First Department, July, 1920.

App. Div.] allegations which relate to alleged acts of illegality, violence and tyranny on the part of the Mexican government during the years 1916 and 1917 with respect to the affairs of the Banco de Londres y Mexico, with which the courts of our country under international law can have no concern and which may not be considered in determining the rights of the parties to this action. The facts alleged in the complaint, which must be deemed admitted by the demurrers of both defendants, will be briefly summarized.

The plaintiff is a resident of this State and a creditor of the Banco de Londres y Mexico to the extent of a claim of $20,777.55, which has been formally acknowledged by the board of directors of the said bank by resolution. The defendant Bank of Montreal is a corporation of the Dominion of Canada which has an office for the transaction of its business in this State, and which holds on deposit approximately the sum of $140,000 to the credit of the defendant Mexican bank. The defendant Caturegli is a representative in this country of what is known as the Comision Monetaria of Mexico, and occupies a position somewhat akin to that of a liquidator under our Banking Acts. The defendant Banco de Londres y Mexico is a bank of issue duly organized under the laws of the Republic of Mexico in the year 1889, which had actively functioned as such bank until about September, 1916. About that time Venustiano Carranza, as First Chief of the Constitutional Army of Mexico, decreed the abrogation of all the banking laws of Mexico and of all the charters of banks of issue. The decree also provided: "That every bank of issue should within sixty days from the date of the decree, increase its metallic reserve to an amount equal to its bills in circulation," and that the banks may carry on executive operations only as authorized by the Department of Finance of Mexico. It is alleged that the object of this decree was to conserve the interests of the banks. It is also alleged that for the purpose of making the decree effective, provision was made "for the appointment of a Board of Sequestration for each bank of issue, to act as a conservation commission and to liquidate the bank if it did not maintain its metallic reserve under the provisions of the decree." Subsequently a further decree was issued by Carranza, which designated a Comision

First Department, July, 1920.

[Vol. 192.

Monetaria for the purpose of reorganizing the circulation of coin in the United States of Mexico. In or about the month of December, 1916, the Board of Sequestration, in ostensible compliance with the decree of the First Chief, took possession of the defendant Bank of Mexico by armed force. In or about.April, 1917, the Board of Sequestration was supplanted by the Comision Monetaria, which has since held and still holds physical possession of the property and assets of the Bank of Mexico.

There are allegations in the complaint as to the alleged illegality of the governmental acts and the protest of the bank officials thereto and that the Mexican Bank was taken possession of by the Comision Monetaria; that the bank was solvent and financially able to liquidate its assets and pay its creditors in full, but that owing to the alleged acts of violence and threats made to the managers of the Mexican Bank and while under duress and fear of their lives, the officers of the bank delivered up to the Minister of Finance 825 silver bars of the value of $1,400,000, and eighty gold bars of the approximate value of $1,800,000, on the promise that there would be returned therefor to the bank the money coined therefrom, and that up to the 19th day of February, 1917, there was returned to the bank coinage of the value of approximately $500,000, leaving a deficit in this transaction of $2,700,000. There are also allegations of illegal and forcible extractions from the vaults of the bank of many millions of dollars of gold and that the purpose of the various decrees, although ostensibly to preserve the assets of the bank and to liquidate it for the benefit of the creditors of the bank, was to put the Mexican government in funds for the maintenance of armies in the field and to assure Carranza his position as political head of the government and for his own personal use and gain.

It is further alleged that by reason of the unlawful acts detailed, the Mexican Bank has become insolvent and unable to pay its liabilities; that before the institution of this action that bank deposited with the Bank of British North America approximately the sum of $140,000, and that the defendant Bank of Montreal has succeeded to all the rights of the Bank

British North America. It is also alleged that before the

First Department, July, 1920.

App. Div.] institution of the present action the Comision Monetaria, by the defendant Caturegli, instituted an action in this court against the Bank of British North America, now the Bank of Montreal, the object of which was to obtain possession of the $140,000 and interest now on deposit with that bank and that if this action is successful it is intended to take the said money without the State and out of the territorial borders of the United States and to carry it into Mexico.

It is also alleged that there are other creditors of the Mexican Bank in this State and country, and that if the Comision Monetaria is permitted to prosecute this action and if it succeeds in obtaining possession of the said fund, it will be dissipated and unlawfully appropriated and will not be used for the purpose of satisfying claims of creditors and stockholders of the bank unless the equitable interposition of the court is exercised to protect the interest and rights of American creditors.

The prayer for relief is that the defendant Caturegli, as representative of the Comision Monetaria, be restrained from prosecuting the action against the Bank of Montreal brought to recover moneys on deposit belonging to the Bank of Mexico, and that the Bank of Montreal be enjoined from turning over these funds to Caturegli or to anybody else, and that a receiver be appointed by the court to preserve the money of the Bank of Mexico on deposit with the Bank of Montreal, and thereafter to deal therewith pursuant to the directions and order of this court pending a proper liquidation of the assets and property of the Bank of Mexico.

The first question that will be considered is that of the jurisdiction of this court. At the outset it is to be borne in mind that the plaintiff does not seek to appoint a receiver of the Mexican Bank, which is a foreign corporation, but merely to appoint a receiver of the assets of that corporation which are located in this State in order to bring about an ultimate equitable distribution of these assets in the foreign liquidation proceedings so far as the citizens of this State and of this country who have lawful claims against the Bank of Mexico are concerned. In other words, the plaintiff does not seek to obtain any advantage over any other creditor, and indeed he insists that he has no right so to do, for reasons

First Department, July, 1920.

[Vol. 192. that will be presently considered. There is ample authority for the proposition that the court may appoint a receiver of the assets of a foreign corporation which are located in this State. It was so held in Horton v. McNally Co. (155 App. Div. 322). In Popper v. Supreme Council (61 App. Div. 405) the defendant, an Indiana corporation, which was a mutual benefit or fraternal association, became insolvent and was in the hands of a receiver appointed in Indiana. The plaintiff, a resident of this State, who was a member of the corporation, succeeded in having the funds of the corporation in this State put in the hands of a receiver so that they might be equitably distributed among the lawful claimants thereto. The court recognized the principle that the claimant had such an interest in the funds in liquidation as to entitle him to the relief sought, citing the following authorities: Glines v. Supreme Sitting Order of Iron Hall (20 N. Y. Supp. 275; affd., 21 id. 543); Mosher v. Supreme Sitting of Iron Hall (88 Hun, 394), and People v. Granite State Provident Assn. (41 App. Div. 257; affd., 161 N. Y. 492).

In Glines v. Supreme Sitting Order of Iron Hall (20 N. Y. Supp. 275, 277) the defendant, a benefit society incorporated under the laws of Indiana, was in the hands of a receiver appointed in that State and had local branches in the State of New York which had funds in their possession, the property of the corporation. It was held that a temporary receiver could be appointed to preserve these assets within this State upon the application of a member of the order, for the protection of members resident in this State. To the same effect are Reusens v. Manufacturing & Selling Co. (99 App. Div. 214); Hallenborg v. Greene (66 id. 590). That a general creditor may invoke such jurisdiction is also recognized in Buckley v. Harrison (10 Misc. Rep. 683).

The theory upon which a member may bring such a proceeding is that he has an interest in the assets of the insolvent corporation, just as creditors of an insolvent corporation would have, and that he is entitled to secure an equitable distribution of its assets among those legally entitled thereto.

In Horton v. McNally Co. (155 App. Div. 332) the court stated: "We think this court is committed to the doctrine that a receiver of the property of an insolvent foreign corpora

First Department, July, 1920.

App. Div.] tion situated in this State may be appointed to preserve the property pendente lite for the protection of the interests of New York creditors" (citing numerous authorities, including People v. Granite State Provident Assn., 41 App. Div. 257; affd., 161 N. Y. 492).

The fallacy of the respondent's reasoning in insisting that the plaintiff has no standing unless he is a judgment creditor will be apparent upon slight reflection. The necessity of being a judgment creditor arises only in cases where, for example, a creditor seeks to set aside a fraudulent conveyance made by a debtor, which is an obstruction to the collection of his claim, through an execution issued under the judgment. In such a case, if successful, the judgment creditor may of course obtain a preference over other creditors. In a case however, where a corporation is insolvent and in the hands of a receiver or liquidator appointed in a foreign state, it has been repeatedly held that a creditor in this State, whether his claim is reduced to judgment or not, must recognize the insolvency proceedings in the foreign State and he can gain no preference over any other creditors of the corporation upon the assets of the insolvent corporation which may be located in this State. (Martyne v. American Union Fire Ins. Co., 216 N. Y. 183; Matter of French, 181 App. Div. 719.)

It follows that the plaintiff has no adequate remedy at law, and it is clear that the court has jurisdiction in this action, which is properly maintainable unless the court has no jurisdiction over the defendant Caturegli, a representative of a foreign government.

The facts in this case show that Caturegli is the liquidator appointed under the laws of Mexico and may be regarded in the same light as a liquidator appointed under the Banking and Insurance Laws of this State. It is also to be borne in mind that the money in the Bank of Mexico is not the property of the sovereign government of Mexico. The circumstance that the receiver was appointed by the chief executive officer of Mexico under the peculiar laws of that country, instead of by a court of the Republic, does not make the government of Mexico an owner of the funds of the bank. If this proposition be sound, as I think it is, it follows that Caturegli, as liquidator, appointed under the laws of his