816
REPORTER,
vol. 57.
GREAVES v. NEAL et al.
\li'ircu1t Court, D. MassacnusettB. August 22, 1893.) No. 8,453.
1
FEDERAl, EXTlIATERRITORIAL RIGHTS.
-
ASSIGNEE FOR BENEFI.:I' Oll' CREDITORS-
An· under the Minnesota statutes regulating vohmtary assignments for creditors may maintain suit In a federal court In Massachusetts to recover the value of property acquired by. the defendant in Minnesota In violation of Laws Minn. 1881, c. 148, § 4, declaring void preferences made wltbjn 90 daYf! of making an assignment. HUntington v. Attrlll, 13 Sup. Ct. Rep. 224, 146 U. S. 657, followed. 'l'he enforcement of such statute rights by federal courts is not ordinarily restricted by the local polley of the state where suit is brought, as the qucstiop is one of general and international law.
2. SAME-COMrry.
3., SAME-RHlHT OF ASSIGNEE TO SUE.
The; right of action having arisen prlmnrily, and yested in the assignee by foI'ce of' the Minnesota statute, and not by force of the assignment, his right 'to maintain the suit is not affected by the fact that in a certain sense he sues In a representative capacity. ALLEGA'1'IQNS-.A.SSIGNMENT FOR BENEFIT OF CREDITO:&l!.,
4.
Laws.Wnn. 1881, c. 148, § 1, as amended by Laws 1889, c. 30, authorizes debtor· to' assign "for the equal benefit of all bls creditors, in proportion:to., their respective valid· claims, who shall file releases," and section 4, ,all a.Jillended by the same act, declares, void preferential conveyances and made witbln. 90 days of making an assignment as provided in Se(:tiOIl 1. Held, that a declaration by an ass'gnee to recover the value of property acquired by the defendant in violation of section 4, wblch set fort1h that· the "assignment was for the equal bendit of all the· assignor's who should file releases," and :which had annexed and made a pal'tthereof the instrument of ,assignment, which stated that it was for the benefit of all creditors without any preference, contained inconsistent allegations, which neutralized each other, and failed to show the right of the assignee to maintain the suit.
a
5. SAME-AIDER.
'l'he inconsistent pleading was not aided by a general allegation in the declaration. that tlIe al;lsignment was executed under and In accordance with the laws of Minnesota.
6. SA1.m-RIGH'l' OF ASSIGNEE TO SUE-CONDITION PRECEDENT.
It WHS a: condition precedent to the right of the assignee to sue that 1fue assignment should have bern made in the precise terms of the act of 1881, terms are limited to assignments for the benefit of creditors who file releases.
, At Law. Suit by }trank W. Greaves, assignee of James T., Harrison, against William H. Neal and others, to recover the value of :property alleged to have been acquired by defendants by an unlawful prefe'l:ence. Defendants demur to the declaration. Susta'ined. 'WllJrren & Brandeis and Ezra R. Thayer, for plaintiff. J. F. 'Viggin and B. M. Fernald, for defendants. PUTNAM, Circuit Judge. 'l'his case came up originally on a motion to dismiss, which the court decl'ined to hear in that form on account of the difficulty and importance of the questions involved. By
GREAVES II. NEAL.
817
consent of the court the same was converted into a dem'll'lTer to the 1lrst, second, and third counts. One question relates to the extraterritorial force of rights of action. given by statute, and this in its general aspect is settled favorably to the plaintiff by the supreme court in the line of cases ending with Huntington v. Attrlll, 146 U. S. 657, 13 Sup. Ct. Rep. 224. The Massachusetts decisions have felt the force of the line of reasoning of the supreme court, although they have not fully yielded to it, as will be seen by Higgins v. Railroad Co., 155 Mass. 176, 29 N. E. Rep. 534. However, th'is court has no occasion to investigate the conclusions of the courts of Massachusetts, bec.ause Huntington v. Attrill, and the cases to which it refers, have determined that the main proposition involved is one of general and . international law. Singularly, the same transaction came before the privy counCil; in Huntington v. Attrill, [1893] App. Cas. 150, in which the same result was reached as by the supreme court, aJld upon the same general line of reasoning. In cases of this character the state tribunals may regard the local policy, and on account of it may, under some circumstances, refuse to take jurisdiction. In the federal courts, however, the rules laid down by the supreme court seem to leave no room for mere questions of comity, except so far as they may be involved in the underlying of jurisprudence, which prevent tfue enforcement within any jurisdiction of claims contra bonos mores, or claims which v'iolate a well-settled and deep-seated policy concerning something beyond mere mala prohibita. The propositions touching the local policy of the state of Massachusetts presented in the case at bar do not go so deep, and cannot be considered under the broad rules of Huntington v. Attrin. Neither is the case affected by the fact that the plaintiff sues in a certain sense in a representative capacity. While there is nothing in the decision of the supreme court in Huntington v. Attrill which modifies the settled rule that a statutory or judici,al officer, like an admin'istrator or executor or an assignee in insolvency, can· not ordinarily be recognized in a foreign jurisdiction with reference to interests which vest in him merely by succession, yet the alleged right of action in the present case arose primarily in the plaintiff and vested in him, not by force of the assignment from the 'insolvent, but under the statute. Indeed, the subject-matter is one as to which the insolvent never had any right of action, and never could have any; and therefore this suit is clearly distinguishable on this po'int from the class of cases on which the defense relies. The transaction was, as a matter of fact, complete in the state of Minnesota, where,' according to the declaration, the defendants were personally present, and received delivery of what is now sought to be recovered. If, when the goods were delivered, the violation of the law of Minnesota had been complete also as a matter of law, and was no inchoate, the fact that defendants departed from the state with the advantages of the preference which they. had obtained would .be of no importance in this proceeding. Neither would the peculi:;tr form of action, which it is claimed by the dev.57F.no.7-52
FEDERAL <REPORTER,
fenda.nuPfSbNiught'tti recover not d8JIl.ages, but properly, be of any consequence. Vested rights cannot be made t9 depend ordinarily UpOill the mere fOrms of remedy, which "\'RrY' according to the local pmctice of thetribunaJs in which the lltigationis pending. It is plain the statute intended to give the plaintiff the right to reCOVef: the property specifically, or its value; and when he seeks the latter, it is of no importance whether the statute looks strictly to an actiOill for' damages for a tort or to one in which the value or proceeds are detnandedspecifically as such. All such matte1"s relate merely to fom, and not to· substance. The defendants claim that the statute right was not complete under the laws of Minnesota when the preference was received, . nor until the assignee was appointed and had elected to avoid the transaction. . On the other hand, there is ground for claiming from the "letter of the statute that the transaction was void at the outset; 1!hat the authority· given the, assignee to proceed by suit, Uan assigriment: was made within the specified 90 days, only indicat·. ed the party to act, and the limit of time, and that meanwhile the right existed although the person who should maintain ilie action was not designated. It can easily be shown that, there is no legal impossib'llity in,' this proposition. But if 'the position of the defendants is cQI1rect,611d if everything remains mchoate until an assignee is appointed, and if, meanwhile, the party who receives the . preference withdraws from the state of Minnesota With the benefits thereof, it may be a difficult question whether ()l' not the right of . action ever vested. Of cohrse, the rule of the supreme court in' Huntington v. Attrill, nbisupl"a, is not without limitations. There' is aciasel of statute rights which, although apparently absolute, yeti: are in fact qualified, as is the case in several, if not all, of the New England states, with judgments of the first instance against trustees' or garnishees. So, also, there are jUdgments which concern the status of individuals, as to which the court ordering them reserves within its own breast the right to modify t;hem, among which are those touching the relations of husband and wife before or after divorce, and of infants with or without guardians. So, also, there are like judgments in the course of administration, of property, as those touching proceedings by executors or administrators. So, also, there are certain rights where certain local forms are in the nature of conditions precedent, so that extraterritorial proceedings QTe impracticable, as is the fact willi reference to ordinary statute proceedings touching bastard children and their mainte!nance. And 'there may also be other cases of a peculiar ch.amcter, where for various reasons extraterritorial enforcement of the right given is impracticable. It is, however, not necessary to detel"Dline now whether the claim of the plainti1l in this case takes color from any' of these suggestions, because the demurrer must be sustained for another reason; and, if it hereafter becomes necessary during the further progress of this cause, the court may receive mOTe light on this branOh of the case than it has yet been able to obtain. The 'declaration sets out various statutes of Minnesota on which , <
GREAVES
v.
NEAT,..
819
the plaintiff relies. It with the act of 1878, which is not important in this connec;tion. It then follows with. the act of 1881, (chapter 148, § 1,) which provides that a debtor whose property is attached or levied upon., or against whom a garnishment is made, may "make an assignment * * * fO'!' the equal benefit of all his c'l'editors, in proportion to their respective valid claims, who shall file releases." Then, further, is set O'l1t section 4 of the last-named act, by which preferential conveyances and payments "within four months of making an assignment, as provided in section 1 of this act," are made void. Plainly, by the letter of the statutes to this point, no assignment is effective for the purposes of section 4 unless it is made according to section 1. The whole closes with the act of 1889, which amends section 1 of the act of 1881, already refecred to, so as to include any debtor "who shall have'become insolvent." 'TIhis last act expressly repeats the dil'ectionthat the assignment shall be made for the equal benefit of all creditors who file releases of their demands; and it further amends the act of 1881 by changing the limit of time from 4 months to 90 days. The counsel on each side have cited statutes of Minnesota not set out in the. declaration, and some decisions of the courts of that state to which it does not refer. Perhaps this is ordinarily permissible with reference to the laws of states other than that within which a suit is pending in a circuit court, according to the rule stated in Fourth Nat. Bank of New York v. Francklyn, 120 U. S. 747, 751, 7 Sup. Ct. Rep. 757. Whether or not this rule would apply as against an express setting out in the declaration of the terms of such laws the court need not now determine, noting only that very likely enough of the common-law rule that if a statute is unnecessarily set out and misrecited in ill material part the declaration is ill in substance remains to reach a case like this at bar. Gould, PI. (4th Ed.) c. 3, § 171. The court thinks, however, that in no event do any of these extrinsic matters referred to aid the plaintiff's declaration. The Minnesota Code of 1891, referred to by cO'llnsel on each side, clearly introduces no new element of law. In a case cited by the plaintiff -Mackellar v. Pillsbury, 48 Minn. 396, 51 N. W. Rep. 222-it was held, and was a matter in point, that under the laws of Minnesota a preference is not unlawful, except as prohibited by the act of 1881, already referred to. This decision was made February 10, 1892, and therefO'!'e meets the point taken by the plaintiff that the statutes of 1889 and 1891, extending to all insolvents the right to make assignments of the form and effect contemplated by the act of 1881, superseded the common hiw of Minnesota as to voluntary assignments. Independently of this decision, there is no force in this proposition, as there was no repugnancy between those statutes and the law as it previously existed; and they only granted a privilege to the insolvent debtor, without taldng away any rights. Neither the case of Mackellar v. Pillsbury nor that of In re Biro, 39 Minn. 520, 40 N. W. Rep. 827, decides any othe'l' point here under considerotion; and In re Bird expressly reserres them all, including
820
FEDERAL REPOltTER,
whether an tLSsignment Which does not, provide for a release 'can bE! 'ef!/ktive under the of 1881; In'the .absence of any decision of'the supreme court of Minnesohi' to the,: contrary, this conrt feels bc:mnd to follow the plain laIigUage of the statute, and, see.s, ,some reasons why its purpose follows its letter. There is a ju'st necessity for wmulling preferences in favor of creditors who cannot availtlhemselves of an assignment' without releasing theirdem.ailds, which does n()t arlsein favor of those who may share in the ,debtor's property uJ,lder an or otherwise, and hold their claims good for 'any unpaid percentage. The statutes of Min.nesota having twice reiterated,-once in and once in 1889, -and each time in express terms, the requirement of a release of all demands iiJ. an assignment.' which is to be effectual to make preferences it appea['S to' Wis court that for the judiciary to strike out this expression would be to legislate; and n()t to interpret. .. The declarati9n refers to the assignment, and annexes it in S'Ilch a way as'tt> make it a part 'Of WM,Ie the former alleges in tel'Illsthat person assigned "for the equal benefit of'all his creditors .who should file releases," the. asSignment is .expressed to ,be "for the benefit of all his creditors without any ",ThIs discrepancy is unexplained, so makes a' clerur rePllgnaIicy in pleading a material matter. This, of must , betaken, to tlJ,e of the pleader, with the result that the inconsistent allegations neutralize each other, or the ,one which is fOl'the .advantage of the defendants overrides the other. The g{'Deral phrasoology found at one place in the declaration, to the effect that the assignment was execllted under and in accordance with. the laws of the state of Mi1ni.esota, cannot aid the pleader, for reasonswliich are so clellir that they need not be stated. As this court must hold that the statutes of Minnesota, whether as pleaded by the plaintiff or as explained by the extrinsic matters cited by cOunsel, render ita conditiOOl precedent to the right of an assignee to proceed for a preference that the asSignment should have been made in the, precise terms of the act of 1881, and that these terms are limited to assignments ,for the benefit of creditors who file releases, the demurrer must be sustained as the pleadings now stand. As tlle case must, however, go to trial on the fourth count, and as'1Jhe questions involved ,are difficult and important, the court is disposed to permit the plaintiff to amend the declaration with reference to the counts demui'red to, if he thinks he can do so successfully. The court notes that 'it does not find in these counts any allegation in terms that the assignor was in fact insolvent atthe time of the alleged preferences. It has considered the questions argued by both parties reference to the form of demurrer, either at common law or under the Massachusetts practice acts. Demurrer sustained; first, second, and third counts adjudged insufficient; judgmento'n the same for the defendants, with costs on the demurrer, unless plldntiff amends) a)i.d pays costs on or before the 18th day of Septe:nrlJer next.
BELL V. HANOVER NAT. BANK.
821
BELL v. HANOVER NAT. BANK. (Circuit Court, S. D. New York. September 80, 1893.) 1, NATIONAL BANKS-INSOLVENCy-TRANSFER OF DEPOSIT.
Rev. St § 5242, which declares all deposits, all transfers of deposits, and all payments of money made by a national bank after an act ot ins(.lvency, or in contemplation thereof, to be null and void, does not render illegal the retention of a balance standing to the a-edit of an in· solvent national bank with a correspondent on the day of its failure, which has been pledged for the purpose of securing loans made by the correspondent to the insolvent bank. Where a deposit with a correspondent has, long prior to the commission of the act of insolvency by a national bank, been pledged as collat· eral to secure the payment of loans made to the insolvent by its correspondent, neither the subsequent insolvency of the bank, nor appoint. ment of the receiver, destroys the lien of the correspondent, or its right to dispose of the pledge to satisfy the debt secured. Authority of the pre!!ident of a. national bank to contract with a. correspondent that \ a deposit with the correspondent to the crel11t of the bank shall stand as collateral for loans made by the correspondent to the bank may be· established by proof of the course of business, and by the usage and practice which the directors have permitted to grow up in the business of the bank, and by the knowledge which the board of directors must be presumed to have had of the acts ot its subordinates in the affairs of the bank.
2.
SAME-INSOLVENcy-PLEDGE OF DEPOSIT WITH CORRESPONDENT.
8.
SAME-POWERS OF PRESIDENT.
'" SAME-EVIDENCE.
In an action by the receiver of an insolvent national bank against a cor. respondent to recover the amount of a deposit by the insolvent bank with its correspondent, the evidence showed that the board left it to thtl president. as the agent of the bank, to negotiate loans, and to make such contracts as to repayment and security as were lawful and usual. Held, that the evidence was sufficient to establish the authority of the president to pledge the deposit with the correspondent as security for loans by it to the insolvent bank.
At Law. Action by Ortha C. Bell, as receiver of the First Na· tional Bank of Red Cloud, Neb., against the Hanover National Bank, of New York city, to recover the amount of a deposit by the insolvent bank with the defendant. Mitchell & Mitchell, for plainttiI. Moore & Wallace, for defendant. . LACOM,BE, Circuit Judge. The retaining of the balance stand· ing to the credit of the Bank of Red Cloud on the day of its fail· nre'was not a transfer of deposit, within the meaning of section 5242, Rev. St. U. 8., which apparently contemplates a transfer by the insolvent bank. Bank v. Colby, 21 Wall. 613. The deposit had been pledged (assuming the contract of February 1, 1890, to be valid) long prior to the commission of the act of insolvency, as collateral to secure the payment of the loans made to the Bank of Red Cloud by defendant. Neither the subsequent insolvency of the bank, nor the appointment of the receiver,. destroyed the lien ·of defendan,t,nor its right to dispose of the pledge to satisfy the