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the foreign country are incapable of operating a legal transfer of property in the United States," and judgment was given in favor of the attaching creditors, against the claim of the foreign assignees.
In that case, also, another important doctrine is established in hostility with the British doctrine. For the United States had interposed a claim against the English assignees, in order to obtain satisfaction from the proceeds of the bankrupt's effects in this country, for a debt contracted in Great Britain. And this court decreed, accordingly, expressly restricting the power of the country of the contract to its concoction and exposition.
The language of the court is, “The law of the place where a contract is made is, generally speaking, the law of the contract; that is, it is the law by which the contract is expounded. But the right of priority forms no part of the contract itself. It is extrinsic, and is rather a personal privilege, dependent on the laws of the place where the property lies, and where the court sits which decides the cause.
And, accordingly, the law of the United States was sustained, which gave the debts due the bankrupt here, to satisfy a debt contracted in England, to the prejudice of the law of England, which gave the same debt to the assignees of the bankrupt.
It cannot be necessary to go farther than this case to establish, that, so far as relates to the foreign creditor, this country does not recognize the English doctrine, that the bankrupt law of the country of the contract is paramount in disposing of the rights of the bankrupt.
The United States pass a law which asserts the right to appropriate a debt due a foreign bankrupt, to satisfying a debt due itself, and incurred by that bankrupt in his own country. The assignees of that bankrupt question this right, and claim the debt as legally vested in them by the law of the country of the contract, and maintain that the debt due the United States, being contracted in Great Britain, was subject to the laws of Great Britain, and, therefore, entitled only to share in common with
other creditors in the proceeds of the bankrupt's effects; that the debt so appropriated by the law of the United States to its exclusive benefit was, as to all the bankrupt’s contracts, or certainly as to all English contracts, vested in the assignees, on international principles, principles which gave effect to the English bankrupt laws, so vesting that debt, paramount to the laws of other countries.
In giving effect to the law of the United States, this court overrules that doctrine ; and in the act of passing that law, this government asserts both the power over the subject, and the right to exercise that power without a violation of national comity; or has, at least, taken its stand against that comity, and asserted a right to protect its own interests; which, in principle, is equally applicable to the interests of its own citizens.
It has had, in fact, regard to the lex loci rei sita, as existing in the person and funds of the debtor of the bankrupt, and the rights of self-preservation, and duty of protection to its own citizens, and the actual allegiance of the creditor and debtor, not the metaphysical allegiance of the contract, on which the foreign power is asserted.
It would be in vain to assign the decision of this court in Harrison v. Sterry, or the passing of the law of the United States, to the general preference which the government may assert in the payment of its own debt, since that preference can only exist to the prejudice of its own citizens, whereas the precedence there claimed and conceded operated to the prejudice of British creditors.
The case of Baker v. Wheaton, adjudged in the courts of Massachusetts, in the time of Chief Justice Parsons, (5 Massachusetts Reports, 509,) is a very strong case upon this subject. That also was argued with great care, and all the British cases reviewed; the court took time to deliberate, and the same doctrine was maintained, in the same year and the same month with Harrison v. Sterry, and certainly without any communication between the two courts.
The case was this : one Wheaton gave a promissory note to
one Chandler, both being at that time citizens and inhabitants of Rhode Island. Wheaton was discharged under the bankrupt laws of Rhode Island, both still continuing citizens and inhabitants of the same state, and the note remaining the property of Chandler. Subsequent to the discharge, Chandler endorses the note to Baker, and Wheaton is arrested in Massachusetts. He pleads the discharge in bar, and the court, in deciding, expresses itself thus: “When, therefore, the defendant was discharged from that contract, lege loci, the promisee was bound by that discharge, as he was a party to the laws of that state, and assenting to their operation. But if, when the contract was made, the promisee had not been a citizen of Rhode Island, he would not have been bound by the laws of it or any other state, and holding this note at the time of the discharge, he might afterwards maintain an action upon it in the courts of this state.” And again, (page 311,) - If the note had been transferred to the plaintiff, a citizen of this state, whilst it remained due and undischarged by the insolvent laws of Rhode Island, those laws could not affect his rights in the courts of law in this state, because he is not bound by them.”
This, it will be observed, regards a contract acknowledged to be of Rhode Island origin.
There is another case reported in the decisions of the same state, (vol. x. page 337,) which carries this doctrine still farther, and, I apprehend, to a length which cannot be maintained.
This was the case of Watson v. Bourne, in which Watson, a citizen of Massachusetts, had sued Bourne in a state court, and obtained judgment. Bourne was discharged under the insolvent laws of that state, and being afterwards found in Massachusetts was arrested on an action of debt upon the judgment. He pleads the discharge ; plaintiff replies, that he, plaintiff, was a citizen of Massachusetts, and, therefore, not precluded by the discharge. The origin of the debt does not appear from the report, and the argument turned wholly on the question, whether, by entering judgment in the court of the state, he had not subjected his rights to the state laws pro tanto.
The court overruled the plea, and recognized the doctrine in Baker v. Wheaton, by declaring “ that a discharge of that nature can only operate where the law is made by an authority common to the creditor and debtor in all respects, where both are citizens or subjects.”
I have little doubt that the court was wrong in denying the effect of the discharge as against judgments rendered in the state courts, when the party goes voluntarily and unnecessarily into those courts; but the decision shows, in other respects, how decidedly the British doctrine is repelled in the courts of that state.
The British doctrine is also unequivocally repelled in a very learned opinion delivered by Mr. Justice Nott, in the court of the last resort in South Carolina, and in which the whole court, consisting of the common law judges of the state, concurred. This was in the case of the Assignees of Topham v. Chapman et al., in which the rights of the attaching creditor were maintained against those of the assignees of the bankrupt (1 Constitutional Reports, page 253); and that the same rule was recognized at an early day in the court of Pennsylvania, appears from the leading case of Phillips v. Hunter, (2 H. Blackstone's Reports, 402,) in which a British creditor, who had recovered of a debtor of the bankrupt in Pennsylvania, was compelled by the British courts to refund to the assignees in England, as for money had and received to their use.
I think it, then, fully established, that in the United States a creditor of the foreign bankrupt may attach the debt due the foreign bankrupt, and apply the money to the satisfaction of his peculiar debt, to the prejudice of the rights of the assignees or other creditors.
I do not here speak of assignees, or rights created, under the bankrupt's own deed; those stand on a different ground, and do not affect this question. I confine myself to assignments, or transfers, resting on the operation of the laws of the country, independent of the bankrupt's deed ; to the rights and liabilities of debtor, creditor, bankrupt, and assignees, as created by law. 12 Wh. 364.
What is the actual bearing of this right to attach, so generally recognized by our decisions ?
It imports a general abandonment of the British principles ; for, according to their laws, the assignee alone has the power to release the debtor. But the right to attach necessarily implies the right to release the debtor, and that right is here asserted under the laws of a state which is not the state of the contract.
So, also, the creditor of the bankrupt is, by the laws of his country, entitled to no more than a ratable participation in the bankrupt's effects. But the right to attach imports a right to exclusive satisfaction, if the effects so attached should prove adequate to make satisfaction.
The right to attach also imports the right to sue the bankrupt; and who would impute to the bankrupt law of another country the power to restrain the citizens of these states in the exercise of their right to go into the tribunals of their own country for the recovery of debts, wherever they may have originated ? Yet, universally, after the law takes the bankrupt into its own hands, his creditors are prohibited from suing.
Thus much for the law of this case in an international view. I will consider it with reference to the provisions of the constitution.
I have said above that I had no doubt, the erection of a distinct tribunal for the resort of citizens of other states was introduced, ex industriâ, into the constitution, to prevent, among other evils, the assertion of a power over the rights of the citizens of other states, upon the metaphysical ideas of the British courts on the subject of jurisdiction over contracts. And there was good reason for it; for upon that principle it is that a power is asserted over the rights of creditors which involves a mere mockery of justice.
Thus, in the case of Burrows v. Jemino, (reported in 2 Strange, and better reported in Moseley, and some other books) the creditor, residing in England, was cited, probably by a placard on a door-post in Leghorn, to appear there to answer