Hibernia National Bank v. Lacombe

28 N.Y. Sup. Ct. 166

• Court: New York Supreme Court
• Decided: May 15, 1880
• Status: Published

Opinion

Barrett, J.:

The main question in this case is whether a Louisiana creditor of the defendant bank, who has attached property here, takes precedence over liquidators appointed by a Louisiana court, under an act of that State, which is in the nature of a bankrupt or insolvent law.

1. It is incidentally argued that the present proceedings were absolutely void because of the forfeiture decreed by the Louisiana court. The contention is that thereby the bank had ceased to exist, and consequently could no more be sued than a natural person deceased. This is but another way of saying that the liquidators take precedence. 'Whatever rights they have flow from the judicial proceedings against the bank. They claim the property thereunder. Now it is evident that if, on general principles, well settled in our courts, the liquidators’ title, thus acquired, cannot prevail against the rights of attaching creditors, this legal status cannot be affected by either the form or substance of the foreign tribunal’s judgment. No act of the foreign jurisdiction, no special provision of the foreign decree, can be permitted to prevent the free exercise of rights conferred by our laws. The corporation lives and exists, therefore, at least, so far as to enable creditors to proceed against property here, quasi inrem. (City Ins. Co. v. Commercial Bank, 68 Ill., 348.) In this case the court said: “ If it be- conceded that it is proven this bank has forfeited. its franchises %mder the laws of Bhode Island, the obligation of its contracts survives, and this action may be maintained on the ground that it is a proceeding against the property of the bmlc (not in the hands of a bona fide purchaser), to enforce payment.”

To subject the property of the bank within the State to the payment of their claims, is a right of which creditors cannot be deprived, either directly, by conveyance in vmibum under a foreign bankrupt law, nor indirectly, by a decree, which in effect is nothing more nor less, so far as we are concerned, than a declaration of the foreign court that the debtor ca/rmot be sued. Nor can the liquidators be heard to set up this defense. The only effect it could have, if successful, would be to defeat the creditor, and enable the liquidators to reduce the property to possession — the very thing which our law will not suffer. The law of Louisiana, under which the liquidators claim, has no extra-territorial force. On this head the principle of comity has been repeatedly but unsuccessfully invoked. The light of the liquidators to appear in our courts, and litigate, is not a strictly legal one, but depends upon the comity. Such comity should not be extended so far as to permit them to set up the provisions of a decree which could possibly have the effect contended for.

But further, we do not think that there was an absolute dissolution, analogous, in legal contemplation, to the death of a natural person. The act under which the decree proceeded provided for a forfeiture “ of corporate rights ” upon proof of insolvency, but, as was said in In re Independent Insurance Company (1 Holmes, 103, U. S. Circuit Ct., Mass.), “ A corporation may, for certain purposes, be considered dissolved so far as to be incapable of doing injury to the public, while it yet retains vitality so far as essential for the protection of the rights of others.” Under the decree in question the bank was put in liquidation. Its assets were placed in the hands of the liquidators. The power to carry on business was taken away. Undoubtedly, it ceased to be, so to speak, a going corporation ; nay, more, as its corporate rights were forfeited, perhaps it could not be sued with a view to an ordinary judgment in personam. But it could be impleaded in many ways : e. g., by parties having liens to be foreclosed or other rights to be secured, not demanding a personal judgment to be collected by execution against its general assets. So also, where the proceeding is in substance, though not in form, against the thing sought specially to be subjected.

2. The next subdivision of the main point urged by the appellant is, that the court below had no jurisdiction, for the reason that both jdaintrff and defendant are foreign corporations, an¿l that the cause of action did not arise within this State. It is true, that the plaintiff and defendant are foreign corporations, but the appellant is in error in supposing that the cause of action did not arise within this State. The action is founded upon a bill of exchange, drawn by the defendant bank, in New Orleans, on Messrs. M. Morgan’s Sons, in this city. The drawer’s contract was that Morgan’s Sons should pay the bill here upon demand. That contract was broken upon the refusal of .Morgan’s Sons to so pay. The cause of action was this breach. The question is not what law shall govern in the enforcement of the • contract, but where the breach occurred. Clearly that was here. The cause of action was complete upon presentment, refusal, protest and notice — all acts occurring here. The authorities, with the single exception of the Special Term case of Cantwell v. Dubuque Western R. R. Co. (17 How. Pr., 16), fully support this j>osition. (Bank of Commerce v. Rutland R. R. Co., 10 How. Pr., 1; Conn. Mutual Life Ins. Co. v. Cleveland R. R. Co., 23 How. Pr., 180, followed, 41 Barb., 9; Spencer v. Rogers Locomotive Works, 8 Bosw., 612 ; Burckle v. Eckhart, 3 N. Y., 132; Johnson v. Adams Tobacco Co., 14 Hun, 89.) The Cantwell Case is overshadowed by the authorities cited. Besides, it was evidently decided under a misapprehension of the ruling in Western Bank v. City of Columbus (7 How. Pr., 238). The latter case was well decided upon the actual facts, for the action was on a loan made and payable in the foreign State. The bill of exchange was merely collateral, and the defendant corporation was not a party to it.

3. The appellant next invokes the comity in favor of the liquidators, especially as against this plaintiff, on the ground that the latter is a Louisiana creditor, and should not in this manner be permitted to obtain a preference which would not be allowed in the homeforwm. This in our judgment is the gravest question arising on this appeal. If it were original we would certainly hesitate before rejecting the appellant’s claim. The departure in this country from the English rule, with respect to the universal operation, upon all personal property, of an assignment under a foreign bankrupt law, was mainly attributable to considerations affecting domestic creditors. Our own attaching creditors were to be preferred to any foreign assignees. So our local laws were to be defended and sustained as against those of any foreign State. From this it resulted that a foreign assignment, void under our laws, would not be here enforced. It was maintained that every country may, by positive law, regulate as it pleases the disposition of personal property found within it (Story Conf. of Laws, § 410); that a statutory conveyance, made under the authority of any legislature, can operate intra-territorially only, (§§ 411, 414), and that- national comity, which is all that a foreign assignee can invoke, requires us to give effect to such assignments only so far as may be done without impairing the remedies or lessening the securities which our laws have provided for our own citizens. It is apparent that the reason of the rale does not include foreign creditors, domiciled in the State wherein the assignment originated, and subject to its laws. There would appear to be no good reason why the comity should be withheld from the foreign assignee, in favor of such foreign creditor. In England, a British creditor, who thus seeks to defeat the operation of the law of equality, is treated as a trustee, and in an action by the assignee may be compelled to refund what he secured by attachment in foreign parts, or, he may be restrained by injunction from proceeding against the estate of the insolvent in the foreign jurisdiction.

But the weight of authority in this country is against even this limited application of the doctrine of national comity. To sustain and fortify the position taken for the protection of domestic creditors, the courts have substantially shut out the foreign assignment altogether. Chief Justice Marshall, in Harrison v. Sterry (5 Cranch, 289, 302), declared that the bankrupt law of a foreign country is incapable of operatmg a legal trrcvnsfer of property in the United States. It lias even been doubted whether the assignee can sue here at all; but the better opinion would seem to be that he may. Not, however, as an assignee having an interest, but as the representative of the bankrupt. (Holmes v. Remsen, 20 Johns., 259; Hoyt v. Thompson, 1 Seld., 351, Opinion of Paige, J.; Willitts v. Waite, 25. N. Y., 584, Opinion of Allen, J.) In Abraham v. Plestoro (3 Wend., 548) it was held that the assignee was not entitled to an injunction to restrain even the banlarupt from receiving property which was on the high seas, on its way from England to New York, at the time of suing out the commission of bankruptcy. In Johnson v. Hunt (23 Wend., 91) Abraham v. Plestoro was commented upon and followed, the court giving its view of what was decided in that case in the following language: “ The amount of the decision, as I understand it, is that an assignment in i/mihu/m, under the law of one State or nation, has no operation in another, even with respect to its own citizens. That the bankrupt, a subject of the very country under whose laws he was proceeded against, may, on crossing the territorial line, dispose of the property which he has brought with him ; may withhold it entirely from the creditors who are proceeding against him in the foreign jurisdiction; and it follows that other creditors, coming from the same jurisdiction, may either pursue him by attachment, by judgment and execution, or take a voluntary transfer of the property so brought by the debtor in satisfaction of claims.”

Both of these cases were considered in Hoyt v. Thompson, ubi supra, Ruggles, Oh. J., took a different view of Abraham v. Plestoro, and dissented from Johnson v. Hunt, but Paige, J"., declared that the effect of these decisions was to establish “ the absolute invalidity of the foreign statutory assignment, as it respects property in this State ; not only as between the foreign assignees and domestic creditors, but also as between such assignees and creditors residing in the country under whose laws the assignment was made, and who are proceeding agahnst the property by< attachment or otherwise in our courts.” To like effect is Willetts v. Waite (supra), where Sutherland, J., said: “I understand that in this case the court held that such title will not be recognized by the courts of this State, even where the question arises entirely between the bankrupt and his assignee and creditors all residing in the country under whose loros the assignment was made.”

The tendency of the cases in the Supreme Court of the United States, and in the other States of the Union, is in the same direction. (Ogden v. Saunders, 12 Wheat., 218; Booth v. Clark, 17 How. U. S., 322; Zipcey v. Thompson, 1 Gray, 243 ; Birch v. McLean, 1 Harris & McH., 286 ; Wallace v. Patterson, 2 Id., 463 ; Blake v. Williams, 6 Pick., 303 ; McNeil v. Colquhoon, 2 Hayw., 24; Lanfear v. Sumner, 17 Mass., 110; Payne v. Lester, 44 Conn., 204; Upton v. Hubbard, 28 Conn., 274; City Ins. Co. v. Commercial Bank, 68 Ill. 351; Betton v. Valentine, 1 Curtis, 168.)

In Booth v. Clark, tbe doctrine laid down by Chief Justice Marshall in Harrison v. Sterry, was reasserted; and, speaking of a receiver appointed by the Court of Chancery in this State, the court remarked: “ lie has no extra-territorial power of official action, none which the court appointing him can confer with authority to enable him to go into a foreign jurisdiction to take possession of the debtor’s property.”

Upton v. Hubbard was a contest in Connecticut between a Massachusetts assignee and a creditor who was also from that State. The court, held that although a foreign assignee may in some cases be allowed to sue in our comts as a matter of courtesy, yet the courtesy will be denied in all eases where there are claims upon the property adverse to the assignment, whether the elemmemts be citizens of ou/r own or of some other State.

In City Ins. Co. v. Commercial Bank, both the attaching creditor and the debtor were corporations created by the laws of Rhode Island. The attachment was sustained.

In Payne v. Lester, the court alluded to the fact that the plaintiff was a citizen of Rhode Island, but remarked that that did not affect the case. “ The citizens of dll oum sister States,” said Granger, J., “have by the Constitution of the United States the same privileges with our own citizens, and any one of them who has availed himself of the legal remedies furnished by our laws to secure payment of a debt due him, has the same claim to the assistance of our courts that one of our own citizens would have.”

We feel constrained by this strong current of authority to hold that the Louisiana creditor has a right, as against the liquidators, to take advantage of our laws and to proceed thereunder; that the liquidators are not vested, as assignees having an interest, with the property within our jurisdiction; and that, treating them, as we must, merely as representing the bankrupt, they have no status to dissolve the attachment or to oust the plaintiff.

A Some minor points were made which need not be considered at length.

It is said, for instance, that there was nothing to attach but a debt; and that, as such debt was due by Morgan’s Sons to the defendant bank in New Orleans, the moneys were in the eye of the law located in Louisiana; ergo, the defendant had no property in this State. There is nothing in this point. The books are full of just such cases. . The Code expressly provides for the attachment of debts. But without pursuing this further, we need only say that the findings below, made upon consent, show that at the commencement of this action, there were “ fionds ” in the hands of Morgan’s Sons “ belonging to the bank,” and that the attachment was levied upon such “ funds.” There is nothing here about a debt; on the contrary, the relation of bailor and bailee may be presumed. The fwids are within this State.

Upon the whole we are of the opinion that the judgment must be affirmed with costs.

Davis, P. J., and Brady, J., concurred.

Judgment affirmed with costs.