Douglas v. Phoenix Ins. — 18 N.Y.S. 259

Majority

p. 259

Douglas v. Phoenix Ins. Co. of Brooklyn.

(Supreme Court, General Term, Third Department.

March 15, 1892.)

Headnote

1. Foreign Attachment—Lien on Domestic Debt—Pleading.

In an action on a fire insurance policy, in which plaintiff and defendant were both residents of, and the loss payable in, the state of New York, the defense was that the debt had been attached on trustee process issued against plaintiff in the state of Massachusetts. Held, that the answer was fatally defective in failing to allege an actual seizure under the attachment, or other step divesting plaintiff of control over the debt, and in failing to allege that the claim had any existence in the state of Massachusetts.

2. Same—Pleading—Situs oe Debt.

The fact that plaintiff had a debt due him from defendant in the state of Massachusetts could not be inferred from the fact, alleged in the answer, that defendant had an agency in that state; the situs of the debt in question being in the state of New York, where debtor and creditor both resided.

3. Same—Effect of Foreign Attachment.

In such case, the situs of the debt being in the state of New York, it could not be reached by an attachment issued under the laws of Massachusetts.

4. Same—Pleading—Conclusions of Law.

The answer alleged the jurisdiction of the Massachusetts court, and the full and complete control of the property under the attachment, but did not set out or refer to the provisions of any Massachusetts statute applicable to the case. Held an allegation of conclusions only, and insufficient to show jurisdiction of the court in question.

Appeal from special term, Franklin county.

Action by Hiram A. Douglas against the Phcenix Insurance Company of Brooklyn to recover the amount claimed to be due the plaintiff on a fire insurance policy issued by the defendant. The complaint was in the ordinary form in such actions, and also contained an allegation that the defendant was a domestic corporation, organized under the laws of the state of New York, and that the plaintiff, at the time of the issuing of the policy, was a resident of the state of New York, and the holder and owner of the policy. The answer, after admitting many of the allegations of the complaint, alleges in substance that creditors of the plaintiff residing in the state of Massachusetts have by attachment or trustee process, issued or granted in that state, attached the claim of the plaintiff sued upon in this action. To this alleged defense the plaintiff interposed a demurrer, on the ground that the same is insufficient in law upon the face thereof. This demurrer was sustained, and the trial court ordered judgment for the plaintiff, in accordance with the prayer of the complaint, with costs, and from that judgment the defendant appeals.

Affirmed.

The following opinion was delivered by Mr. Justice Kellogg at special term:

“ The only issue made in this case is that made by the demurrer to the affirmative defense set forth in the answer. All the allegations of the complaint are admitted; but this defendant, by way of plea in abatement, alleges, in substance, that certain creditors of this plaintiff residing in the state of Massachusetts have, by trustee process or attachment in that state, attached the claim here sued upon. To this affirmative defense the plaintiff demurs on the ground that the defense as alleged is insufficieht in law upon the face

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thereof. To dispose of this issue it may be sufficient to call attention to the single allegation in the complaint, to-wit, ‘that defendant agreed to pay * * * within sixty days after notice and its receipt of the usual proofs of loss,’ and the allegation of the answer that the attachment in Massachusetts was issued and served upon defendant ‘ before any proof of loss had been received by defendant from plaintiff.’ Upon the face of this statement it is clear that nothing was due or owing, at the time of such service, from defendant to plaintiff; nor was there at such time any claim liquidated or adjusted, and under no general public law could any such attachment attach anything. If there is any special statute of Massachusetts which could create a lien in such a case, it should have been in substance alleged, so that the court could see how far it was inconsistent with the general public law, and how far it was intended to extend. Upon this ground alone I am of opinion that the demurrer should be sustained.

“There are, however, other grounds; and the most important, and the one which impresses me as conclusive and final and disposes of all merits of this defense, however concisely it may be alleged, is this: that there is nothing in the state of Massachusetts upon which the attaching creditors at any time can levy or obtain a lien by any compulsory process against this defendant. The defense relies upon the principle expressed in Embree v. Hanna, 5 Johns. 101 , as the foundation of its contention, and claims that this principle has been applied in other states to cover completely the case before us, and refers to Barr v. King, 96 Pa. St. 485 ; Bank v. Huntington, 129 Mass. 444 . The principle in Embree v. Hanna, as expressed in the opinion of Chief Justice Kent, went so far as to declare that a debt owing by an individual debtor residing in a sister state might be attached, if the laws of that state so declared* by a creditor of his creditor residing in this state, even though the eréditor of such foreign debtor had no notice of such attachment, and no opportunity to defend; and that such attachment might subsequently be pleaded in abatement of a suit brought in this state by the creditor against such debtor: provided, always, that such attachment were served before the action was-brought here. He says: ‘ The principle will support a plea in abatement of an attachment pending and commenced prior to the present suit;’ and he-adds the familiar expression, ‘ Qui prior est tempore potior estjure; ’ for ‘ we-may reasonably presume that, if the priority of the attachment in Maryland, be ascertained, the courts in that state would not suffer that proceeding to be defeated.’ This principle has been somewhat limited by the declaration of the general term of this district expressed in Martin v. Railroad Co., (Sup.), 3 N. Y. Supp. 82 , but only so far as to limit its application to cases where the creditor has reasonable notice and opportunity to defend. When the individual debtor resides in another state, any creditor of his creditor may attach such debt, if the laws of that state so declare, and such -laws provide that reasonable notice is given to the creditors, so that the provisions of the constitution of the United States touching the deprivation by a state of the liberty or property of a person, except by due process of law, is complied with.' This proceeds upon the theory that, so far as the debt of any resident in a state is concerned, the legislature of that state may declare the situs of such, claim, for the purpose of attachment, etc., to be the residence of the debtor.. This is so declared by Andrews, J., in Plimpton v. Bigelow, 93 N. Y. 596 , in this language: That ‘the fundamental principle upon which all attachment proceedings rest is that the res must be actually or constructively within the jurisdiction of the court issuing the attachment, in order to any valid or effectual seizure under the process. In the case of tangible property, capable of actual manucaption, it must have an actual situs within the jurisdiction. But credits, choses in action, and other intangible interests are made-by statute susceptible of seizure by attachment. The same principle, however, applies in this case as in the other; the res,—that is, the intangible-

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right or interest,—to be subject to the attachment, must be within the jurisdiction. But it is manifest from the nature of this species of property that it must be a constructive or statutory presence only, founded upon some characteristic fact which determines its locality.’ The application of this principle expressed in Embree v. Hanna, as modified by Martin v. Railroad Co., taken in connection with the fundamental principles expressed above by An? dbews, J., in Plimpton v. Bigelow, do not carry us to the extent of admitting that the defendant here can avail himself of any such defense. This defendant does not stand in the position of a debtor residing in the state of Massachusetts. It is a domestic corporation organized under the laws of the state of Hew York, 1 having its domicile and residence alone within the bounds of the sovereignty which created it, and is incapable of passing personally beyond that jurisdiction.’ The ‘abstract entity,’ the corporation, possesses a credit, an intangible right or interest, belonging to the plaintiff in this action; and while, with the permission of other states, this corporation may send agents into other states, and do business there, or own property there, it would be wholly inconsistent with the declaration that it is incapable of passing personally beyond the bounds of the sovereignty which created it to say that it is capable, without the consent or aid of the plaintiff, of carrying this credit—this intangible right or interest—belonging to the plaintiff beyond such bounds. This intangible right or interest must of necessity remain with the corporation, and is never, constructively or otherwise, in the possession of an agent. If this were not so, and it were possible to conceive that any agent of this * entity ’—this corporation, outside the bounds of the sovereignty which created it—could in fact possess this intangible right or interest, it would be interesting to know which of its agents possess it, and in how many of the states of this Union it is so possessed at one and the same time. It must be taken to the state of Massachusetts before it can be there subject to the jurisdiction of that state. ‘ The principle found in the Codes of all enlightened nations is that jurisdiction, to be rightfully exercised, must be founded upon the presence of the person or thing in respect to which the jurisdiction is exerted within the territory.’ To say that it is possible for a legislature to enact that, because an agent of this stable entity is within its borders, this intangible interest or right, which is inseparable from the corporate body, is also there, is simply to say that the legislature may enact that any other species of property actually in the state of Hew York is also within the jurisdiction of Massachusetts for the purpose of appropriation or taxation or otherwise. I am aware of the holding incases cited and before referred to as Barr v. King and Bank v. Huntington, but the doctrine declared in those cases has never been approved in this state. Justice Andrews, in Plimpton v. Bigelow, refers to these cases, but not with approval. He says, ‘ We do not enter into this question here. ’ And in the light of what this learned justice does say in that case, and hold to be the true principle for decision of the matters involved in that case, it is very difficult to see how it can ever be held in this state that a corporation may send by its agent, to places where it cannot itself go, these intangible rights and interests to subject them to a foreign jurisdiction. In theory it seems impossible, and in practice, if such practice were permissible, considering the vast affairs of this class of corporations and the territory covered by their agents, confined to no one hemisphere even, the peril and burden attending the citizen of the state where such corporation is domiciled would be incalculable. That a legislature may enact that for protection of its citizens a foreign insurance company shall name some person in the state upon whom process may be served, is reasonable. That the corporation, touching any matters of controversy between it and any individual, maybe called by proxy into the courts of the state where it so does business, is also reasonable. But the legislature cannot transport the corporation itself into its jurisdiction, Ho

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more can it transport there the intangible interests and rights inseparable from the body corporate, and as firmly fixed as the immovable domicile itself. If anything were lacking in the case of Plimpton v. Bigelow by way of application of the principle there so well reasoned to a case exactly like this, it is fully supplied by Justice Daniels in Straus v. Chicago Glycerine Co., 46 Hun, 217 . Demurrer sustained.”

Argued before Mayham, P. J., and Putnam and Herrick, JJ.

G.A.Seixas, for appellant. Cantwell & Cantwell, (Wm. P. Cantwell, of counsel,) for respondent.

By the demurrer the plaintiff admits all the allegations of fact, if any, in the answer demurred to; and the first question to be examined on this appeal seems to be whether that part of the answer interposed as an affirmative defense was sufficient upon its face to show that the attachment alleged to have been issued in Massachusetts in favor of creditors of the plaintiff residing "there was a valid and effectual lien on the debt due the plaintiff from the defendant on this insurance policy, so that, if the defendant should pay the plaintiff, it would still be liable to the attaching creditors. It is quite clear that, if this foreign attachment had so far levied upon this claim as to suspend the plaintiff’s control over it, and transfer the same to the custody of the law, in trust for the payment of the claim of the attaching creditors of the plaintiff, that fact, properly alleged, would constitute a defense to this action, either in abatement, if the attachment proceedings were still pending, or in bar, if the attachment creditors had recovered the money of the defendant, provided the plaintiff had been properly before the court in the attachment proceedings. Ember v. Hanna, 5 Johns. 101 ; Donovan v. Hunt, 7 Abb. Pr. 29 ; Martin v. Railroad Co., (Sup.) 3 N. Y. Supp. 82 . But the defendant, in order to avail itself of such a defense, must, in its answer, allege facts showing that the foreign attachment has by its operation divested the plaintiff of his right to the control of the property or rights in action upon which it is levied or claimed to have operated, and that under it jurisdiction has been acquired of the person of the plaintiff and of the property, or at least of the property which is within the jurisdiction and control of the attaching tribunal. The answer does not allege that the attachment was served on the plaintiff, and it in effect admits that the plaintiff is a nonresident of the state of Massachusetts, and that the domicile of the defendant is in the state of New York, and that the policy was issued in this state to the plaintiff on property in this state, where the loss occurred; but it alleges that by reason of certain provisions of the laws of Massachusetts the defendant was, by complying with the laws of that state, authorized to do business therein; that the defendant had complied with such laws, and had an agency in that state, on whom legal process could be served; and that the process of attachment was served on the agent of the defendant in the state of Massachusetts. No other service is alleged in the answer, and no allegation is contained in the same that any actual seizure under the attachment was made of the claim of the plaintiff against the defendant, or that such claim was in that state; nor does the answer allege as a fact that the plaintiff’s claim on which the attachment is claimed to operate had any existence in the state of Massachusetts.

Under the allegations of fact in the answer we do think that the attachment could be held to operate on the amount due on this policy. It cannot be claimed that the courts of Massachusetts have extraterritorial jurisdiction. It seems to be the settled rule that the state courts are confined in the exercise of their jurisdiction to the limits of their own state, and jurisdiction between citizens of different states is by the federal constitution conferred on the federal courts. In Plimpton v. Bigelow, 93 N. Y. 592 , the court says: “In the case of tangible property, capable of actual manucaption, it must have

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an actual situs within the jurisdiction. But credits, choses in action, and other intangible interests are made by the statute susceptible of seizure by attachment. The same principle, however, in this case as in the other, the res—that is, the intangible right of interest to be subject to attachment— must be within the jurisdiction.” Again, in the same case, the court says: “When the defendant who owes a credit is within the jurisdiction, there is no difficulty, through proceedings in personam, in reaching and applying it in discharge of his debt to the plaintiff. But where he is out of the jurisdiction, and the debt or duty owing to him or the right he possessés exists against some person within the jurisdiction, attachment laws fasten upon that circumstance, and, by notice to the debtor or person.owing the duty or representing the right, impound the debt, duty, or right to answer the obligation which the attachment proceeding-is intended to enforce. ” The answer in this action does not, in terms, charge that the plaintiff had a debt due him from the insurance company in.the state of Massachusetts; nor can it be inferred from the answer, except from the fact that the defendant, while chartered by the laws of New York, and domiciled in that state, having its principal place of business there, had established an agency in the state of Massachusetts. There seems no warrant for holding that the defendant owed this debt for the purpose of attachment in all the states of this Union where it had an agency, and that the situs of the debt was where the defendant saw fit to locate a person on whom process against the defendant might be served. In discussing the question of the location of a corporation for the purposes of an attachment, Andrews, J., in Plimpton v. Bigelow, supra, says: “If the corporation, by having its officers and by transacting business in a state other than its domicile of origin, is deemed to be itself present as an entity in such foreign state, to the same extent and in the same sense as it is present in the state which created it, it may be conceded that its shares might properly be attached in such foreign jurisdiction. But we regard the principle to be too familiarly settled by repeated adjudication of the federal and state courts to admit of further controversy, that a corporation has its domicile and residence alone within the bounds of the sovereignty which created it, and that it is incapable of passing personally beyond that jurisdiction.” Again, as to personal property consisting of debts, choses in action, and contracts, the situs seems to be that of the residence of the creditors. In Williams v. Ingersoll, 89 N. Y. 523 , Earl, J., says: “A debt always, under general jurisprudence, has its situs either at the domicile of the creditor, or' where the written obligation upon which it is due is held, and not at the situs of the debtor.” It follows, therefore, that, in the absence of any special provisions of law, this debt from the defendant to the plaintiff on the policy in question had its situs in the state of New York, and could not be reached under an attachment issued under the laws of Massachusetts, as there was no property in that state upon which the attachment was or could be served, and no personal service of the attachment on the plaintiff.

But it is insisted by the appellant that the answer alleged the jurisdiction of the Massachusetts court, and the full and complete control of the property under the attachment. The difficulty of that contention is that the allegations of this character in the answer are conclusions, and not allegations of fact. While the demurrer admits all the allegations of facts in the pleadings to which it is interposed, it does not admit the conclusions, either of fact or law, set out in the pleading. In Angell v. Van Schaick, (Sup.) 9 N. Y. Supp. 571 , the court, in discussing the manner of pleading foreign statutes, uses this language: “After setting forth the foreign statutes, and averring that they were the whole of the law of the state of Pennsylvania relating to the subject, the pleader alleges that by such statutes the plaintiff was absolutely prohibited from exercising his trade without a license, and that he was prohibited by such statutes from recovering in this action. But these averments

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are mere inferences and deductions drawn from the statute, and are not in any sense allegations of fact. In interposing a demurrer, the plaintiff, did not thereby admit the construction put upon the statute by the pleading demurred to, or the correctness of the inference, but only the truth of such facts as were properly stated in the answer.” This language is identical with that used by the court of appeals in Bogardus v. Insurance Co., 101 N. Y. 337 , 4 N. E. Rep. 522 . In the case at bar the defendant has omitted entirely the provisions of the Massachusetts statute, or any appropriate reference thereto, as facts, but states only the conclusions which the pleader draws from such statutes. This we think insufficient, and the demurrer to such answer does not admit the conclusions of the pleader. But if it could be held that the Massachusetts statutes are sufficiently pleaded in the answer, still, as the situs of the claim of the plaintiff is in the state of New York, where the plaintiff resides, and where the defendant has its domicile or origin, and where the contract of insurance between the plaintiff and defendant was made, and no personal service in the attachment proceedings having been made on the plaintiff, it would seem to follow that he was not before the court in such attachment, and that no jurisdiction over his person or property was acquired in such attachment proceedings. If this be so, the plaintiff had no hearing or opportunity to be heard on this attachment proceeding, and no statute that the legislature of Massachusetts could enact could deprive the plaintiff of his interest in this policy under the provisions of section 1 of the fourteenth amendment of the constitution of the "United States, which, among other things provides: “Nor shall any state deprive any person of life, liberty, or property without due process of law. ” It had been held in Stuart v. Palmer, 74 N. Y. 191 , that “due process of law requires an orderly proceeding, adapted to the nature of the case, in which the citizen has an opportunity to be heard, and to defend, enforce, and protect his rights. A hearing or an opportunity of being heard is absolutely essential. We cannot conceive of dueprocess of law without this.” In Martin v. Railroad Co., (Sup.) 3 N. Y. Supp. 83 , Learned, J., says: “It seems hardly necessary to argue that a judgment which deprives a man of his property cannot lawfully be recovered without notice to him. We do not mean that against absent debtors the law may not authorize an attachment of the alleged debtor’s property. It may thereby acquire jurisdiction of the thing, but, in order to make the jurisdiction perfect, it must give due notice to the owner before it attempt to divest his title.” But in this case the proceedings in rem seem to have been instituted and property seized, and the only defect was in giving notice to the owner. In the case at bar no proceeding in rem was operative in the state of Massachusetts. The res was not within that state. It was but a right in action against the defendant, and the situs of that right was in New York, and the process of the Massachusetts court, which can operate only in that state, did not attach to it in this state, or operate to bring either the plaintiff or his interest in this policy within the jurisdiction of the laws of the process of the courts of the state of Massachusetts. The answer, therefore, as to the new matter did not'constitute a defense to this action, and the demurrer thereto was properly sustained, and judgment for the plaintiff upon the demurrer was proper, and should be affirmed. J udgment affirmed, with costs.

All concur.

Cases cited

Embree & Collins v. Hanna 5 Johns. 101 N.Y. Sup. Ct. p. 260, p. 262
Plimpton v. Bigelow 93 N. Y. 592 N.Y. 1883-11-20 p. 262