10 F. Cas. 488 | U.S. Circuit Court for the District of Northern Ohio | 1876
Upon this writ of error, if there are any facts which prevent a decision upon the abstract question of law which we discuss from being a complete disposition of the case, they, have not been called to our attention. The sole question for our determination is, whether the general assignment, for the benefit of all creditors equally, made by the Cleveland Insurance Company, is an act of bankruptcy, and void under the statute. For a number of years the anomalous condition has existed of a special local rule, in the Sixth circuit, in reference to general assignments under the bankrupt law, which pertains in no other part of the Union. In deference to an opinion expressed by Justice Swayne, soon after the enactment of the law, in a case where the point did not arise, the district and circuit judges, in conflict with their own opinions, have refused to interfere with such conveyances. A letter from our Brother Swayne desired us to decide the question as we deemed right, that it might be ultimately settled by the supreme court. A recent judgment by that tribunal — Mayer v. Hellman [91 U. S. 496] — refers to, but expressly waives, an expression of opinion upon the point. That tribunal is not accustomed thus to treat questions it deems too plain for discussion. In these circumstances, having been unable to change the views which we have always entertained upon this subject, as well under the law of 1841 as the present statute^ we have deemed it proper to accompany the judgment which we render with a somewhat full statement of the reasons upon which we rest it. The very efficient aid which the learned counsel for the Globe Insurance Company have rendered us enables us to do so with more fullness than otherwise would have been possible.
The following are a portion only of the cases which have been decided by the circuit and district courts, declaring a general assignment void under the act of 1867. We do not take pains to exhaust the references upon this subject. Perry v. Langley [Case No. 11,006] was an assignment which had been recorded under the laws of Ohio, five days before the bankrupt law came into operation. It is treated by the court like an ordinary general assignment. Judge Leavitt, erroneously, we think, holding that the statute had a retroactive effect, decided that a general assignment, for the equal benefit of creditors, was void, because it transferred the property to a different course of administration, and gave the appointment of the trustee to the debtor instead of to the creditors. He refers to Deacon on Bankruptcy (pages 72 and 73) and Griffith on Bankruptcy (pages 107, 119, 120) to show that such had always been the interpretation of the English statutes: and to the American judgments which had given a like construction to the law of 1S41. We hereafter notice the judgment of Justice Swayne reversing this decision. In Re Gold-schmidt [Case No. 5,520] Judge Blatchford
Opposed to these concurring judgments directly upon the point is that of Justice Swayne in Langley v. Perry [Case No. 8,067], and his dictum in Farrin v. Crawford [Id. 4,686]. We are not aware of any other judgment under the law of 1867, so holding. There are a few dicta. We repeat only criticisms frequently made when it is said the point did not arise in Langley v. Perry. The assignment was made before the bankrupt law was in operation, and the latter could have no effect upon it. That it could not will hardly be doubted, but it has been frequently ruled. Day v. Bardwell, 97 Mass. 246; Chamberlain v. Perkins, 51 N. H. 336; 37 Cal. 208. This is familiar law, and would not have been overlooked by the learned justice, but for the accident that the district court had ruled the point, and the rectitude of his judgment in that regard was not discussed or questioned in the circuit court. The report of the judgment is very meager and is manifestly imperfect. We infer from what litue we have of it that the argument turned mainly upon the question of fraud under the statute of Elizabeth, and at common law. In Farrin v. Crawford [supra], his honor expressly says the point does not arise, and he remarks only, that he supposes the judgment in Langley v. Perry to be right. The opinion of Judge Nelson is elsewhere shown not to be opposed to our present ruling. In Re Marter [Case Noi 9,143], Judge Brown, of the Eastern district of Michigan, saying that he withheld an expression of his own opinion, followed that of Justice Swayne, in Langley v. Perry [supra], as have all the judges in this circuit since it was rendered up to the present time. He refers to the judgment of Judge Hall in Re Wells [Id. 17.387], as in accord with that of Judge Swayne. Judge Hall decided only that, as the intent to delay creditors was denied upon the record, and no issue was taken upon that intent, he was precluded by the averments from going into the question at all. He expressly disclaims a decision upon the question before us, whether a general assignment is or is not an act of bankruptcy. That he did not intend to decide, as our Brother Brown supposes, is entirely clear, from his able judgment deciding this point as we now rule it, in Re Smith [Id. 12,974]. A reference is also made to a like opinion by Judge Treat, of Missouri. In the report no opinion is given. It is simply said such a judgment had been rendered. That this is not the law administered in that district appears from the concurring judgments of Justice Miller, of the supreme court, and Judge Dillon, already referred to.
Upon mere authority, therefore, being released from the obligation of following the precedent in our own circuit, this review shows we have no choice of judgment. Jus
Under the law of 1841 several decisions of this precise question were made. During the administration of that law, when at the bar, we had occasion to examine it. Few doctrines were more generally acquiesced in at that time than that general assignments for the benefit of creditors had become unlawful. Every lawyer of large practice will be enabled to say that the practice was abandoned throughout the country. The local judgments were then less frequently reported than now, or they would have been as numerous in the books as they are under the law of 1807. We are quite confident there-are others, but our want of time enables us now to refer only to the two cases following, which ruled the precise point upon a general assignment. As we soon notice, however, the identical principle is involved in all those numerous judgments under both acts which hold similar assignments under local statutes to be acts of bankruptcy. When they are considered, it will abundantly appear that the act of 1841 was interpreted as we construe the present law. In McLean v. Johnson [Case No. 8,883] the precise point was presented under the law of 1841, and the assignment was declared to be a fraud upon the act, and the assigned property was directed to be delivered up to the assignee in bankruptcy. That act contained no clause providing that transfers should be void which defeated the operation of the act, like our present law-; but it was held to be so by implication, in conformity to the English precedents. McLean v. Meline [Id. 8,890] involves the same question and was decided in the same way.
The cases already referred to in terms involving a general assignment are by no means all which pointedly and directly decide this very matter. All the numerous cases which have held that state insolvent laws are suspended by the enactment of a national bankrupt law, necessarily involve this identical principle. There is not a scintilla of difference distinguishing one class of judgments from the other. It is but an immaterial accident that in the one what is prohibited by the bankrupt law is effectuated by a voluntary general assignment, and in the other that a similar transfer is made in conformity with the state law. Such statutory conveyances are not held void as against the policy of the bankrupt act, because of the state enactment, but on account of what those statutes authorize to be done. Sturges v. Crowninshield, 4 Wheat. [17 U. S.] 122; Ogden v. Saunders, 12 Wheat. [25 U. S.] 213; and Cook v. Moffat, 5 How. [46 U. S.] 295, 308, and the long list of federal and state concurring judgments,— abundantly show that state legislation is authorized until congress acts; and that such legislation is suspended so far only as it comes in conflict with federal legislation. In determining w'hether it does so come in conflict, the very question asked in this case has to be answered. Is the matter which is authorized in conflict with the general policy and the mode of its execution provided by the national law ? If the state statute authorized a transfer of all a debtor’s property for equal distribution among his creditors, in the language of many of the cases, -“acting upon the same persons and property,” a transfer under it is void; not because the distribution is different or because the proceedings are less plenary, but for the sole reason that a different tribunal is selected than that provided by congress. The reasons given by the most learned judges who have discussed this subject are so strikingly like those found in the British decisions declaring general assignments void as against the English bankrupt law that were they interchanged the opinions would be equally sustained. The remark is equally true of the American rulings, where a general assignment has been called in question. When, therefore, it is decided that a state insolvent law is suspended, because it takes the property of a bankrupt from the control of the national courts, a decision has been made which not only completely covers and declares void a general assignment, but goes very far beyond the doctrines necessary for its invalidity. They demand only that a different tribunal shall be sought, and for a much greater-reason is an assignment void which not only seeks such other tribunal, but chooses the trustee by the uncontrolled election of the debtor, and practically avoids all the guards which the provisions of the statute are intended to throw around the rights of creditors.
In referring to the judgments deciding what proceedings are in conflict with the bankrupt law, when authorized by state enactments, it is manifest that we are not at all concerned with the differences in opinion between those judges who think the state-provision is wholly suspended, and those who-think proceedings under them are good until called in question by an assignee in bankruptcy. All are unanimous in declaring that transfers under them are void, when questioned in that mode. It is this consistent feature in them all to which we point as de^ termining the question now before us. It would lead to most unwarrantable prolixity were we to analyze and reproduce the provisions of the various state statutes, for the-purpose of showing, by their particulars, that all of them, with slightly varying forms, simply take the estate of the debtor, transfer it to trastees,- convert it into money, and distribute the proceeds among the creditors. They all do substantially, but in a better and;
The entire body of the law in reference Instate legislation upon general subjects, cognizance of which is given to congress, is equally forcible to show that a general assignment is void as against the bankrupt law. When the inquiry is made whether a state regulation is in conflict with federal, enactments regulating commerce, the militia, establishing a currency, or any other subject of national control, it is answered by the precise mode of inquiry and investigation demanded in this instance. The degree of conflict tolerated in those instances, and that which is held to be inconsistent and void, afford precedents for decision here. ’Were this a novel question, and need arose to go beyond adjudications of the precise thing, an argument equally demonstrative would be deduced from the facts and literal reasonings in Brown v. Maryland, 12 Wheat. [25 U. S.] 419; Wynne v. Wright, 1 Dev. & B. 19; McCulloch v. Maryland, 4 Wheat [17 U. S.] 316; Gilman v. Philadelphia, 3 Wall. [70 U. S.] 713; and the numerous other judgments of this class. They all go upon the ground that when congress has regulated a subject, a state shall not regulate the same subject-And, we add, much less can a citizen, of his own volition, so regulate the same matter as to take himself and his estate without the operation of the federal law.
The course of English adjudication upon the successive bankrupt laws of that country, the language of .the British statutes and of our own which have adopted them, constitute an argument against the validity of a general assignment, for the equal benefit of creditors, which we should be unable to resist, were the
The following are but part of the older English judgments additional to those cited in [Case No. 1,091], reaffirming, in varying circumstances, the principle that an assignment of all a debtor’s property, whereby its conversion into money and its distribution among his creditors is given over to a trustee of his own selection, is an act of bankruptcy, and void under the statute. Lindon v. Sharp, 7 Scott, N. R. 730; Hassel v. Simpson, 2 Dickens, 583,1 Doug. 89; Butcher v. Easto, Id. 295; Porter v. Walker, 1 Man. & G. 686; Ex parte Bland, In re Murgatroyd, 6 De Gex, M. & G. 757. The elementary books are equally full. Eden, Bankr.
In view of this long and uninterrupted judicial reading, where our own re-enactment has in such unambiguous terms used language which plainly includes it, by inhibiting conveyances “which defeat the operation of the act,” it may well be asked, with emphasis, why shall not the American law be construed like the English, from which it was taken? Why shall not the familiar rule be applied, that where a judicially construed law is adopted, the construction is ajjprobated by implication? We can imagine no conditions where the following language of the supreme court of the United States is more applicable: They say, where English statutes are adopted, “the known and settled construction of those statutes has been considered as silently incorporated into the acts.” Pennock v. Dialogue, 2 Pet. [27 U. S.] 2. And see [Fisher’s Lessee v. Cockerell] 5 Pet. [30 U. S.] 263; 5 Ohio, 74; 1 Kan. 226; 4 Kan. 353; 3 Ill. 288; 13 Ill. 17; 19 Ill. 151; 21 Vt. 256; 41 Mo. 453; 21 Wis. 274. This rule is one upon which the lawyer and the citizen have a right to rely, because, in ninety-nine cases in the one hundred, it is followed by courts. We understand it to be among the well-settled canons of construction which will not, without pressing reasons, be departed from. It is not, of course, constraining and so obligatory as to be yielded to in instances where the home interpretation has become unsatisfactory and productive of manifest evils. There are some such instances. But if anything were needed to complete and clinch the argument in favor of its application in this instance, it is found in the fact that, in the revision of the British law in 1869, the entire satisfaction of English judges and statesmen with the judicial interpretation which we have followed, in this opinion, is testified by inserting in the law an express provision making it an act of bankruptcy “that the debtor has in England or elsewhere made a conveyance ox-assignment of his property to a trustee or trustees, for the benefit of his creditors generally.” This, then, is no accidental and hasty interpretation, calling for dissent and review by our courts. It embodies the re-, suits of hundreds of years of experience, with commercial conditions strikingly like our own, and with a people whose modes of action and sense of justice are so kindred as to make their well-matured and long-administered rules of civil conduct the very highest evidence of their substantial fitness here.
To our mind, one of the leading arguments against the validity of a general assignment grows out. of the criminal features of the bankrupt law. They are pointedly referred to by Judge Woodruff in Hardy v. Binninger [Case No. 6,057], by Judge Hall in Re Smith [Id. 12,974], expressly, and in more general form in other judgments. These crimes cannot be punished at all without an adjudication in bankniptcy against the offender. This is quite plain, and was so ruled in U. S. v. Prescott [Id. 16,084]. If a general assignment Is good against the bankrupt law, then every debtor clearly subject to criminal punishment would transfer his entire property to an as-signee, thus leaving nothing to pay the expenses of proceedings in bankruptcy. It is certain creditors already sufficiently injured would not, without any hope of reimbursement, incur the expenses of an adjudication, simply for the purpose of punishment. It would seem that an act so protective of a criminal debtor, and thi-owing such impediments in the way of prosecution under the federal law, must be considered in conflict with it. The power to pass a bankrupt .law is specifically given. But little argument would have been needed to have deduced it from the power to regulate commerce between the states in all instances of inter-state trade. Our active industry, and the great interests of trade, our bills of exchange, the transit of our grain crop, and the pi-oductions of our mines absolutely refuse to obey the behest of any class of politicians and stop at state lines. We do not believe there is a state in the Union in which commercial centers have not far more intimate relations with similar points in other states than in their own. Not one bankruptcy in' fifty finds all the creditors in a single district. The subject to be regulated is one essentially national. Commerce in a most compendious sense is not more so. Owing to the imperfections of the present
After much professional experience under previous laws, and judicial familiarity with the administration of this one, we believe the bankrupt law had far better be repealed than have it established that it is at the option of every debtor in the United States to determine whether he will or not submit himself and his. assets to the control which the statute intends to give his creditors over them. Inevitably he first knows of his own insolvency. In every instance, therefore, he has the power of selection. When that selection is once made, such is the embarrassment by citizens of other states, growing out of the doctrine of parties in transferring causes from the state to the federal courts, that, in a vast majority of instances, the debtor may compel his widespread creditors, in the distant commercial centers where lie has incurred his debts, to come to the county courts of the state for the settlement of those important questions, for the trial of which the bankrupt law secures a different tribunal. It is no disrespect to these local courts to call attention to the universality with which citizens of other states prefer a tribunal removed from the local influences which so naturally interfere with complete impartiality. They prefer a jury from the whole district, instead of the narrow vicinage in which the liberality of their debtor, by which their property has been squandered, has rendered himself personally popular. Every one of the great leading reasons which underlie the federal jurisdiction between citizens of different states, in all cases, those which led to the conferring upon congress of this bankrupt power, at the outset, for the regulation of this eminently national subject, forbid an interpretation of the present statute which would enable an attorney of the most common intelligence utterly to tlefeat every practical benefit intended to be secured by its adoption.