Robinson Co v. John Belt, 46

• Court: United States Supreme Court
• Writing for the Court: Brown
• Citation: 23 S.Ct. 16,41 L.Ed. 65,187 U.S. 41
• Parties: J. M. ROBINSON & CO., Plffs. in Err. , v. JOHN C. BELT et al
• Docket Number: No. 46,46
• Decision Date: 27 October 1902

187 U.S. 41

23 S.Ct. 16

41 L.Ed. 65

J. M. ROBINSON & CO., Plffs. in Err.,

v JOHN C. BELT et al.

No. 46.

Argued May 2, 1902.

Decided October 27, 1902.

Mr. David Goldsmith for plaintiffs in error.

No counsel for defendants in error.

Statement by Mr. Justice Brown:

This was a writ of error to a judgment of the circuit court of appeals for the eighth circuit affirming a judgment of the court of appeals of the Indian territory, which latter court affirmed the judgment of the United States court for the northern district of such territory, sustaining an interplea by one King to recover the value of certain property attached and sold by Robinson & Co., which had been conveyed to King as assignee by a deed of assignment made by his codefendant Belt.

The facts of the case are substantially as follows: One John C. Belt, a resident of Arkansas, who was engaged in business in the Indian territory, on December 29, 1891, made an assignment for the benefit of his creditors to King, as assignee.

On the following day 'J. M. Robinson & Co.,' plaintiffs in error, brought suit against Belt in the United States court in that territory, sued out an attachment, and levied upon the property assigned. Belt failed to plead, and judgment by default was taken against him, and the attachment sustained.

On May 31, 1892, defendant in error King filed an interplea setting out his deed of assignment, and claiming the property as his by virtue of such deed. After so doing he entered into a stipulation with other attaching creditors, of whom there were a large number, whereby it was agreed that this interplea should be considered as filed in every suit, and, virtually, that the result of the interpleader proceedings in the suit of J. M. Robinson & Co. should control all other suits. The property was, after its attachment, sold under order of court, pursuant to statutes governing such proceedings, and at such sale realized the sum of $7,900.

A demurrer to the interplea was filed and sustained by the court, from which order King sued out a writ of error from the United States court of appeals. He gave no supersedeas bond, however, and the fund was, by order of the court, distributed pro rata to the attaching creditors according to their priorities. The court of appeals reversed the judgment on the demurrer, and on September 19, 1895, Robinson & Co. filed their answer to the interplea, denying that King was owner by virtue of the deed of assignment, and alleged the same to be fraudulent and void; denied that King filed a complete inventory; denied that certain personal property described in the deed of assignment was the property of the wife of Belt, and admitted that the property described in the deed was seized under the attachment.

The trial on the interplea was had before a jury, and resulted in a verdict in favor of the interpleader, which found the attached property to be the property of King, as assignee. A judgment was thereupon entered in his favor, which was subsequently affirmed, first, by the court of appeals for the Indian territory, and then by the circuit court of appeals for the eighth circuit. Whereupon a writ of error was sued out by Robinson & Co. from this court.

Mr. Justice Brown delivered the opinion of the court:

This is a contest between certain attaching creditors of John C. Belt, and one King, his voluntary assignee for the benefit of creditors.

The record is in an unsatisfactory condition. It is impossible to tell whether the plaintiffs are a corporation or a partnership; and, if the latter, who constitute the firm, or against what individuals the judgment of the court was rendered. Although the only right of the plaintiffs to contest the assignment of Belt to King arises from the levy of an attachment upon the assigned property, neither the writ of attachment nor the return of the marshal of the levy thereunder appears in the record or testimony. Nor does the record contain a copy of the complaint, in which these proceedings were probably averred. The only pleadings before us are the interplea of King, filed in the action (which appears to have been brought against Belt alone), setting up the assignment, and the answer of the plaintiffs thereto, denying the ownership of King and averring the fraudulent character of the assignment. But as the interplea of King alleges that on December 31, 1891, and just after he had completed an inventory of the property so assigned, plaintiffs caused a writ of attachment to be levied upon a portion of the property, we may treat this as a sufficient admission of plaintiffs' title to justify us in passing upon the question of the validity of the assignment, upon which the case largely depends.

1. This assignment is attacked by the plaintiffs chiefly upon the ground that it contains a provision that the preferred creditors shall accept their dividends 'in full satisfaction and discharge of their respective claims, . . . and execute and deliver to said John C. Belt a legal release therefor.' This provision has been the subject of discussion in England and in most of the states, and in a large number of cases has been held to avoid the assignment, upon the ground that the debtor has no right to compel his creditors to accept his terms or lose their preference. In England a clause of a somewhat similar nature was held to be void under the statute of Elizabeth as an attempt to hinder, delay, or defeat creditors (Spencer v. Slater, L. R. 4 Q. B. Div. 13), though the applicability of that case to this particular provision admits of some doubt.

The fact that it enables the debtor to extort a settlement by playing upon the fears or apprehensions of his creditors is thought by the courts of many of the states to be sufficient to justify them in setting aside the assignment; and, where such provision has been sustained, it has usually been in deference to authority, rather than upon conviction of its propriety or wisdom. The question was discussed at considerable length by Mr. Justice Story in Halsey v. Fairbanks, 4 Mason, 206, 227, Fed. Cas. No. 5,964, and the validity of the clause sustained, largely in deference to the case of King v. Watson, 3 Price, 6, where, as he states, the very exception was taken by counsel, and the assignment held good by the court of exchequer. King v. Watson, however, has but a remote bearing, and seems to have been pro tanto overruled by the case of Spencer v. Slater, above cited. Mr. Justice Story finally remarks that if the question were entirely new, and many estates had not passed upon the faith of such assignments, the strong inclination of his mind would be against their validity. 'As it is,' said he, 'I yield with reluctance to what seems the tone of authority in favor of them.' Somewhat similar doubt is expressed by Mr. Chief Justice Taney in White v. Winn, a memorandum of which is found in 8 Gill, 499. The question was also incidentally considered by this court in Security Trust Co. v. Dodd, 173 U. S. 624, 633, 43 L. ed. 835, 839, 19 Sup. Ct. Rep. 545, but the case went off upon another point.

This court has never directly passed upon the validity of this provision, but, wherever it has been called in question, it has been treated as determinable by the local law of the state from which the question arose. Thus, in Brashear v. West, 7 Pet. 608, 8 L. ed. 801, the clause was upheld solely upon the ground that the courts of Pennsylvania had sustained its validity. The assignment in that case was in trust to pay and discharge the debts due from the assignor, first, to certain preferred creditors, and afterwards to creditors generally, provided that no creditor should be entitled to receive a dividend, who should not, within ninety days, execute a full and complete release of all claims and demands upon the assignor. Mr. Chief Justice Marshall, after summarizing the arguments for and against the validity of this provision, did not commit the court to the expression of an opinion, but held that 'the construction which the courts of that state [Pennsylvania] have put on the Pennsylvania statute of frauds must be received in the courts of the United States,' and decided the case upon the authority of Lippincott v. Barker, 2 Binn. 174, 4 Am. Dec. 433, in which this question arose, and was decided, after an elaborate argument, in favor of the deed. He also remarked that the question had been decided the same way in Pearpoint v. Graham, 4 Wash. C. C. 232, Fed. Cas. No. 10,877. In that case Mr. Justice Washington thought that an assignment in trust for the benefit of such creditors as should release their debts was founded upon a good and valuable consideration, and was valid, the only inquiry being whether it was bona fide. The assignment was supported in favor of such of the creditors as executed a release of their demands within sixty days after the date of the instrument, that being the time limit provided for such acceptance. Neither in Lippincott v. Barker nor in Pearpoint v. Graham were there any preferred creditors, but the assignments were in trust for all the creditors who should, within sixty days in one case, and four months in the other, execute a release of their demands. In several subsequent cases the rule laid down in Brashear v. West has been adopted, and the principle fully established that the construction and effect of a state statute regulating assignments for the benefit of creditors is one upon which the decisions of the highest courts of the state are a controlling authority in the Federal courts. They are treated as establishing a rule of property applicable within their several jurisdictions. Sumner v. Hicks, 2 Black, 532, 17 L. ed. 355; Jaffray v. McGehee, 107 U. S. 361, 27 L. ed. 495, 2 Sup. Ct. Rep. 367; Peters v. Bain, 133 U. S. 670, 686, 33 L. ed. 696, 702, 10 Sup. Ct. Rep. 354...