Maberry & Pollard v. Shisler

1 Del. 349

• Court: Superior Court of Delaware
• Decided: July 5, 1834
• Status: Published

Opinion

Mr. Justice Robinson delivered the opinion of the court.

Robinson, Justice.

On the 28th of January, 1832, John Bowers and Alban H. Glasby and John B. Striker, all of the state of Pennsylvania, executed a deed called an indenture, John Bowers and Al-ban H. Glasby of the one part, and John B. Striker of the, other part, by which Bowers and Glasby (after reciting that by their account of the same date of the deed they stood justly indebted to Striker in $20,471 71, and that, in order to secure payment of a part thereof, they had executed to him two mortgages, with bonds and warrants of attorney, for $3,700, and to secure the balance of $16,771 71, executed a bond payable on demand, on which judgment had been entered and an execution issued, and that it was doubtful whether the mortgaged premises and the goods, wares and merchandizes in their possession were adequate to pay the full demand owing to Striker, or that if the same should be exposed to sale by the sheriff, it would be attended not only with additional expenses, but also, probably, with a sacrifice of the property) bargain, sell and convey to the said Striker all the goods, wares and merchandizes in their store and possession, or elsewhere, and all debts due and owing and to become due to them, by bond, bills, notes, book accounts, or otherwise, as also all debts due and owing and to become due to them individually; and they agree that Striker shall hold all the property granted, bargained and sold to his only use forever, being then put into the absolute possession of the same by the delivery of one piece of broad cloth in the name of the whole; and they give and grant to Striker full power and authority to dispose of all the goods, wares and merchandizes, at public or private sale, as soon as he might think proper, an inventory having been taken thereof; and they constitute and appoint Striker their attorney to demand, sue for and receive all sums of money due and owing, and to become due, and on receipt thereof, sufficient discharges to give, and to compound and agree, by taking less than the whole in any case, as their said attorney might think proper; and it was agreed that so soon as a sufficient sum of money should be realized from the sale of the effects or the collection of the debts or moneys to enable Striker to liquidate the debt owing to him as aforesaid and pay all charges attending the disposal of the effects and the collection of the debts, and also a commission of five per cent, on the amount realized, then the balance, if any, should revert and become payable to the said Bowers and Glasby, or should be applied in any other manner they might thereafter direct, provided the same should not be inconsistent with the interest of the said Strieker, or against the spirit and intention of the indenture, it being agreed that Striker should be entitled to receive interest on the whole of the debt due and owing to him from the date thereof, until his debt was liquidated. On the third of February, 1832, six days after this deed was executed, Maberry and Pollard, creditors of Bowers & Glasby, and also citizens of Pennsylvania, sued out the above writ of attachment, and thereupon Godfrey Shisler, a debtor of Bowers & Glasby, was summoned as a garnishee, who pleaded nulla bona. Upon these facts, it has been- agreed by the counsel for the plffs. and for the garnishee, that if the court shall decide that Striker is not entitled to collect and receive the. debt due from Shisler, the garnishee, by virtue of the aforesaid deed, then judgment shall be rendered against said garnishee; but if the court shall decide that Striker is entitled as aforesaid by virtue of said deed, then judgment shall be rendered in favor of Shisler, the said garnishee. The counsel for the attaching creditors insisted, that as the deed preferred Striker to all other creditors, that it was void, by the act passed by the legislature of this state, in 1826, for the punishment of certain crimes and misdemeanors, in which is contained the following provision, relied on to support the objection: “If any person or persons, in contemplation of insolvency, shall make an assignment of their estate or effects, for the benefit of their creditors, and in and by such assignment shall prefer any one or more creditors, that every such assignment shall be deemed fraudulent and absolutely void, and the estate, goods, chattels, or effects, contained in such assignment shall be liable to be taken in execution or attached for the payment of the debts of such assignors, in the same manner and to as full an effect as if no such assignment had been made.” This contract was made in Pennsylvania, and between citizens of that state, who entered into it expecting it to stand or fall according to the laws there. Generally speaking, the validity of a contract is to be decided by the laws of the place where it is made; but to this rule there are said to be exceptions. No people are bound to enforce in their courts of justice any contract which is injurious to their public rights, their morals, their policy, or that violates a public law. We do not consider the contract in this case as liable to any portion of these exceptions. Chief Justice Ellenborough, in 5 East. Rep. 131, is reported to have said that “We always import together with their persons, the existing relations of foreigners as between themselves, according to the laws of their respective countries, except indeed when those laws clash with the rights of our own subjects here, and one or the other of the laws must necessarily give way, in which case our own is entitled to the preference.” One of the strongest cases to illustrate this rule is that in relation to the interest of money arising on contracts made in foreign countries. Thus in England the statute of Ann prohibited in positive terms taking more than five per cent, for the loan of money, and although it has been held that a breach of that law subjected the offender of it (when the offence was completed in England) to an indictment, yet it has been decided there that where interest arises by force of a contract made in America, agreeable to the laws here, the courts in England had been obliged to follow the American law on the subject. So it has been decided there that though the debt was contracted in England, but the bond taken for it in Ireland, to be paid at seven per cent, interest, it should carry Irish interest. This rule, however, is not adopted because the laws of the country where the contract is made have any binding force beyond the limits of such country, but their authority in other states is admitted from policy and comity. The judges in Pennsylvania recognize the same influence of foreign laws in relation to contracts made in foreign states, as will be found in 4 Dallas, 325, 419, and it has been there decided that a debtor in failing circumstances may, by an assignment of his estate, prefer one or more creditors, provided that in all other respects it be untainted with fraud. 1 Binney, 502. As the deed in question was made in Pennsylvania, between citizens of that state, we cannot decide that it is fraudulent and void, because it has preferred one creditor, and thereby seems contrary to the recited act of assembly. It would unquestionably be otherwise if it should be brought forward against any of our citizens as creditors, claiming by attachment or otherwise. There is an objection to this deed, which has not been noticed in the argument, although it appears on the face of the deed itself. After having provided for the payment of only one creditor, it is agreed “that the balance, if any, shall revert and become payable to Bowers and Glasby, the assignors, or applied in any other manner they might thereafter direct.” The same rule which is applied to the validity of contracts applies vice versa to their invalidity; they are generally held void and illegal everywhere, if so where made. Those provisions of the thirteenth of Elizabeth, chap. 5th, that have any bearing on cases of this kind, have been admitted as declaratory of the common law, and held in force in Pennsylvania, and most, if not all, the original states of our union. By those provisions, all conveyances to delay, hinder or defraud creditors of their remedies, are declared to be clearly and utterly void, frustrate, and of none effect, any pretence, color, feigned consideration, expressing of use, or any other matter or thing to the contrary notwithstanding. It is manifest from the recital in the deed, that Bowers, and Glasby, at the time of executing it, contemplated an approaching insolvency, because it is there admitted, that “it was doubtful whether the mortgaged premises, and the goods, wares and merchandizes in their possession were adequate to pay the full demand owing to Striker;” and yet they, through the agency of their greatly favored creditor, undertake to deprive their other creditors of what should have been assigned to them, by securing to themselves the balance. Suppose this court were to decide in favor of the deed and dismiss the attachment, and there should remain a balance. To whom would Striker pay it? Certainly to Bowers and Glasby; or he would apply it to some of their relations, perhaps, as they might direct and would have the right to do according to the deed. His motive to perform what would be a duty under the deed, as a legal obligation, would be excited by feelings of gratitude. That a debtor in such an assignment cannot make a reservation, at the expense of his creditors, of any part of his property or income, for his own benefit, is clearly established by numerous authorities. Chancellor Kent says, that “it has been supposed that such a reservation, if not made intentionally to delay, hinder and defraud creditors, would not affect the validity of the residue, or main purpose of the assignment, and that if the part of the estate assigned to the creditors should prove insufficient, they might resort to the part reserved by the aid of a court of equity; but later authorities have given to such reservations the more decided effect of rendering fraudulent and void the whole assignment; and no favored creditor or creditors can be permitted to avail himself of any advantage over other creditors under an assignment which by means of such a reservation is fraudulent on its face.” From these views of this case we decide that the deed in question is in law fraudulent and void, and that Striker is not entitled to collect and receive the debt due from Shisler, the garnishee, by virtue of the said deed, and therefore render judgment against said garnishee. Story’s Conflict of Laws, 201, 203; 3d Bacon, Abt. by Wilson, 294, 308; 2 Chitty, ch. 549, note (f); 1 Vez. sen. 428; 2 Atk. 382; 2 Kent Com. 457, 535; 1 Hopkins’ Ch. Rep. 373, &c.; 6 Binney Rep. 338; 14 John. Rep. 465.

Gilpin, for plaintiffs. Hamilton and J. JL. Bayard, for Stryker.

Judgment for plffs. (a)

Note by the reporter.

(a) A contract shall be governed by the law of the place where it is made; if good there, it is good everywhere; and if illegal or void there, it cannot have effect anywhere. Within themselves, however, contracts have no force or efficacy out of the jurisdiction of the place where they are made; nor can the law of that place give them effect elsewhere; hence, whatever force is given to them in the courts of other countries arises from comity, and is not a matter of right. Every nation may place what limitation it pleases on the exercise of this comity, and it is by most nations held a reasonable limitation to restrict its exercise to cases where it can be extended without prejudice to its own citizens. The rule is stated by Judge Story, from the English authorities, thus—“The effects of a contract entered into at any place will be allowed according to the law of that place, in other countries, if no inconvenience will result therefrom to the citizens of that other country, with respect to the right which they demand.” (Story’s Com. 320.)

It is also true that personal property has no situs, but is by a legal fiction deemed to be with the owner, and affected by his contracts wherever it may in fact be found. Yet this is so only by a legal fiction, which yields whenever it is necessary for the purposes of justice to regard the actual location-of the property. This general rule, therefore, is subject, in the present case, to precisely the same modification with the other: “if no inconvenience will result to the citizens of this state with respect to rights which they may demand,” the property here in controversy ought to be regarded according to the legal fiction, as being attached to the domicil of Bowers & Glasby; but otherwise it should be treated according to its real location in this state. The reason is the same as in the former case. The laws of Pennsylvania, under which the assignee of Bowers and Glasby claims this property, can have no operation here; the judgments or decrees of their courts cannot reach it. On the contrary, it is entirely under the jurisdiction, and subject to the disposition and control of our laws and tribunals. When a foreigner sends his property front the place of his own residence, he voluntarily subjects it to the laws of the country where he so places it; and by his own consent, as well as on other principles, it becomes peculiarly subject to that jurisdiction. What the law protects it has the right to regulate; and in s» regulating it, if our courts recognize and give effect either to the lex loci contractus or the lex domicilii, it is on a principle of comity, and subject to-such restrictions as the rights and interests of our own citizens require.

The effect of assignments of property by operation of law, as in transfers under bankrupt and insolvent laws, has been much discussed in the courts of England and of this country, and the result seems to be a different doc trine on this subject in the two countries. In England it is held that assignments under the bankrupt laws transfer moveable property, wherever it may be situate, applying the principle that personal property has no locality, that the assignment under the bankrupt laws transfers all the bankrupt’s title as fully as he might do by a voluntary assignment or sale, and that the assignees become the lawful owners of it, to be administered for the benefit of the creditors. And they give the same effect to assignments made under the bankrupt laws of other countries, without any distinction as to citizens and foreigners. Thus an attachment of the property of a foreign bankrupt by an English creditor, after bankruptcy, will not be sustained against the assignment, with or without notice. (Story’s Com. 345.) And this principle is not without support in this country, (Goodwin vs. Jones, 3 Mass. R. 517; Holmes vs. Remsen, 4 John C. R. 460) but the weight of authority is the other way. And although it was sustained by Chancellor Kent, in the case of Holmes vs. Remsen, he admits, in the second volume of his Commentaries, page 406, that “it may now be considered as a part of the settled jurisprudence of this country, that personal property as against creditors has locality, and the lex loci rel sit.se prevails over the law of the domicil with regard to the rule of preferences in the case of insolvents’ estates.” A prior assignment in bankruptcy, under a foreign law, will not be permitted to prevail against a subsequent attachment by an American creditor of the bankrupt’s effects found here; and our courts will not subject our citizens to the inconvenience of seeking their dividends abroad when they have the means to satisfy them under their own control. It was so decided in Maryland in Burk vs. McLean, 1 Harr. & McHenry, 236, and Wallace vs. Patterson, 2 Harr, & McH. 463; in Pennsylvania, in Milne vs. Moreton, 6. Binn Rep. 353, and Mulliken vs. Aughinbaugh, 1 Penn. Rep. 117; in North Carolina, (2 Haywood’s Rep. 24;) South Carolina, (4 McCord’s Rep. 519;) Connecticut, (Kilby’s Rep. 313;,) and also in the supreme court of the United States, in Ogden vs. Saunders, 12 Wheaton R. 213. The case of Holmes vs. Remsen has also been ably questioned in the supreme court of New York, in a case at law between the same parties. 20 Johns. Rep. 254.

The law, therefore, is fully settled, in this country, against the admitted doctrine of the English courts, that an assignment under the bankrupt or insolvent laws of a foreign country will not transfer the bankrupt’s property, including dioses in action, in this country so as to prevent a subsequent attachment by the bankrupt’s creditors here.

But in the case before the court both the attaching creditors and the assignees were citizens of Pennsylvania. It was altogether a transaction between foreigners. Supposing such an assignment to be valid according to the laws of that state, and that its effect there would be to transfer all the property of Bowers & Glasby to Stryker, the question would arise whether mere was any reason why our courts should not, in the usual comity of na tians, give it the same effect here as between citizens of that state. This point was not decided, it being rendered unnecessary by the terms of the assignment; and it may be considered as still open and worthy of grave consideration, notwithstanding the intimation which the court gave of the inclination of their opinion.

A distinction has been taken in some of the cases on this subject between voluntary conveyances and conveyances ininvitum, by the mere operation of law, as in cases of bankruptcy and insolvency. (Kaims on Equity, b. 3 ch. 8, s. 6; Story 6 Com. 346.) But it does not appear to be established. Chancellor Kent, in Holmes vs. Remsen, thought himself bound to give effect to the assignment, “because it is equivalent to a voluntary act of the party over his own property.”—“Every man’s assent is presumed to a statute.” And Chief Justice Parsons, in Goodwin vs. Jones, “considered the assignment under the bankrupt laws as the party’s own act, since it was in the execution of laws by which he was bound, and since he voluntarily committed the act which authorized the making it. ” The distinction is not between a bona fide sale for a valuable consideration (which would certainly be good against a subsequent attaching creditor) and a statutory transfer; but it is between a voluntary assignment in contemplation of insolvency and a compulsory assignment under the operation of the insolvent laws; and no such distinction appears to be sustainable on principle or sustained by authority. On the contrary, the supreme court of Massachusetts decided, in Ingraham vs. Geyer, (13 Mass. Rep. 146) that a voluntary assignment by a debtor of all his property, made in Pennsylvania, for the benefit of creditors generally, should not prevail over a subsequent attachment, because such assignment would be void by the laws of Massachusetts, if made there, as being in fraud of creditors. And Fox vs. Adams, 5 Greenleaf’s Rep. 245; Oliveir vs. Townes, 14 Martin’s Louis. Rep. 93; and Norris vs. Mumford, 4 Martin’s Louis. R. 20, are to the same effect.

The principal case was much stronger. It was not the case of an assignment for the benefit of other creditors than a single preferred one; and any assignment preferring creditors is, by the express terms of our act of assembly, declared to be fraudulent and void, and the property intended to be transferred thereby remains liable to be taken in execution or attached for the payment of the assignor’s debts, in the same manner as if no such assignment had been made. (Dig. 140.) Can our courts in any manner give effect to such an assignment? It is not pretended that our laws can make this transaction illegal where it was executed, if by the laws of that place it is authorized; but if the aid of our courts is invoked to give it effect within our jurisdiction and over property which it cannot reach unless our cdurts recognize its validity here, could they do so consistently with a just regard to our own laws? In Forbes vs. Cochrane, 2 Barn & Creswell 448, 471, Mr. Justice Best says that in cases turning on the comity of nations it is a maxim, that the comity cannot prevail in cases where it violates the law of our own country, the law of nature, or the law of God. And all the authorities sustain the position of Chancellor Kent, (2 Com. 461) “that when the lex domicilii and the lex fan come in direct collision, the comity of nations must yield to the positive law of the land. In tali conflictu magis est ut jus nostrum quam jus alienum servemus.” And the supreme court of Louisiana has adopted the rule, that whenever, in a conflict of laws, it is a matter of doubt which should prevail, the court which decides will prefer the law of its own country to that of the stranger. (17 Martin’s Rep. 596.)