Broderick v. Rosner

Background

A New York official who oversees banks, acting as Superintendent of Banks, sued 557 New Jersey residents who owned stock in the Bank of the United States to collect unpaid assessments the New York law required. New Jersey courts dismissed the case under a state rule that bars suits enforcing another State’s statutory liability except as an equitable accounting that must include the corporation, all creditors, and all stockholders — a condition the Superintendent said was impossible to meet.

Reasoning

The Court examined whether New Jersey could refuse to hear the New York enforcement action. It held that the New Jersey rule, as applied, made the suit legally impossible because necessary nonresident parties could not practically be joined and the cost would be prohibitive. The Court said stockholder liability imposed by the state of incorporation is contractual in character and must be respected by other States under the Constitution’s full faith and credit clause. The Superintendent’s administrative assessment was treated as a public act entitled to recognition.

Real world impact

The decision requires New Jersey courts to hear the New York Superintendent’s claims and allows New York’s statutory assessments to be enforced in other States despite local procedural obstacles. This affects many stockholders, creditors, and officials who collect bank liabilities across state lines. The ruling does not foreclose defenses available under New York law, but it prevents a State from using procedural rules to nullify another State’s statutory obligations.

Dissents or concurrances

One Justice (Cardozo) disagreed and would have affirmed the New Jersey judgment, noting concerns about the practical burdens of joining nonresident parties.