Theophilus King v. John Cross

• Decision Date: 11 December 1899
• Docket Number: No. 28,28
• Citation: 175 U.S. 396,44 L.Ed. 211,20 S.Ct. 131
• Parties: THEOPHILUS KING, Adverse Claimant, and the Lippitt Woolen Company, Alleged Trustee, Plffs. in Err. , v. JOHN A. CROSS et al
• Court: U.S. Supreme Court

175 U.S. 396

20 S.Ct. 131

44 L.Ed. 211

THEOPHILUS KING, Adverse Claimant, and the Lippitt Woolen Company, Alleged Trustee, Plffs. in Err.,

v JOHN A. CROSS et al.

No. 28.

Argued October 12, 1899.

Decided December 11, 1899.

Statement by Mr. Justice White:

The firm of Brown, Steese, & Clarke, established in Boston, on the 12th day of August, 1889, filed in the proper court in and for the county of Norfolk, Massachusetts, a petition praying to be allowed to take the benefit of the insolvent laws of the state of Massachusetts. On the day after—that is, on the 13th of August, 1889—John A. Cross, a citizen of Rhode Island, residing at Providence in that state, commenced suit in Rhode Island against the members of the firm of Brown, Steese, & Clarke on two negotiable notes drawn by the firm. The Lippitt Woolen Company and two other Rhode Island corporations carrying on business in that state were served, on the day the suit was filed, with trustee process on the averment that these corporations were indebted to the above-named firm. The Lippitt Woolen Company answered under the trustee process, disclosing the sum of its indebtedness. In the insolvency proceedings an assignee was appointed, and he commenced suit in Massachusetts against the Lippitt Woolen Company to recover the debt due by that corporation to the insolvent firm, and against which debt the trustee process had been issued in Rhode Island, and Hiram Leonard, a resident of Massachusetts, and who was indebted to the Lippitt Woolen Company, was made a garnishee. Pending these proceedings the assignee sold the claim against the Lippitt Woolen Company and one against another corporation to Theophilus King, a resident of Massachusetts, and he was substituted as plaintiff in the action in Massachusetts above referred to. The Lippitt Woolen Company pleaded the pendency of the trustee process against it in the Rhode Island court. The Massachusetts court entered judgment in favor of the plaintiff King and against the Lippitt Woolen Company and the garnishee Leonard. The court, however, directed that execution on the judgment be stayed and the parties enter into a stipulation that no execution should issue until the proceedings in the Rhode Island action had been fully determined. Thereupon King was allowed, by the Rhode Island court, to become a party to the action there pending so far as necessary to enable him to assert his title to the indebtedness due by the Lippitt Woolen Company and other corporations to the firm of Brown, Steese, & Clarke, which debts were covered by the trustee process previously issued in Rhode Island under the circumstances already stated.

In the Rhode Island court both King and the Lippitt Woolen Company pleaded the proceedings under the insolvent laws of Massachusetts, the sale by the assignee to King, and the judgment of the court in Massachusetts, heretofore referred to, and asserted that thereby the title to the indebtedness due by the Lippitt Woolen Company to Brown, Steese, & Clarke passed to King, and that such title was superior to any lien supposed to have arisen from the trustee process which had been issued in the Rhode Island action. The court gave judgment in favor of the plaintiff Cross, charging the Lippitt Woolen Company for the amount of the debt due by that corporation to the firm of Brown, Steese, & Clarke, as stated in the answer of the Lippitt Woolen Company to the trustee proceedings. The court therefore rejected the claim of title preferred by King and acquired by him in the insolvency proceedings in Massachusetts, and in effect decided that the trustee process in Rhode Island operated to create a paramount lien on the debt due by the Lippitt Woolen Company, and was unaffected by the insolvency proceedings in Massachusetts and the action taken on the subject in the courts of that state. Motions for a new trial upon numerous grounds were filed on behalf of the Lippitt Woolen Company and the claimant King. These motions were heard before the appellate division of the supreme court of Rhode Island, and that court overruled them. (19 R. I. 220.¹) The case was then brought to this court by writ of error. In substance, the grounds relied on in this court for a reversal are, that at the time of the service of the trustee process the Rhode Island court was wholly wanting in jurisdiction over the defendants in the action, residents of Massachusetts, and over their property, and that by charging the Lippitt Woolen Company as trustee for the benefit of the plaintiff Cross, the tribunal last mentioned failed to give full faith and credit to the judicial proceedings in the insolvency court in Massachusetts.

Messrs. Chas. H. Hanson, John C. Coombs, and Robert W. Burbank for plaintiffs in error.

Messrs. Wm. R. Tillinghast and James Tillinghast for defendants in error.

Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:

It is first asserted that the judgment of the supreme court of the state of Rhode Island was not due process of law, and was in conflict with the 14th Amendment to the Constitution of the United States, because it recognized the right, in a suit brought in Rhode Island against a nonresident defendant, to garnishee the resident debtor of such defendant. It is contended that a judgment rendered by a court against a defendant who is neither within its jurisdiction by his person or his property is wholly void, and any attempt to enforce such judgment amounts to a denial of due process of law. The Rhode Island court, it is, claimed, had no jurisdiction over the defendant firm because it was a resident of Massachusetts, and it is asserted that such court had no property of the firm within its control upon which to exercise its jurisdiction. True it is the Lippitt Woolen Company, which alone was charged by the judgment, was made a trustee under the Rhode Island process, and was indebted to the Massachusetts firm; but this fact, it is asserted, did not establish that there was any right in Rhode Island to be subjected to the jurisdiction of the courts of that state, for the following reasons: The situs of movable property is at the domicil of the owner of such property, and therefore the situs of the claim or credit held by the Massachusetts firm against the Lippitt Woolen Company was not in Rhode Island, where the Lippitt Woolen Company was resident, but was in Massachusetts, where the creditor firm was established. The contention in substance is that any process of foreign attachment predicated upon the assumed right to levy on debts due to nonresidents by persons within the state wherein the process issues is absolutely void, hence a denial of due process of law.

We need not enter into a review of the contentions thus presented, since they were all considered by this court at its last term and held to be untenable. Chicago, R. I. & P. R. Co. v. Sturm, 174 U. S. 710, 43 L. ed. 1144, 19 Sup. Ct. Rep. 797.

Conceding, however, as a general rule, that jurisdiction as to a nonresident can be acquired by trustee or garnishment process against a resident debtor of a nonresident defendant, it is urged that the facts in this case cause it to be an exception to this general principle. The proceedings in involuntary insolvency were begun in Massachusetts before the commencement of the suit in Rhode Island. The legal effect of the insolvency proceedings, it is asserted, was to vest all the credits of the insolvent in the court of insolvency of Massachusetts, and therefore there could legally be no debt due to the nonresident insolvent in Rhode Island, because that debt by operation of the Massachusetts insolvent proceedings had ceased to be a debt due the firm, and had become a debt controlled by the Massachusetts insolvent court. The debt in Rhode Island, originally due to the firm in Massachusetts cannot, it is claimed, be treated as continuing after the insolvency proceedings to be due to the firm without refusing to give effect to the proceedings in Massachusetts, and such refusal is therefore asserted to be the necessary result of the judgment of the court of Rhode Island which is before us for review.

The contention thus relied upon, it is argued, is not contrary to the settled rule that insolvency proceedings of the several states do not have extraterritorial operation; and it is also asserted that the claim here relied upon is not contrary to the decision of this court in Security Trust Co. v. Dodd, 173 U. S. 624, 43 L. ed. 835, 19 Sup. Ct. Rep. 545. In that case it was held that a general assignment for the benefit of creditors, made by an insolvent under the insolvent laws of a state, did not operate to exempt tangible property situated at the time of the insolvent assignment in another state from seizure in the state where the tangible property was actually situated. This decision, it is claimed, was but an exemplification of the general rule limiting insolvency proceedings of one state to the jurisdiction of that state and depriving them of extraterritorial operation. A mere credit, however, it is asserted, conceding it to be subject to attachment or trustee process at the residence of the debtor, is governed by a different rule from that which controls tangible property. Such credit, the claim is, being at the situs of the domicil of the creditor, passes to the custody of the insolvent court when the insolvent law so provides, and therefore comes under the dominion and control of the insolvent court having jurisdiction of the person of the creditor. As by operation of law the credit from the date of insolvency proceedings at the residence of the creditor ceases to be under his dominion, but, on the contrary, is in gremio legis, the power to levy by garnishee or trustee process on the same at the residence of the debtor is destroyed. But the predicate upon which this contention rests is that the Massachusetts insolvent proceedings operated to deprive the...