Fall River Iron Works Co. v. Croade & Trustee

Morton J. drew up the opinion of the Court. Scarcely any subject has been more frequently before our Court or commanded more of its attention, than that of trust assignments. And it may reasonably be presumed, that the principles applicable to them are as well settled as any in our jurisprudence. Our laws of attachment and other local legislation may have given to them some peculiarities. But a long course of judicial decisions has reduced them to a system which is, in itself, symmetrical, and, in practice, operates favorably. Assignments by insolvent debtors in trust to pay their debts, either in a specified order or pro ratá, are not deemed of sufficient validity to protect the assigned property from the attachments of the creditors of the assignor. There is no adequate consideration ; and without this, no insolvent debtor can so dispose of his property as to place it beyond the reach of his creditors. The validity of such assignments must de pend upon the assent of the creditors. Nothing being paid by the assignees, the consideration, as to them, must consist in their covenants to execute the trusts. The creditors are not obliged to become parties to them. Nor is their assent to their provisions to be presumed. They may prefer to resort to attachments. The option is to be exercised by them and to be evidenced by some overt act on their part. If they decline or omit to join in the assignment, there are no cestui que trusts, and so no trusts to be executed, and the consideration entirely fails. All the objects of the assignment are defeated, and the whole proceedings prove abortive, leaving the assigned property to be taken by the creditors in such way as they may deem expedient. If the specific property remains, it may be attached in the ordinary method. If the assignees take possession of it, and especially if they convert it into money, it may be attached in their hands by the process of foreign attachment, and if the choses in action remain uncollected, they may be attached by the same process, in the hands of the debtors of the assignors Widgery v. Haskell, 5 Mass. R. 144 ; Marston v. [16] Coburn, 17 Mass. R. 454 ; Quincy v. Hall, 1 Pick. 358, Harris v. Sumner, 2 Pick. 129 ; Viall v. Bliss, 9 Pick. 13 ; Russell v. Woodward, 10 Pick. 408 ; Foster v. Saco Man. Co., 12 Pick. 451. If the creditors elect to become parties to tbs assignment, and their debts amount to as much as the assigned property, this will complete the intended consideration, render the conveyance effectual, even against other creditors, and vest in the assignees the whole property, whether real, or personal, or chases in action. This rests upon the established principle, that an insolvent debtor has a legal right to convey his estate to whom he pleases, for a valuable consideration, although it may benefit some and prejudice other of his credi tors. Hatch v. Smith, 5 Mass. R. 42 ; Hastings v. Baldwin, 17 Mass. R. 552; Lupton v. Cutter, 8 Pick. 298; Gore v. Clisby, 8 Pick. 555. If the debts of the creditors who assent to the assignment, are of less amount than the property assigned, then they will constitute a good consideration pro tanto, and give the assignees a right to retain to the amount of such debts. But the balance remaining in their hands will be liable to attachment by the trustee process. If after satisfying the claims of all the parties to the assignment, any of the property remains in its original situation, or if any of the chases in action remain uncollected, they may be attached by the appropriate processes. Dennie v. Hart, 2 Pick. 204 ; Andrews v. Ludlow, 5 Pick. 28 ; Ward v. Lamson, 6 Pick. 358 ; Webb v. Peele, 7 Pick. 247. In the case at bar, the indentures, which were of two parts and intended to be executed by two parties only, were in fact merely executed by the assignor and assignees. No creditors executed them professedly as such. One of the assignees was also a creditor ; and if his signature be deemed sufficient to make him a party in the character of a creditor, it will have no effect upon the decision; for the assigned property was much greater than was needed to pay the whole of his debt, without having recourse to that in the hands of the trustee. The agreed fact, that the defendant informed some of the preferred creditors of his intention to make an assignment, [17] and showed them a sketch of the form in which it was to be made, did not make them parties to it; nor is it evidence of their assent to its provisions. We do not intend to decide whether it is necessary, that creditors should actually sign the indenture, to make it binding upon them, or what evidence of their assent may be- admissible. But as neither the debtor nor the creditors supposed that their assent was necessary, or that they had the option to withhold or grant it, and as the sole purpose of informing them was to prevent surprise and a shock upon them, we can see nothing tending to show their assent. These well-settled principles seem to be applicable to and decisive of the question before us, unless another objection taken by the assignees shall prove to be well founded. The assignment was executed in the State of Rhode Island, and the parties to it were inhabitants of that State. It is contended, that by the laws of that State it was valid and effectual to vest the property in the assignees, and that a transfer of personal property according to the laws of the State where the parties reside, is good everywhere, and passes all such property whether situated within or without the same jurisdiction. We have neither the means nor the inclination, to decide upon the conformity of this mode of conveyance to the laws of another State. It is not necessary to our present purpose to do so. For even if it would there be deemed to be legal, we think it cannot operate in this State to defeat an established remedy by one inhabitant of this State against another. We need not here consider the question, whether a conveyance of personal property legal in the place where the parties reside, may be avoided elsewhere. This assignment would have been valid in this State, and doubtless would have passed property to the amount of the assignee’s debts. If avoided at all, it must be on the ground of fraud. Now whether it shall be deemed fraudulent or not, must depend on proof, produced before our courts, and must be governed by our rules of evidence and our laws. The trustee is an inhabitant of this State. The plaintiff is entitled to all the rights of a citizen; for the charter of incorporation was granted [18] by our legislature; its place of business is fixed here; the corporators are supposed to be inhabitants of this State; and if a corporation can be said to have a local habitation, it must be considered as belonging here. Different states adopt different systems of policy touching the relation of debtor and creditor, and the right and power of the one over the person and property of the other. Each prescribes its own forms of judicial proceedings, its own modes of recovering demands and enforcing judgments, and its own regulations for securing the property or the persons of debtors. These are supreme within the state, and cannot be affected by the laws of other states. Although in the construction of instruments and in determining the legal effect of them, the lex loci or the lex domicilii may, according to circumstances, govern, yet in the remedy and the mode of enforcing it, we are always governed by our own laws. We have adopted our own system of attachments. The plaintiff by it had a right to avoid the assignment and arrest the debtor’s property in the hands of the trustee. Can the defendant, by an act done in another State, without the knowledge or consent of the plaintiff, defeat this right, and thus entirely prevent the collection of a just debt ? We know of no principle of law or comity which requires us to give this advantage to citizens of other States over our own, or to make our processes of attachment subordinate to the voluntary insolvent laws of private individuals of other States. The case of Ingraham v. Geyer, 13 Mass. R. 146, cannot be distinguished from this by the slightest shade, and unless it be overruled must govern it. The more recent case of Borden v. Sumner, 4 Pick. 265, although the facts do not fully appear in the report, is exactly in point. The only distinguishing feature is in favor of the case at bar ; for in that, the plaintiffs, as well as all the parties to the assignment, were inhabitants of Rhode Island. See also Dawes v. Boylston, 9 Mass. R. 337 ; Orr v. Amory, 11 Mass. R. 25 ; Meeker v. Wilson, 1 Gallison, 419. The same doctrine nos even in a stronger case been adopted by the Supreme Court of Maine Fox v. Adams, 5 Greenl. 245. [19] The same principle has been applied to assignments under the bankrupt laws of foreign states. This subject was learnedly investigated and entirely exhausted, in reference to authorities and in argument, in Blake v. Williams, 6 Pick. 286. Trustee charged.