Pettit v. Vasse

by Joseph Story

United States Supreme Court

26 U.S. 193

Pettit  v.  Vasse

THIS case came before the Court, by writ of error to the Circuit Court of Pennsylvania. The defendant in error instituted his suit against the plaintiffs here, who were the surviving assignees, under a commission of bankruptcy, issued against him under the Act of Congress of the United States, for establishing a uniform system of bankruptcy throughout the United States, passed April 5, 1800.

In the Circuit Court, a judgment was entered in favour of the defendant in error, the parties having agreed upon a case, which, if required by either, might be turned into a special verdict, subject to the opinion of the Circuit Court—

The case was: that Ambrose Vasse, previously to the year 1802, was an underwriter on various vessels and cargoes, the property of citizens of the United States, which were captured and carried into ports of Spain and her dependencies; and abandonments were made thereof to the said Vasse, by the owners, and he paid the losses arising therefrom, prior to the year 1802.

The said Ambrose Vasse became embarrassed in his affairs, and his creditors proceeded against him as a bankrupt, under the Act of Congress of the United States, for establishing an uniform system of bankruptcy throughout the United States. An assignment was made accordingly, to Jacob Shoemaker, who is since deceased, and the defendants, Cornelius Comegys and Andrew Pettit; who proceeded to take upon themselves the duties of assignees, and have continued to discharge the same. The certificate of discharge of the said Ambrose Vasse, bears date the 28th day of May, 1802.

In the year 1824, the sum of 8846 dollars 14 cents, was received by the defendants from the Treasury of the United States; being the sum awarded by the commissioners sitting at Washington, under the treaty of amity, settlement, and limits, between the United States of America, and his Catholic Majesty, the king of Spain, dated the 22d day of February 1819, on account of the captures and losses aforesaid.

On the 9th day of December 1823, the said Ambrose Vasse filed a bill in equity in the Circuit Court of the District of Columbia, claiming the sum awarded by the commissioners, and a settlement of the accounts of the assignees. This bill was intended to operate upon the funds which were expected to come into the hands of the agent of the assignees, prosecuting for them the claim before the commisioners; but it was not proceeded on; the said funds having been received by another person.

The said Ambrose Vasse made a return of his effects to the commissioners of bankruptcy. The claim upon Spain for spoliations was not in the schedule; but claims upon France and Great Britain were.

The plaintiffs in error made the following points:

1. That the decree of the commissioners under the Florida treaty, awarding the fund to the assignees of Ambrose Vasse, is conclusive in their favour, and against him.

2. That if the claim on the Spanish government was not legally the subject of assignment, and therefore did not pass under the bankrupt proceedings, to the assignees, it could not pass under the abandonments made to Ambrose Vasse; who claims the fund, not as the original proprietor, but through cessions or assignments of the property made to him as an underwriter.

3. That this claim, as an incident to the property captured and carried into Spanish ports, did pass under the assignment of the bankrupt, and became vested in his assignees.

The case was argued by Mr. J. R. Ingersoll, and Mr. D. B. Ogden, for the plaintiffs in error; and by Mr. Lee, and Mr. C. J. Ingersoll, for the defendant.

For the plaintiffs in error, it was contended,

1. That the commissioners, under the Florida treaty had fixed the relative rights of the parties, by awarding the fund to the assignees, in the face of a claim presented by the bankrupt himself. In deciding thus, they decided, in effect, on the validity and operation of the assignment. The proceeding was not merely ex parte, but afforded to the bankrupt an opportunity to exhibit his pretensions; of which he had not failed to avail himself. His act of interposition, was manifested by a bill in equity, filed in the Circuit Court of the District of Columbia, for the county of Washington, in December 1823; in which Ambrose Vasse, the complainant, states the facts now before this Court, and attempts to reach the fund, not (as at present,) from the assignees, but against the assignees; and to wrest it, not from the commissioners-but from the Treasurer of the United States, who acted under their authority and decrees; and was, accordingly, made a party to the bill. If the commissioners have really decided the point-and, in so doing, they have not exceeded their jurisdiction; no appeal lies to this Court. They acted under a treaty, which is the supreme law of the land; and no other tribunal, however exalted, can reverse, or interfere with their decrees. The bill in equity admits, that Ambrose Vasse never filed the original claim. Hence, it appears, that all the documents in support of it, were in the possession of his assignees; and they enjoyed this evidence of ownership, at least. It is not, however, necessary, that the award of the commissioners should be conclusive-as the case of the plaintiffs in error, is sufficiently strong upon the other points, which have been decided in the Court below.

2. The argument of the defendant in error, is absolute and unqualified-that the claim which has yielded the fund in controversy, was of a description which could not be assigned. That the right to receive, did not exist in himself; and, therefore, he could not transfer it to others-that he had nothing to assign-that his hopes rested on the will of an uaccountable, because sovereign power, who might, or might not, realize them that no legal remedy could be pursued; and, without some species of remedy, there can exist no right-that a claim, to be assignable, or even to have existence, means something not ideal, or merely precarious, but substantial, and susceptible of enforcement-not merely to be thought of, but pursued; and, by possibility, to be gained. Admitting, for a moment, both the position and the inference, the shadowy character of the claim, and the impossibility of transferring its ownership,-and where does the defendant in error stand? His right to sue and recover, either from the commissioners, or his assignees, is derived through exactly the same sort of channel, as that of his antagonists. The only difference is, that he claims through a limited and partial assignment; and they through a general and all-comprehensive one. He was not the original owner. He was an underwriter, merely, on the property lost; and, when he paid the losses, he received the assignments, without an idea, that, at a distant day, this would be the shape in which they would develop themselves. He made his assignment, when every thing was entirely unchanged. If all the representative interests are to be disregarded, and the political bounty is to enure to the first proprietor; then we are accountable, not to Ambrose Vasse, the underwriter-but to the original proprietors themselves. If the opposite argument be sound, neither of these parties is entitled to the money; and then, potior est conditio defendentis.

Nor does the defendant in error, injudiciously concede any thing, in the position which he assumes. He has no standing without it. Whatever he had, in the shape of property, passed by the bankruptcy. His only refuge, is in the suggestion, that there was nothing, in the shape of property, to pass; and then, he is unhappily landed here-that being himself a claimant of it, as property, because under an assignment-the same argument applies with equal force to himself; and he is exactly as badly situated, as his opponents.

The bankrupt thought the claim passed by the assignment, and intended that it should-for claims of a similar character, upon the French and British governments, are stated among his effects, in the schedule laid before the commissioners. This, upon the government of Spain, was omitted-probably, because it was regarded as desperate, not being then included in any treaty.

3. There was a clear property to be assigned; and it was assigned by the original owners to the underwriter, and by the underwriter to his assignees.

1. Independently of all questions growing out of mere bankruptcy.-This was, in its nature, peculiarly the subject of assignment. In matters of insurance, there was a time, when nearly every transfer consisted of a claim on a foreign government. No neutral vessel could, with safety, navigate the ocean. The attempt led, in instances innumerable, to capture and condemnation. Insurances were resorted to, at any rate of premium, however extravagant; and the little change of hope of redress, or indemnity, to which the underwriters succeeded, was to be gathered from the sense of justice of these ruthless belligerents. Hence, transfers of these claims, were of perpetual occurrence. Not only were the transfers made, and deemed worthy of acceptance-but our American Courts of Justice would permit no recovery from the insurers, until a cession had been actually made. Brown vs. Phoenix Ins. Co. 4 Binn. 45. Rhinelander vs. Penn. Ins. Co. 4 Cranch, 42. Not only this; the time when abandoment cannot be made, is after restitution-when the opposite argument supposes the right only begins. Adams vs. The Del. Ins. Co. 3 Binn. 287. Marshall vs.. The Del. Ins. Co. 4 Cranch, 202.

The claims on Denmark, France, England, Naples, and Holland, comprise, agreeably to a sober estimate, seventeen millions of dollars, of American capital, locked up in the coffers of foreign potentates; and, long since, for the most part, reimbursed to the original proprietors, and resting on the insurance offices, to an immense extent.

Why is it, that a policy always stipulates, that the insured shall sue, labour, &c. after capture, and even after condemnation; if the one party be requiring, and the other undertaking a wild, preposterous, and despairing pursuit? It is the spes recuperandi the incident to the property, or substitute for it, which is transferred, in whatever shape it may, at a distant day, present itself; although the transfer may be in form of the property itself. A thing need not be in possession, to be transferred. It may be on the other side of the globe. It need not even have actual existence, to be the subject of a legal contract of transfer, or sale. A ship out of time-the hope, or chance of redemption, is sold in good faith. It appears, afterwards, that she was, at the time, consumed by fire, or at the bottom of the sea. Yet the contract was good.

2. As a matter of bankruptcy concern, and to be regulated by the principles of bankrupt laws.

The treaty itself says not a word, as to the person by whom the restored property, or its substitute, is to be received. It merely provides and awards the fund; but whether for the original owner, or underwriter, or assignee, is submitted to the general principles of established law. If it had provided, eo nomine, for the bankrupt, then it might, indeed, have been considered a solace for his general misfortunes, derived from a kind but ill-judged policy; and the political bounty, (as it would then really be,) would, perhaps, flow exactly where it was directed. But the argument, founded upon the idea of political bounty, is defective, when it attempts, on that ground, to give the fund to the bankrupt; since the treaty leaves that point, viz. the individual object of its kindness, entirely undefined. In the concatenation of inferences, one essential link is wanting; namely, that the particular individual is to be reimbursed. But why should the underwriter be preferred? He is not the original sufferer, whose feelings are to be assuaged; nor the final loser, whose pecuniary injuries are to be redressed. Had the violation of neutrality, which is remedied by the treaty, never occurred, the property would have remained with the insured. As it is, the underwriter has paid the loss, but he has done it with the money of his creditors; and hence the deficit, manifested in his bankruptcy. The real losers, then, on principle, have the fairest claim to redress.

As to the propriety of adopting bankrupt laws, there may be differences of opinion; but with respect to their object, policy, and true application, when established, there can be none. They are not technical, but substantial. If they give relief from present difficulties, and hope and energy to future exertions, it is in consequence of entire renunciation of all benefit from the past. If ingenuity could discover means by which debtors, notwithstanding their seeming surrender of all, could still retain a lurking interest, which deprives the creditor of his expected consolation; it would not be surprising that bankrupt laws should be for ever discountenanced by legislative opposition, and that one general mercantile community should continue under the influence of a multitude of heterogeneous insolvent systems, feeble in their protection of the debtor, and worse than useless to the creditor.

It were extraordinary, indeed, if the effect of bankruptcy were to protect previously acquired property. But for his certificate, execution might be levied, attachment might reach the fund, the wit of man could not elude the scrutiny of the law. Yet, the bankruptcy, which is designed to facilitate the assertion of these rights, if the present effort succeeds, would take them all away.

The moment one becomes a bankrupt, a clear line is drawn between what is his, and what is his creditors'. The faculties which God and nature have given him, the disposition to labour, and the capacity for exertion of mind and body, are his own, inalienably, and nothing can deprive him of them. Even the personal claims to redress for bodily wrongs, which grow out of his person, and not out of his creditors' property, remain. But results arising from the investments of property, whether voluntarily or involuntarily made, however, or whenever to arise, tracing their origin to previous possessions, are to return to those with whom they originated, and who did but advance them. Hence, all the limitations to the transfer by bankruptcy, are reducible to three classes.--

1. Such as may never happen, being not merely future in their actual existence, but dependent for any, even a prospective existence, upon events which, perhaps, never may occur.

Of this description, are an heir apparent's pretensions. Moth vs. Frome, Ambler, 394. A pension to a soldier, who may die the moment after bankruptcy. Pay to an officer. Legacy to a bankrupt's wife, on the contingency of her surviving another person. Krumbhaar vs. Burt, 2 Wash. C. C. Rep. 406.

2. The lien of a tradesman, who has done work to a vessel. Shoemaker vs. Norris, 3 Yeates, 392.

3. Torts which require an action in a personal form. Shoemaker vs. Keeley, 1 Yeates, 245. Benson vs. Flower, Sir T. Jones, 215.

This is confined to mere personal wrongs, not growing out of property, for there the assignees take, even though the injury be accompanied with violence. Eden's B. L. 235.

Whatever does not come within one of these three exceptions, passes. Hence, almost every possible variety is to be found in the English cases, which are frequent, because of a continuance of bankrupt laws for a long series of years. 1 Cook B. L. 290. 365. 3 T. R. 88. 2 Vern. 432. 19 Vez. 432.

It was decided in England, nearly a century ago, that the insurer had the plainest equity in the world, to claim the proceeds of prizes taken under letters of reprisal, after they had paid the original owners. Randal vs. Cochran, 1 Vez. Sen. 98. The bankrupt law of the United States, makes express provision for the transfer of equitable, as well as legal interests. Chief Justice Kent recognises our principle, in its largest extent, as to the substitute for the property, while he asserts that there was no existing hope of recovery, as to the property itself. Gracie vs. N. Y. Ins. Co. 8 Johns. 245.

The bankrupt law of the United States, in principle and policy, is the same with the British statutes on the subject. In terms, so far as it applies to the present object, there is no difference. The deficiency is supposed to exist—

1. In the absence of the phrase of the statute, (13 Eliz. c. 7.) giving to the commissioners power 'over all such interest in lands, as the bankrupt may lawfully depart withall.'

But this leaves the question exactly where it found it; as we are upon the very inquiry whether this be such a thing as he may lawfully depart withall. And it is more than doubtful, whether the phrase would apply to the kind of interests now in contemplation.

2. In the supposed non-application of the 18th section, which contains the words possibilities of profits. It is supposed that this clause is introduced, not for the purpose of conveying the thing contemplated, but merely to discover any thing which may fall in prior to the certificate.

It is apprehended that there could be no object in a discovery, except to transfer; and it matters not whether the transfer is made while the object is remote, or is deferred until beneficial possession can accompany the conveyance. And any thing falling in, would become property; and under that name, must then and at all times be disclosed.

3. In the absence of the general expression in the statute, 6 Geo. 4, c. 16. 'That this act shall be construed beneficially for creditors.'

That provision is not necessary for the present object, which is attained by a construction founded on the mere ordinary and inherent policy of a bankrupt system. The result is reached by Lord Chief Justice Dallas, in an opinion delivered at Hilary Term, 59 Geo. 3, several years before the statute referred to, had any existence. Clark vs. Calvert, 8 Taunt. 742.

Notes