The action was against the defendant as the drawer of a bill of exchange.. The bill was dated March 28, 1879, and was drawn upon Samuel Johnston & Co., of Liverpool, for the sum of 2,750 pounds sterling. It was accepted by the drawees, payable in London. The bill and the acceptance were in the following form:
Sixty days after sight of this first of exchange, second and third of sanie tenor and date being unpaid, pay to my order the sum of twenty-seven hundred and fifty pounds sterling for value received and chargfe to account as advised.
R. B. BORLAND.
To Messrs. Samuel Johnston & Co., Liverpool.
No. 393. Payable in London.
SAMUEL JOHNSTON & CO.
12-6 D. S. N.
10 June, 1879.
Indorsed: R. B. Borland. Pay to the order of the Union Bank of London.
Rec’d per pro. of the Union Bank of London.
J. WARREN, Manager.
A further defense consisted in’ the fact that after the bill had been drawn and accepted the acceptors had.been discharged by their creditors under the authority of the English bankrupt laws, in which the plaintiffs proved this indebtedness and received their proportionate part of the composition paid by the acceptors. These facts were proved upon the trial and' were held by the court to create a legal defense in the defendants favor, and accordingly a .verdict for him was directed in the action. Whether this direction can be sustained upon these facts is the controlling point to be determined in the disposition of this motion.
The bankrupt proce'jdings were commenced and carried on under the English bankrupt act of 1869, which was.given in evidence upon the trial. By that act the creditors of the bankrupt have been empowered to discharge him from his debts upon a compromise or composition accepted 'by them from him in ’satisfaction .of their demands, and the proceeding provided for has been declared to be binding on all the creditors whose names and addresses and the amount of the debts due to whom are shown in the statement of the debtor produced to the meeting of the creditors, at which their resolution shall be adoptéd for the adjustment of their demands and the debtors discharged. And by a concession made upon the trial the fact was established that the statement required by the act was made by the debtor and presented at the meeting of his creditors containing the names and addresses of the. creditors to whom the debts were due, including the names of the plaintiffs and this particular debt in question. The creditors who were present, but among whom the plaintiffs were not included, accepted the composition offered by the acceptors of the bill and in consideration thereof granted them a discharge from their debts.
This principle was held to be deduced from the well established rule that the force and effect as well as the validity of a contract are to be determined by the laws of the country where by its terms it is to be performed. It has been often considered by the courts, and this rule has been deemed to be well established both by reason and authority (Smith v. Smith, 2 Johns., 235; Mather v. Bush, 16 id., 233; and Sherrill v. Hopkins, 1 Cow., 103, 108), where it was stated “ that the law of the place where the contract is made is to control it, unless it appear upon the face of the contract that it was to be performed at some other place, or was made with reference to the laws of some other place.” (Hibernia Nat. Bank v. Lacombe, 84 N. Y., 367, 378.)
Put neither the Eederal courts nor the courts of this State in their more recent adjudications, nave sanctioned this broad principle, giving general effect to discharges obtained by a debtor under the provisions of the English bankrupt laws. It has been considered more particularly with reference to the effect of discharges obtained under the insolvent laws of the States, and an effort has been made for that reason to distinguish these adjudications from the general principle already mentioned, because of the restraint imposed upon State legislation by the Eederal Constitution. Put this restraint is applicable only to contracts entered into before, the enactment of the insolvent law of the State, relied upon as affecting them. Where the contract is entered into before the enactment of the State insolvent law, there the State has no authority to discharge it in that manner, for it can pass no law impairing the obligation of a contract. Put where the contract is entered into subsequent to the passage of the insolvent law, then the Constitution of the United States in no way interferes with the act, but its effect is to be other
The principle upon the effect of which the State insolvent laws have been so far restrained in their operation as to exclude debts owing to and contracts in favor of citizens of other States, is “ that insolvent laws have no extra-territorial operation upon the contracts of other States; that the principle is applicable as well to the discharges given under the laws of the States as of foreign countries; and that the anterior or posterior character of the law under which the discharge is given with reference to the date of the contract, makes no discrimination in the application of the principle.” (Ogden v. Saunders, 12 Wheat., 213, 272.) And if this principle can properly be made applicable to the insolvent laws of the States, the reason upon which it has been founded will render it equally as applicable to the discharge of a debtor under the bankrupt laws of a foreign country, and it was so considered in the case just referred to.
The English rule was regarded as having grown up under the policy of Great Britain as a commercial nation, but it was declared in the prevailing opinion of the court to be “perfectly clear that in the United States a different doctrine has been established.” (Id., 360.) And for that reason a creditor in the' United States may proceed to seize and appropriate the property of the debtor to the payment of his debts, when that may be found within the jurisdiction of any of the tribunals of this country, although he may have been discharged as a bankrupt by proceedings instituted and carried on elsewhere. (Saunders v. Williams, 5 N. H., 213.)
While, therefore, the law of the place of the contract is in general terms to have the effect attributed to it as that has been already stated, still it is not entitled to be extended so far as to maintain the legality and effect of a foreign bankrupt discharge against creditors to whom the bankrupt may be indebted, who are at the time citizens and residents of this State. ' The English rule has been here so far abridged as to render the discharge itself inoperative against such creditors, and consequently the proceedings which have been relied upon; although they conformed to the English bankrupt act, in and of themselves constituted no defense for the reason that they were not binding upon the plaintiffs as creditors.
The plaintiffs not being bound by the bánkrupt proceedings were under no obligation either to prove their debt or to accept the composition projiosed to be paid by the acceptors of this bill. They did, however, voluntarily make themselves parties to the bankrupt proceedings by proving the debt now in suit and accepting the composition offered by the bankrupt, and in that manner, without being obliged so to do, they released and discharged the acceptors of this bill. In taking these proceedings they brought themselves within the authority of the case of Gardner v. Oliver Lee's Bank (11 Barb., 559). There the creditors in a similar manner made
Motion for new trial' denied. Judgment ordered for defendant on verdict.
*.
Ante, page 363.