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April 15, 1891, and duly recorded April 18 | this mortgage, which he obtained in 1891, as of that year. The defendant has paid some a lien upon the after-acquired property, yet $500 of the indebtedness of the bankrupt for prior to the title of the trustee for the which defendant was liable as indorser on a benefit of creditors, it must be because of note, and he remains liable to pay the note some provision of the bankruptcy law, which of $2,510.75, held by the Passumpsic Savings we think the court ought not to construe or Bank, which was signed by him as surety. endeavor to enforce beyond its fair meaning.
The property taken possession of by the In Vermont it is held that a mortgage defendant under the chattel mortgage was such as the one in question is good. The sold by a deputy sheriff on the 11th of June, supreme court of that state has so held in 1900, and the net avails of the sale, amount. this case, and the authorities to that effect ing to $922.08, have been paid over by the are also cited in the opinion of that court. officer who made the sale, to the defendant. And it is also there held that when the
This suit is brought by the trustee to re- mortgagee takes possession of after-acquired cover from the defendant those net avails on property, as provided for in this mortgage, the theory that the action of the defendant the lien is good and valid as against every in taking possession and making the sale of one but attaching or judgment creditors the property was unlawful under the provi- prior to the taking of such possession. sions of the bankrupt act.
At the time when the defendant took posThe defendant had assisted the bankrupt session of this after-acquired property, covin the purchase of the property and had in- ered by the mortgage, there had been a dorsed notes for him in order to enable him breach of the condition specified therein, and to carry on the business of conducting a the title to the property was thereby vested livery stable. This mortgage, to secure him in the mortgagee, subject to the mortgagor's for these payments and liabilities, was given right in equity to redeem. This has been some seven years before the passage of the held to be the law in Vermont (aside from bankrupt act, and at the time it was given any question as to the effect of the bankrupt it was agreed by the parties to it that the law), both in this case and in the cases also bankrupt might sell or exchange any of the cited in the opinion of the supreme court of livery stock covered by it, as he might de- Vermont. The taking of possession of the sire, and should, by purchase or exchange, after-acquired property, under a mortgage keep the stock good, so that the defendant's such as this, is held good, and to relate back security should not be impaired, and it was to the date of the mortgage, even as against also agreed that all after-acquired livery an assignee in insolvency. Peabody v. Lanproperty should be covered by the mortgage don, 61 Vt. 318, 15 Am. St. Rep. 903, 17 Atl. as security for the debts specified therein. 781, and other cases cited in the opinion of
Under this agreement the bankrupt made the supreme court. sales, purchases, and exchanges of livery Whether and to what extent a mortgage stock to such an extent that on May 16, of this kind is valid is a local question, and 1900, there remained but two horses of the the decisions of the state court will be folproperty originally on hand. The stock as lowed by this court in such case. Dooley v. it existed on the above date was all acquired Pease, 180 U. S. 126, 45 L. ed. 457, 21 Sup. by exchange of the original stock, or with Ct. Rep. 308. the avails of the old stock sold, or the money The question that remains is whether the derived from the business.
taking of possession, after condition broken, There is no pretense of any actual fraud of these mortgaged chættels before although being committed or contemplated by either within four months of filing the petition in party to the mortgage. Instead of taking bankruptcy, was a violation of any of the possession at the time of the execution of provisions of the bankrupt act. the mortgage, the defendant had it recorded The trustee insists that such taking pogin the proper clerk's office, and the record session of the after-acquired property, under stood as notice to all the world of the exist- the niortgage of 1891, constituted a preference of the lien as it stood when the mort-ence under that act. He contends that the gage was executed, and that the defendant defendant did not have a valid lien against would have the right to take possession of creditors, under that act; that his lien property subsequently acquired, as provided might, under other circumstances, have been for in the mortgage. The bankrupt was, consummated by the taking of possession, therefore, not holding himself out as uncon- but, as that was done within four months of ditional owner of the property, and there the filing of the petition in bankruptcy, the was no securing of credit by reason of his lien was not valid. apparent unconditional ownership.
Did this taking of possession constitute a ord gave notice that he was not such uncon- preference within the meaning of the act ? ditional owner. There was no secret lien, It was found by the referee that when the And if defendant cannot secure the benefit of 'defendant took possession of the property
he knew that the mortgagor was insolvent | recognized in the above case. So in this and was considering going into bankruptcy, case, although there was no actual existing but that he did not intend to perpetrate any lien upon this after-acquired property until actual fraud on the other creditors, or any the taking of possession, yet there was a of them, but did intend thereby to perfect positive agreemerit, as contained in the his lien on the property, and make it avail mortgage and existing of record, under able for the payment of his debts before which the inchoate lien might be asserted other complications, by way of attachment and enforced, and when enforced by the takor bankruptcy, arose. He then understood ing of possession, that possession under that Ryan's attachment would probably hold the facts of this
related back good against his mortgage. The question to the time of the execution of the whether any conveyance, etc., was in fact mortgage of April, 1891, as it was only made with intent to defraud creditors, when by virtue of that mortgage that pospassed upon in the state court, is not one of session could be taken. The supreme a Federal nature. McKenna v. Simpson, court of Vermont has held that such a mort129 U. S. 506, 32 L. ed. 771, 9 Sup. Ct. Rep. gage gives an existing lien by contract, 365; Cramer v. Wilson, 195 U. S. 408, 25 Sup. which may be enforced by the actual taking Ct. Rep. 95, 49 L. ed. 256. It can scarcely of possession, and such lien can only be be said that the enforcement of a lien by the avoided by an execution or attachment cred. taking possession, with the consent of the itor whose lien actually attaches before the mortgagor, of after-acquired property cov- taking of possession by the mortgagee. Alered by a valid mortgage, is a conveyance or though this after-acquired property was subtransfer within the bankrupt act. There is ject to the lien of an attaching or an execuno finding that, in parting with the posses- tion creditor, if perfected before the mortsion of the property, the mortgagor had any gagee took possession under his mortgage, purpose of hindering, delaying, or defraud- yet, if there were no such creditor, the ening his creditors, or any of them. Without forcement of the lien by taking possession a finding to the effect that there was an in- would be legal, even if within the four tent to defraud, there was no invalid trans- months provided in the act. There is a disfer of the property within the provisions of tinction between the bald creation of a lien § 67e of the bankruptcy law. Sabin v. within the four months, and the en Camp, 98 Fed. 974.
forcement of one provided for in a In the case last cited the court, upon the mortgage executed years before the passubject of a preference, held that though the sage of the act by virtue of which morttransaction was consummated within the gage, and because of the condition broken, four months, yet it originated in October, the title to the property becomes vested in 1897, and there was no preference under the the mortgagee, and the subsequent taking facts of that case. “What was done was in possession becomes valid, except as above pursuance of the pre-existing contract, to stated. A trustee in bankruptcy does not, which no objection is made. Camp furnished in such circumstances, occupy the same posithe money out of which the property, which tion as a creditor levying under an execuis the subject of the sale to him, was cre- tion, or by attachment, and his rights, in this ated. He had good right, in equity and in exceptional case, and for the reasons just inlaw, to make provisions for the security of dicated, are somewhat different from what the money so advanced, and the property they are generally stated. Mueller v. Nw purchased by his money is a legitimate se gent, 184 U. S. 1, 46 L. ed. 405, 22 Sup. Ct. curity, and one frequently employed. There Rep. 269. is always a strong equity in favor of a lien It is admitted on the part of the counsel by one who advances money upon the prop- for the plaintiff in error that the rule in erty which is the product of the money so Vermont, in cases of chattel mortgages of advanced. This was what the parties in-after-acquired property (where possession tended at the time, and to this, as already by the mortgagee is necessary to perfect his stated, there is, and can be, no objection in title as against attaching or execution credlaw or in morals. And so when, at a later itors), is that, although such possession be date, but still prior to the filing of the peti- not taken until long after the execution of tion in bankruptcy, Camp exercised his the mortgage, yet the possession, when taken rights, under this valid and equitable ar- (if it be before the lien of the attaching or rangement, to possess himself of the prop- execution creditor), brings the property unerty, and inake sale of it in pursuance of his der the cover and operation of the mortgage contract, he was not guilty of securing a as of its date,—the time when the right of preference under the bankruptcy law.” possession was first acquired. It was also
The principle that the taking possession admitted that the supreme court of Vermay sometimes be held to relate back to the mont has held that when a chattel mortgage time when the right so to do was created is' requiring possession of the mortgaged prop
erty to perfect it as to third persons was ex- In Wilson Bros. v. Nelson, 183 U. S. 191, ecuted more than four months before the 46 L. ed. 147, 22 Sup. Ct. Rep. 74, it was commencement of insolvency proceedings, held that the bankrupt had committed an the taking of actual possession of the mort. act of bankruptcy, within the meaning of gaged property within the four months' the bankrupt law, by failing, for at least period brought that property under the five days before a sale on the execution ismortgage as of its date, and so did not con- sued upon the judgment recovered, to vacate stitute a preference voidable by the trustee, or discharge the judgment, or to file a volalthough the other elements constituting a untary petition in bankruptcy. The judg. preference were present. Many decisions of ment and execution were held to have been the supreme court of Vermont are cited to such a preference, “suffered or permitted” this effect. It will be observed, also, that by the bankrupt, as to amount to a violathe provisions of the state insolvency law in tion of the bankrupt act. Although the regard to void and voidable preferences and judgment was entered upon the power of attransfers were identical with similar provi- torney given years before the passage of the sions of the bankruptcy act of 1867. Gil-bankrupt act, it was nevertheless regarded bert v. Væil, 60 Vt. 261, 14 Atl. 542.
as “suffering or permitting" a preference, Under that law it was held that the as- within that act. This is not such a case. signee in bankruptcy stood in the shoes of As we have said, there is no finding that the the bankrupt, and that "except where, with defendant had reasonable cause to believe in a prescribed period before the commence that by the change of possession it was inment of proceedings in bankruptcy, an attended to give a preference. As the state tachment has been sued out against the court has said, it was rather a recognition property of the bankrupt, or where his dis- of what was regarded as a right under the position of his property was, under the stat. previous agreement contained in the mortute, fraudulent and void, his assignees takegage. his real and personal estate, subject to all Nor does the existence of the Ryan attachequities, liens, and encumbrances thereon, ment, or the chattel mortgage of March 5, whether created by act or by operation of 1900, executed by the bankrupt, and delivered law.” Yeatman v. New Orleans Sav. Inst. to the defendant, and by him assigned, on 95 U. S. 764, 24 L. ed. 589. See also Stewart the 23d of March, 1900, to the bank, create v. Platt, 101 U. S. 731, 25 L. ed. 816; Hauselt any greater right or title in the trustee v. Harrison, 105 U. S. 401, 26 L. ed. 1075. than he otherwise would have. The trustee Under the present bankrupt act, the trustee moved under $ 67f, [30 Stat. at L. 565, chap. takes the property of the bankrupt, in cases 541, U. S. Comp. Stat. 1901, p. 3450), on nounaffected by fraud, in the same plight and tice to the defendant, for an order that the condition that the bankrupt himself held it, right or lien under the Ryan attachment and subject to all the equities impressed should be preserved, so that the same might upon it in the hands of the bankrupt, except pass to the trustee for the benefit of the in cases where there has been a conveyance estate, as provided for in that section. This or encumbrance of the property which is was denied. And unless such permission void as against the trustee by some positive had been granted, the lien of the attachment provision of the act. Re Curcewich, 53 C. C. was not preserved by the act, but, on the A. 510, 115 Fed. 87, 89, and cases čited. contrary, it was dissolved under $ 670.
It is true that in the case in 95 U. S. The mortgage assigned to the bank, and 764, 24 L. ed. 589, the savings institution the attachment obtained by Ryan, having had a special property in the certificates been dissolved by the bankrupt proceedings, which were the subject of dispute, and had the defendant's rights under his mortgage possession of them at the time of the bank- of April 15, 1891, stood the same as though ruptcy proceedings, and it was held that the there had been no subsequent mortgage institution was not bound to return them, given, or attachment levied. This is the either to the bankrupt, the receiver, or the view taken by the state court of the effect of assignee in bankruptcy, prior to the time of the dissolution of the mortgage and attachthe payment of the debt for which the cer- ment liens under the bankrupt act, and we tificate was held. So the state court held in think it is the correct one. It is stated in this case, where the defendant took posses- the opinion of the state court as follows: sion under the circumstances detailed, by “It is urged that with the annulment of virtue of his mortgage, and where he had the attachment, the property affected by it the legal title to the property mortgaged, passed to the trustee as a part of the estate after condition broken, that the possession of the bankrupt under the express provisions thus taken related back to the date of the of $ 671. There would be more force in giving of the mortgage, and in thus enforc- this contention were it not for the provision ing his lien there was not a violation of any that, by order of the court, an attachment of the provisions of the bankruptcy act. lien may be preserved for the benefit of the
estate. If there is no other lien on the prop- See same case below, 69 N. J. L. 270, 55 erty, there can be no occasion for such or- Atl. 724. der; for, on the dissolution of the attachment, the property, unless exempt, would Statement by Mr. Justice Brown: pass to the trustee anyway. It is only
This was a suit begun in the supreme when the property for some reason may not court of New Jersey by the Alleghany Comotherwise pass to the trustee as a part of pany, to recover the amount due upon a the estate that such order is necessary. We promissory note dated at New York, July think such is the purpose of that provision, 16, 1900, given by the plaintiffs in error, and that unless the lien is preserved, the under the firm name of I. N. E. Allen & property, as in the case at bar, may be held Co., for $1,989.54, upon which payments upon some other lien, and not pass to the amounting to $1,000 were indorsed. The trustee. Re Sentenne & G. Co. 120 Fed. declaration was upon the common counts, 436.”
but annexed was a copy of the note, with a We think the judgment of the Supreme notice that the action was brought to recovCourt of Vermont was right, and it is af- er the amount due thereon. The defendants firmed.
pleaded four several pleas:
1. General issue.
2. That the note was executed and deliv(196 U. S. 458)
ered in the state of New York to the plainISAAC N. E. ALLEN et al., Plffs. in Err., tiff company, a business corporation created
under the laws of North Carolina. That ALLEGHANY COMPANY.
when said note was executed and delivered
it was provided by the statute of the state Error to state court—Federal question--full of New York that
faith and oredit-construction of statute “No foreign corporation . shall do of other slate-sufficiency of pleadings-business in this state without having first comity.
procured from the secretary of state a cer
tificate that it has complied with all the 1. Whether or not a corporate contract entered requirements of law to authorize it to do
into in contravention of the státutes regulat. business in this state, and that the business ing foreign corporations was, under the proper construction of such statutes, ipso facto void of the corporation to be carried on in this and therefore unenforceable in the courts of state is such as may be lawfully carried on another state, does not present a question un- by a corporation incorporated under the der the full faith and credit clause of the laws of this state.
No foreign stock Federal Constitution which will sustain the exercise by the Federal Supreme Court of its corporation doing business in this state appellate jurisdiction over state courts.
shall maintain any action in this state, up2. A decision of the highest state court that a
on any contract made by it in this state, plea, when construed most strongly against unless, prior to the making of such contract, the pleader, does not disclose the defense that it shall have procured such certificate." the note in suit was given to a foreign cor
The plea further averred that at the time poration in pursuance of business carried on in another state without compliance with the of the making of the note the plaintiff was statutory conditions upon which its right to
a business stock corporation, foreign to the do business there depended, involves purely a state of New York, and had not theretofore local question, which will not sustain a writ procured from the secretary of state a cerof error from the Federal Supreme Court.
tificate that it had complied with all the 3. Whether or not the courts of one state
should, on principles of comity, permit an ac requirements of the law to authorize it to tion to be maintained on a contract entered do business within the state, and that the into in contravention of the laws of another business of said plaintiff was such as might state, is not a Federal question which will be lawfully carried on by a corporation insustain a writ of error from the Federal Sus corporated under the laws of said state for preme Court to a state court.
such or similar business, according to the [No. 119.]
form of the statute of New York in such
case made and provided. Argued January 11, 1905. Decided Febru- 3. The third plea sets out that the note ary 20, 1905.
was made and executed in the state of
Pennsylvania to the plaintiff company, a IN N ERROR to the Supreme Court of the foreign corporation created under the laws
State of New Jersey to review a judg- of North Carolina. ment affirmed by the Court of Errors and That when said note was executed and deAppeals of that State, enforcing a contract livered it was provided by the state of Pennmade in contravention of the statutes of an- sylvania thatother state regulating the conduct of busi- “1. No foreign corporation shall do any ness by foreign corporations. Dismissed. . business in this commonwealth until said corporation shall have established an office | York, and that, under the laws of that or offices and appointed an agent or agents state, no foreign corporation could do busifor the transaction of its business therein. ness there without a certificate of the secre2. It shall not be lawful for any such cor- tary of state that it had complied with all poration to do any business in this common the requirements of law to authorize it to wealth until it shall have filed in the office do business there; and that no such corof the secretary of the commonwealth a poration could maintain any action in that statement, under the seal of said corpora- state unless, prior to the making of such tion, and signed by the president or secre-contract, it had procured such certificate; tary thereof, showing the title and object that plaintiff was a foreign corporation of said corporation, the location of its office within the meaning of the law, and had not or offices, and the name or names of its at- procured a certificate. torney, agent, or agents therein, and the The third plea was similar in terms, avercertificate of the secretary of the common-ring the note to have been made in Penn. wealth, under the seal of the commonwealth, sylvania, whose statutes provided that forof the filing of such statement, shall be eign corporations should do no business in preserved for public inspection by each of the state without filing a certain statement said agents in each and every of said offices. in the secretary's office and procuring the 3. Any person or persons, agents, officers, or certificate of the secretary of the common. employees of any such foreign corporation, wealth, and further providing that the agent who shall transact any business within this of any foreign corporation transacting busicommonwealth for any such foreign corpo- ness within the state, without complying ration, without the provisions of this act with the provisions of the law should be being complied with, shall be guilty of a deemed guilty of a misdemeanor. The plea misdemeanor, and upon conviction thereof also averred noncompliance with those proshall be punished by imprisonment, not ex- visions. ceeding thirty days, and by a fine not ex- Both the supreme court and the court of ceeding one thousand dollars, or either, at errors and appeals held that a contract the discretion of the court trying the same." made in contravention of these statutory
The plea further averred that, at the regulations, though not enforceable in the making of the note, the plaintiff was a cor-courts of New York and Pennsylvania, was poration foreign to the said commonwealth, not ipso facto void, and might be, notwithand had not theretofore filed in the office of standing such statutes, enforced in New Jerthe secretary a statement showing the title sey. and object of said plaintiff, the location of Plaintiffs in error insist that by this rulits office, and the name of its authorized ing full faith and credit was denied by the agent therein, according to the form of said courts of New Jersey to the statutes of New statute; yet, notwithstanding the premises, York and Pennsylvania, in contravention to the plaintiff, at the time of the making of g 1, article 4, of the Constitution. the said note, did business in the said com- By $ 709 of the Revised Statutes (U. S. monwealth of Pennsylvania, contrary to the Comp. Stat. 1901, p. 575), authorizing writs form of the said statute.
of error to the state courts, it is declared The plaintiff demurred to the second and that final judgments, where is drawn in third pleas, and, the demurrer being over- question the validity of a statute of any ruled, the cause was sent down to the Cir-state, or any authority exercised under any cuit Court of Hudson county for trial on state, on the ground of their being repug. an issue of fact raised by the fourth plea, nant to the Constitution, etc., and the dewhich is not material here.
cision is in favor of their validity, may be The trial judge there directed a verdict re-examined here. for the plaintiff, and upon appeal to the
But the validity of these statutes was not court of errors and appeals of New Jersey denied. The case turned upon their conthe judgment of the lower court was af- struction and the effect to be given to them firmed. 69 N. J. L. 270, 55 Atl. 724. in another state. The New York statute
directly, and the Pennsylvania indirectly, Mr. Alexander S. Bacon for plaintiffs forbade the maintenance of actions “in this in error.
state.” The Pennsylvania statute made it Mr. James A. Gordon for defendant in a misdemeanor to transact business without error.
complying with the law. Neither statute
declared the contract so made to be void, Mr. Justice Brown delivered the opinion and it was apparently upon this ground that of the court:
the New Jersey courts held that the case The defendants, plaintiffs in error here, did not fall within those decisions wherepleaded that the note upon which suit was in it is declared that a contract void by the brought was executed in the state of New 'les loci contractus is void everywhere.