Strasburger v. Dodge

Mr. Justice Shepard delivered the opinion of the Court: 1. In the view that we have taken of the question upon which this case must turn, it is unnecessary to review the evidence introduced by the respective parties. On the one hand, it is sufficient to say that the appellants have been decreed to be bona fide creditors of Strasburger to the extent of the judgments rendered in their favor respectively; and there is nothing to show that they entered into any conspiracy to defraud the opposing creditors. On the other hand, it may be conceded that Strasburger was insolvent; that all of 1ns visible assets, wrorth little more than one-third of the amount of his indebtedness, had been seized by the marshal under executions issued upon the confessed judgments; and that he confessed each of said judgments for the purpose of enabling the appellants to obtain an advantage or preference over all other creditors. Unless prohibited by statute, an insolvent debtor may lawfully prefer one bona fide creditor to others, by way of mortgage, pledge, sale, confession of judgment, or assignment. No principle was more firmly established at common law. The question, then, to be considered and determined is, whether that right to prefer, as exercised in this case, is within the prohibition of the Act of Congress approved February 24, 3.893, and entitled “An act relative to voluntary assignments by debtors for the benefit of creditors, in — 46 — the District of Columbia, and to amend section seven hundred and eighty-two of the Revised Statutes of the United States, relating to the District of Columbia.” The three sections of the act that have any bearing on this case read as follows: “Sec. 1. That in all cases of voluntary assignments hereafter made in the District of Columbia for the benefit of creditor or creditors, the debtor or debtors shall annex to such assignment an inventory, under oath or affirmation, of his, her, their, or its estate, real and personal, according to the best of his, her, their or its knowledge, and also a list of his, her, their or its creditors, their respective residences and places of business, if known, and the amount of their respective demands; but such inventory shall not be conclusive as to the amount of the debtor’s estate, but such assignment shall vest in the assignee or assignees the title to any other property except legal exemptions, where legal exemptions are reserved by the deed of assignment, belonging to the debtor or debtors at the time of making the assignment and comprehended within the general terms of the same. The assignee in every such assignment shall be a resident of the District, and every such assignment shall be duly acknowledged and recorded in the land records of the District of Columbia. “Sec. 2. That every provision in any assignment hereafter made in the District of Columbia providing for the payment of one debt or liability in preference to another shall be void, and all debts and liabilities within the provisions of the assignment shall be paid pro rata from the assets thereof. “Sec. 3. That any creditor of an assignor may proceed in equity to attack the assignment as made to hinder, delay, or defraud the creditors of the assignor, without first reducing his, her, their or its debt or claim against the assignor to judgment at law, and may in such equity proceeding prove that he, she, they or it is or are a creditor or creditors, and as such entitled to relief.” — 47 — In two cases heretofore decided, we have, in a measure, indicated our view of the operation of this statute. Cissel v. Johnson, 4 App. D. C. 335, 344; and Droop v. Ridenour, 11 App. D. C. 224. But in neither case was the proper construction of the second section considered in the light of the facts appearing in this record; nor was it essential to the decision of either. Treating the question, therefore, as an open one, we have given it the consideration that the interests involved, the general importance of the question, and the weight of the argument on both sides deserves. And notwithstanding our views in respect of the justice and expediency of an express statutory prohibition of preferences made in contemplation of failure and cessation of business, as well also as the apparent condition that the operation of the statute aforesaid will be rendered practically futile by reason of the ease with which debtors, determined to prefer creditors under such circumstances, may avoid coming within its scope, we are, nevertheless, constrained to hold that the terms of the second section of the act do not warrant the raising up of a voluntary assignment by construction of law, in a case where the facts show the plain intention of the debtor not to make a common law assignment at all. That the section will operate in the case of an attempted or defective assignment, by aiding the intent and annulling unlawful provisions, may be conceded. So, likewise, where, from ascertained facts and contemporaneous or connected transactions, transfers and assignments, the intention to accomplish an assignment for the benefit of creditors, with preferences, may be found in the substance thereof, without regard to the particular form in which it may have been clothed or disguised. Like statutes have been enacted in many of the States, and their construction has nearly always been that they were not intended to prohibit the preference of a creditor, save in cases of formal assignment, or within the exceptions — 48 — above stated. The decisions of the courts showing this construction are collated in the briefs of counsel and need not be recited. It was asserted on the argument for the appellees that the bill relating to this subject had been prepared and sent for submission to Congress by an eminent lawyer of the District, since deceased, and that the object which he sought to accomplish thereby was the prohibition of preferences under the circumstances that exist in this case. If such was indeed the object, it seems more than strange that it was not plainly expressed. Its provisions, as enacted into law, are substantially like, if not identical with, the statute of the State of Illinois on the same subject, and it is no doubt true, as claimed by the appellants, that they were copied therefrom. According, then, to the familiar rule in respect of the adoption, without material change, of the statute of another State, namely, that it must be taken, together with such interpretation as it shall have received from the courts of that State, before its said adoption, our duty would seem to be perfectly clear. Before the adoption by Congress, the Supreme Court of Illinois, in at least four well-considered cases, had declared that the statute did not operate to abolish the common law right to prefer creditors, but only the right to make such preferences as a feature merely of an assignment. “The act,” said that court, “regulates the conduct of assigning, not insolvent, debtors.” Farwell v. Nilsson, 133 Ill. 45, 49, 51 (A. D. 1890); Schroeder v. Walsh, 120 Ill. 403, 412 (A. D. 1887); Weber v. Mick, 131 Ill. 520, 533 (A. D. 1890); Young v. Clapp, 147 Ill. 176 (A. D. 1892). It is contended, however, that the Illinois statute had received an interpretation by the Supreme Court of the United States in White v. Cotzhausen, 129 U. S. 329, different from that since given by the Supreme Court of Illinois, and that Congress must, consequently, be presumed to have — 49 — had that in mind in adopting the statute. In this view we can not concur. In the case of a local statute, the Supreme Court has always adopted the construction given thereto by the highest court of the State, and that practice was not departed from in White v. Cotzhauzen. It is quite true that the opinion delivered in that case embodies a most pursuasive argument in support of the contention in this case; but the decision was rendered in deference to what the court understood then to be the doctrine of the Supreme Court of Illinois. This was expressly stated in a subsequent case, where the opposite construction was given to a substantially similar statute of the State of Missouri, in deference to the opinion of the Supreme Court of that State. Chicago Union Bank v. Kansas City Bank, 136 U. S. 223, 235. See, also, May v. Tenney, 148 U. S. 65, a case arising under a statute of the State of Colorado. In addition to the foregoing cases, and before the enactment of the statute by Congress, the Supreme Court of the United States had followed the Supreme Courts of Texas and Iowa, respectively, in a like construction of statutes of those States of the same general character. Reagan v. Aiken, 138 U. S. 109, 113; Bock v. Perkins, 139 U. S. 628, 641; South Branch Lumber Co. v. Ott, 142 U. S. 622, 628. In arriving at the intention of Congress, we must presume that it was aware of the rule of the common law, and that this statute was in derogation thereof; that it was equally informed in respect of the interpretation that had been given time and again by the Supreme Court of Illinois to the precise language adopted from the statute of that State, as well, also, as that which had generally been given to similar statutes by the highest courts of other States; that these decisions of the State courts had always been regarded by the Supreme Court of the United States as binding in cases arising under their respective statutes; and that the decision in White v. Cotzhausen (made in pur — 50 — suance of the same settled policy) was not intended to express the independent and uninfluenced opinion of the court, but simply what it then understood to be the doctrine of the Supreme Court of Illinois in respect of the interpretation of the statute of that State. In consideration of the foregoing premises, we are forced to the conclusion that if Congress had intended to repudiate the construction that the statute had received in the State from which it was adopted, it would have made some corresponding changes in the language used, so as to remove all doubt in respect of its intention. Instead of making such changes, the statute was adopted with all its details in respect of schedules and inventories to be attached to the assignment, registration, and so forth, as well as with its unnecessary reiteration of the words “ assignment” and “deed of assignment.” One addition was made, namely, that “the assignee in any such assignment shall be a resident of the District of Columbia.” Great stress had already been laid by the Supreme Court of Illinois upon the use of the word assignment in connection with the prohibition of preferences, instead of apt words evincing an intention of a complete or general prohibition thereof. That court said that the word assignment had a definite and well understood signification, alike in law and in common use, and that there was nothing in the statute tending to show that it was to be given therein a wider or more extended meaning. Under all the circumstances, we do not feel that we would be justified in going beyond the interpretation that has been given this statute by the Supreme Court of Illinois. To do so would savor too much of judicial legislation. Another and very important question has been raised in this case, namely, whether the provision of section 3 of the act aforesaid, authorizing creditors to proceed in equity without first having reduced their demands to judgment, is within the power of Congress to enact? It has been decided — 51 — that a statute of the State of Mississippi, to the same effect, could not confer jurisdiction in equity upon a court of the United States. Scott v. Neely, 140 U. S. 106, 110; Cates v. Allen, 149 U. S. 451, 458. And it would seem that the reasoning by which that conclusion was reached is not without some application to the question of the exercise of a like power by Congress itself. But this question may be passed, as under the conclusion reached in respect of the interpretation of the act it is not now necessary to be decided. It follows from that conclusion that the decree must be reversed, with costs, and the cause remanded with direction to dismiss the bill, and to make such other orders regarding the fund in the custody of the court as may be proper and not inconsistent with the opinion of this court. It is so ordered. Reversed.