Black v. Zacharie - 44 U.S. 483 (1845)
U.S. Supreme Court
Black v. Zacharie, 44 U.S. 3 How. 483 483 (1845)
Black v. Zacharie
44 U.S. (3 How.) 483
When a creditor, residing in Louisiana, drew bills of exchange upon his debtor, residing in South Carolina, which bills were negotiated to a third person and accepted by the drawee, the creditor had no right to lay an attachment upon the property of the debtor until the bills had become due, were dishonored, and taken up by the drawer.
By the drawing of the bills, a new credit was extended to the debtor for the time to which they run.
The laws of Louisiana allowing attachments for debts not yet due relate only to absconding debtors, and do not embrace a case like the above.
The legal title to stock held in corporations situated in Louisiana does not pass under a general assignment of property, until the transfer is completed in the mode pointed out by the laws of Louisiana regulating those corporations.
But the equitable title will pass, if the assignment be sufficient to transfer it by the laws of the state in which the assignor resides, and if the laws of the state where the corporations exist do not prohibit the assignment of equitable interests in stock. Such an assignment will bind all persons who have notice of it.
The laws of Louisiana do not prohibit the assignment of equitable interests to the state by residents of other states.
Personal property has no locality. The law of the owner's domicile is to determine the validity of the transfer or alienation thereof unless there is some positive or customary law of the country where it is found to the contrary.
This was an attachment issued originally by the Commercial Court of New Orleans (a state court) against the goods and chattels, lands and tenements, rights and moneys, effects and credits of Black at the instance of Zacharie & Co., and removed, on the petition of Black into the circuit court of the United States.
Black resided in Charleston, South Carolina, and Zacharie & Co. in New Orleans.
In 1837, Black was the owner of five hundred shares of the capital stock of the New Orleans Gas Light & Banking Company, and six hundred shares of the Carrollton Bank of New Orleans. On 31 May, in that year, he assigned to the Bank of South
Carolina, as security for a loan, his shares in the Gas Light & Banking Company, with power to sell, if necessary.
The shares in the Carrollton Bank were mortgaged to that bank.
Zacharie & Co. and Black were in commercial correspondence from 1835 to 1840, and a number of letters were inserted in the record. The point of law, however, which was based upon those letters, having been decided by the court below, and the decision not excepted to, it is unnecessary to recite their contents.
In the early part of 1841, Zacharie & Co. shipped to Black a cargo of sugar and molasses, which was sold from time to time, beginning with January 25 and ending with April 9, partly for cash and partly on time.
The following bills of exchange were drawn by Zacharie & Co. on Black:
February 17 at sixty days after sight . . . . . $1,500.00
February 18 at sixty days after sight . . . . . 1,500.00
February 24 at sixty days after sight . . . . . 2,000.00
March 1 at sixty days after sight . . . . . . . 2,000.00
April 1 at sixty days after sight . . . . . . . 1,088.25
They were all drawn in favor of Alexander McDonald and accepted by Black. The two first fell due on the same day, viz.: on 30 April, 1841, and were protested.
On 15 April, 1841, Black executed a power of attorney appointing the cashier of the Gas Light & Banking Company his agent to transfer the five hundred shares of stock standing in his name to the Bank of South Carolina.
On 16 April, 1841, this power was forwarded by the Bank of South Carolina to the cashier of the Gas Light & Banking Company, with a request that the transfer might be immediately made, and a new certificate issued.
On 28 April, 1841, Black made a general assignment of all his property to James Chapman, for the benefit of all his creditors, mentioning particularly the five hundred shares of stock in the Gas Light & Banking Company, subject to the mortgage before-mentioned to the Bank of South Carolina, and the six hundred shares in the Carrollton Bank, subject to a mortgage to the Carrollton Bank. These mortgages the trustees were directed to pay off and divide the surplus amongst the creditors named in a schedule annexed to the deed, including Zacharie & Co.
On the same day, Black addressed a letter to Zacharie & Co. informing them of what he had done and that he had sent the assignment to Messrs. J. H. Leverich & Co. He said also:
Your two drafts, $1,500 each, fall due on 30 inst.
Your one draft, $2,000, falls due on 7 May.
Your one draft, $2,000, falls due on 5 June.
Your one draft, $1,088, falls due on 14 June.
On 4 May, 1841, Zacharie & Co. filed an affidavit for the
the purpose of obtaining from the Commercial Court of New Orleans, as before stated, an attachment against the goods and credits of Black. The necessary bond was given, and the attachment laid in the hands of the Carrolton Bank, and of the Gas Light & Banking Company.
On 5 May, 1841, Zacharie & Co. addressed to Black a letter, from which the following is an extract:
"FRANCIS C. BLACK, Esq."
"DEAR SIR: Yours of the 28th ultimo came to hand yesterday morning at the opening of the post office, and immediately after the shock the writer experienced, he called on our attorney, and in less than ten minutes we had an attachment levied on your stocks, both of the Carrollton and Gas Banks, and am happy to say that our attorney assures us that we have succeeded it in spite of our assignment, which is worthless in our state, particularly as no transfer had taken place on the books of the bank; this course we feel satisfied you must approve of, as it certainly will relieve you from the very unhappy and truly inevitable dilemma of throwing upon your friend, who to serve you has, without compensation, accepted for your accommodation upwards of $3,000, a loss to that amount. A neglect to provide for this sacred and confidential debt, you could not be sustained in by your best friend, and indeed we cannot but believe you will be happy to learn the course we have pursued, and we now hope that your assignee will urge a decision as soon as practicable, as it is useless to procrastinate the matter longer than necessary."
On 5 May, 1841, J. H. Leverich addressed letters to the cashier of the Carrollton Bank, and of the Gas Light & Banking Company, requesting them to transfer the stock in their respective institutions, standing in the name of Black to Chapman, his assignee; to which the following answers were returned:
"Gas Light & Banking Company,"
"New Orleans, May 5, 1841"
"Messrs. JAMES H. LEVERICH & CO."
"GENTLEMEN: In answer to your note of this date, I have to say that on the 22d ult. I received a letter from J. Chapman, Cashier of the Bank of South Carolina, covering a certificate of five hundred shares of the stock of this institution, in favor of Francis C. Black together with a power from said Black to me to transfer the stock to the Bank of South Carolina; that said power being not considered sufficiently formal, although it might be thought so by persons less rigid than myself in matters of the kind, was returned to the Bank of South Carolina with the remark that upon another being furnished in conformity with corrections which were stated on the face of the one returned, the desired certificate would be transmitted."
"On the 4th inst., a notice of seizure of all effects or property of said Black in this bank under an attachment was served; consequently,
under all these circumstances, we cannot consent to the transfer requested in your note, but must hold the stock, subject to the decision of the courts."
"Respectfully, your obedient servant,"
"[Signed] J. W. HOUSTON, Cashier"
"New Orleans, 7 May, 1841"
"GENTLEMEN: Your application, of date 5 inst., to transfer six hundred shares and stock standing in the name of F. C. Black by virtue of a power from James Chapman, as his assignee, is noted. The transfer cannot be allowed, because that said stock has been attached at the suit of J. W. Zacharie & Co., served on 4 inst., and also for the reason that said stock is pledged to this bank for a stock loan."
"[Signed] JOHN NICHOLSON, Cashier"
"Messrs. J. H. LEVERICH & Co., New Orleans"
On the day when the attachment was issued, the court appointed counsel to represent the absent defendant, and on 12 June, 1841, that counsel filed an answer on behalf of Black, but without instructions from him.
On 19 November, 1841, Black filed a petition praying that the cause might be removed into the circuit court of the United States, and it was accordingly removed.
On 7 December, 1841, Black prayed oyer of the bills of exchange, and Chapman filed a petition of intervention in which he set forth the assignment to him by Black on 28 April, claimed the shares of stock in consequence thereof, and prayed that the attachment might be dissolved Zacharie & Co. appeared to the intervention, and denied all the allegations in the petition except that the stock had been attached and the case removed.
The notes were filed in conformity with the prayer for oyer.
On 28 December, 1841, Black filed the following exceptions and answer:
"And now into the Ninth Circuit Court of the United States for the Eastern District of Louisiana comes Francis C. Black the defendant in said suit, by his attorneys, and excepts to the order and writ of attachment granted therein, to the petition and the demand therein made, and for cause of exception avers that at the institution of said suit the plaintiffs therein had no cause of action whatever against this defendant, and that no debt was at the date of said suit due by defendant to said plaintiff, all of which is apparent by the petition of said plaintiff, and the account and bills of exchange annexed and referred to; wherefore defendant prays that said writ of attachment be set aside and dismissed, and that said suit be dismissed."
"But if the said exception be overruled, then this defendant answers to said suit, and denies all and singular the
allegations in plaintiff's petition contained, and denies specially being indebted to said plaintiffs as alleged in said petition, and defendant further pleads that the bank stock attached in this case was not, at the date of said attachment, the property of defendant or liable to be attached for any debt by him owing, and that the said stock was then the property of James Chapman of South Carolina, who became the owner thereof under a trust deed for the benefit of all the creditors of defendant without distinction, executed in Charleston, South Carolina, on 28 April, 1841, and that said stock was delivered to said Chapman before the issuing of the attachment in this case. Defendant further shows that the said trust deed was executed in due form of law in South Carolina, where defendant resides, and that the same is effectual to pass the said stocks both in said state where it was executed and in this state, and that before the attachment in this case, the plaintiffs were notified of said assignment, and that the Gas Bank and the Carrollton Bank were also notified of said assignment immediately after the execution thereof. Wherefore defendant prays that plaintiffs' demand be dismissed."
On 13 January, 1842, the court overruled these exceptions.
In March, 1842, the cause came on for trial, when the jury on 5 March found a verdict for the plaintiffs Zacharie & Co. against the defendant, Black for the sum of $8,000.
A motion for a new trial was made, but overruled.
Before stating the bills of exception which were taken on the trial, it is proper to mention that the depositions of three members of the bar of South Carolina were read in evidence to show what the law was in that state. The following is an extract from that of J. L. Pettigru:
"That he, the witness, knows that the said Francis C. Black immediately advised the plaintiffs in this cause of his assignment, and that in consequence thereof they laid their attachment, for he, the witness, has seen the letter of the said Francis C. Black to the said J. W. Zacharie, and the answer to it, and he advised the assignee, as well as Mr. Black to inform all the creditors immediately of what has been done. But by the law and usage of South Carolina, no act of the cestui que trust or creditor in whose favor an assignment is made is necessary either to entitle them to the benefit of its provisions or give validity to the deed, and that the assignor and assignee were advised by the witness to give the creditors notice, because, in a business point of view, it is right and proper always to inform a correspondent or creditor of that which concerns his interest, and because, by an act of assembly of this state, Statutes of South Carolina, vol. 6, 365, it is made the duty of an assignee to call the creditors together within ten days after the execution of the assignment to appoint agents on their part equal in
number to the assignee, with equal authority in the execution of the trust; but if the assignee neglects his duty, the deed is not thereby invalidated, but the creditors may appoint their agents and take the whole property out of the hands of the assignee and apply the same according to the provisions of the deed."
"And the witness says that he has practiced in the courts of South Carolina for nearly twenty-nine years as a solicitor and counselor, and he deems himself qualified to express an opinion on the law of South Carolina. That by the common law, as known and administrated in South Carolina, an assignment completely diverts the property from the execution of the deed, so that it cannot be questioned by the assignee himself, and, if free from fraud, cannot be questioned by his creditors or anybody else, and that though such assignment be made abroad, it passes the property of the debtor in South Carolina from the instant of its execution, and no subsequent execution, and no subsequent attachment can disturb the right of the assignee. That this principle was denied as long ago as the year 1816, in the case of Prime v. Yates, Treadw. 770. That the distinction between an assignment of the party and one by operation of law, was taken and recognized in Topham v. Chapman, 1 Constitutional Report 283, decided in the year 1817. That this decision was followed in Brown v. Minis, 1 McCord 106, though the point there was not considered one of any difficulty, the controversy in that case turning on other questions involved. But the very question between an assignment of property in South Carolina, executed in New York, in trust for creditors, and an attachment laid on the property of the assignor in South Carolina after the date of the assignment, was raised in West v. Tapper in the year 1829, and was decided in favor of the assignment, in which case his honor, Judge Gilchrist, of the United States court, then at the bar, was of counsel for West, the assignee. See 1 Bail. 193. That the question was made again in Green v. Maury, decided in the year 1831, and again decided that a bona fide assignment in trust for creditors (though made out of the state and of the property within the state) takes precedence of a subsequent attachment. That since that time, the point has not, as far as witness knows, been questioned, although property to an immense amount has been passed by such assignments, and so well settled is the law on the subject that if the situation of these parties were reversed and the plaintiffs, by a bona fide assignment in Louisiana, had conveyed their property in South Carolina, whether consisting of real or personal estate or choses in action for the payment of debts, no lawyer of reputation could be found to advise a creditor in this state to attempt to take the property by a subsequent execution or attachment. That in the case of the assignment of stocks, though they can only be transferred on the books of the bank itself, yet the assignee would be entitled to call for a transfer, and no creditor by any attachment subsequent to
the deed of assignment could prevent the assignee from taking the stocks and disposing of them according to the trusts of the deed, and that in the decision of the question it is perfectly immaterial whether the assignee be in actual possession of the property assigned when such property is capable of manual delivery or whether the transfer be completed on the books of the bank when the property is of such a nature as to require such transfer, for in all cases the right of property is in the assignee from the date of the deed, and there is nothing for the attachment to act upon."
Mr. McCrady says "that he has read the deposition of Mr. Pettigru, and concurs fully in the opinion expressed by him."
Mr. Henry Bailey also concurs, and adds
"That no assent or other act on the part of the assignee, or cestui que trust, is necessary to give validity to an assignment for the benefit of creditors unless such assent or act is made a condition precedent by the express provisions of the deed of assignment, in which case the conventional law of the parties supersedes the general law of the land; that the assignment takes effect from its execution, and although executed in a foreign country, prevails over a subsequent attachment or assignment in South Carolina; that this principle applies only to voluntary assignments by the debtor, and not to assignments by operation of the foreign laws of a country, such as the bankrupt law of England; that the cases cited by Mr. Pettigru in his foregoing deposition are of unquestionable authority in South Carolina, two of which were reported by this witness when he held the office of state 5eporter; that the same principles have been recognized in various adjudications since, and are universally regarded by the bar of this state as settled and familiar law."
The following are the bills of exceptions to the ruling of the court upon the trial:
"Be it know, that on the trial of this case the plaintiffs offered in evidence the following bills of exchange, to-wit: "
One of 17 February, protested 30 April, 1841. . . . $1,500.00
One of 18th February, protested 30 April, 1841. . . 1,500.00
One of 24th February, protested 7 May, 1841 . . . . 2,000.00
One of 24th March, protested 3 June, 1841 . . . . . 2,000.00
One of 1st April, protested 14 June, 1841 . . . . . 1,088.25
"And before said drafts were offered in evidence, it was proved by the testimony of a witness that each of said drafts had been negotiated by the plaintiffs; that the two drafts of $1,500 each were returned under protest, and taken up by the plaintiffs on 7 May, 1841; the draft of $2,000, protested on 7 May, was returned and taken up on 17 May, 1841; the draft for $2,000, protested on 3 June, 1841, was returned and taken up on 10 June, 1841; and the draft for $1,088.25 was returned and taken up by the plaintiffs on 30 June, 1841. And before the said drafts were offered in evidence, the said plaintiff also introduced
the account sales, marked 'A;' the letter of the defendant on file, of date 28 April, 1841, and the deed of assignment executed in Charleston on 28 April, 1841. All of which, to-wit, the said bills of exchange, the account sales market 'A,' the said letter, and the said assignment, are prayed to be taken as a part of the bill of exceptions, and the counsel for the defendant thereupon objected to the said bills of exchange as evidence in this case, and denied the plaintiffs the right to present them to the jury on the ground that by said bills of exchange, and said testimony connected therewith, it fully appeared that the indebtedness of defendant to plaintiff, thus attempted to be proved, arose after the institution of this suit, and said bills were consequently no evidence in this cause, but the said objection was overruled, and the plaintiffs were permitted to present the said drafts and protests to the jury as evidence, and the defendant's counsel thereupon took this bill of exceptions. The plaintiff's petition and the account current annexed thereto had, before the said bills were offered, been read to the jury as pleadings, but not as evidence."
"THEO. H. McCALEB [SEAL]"
A great number of letters were then given in evidence and made a part of the exception. Some of them have been already quoted; those which have not were intended to show an agreement between Zacharie & Co. and Black that the former should hold the stock as security for advances which they alleged themselves to have made to Black. But the court, by granting the ninth prayer asked by the intervenor, decided this point against Zacharie & Co., whose counsel did not except to the opinion of the court. The papers therefore need not be further noticed.
The defendant Black and the intervenor Chapman offered separate prayers to the court, viz.:
The defendant prays the following instructions to the jury:
"1. That the drawing, negotiations, and acceptance of bills of exchange operate a complete transfer of the funds of the drawer in the hands of the acceptor, up to the amount of the bills so drawn and accepted."
"2. That after the negotiation and acceptance of such bills, the drawer ceases to be a creditor of the acceptor for the amount thereof, and has no right of action against the acceptor for said amount."
"3. That the plaintiff's account annexed to this petition, in which the proceeds of sugar and certain advances are charged on one side, and certain bills of exchange are credited on the other, is an admission that said proceeds and advances constituted the final against which said bills were drawn."
"4. That if the jury believe, from the evidence before them, that such bills have been drawn, negotiated, and accepted, the said drawing, negotiation, and acceptance transferred to the payee of said
bills so much of the said fund against which they were drawn as is represented by said bills."
"5. That if the jury believe from the evidence before them that at the date of the institution of this suit, the plaintiffs had drawn and negotiated such bills, and were not then the holders thereof, then the jury must reject from the plaintiff's demand the amount of said bills, although it should have been proved that subsequently to the institution of this suit, to-wit, upon the return of said bills under protest, the plaintiffs took up the same, and became the owners thereof."
"6. That a suit upon an account, the items of which consist of the amounts of certain bills of exchange, and that a suit upon such bills, cannot be maintained unless the plaintiff in the suit is the holder of the bill at the date of the institution of his suit."
The intervenor prays the following instructions:
"1. That a bona fide assignment of property by a debtor for the equal benefit of all his creditors is not unlawful, but is highly favored by the law."
"2. That the law presumes an assent of creditors to such an assignment, unless their dissent is proved, and that the creditors who assent acquire, from the date of the assignment, an interest in the property which cannot be destroyed by a subsequent attachment of any single creditor."
"3. That from the date of the assignment the title of the assignor is divested, and the property assigned and delivered is not liable to attachment for his debts, and that bank stocks are incorporeal rights, the deriving of which passes by the delivery of the title or act of transfer."
"4. That if the certificates of the stocks are not in the possession of the owner, but in the possession of other persons to whom he has pledged them, said owner may make a valid transfer, and an effectual and complete delivery of such stock, by delivering to the vendee or assignee a written title to the same, and that such title passes all the interest of the assignor."
"5. That the provisions in the charters of the Carrollton and Gas Banks, to the purport that the transfer of stocks in those banks shall not be effectual or valid, until entered upon the books of the banks, are introduced solely for the protection of the interests of said corporations, and for purposes connected with the elections thereof, but that said provisions do not in any wise alter or affect the general laws touching the delivery of incorporeal rights or stocks in said banks."
"6. That a sale or assignment of stocks in said banks, and the delivering of the title to the same, makes the assignee or vendee the owner of the same, although the transfer should not have been entered upon the books of the bank, subject only to such rights or equities as said banks themselves may have or possess upon said
stocks, and that the vendee or assignee may force the bank to enter such transfer upon their books."
"7. That if the jury believe from the evidence before them, and especially from the act of assignment and the depositions of witnesses taken in Charleston, South Carolina, on file and offered in evidence, that on 28 April, 1841, the defendant, being domiciliated in the State of South Carolina and being indebted to sundry persons in the amount stated in said depositions, and being the owner of the six hundred and sixty shares of the stock of the Carrollton Bank, and five hundred shares of the stock of the Gas Bank, executed and delivered to the intervenor a deed of assignment of said stocks bona fide and for the benefit of all his creditors; that said stock was, after said date, attached by the plaintiffs; that no creditor is shown to have objected to said transfer except the plaintiffs; that other creditors are proved to have excepted; that the certificates of said stock were not, on the date aforesaid, in possession of said defendant, by reason of his having pledged them respectively to the Bank of South Carolina and the Carrollton Bank; that then the delivery of said deed of assignment constituted a complete and legal delivery of said stocks to the intervenor for the benefit aforesaid; and the jury must find for the said intervenor."
"8. That if the jury believe, from the evidence, and especially from the letter of the plaintiffs of date 5 May, 1841, on file, that the plaintiff had been notified of the assignment made as aforesaid, and thereupon and afterwards levied an attachment, then that such attachment was invalid, and cannot be sustained."
"9. That the letters of F. C. Black dated at Charleston, South Carolina, on 11 January, 1837, and at Macon, Georgia, on 13 May, 1837, on file and in evidence, do not in law amount to a contract, agreement, or understanding that the stock of the Carrollton Bank should be held by plaintiffs as a security or pledge for the debt claimed by the plaintiffs in this suit, and that no such agreement between the defendant and plaintiff (if the jury believe that any such agreement existed) can avail in law against the intervenor in this case, representing the other creditors, unless the jury find from the evidence that such agreement was made in the form of a pledge, as prescribed in act 3125 of the Civil Code of Louisiana."
And afterwards, to-wit, on 5 March, 1842, the following bill of exceptions was filed:
"Be it known that on the trial of this case and after the argument, the counsel of defendant and the intervenor prayed the instructions of the court to the jury, to the purport of the written request on file, numbered from 1 to 6 for the defendant, and from Nos. 1 to 9 for the intervenor, and the court having granted and given to the jury all the instructions prayed for except those designated as Nos. 3, 4, 5, 6, and 7, prayed by the intervenor, and the court refused
to give the said charges as demanded, but gave them with the qualification, as to all said instructions, that the delivery of the stock was not complete and did not pass to the assignee unless the transfer was entered upon the books of the bank, and that the laws of Louisiana alone, and not the laws of South Carolina or the general commercial law of the United States, were to be regarded in the decision of this suit, to which qualification the counsel of the intervenor takes this bill of exceptions and prays that said instructions, as prayed for, be taken as a part thereof."
On 24 March, 1842, Black prayed that a writ of error be allowed, and tendered a bond, with James H. Leverich & Co. as securities, in the penal sum of $500, with a condition that he should prosecute his writ of error to effect, and answer all costs. Whereupon the judge issued the following order:
"Be it so, on the petitioner's giving bond, with J. H. Leverich & Co. as security, as the law directs, in the sum of five hundred dollars."
Chapman also prayed for a writ of error,
"and that the said writ operate supersedeas of any further proceedings of J. W. Zacharie & Co. against the bank stock attached in said cause, and claimed by your petitioner as plaintiff in said intervention, until the final decision of the said cause in the Supreme Court of the United States."
Whereupon the judge issued the following order:
"A writ of error is allowed as a supersedeas, on petitioner's giving bond, conditioned according to law, with J. H. Leverich & Co. on the same, of five hundred dollars."
"Signed THEO. H. McCALEB, U.S. Judge"
"March 28, 1842"
On the next day, viz., 29 March, the following order was passed:
"On motion of George Strawbridge, Esq., for plaintiffs, ordered, that so much of the order of this Court as grants a supersedeas to the intervenor, Chapman, on his giving bond in the sum of five hundred dollars, be annulled, the court being of opinion that the stocks attached are not sufficient security for said writ of supersedeas."
The court afterwards re-opened this matter, upon motion of Chapman's counsel, but after hearing an argument declined to change the last quoted order and refused to restore the supersedeas upon the ground that the "bond was considered as insufficient."