Court Opinion

ID: 7159403
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:14:53.057131+00
Date Added: 2024-06-11T16:15:19.757444
License: Public Domain

Bullard, J.,

delivered the opinion of the court.
The appellee, Solomon Andrews, a merchant of Mobile, in the state of Alabama, having been arrested in this city, at *475the suit of the Planters’ and Merchants’ Bank of the same place, applied to the parish court for his discharge, under the act of 1S08, for the relief of honest and unfortunate debtors in actual custody. The bank, as well as other creditors of the insolvent, made opposition to his discharge, and in pursuance of the provisions of that act, filed charges of fraud, founded on various acts and transactions, some of which took place in Alabama and some in this city, within the three months preceding his arrest. The verdict of the jury having been in favor of the insolvent, and followed by a judgment ordering his discharge, on executing an assignment of his property and taking the oath prescribed by the statute, the opposing creditors prosecute the present appeal. The case has been elaborately argued in this court, both upon the facts and the questions of law which it involves.
The attention of this court has been chiefly directed to a question of law, which is brought to our view by a bill of exceptions, and which appears' to us to cover most of the ground of controversy.
It appears by that bill of exceptions, that when the jury was about to retire, the counsel for the opposing creditors, prayed the court to charge them: “ that, if they believed from the evidence, Solomon Andrews had in contemplation the taking the benefit of the act for the relief of insolvent debtors in actual custody, at any time within three months previously to his arrest and imprisonment, assigned or made over any part of his estate or effects, either in trust for himself, or as a donation or gift, or mortgaged his property, or confessed a judgment, or otherwise disposed of the same, or given an undue preference to one of his creditors over others, then, and in such case, said Andrews was not entitled to the benefit of the said law, whether said acts were done or committed in Alabama or ip Louisiana,” but the court refused to give such a charge, and added as a qualification, “ that those of such acts which were committed in Alabama, and which are not considered as fraudulent by the laws of that state, could not be regarded as an objection or obstacle to the said Andrews being admitted to the benefit of the insolvent laws of the state of Louisiana.”
Contracts entered into in other states, as it relates to their validity, and the capacity of the contracting parties, are to be tested in this state, by the law of the place where they are made.
So, contracts made in another state, in accordance with its laws, will not be declared null by our courts, because such contacts would not beValid accord-V ing to the laws of Louisiana. They will be enforced here, as regards the parties to them, when they are valid where made.
*476The case certainly presents a novel spectacle: that of a contest between debtor and creditor, both residents of another state, engaged, as it were, in a struggle upon neutral ground, the one party seeking the recovery of an acknowledged debt, in the tribunals of this state, according to our forms of proceeding ; the other claiming not merely a release from imprisonment, but the entire exemption hereafter from all liability on account of those debts, on executing an assignment of a remnant of his property, remaining after having disposed of the greater part of his means to satisfy a class of favored creditors in the same state, and some of them residing here.' On the one hand it is contended, that those contracts which took place in Alabama, between the debtor and a part.of his creditors, must be judged of according to the laws of the place where they were entered into and consummated; that if valid and binding there, they are so here to all intents and purposes ; and on the other it is urged, that although the debtor might well favor certain creditors by the laws of Alabama, and that such contracts must have their effects, according to the local law, yet, when the debtor asks in our tribunals the protection of our bankrupt laws, he must bring his case clearly within their provisions, and that he is not entitled to their benefits, if, within thre'e months preceding his discomfiture, he has voluntarily favored one class of his creditors to the prejudice of others.
'¿■'We find no difficulty in assenting to the proposition, that contracts entered into in other states, as it relates to their validity and the capacity of the contracting parties, are to be tested here by the lex loci celebrati contractus.. This court has often recognized that doctrine as well settled. When a contract is entered into in Alabama, in conformity to the local law, to have its effects and execution there, it is clear the courts of this state cannot declare its nullitjr, on the ground that such a contract would not be valid according to our system of jurisprudence; such would be the case even if one of the contracting parties, or both, were not citizens of Alabama. If Andrews, for example, had been a citizen of Louisiana, having creditors and effects both here and in Alabama, and had gone over to that state, and transferred a *477portion of his property there to certain preferred creditors, such a transaction, as to its legality, would depend upon the law of Alabama. But if such citizen of Louisiana should immediately afterwards seek to avail himself of the benefit of our insolvent laws, a different question would present itself. Although our courts might not be authorized to annul such contracts, as to their effects between the parties, yet they might well inquire, whether it was not the intention of the Legislature to afford the protection of the insolvent laws to such only as shall have abstained from giving an undue preference to certain creditors, in derogation of that vital principle of our system, that the property of the debtor forms the common pledge of his creditors, and although such preferences may be tolerated by the lex loci. If the legislature has thought proper to declare such a condition as one upon which shall defend the right to claim the benefit of the insolvent laws, which it is not denied they had an unquestionable right to do, then there is an end to the argument, unless it can be shown that the mere residence of the party in another state dispenses him from a compliance with the condition. The correctness of the charge depends, therefore, upon the solution of this question.
But where a debtor makes contracts and transfers of his property, to certain of his creditors in preference to others,in another state, which are not deemed fraudulent in regard' to other creditors by its laws, and comes to Louisiana,where he is arrested by a creditor from that state, and claims the benefit of our insolvent laws: Held, that his case must be governed by the provisions of these laws,which grant a discharge to the debtor who is not convicted of fraud. Such contracts and transfers being deemed in fraud of creditors by our insolvent laws, will be so declared by our , courts, and their protection denied to the insolvent.
As it was originally enacted, the act of 1808 permitted only such as had resided one year in the territory to avail themselves of its provisions. When that restriction was removed by a subsequent act, in 1822, no modification was made of the general provisions of the act, which might be construed to place strangers upon a more favorable footing.
The same oath is required of all who apply, whether citizens or strangers. The 17th section, which defines the acts which shall, if established, deprive the debtors of the benefits of this law, and which are set forth nearly, if not literally, in the very words of the charge asked for, purports to be equally applicable to all. The ■ law contemplates that all the property and rights of the insolvent, wherever situated, shall be assigned for the common benefit of all his creditors, whether present or absent.
*478If by the statute, strangers and citizens are placed on the same footing, the question resolves itself into this: whether á citizen of this state, invoking, as the insolvent in this case does, the protection of the act of 1808, who should appear to have given an undue preference to any of his creditors any where, within the three months preceding his arrest, may not be repelled by his other creditors, to whom he offers to surrender only a remnant of his means; although such contracts may have been entered into, and consummated in a state where such partial assignments may be tolerated by the usages and laws of the place. Could he be permitted at the same time to avail himself of his right to favor a part of his creditors, under the law of the place where such partial distribution is permitted, and in virtue of our insolvent laws, be forever released from all obligation to pay the rest of his creditors, on making an assignment of such part of his effects as he has chosen to retain l Such a doctrine appears to us equally at war with the words of the statute, and the general policy of the laws.
But it is said, that if we put such a construction upon the act, we give an extra-territorial operation to our law, by treating as null, contracts sanctioned by the lex loci, and •regarding as fraudulent those transactions which were in fact not only legal, but meritorious. To this it may be answered, that we leave those contracts undisturbed, and take cognizance of them' no further than as the voluntary disposition of property in reference to our own insolvent laws, when the insolvent seeks an extraordinary remedy to which he would not be entitled by the law of his domicil; that of being declared exonerated from the payment of his remaining debts, on the assignment of the remainder of his effects. We look at them only so far as they form a condition, upon which depends his right to be discharged, and consequently as pertaining to the remedy sought for.
It is further urged, that the acts spoken of in the statute, must be shown to have been done in contemplation of taking the benefit of the act, and that it cannot be supposed that Andrews had in view the bankrupt laws of Louisiana* *479when he made these assignments in Alabama. Taken in their literal sense, it is certainly difficult, if not impossible to give any legal effect to these expressions, without resorting to the extravagant supposition, that the insolvent had procured his own arrest, by colluding with some one creditor, and that he had done other acts which would tend to defeat his own project. But the charge prayed for, does not omit those expressions, and it is not now our duty to inquire, in what sense they are to be understood, and whether by the general principles of our law, all contracts of-the kind spoken of, within three months preceding insolvency, between debtor and creditor, be not presumed to be in fraud of other creditors.
Having taken this view of the law of the case, so far as it relates to the instructions to be given to the jury, we forbear to examine other questions of fact and of law which have been argued, and to inquire whether the verdict be supported by the evidence.
It is, therefore, ordered, adjudged and decreed, that the judgment of the Parish Court be reversed, and the verdict set aside; and it is further ordered, that the case be remanded for a new trial, with directions to the judge not to decline charging the jury, as prayed for by the counsel for the appellants, and that the appellee pay the costs of the appeal.