King v. Cross, 175 U.S. 396 (1899)

King v. Cross

No. 28

Argued October 12, 1899
Decided December 11, 1899
175 U.S. 396

ERROR TO THE SUPREME COURT

OF THE STATE OF RHODE ISLAND

Syllabus

An attachment regularly made in Rhode Island at the suit of a citizen of Rhode Island, of a debt due from a Rhode Island corporation to a citizen of Massachusetts, the day after the latter had filed in Massachusetts a petition for the benefit of the Massachusetts insolvent laws, but eight days before the publication of notice of the issue of a warrant on that petition, is a valid attachment, and is not dissolved by a subsequent assignment under those laws, notwithstanding the provision thereof dissolving attachments of the property of an insolvent debtor, made within four months before the first publication of such notice, that provision having no extra-territorial effect.

The firm of Brown, Steese & Clarke, established in Boston, on the 12th day of August, 1889, filed in the proper court in and for the County of Norfolk, Massachusetts, a petition praying to be allowed to take the benefit of the insolvent laws of the State of Massachusetts. On the day after -- that is, on the 13th of August, 1889 -- John A. Cross, a citizen of Rhode Island, residing at Providence in that state, commenced suit in Rhode Island against the members of the firm of Brown, Steese & Clarke on two negotiable notes drawn by the firm. The Lippitt Woolen Company and two other Rhode Island corporations carrying on business in that state were served, on the day the suit was filed, with trustee process on the averment that these corporations were indebted to the above-named firm. The Lippitt Woolen Company answered under the trustee process, disclosing the sum of its indebtedness. In the insolvency proceedings, an assignee was appointed, and he commenced suit in Massachusetts against the Lippitt Woolen Company to recover the debt due by that corporation to the insolvent firm, and against which debt the trustee process had been issued in Rhode Island, and Hiram Leonard, a resident of Massachusetts, and who was indebted to the Lippitt Woolen Company, was made a garnishee. Pending these proceedings, the assignee sold the claim against the Lippitt Woolen Company and one against another corporation to Theophilus King, a resident of Massachusetts, and he was substituted as plaintiff in the action in Massachusetts above referred to. The Lippitt Woolen Company pleaded the pendency of the trustee process against it in the Rhode Island court. The Massachusetts court entered judgment in favor of the plaintiff King and against the Lippitt Woolen Company and the garnishee Leonard. The court, however, directed that execution on the judgment be stayed and the parties enter into a stipulation that no execution should issue until the proceedings in the Rhode Island action had been fully determined. Thereupon King was allowed by the Rhode Island court to become a party to the action there pending so far as necessary to enable him to assert his title to the indebtedness due by the Lippitt Woolen Company and other corporations to the firm of Brown, Steese & Clarke, which debts were covered by the trustee process previously issued in Rhode Island under the circumstances already stated.

In the Rhode Island court, both King and the Lippitt Woolen Company pleaded the proceedings under the insolvent laws of Massachusetts, the sale by the assignee to King, and the judgment of the court in Massachusetts, heretofore referred to, and asserted that thereby the title to the indebtedness due by the Lippitt Woolen Company to Brown, Steese & Clarke passed to King, and that such title was superior to any lien supposed to have arisen from the trustee process which had been issued in the Rhode Island action. The court gave judgment in favor of the plaintiff Cross, charging the Lippitt Woolen Company for the amount of the debt due by that corporation to the firm of Brown, Steese & Clarke, as stated in the answer of the Lippitt Woolen Company to the trustee proceedings. The court therefore rejected the claim of title preferred by King and acquired by him in the insolvency proceedings in Massachusetts, and in effect decided that the trustee process in Rhode Island operated to create a paramount lien on the debt due by the Lippitt Woolen Company, and was unaffected by the insolvency proceedings in Massachusetts and the action taken on the subject in the courts of that state. Motions for a new trial upon numerous grounds were filed on behalf of the Lippitt Woolen Company and the claimant King. These motions were heard before the Appellate Division of the Supreme Court of Rhode Island, and that court overruled them. 19 R.I. 220. The case was then brought to this Court by writ of error. In substance, the grounds relied on in this Court for a reversal are that at the time of the service of the trustee process, the Rhode Island court was wholly wanting in jurisdiction over the defendants in the action, residents of Massachusetts, and over their property, and that by charging the Lippitt Woolen Company as trustee for the benefit of the plaintiff Cross, the tribunal last mentioned failed to give full faith and credit to the judicial proceedings in the insolvency court in Massachusetts.