Source: https://supreme.justia.com/cases/federal/us/175/396/
Timestamp: 2019-04-25 17:50:17+00:00

Document:
An attachment regularly made in Rhode Island at the suit of a citizen of Rhode Island, of a debt due from a Rhode Island corporation to a citizen of Massachusetts, the day after the latter had filed in Massachusetts a petition for the benefit of the Massachusetts insolvent laws, but eight days before the publication of notice of the issue of a warrant on that petition, is a valid attachment, and is not dissolved by a subsequent assignment under those laws, notwithstanding the provision thereof dissolving attachments of the property of an insolvent debtor, made within four months before the first publication of such notice, that provision having no extra-territorial effect.
these proceedings, the assignee sold the claim against the Lippitt Woolen Company and one against another corporation to Theophilus King, a resident of Massachusetts, and he was substituted as plaintiff in the action in Massachusetts above referred to. The Lippitt Woolen Company pleaded the pendency of the trustee process against it in the Rhode Island court. The Massachusetts court entered judgment in favor of the plaintiff King and against the Lippitt Woolen Company and the garnishee Leonard. The court, however, directed that execution on the judgment be stayed and the parties enter into a stipulation that no execution should issue until the proceedings in the Rhode Island action had been fully determined. Thereupon King was allowed by the Rhode Island court to become a party to the action there pending so far as necessary to enable him to assert his title to the indebtedness due by the Lippitt Woolen Company and other corporations to the firm of Brown, Steese & Clarke, which debts were covered by the trustee process previously issued in Rhode Island under the circumstances already stated.
unaffected by the insolvency proceedings in Massachusetts and the action taken on the subject in the courts of that state. Motions for a new trial upon numerous grounds were filed on behalf of the Lippitt Woolen Company and the claimant King. These motions were heard before the Appellate Division of the Supreme Court of Rhode Island, and that court overruled them. 19 R.I. 220. The case was then brought to this Court by writ of error. In substance, the grounds relied on in this Court for a reversal are that at the time of the service of the trustee process, the Rhode Island court was wholly wanting in jurisdiction over the defendants in the action, residents of Massachusetts, and over their property, and that by charging the Lippitt Woolen Company as trustee for the benefit of the plaintiff Cross, the tribunal last mentioned failed to give full faith and credit to the judicial proceedings in the insolvency court in Massachusetts.
it is asserted that such court had no property of the firm within its control upon which to exercise its jurisdiction. True it is the Lippitt Woolen Company, which alone was charged by the judgment, was made a trustee under the Rhode Island process, and was indebted to the Massachusetts firm; but this fact, it is asserted, did not establish that there was any right in Rhode Island to be subjected to the jurisdiction of the courts of that state, for the following reasons: the situs of movable property is at the domicil of the owner of such property, and therefore the situs of the claim or credit held by the Massachusetts firm against the Lippitt Woolen Company was not in Rhode Island, where the Lippitt Woolen Company was resident, but was in Massachusetts, where the creditor firm was established. The contention, in substance, is that any process of foreign attachment predicated upon the assumed right to levy on debts due to nonresidents by persons within the state wherein the process issues is absolutely void, hence a denial of due process of law.
We need not enter into a review of the contentions thus presented, since they were all considered by this Court at its last term and held to be untenable. Chicago, Rock Island &c. Railway v. Sturm, 174 U. S. 710.
proceedings to be due to the firm without refusing to give effect to the proceedings in Massachusetts, and such refusal is therefore asserted to be the necessary result of the judgment of the court of Rhode Island which is before us for review.
The contention thus relied upon, it is argued, is not contrary to the settled rule that insolvency proceedings of the several states do not have extraterritorial operation, and it is also asserted that the claim here relied upon is not contrary to the decision of this Court in Security Trust Co. v. Dodd, 173 U. S. 624. In that case, it was held that a general assignment for the benefit of creditors, made by an insolvent under the insolvent laws of a state, did not operate to exempt tangible property situated at the time of the insolvent assignment in another state from seizure in the state where the tangible property was actually situated. This decision, it is claimed, was but an exemplification of the general rule limiting insolvency proceedings of one state to the jurisdiction of that state and depriving them of extraterritorial operation. A mere credit, however, it is asserted, conceding it to be subject to attachment or trustee process at the residence of the debtor, is governed by a different rule from that which controls tangible property. Such credit, the claim is, being at the situs of the domicil of the creditor, passes to the custody of the insolvent court when the insolvent law so provides, and therefore comes under the dominion and control of the insolvent court having jurisdiction of the person of the creditor. As by operation of law the credit from the date of insolvency proceedings at the residence of the creditor ceases to be under his dominion, but, on the contrary, is in gremio legis, the power to levy by garnishee or trustee process on the same at the residence of the debtor is destroyed. But the predicate upon which this contention rests is that the Massachusetts insolvent proceedings operated to deprive the insolvent of all control over his assets prior to or at the time when the suit in Rhode Island was commenced and the trustee process there issued. If this premise is unsound, the whole contention is without merit, and therefore the legal proposition deduced from it need not be examined.
"the assignment shall vest in the assignee all the property of the debtor, real and personal, which he could have lawfully sold, assigned, or conveyed, or which might have been taken on execution upon a judgment against him at the time of the first publication of the notice of the issuing of the warrant in case of voluntary proceedings."
petitioner admits that it could not, if the property of the insolvent had been actually assigned prior to the first of February, when the bankrupt law went into operation; but he contends that, as the assignment in this case was not actually made until the 7th of February, the whole proceedings were suspended or superseded. Upon consideration, we are of opinion that the proceedings under the commission are not to be thus separated, but that they are to be treated as the parts of one whole; that the assignment not only relates back to the first publication of the notice and vests all the property of the debtor, both real and personal, in the assignee, but that the debtor is divested of his property before such assignment by virtue of the warrant to the messenger and the taking of the property of the debtor into custody, by force of which a qualified property in the estate vests in the messenger insomuch that no act of the debtor, after the due service and publication of the warrant, can be lawfully done to make any transfer of his property or to affect the rights of any of his creditors; that the property is, by the act of publication, placed in the custody of the law in the person of the messenger, and that the judge or master alone can dispose of the same by the appointment of an assignee to receive it or by dissolving the process."
"The question then recurs, to what time does this assignment relate back? The statute, section 5, thus states it:"
"Which assignment shall vest in the assignees all the property of the debtor, both real and personal, which he could by any way or means have lawfully sold, assigned, or conveyed, or which might have been taken on execution on any judgment against him at the time of the first publication of the notice of issuing the above-mentioned warrant."
to take possession, etc., the second section provides as follows:"
"The said messenger shall forthwith give public notice, by advertisement, in such newspapers as shall be designated by the judge, and also such personal or other notice to any persons concerned as the judge shall prescribe."
"It seems to have been the obvious policy of the statute to fix some precise point of time at which the whole property and effects of the debtor shall be deemed to have passed from him and vested in the assignees. The legislature appears to have intended that a time should be fixed before which all transfers and conveyances of property by the debtor, made in good faith and not intended to give preferences, shall be valid; so, of all payments in the ordinary course of business and transfers of property made without the concurrence of the owner, as by seizure or levy on execution."
"We are now seeking to ascertain and fix the point of time intended by the statute as the time at which all the property of the debtor is changed and his power over it suspended -- that point, in other words, prior to which all payments, made by him or to him, all conveyances (not fraudulent) made by him, all seizures, levies, and extents of execution upon his property, shall be held valid, and all those made after void. It was competent for the legislature to have fixed any other time, as, for instance, the application to the judge, or the act of the judge in issuing the warrant, or the delivery of the warrant to the messenger. Either of these would have afforded security to the creditors, but might have unjustly interfered with the rights of those who had been dealing with the debtor in good faith and without notice. The time of first publication was fixed, obviously, because that act would, in most cases, afford actual notice to those immediately interested, and it was intended as constructive notice to all. But no such effect can be attributed to personal notice to one individual."
"One who has been charged as the trustees of H, by a judgment in the trustee process and has paid to the judgment creditor, on execution, the sum with which he has been so charged, will not be protected against H's assignee in insolvency if the first publication of the warrant in insolvency against H was before the rendition of the judgment in the trustee process, though he had no actual notice of H's insolvency until after payment."
"The payment by the defendants upon the judgment against them as trustees was a valid payment as against Holbrook, his executors and administrators. (Gen.Sts., c. 142, sec. 37.) But it had no validity against a party whose title intervened before the judgment against them was rendered, and whose title was superior to the attachment by which the fund had been held. Not only does the assignment, when made, relate back to the first publication of the notice in insolvency, and vest all the property of the debtor in the assignee, but before the assignment, the debtor is so far divested of his property by virtue of the issuing of the warrant that, from the first publication, no transfer or conveyance of it can be made which will have any validity against the assignee. Gen.Sts., c. 118, sec. 44; Clarke v. Minot, 4 Met. 346; Judd v. Ives, 4 Met. 401; Edwards v. Sumner, 4 Cush. 393; Gallup v. Robinson, 11 Gray 20."
law. This becomes evident when it is considered that the case as presented does not involve the power of a Massachusetts court to assert control over a citizen of that state in order to prevent him from prosecuting in Rhode Island an attachment levied by him upon property in Rhode Island, in supposed violation of the laws of Massachusetts. On the contrary, the question here is simply whether a citizen of Rhode Island was prevented in the courts of his own state from levying an attachment upon a debt due by a citizen and resident of Rhode Island to a citizen and resident of Massachusetts because such levy was in conflict with the Massachusetts insolvent statutes. And this although, by the statutes of Massachusetts, the debt levied on in Rhode Island by the citizen of the latter state, if such debt had been situate in Massachusetts, would have been subject to the disposition and control of the insolvent.
"As the attachments were made prior to the time when the assignment in insolvency took effect, and, having been made in other states, were not dissolved by the proceedings in insolvency in this commonwealth, and were valid by the laws of the states respectively in which they were made, they must prevail over the assignment unless the statutes of the commonwealth make a title so acquired by a citizen of the commonwealth void or voidable at the election of the assignees in insolvency."
"In the case at bar, the title to the credits attached, which passed to the assignees by virtue of the proceedings in insolvency, whether it be regarded as a legal or an equitable title, was a title subject to the attachments. As neither the common law nor our statutes give any right of action on the facts agreed in this case, the assignees cannot maintain their suit if the attachments were properly made."
See also Proctor v. National Bank of the Republic, 152 Mass. 223.
"SEC. 46. The assignment shall vest in the assignee all the property of the debtor, real and personal, which he could have lawfully sold, assigned, or conveyed, or which might have been taken on execution upon a judgment against him at the time of the first publication of the notice of issuing the warrant in case of voluntary proceedings, and at the time of the first publication of notice of the filing of the petition in cases of involuntary proceedings, and shall be effectual, subject to the provisions of the following section, to dissolve any attachment on mesne process made not more than four months prior to the time of the first publication aforesaid. The assignment shall vest in the assignee all debts due to the debtor or any person for his use, and all liens and securities therefor, and all his rights of action for goods or estate, real or personal, and all his rights of redeeming such goods or estate. The assignee may redeem all mortgages, conditional contracts, pledges, and liens of or upon any goods or estate of the debtor, or sell the same subject to such mortgage or other encumbrance, and if a mortgage is foreclosed, pending proceedings in insolvency, and before the appointment of an assignee, or within sixty days thereafter, the assignee, when appointed, may redeem the same at any time within sixty days after the appointment, with remedies similar to those provided by law for the redemption of mortgages before foreclosure."
"SEC. 5. The said judge shall, by an instrument under his hand and seal, assign and convey to the person or persons chosen or appointed assignees as aforesaid all the estate, real and personal, of the debtor, excepting such as may be by law exempted from attachment, with all his deeds, books, and papers relating thereto, which assignment shall vest in the assignees all the property of the debtor, both real and personal, which he could by any way or means have lawfully sold, assigned, or conveyed, or which might have been taken in execution on any judgment against him at the time of the first publication of the notice of issuing the above-mentioned warrant, although the same may then be attached on mesne process as the property of the said debtor, and such assignment shall be effectual to pass all the said estate, and dissolve any such attachment, and the said assignment shall also vest in the said assignees all debts due to the debtor, or to any person for his use, and all liens and securities therefor, and all his rights of action for any goods or estate, real or personal, and all his rights of redeeming any such goods or estate, and the assignees shall have power to redeem all mortgages, conditional contracts, pledges, and liens, of or upon any goods or estate of the debtor, or to sell the same, subject to such mortgage or other encumbrance. . . ."

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