Proctor v. National Bank

Field, C. J. We think it appears that the notes were actually sold and delivered by the defendant to the Continental National Bank of New York ; that the intention of the defendant in making the sale was to obtain an advantage over the other creditors of E. & A. H. Batcheller and Company; that this intention was known to the Continental National Bank at the time it purchased the notes, and that it bought them for the purpose, among others, of enabling the defendant to carry this intention [226] into effect. The defendant knew that Batcheller and Company were insolvent in fact, and might be adjudged insolvent debtors in this Commonwealth, and that, if this were done before it obtained judgment in Ohio, it might be enjoined from prosecuting the action in Ohio to judgment; and in order to avoid this, it sold the notes to the Continental National Bank. This sale included all the rights which the defendant had to prosecute the action then pending in Ohio. The agreement of the defendant with the Continental National Bank to pay to it any deficit, if it should not recover the full amount of the notes, and also to pay to it a sum equal to all its costs, charges, and expenses, is an agreement collateral to the sale, and does not affect the title of the Continental National Bank to the notes, or the absolute right of control,' which, after the sale, it had over the action pending in Ohio. When, therefore, this bill was brought, an injunction against the defendant’s prosecuting the action in Ohio would have been ineffectual, because the defendant had no control over the action. It has been held in Lawrence v. Batcheller, 131 Mass. 504, that if the defendant had prosecuted the suit in Ohio to judgment, and the judgment had been satisfied out of the funds there garnisheed, the plaintiffs could not recover of the defendant the amount of the judgment. It is also settled that if the defendant, after Batcheller and Company had been adjudged insolvent debtors, had retained control of the suit, the plaintiffs could have obtained an injunction against the further prosecution of it by the defendant. Dehon v. Foster, 4 Allen, 545, and 7 Allen, 57. Cunningham v. Butler, 142 Mass. 47. Cole v. Cunningham, 133 U. S. 107. If there seems to be any inconsistency in principle between these two classes of cases, it arises, in part at least, from the limitations imposed by the Constitution of the United States upon the power of the Commonwealth to pass laws which relate to bankruptcies, and laws which will impair the obligation of contracts, and from a want of jurisdiction over citizens of other States. It also has been contended, that, as by Article IY. Section I. of the Constitution of the United States, full faith and credit must be given to the judicial proceedings of other States, it is beyond the power of the Commonwealth to declare void an [227] attachment of property made in another State pursuant to its laws, or to make such an attachment inure to the benefit of an assignee in insolvency of a citizen of Massachusetts. The Commonwealth by its statutes has 'not undertaken to prohibit under a penalty Massachusetts creditors from selling their claims to the citizens of other States when the debtors, being citizens of Massachusetts, are in fact insolvent, and intend to take the benefit of its statutes relating to insolvency, nor do the statutes provide that the consideration received by the vendors, when they sell such claims, shall be held in trust for the benefit of the estate in insolvency of such debtors, or that assignees in insolvency may recover anything of the vendors on account of such sales. The statutes are entirely silent with reference to the effect of the proceedings in insolvency upon any such transaction as is shown in the case at bar. It is not, therefore, now necessary to consider how far it is within the legislative power of the Commonwealth to prohibit such a transaction, or to provide civil remedies which shall enable assignees in insolvency to recover, for the benefit of estates in insolvency, compensation for any property of the insolvent debtors which Massachusetts creditors may obtain by prosecuting suits against such debtors in other jurisdictions, or by selling their claims to persons not citizens of the Commonwealth. Jurisdiction in equity was maintained in Dehon v. Foster wholly on the ground that there was no remedy at common law, or under the statutes; and that, as it was against equity that the defendant, who was a citizen of Massachusetts, should obtain an advantage over other creditors by his proceedings in another State, the court could properly prevent this by the control which it had over his person, and this was done by injunction. But if, by a transaction in another State, a Massachusetts creditor of a Massachusetts insolvent debtor acquires under the laws of that State an absolute title to property situated there, and this title under the laws of that State is paramount to that of the assignee in insolvency, the property, or its value, cannot, under existing laws, be recovered here by the assignee. The case at bar falls within the principles declared in Lawrence v. Batcheller, ubi supra. The defendant sold the notes, and received the proceeds of the sale in New York, before the [228] assignment in insolvency took effect, and thereafter retained no control over the suit in Ohio; an injunction against the defendant’s prosecuting that suit cannot be issued, because the Continental National Bank of New York has acquired the right to prosecute it for its own benefit; and the proceeds of the sale, or of the suit, cannot be recovered of the defendant. The bill cannot be maintained for the purpose of enjoining the defendant from proving against the estate in insolvency of Batcheller and Company the notes which it. still holds, or of deciding the terms on which, if at all, such notes may be proved, because it is not a bill brought under the Pub. Sts. c. 157, § 15. If the defendant intends to offer these notes for proof, it is for the Court of Insolvency to pass upon the allowance of the claim before the supervisory power of this court can be invoked. We have not considered whether, on the facts of this case, the plaintiffs must not be held to represent, only the insolvent debtors, on the ground that, as the debtors have deposited in the Court of Insolvency the money necessary to carry out the compromise which has been sanctioned by that court, and have obtained their discharge, whatever the assignees would recover, if the bill were maintained,' must be paid by them to the debtors. For these reasons, a majority of the court are of opinion that the Bill must be dismissed.