Estate of Coates v. Hillard

By the Court, Roosevelt, J.

Is the foreign creditor, in case of a non-resident debtor attachment, entitled to a dividend ? The judge at special term, although with some hesitation, held that he was not. From that decision an appeal is taken to the general term.

The trustees contend that, as the proceeding by attachment is a statutory remedy, and as the statute expressly limits the right of instituting it to the resident creditor, (unless the non-resident’s claim originated here,) and contains no express provision entitling the foreign creditor afterwards to come in and share in the distribution of the assets, the foreigner cannot be admitted ; and that the exclusion, thus inferred, is in accordance with the general policy of our laws, by which, it is said, foreign assets within the jurisdiction of our courts, are always reserved for the exclusive benefit of domestic creditors.

The latter branch of the proposition, as I shall presently show, is not true in point of fact—and the former would seem to be felo de se. It first assumes that the language of the statute is to be the sole guide; and then, when that language fails to make the exception contended for, seeks to supply the omission by a forced inference.

The statute in express terms, (so at least the counsel contend,) excludes the non-resident from becoming an attaching creditor in fact: and does not the same statute, in equally and more express terms, declare that “ any other creditor,” that is, any creditor other than the one first commencing, may, when the proceedings have been once duly instituted, come in and petition “ to be deemed an attaching creditor ?” (§ 39.) And that such creditor, so coming in, “ shall be entitled to the same benefits and advantages, as the creditor at whose instance such attachment originally issued ?” ($41.) And does not the statute further declare that the trustees, to be appointed in pursuance of it, are. “ to be trustees for all the creditors of such debtor ?” At whose instance, moreover, are the proceedings of the officer, in case of alledged error, to be reviewed 1 The statute says again, “ at the instance of the debtor or of any creditor.” And when it prescribes the notice to be published by the trustees, announcing their appointment, it declares that they, the trustees, “ shall therein [among other things] require all the creditors of such debtor to deliver them respective accounts and demands, &c. by a day to be therein specified.” And when the distribution takes place, among whom does the statute say it shall be made 1 “ Among all those who shall have exhibited them claims as creditors and whose debts shall have been ascertained, in proportion to their respective demands.”

Thus all, at their option, may be deemed attaching creditors; all are allowed to question the proceedings: all are to have trustees for their benefit; all are to be required to present their claims; and all are to be invited to participate in the property of the common debts of all: and yet, when they accept the invitation, thus addressed to all, they are to be told that by “ all” was meant, (in some cases at least,) two out of two hundred! Such a mode of expressing ideas, it seems to me, would be a mere mockery, too gross for sensible legislators to have indulged in; unless we suppose them to have adopted the Talleyrand maxim, that language is the instrument, not of conveying, but of concealing our thoughts.

This statute too, it should be borne in mind, in its present form, was not a hasty enactment, requiring judicial legislation to " supply its omissions. It had passed under the review—I may add the deliberate, cautious, capable review—of three of the ablest masters of legal language, appointed for the express purpose of revising and correcting any inaccuracy in the form of the then written law of the state. Every word was deliberately weighed, and every condition, incident to the matter in hand, fully considered. The revisers well knew, and they could not but have remembered, that they were dealing with the business of a commercial people—the most commercial people in the Union—a people whose foreign commerce, in proportion to their numbers, is probably the greatest in the world. They knew that a New-York debtor, whether resident or non-resident, must often have foreign creditors; and that not unfrequently the mass of his property would be the merchandise, bought on time from such creditors. Had they intended then to exclude the foreign creditor from all share in the insolvent debtor’s estate, they would have said so, in express terms. Common frankness required it at their hands. And when they' used the word all, and repeated it in so many forms, we must presume they intended all that the word imports.

As to the question of policy, it is no doubt true that in cases of solvency, as well as of insolvency, the law guards the domestic creditor. But in what manner? Not by denying to the foreign claimant his equal share, but by reserving to the domestic tribunals their proper jurisdiction over the distribution of the domestic assets. Thus a foreign assignee, appointed by and amenable to a foreign court, cannot in that character withdraw the debtor’s assets from our jurisdiction and transfer them to his own domicil; nor, in case of death, can a foreign executor or administrator, meddle with the property of the deceased, within our limits, until he has submitted himself to, and obtained letters testamentary or of administration from the courts of this state. (2 R. S. 70, §§ 6, 8.) Our courts insist, and rightfully, that the administration of a debtor’s assets, within our limits, where our own citizens have an interest in them, shall be here and not elsewhere. But does it follow that in protecting our own citizens we must do injustice to the citizens of other countries ? In the case of a deceased debtor, where, as in the case of a nonresident or insolvent, the estate is also assigned by operation of law, to trustees, under the name of executors or administrators, was it ever yet contended that foreign debts were not to participate 1 And yet the language of the law (2 R. S. 87) and the reason of the thing are no stronger in the one instance than in the other.

As a question of morals, there is something most revolting in the position contended for. If judicially established, it must go the entire length of appropriating the whole of a non-resident debtor’s estate within our limits, to our own creditors, to the exclusion of the foreigner, even when every dollar of that estate had been obtained from abroad, and perhaps from that very foreigner who asks a dividend, and without a dollar being paid on its purchase. And for such an act of unmitigated selfishness we are to have invoked the sacred name of charity— which, it is said, begins at home !

It is next contended that even if a foreign creditor is, under ordinary circumstances, entitled to a dividend, the petitioner in o this case has no such right, his debt being “ absolutely extinguished” by the bankrupt discharge in Great Britain.

I do not so understand the English bankrupt law. The debt is in no sense absolutely extinguished. It continues in full force as to all the existing property of the debtor. A subsequent promise even, may be founded on it, as a sufficient consideration in law, to bind his future earnings. The discharge presupposes, as an essential qualification or condition, that all his existing property, wherever situated, is to be appropriated to his existing debts. What is the assignment but a trust created for the benefit of creditors ? And how can there be creditors without credits 1 To say that the debt is absolutely extinguished, is to say that the creditor, as creditor, is also absolutely extinguished. And then we are presented with this absurd consequence, the creation of a trust for the benefit of those whose annihilation is declared in the same breath.

No suit, it is said, can be maintained upon this claim, either here or in Great Britain. If, by suit, is meant one particular kind of action, the proposition may be true; but if the term is to be taken in its comprehensive sense, the proposition is not true. A suit in equity, founded on such a debt, may undeniably be maintained against the assignees abroad; and to say that such a suit cannot be maintained, in like manner, against the trustees here, is merely begging the question.

The true view of the whole subject appears to be this: Our policy and that of Great Britain, agree in dedicating the insolvent’s estate, wherever situated, to the payment of the insolvent’s debts. In its administration, however, we insist on the control of our own courts over that portion which happens to be within our own limits. We take this stand, not to defeat, but to insure justice; not to rob the foreign creditor, but to protect the rights of all the creditors. We do it to enable our courts to marshal the assets, and to correct, if necessary, inequalities abroad, by proper compensating adjustments at home. If any creditor has received a dividend from the English assignee, we can, and ought to compel him to stand aside, and wait till others, less favored, have received as much, in proportion, from the American assignee; or, which leads substantially to the same result, we can compel every creditor, seeking a dividend here, first to transfer, for the general benefit, all his claims on the fund abroad. (2 R. S. 36, § 11.)

The opposite doctrine, in addition to its harsh and repulsive character, in respect of foreign creditors generally, would, in one case, at least, be attended with a most absurd consequence in reference to our own citizens. A citizen of this state, residing for the time in Paris, might receive a dividend in London, under English law, if the debtor had assets there, and be denied a dividend in New-York, under American law, if the debtor had assets here. An alien, too, temporarily residing in the state, would be admitted to share in the distribution, while a citizen, who chanced to be temporarily residing abroad, would (and that under the plea of protecting his rights) be entirely excluded; thus placing, in a matter of mere justice, the comparatively unimportant circumstance of residence, however temporary and dependent on fluctuating will and caprice, above the substantial claims of nativity and citizenship.

[New-York General Term, June 11, 1852.

Edwards, Mitchell and Roosevelt, Justices.]

Such an interpretation, of an act of the legislature, could only be warranted, in a case where language had been employed, so clear and imperative as to admit of no other meaning; certainly not in a case, in which, to arrive at the result contended for, “ all a man’s creditors,” however frequently repeated, must be construed, by implication, to exclude even a native of the state, if temporarily non-resident.

My conclusion, therefore, is, that an order should be entered, declaring the right of all the creditors of Coates & Co. whether resident or non-resident, to participate in the assets, which have or may come to the hands of the trustees: provided that, in adjusting the dividends, due regard shall be had to the assignment made under the English bankrupt law, so that no creditor, whether here or abroad, shall receive more than his equal proportionate share, of the entire estate of the debtors, wherever it may be.

Ordered accordingly.