## Facts

- A Minnesota corporation became insolvent and was placed in receivership by a Minnesota court.
- Minnesota law imposed “double liability” on certain corporate shareholders, measured by the par value of their shares, and provided a sequestration procedure to determine debts and assess shareholders.
- In the sequestration proceeding, the Minnesota court determined the corporation’s debts and ordered an assessment equal to 100% of the par value of the shares, directing the receiver to collect “within or without” Minnesota.
- Some shareholders resided in Wisconsin and were not individually made parties to the Minnesota sequestration proceeding; notice was by publication and, where known, by mail.
- The receiver sued the Wisconsin shareholders in Wisconsin courts to collect the Minnesota assessment.
- Wisconsin courts refused to enforce the assessment, citing Wisconsin policy and the shareholders’ lack of personal participation in the Minnesota proceeding.

## Issues

1. Whether Minnesota’s shareholder “double liability” was penal or contractual, and joint or several, for purposes of enforcement outside Minnesota.
2. Whether the Minnesota receiver had authority, beyond that of an ordinary chancery receiver, to sue shareholders in other states to collect the assessment.
3. Whether due process was denied by fixing the amount and necessity of an assessment in a proceeding where nonresident shareholders were not personally served or individually heard.
4. Whether the Full Faith and Credit Clause required Wisconsin courts to recognize and enforce the Minnesota assessment and the receiver’s authority despite contrary Wisconsin policy.

## Decision

- The Supreme Court reversed the Wisconsin courts.
- Minnesota’s constitutional double-liability provision was treated as self-executing and created a several, contractual obligation of each shareholder to the creditors collectively, not a penalty.
- The receiver, by statute, was more than a custodial chancery receiver; he functioned as a quasi-assignee of creditors’ rights and could sue in any court of competent jurisdiction, including in other states.
- Minnesota’s procedure did not violate due process because shareholders could still contest shareholder status and assert personal defenses in the later collection actions.
- Wisconsin was required to give full faith and credit to Minnesota’s law and the Minnesota court’s determination establishing the assessment and the receiver’s authority, and could not refuse enforcement on policy grounds or by recharacterizing the liability as penal.

## Legal Principles

- The nature and enforcement method of a state-created shareholder liability are determined by the state’s constitution, statutes, and authoritative state court interpretations.
- A state-imposed shareholder double liability that is contractual and several, and owed to creditors collectively, is not treated as a penal obligation for full faith and credit purposes.
- A receiver statutorily vested with creditors’ rights to collect a shareholder assessment may sue outside the appointing state as a quasi-assignee, not merely by forum-state comity.
- Due process permits a centralized proceeding to determine corporate debts and fix the amount of a shareholder assessment, so long as shareholders retain the opportunity in subsequent suits to raise defenses personal to themselves (including denial of shareholder status).
- Under the Full Faith and Credit Clause, a forum state must recognize and enforce a sister state’s valid assessment determination and the collecting officer’s authority, notwithstanding conflicting local policy.

## Conclusion

The Court held that Wisconsin had to enforce Minnesota’s shareholder assessment and recognize the receiver’s authority to sue in Wisconsin, because the obligation was a nonpenal, several, contractual liability to creditors, fixed through a procedure consistent with due process and protected by full faith and credit.


Converse v. Hamilton, 224 U.S. 243 (1912)