Barth v. Backus

• Decision Date: 28 November 1893
• Citation: 140 N.Y. 230,35 N.E. 425
• Parties: BARTH v. BACKUS, Sheriff, et al.
• Court: New York Court of Appeals Court of Appeals

140 N.Y. 230

35 N.E. 425

BARTH

v.BACKUS, Sheriff, et al.

Court of Appeals of New York.

Nov. 28, 1893.

Appeal from supreme court, general term, third department.

Action by John Barth, assignee of the Wilkin Manufacturing Company, a Wisconsin corporation, against Erastus P. Backus, sheriff of St. Lawrence county, and others, substituted for the Canton Lumber Company, for the price of goods sold and delivered. From a judgment of the general term (22 N. Y. Supp. 460) affirming a judgment for plaintiff, defendants appeal. Reversed.

Nelson L. Robinson, for appellants.

Thomas Spratt and Ledyard P. Hale, for respondent.

ANDREWS, C. J.

The general rule that the validity of a transfer of personal property is governed by the law of the domicile of the owner is in most jurisdictions held to apply to a transfer by voluntary assignment by a debtor of all his property for the benefit of creditors, as well as to a specific transfer by way of ordinary sale or contract; and the title of such assignee, valid by the law of the domicile, will prevail against the lien of an attachment issued and levied in another state or country subsequent to the assignment, in favor of a creditor there, whether a citizen or nonresident, upon a debt or chattel belonging to the assignor, embraced in the assignments, provided the recognition of the title under the assignment would not contravene the statutory law of the state or be repugnant to its public policy. The decisions are not uniform, but this is the general rule, supported by the preponderating weight of authority, and is the settled law of this state. Ockerman v. Cross, 54 N. Y. 29; Bish. Involv. §§ 241, 265, and cases cited. But this general rule is subject to a qualification established in the jurisprudence of the American states,-that a title to personal property acquired in invitum under foreign insolvent or bankrupt laws, good according to the law of the jurisdiction where the proceedings were taken, will not be recognized in another jurisdiction where it comes in conflict with the rights of creditors pursuing their remedy there against the property of the debtor, although the proceedings were instituted subsequent to and with notice of the transfer in insolvency or bankruptcy. Holmes v. Remsen, 20 Johns. 229;Kelly v. Crapo, 45 N. Y. 87;In re Waite, 99 N. Y. 433, 2 N. E. 440; 2 Kent, Comm. 406, 407. This exception proceeds upon the view that to give effect to such a transfer arising by operation of law, and not based upon the voluntary exercise by the owner of the jus disponendi, would be to give the foreign law an extraterritorial operation, which the rule of comity ought not to permit to the prejudice of suitors in another jurisdiction. The cases in this state since the case of Holmes v. Remsen, supra, in which the chancellor sought to maintain the English doctrine on the subject, have uniformly sustained the rights of domestic attaching creditors against a title under a prior statutory assignment in another state or country, the several states of the Union being treated for this purpose as foreign to each other. Willitts v. Waite, 25 N. Y. 577;Johnson v. Hunt, 23 Wend. 87; Kelly v. Crapo, supra.

The general question in this case involves the point whether the assignment made by the Wilkin Manufacturing Company, under the statutes of Wisconsin, is to be treated as a voluntary assignment, not in conflict with our laws or policy, or whether, in view of the compulsory clauses of the Wisconsin statute, that statute is to be regarded as in the nature of a bankrupt law, and ineffectual to transfer title to the property of the insolvent in our jurisdiction as against attaching creditors. In considering whether the title of the assignee in Wisconsin is paramount to the claims of creditors here, who, subsequent to the assignment, procured attachments against the debt owing to the Wilkin Manufacturing Company by the Canton Lumber Company, a reference to the Wisconsin statute under which the assignment was made becomes important. The original Wisconsin statute upon the subject of voluntary assignments by failing debtors was similar to the statute in this state upon the same subject. It was a statute prescribing the conditions of such assignments, and regulating the administration of the trust for the protection of creditors. In 1889 radical changes were made in the statutory system of Wisconsin, and the prior statute was amended. The amendments, among other things, provided that the assignor in a voluntary assignment for the benefit of his creditors, made under or in pursuance of the laws of the state, ‘may be discharged from his debts, as a part of the proceedings under such assignment, upon compliance with the provisions of this act.’ It further declared that every creditor of the insolvent debtor residing within or without the state who should accept a dividend out of the assigned estate, or in any way, by proving his claim or otherwise, participate in the proceedings under the assignment, shall be ‘deemed to have appeared in the matter of such assignment and the application for a discharge, and should be bound by any order or discharge granted by the court,’ subject to the right of appeal. Under the statute, a creditor, by accepting a dividend, thereby consented to a discharge of the debtor from the portion of the debt remaining over and above his share of the assets; and, unless a creditor comes in under the assignment, he is debarred from receiving anything out of the assigned property, unless, indeed, a surplus should remain after payment of the participating creditors in full, although it seems the debt would remain as a claim against the insolvent. The power to discharge a contract without payment or satisfaction, and without the consent of the parties, is a power which pertains to the sovereign alone. The statute of Wisconsin does not assume to discharge the debts owing by the insolvent assignor absolutely. But, as has been said, it deprives creditors who do not come in under the assignment of all share in the assigned estate, unless in the improbable contingency of a surplus. This coercive feature of the scheme, if contained in a voluntary general assignment for the benefit of creditors, would render the assignment void. Grover v. Wakeman, 11 Wend. 189. The statute of Wisconsin, however, incorporates this feature, and the law is recognized by the courts of Wisconsin as an insolvent law. Holton v. Burton, 78 Wis. 321, 47 N. W. 624;Hempsted v. Insurance Co., 78 Wis. 375, 47 N. W. 627. This court had occasion in the case of Boese v. King, 78 N. Y. 471, to consider a similar provision in a statute of New Jersey, regulating voluntary assignments for the benefit of creditors in that state, and it was assumed that the provision in that act was in the nature of a bankrupt law. Effect cannot be given here to this coercive feature in the Wisconsin law, except by giving extraterritorial effect to the law of that state. The assignor had no power to make such a...