Case ID: la-ann_5/html/0271-02.html
Source: Caselaw Access Project
Author: {"author": "Eustis, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Fisher, Burgess & Co. v. Wheeler and Ellis.
    The State insolvent laws do not extend to a contact made in another State, and to be there executed between citizens of other States; and a discharge under those laws does not extinguish the remedy against the future property of the debtor who has taken the benefit of them.
    The laws of Louisiana relating to the voluntary surrender of property by insolvent debtors, date no further back than 1817. They are consequnetly controlled by the inhibition contained in the Constitution of the United States against the passage of laws by the States impairing the obligation of contracts.
    APPEAL from the Fourth District Court of New Orleans, Strawbridge, J.
    
      A. D. Rozier, for plaintiffs,
    contended: The appellants contend, that there is error in the judgment of the court a qua. in not entertaining jurisdiction of this suit, and in dismissing it.
    The insolvent laws of this State are inoperative, so far as this contract is concerned. It is not maintained, that where, a debt has been contacted after the passing of an insolvent law, and tho debt was contracted within the State, and between citizens of the State, the discharge of the defendant would not be a bar to the suit. The obligation sued on was not contracted in this State. If our insolvent laws were merely tantamount to the cessio bonorum of the Roman law, which only exempted the person of the debtor from imprisonment, there would be no objection to them; but they go much further, and in certain contingencies release or discharge the debt, and exempt the future acquisitions of the debtor from execution for the debt. The article C. C. 2173 is thus worded : “a cession of property discharges all the debts which the debtor placed on his bilan, including those arising from offences and quasi offences, provided a majority of his creditors in number, and who are also creditors for more than the half of the whole sum due by him, agree to such discharge.”
    This makes our insolvent laws conte within the constitutional prohibition, and they impair the obligation of contracts. No State can impair the obligation of contracts.
    The appellants cannot be forced to become parties to the insolvent proceedings. If so, then the debtors under the article 2173- could obtain a full discharge'from the debt, and thereby exempt their future acquisitions from execution for the debt. This cannot be done. The debt was contracted out of this State, to be executed out of this State, and the obligation was entered into by and between citizens of another State. Tho application of the defendants for the benefit of the insolvent laws of this State can have no reference or application to the debt sued on in the court a qua. At the time the parties contracted they had not in view the insolvent laws of this State. They cannot be supposed to have been incorporated in their contract, as is the case when the debt is contracted within the State, and between citizens of the State.
    The result of the decisions, says Judge Slory, (3 Com. Const. U. S. 15, 256,) is, that State insolvent laws lawfully apply, 1st. to all contracts made within the State, between citizens of the State; 2d. they do not apply to contracts made within the State, between a citizen of the State and a citizen of another State ; 3d. nor to contracts not made within the State; and the contracts so protected are equally so from prospective as well as retrospective legislation. See Kent’s Com., vol. 1, p. 422.
    Can, therefore, these creditors, citizens of the State of Missouri, be foi-ced to enter into the concurso, and thereby enable the insolvents to obtain a discharge of the debt? The appellants think not, and maintain that there was error in the judgment of the court a qua.
    
    But even if we did not incur the risk of these debtors obtaining this discharge, still our insolvent laws, so far as this debt is concerned, are totally inoperative, for the reasons set forth above.
    
      Frank Haynes, for the defendants,
    contended: The question is narrowed to a single point. Shall King and Fisher be bound by the insolvent proceedings had by defendants before the Third District Court, King and Fisher being absent creditors residing in the State of Missouri ?
    The appellees contend, that King and Fisher are bound by said proceedings, for this: 1st. King and Fisher are placed on insolvent’s bilan for note sued on. 2d. That an attorney was appointed by the court to represent the absent creditors. Notice and citations were served on him by the sheriff. That King and Fisher were represented in the concurso by P. S. Warfield, attorney, appointed to represent the absent creditors, Olney v. Walkers 12 L. R. 247. 3d. The plaintiffs have attempted to enforce their claim in the tribunals of this State; therefore they should be bound equally with one who has resided here. Should one who is a non-resident claim a greater privilege than our own citizens ? This subject was fully discussed and settled in the case of Ray v. Cannon, 2 N. S. 26. 4th. That the insolvent laws of Louisiana do not grant an absolute remission of the debt. It releases the debtor from imprisonment, but does not extinguish the debt. Union Bank v. Bagley, 10' R. R. 43. 5th. That the placing plaintiffs, or rather King and Fisher, on the bilan, their claim being acknowledged, they are the same as judgment creditors, so far as the distribution of the effects surrendered, or the amount the insolvent might be possessed of, were he fortunate. Fernez y Carille v. Bank of the United States, 10 R. R. 164. 6th. That the judge of the cour-ta qud properly ordered, that these proceedings be cumulated with the insolvent proceedings before-the Third District Court of New Orleans. That King and Fisher were parties to the concurso by representation of the attorney appointed by the court.
   The judgment of the court was pronounced by

Eustis, C. J.

This is an action on a promissory note drawn by the defendants in favor of King and Fisher, (who are the real plaintiffs in interest,) in the State of Missouri, and payable at the bank of said State in St. Louis. All the parties were at the date of the note citizens of that State. The defendants afterwards removed to this State, and established themselves in business in New Orleans. Previous to the institution of this suit they applied to the Court of the Third District of New Orleans for the benefit of the laws relative to the voluntary surrender of property. The cession of their properly was accepted by the judge, and the sheriff was appointed syndic of their estate. These facts and the order of the district judge staying all proceedings against the person and property of the insolvents, were pleaded by the defendants in bar of the plaintiffs’ action.

The judge of the Fourth District Court of New Orleans, in which that suit was instituted, sustained virtually the exception of the defendants, and transferred the proceedings to the Third District Court, decreeing that the plaintiffs be precluded from proceeding in the court in which it was then pending. From this judgment the plaintiffs have appealed.

The regularity of the insolvent proceedings has not been impugned; and it appears that King and Fisher, to whom the note belongs, were placed on the schedule of the insolvents as creditors for the amount thereof. The question on which this case has been presented in the argument of counsel is, whether King and Fisher are bound by the insolvent’s proceedings had in New Orleans, they as Well as the defendants having been citizens of Missouri at the time of the making of the note, and the note having been executed and made payable in the said State. The case has been argued by the counsel on both sides as resting on authority, and the argument has been confined to the authorities cited.

We think the rule to be settled, that the State insolvent laws do not extend to a contract made in another State, and to be there executed between citizens of other States; and that a discharge under these laws does not extinguish the remedy against the future property of the debtor who has taken the benefit of them. The point has been repeatedly decided in express terms. Witty, Follet, 4 Wendell, 458; and cases cited by counsel. 2 Wendell, 458, same case.

It is true, as contended for by the counsel for the defendants, that the late Supreme Court held, that the inhibition contained in the Constitution of the United States against the passage of laws by the States impairing the obligation of contracts, did not apply to the Spanish law's originally in force in Louisiana, or to the laws of the Territorial Government relating to insolvent debtors, but to laws enacted by States of the Union exclusively. But the Spanish laws have been repealed, and the laws of the State relating to the proceedings in case of voluntary surrender of property by debtors, not in actual custody, of which the defendants have sought the benefit, date no further back than the year 1817, subsequent to the admission of Louisiana into the Union. The Code of 1808 is also repealed by a statute of 1828, except as to some articles which have no reference to the present subject. Laws of 1828, No. 40.

The defendants obtained no discharge from their creditors, but have pleaded their application for the benefit of the insolvent laws, the acceptance of the cession of property, and the stay of proceedings ordered by the district judge on accepting the cession; which raises the question before stated, whether the plaintiffs are bound by the insolvent proceedings of the defendants.

It seems to follow necessarily, from the rule above stated, as the plaintiffs did not attempt to reach the property vested in the creditors by the cession made by the insolvents, but merely asked for judgment on their debt, the proceedings iu insolvency are no legal impediment to the plaintiff’s action.

The judgment of the district court is therefore reversed, and the case remanded for a new trial, with directions to the judge to proceed therein according to law; the appellees paying the costs of this appeal.