1. A., a British subject resident in this country, was duly
declared a bankrupt by the proper district court, Dec. 10, 1808,
and the conveyance of his estate was in the usual form made by the
register to an assignee. At that time, he had a claim against the
United States, of which the commission organized under the treaty
between the United States and Great Britain of May 8, 1871, 17
Stat. 883, took cognizance, and made an award for its payment.
Held that the claim passed to the assignee.
2. The statutory requirement that all suits by or against an
assignee in bankruptcy shall be brought within two years from the
time the cause of action accrued relates to suits by or against him
with respect to parties other than the bankrupt.
3. Although a court of equity has not within its territorial
jurisdiction the real or the personal property which is the subject
matter in controversy, it may, having the necessary parties before
it, compel, by appropriate process, the performance of every act
which, if done voluntarily by them according to the
lex loci
rei sitae, would give full effect to its decree
in
personam.
This was a bill filed Sept. 8, 1874, by Thomas J. Phelps against
Augustine R. McDonald. By an amendment, William White was made a
defendant. It alleges that McDonald was on his petition declared a
bankrupt by the District Court of the United States for the
Southern District of Ohio, Dec. 10, 1868; that Phelps was appointed
assignee, and received, Feb. 12, 1869, in due form the assignment
of all the bankrupt's real and personal estate; that in the
schedule of assets filed by the bankrupt appears this item:
"Claim against General Osborne, of U.S. Army, and others, for
burning, in January and February, 1865, from one to two thousand
bales of my cotton in Arkansas and Louisiana;"
that this is the only description of the claim, except that in
the duplicate schedule filed in the office of the register of said
court the amount is stated at seven thousand to eight thousand
bales, and the claim, with others, is designated as "worthless;"
that McDonald, March 17, 1869, received his discharge from the
court, and that thereafter Phelps, having petitioned for and
obtained and order to sell certain accounts, notes, and judgments
of the bankrupt, sold them at public sale, White becoming the
purchaser of the uncollected accounts belonging to the estate for
the sum of
Page 99 U. S. 299
twenty dollars; that the purchase was made for McDonald, with
money furnished by him, and the claim transferred to him by
White.
The bill further alleges that prior to the filing of his
petition in bankruptcy, McDonald had a just and valid claim against
the United States for certain cotton destroyed by the army during
the late civil war; that being a British subject, although for many
years a resident of this country, he prosecuted the claim before
the joint British and American commission organized under the
Treaty of May 8, 1871, between the United States and Great Britain;
that the claim was finally adjudged to be valid; and that, Sept.
25, 1873, the commission awarded the sum of $197,190 "to be paid in
gold by the government of the United States to the government of
her Britannic Majesty in respect of the above claim."
To the bill of complaint is annexed as an exhibit McDonald's
memorial to the joint commission, which shows his claim as one
arising from purchases of cotton made by him in the insurrectionary
states under permits from the Secretary of the Treasury and letters
from the President of the United States, and alleges the subsequent
repeal of the laws authorizing such permits before he could remove
the cotton, and its final destruction by the federal army.
The complainant insisted that this claim, thus arising from an
alleged breach of an obligation of the United States to protect
McDonald in the possession of the cotton destroyed, is not that
described in the schedule of the assets which were sold by the
assignee to the defendant White and afterwards assigned by him to
McDonald; that the schedule did not describe a claim against the
United States arising from a violation of permits given by the
President, and that the designation of it as "worthless" added to
the description given was well calculated to mislead; that the
rules of the joint commission required all assignments of claims to
be stated, which McDonald did not do, but prosecuted his claim upon
his original title; that the award was made to him on that title,
and not on that derived by purchase through White from the assignee
in bankruptcy; and that said award ought rightfully to be paid to
the complainant as assignee for the benefit of the creditors of
said
Page 99 U. S. 300
bankrupt, whose claims, as stated in his schedule, amount to
$177,380, the only sum ever realized from his estate being the
twenty dollars derived from the sale to White.
The bill then alleges that McDonald assigned said award to
White, "who took the same with full knowledge that said McDonald
had no valid title thereto;" that the United States paid to the
agent of the British government in the City of Washington said
award, and he is about to pay the same to McDonald. The bill prays
for an injunction restraining McDonald and White or either of them
from receiving said award and for a decree that said fund be held
in trust for the creditors of said McDonald, and be subject to the
complainant's rights as assignee in bankruptcy.
Process was personally served on both defendants. They answered,
and the complainant filed a replication. A temporary injunction was
awarded. Subsequently, by consent of parties, as decree was made
that one half of the amount of the award be received by the
defendants to pay the expense of prosecuting the claim before the
joint commission, and the other half placed in the hands of George
W. Riggs, as receiver, to await the final action of the court, and
that McDonald execute all orders, receipts, and acquittances
necessary to enable the receiver to obtain the fund.
The defendants withdrew their answer and filed a demurrer the
grounds whereof are, in effect, that the court below had no
jurisdiction of the case, but that the exclusive jurisdiction
remained with the District Court of the United States for the
Southern District of Ohio; that the bill was not filed within two
years from the time when the cause of action accrued; that the
claim against the United States did not give any right of action
either to McDonald or to the complainant as his assignee in
bankruptcy; that if it did, such right was in tort, and did not
pass to the assignee; that it appears by the bill and the said
treaty that no ground or right of action against the United States
ever existed in favor of said assignee by virtue of the assignment
in bankruptcy.
The special term of the court sustained the demurrer and decreed
that the bill be dismissed and that the receiver pay over to the
defendants the money in his hands. The complainant
Page 99 U. S. 301
having appealed to the general term, where the decree was
affirmed, he brought the case here.
Page 99 U. S. 302
MR. JUSTICE SWAYNE delivered the opinion of the Court.
This is an appeal in equity from the Supreme Court of the
District of Columbia. The case was decided in that court upon a
demurrer to the bill and amended bill of the complainant. The
demurrer was sustained and the bills were dismissed. The
complainant is the appellant, and the action of the court below is
brought before us for review.
The demurrer admits the facts alleged. The question is only as
to their sufficiency to entitle the appellant to the relief which
he seeks. Without reproducing the case in detail as it is in the
record, we shall address ourselves to the salient points which it
presents for our consideration.
A chose in an action lies at the foundation of the controversy.
It is thus described by McDonald in the schedule of his assets
filed with his petition in bankruptcy:
"Claim against General Osborne, of U.S. Army, and others, for
burning, in January of February, 1865, from 1,000 to 2,000 bales of
my cotton in Arkansas and Louisiana."
The late bankrupt law provided that as soon as an assignee was
appointed, the judge or register should convey to him "all the
estate, real and personal, of the bankrupt." Rev.Stat., sec. 5044.
And that there should vest in the assignee, among other things, all
the bankrupt's
"rights of action for property, real or personal, and for any
cause of action which he had against any person arising from
contract, or from the unlawful taking or detention or injury
to"
his property.
Page 99 U. S. 303
Comegys v.
Vasse, 1 Pet. 195, has an important bearing upon
this case. It arose under the bankrupt law of April 4, 1800. 2
Stat. 19. The fifth and sixth sections authorized the commissioners
to convey to the assignees
"all the real and personal estate, of every nature and
description, to which the said bankrupt may be entitled, either in
law or equity, in any manner whatsoever."
Under this act, Vasse was declared a bankrupt and received his
certificate of discharge. He had been an underwriter, and as such
received from those whom he had insured and indemnified assignments
of their claims against France, Great Britain, and Spain. In his
return of his effects to the commissioners pursuant to the statute,
he named the claims against France and England, but not the claim
against Spain. The omission was supposed to have been honestly
made, because there was then not the slightest
spes
recuperandi with respect to that country. The claim was
regarded as hopelessly worthless.
More than twenty years later, under a treaty between Spain and
the United States, an award was made for its payment. There, as
here, the money was demanded by the bankrupt and by his assignees,
and the same lines of argument to which we have listened in this
case were pursued by the counsel in that case with consummate
learning and ability. The judgment of the Court was delivered by
Mr. Justice Story. It sustained the demand in behalf of the
creditors, and is exhaustive and conclusive.
It is needless for us in this case to go over the same field of
discussion. A few remarks, however, grounded chiefly upon that
authority will not be out of place. It will be observed that the
claim against Spain and the claim against the United States here in
question rested upon the same foundation, and that each was
surrounded by like circumstances.
There is no element of a donation in the payment ultimately made
in such cases. Nations, no more than individuals, make gifts of
money to foreign strangers. Nor is it material that the claim
cannot be enforced by a suit under municipal law which authorizes
such a proceeding. In most instances, the payment of the simplest
debt of the sovereign depends wholly
Page 99 U. S. 304
upon his will and pleasure. The theory of the rule is that the
government is always ready and willing to pay promptly whatever is
due to the creditor. It is but a short time since our government
could be sued, and it can be done now only under the special
circumstances defined by the statute. It is enough that the right
exists when the transfer is made, no matter how remote or uncertain
the time of payment. The latter does not affect the former. Nor has
an adverse decision any final effect. If the demand by just and
recognized as valid by the law of nations, the claimant or his
government, if the latter choose to do so, may still press it upon
the attention of the alien government.
If the thing be assigned, the right to collect the proceeds
adheres to it, and travels with it whithersoever the property may
go. They are inseparable. Vested rights
ad rem and
in
re -- possibilities coupled with an interest and claims
growing out of property -- pass to the assignee. The right to
indemnity for the unjust capture or destruction of property,
whether the wrongdoer be a government or an individual, is clearly
within this category.
Erwin v. United States, 97 U. S.
392. The register's deed in this case bears date Feb.
12, 1869. The title then became vested in the appellant. Thereupon
he stood in the place of McDonald, and was clothed with all the
rights which had belonged to the bankrupt before he became such. On
the 25th of September, 1873, within less than five years after the
assignment, an award was made by the mixed commission, sitting
under the treaty between the United States and Great Britain, for
the payment of $187,190 in satisfaction of the claim.
In the light of these considerations, it would be sheer fatuity
to deny the substantial character and value of the claim at the
time of the transfer by the register's deed.
But it is insisted that the alleged sale under the order of the
district court divested the title of the assignee.
According to the bill, the order was to sell "certain accounts,
notes, judgments," &c. The exhibit referred to as containing
"copies of the petition, order, and report of the sale" is not in
the record. Whether the order was broad enough to include the claim
in question, and whether the report showed that it
Page 99 U. S. 305
was sold are questions which, in the state of the record as it
is before us, we are unable to determine. Doubts in such cases are
to be resolved against the pleader. But if the affirmative be
conceded as to both these points, a fatal objection still remains.
McDonald went into voluntary bankruptcy. His petition did not
disclose that he was a British subject. We have given the
description of the claim in the schedule filed with his petition.
It was brief and vague, and gave no definite information. In a
duplicate schedule filed with the register, he pronounced it
"worthless." In assigning to him exempted property, the register
and assignee unite in saying,
"No other exemptions made, because there are no assets, except
some old claims which upon their face called for large amounts, and
upon inquiry I find them totally or entirely worthless."
He failed to make known that he bought the cotton under a permit
from the Treasury Department, accompanied with an order from the
President directing the officers of the army and navy to aid him in
getting it beyond the lines of the insurgent territory, and that it
was lost to him by reason of a sudden and unexpected change in the
legislation of Congress, thus creating as strong an equity in his
favor against the United States as could well exist.
His memorial to the mixed commission was sworn to on the 25th of
November, 1871. In that document, his losses are stated with
fullness and particularity. It is in striking contrast with the
meagerness of the schedules. When there had been a transfer of the
claim, the rules of the commission provided that "the mode and
manner of such transfer must be stated." The memorial was silent
upon this subject. This asset -- soon to realize nearly $200,000 --
was sold for $20! The amended bill avers, and the demurrer admits,
that "the said White at the sale of assets in the bill mentioned
purchased the same at the request of said McDonald, and with money
furnished by him."
Such is the case touching the point in hand, as it is presented
by the demurrer of the appellees to the allegations of the
complainant. Considering the sale in the light of this showing, we
cannot hesitate to hold it invalid. We are not unmindful that the
question may come again before the lower
Page 99 U. S. 306
court, and perhaps before this Court, upon the answers of the
appellees and the testimony adduced by the parties, and that it may
then be the hinge of the controversy. It is our purpose in such
case to leave both courts unfettered by anything in this opinion,
and in all respects as free to decide, one way or the other, as if
the subject had not been before considered by either tribunal.
The bankrupt law required that all suits by or against the
assignee should be brought within two years from the time the cause
of action accrued. Rev.Stat., p. 982, sec. 5057.
But this provision relates to suits by or against the assignee
with respect to parties other than the bankrupt. In a case like
this, it has no application. If this were otherwise, the cause of
action here did not accrue until the award was made and McDonald
set up a claim to the fund awarded.
Clark v.
Clark, 17 How. 315.
Lastly, it is said that the suit is in effect a suit against the
British government, and that hence the court below had no
jurisdiction of the case.
In
Clark v. Clark, supra, where the contest was between
the bankrupt and his assignee touching a fund in the treasury
derived from a foreign government, the Secretary, though not a
party, was enjoined from paying it over until the rights of the
contestants were settled in the suit then pending.
In
Millnor v.
Metz, 16 Pet. 221, also, the fund in controversy
was in the treasury. The Secretary refused to recognize the claim
of either party, and left them to adjust the conflict by a judicial
determination. The contest was ended by a decree in the court
below, which was affirmed by this court, perpetually enjoining one
of the parties from receiving the money.
This objection assumes facts which have no existence. The
British government is in no wise, either in form or substance, a
party to the record, and no final or coercive judicial action is
sought except with respect to McDonald and White. In the progress
of the case below, George W. Riggs was appointed receiver, with
authority to collect the fund. Of course he could do nothing
without the voluntary concurrence of the just and eminent British
agent, who was in possession.
Page 99 U. S. 307
By consent of parties, the fund was delivered to the receiver,
and in the final decree brought here for review he was directed to
pay it over to the appellees, less certain charges and expenses
incurred in procuring the award, and he was thereupon to be
discharged from his office. We have heard no objection from any
quarter to the placing of the fund in the hands of the receiver.
Certainly none has been suggested in behalf of the sovereignty
whose rights are said to have been invaded.
But suppose, as has been suggested, that the money were in the
British exchequer, at the seat of the home government, still the
court below acquired jurisdiction of the parties and of the cause,
and had an important duty to perform.
Such commissions as that which made the award here in question
usually decide only as to the validity of the claim and the amount
to be paid. It is rarely, if ever, within their jurisdiction to
decide upon the ownership of the claim. They have no means of
compelling the attendance of parties or witnesses, no rules of
pleading or procedure applicable to such a case, and the foreign
element in the tribunal, at least, cannot be supposed to have any
knowledge of the law according to which the question is to be
determined. The validity of the claim depends upon the law of
nations; its ownership, upon the local jurisprudence where the
transfer is alleged to have been made.
Hence,
Comegys v. Vasse, Clark v. Clark, supra, and
other like cases have arisen, involving conflicting claims to the
fund awarded, and nothing else.
In this case, whether the money be here or abroad, the assignee
is entitled to have the question finally settled whether he or
McDonald has the better right. This Court has twice decided that a
British subject can sue the United States in the Court of Claims,
because an American citizen is permitted to sue the British
government by a petition of right. The act of Congress creating the
court requires reciprocity.
United States v.
O'Keefe, 11 Wall. 178;
Carlisle
v. United States, 16 Wall. 147.
If the claim of the assignee were presented to the British
government by a petition of right, and the claim of McDonald were
also presented, the parties, in the absence of any judicial
Page 99 U. S. 308
determination, would doubtless be required to settle their
controversy by interpleading, or in some other appropriate form of
litigation. If the appellant shall be finally successful in this
case, and the record should be presented with his petition, no such
question could arise, and judgment in his favor must necessarily
follow. Conceding the fund to be there, why should not this
question of paramount right be settled in this case, rather than
that the American claimant should be subjected to the delay,
expense, and other inconveniences of a suit before a foreign
tribunal? The adjudication would be as binding in one case as in
the other.
Where the necessary parties are before a court of equity, it is
immaterial that the
res of the controversy, whether it be
real or personal property, is beyond the territorial jurisdiction
of the tribunal. It has the power to compel the defendant to do all
things necessary, according to the
lex loci rei sitae,
which he could do voluntarily, to give full effect to the decree
against him.
Without regard to the situation of the subject matter, such
courts consider the equities between the parties, and decree
in
personam according to those equities, and enforce obedience to
their decrees by process
in personam. 2 Story, Eq., sec.
899;
Miller v.
Sherry, 2 Wall. 249;
Penn v. Lord
Baltimore, 1 Ves. 444;
Mitchell v. Bunch, 2 Paige
(N.Y.), 606.
The decree of the court below will be reversed and the cause
remanded with directions to proceed in conformity to this opinion,
and it is
So ordered.
MR. JUSTICE MILLER, with whom concurred MR. JUSTICE FIELD,
dissenting.
The treaty under which the award was made, which is the subject
matter of this suit, provides for the payment to Great Britain of
claims for injury to British subjects and the award in this case in
express terms orders the money to be paid to the agent of that
government in this country.
Comegys v. Vasse and
Clark
v. Clark, cited in the opinion, are cases of awards made in
favor of the United States for the use of its citizens.
While the money so awarded is properly a fund within the
Page 99 U. S. 309
jurisdiction of our courts, as are also our own citizens, I do
not think those courts have any control over the British government
or its agents in the distribution of the fund awarded to them.
It does not appear from anything in the record, as I read it,
that the fund in controversy has ever been voluntarily paid into
court by the agent of that government. It is an indelicate attempt
by the courts of this country to seize
in transitu, for
its own citizens, what by treaty this government has agreed to pay
to another government for its subject.
