assets or enforce a right to specific property in the possession of the liquidation court except upon application to it. But proof and allowance of claims are matters distinct from distribution. They do not "deal directly with any of the property." "The latter function, which is spoken of as the liquidation of a claim, is strictly a proceeding in personam." Id., p. 224. The establishment of the existence and amount of a claim against the debtor in no way disturbs the possession of the liquidation court, in no way affects title to the property, and does not necessarily involve a determination of what priority the claim should have. And see Chicago Title & T. Co. v. Fox Theatres Corp., 69 F.2d 60.

One line of cases holds that where a statutory liquidator or receiver is appointed, the court taking jurisdiction of the property draws unto itself exclusive control over the proof of all claims.*fn2 But the notion that such control over the proof of claims is necessary for the protection of the exclusive jurisdiction of the court over the property is a mistaken one. As Justice Beach of the Supreme Court

[ 329 U.S. Page 550]

     of Errors of Connecticut aptly said, "The question is simply one of the admissibility and effect of evidence; and the obligation to receive a judgment in evidence is no more derogatory to the jurisdiction in rem than the obligation to receive in evidence a promissory note or other admissible evidence of debt." Beach, Judgment Claims in Receivership Proceedings, 30 Yale L. Journ. 674, 680.

Moreover, we do not have here a situation like that involved in Pendleton v. Russell, 144 U.S. 640, where it was sought to prove in a New York receivership of a dissolved corporation a judgment obtained in Tennessee after dissolution. The proof was disallowed, dissolution having operated, like death, as an abatement of the suit. No such infirmity appears to be present in the Missouri judgment; and the Illinois Supreme Court did not hold that the appointment of a liquidator for Chicago Lloyds operated as an abatement of the suit. Nor is it sought on any other ground to bring the Missouri judgment within the exception on which Williams v. North Carolina, 325 U.S. 226, rests, by challenging the jurisdiction of the Missouri court over either the parties or the subject matter. Nor is there any lack of privity between Chicago Lloyds and the Illinois liquidator. Cf. Ingersoll v. Coram, 211 U.S. 335, 362-364. There is no difference in the cause of action, cf. United States v. California Bridge Co., 245 U.S. 337, whether Chicago Lloyds or the liquidator is sued. The Missouri judgment represents a liability for acts committed by Chicago Lloyds, not for those of the liquidator. The claims for which the Illinois assets are being administered are claims against Chicago Lloyds. The Missouri judgment represents one of them. There is no more reason for discharging a liquidator from the responsibility for defending pending actions than there is for relieving a receiver of that task. Riehle v. Margolies, supra.

Second. "A judgment of a court having jurisdiction of the parties and of the subject matter operates as res judicata,

[ 329 U.S. Page 551]

     in the absence of fraud or collusion, even if obtained upon a default." Riehle v. Margolies, supra, p. 225. Such a judgment obtained in a sister State is, with exceptions not relevant here, see Williams v. North Carolina, 317 U.S. 287, 294-295, entitled to full faith and credit in another State, though the underlying claim would not be enforced in the State of the forum. Christmas v. Russell, 5 Wall. 290; Fauntleroy v. Lum 210 U.S. 230; Roche v. McDonald, supra; Titus v. Wallick, 306 U.S. 282, 291. It is no more important that the suit on this underlying claim could not have been maintained in Illinois after the liquidator had been appointed than the fact that a statute of limitations of the State of the forum might have barred it. See Christmas v. Russell, supra; Roche v. McDonald, supra. And the Missouri judgment may not be defeated by virtue of the fact that under other circumstances petitioner might not have been able to obtain it in Missouri or to have received any benefit from it there, as, for example, if a liquidator had been appointed for the debtor in Missouri prior to judgment. The full faith and credit to which a judgment is entitled ...


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