Pinckney v. Lanahan

Robinson, J., delivered the opinion of the Court. The appellant, a citizen of South Carolina, obtained a judgment on the 13th of March, 1882, for $14,696.85, against Robert W. L. Rasin and Edward K. Cooper, trading as R. W. L. Rasin & Co. On the 14th of March, 1882, an attachment was issued on this judgment, and laid on the same day in the hands of Thomas M. Lanahan, trustee. To the plea of the garnishee, the appellant filed eight replications, to all which the garnishee demurred. Gosnell, the permanent trustee in insolvency of Rasin, the surviving partner of Rasin & Co. also intervened, claiming title, as such trustee, to the property attached in the hands of the garnishee.

The Court below rendered judgment on the demurrer for garnishee, and quashed the attachment. Hence this appeal. Without setting forth the pleadings at length, it is sufficient to say, the demurrer on which the judgment ⁴⁴⁹ •of tlie Court was rendered admits, that Rasin and Cooper, being embarrassed and in failing circumstances, conveyed to Lanahan and others, their individual and partnership property in trust, for the payment of creditors; that the •conveyances although valid on their face, were in fact fraudulent and void as to creditors; that after their execution and before the issuing of the plaintiff’s attachment, certain creditors of Rasin and Cooper, on February 13th, 1882, filed petitions in the Court of Common Pleas of Baltimore City, praying to have the said Rasin and Cooper, who •composed the firm of R. W. L. Rasin & Co., individually ■adjudged insolvent debtors; that pending these proceedings and before any adjudication had on the same, Cooper died; that subsequently to wit, on November 15th, 1883, Rasin, the surviving partner, was adjudged an insolvent debtor, and a certain Frank Grosnell, was duly appointed his permanent trustee, and as such gave bond according to law. The main questions arising upon these facts, are: First.

Whether the adjudication of Rasin as an insolvent debtor, vested in Grosnell, his trustee in insolvency, the partnership assets of Rasin & Co., by relation from the time of the filing of the proceedings in insolvency? And secondly, if so, whether the title to such assets thus vested in the trustee, was a bar to the attachment issued subsequently to the filing of the proceedings in insolvency, by the appellant, a citizen of another State? No one denies that by a series of decisions beginning with Larrabee vs. Talbott, 5 Gill, 426 , it has been decided that as to the claims of non-resident creditors who were not parties to the proceedings, the insolvent law of the State was wholly inoperative and void; and that notwithstanding the transfer by the insolvent of his property to a trustee, such creditors could reduce their claims to judgment, and by issuing attachments thereon, seize any prop ⁴⁵⁰ erty or funds undistributed in the hands of the insolvent trustee. “The practical injustice of the rule,” says Mr. Poe, 2 vol. Pleading and Practice, sec. 815, “was obvious.

It oftentimes enabled the foreign creditors to obtain payment of their claims in full, while the domestic creditors, against whom the discharge of the insolvent was confessedly complete and effectual, received nothing whatever.” Such a construction of a statute, which dedicated the entire estate of the insolvent to the payment of his creditors, and which declared in express terms, that it should be distributed among them, according to the principle's of equity, cannot be supported, it must be admitted, upon any principle of abstract justice, nor upon any principle of comity or international law. It rested, and rested solely, upon a series of decisions, in which the power of a State to pass insolvent laws, discharging the person of the debtor and his future acquisitions of property from the payment of his debts, and the effect and operation of such laws upon the rights of resident creditors, and creditors citizens of other States, had been considered and decided by the Supreme Court of the United States. Sturges vs. Crowninshield, 4 Wheat., 122 ; Ogden vs. Saunders, 12 Wheat., 213 ; Boyle vs. Zacharie., 6 Peters, 635 ; Cook, vs. Moffat, 5 Howard, 295 . From the conflicting opinions filed in these cases, and the widely different reasons on which they are based, it may not be easy, especially in Ogden vs. Saunders, to say. precisely what was decided by the majority of the Court.

Without extending this opinion by a review of these cases, it is sufficient to say, that the following constitutional principles may be considered as definitely settled:— 1. That a State may pass an insolvent law, discharging the person of the debtor and his future acquisitions of property from the payment of his debts, so far as it con ⁴⁵¹ cerns contracts between citizens of the State, made within the State, after the enactment of such laws. 2dly. That such laws, do not apply to contracts between citizens of one State and citizens of another State. Passing by the earlier cases in which these questions were considered, and coming down to Cook vs. Moffat, et al., 5 How., 295 , in which it was decided that the discharge of a Maryland debtor under the insolvent laws of that State, did not affect a contract made in New York, with a citizen of that State, although the contract was made after the passage of the insolvent law.

Mr. Justice G-rier, in delivering the opinion of the Court, said: “It is true, that as between the several States of this Union, their respective bankrupt laws, like those of foreign States, can have no effect in any forum beyond their respective limits, unless by comity. But it is not a necessary consequence, that State Courts can treat this subject as if tbe States were wholly foreign to each other, and inflict her bankrupt laws on contracts and persons not within her limits.” And then after referring to Sturges vs. Crowninshield, in which it was held that a State had the power to pass insolvent laws, provided they did not impair the obligation of a contract, within the meaning of the Constitution of the United States, he says, “It followed, as a corollary from this modification and restraint of the power of the State to pass such laws, that they could have no effect on contracts made before their enactment, or beyond their territory.” This case was decided in 1841, and in the same year, Larrabee vs. Talbott, was argued in the Court of Appeals of this State, involving the validity of a transfer of property by a Maryland debtor in failing circumstances, and who afterwards became insolvent, to a New York creditor, in plain violation of the insolvent law of Maryland.' In sustaining the validity of the transfer, Judge Marttat said: ⁴⁵² “We have then before us a contract made and to be performed in New York, between citizens of Maryland and citizens of New York, and it is now settled by the adjudications of the Supreme Court, that the discharge obtained by Rogers & Erick under the insolvent laws of Maryland, could not affect the right of Berrien & Co. to obtain against them in the Maryland Courts, an absolute and unqualified judgment, and to place their execution upon any property of the insolvent debtors, to be found undistributed in the hands of their trustee.” In support of these views, Judge Martin relies mainly on the decision of Cook vs. Moffat, and says: “We have quoted largely from the opinion of the learned Judge in this case, because it contains the views of a Court whose decisions upon all questions of constitutional law, are to be received as conclusive.” It is clear then that the decision in Larrabee vs. Tal bott, was based solely upon what the Court of Appeals understood to be the decision of the Supreme Court as to the effect and operation of the insolvent law of this State, between a citizen of this State and a citizen of another State. However broad may be the language used by Mr. Justice Grier, and it must be admitted to be very broad, yet the Supreme Court bad not in terms decided, that a foreign creditor could come into this State, and obtain judgment against an insolvent debtor, and seize by execution the property conveyed to the trustee. In the later case of Crapo vs. Kelly, 16 Wallace, 610, this question has been considered and determined by that Court.

In that case the insolvent debtor, a citizen of Massachusetts, was at the time of bis application for the benefit of the insolvent laws of that State, the owner of a ship then on the high seas. Shortly after the execution of the deed transferring bis property to the trustee in insolvency, the ship arrived at the port of New York, and while there ⁴⁵³ was seized under an attachment issued at the instance of a New York creditor, and was sold. The right of the attaching creditor as against the trustee of the insolvent debtor was sustained hy the Court of Appeals of New York, 45 N. Y., 85 , but on appeal to the Supreme Court of the United States, this decision was reversed, and that Court held, that the title to the ship, passed under the insolvent laws of Massachusetts to the trustee, and the title being in the trustee, she was not liable to seizure and sale by the New York creditor. “If the title passed to the insolvent assignees,” says Mr. Justice Hunt, in delivering the opinion of the Court, “it passed eo instanti the assignment was executed. The return of the vessel afterwards to America, her arrival in the port of New York, her seizure and sale there did not operate to divest a title already complete.” The concurring opinion of Mr, Justice Clieeoed, is even more emphatic; “it is quite clear” he says, “thatthe