Dehon v. Foster

Bigelow, C. J. The authority of this court as a court of chancery, upon a proper case being made, to restrain persons within its jurisdiction from prosecuting suits either in the courts of this state or of other states or foreign countries, is clear and indisputable. In the exercise of this power, courts of equity proceed, not upon any claim of right to interfere with or control the course of proceedings in other tribunals, or to prevent them from adjudicating on the rights of parties when drawn in controversy and duly presented for their determination. But the jurisdiction is founded on the clear authority vested in courts of equity over persons within the limits of their jurisdiction and amenable to process, to restrain them from doing acts which will work wrong and injury to others, and are therefore contrary to equity and good conscience. As the decree of the court in such cases is pointed solely at the party, and does not extend to the tribunal where the suit or proceeding is pending, it is wholly immaterial that the party is prosecuting his action in the courts of a foreign state or country. If the case stated in the bill is such as to render it the duty of the court to restrain a party from instituting or carrying on proceedings in a court in this state, it is bound in like manner to enjoin him from prosecuting a suit in a foreign court. 2 Story on Eq. §§ 899, 900. Mackintosh v. Ogilvie, 3 Swanst. 365, n., & 4 T. R. 193, n. Carrón Iron Co. v. Maclaren, 5 H. L. Cas. 416, 445. Maclaren v. Stainton, 16 — 551 — 3eav. 286. Massie v. Watts, 6 Cranch, 158. Briggs v. French, 1 Sumner, 504. Dobson v. Pearce, 4 Duer, 142; S. C. 2 ICernan, 156. All that is necessary to sustain the jurisdiction in such cases is, that the plaintiff should show a clear equity, and that the defendant should be subject to the authority and within the reach of the process of the court. Inasmuch as the defendants in the present case are citizens of and residents in this commonwealth, there can be no doubt that the jurisdiction of this court over them is plenary. We have then only to inquire whether the case stated in the bill is sufficient to warrant us in enjoining the defendants Foster & Co. from the further prosecution of the action commenced by them in the courts of the state of Pennsylvania, so far as to prevent them from taking by attachment to their own use, in payment of a debt due to them from insolvent debtors under the laws of the Commonwealth, money which is owing to such insolvent debtors from persons resident in Pennsylvania. It is obvious that this inquiry raises no question involving a conflict of rights between citizens of this and another state. It is simply a controversy as to the relative rights of citizens of our own state to personal property belonging to insolvent debtors, who are also domiciled here. Nor is the validity of a foreign law, or of the lien acquired under it, in any manner called in question. On the contrary, the case proceeds on the ground that the defendants, if allowed to proceed with their action, will perfect the lien which is now inchoate under their attachment, and will thereby establish a valid title to the property of the insolvent debtors under the laws of Pennsylvania. Looking then at our own laws to ascertain which of the two parties to this suit has a paramount right or superior equity to the debts due to the insolvents from persons residing out of the state, there would seem to be but little if any room open for doubt or controversy. The fundamental principle of the insolvent laws of this commomyealth is, that all the property of the debtor shall be taken and equally distributed among his creditors. To this end it avoids all preferences, and defeats or sets aside all attachments in favor of particular creditors, so that the surrender — 552 — of the property to the assignees may be universal and complete. To this entire transfer of the debtor’s property, with the exception of the few articles by law exempted from attachment, there is no limitation. It extends to all his property and assets, wherever situated. That it was intended to embrace property in other states and countries, is shown by the provision which requires the debtor to do all acts necessary to give the assignees the rights of those claiming under a voluntary assignment of his estate, “ especially of any part thereof which is without this state.” Gen. Sts. c. 118, § 60. Now it is clear that the act of the defendants in causing the property of the insolvent debtors to be attached in a foreign jurisdiction tends directly to defeat the operation of this law in its most essential features. It prevents a portion of the property of the debtors from coming to their assignees to be equally distributed among their creditors, and gives a preference to certain of their creditors, by which they will obtain payment of their debt in full. It is therefore an attempt by those creditors, citizens of this state, to defeat the operation of our laws, to the injury of the other creditors of the insolvents. This is manifestly contrary to equity. The defendants, being citizens of this state, are bound by its laws. They cannot be permitted to do any acts to evade or counteract their operation, the effect of which is to deprive other citizens of rights which those laws are intended to secure. Certain it is that they could not in any manner or by any process take from the assignees of an insolvent debtor property belonging to him within this state, and appropriate it to the payment of their debt in full. To prevent such appropriation, if the law furnished no adequate and complete remedy, this court would interfere by suitable process in equity. We are unable to see any reason for withholding such interference, merely because our citizens seek to accomplish the same purpose by resorting to a foreign jurisdiction, and with the aid of the laws of another state or country. An act which is unlawful and contrary to equity gains no sanction or validity by the mere form or manner in which it is done. It is none the less a violation of our laws, because it is effected through the instrumentality of a process which is lawful in a foreign tribunal, — 553 — By interposing to prevent it, we do not interfere with the jurisdiction of courts in other states, or control the operation of foreign laws. We only assert and enforce our own authority over persons within our jurisdiction, to prevent them from making use of means by which they seek to countervail and escape the operation of our own laws, in derogation of the rights and to the wrong and injury of our own citizens. It was urged very strenuously by the learned counsel for the defendants, that this bill cannot be maintained, because the statutes of this commonwealth regulating the assignment and distribution of insolvent estates have no extra-territorial effect or operation, and cannot be held to impair or affect a lien or attachment which is valid by the laws of the place where it is created or made; in other words, that no act or proceeding which is legal where the insolvent laws of this state do not operate can be deemed to impair their effect or to work any prejudice to creditors. But this argument seems to us to proceed on an unfounded assumption. No doubt it is true that the statutes of this commonwealth ex proprio vigore have no effect or operation in other states. But it is also true that, by the comity of states and nations, the laws of one country are allowed to a certain extent to control the rights of persons and property in other countries. The general principle is everywhere recognized, that personal property has no locality, and that the laws of the domicil of the owner, and not those of the place where it happens to be, furnish the rule by which its disposition and transfer are regulated and governed. This, in the language of Lord Loughborough, “ is not only the law of England, but of every country in the world where law has the semblance of a science.” This principle is, however, to be taken with the reasonable limitation that, as the law of a country can operate beyond its limits only by comity, it shall not be allowed to have any effect to the injury of the citizens of the state whose laws are invoked to carry it into effect. This is the principle recognized by the decisions of this court, as well as by those of the courts of Pennsylvania. Dawes v. Head, 3 Pick. 128. Blake v. Williams, 6 Pick. 286. May v. Breed, 7 Cush. 15, 42 Milne — 554 — v. Moreton, 6 Binn. 360. Lowry v. Hall, 2 Watts & S. 131. Speed v. May, 17 Penn. State R. 91, 94. It follows, as a necessary consequence of this well settled principle, that personal property of an insolvent debtor domiciled in this state, which is situated in Pennsylvania, as well as debts due to him from citizens of this state, would vest in the assignees appointed under our insolvent laws, with power to take possession of and collect them either in their own names or in the name of the insolvent, if they were not held or attached by virtue of a process or lien in favor of a creditor which would be valid under the laws of that state. The result, therefore, is, that if it be true, as is contended by the counsel for the defendants, that the attachment made by them of the debt due to the insolvent debtors in Pennsylvania is valid and binding, and vests in them a right superior to that conferred by the assignment under our laws on the plaintiffs as assignees, it is the act of the defendants which defeats the operation of our laws in that state, and prevents the assignees from obtaining the money for equal distribution among all the creditors. It is not the infirmity of our law, but the interposition of the defendants, which operates to deprive the assignees of the power of collecting the debt due to their insolvents in the state of Pennsylvania. So that the object of this suit is to compel the defendants to desist from the prosecution of a suit, the direct effect of which is to defeat the operation of our insolvent laws, and to withdraw from creditors money which would otherwise be equally distributed among them. It would therefore seem to be clear that it is the duty of this court, having regard to the equities between the parties to this suit, as created and fixed by our own laws, to restrain the defendants from any attempt to pursue their attachment further in the courts of Pennsylvania. That such an exercise of the equity jurisdiction of this court is important and necessary to the full and beneficial operation of our insolvent laws, cannot be doubted. The intimate commercial and business relations which subsist between different states of the Union áre such, that it often happens that the property and assets of a debtor are situated in states other than that — 555 — of his own and his creditors’ domicil. In such cases, if there was no mode in which domestic creditors could be restrained from seeking, by the use of the process of other states, to appropriate the property of their debtors to the payment of their debts, it is obvious that the essential feature of equality of distribution among all the creditors of an insolvent debtor would be defeated, and a system of preferences would exist in direct contravention of the policy of our laws. Nor is the exercise of such a jurisdiction as the bill seeks wholly without precedent. In the case of Mackintosh v. Ogilvie, 4 T. R. 193, n., & 3 Swanst. 365, n., this precise point was adjudicated. In that case, the plaintiff was assignee of the bankrupt; the defendant, a creditor, who before the bankruptcy went into Scotland and made “ arrestments ” of debts due to the bankrupt from persons there. Lord Hardwicke, in giving judgment, said it was “ like a foreign attachment, by which this court will not suffer a creditor to gain a priority.” The jurisdiction was exercised and an injunction issued in that case on the ground that it was against equity for a creditor to evade the laws of his own country, and thereby to obtain a preference to the injury of the other creditors. The authority of this adjudication “ by the most consummate judge who ever sat in the court of chancery,” and who is said to have perfected “ English equity into a symmetrical science,” has never been denied or called in question. It certainly seems to rest on the plainest principle of equity. To the suggestion that the attachment made by the defendants was prior in point of time to the institution of the proceedings in insolvency, the answer is, that, on the facts stated in the bill, such priority does not impair the plaintiff’s equity. We doubt very much whether the fact would be at all material, even if the attachment was made bona fide, and without any intent to defeat the operation of our insolvent laws; because it tends to contravene the clear intent of- our statutes, which aim to vest in the assignee all the property of the debtor which could have been assigned by him or taken on execution against him at the time of the commencement of insolvent proceedings, “ although the same is then attached on mesne process as the property of — 556 — the debtor.” It is true that it does not in terms provide that attachments in other states shall be dissolved, because such an enactment would be without the force of law, as against attachments which are valid according to the laws of the place where they are made. But they nevertheless operate to divert property from the assignees and create preferences, and so are against equity, as between citizens of our own state. But aside from this, it appears in the present case, by the allegations in the bill, that the defendants, when they instituted process in Pennsylvania, and made their attachment, knew that the debtors were insolvent, and had reason to believe that proceedings in insolvency were about to be instituted against them, and caused the attachment to be made with an intent to obtain a preference over other creditors, and to avoid the operation of the insolvent laws of this commonwealth. Under such circumstances, priority gives no equity to the defendants. The purpose to interfere with and prevent the proper distribution of the property of the -nsolvent takes away all claim to equitable consideration which might exist when priority was obtained in good faith. Smith v. Hill, 8 Gray, 574. It was urged, as an objection to the exercise of the authority to restrain the defendants from the further prosecution of their action, that the effect would be to enable foreign creditors to step in and appropriate the property by attachment to the payment of their debts, and thereby not only gain a preference over attaching creditors residing in this state, but also prevent the property from passing to the assignees. This objection would be entitled to very grave consideration, if it appeared that there were creditors residing out of the jurisdiction of this court, who could avail themselves of the laws of Pennsylvania to secure their uebts by attachments. But no such fact appears by the bill, and on demurrer we cannot assume that it exists. JDemurrer overruled.