62 U.S.

126
21 How. 126
16 L.Ed. 55

EDWARD M. LIVERMORE AND DAVID B. SEXTON,

APPELLANTS,
v.
THOMAS A. JENCKES, ALEXANDER FARNUM, AND
STEPHEN WATERMAN.
December Term, 1858

THIS was an appeal from the Circuit Court of the United States for the
southern district of New York, sitting in equity.
Livermore and Sexton, who filed the bill, were citizens of New York, and
Jenckes, Farnum, and Waterman, citizens of Rhode Island.
The complainants claimed to set aside an assignment made on the 19th of
April, 1854, by Waterman, to Jenckes & Farnum, upon the ground that the
assignment was to enure to such of Waterman's creditors who should sign
a release. This provision, it was admitted, was valid by the laws of Rhode
Island, where the assignment was executed, but invalid by the laws of
New York, where the property in question was situated. Livermore and
Sexton had become judgment creditors after the assignment was made;
and if it could be set aside, the property would be open to execution upon
their judgments.
The defendants all answered the bill, and much evidence was taken. After
the cause was heard upon the pleadings and proofs, the Circuit Court
passed the following decree:
'This cause having been heretofore brought on to be heard at final hearing
on pleadings and proofs, and having been argued by Mr. A. J. Willard on
the part of the plaintiffs, and by Mr. T. A. Jenckes and Mr. C. A. Seward
on the part of the defendants, now, on consideration thereof, it is found
and decided by the court, that the property in the State of New York,
assigned by the defendant Waterman to the defendants Jenckes & Farnum,
by the assignment mentioned in the pleadings herein, was taken into
possession by said assignees, and converted into money, and the proceeds

transferred to the State of Rhode Island, prior to the filing of the bill in this
cause, and that the plaintiffs have no lien on said property, and that there
was no fraud in fact in the making of said assignment; and it is therefore
ordered, adjudged, and decreed, that the bill in this cause be and the same
is hereby dismissed, with costs to the defendants against the plaintiffs to
be taxed, and that the defendants have execution against the plaintiffs for
such costs, according to the course and practice of this court.'
The complainants appealed from this decree.
The cause was submitted on printed arguments by Mr. Morrell for the
appellants, and Mr. Jenckes and Mr. Clarence A. Seward for the
appellees.
The arguments upon both sides covered a great deal of ground.
It will be seen by the decree above recited, which was affirmed by this
court, that the broad question of whether the law of Rhode Island or that
of New York should govern, was not decided by either court, but that the
decree was founded upon the three following circumstances:
1. That the property was converted into money, and transferred to Rhode
Island.
2. That the plaintiffs had no lien on the property.
3. That there was no fraud in fact in the assignment.
In noticing the arguments upon the general proposition, whether the lex
loci contractus or the lex fori should govern, the reporter can give only an
outline.
The first point of Mr. Morrell was the following, viz:
FIRST POINT.The Circuit Court erred in not deciding that the
assignment from Waterman to Jenckes & Farnum was fraudulent and void
as affecting the complainants below, and the other creditors of Waterman
residing within the State of New York at the time of the assignment, so far
at least as the assignment affected the estate of the assignor within the
State of New York, at the time of its execution and delivery.
As it regards the invalidity of the assignment, the essential facts are
briefly as follows:

Waterman being insolvent, and indebted, among others, to the

complainants, and holding property and choses in action in the State of
New York, assigned to J. & F., giving certain preferences, and directing
the residue to be paid to such of his creditors at large as should release
their demands within six months, reserving to himself the dividends of
such creditors as should refuse to release.
We contend that such an assignment is adjudged fraudulent as to creditors,
by the laws of the State of New York. That, as to property situated within
the State of New York and the claims of resident creditors, the laws of the
State of New York are paramount, and do not yield to the laws of the
domicil of the debtor.
First. This case is one of State jurisdiction. It has arisen out of the conflict
of the laws of the States of New York and Rhode Island. These laws relate
to matters of internal administration, over which Congress, under the
Constitution, has no control whatever. The States have not seen fit to
lodge in Congress power to harmonize the conflict of their internal
systems. Such a power, if lodged in the Federal Government, would
necessarily involve the right to carry the laws and systems of polity
prevailing in one State within the territorial limits of another. It would aim
a blow at the integrity of the State sovereignties. Whatever may be
thought of the necessity or wisdom of such an accession of authority to the
Union, it is undisputed that no such grant has been made by the Federal
Constitution.
Story's Conflict of Laws, sec. 18.
Previous to the Constitution, the States possessed the absolute dominion
common to all independent sovereigns over all persons and property
within their territorial limits. They determined for themselves the laws by
which real and personal property within their limits should be held and
transmitted. If they recognised the dispositions of property made by
foreign States, it was on a principle of comity alone, and not an
acknowledgment of any inherent vitality in the laws of the foreign State
within their own territories.
That body of opinion called the law of nations had no practical existence
or positive efficacy, except so far as it had become embodied in and
formed a part of some local system of laws.
The Constitution created the Federal sovereignty, and invested it with
certain specified powers; but neither by express grant nor by necessary
implication has the power been conferred to communicate vitality to the

laws of one State within the limits of another.

Wherever it was deemed desirable that a harmonious system should exist
throughout the Union in regard to a particular subject, the Constitution, in
regard to that subject, conferred supreme legislative power on Congress,
in some instances excluding the States from all legislative control over the
subject, and in others permitting local legislation to a certain extent, but
subordinating it to the paramount authority of Congress.
The power vested in Congress to establish an uniform rule of
naturalization, and uniform laws on the subject of bankruptcies, is an
instance of this kind.
The system of laws adopted by Congress in such cases displace State
legislation on the same subjects altogether. It was no part of the intent of
the Constitution that Congress should leave the conflicting laws of the
States in such cases in force, and adopt merely a system of rules by which
the conflict arising out of these jarring provisions should be determined.
Such a principle would blend the national and local legislation into an
inextricable maze. It would be impossible to define the limits of either.
The line of demarcation once destroyed, the stronger of the antagonistic
powers would gradually absorb the weaker, and the balance of the Union
ultimately be destroyed.
It is not necessary to consider whether the power granted to Congress in
regard to the establishment of bankrupt laws could be so exercised as to
make the disposition of the estates of insolvents depend wholly and
exclusively on the laws of Congress. Until Congress exercises the power,
no such question can arise. The defendants rest their case upon the
authority of the laws of the State of Rhode Island, and not upon those of
Congress.
The power, then, of determining what disposition may be made by
insolvents of their property within the State of New York, rests with that
State to determine, free from any control in Congress, under existing laws.
If Congress cannot define a system of rules to determine controversies
growing out of the conflict of the laws of the States, it is clear that the
Federal courts cannot, independently of the States, compose and enforce
such a system.
The adjudications of the Federal courts must, in every instance, rest upon
the express or the implied authority of either the National or State

Legislatures.
The language used by Mr. Justice Grier in Caskie v. Webster (2 Wallace,
jun., 131) would, on a cursory examination, appear to imply that it was a
part of the duty of the Federal courts to apply to controversies of this
character a sort of modified jus gentium, adapted to harmonize with the
objects and purposes of the Union of the States. He says: 'We do not think
that the different States of this Union are to be regarded, as a general
thing, in the relation of States foreign to each other; especially ought they
not to be so regarded in regard to questions relating to the commerce of
the country, which is co-extensive with the whole land, and belongs, not
to the States, but to the Union.' A careful examination of that case will
show that such was not his intent.
The question in that case was as to the validity, in Pennsylvania, of an
assignment valid by the laws of Virginia, where it was made, in its
operation upon property situated in Pennsylvania. We shall see hereafter
that the case was decided in strict conformity with the laws of the State of
Pennsylvania, and that the principle above cited was intended as an
exposition of the liberal rules that governed the State of Pennsylvania in
questions arising out of the conflict of her laws with those of other States.
The present controversy originated in the Supreme Court of the State of
New York, which court had jurisdiction, not only of the subject-matter,
but of the parties who had been served with process. It has been removed
into this court merely in consequence of the parties being residents of
different States.
This court must therefore give the same judgment which the courts of the
State of New York would have been bound to give, had they adjudicated
the case.
See the remarks of Chief Justice Marshall in Elmendorf v. Taylor, 10
Wheaton, 159.

Second. By the laws of the State of New York, an insolvent's assignment,

containing the clause requiring creditors to release or forfeit their dividends,
and directing them to be paid in that case to the assignor, is fraudulent as to
creditors, and is void.

The Revised States re-enact the statute of 13 Eliz., which is an affirmance of

the common law.

Third. The assignment being of a nature forbidden by the laws of New York,
according to the acknowledged principles governing the jurisprudence of that
State, it cannot be asserted there as affecting property within that State, and as
against a creditor of the assignor there resident.

We do not find that the precise point in question has been adjudicated in that
State, but the principles governing the case are well settled.

[Mr. Morrell then examined the following cases: 2 Mason, 157; 12 Wheaton,
259; Ware, 232; 5 Greenl., 245; 19 Wendell, 15; 3 Dallas 375, note; 14 Martin,
93, 102; Conflict of Laws, sec. 390; 4 Term Reps., 192; 5 East., Potter v.
Brown.]

These authorities go as far as authority can go to establish the principle, that it

is not only within the power, but it is the duty, of a State to deny to strangers
privileges not permitted to its own citizens. The wisdom of such a rule can find
no better illustration than the present case. Waterman establishes himself in
business in the State of New York, contracts debts due to its citizens, until,
finding himself insolvent, he returns to the State of Rhode Island, and there
executes an assignment, which, if executed in this State, would have been
adjudged fraudulent as against his creditors. If the State of New York should
allow so unequal a privilege to strangers, would she not be justly chargeable
with neglecting the interests of her own citizens? Would it not, in the language
of Judge Ware, be equivalent to surrendering her independence?

Such a doctrine would give rise to great abuses. A citizen of New York, in
failing circumstances, wishing to make a disposition of his property forbidden
by the laws of his own State, but permitted by another, could, by taking up a
residence in the latter State, successfully evade the laws of his State.

There is another view of this case still more conclusive. The law of the State of
New York, which in the present instance is in conflict with the laws of Rhode
Island, is a part of the insolvent system of the State. The greatest diversity
exists between the insolvent systems of the different States and foreign
countries; all, however, recognise, in greater or less degree, the right of the
State to assume the disposition of the estates of insolvents. In some countries,
the system is coercive; in others, voluntary; and in some, a mixture of both; but
all unite in limiting the power of the insolvent in regard to the absolute
disposition of his estate. The laws which have relation to the estates of
insolvents, and tend to prevent the unequal or unjust dispositions of such
estates, are a part of the insolvent system of the State.

Whatever relates to the insolvent system of the State depends exclusively upon
the lex fori.

10

If the insolvent or bankrupt laws of a foreign country or State are not permitted
to have any extra-territorial efficacy, for the reason that every State must
determine for itself the best mode of administering the estates of insolvents,
with how much more reason should we refuse to permit a citizen of a foreign
State voluntarily to make such a disposition of his property in this State, at
variance with our insolvent laws?

11

The cases of insolvency and of administration are similar in principle in this

respect.

12

Let us now consider the decisions that have been made on this subject in sister
States:

13

[Mr. Morrell then examined the following cases:

14

Massachusetts: 13 Mass., 146; 6 Pick., 286; 19 Pick., 281; 15 Pick., 11; 19

Pick., 105.

15

Connecticut: 14 Conn., 555; 9 Conn., 487.

16

New Jersey: 1 Green, 326.

17

Missouri: 6 Missouri, 302.

18

Pennsylvania: The precise point does not appear to be adjudicated, although

there are floating dicta adverse to the principle contended for. 3 Harris, 91; 6
Harris, 185; Caskie v. Webster, Wallace, jun.

19

Maryland: 7 Gill, 446, where the court states the condition of the question upon
the State authorities at that time (1848-'9) to be as follows:

20

The States which had determined against the validity of the releasing clause
were stated to be New York, Ohio, North Carolina, Mississippi, Missouri,
Alabama, Connecticut, and Illinois.

21

In favor of the validity, Pennsylvania, Virginia, South Carolina, Massachusetts,

New Hampshire, and Maine.

22

Virginia: 8 Grattan, 457.

23

Since the decision in Abbert v. Winn, New Jersey has acceded to the States
holding such assignments void.

24

Varnum v. Campbell, 1 Green, 326.

25

Rhode Island should be added to the States sustaining the clause. At the present
time, the States whose systems of jurisprudence forbid such clauses are New
York, Ohio, North Carolina, Mississippi, Missouri, Alabama, Connecticut,
Illinois, Pennsylvania, New Hampshire, Maine, Maryland, and New Jersey.

26

On the other side stand Rhode Island and South Carolina, side by side. Virginia
is bound, contrary to the opinions of her jurist, to an erroneous course of
decision, and thus, on a question of authority, throws her weight against, rather
than in favor of, the Rhode Island and South Carolina doctrine.]

27

SECOND POINT.The assignment to J. & F. being void by the laws of the

State of New York, the appellants were entitled to a decree in the court below
for an account of the property, or the proceeds thereof, which came into the
assignee's hands from the State of New York, such being the remedy allowed
by the State of New York, and, consequently, the appropriate remedy to be
allowed under their bill.

28

First. In a case arising exclusively under the laws of the States, and where the
Circuit Court obtains jurisdiction solely through the residence of the parties to
the controversy, the lex fori is carried into the Circuit Court with the case, and
the same remedy is to be allowed, which, by the lex fori, is appropriate to the
case.

29

Second. Had this case been carried to a decree in the New York courts, the
appellants would have been entitled to an account against the assignees, as
above stated. There are two remedies allowed in the courts of equity of that
State to a judgment creditor, for the purpose of reaching the estate of his debtor,
and applying it in satisfaction of his judgment.

30

[The other subdivisions are necessarily omitted.]

31

IV. The conveyance of the proceeds of this sale into the State of Rhode Island
does not relieve the assignees from liability to the New York creditors.

32

The removal of the assigned estate beyond the jurisdiction of the courts of the
State of New York was in itself an act of bad faith. If the act of Waterman in
assigning was an illegal act, that of the assignees in carrying the assets of the
estate to Rhode Island was equally illegal. How, then, can the assignees shelter
themselves behind an act of wrong? They say that the claims of other creditors
have attached to the fund; if so, it is through their wrong that the complainants
have lost their remedy.

33

It is quite clear that this would have been no justification, had the assignees
been citizens of the State of New York; nor can their citizenship of Rhode
Island protect them in New York for an act of wrongful intermeddling with the
estate of an insolvent in New York, in fraud of New York creditors.

34

It is not alleged by the respondents, that, previous to the filing of the bill, they
had received of Hill, Carpenter, & Co., more than the notes representing 33 1/2
per cent. of the appraised value of the property appertaining to the mill. The
presumption is, that the balance had not been paid. The presumption is, also,
that the property transferred to Hill, Carpenter, & Co., consisting of the
machinery, goods, and stock, at the Owasco Mills, Auburn, New York,
remained in that State until the filing of the bill. These presumptions are not
repelled by either allegation or proof to the contrary.

35

The sale to Hill, Carpenter, & Co., being, as we have seen, colorable, the
property remained in the assignees, and must be presumed so to have remained
at the filing of the appellant's bill.

36

V. The supposed equities of Rhode Island creditors, arising from the pretended
transfer to that State, offer no proper answer to the appellant's demand of a
decree.

37

The counsel for the appellees made the following points, which the reporter is
obliged to give, without the arguments to sustain them.

38

POINT FIRST.The assignment was valid inter partes, and the assignees
legally acquired, and legally translated to Rhode Island, the property covered
by it.

39

1. The assignment was valid lege loci. (See Point IV, 2, b.)

40

2. It was also valid by the law of the State of New York, until its invalidity had
been judicially declared.

41

3. The action of the assignees in reducing the property to their possession, and
removing it prior to such judicial declaration, cannot be impeached.

42

Henriques v. Hone, 2 Edwards Ch. R., 120.

43

Mills v. Argall, 6 Paige, 577.

44

Porter v. Williams, 5 Selden, 149, and cases there cited.

45

Averill v. Loucks, 6 Barb. S. C. R., 477.

46

POINT SECOND.The appellants had not, at the time of filing their bill,
acquired that lien upon the estate which is an indispensable prerequisite to the
granting of the relief sought.

47

POINT THIRD.The relief sought by the appellants cannot be granted

consistently with the rights of other creditors of Waterman, who are not now
before the court.

48

POINT FOURTH.A conflict between the lex fori and the lex loci does not
necessarily or properly arise. The important element of a conflict of lien is
wanting. The lex fori can operate upon the persons only of the defendants; the
property, the subject-matter of the controversy, is not within its jurisdiction.

49

It is only in cases of rival claimants to property within the jurisdiction of the lex
fori that such a conflict can arise.

50

But if the question of the construction of the assignment is necessarily before

the court, then, both upon principle and authority, it should sustain the
assignment.

51

I. The question is one of law, and not of fact. By the Revised Statutes of the
State of New York, (2 R. S., 138, sec. 4,) the question of fraud in an assignment
is a question of fact, and, as such, is to be decided, first upon the evidence, and

secondly by the language of the instrument.

52

a. The question of fraud in fact does not arise. The bill is verified, and calls for
an answer under oath. The answers are fully responsive to all the charges of
fraud alleged in the bill, and, so far as they are responsive, are evidence for the
defendants, to be taken as absolutely true, because not disproved.

53

Hough v. Richardson, 3 Story, 692.

54

Landon v. Goddard, 2 ib., 267.

55

b. When the question to be decided arises upon the language of the assignment,
the question becomes one of law rather than of fact. Its answer determines the
legal construction or effect of the instrument.

56

Cunningham v. Freeborn, 3 Paige, 557.

57

Sheldon v. Dodge, 4 Denio, 217.

58

Goodrich v. Downs, 6 Hill, 438.

59

II. The single question then presented for the decision of the court is: Is this
assignment, upon its face, valid or fraudulent, within the State of New York? It
must be borne in mind 1. That the assignor and the assignees were neither
citizens of nor residents in New York. They were citizens of Rhode Island, and
residents of Providence.

60

2. That the assignment was not executed in New York, but was executed in
Rhode Island, the domicil of the parties.

61

3. That by the laws of Rhode Island it is valid.

62

4. That it operated upon personal property only in the State of New York.

63

5. That the personal property is not within the jurisdiction of the lex fori.

64

6. That the parties proposing the question have no lien upon the property.

65

a. Personal property has no locality. It follows the law of the person. The

disposition and transmission of it, either by succession or the act of the owner,
are subject to that law. It cannot be legally acquired by another without the
actual or constructive assent of its owneractual, if he voluntarily surrenders
it; constructive, when the law deprives him of it by a proceeding to which he is
an indispensable party. Unless he is thus made a party, his title to his property
cannot be divested. The law, therefore, can only reach his property through
him.
66

Sill v. Worswick, 1 H. Bl., 690.

67

Pipon v. Pipon, Amb., 25.

68

Hence it follows that a transfer of property by its owner, whether inter vivos or
post mortem, valid by the law of his domicil, will, if made before the law of
another country has actually attached upon the property by a proceeding against
its owner, be esteemed valid within every other jurisdiction where the property
may be. (Story on Conflict of Laws, secs. 380, 383, 384.) The law of the
domicil regulates the succession to and the distribution of the personal property
of the intestate. (Ib.; Holmes v. Remsen, 20 Johns., 267.) He has a right to make
a valid distribution of it ante mortem, and the same right to rely upon the law of
the domicil as sanctioning that distribution, that his administrator would have
as sanctioning a distribution post mortem. The right to the protection of the law
of the domicil arises from the residence of the owner of the property, not from
his decease. If, then, the assignment is valid by the lex domicilii and by the lex
loci contractus, it operated to pass a legal title to the assignees to the personal
property in the State of New York.

69

b. The assignment is valid in Rhode Island. This is proved by the answer of the
assignees, and by the decisions of the courts of that State.

70

Stewart v. Spencer, 1 Curtis R., 157.

71

Dockerry v. Dockerry, 2 R. I. Rep., 547.

72

Haydock v. Stanhope, 1 Curtis R., 471.

73

c. This court should interpret the assignment as it would be interpreted by the

courts of Rhode Island, not only in compliance with authority, nor upon
principles of comity only, but upon principles of justice. Contracts are to be
interpreted by the lex loci to which the parties had reference when the contract

was made. The integrity of the instrument where, as here, there is no fraud in
fact, is to be tried by the law of the place of its execution. The universality of
this rule, and its every-day application, render, in the case of an ordinary
instrument, citations of authority unnecessary. Authority, however, is not
wanting to show that the rule is equally applicable to the construction of
voluntary assignments. In Brashear v. West, 7 Peters, 608, the assignment was
made in Pennsylvania, and was attached in Kentucky, because it contained,
among other things, a stipulation for a release by the creditors. Marshall, C. J.,
in his opinion, said: 'But whatever may be the intrinsic weight of the objection,
it seems not to have prevailed in the courts of Pennsylvania. The construction
which the courts of that State have put upon the Pennsylvania statute of frauds
must be received in the courts of the United States.' So, also, in the case of
Dundas v. Bowler, 3 McLean, 397, Mr. Justice McLean says: 'The assignment,
having been made in Pennsylvania, is governed by the laws of that State.' And
so this point is not open for discussion. The rule is too well established to be
now shaken or disturbed.
74

Speed v. May, 17 Penn. St. Rep., 5 Harris, 91.

75

Adams v. Storey, 1 Paine's C. C. Rep., 100.

76

Bank of Augusta v. Earle, 13 Peters, 519.

77

Rainsdyke v. Kane, 1 Gall., 371.

78

Leroy v. Crowninshield, 2 Mason, 151.

79

d. If, therefore, this court shall construe the assignment as it would be

interpreted in Rhode Island, it should affirm its validity, and protect the
assignees in their possession of the property against the claims of the plaintiffs
in this suit. The question of the construction of the assignment is not
embarrassed by the presence of fraud in fact in its execution. The evidence and
the decision of the court below are conclusive upon this point. The only
remaining question, therefore, is upon the interpretation of the instrument itself,
without reference to evidence, either of the acts of the parties or to the statute of
Elizabeth as re-enacted in New York. That re-enactment makes the question of
fraud in an assignment a question of fact; and, inasmuch as that fact is, upon the
evidence, and upon the decision of the court below, eliminated from the case,
the only possible question remaining is, by what law shall the assignment be
interpreted?

80

81

1. In England, effect is given to the claims of foreign assignees as against

creditors resident there, and this, whether the assignment be involuntary or in
invitum.
Locke on Foreign Attachments, 36.

82

Sill v. Worswick, 1 H. Bl., 390.

83

Story on Conflict of Laws, secs. 408, 409.

84

2. The rule is not recognised to an equal extent in the United States. A

distinction obtains here between bankruptcy in invitum and a voluntary
assignment. Any extra-territorial effect is almost universally denied to an
assignment made compulsorily under foreign bankrupt laws, while, to an
assignment voluntarily made, ex mero motu, by a failing debtor, effect is or is
not given, as the authorities of each particular State may require. These
authorities are of course numerous, and, it is to be admitted, conflicting.
Numerically, they uphold the assignment, and, in so doing, support the
elementary principle already stated, and affirm the justness of the law which
accords to a failing debtor the right to make such legal disposition of his
property among his creditors as he may elect. The rule sustaining the lex
domicilii and the assignment, to which all the authorities refer, is thus stated by
Story in his Conflict of Laws, sec. 111: 'It is therefore admitted that a voluntary
assignment by a party, made according to the law of his domicil, will pass the
personal estate, whatever may be its locality, abroad as well as at home.' The
distinction is also alluded to in the case of The Watchman, Ware, 240: 'The law
separates that which is derived from the public power from that which comes
from the will of the party. Tried by this principle, if the assignment of the
debtor in the present case is valid in Massachusetts, it is valid everywhere, and
operated a transfer of his property wherever situated, for the transfer was made
by the simple will of the owner, and not by virtue of the public power, as in the
case of bankruptcy.'

85

The counsel then cited the following authorities:

86

New Hampshire: Sanders v. Williams, 5 N. H. Rep., 213; Sanderson v. Berford,

10 N. H., 260.

87

New Jersey: Frazier v. Fredericks, 4 Zab., 162.

88

Massachusetts: 19 Pick., 105, where an assignment was held valid,

notwithstanding the courts of Maine, in Fox v. Adams, (5 Greenleaf, 245,) had
decided that an assignment in Massachusetts did not debar a Maine creditor
from attaching property of the estate in Maine.

89

Connecticut: Atwood v. Protection Insurance Company, 14 Conn., 555.

90

New York: Holmes v. Remsen, 4 John. Ch. Rep., 460; Same v. Same, 20 John.
Rep., 266; 3 Wend., 566; 23 Wend., 87, following Judge Platt's decision, but
recognising the distinction between voluntary and involuntary bankruptcy; 3
Sandford S. C. R., 316; 1 Selden, 353; unreported case of Carnley v.
Tuckerman, N. Y. Sp. Tr. 1 Judicial District.

91

Pennsylvania: Milne v. Morton, 6 Binney, 353; Speed v. May, 17 Penn. St.

Rep., 5 Harris, 91; Law v. Mills, 6 Harris, 186.

92

South Carolina: Green v. Mowry, 2 Bailey, 163.

93

Louisiana: The U. S. v.. Bank U. S., 8 Rob. L. Rep., 262, 413; Richardson v.
Leavitt, 1 Lou. Am. Rep., 430.

94

Wisconsin: 6 Law Register, 737.

95

Courts of the United States: The Watchman, Ware, 232, the court felt
constrained to carry out the doctrine in Fox v. Adams, 5 Greenleaf, 245; 3
McLean, 397; Caskie v. Webster, 2 Wallace, 132.

96

Supreme Court of the U. S.: 12 Wheat., 213, where the court recognises the
doctrine in 5 Cranch, 298; 7 Peters, 608; 13 Peters, 519; 3 Howard, 483.

97

None of the authorities cited by the appellants authorize the granting of the
relief prayed for by them. Ingraham v. Geyer (13 Mass., 146) turned upon the
point that the attaching 'creditor had actually seized the debt before it was paid
over to the assignees.' As the complainants here have no lien, the principle of
this decision, if there by any in it, does not apply. Blake v. Williams, 6 Pick.,
285, reffirmed the distinction between voluntary assignments and those made in
invitum, and decided nothing beyond such reaffirmance. The court,
commenting upon Ingraham v. Geyer, says that a decision against the operation
of an assignment in invitum does not draw after it the inference that an
assignment made by the debtor himself, lawful in the place where made, would

be unavailing. And the case of Le Chevalier v. Lynch (Doug., 161) affirms the
necessity of an attachment before the assignees have acquired possession. The
Fall River Works v. Croade (15 Pick., 11) decides, that if creditors elect to
become parties to the assignment, and their debts amount to as much as the
assigned property, this will complete the intended consideration, render the
conveyance effectual even against other creditors, and vest in the assignees the
whole property. This rests upon the principle that an insolvent debtor has a
legal right to convey his estate to whom he pleases for a valuable consideration,
although it may benefit some and prejudice others of his creditors. The answer
of the assignees states that, with one exception, all the creditors of Waterman
residing in Rhode Island, and many of the creditors residing out of that State
and in New York and elsewhere, have complied with the conditions of said
assignment, and become parties thereto by releasing Waterman; and that the
claims of such releasing creditors, and the dividends to which they are entitled,
far exceed in amount the sum which the said assignees now hold, and the
claims also exceed the value of all the assets of the assigned estate.
98

Varnum v. Camp (1 Green, 326) recognises the necessity of a positive law to

defeat the assignment, and relies upon the statute of New Jersey, which
declares an assignment like the one in that case to be absolutely void. The
statute of New York vitiates an assignment for fraud only, and leaves the
instrument valid inter partes until declared void. There is no fraud in fact in this
case, and no 'positive statute law' like that of New Jersey, and so the
assignment is good, unless avoided for fraud law, necessarily to be presumed
from its language. This cannot be presumed in this case, because the instrument
is to be interpreted lege loci, and by that law it is valid.

99

In the case of Fox v. Adams, (5 Greenleaf, 245,) the first point decided by the
court is, that the debt sought to be trusteed had not passed to the assignees
under the assignment, and all the law of the case adverse to the defendants here
is disposed of in a paragraph of a dozen lines, and solely upon the authority of
Ingraham v. Geyer.

100 Brown v. Knox (6 Mo., 302) decides nothing upon principle, and refers to no
previous authority. The case is eminently unsatisfactory, from the absence of
any reason for the decision of the court. In this case, also, the property was in
Missouri, and was attached by the plaintiff.
101 Breine v. Patten, (17 La. Rep.,) as explained by the case of the United States v.
The Bank U. S., (supra,) turned upon two points: First. It did not appear that the
assignment was valid lege loci. Second. It was not clear that the property was in
the possession of the assignees.

102 The examination of all these cases discloses:

103 First. That in no case have the claims of the assignees been disregarded, when
the property covered by the assignment has become vested in them, and they
have transmitted it beyond the jurisdiction of the court whose aid is invoked by
the attaching creditor, before he has acquired any lien upon it.
104 Second. That when the assignment it proved to be valid by the lex loci,
principle and the weight of authority require that it should be sustained; the
cases refusing to sustain it proceeding rather upon the ability of the court to
make the decision, than upon the general principle before cited, or in
conformity with the weight of previous adjudication.
105 POINT FIFTH.Our argument has thus far proceeded upon the ground that
the presence of the stipulation for a release in the assignment ipso facto
rendered the instrument void. But it is not intended to be conceded that such is
the effect of that stipulation.
106 1. The English cases do not hold such an assignment void.
107 Jackson v. Lomas, 4 T. R., 166.
108 The King v. Watson, 3 Price, 6.
109 2. There is a conflict in the decisions of the local courts of the several States, as
to the effect upon an assignment of a clause requiring a release.
110 In Massachusetts, New Hampshire, (Hawes v. Richardson, 5 N. H., 113, before
the statute of that State,) Pennsylvania, Virginia, South Carolina, Alabama, and
Rhode Island, the assignment is held valid; and in New York, Ohio, Missouri,
Connecticut, Maine, and Illinois, it is held to be void. (1 Am. Lead. Cas., 94,
95, and cases there cited.)
111 In Pierrepont v. Graham, (4 Wash. C. C. R., 232,) the assignment was upheld,
and the decision in this case was followed by Judge Story in Halsey v. Whitney,
(4 Mason, 206;) and in the case of Brashear v. West, (7 Peters, 608,) where the
assignment excluded from the benefit of its provisions all creditors who should
not within ninety days execute a release, the court, after stating the many
reasons why such a stipulation is not pro se evidence of an intent to hinder,
delay, and defraud creditors, and how inefficacious it would be if such were the

intent, decide, as we have already shown, that the construction which the courts
of the State in which the assignment was made have given to the instrument
must govern the construction to be given to it by the courts of the United States.
112 3. If, therefore, looking at it as an original question, the court is satisfied that
the assignment is not upon its face void, it must, in the absence of evidence of
fraud in fact, affirm its validity; but if, on the other hand, the court is of opinion
that the question of the construction of the assignment is not an open question,
but is to be decided by reference to local law, the court then must follow the
decision in Brashear v. West, and adopt the construction given by the courts of
Rhode Island, and thus, also, the assignment must be sustained.
113 Mr. Justice WAYNE delivered the opinion of the court.
114 This bill was filed by the appellants in the Circuit Court of the United States for
the southern district of New York, as judgment creditors of the respondents,
Waterman & Samuel Harris, to avoid an assignment made by Waterman to the
respondents, Jenckes & Farnum, in trust for the payment of the creditors of
Harris & Waterman, and of Waterman individually.
115 The appellants seek to avoid the assignment, on the ground that it was voidable,
from its tending to hinder, delay, and defraud creditors; because there is a
reservation in it to the assignee of the dividends of such creditors as should
refuse to become parties to it, and to release their demands in consideration of
the dividends they might receive. It appears that a large amount of the property
conveyed was in the State of New York; that the appellants resided there, and
that they were then creditors of Harris & Waterman. The trusts in the deed
were, first, to pay the expenses of the assignment; secondly, to pay the debts of
several preferred creditors of Harris & Waterman, and of Waterman
individually; and, thirdly, to pay all the residue of the debts of Waterman
individually, and as a member of the firm of Harris & Waterman. The
assignment contained the following proviso: 'Provided, That none of my said
creditors named in the third class of this assignment shall be entitled to receive
any dividend or benefit under the deed of assignment, unless they shall execute
and deliver to my said assignee, within six months from the date hereof, a full
release and discharge, under seal, of all their claims and demands against me,
the assignor; but the dividends on the claims and demands of the creditors who
shall not execute such release shall be paid over to me, the said assignor, or to
such person as I shall appoint.'
116 It appears that Harris, the copartner of Waterman, had given to the latter a bill

of sale of all their partnership property; that the firm was then dissolved; that
Waterman had the possession of it, and that he afterwards made the deed of
assignment to Jenckes & Farnum. Now, Jenckes & Farnum received and held
the property under the assignment, as well that which was in New York as all
that was elsewhere. A part of the copartnership property was the Owasca Lake
mill, situated at Auburn, Cayuga county, State of New York, and it is admitted
that it exceeded in value the debt due by Harris & Waterman to the
complainants. As to that property, James Fitton was a copartner; but it appears
that he joined with Harris & Waterman in dissolving the copartnership, and in
authorizing Waterman to 'settle up' its business, having on the same day agreed
that Harris should convey to Waterman the bond and mortgage which he had
given to Harris & Waterman for the purchase-money due by him for an
undivided fourth part of the Owasca Lake mill. Thus Waterman was made the
sole owner of it. He supposed himself at that time to be solvent, and that he
could carry on the business of the mill, and worked it for some time; but
finding himself unable to do so, he conveyed it to Jenckes & Farnum, with all
the other property of the late concern which had become his, with the intention
that they should, as his assignees, make an equitable distribution of it among
his creditors; and, in his answer to the bill of the complainants, he declares he
did so without any fraudulent intent to hinder, delay, or defraud creditors.
Waterman had been, was then, and was when he made the assignment, a citizen
of the State of Rhode Island. The property assigned was in different States.
Jenckes & Farnum accepted the trusts of the assignment. Waterman ceased to
have any control over it, and, for aught that appears, the assignees have
executed their trust unimpeachably. After the assignment was made, the
complainants obtained, in the Supreme Court of New York, a judgment upon
their demand against Harris & Waterman.
117 They have now brought their bill as judgment creditors against Waterman and
Jenckes & Farnum, the assignees, to avoid the assignment; alleging that they
have a lien upon the property in New York, or its proceeds, as creditors of
Harris & Waterman, because Waterman's assignment to Jenckes & Farnum
contained a reservation to the assignor, which, by the laws of New York, was
fraudulent. And so it would have been, had the assignment been made in that
State, by persons residing there. But the assignment was made in the State of
Rhode Island, by a person and to persons residing there, and is in every
particular just such a one as, by the laws of that State, merchants and others in
failing circumstances, residing there, are allowed to make in favor of creditors
within that State and those residing elsewhere, wherever the property of the
assignor may be. We see no cause for thinking it was fraudulently made. The
respondents deny it upon their oaths, as responsively to the charge made by the
complainants as that can be done. The latter have not sustained their charge by

any proof whatever. For that cause alone, if there was no other, we should
concur with the circuit judge in the decree given by him in this case. And we
also concur with him, that the complainants never acquired nor ever had any
lien upon the property in New York, so as to subject it legally or equitably to
their demand against Harris & Waterman, either before or after it was carried
into judgment in the Supreme Court of New York. Deeming the grounds stated
decisive of this controversy, we abstain from a discussion of other points
learnedly and ably argued by the counsel in the cause in their respective printed
briefs. They were appropriate to the cause, but we do not deem them necessary
for the decision of it.
118 We direct the affirmance of the decree given in the court below.