In re Waite

• Decision Date: 06 October 1885
• Citation: 99 N.Y. 433,2 N.E. 440
• Parties: In re WAITE, Assignee, etc.
• Court: New York Court of Appeals Court of Appeals

99 N.Y. 433

2 N.E. 440

In re WAITE, Assignee, etc.

Court of Appeals of New York.

Filed October 6, 1885.

Payson Merrill and Geo. C. Holt, for appellant, Mr. Scofield.

Wm. Blaikie, for respondent, Charles Waite.

EARL, J.

On the fifteenth day of October, 1881, Haynes & Sanger, a firm doing business in the city of New York, having become insolvent, made a general assignment for the benefit of their creditors to Charles Waite, who was a member of the firm of Pendle & Waite, and in their assignment preferred that firm as creditors for a large amount. Pendle & Waite did business in New York and London; Waite being a citizen of this country, residing in the city of New York, and having charge of the business of his firm there, and Pendle being a citizen of England and having charge of the firm business there. That firm became insolvent and suspended business in England in February, 1882, and Waite then went to England, and there he and Pendle filed a petition in the London court of bankruptcy, in which they recited their inability to pay their debts in full, and that they were ‘desirous of instituting proceedings for the liquidation of their affairs by arrangement or composition with their creditors, and hereby submit to the jurisdiction of this court in the matter of such proceeding.’ Waite signed the petition in person, and through his counsel at once secured the appointment of Scofield as receiver in bankruptcy of the firm property.

Liquidation by arrangement or composition is a proceeding under the English bankruptcy act, which provides that the filing of such a petition is an act of bankruptcy; that a compromise proposition may be made by a debtor, and that if such proposition shall be accepted by the creditors at a general meeting, and then confirmed at a second general meeting, and registered by the court, it becomes binding, and may be carried out under the supervision of the court; that if it appears to the court, on satisfactory evidence, that a composition cannot, in consequence of legal difficulties, or for any other sufficient cause, proceed without injustice or undue delay to the creditors or the debtor, the court may adjudge the debtor a bankrupt, and proceedings may be had accordingly; and that the title of the trustee in bankruptcy, when appointed, relates back to the time of the commission of the act of bankruptcy.

For reasons which it is unnecessary now to consider or relate, the composition failed, and then, upon the application of creditors, which was opposed by Waite, Pendle & Waite were adjudged bankrupts, and Scofield was appointed trustee of the firm property. By the English law the due appointment of a trustee in bankruptcy, under the English bankruptcy act, transfers to the trustee all the personal property of the bankrupt, wherever situated, whether in Great Britain or elsewhere.

Notwithstanding his bankruptcy, Waite continued to act as assignee of Haynes & Sanger, and converted the assets of that firm into money, and, under the preference given to his firm, paid himself for the firm of Pendle & Waite the sum of $14,333.70. He paid no portion of that sum to Pendle or to the creditors of his firm, the American creditors of such firm having been fully paid from other assets of the firm.

After all this, Waite filed his petition in the court of common pleas of the city of New York for a settlement of his accounts as assignee, and citations were issued, served, and published for that purpose, and a referee was appointed to take and state his accounts. In his accounts he entered and claimed a credit for the sum paid to himself as above stated. Scofield, through his attorney, appeared upon the accounting, and as trustee objected to the credit, and claimed that that sum should be paid to him. The referee ruled that the law of this state does not recognize the validity of foreign bankruptcy proceedings to transfer title to property of the bankrupt situated here, and for that reason that the payment by Waite as assignee to himself, as a member of the firm of Pendle & Waite, was valid, and that he was entitled to the credit claimed. The same view of the law was taken at the special and general terms of the common pleas, and then Scofield appealed to this court.

We have stated the facts as found by the referee and as the respondent did not and could not except to the findings, and is therefore in no condition to complain of them, we must assume that they were based upon sufficient evidence.

The transfer of the property of Pendle & Waite to Scofield, as trustee, was in invitum solely by operation of the English bankrupt law. While the proceeding first instituted by the bankrupts to arrange a composition with their creditors was voluntary, the final proceeding through which the adjudication in bankruptcy was had, and the trustee appointed, was adversary and against their will, having no basis of voluntary consent to rest on. Willitts v. Waite, 25 N. Y. 577. If the transfer effected by the bankruptcy proceedings is to have the same effect here as in England, then the title to the money due to the bankrupts from Haynes & Sanger was vested in the trustee. Scofield was appointed receiver of the property of the bankrupts in March, 1882, and then the title passed out of them. That title continued in him as receiver until he was appointed trustee. After he was appointed receiver, and before or after he was appointed trustee, (which does not appear,) Waite, as assignee, paid himself, as a member of the firm of Pendle & Waite, the sum of money in controversy. He had notice of the bankruptcy proceedings, and knew that the title to the money due from Haynes & Sanger, and from himself as their assignee, had passed out of the bankrupts to Scofield, and hence he had no right to make payment to them. Scofield became substituted in their place, and Waite was bound to make payment to him, and cannot, therefore, have credit for a payment wrongfully made; and Scofield, standing in the place of the original creditors of Haynes & Sanger, had the right to appear upon the accounting and object to the erroneous payment made in disregard of his rights. But the alleged payment was merely formal, not real. Waite, the assignee, still has the money, and is accountable for it to the proper party. It is not perceived how it can be claimed that Scofield was bound at any time before the accounting to make any demand upon the assignee. He was a creditor, holding the claim originally due to Pendle & Waite, and as such he could appear upon the accounting with all the rights of any other creditor to protect his interests, and he could not be prejudiced by a payment alleged to have been made by the assignee to himself. All this is upon the assumption that the transfer to Scofield, as trustee, is to have the same force and effect here as against the bankrupts in England; and whether it must have, is the important and interesting question to be determined upon this appeal. It matters not that Waite was a citizen of this country, domiciled here. He went to England, and invoked and submitted to the jurisdiction of the bankruptcy court there, and is bound by its adjudication to the same extent as if he had been domiciled there. The adjudication estopped him just as every party is estopped by the adjudication of a court which had jurisdiction of his person and of the subject-matter.

We have not a case here where there is a conflict between the foreign trustee and domestic creditors. So far as appears, no injustice whatever will be done to any of our own citizens, or to any one else, by allowing the transfer to have full effect here. Indeed, justice seems to require that this money should be paid to the foreign trustee for distribution among the foreign creditors of the bankrupts. The effect to be given in any country to statutory in invitum transfers of property through bankruptcy proceedings in a foreign country has been a subject of much discussion among publicists and judges, and unanimity of opinion has not been, and probably never will be, reached. We shall not enter much into the discussion of the subject, and thus travel over ground so much marked by the footsteps of learned jurists. Our main endeavor will be to ascertain what, by the decisions of the courts of this state, has become the law here.

In Bird v. Caritat, 2 Johns. 342, it was held that a suit could be brought in this state in the name of a foreign bankruptby his assignee, for their benefit as such, the name of the bankrupt being used, because, by the common-law rule, now abrogated, a chose in action was not assignable so as to entitle the assignee to sue thereon in his own name. In writing the opinion, Chancellor KENT, then chief justice, said: ‘The demurrer to the second plea raises the question whether the assignees, under a commission of bankruptcy sued out in England, can maintain a suit at law here in their own names. This is more a question concerning form than substance, for there can be no doubt of the right of the assignees to collect the debts due to the bankrupt either by a suit directly in their own names, or as trustees using the name of the bankrupt. It is a principle of General practice among nations to admit and give effect to the title of foreign assignees. This is done on the ground that the conveyance under the bankrupt laws of the country where the owner is domiciled is equivalent to a voluntary conveyance by the bankrupt.’

In Raymond v. Johnson, 11 Johns. 488, it was held that although the court will recognize and protect the right of an assignee under the insolvent law of another state, yet an action brought in this state must be in the name of the insolvent.

In Holmes v. Remsen, 4 Johns. Ch. 460, Chancellor KENT wrote an elaborate opinion, holding that foreign assignees in bankruptcy took title to all the property of the bankrupt, wherever situated, with the same force and effect as if the bankrupt had made a voluntary assignment...