Brown v. Smart

• Court: U.S. Supreme Court
• Writing for the Court: GRAY
• Citation: Brown v. Smart, 145 U.S. 454, 12 S.Ct. 958, 36 L.Ed. 773 (1892)
• Decision Date: 16 May 1892
• Parties: BROWN v. SMART et al

145 U.S. 454

12 S.Ct. 958

36 L.Ed. 773

BROWN v. SMART et al.

May 16, 1892.

Petition by Theodore B. Smart, Joseph H. Patterson, and Wilmot L. Rice, copartners, trading as Smart, Patterson & Rice, for an order setting aside a conveyance preferring creditors executed by Solomon Brown, and adjudicating him an insolvent. An order of the court of common pleas of Baltimore city granting the prayer of the petition was affirmed on appeal to the court of appeals of Maryland. See 14 Atl. Rep. 468, 17 Atl. Rep. 1101, from whose decision defendant appeals. Affirmed.

STATEMENT BY MR. JUSTICE GRAY.

This was a petition to the court of common pleas of Baltimore city for an adjudication of insolvency, and the setting aside of an unlawful preference, under the insolvent act of the state of Maryland, which enacts that any conveyance containing preferences (with exceptions not material to this case) by a merchant or trader, being insolvent, shall be unlawful and void, and shall be deemed an act of insolvency, provided a petition in insolvency shall be filed by any creditor within four months afterwards; and that, upon such petition alleging the facts, and upon notice to the debtor, and proof of the allegations, an adjudication shall be made by the court that the debtor is insolvent, and thereupon his right and power to dispose of any part of his property shall cease, and, as soon as a trustee to manage and distribute his estate shall have been appointed by the court and shall have given bond, the whole property of the insolvent shall be divested out of him and be vested in the trustee. Code Pub. Gen. Laws Md. 1860, art. 48, as amended by Laws 1880, c. 172, §§ 13, 23, 24, and Laws 1886, c. 298; Code 1888, art. 47, §§ 14, 22, 23.

This petition was filed December 8, 1887, by Theodore B. Smart and others, partners, and creditors in the sum of $600 of Solomon Brown, a merchant of Baltimore; and prayed the court to adjudicate him an insolvent debtor, to appoint a trustee, and to decree fraudulent and void a conveyance made by him, being insolvent, on November 30, 1887, of all his property, including his stock of goods in his store in Baltimore, and all his debts, accounts, and choses in action, to Isaac Eichberg, of Alexandria, in the state of Virginia, preferring certain of his creditors, citizens of other states, whose debts were for money lent at various times from December 29, 1886, to September 30, 1887, under contracts made and to be performed in those states, and who were preferred in consideration of their agreement, expressed in the conveyance, to accept the provisions thereof in full satisfaction of their debts, and to acquit and discharge him of any part of those debts remaining unsatisfied out of the proceeds of the property conveyed. The petition prayed for a subpoena to Brown, to Eichberg, and to each of the preferred creditors.

Brown alone was served with a subpoena, and appeared, and admitted the facts alleged in the petition and above stated; but denied that the conveyance created an unlawful preference, because all the creditors preferred therein resided out of the state of Maryland, and were creditors on contracts made and to be performed out of the state, and had agreed to accept the provisions of the conveyance in full satisfaction of their debts; and also denied that the court had any jurisdiction to decide upon the validity and effect of the conveyance, and especially because the court had acquired no jurisdiction of the trustee or of the creditors named therein.

The court overruled both defenses, and entered an order adjudicating Brown to be an insolvent, declaring void the conveyance by him to Eichberg, and appointing a trustee to take possession of all his property.

Brown appealed to the court of appeals of Maryland, which affirmed the order. 69 Md. 320, 14 Atl. Rep. 468, and 17 Atl. Rep. 1101. Brown then sued out this writ of error.

Charles Marshall, for plaintiff in error.

[Argument of Counsel from pages 455-457 intentionally omitted] M. R. Walter and C. A. Boston, for defendants in error.

Mr. Justice GRAY, after stating the case as above, delivered the opinion of the court.

The principles which underlie this case are clearly established by the decisions of this court. So long as there is no national bankrupt act, each state has full authority to pass insolvent laws binding persons and property within its jurisdiction, provided it does not impair the obligation of existing contracts; but a state cannot by such a law discharge one of its own citizens from his contracts with citizens of other states, though made after the passage of the law, unless they voluntarily become parties to the proceedings in insolvency. Sturges v. Crowninshield, 4 Wheat. 122; Ogden v. Saunders, 12 Wheat. 213; Baldwin...