Crapo v. Kelly

ERROR to the Supreme Court of New York; the case being thus:

On the 18th of January, 1861, the American ship Arctic, owned, as to one-half, by Gibbs & Jenny, of Massachusetts, and registered as to that half in their names, in the port of Fairhaven, in the State aforesaid, was at the guano islands in the Southern Pacific Ocean, and on that day set sail from the said islands for New York.

On the 12th of February, and the 6th of March following, the ship, then sailing on the said ocean, and the said Gibbs & Jenny being insolvent and applying voluntarily to the judge of the insolvent court of Massachusetts for the benefit of the insolvent laws of the State, that judge, acting under a statute of the State, appointed one Crapo and others their assignees in insolvency, and executed and delivered to them an assignment of all the personal property of the said insolvents. No assignment was made by the insolvents themselves.

The statute which authorizes the judge of the insolvent court thus to transfer the debtor's property makes the transfer operate as a conveyance of all the debtor's property 'which he could have lawfully sold, assigned, or conveyed.' It however enacts further, that the debtor shall,

'When required by the assignees, mak and execute all such deeds and writings, and do all such other lawful acts and things which may be necessary or useful for confirming the assignment so made by the said judge, and for enabling the assignees to demand, recover, and receive all the estate and effects assigned as aforesaid, especially such part thereof, if any, as may be without this Commonwealth.'

On the 24th of April following (the ship still on the high seas), one Robinson, a citizen and resident of New York, began an action against the said Gibbs & Jenny on certain promissory notes of theirs held by him, and in consequence of their residence out of the State of New York, a warrant was issued to the sheriff of New York, one Kelly, to attach their property; this proceeding being one in conformity to the laws of New York.

On the 30th of April the ship arrived at New York, direct from the Pacific Ocean, and the sheriff seized her in the harbor, and attached one undivided half of her as the property of Gibbs & Jenny. Crapo and his co-assignees appeared two days afterwards and, notwithstanding the previous attachment by the sheriff, claimed the ship as assignees of Gibbs & Jenny. She was thereupon released from custody on the claimants giving a bond, in conformity with the statutes of New York, conditioned that in a suit to be brought on the bond they would establish the fact that they were owners of the half of the vessel attached, or on failure to do so pay the sheriff the value of the share.

Kelly accordingly brought suit on the bond; the question on that suit being this, whether a New York creditor of the insolvents, by his prior attachment of their property in the State of New York, and pursuant to the laws of that State, could hold the property against the subsequent possession or claim of possession of such property, asserted in the State of New York, by authority of a statutory sequestration under the laws of Massachusetts of the general property of the debtors for the benefit of their creditors, and seeking to take the property out of the possession of the New York sheriff, on the ground of the sequestration of the Massachusetts insolvent statute antedating the New York sheriff's attachment.

The highest court of the State upheld the sheriff's title, and a recovery accordingly was had upon the bond.

The case was now brought here, as within the jurisdiction of this court, under the 25th section of the Judiciary Act, because, as was alleged, the highest court of New York had disregarded that provision of the Constitution which ordains that

'Full faith and credit shall be given in each State to the public acts, records, and judicial proceedings of every other State; and the Congress may, by general laws, prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof',--

And to the act of Congress of May 26th, 1790, which, after prescribing the forms of authentication, enacts:

'And the said records and judicial proceedings authenticated as aforesaid shall have such faith and credit given to them in every court within the United States as they have by law or usage in the courts of the State from whence the said records are or shall be taken.'

Mr. W. M. Evarts, against the jurisdiction and in support of the ruling below:

I. There is no jurisdiction.

1. The fact that controversies between litigants involve rights or titles claimed under the laws and jurisprudence of different States, does not subject the determinations of State courts, made the forum of such controversies, to review by this court. Unless the controversy and its decision in the State court involves the further element that some right or protection claimed under the Constitution of the United States has been denied by the State court, its judgment is not reviewable here.

. If the insolvent proceedings in Massachusetts are to be considered as within the sense of this article of the Constitution, 'Judicial Proceedings,' full faith and credit was given to their purport at the trial of this cause in the New York courts.

No 'judicial proceeding' in Massachusetts has adjudicated anything whatever concerning the ship, her title or possession, or any consequences that have attached to her by reason of the insolvency of her owners.

The controversy between these two competing pursuits of the ship in the port of New York was res integra, as a judicial question, when the action now under review was begun in New York.

No adjudication on this controversy has ever yet been had in Massachusetts, and all that the insolvent proceedings in Massachusetts have contributed towards such an adjudication has been to furnish the assignees a standing, which has been fully recognized in the New York courts.

The case of Green v. Van Buskirk, where the section of the Constitution relied on by the plaintiffs in error was considered, while it upheld the appellate jurisdiction of this court in that case, excludes it, we submit, in this. That case upon the merits, seems conclusive of this case upon its merits; that is to say, that the lex fori where the res is found must determine when and how it shall be subjected to the pursuit of creditors seeking the forum.

II. But if jurisdiction exists here to review, the judgment below was right.

1. The attaching creditor, Robinson, was a resident, subject, and citizen of New York, and as such entitled to the protection of its tribunals, and to seek their aid and remedies in asserting his claims against his debtors, and in satisfying his debt out of their property found within that jurisdiction.

2. The insolvent proceedings in Massachusetts never operated, or purported to operate, to transfer, by their own force, possession of choses in possession beyond the jurisdiction of the powers of the court, to wit, the county of its jurisdiction. Any further transfer could, by the terms of the statute, exist only by virtue of the jurisdiction which the court had over the persons of the insolvents, and it needed the personal exercise of their jus disponendi in aid of the court.

3. It is too late to dispute the doctrine (which has been accepted and established throughout the United States) that the insolvent laws of a State have no force to transfer the title to property not within the territory of the State, and that the title of such assignees will not be recognized when it comes in conflict with liens acquired by domestic creditors under the local laws. International comity may require us to permit such assignees to come to another State and take possession of property and collect choses in action, but they must take subject to the prior liens of creditors there who, by greater diligence, have availed themselves of the remedies provided by its laws against the property of the debtor.

4. Nor in this view does the fact that the property in dispute was an American ship, registered under the acts of Congress, at Fairhaven, in Massachusetts, make any difference or enable her to carry with her the operation of her insolvent law round the world. Upon the high seas neither the attachment law of New York nor the insolvent laws of Massachusetts have any dominion. After leaving Massachusetts the ship was free from the operation o the one, and until she reached New York she was exempt from that of the other. She was indeed the property of a citizen of the State from which she sailed, and, as property, followed his person so far that his acts and contracts in respect to her were to be controlled by the lex loci contractus, but it was only through the owner that that law could operate upon her. So that if he sold or mortgaged her, or made any other contract respecting her in Massachusetts, or if he died, domiciled there, and bequeathed her by will, or died intestate as to her, the laws of Massachusetts would regulate the rights of property in her arising from these incidents. So in respect to the taxing power, being within no other State, it would properly be held that the owners residing where she was registered would be properly taxable for her there. But in no other or larger sense can it justly be said that at sea she was governed by or subject to the laws of Massachusetts. The American doctrine, as to the effect of foreign bankrupt assignments, has always been a recognized and admitted exception to the rule that personal property follows the person of the owner.

5. Therefore the simple question is, whether, because the vessel did not arrive until after the assignment was executed, comity requires that a New York creditor of the insolvent, pursuing with diligence the remedy prescribed by the law of New York, shall be deprived of the fruits of his diligence for the accommodation and benefit of the assignees and the Massachusetts creditors whom they represent. To this there can be but one answer, and the right of the New York creditor must be preferred and his remedy upheld. The reasons upon which this policy of protecting the rights of domestic creditors have always been rested, apply with equal force to property of the insolvent brought into the State after the assignment, as to that which happens to be here at the exact moment of the assignment. Their convenience, their natural right to all the securities and remedies which the laws of their own State afford, the fairness of allowing them to reap the fruits of their diligence, the hardships of sending them to a foreign State or country for dividends when a remedy lies at their own doors, and those considerations of general utility which relate to the general interests of creditors and the harmony of States, all lead to the same policy and necessity in respect to property of the insolvent attached by the diligent creditor, no matter at what precise moment it came within the State.

6. If the point in issue is regarded as a question of comity, the superior rights of the home creditor must prevail. The argument will then be rested upon the proposition that the operation of the insolvent law of Massachusetts did proprio vigore transfer the absolute title of the ship, being at sea, to the assignees, to the exclusion of creditors attaching under the laws of whatever State and jurisdiction she should first reach.

This proposition is in defiance of the settled law of the Federal and State courts. And, not only is there no authority whatever for the new and startling proposition contended for; not only must this court, to establish it, override the well-settled current of American law, by which bankrupt laws and proceedings of foreign States have been allowed no effect upon property situated outside of their territorial limits, but the result sought to be obtained will be contrary to our best interests and subversive of our longestablished and well-recognized policy. It will be a complete abandonment of the American doctrine, and a submission to the rule devised by Great Britain for her own benefit, as the great creditor nation of the world, so that she might, in the language of Platt, J., in Holmes v. Remsen: