Very v. McHenry

Tenney, J.

In 1839, the plaintiff, a citizen of this State, performed labor in the British Province of New Brunswick, for Duncan Barber, who resided there. No special agreement between them being shown, the promise of Barber to make payment was implied ; and he was bound to fulfil that promise on the performance of the service by the plaintiff. The liability of the defendant, if any existed, resulted from the receipt of means, from Barber, for the purpose of paying the plaintiff’s and others’ claims. The transaction which created this supposed liability, took place in the Province of New Brunswick, and the contract, under which the defendant is attempted to be holden, must consequently have originated there. It was in New Brunswick, that Barber was bound to discharge his obligation in the first instance, and the defendant having assumed the trust to receive money from Barber and to disburse the same to his creditors in that place, he is to be considered as undertaking there to perform these duties. Lavasse v. Barker, 3 Wheaton, 101; Coolidge v. Poor, 15 Mass. 427; 3 Johns. Ch. 610; Boyle v. Zacharie & al. 6 Pet. 644; Blanchard v. Russell, 13 Mass. 1.

The defendant does not admit, that he was ever under any circumstances liable to the plaintiff. But if it were otherwise he relies upon the certificate of discharge as a bankrupt under the act of New Brunswick, entitled “ an act in relation to bankruptcy,” and “ an act in addition to and in amendment of the law of bankruptcy,” as a defence to this suit. The certificate is in the case and is admitted in its terms to be a full discharge under the bankrupt law of New Brunswick ; but still the plaintiff insists, that it can have no effect to relieve him from liability in this action.

1. The counsel for the plaintiff contends that the acts referred to, were merely temporary, and not intended in their operation to extend to creditors living beyond the limits of the Province; or if they were intended to be permanent laws, and to apply to foreign creditors as well as to those residing within the Province, that they are unjust to our citizens, as withholding from them the benefits, to which domestic creditors were entitled.

It is well understood, that bankrupt laws of another country cannot govern our courts here in regard to contracts made there, excepting from a principle of indispensable comity, extending the right to other nations, which it demands and exercises for itself. When it is manifest that the foreign bankrupt law, was not intended to have effect beyond the jurisdiction of the government, where it was made, courts of another government cannot give it an operation beyond the purposes of its authors. If it were designed however to embrace a larger sphere, and to apply to debts due to those out of the jurisdiction, but its provisions insured to domestic creditors in effect all or more than a fair proportion of the assets of the bankrupt, and at the same time provided for the discharge from all claims foreign as well as others, national comity could not be expected to extend so far, as to require courts to lend their aid in doing the injustice that such a law would occasion, to the citizens of the country where they exercise jurisdiction; where the foreign law must obviously deprive citizens or subjects of another government, of rights, which it secured to its own, it certainly ought not to be respected by tribunals of the former, and in the exercise of the discretion with which they are entrusted, such law would bo disregarded.

The acts of the Province of New Brunswick, relied upon by the defendant, are not in their terms temporary only, or limited to claims of persons residing there at the time, when the aid of their provisions should be sought. From the language used, it may be inferred that they were intended as permanent laws, and to have all the operation and effect, of general bankrupt laws. The notice to be given to creditors is not such as would convey to them the information, that attempts were making to render their debtors subject to the provisions of the law, with so much certainty in all cases as that required by some other bankrupt laws. But the time allowed, is not so short, or the medium so imperfect as to induce the conclusion, that all creditors beyond the boundary of the Province, were not enti-tied to prove their claims ; or that they would be prejudiced, if they exercised the care and diligence which the law presumes. The residence of the plaintiff was so near the Province, that he was secure from loss from this cause, if he observed such care and diligence, and it does not appear that he has suffered by reason of any such supposed defect in the law.

2. It is insisted that if the bankrupt law of New Brunswick is to be treated as a general law applicable to all creditors, as other general bankrupt laws are, effect cannot be given to the certificate of discharge obtained under it, so as to bar a suit in this State in favor of one, who has always been a citizen thereof. Reference has been made to decisions of the Supreme Court of the United States and of courts of States of the Union, touching the effect of discharges under bankrupt and insolvent laws of individual States, upon suits in courts in other States, than those which passed such laws, or in federal courts sitting in the States, where they existed. In many respects the principles applicable to such questions, might be supposed to apply also to general bankrupt laws of another country. But the doctrines of those decisions are by no means uniform ; and the same State has not invariably at different times held the same opinions. In some of the cases, questions touching remedies rather than rights were presented. In others, the power of States to pass such laws under the restrictions of the federal constitution was examined. Judge Story, in his Conflict of Laws of Nations, reviews those opinions without the attempt to reconcile them all; and in section 341, remarks, “under the peculiar structure of the constitution of the United States, prohibiting States from passing laws impairing the obligations of contracts, it has been decided that a discharge under the insolvent laws of a State, where the contract was made, will not operate as the discharge of any contract excepting such as are made between the citizens of the same State. It cannot, therefore, discharge a contract made with a citizen of another State. But this doctrine is wholly inapplicable to contracts and discharges in foreign countries, which must, therefore, be decided upon principles of international law.”

It is believed, that in England and in this country, the law touching the effect of a certificate of discharge in bankruptcy obtained in another government is well settled, provided the discharge in the country where it is obtained is absolutely from the contract itself. The general rule is, that a discharge from the contract according to the laws of the place where it is made, or where it is to be performed, is good every where and extinguishes the contract. This rule was recognized by Lord Mansfield in Ballantine v. Golding, 1 Coop. Bankrupt Laws, 347, 5th Ed. In Potter v. Brown, 5 East, 124, Lord Ellenborough says, “ the rule was well laid down by Lord Mansfield in Ballantine v. Golding, that what is a discharge of a debt in the country where it was contracted, is a discharge of it every ■where.” And this doctrine is firmly established and generally recognized in America. Story’s Confl. Laws, § 335. “ The converse of this doctrine is equally well established, viz. that the discharge of a contract by the law of the place where the contract was not made, or to be performed, will not be a discharge in any other country.” ibid. 342. “ The doctrine of the Supreme Court of the United States in Ogden v. Sanders, 12 Wheaton, 213, is, that a discharge under the bankrupt law of one country does not affect contracts made or to be executed in another. The municipal law of the State is the law of the contract made and to be executed within the State and travels with it, wherever the parties to it may be found, unless it refers to the law of some other country, or be immoral or contrary to the policy of the country, where it is sought to be enforced. This was deemed to be a principle of universal law ; and therefore the discharge of the contract or of the parties, by the bankrupt law of the country where the contract was made, is a discharge every where.” 2 Kent’s Com. sect. 37, page 293, 2nd ed.; Blanchard v. Russell, 13 Mass. 1; Hunter v. Potts, 4 T. R. 182; Smith v. Buchanan, 1 East, 6; Sturgis v. Crowinshield, 4 Wheat. 122; McMillan v. McNiel, ibid. 209; Le Roy v. Crowninshield, 2 Mason, 152, 161, 162; Phillips v. Allan, 8 B. & C. 477.

3. Again it is insisted that this suit is not barred by the discharge of the defendant, because the debt did not arise from an ordinary contract between the parties, but the defendant holds the character of trustee. The funds from which the plaintiff contends he was entitled to payment of his claim against Barber, was received by the defendant originally, acting in a fiduciary character. But he failed to apply those funds on demand, as he was bound to do, so far as the plaintiff was concerned, and was therefore liable for the damages arising from his neglect. It is not contended in behalf of the plaintiff, that the acts of the Province of New Brunswick referred to, by any express provision, exclude trust claims from the general operation of the law; but it is insisted that by the settled law, such exception is made. We have been referred to no decision in which such a doctrine has been held applicable to facts similar to those agreed in the case at bar. In Westcott v. Hull, 2 Brown, 305, it was decided that a legacy payable to the legatee at the age of twenty-one years, or marriage with interest, was a vested legacy, and the executor having become bankrupt, might have been proved under the commission, and his certificate was therefore a bar. In ex parte Holt, in cases in bankruptcy, before the Court of Review, 1 Deacon, 248, a trustee, who was directed to convert the whole of the testatrix’s property into money and place the same at interest upon mortgage for the benefit of the cestui que trusts, employed the money in his business, paying interest to the parties entitled to it and afterwards became bankrupt and obtained his certificate, without any proof having been made under his commission for the amount of the trust money either by himself or the cestui que trusts, who were entirely ignorant of his misapplication of the trust money; he became bankrupt a second time, when the cestui que trusts, discovered that he had not invested the money pursuant to the trusts of the will; it was held that his certificate under the first commission was a bar to any proof for the amount under the subsequent fiat. Sir G. Rose, in this case, said, “ in the whole course of my experience in bankruptcy proceedings, I never remember a case, in which it was decided, that where a trustee was liable before his bankruptcy to a cestui que trust, for the payment of a sum of money, the certificate would not bar the claim.” Judgment for defendant.