Case Name: EDMUND JACOBS v. M. W. SMALLWOOD
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1869-01
Citations: 63 N.C. 112
Docket Number: 
Parties: EDMUND JACOBS v. M. W. SMALLWOOD,
Judges: 
Reporter: North Carolina Reports
Volume: 63
Pages: 112–128

Head Matter:
EDMUND JACOBS v. M. W. SMALLWOOD,
The Stay Law, contained in the Ordinances of June 1866 and March 1,868, impairs the obligation of contracts, and is therefore void.
Semite, that the provision for a Homestead in the present Constitution of the State, is not unconstitutional, and has a retrospective effect.
Per RODMAN, J., dissenting. The Stay Law is not unconstitutional.
Debt, tried upon demurrer, before Buxton, J., at Spring Term 1868 of the Superior Court of NORTHAMPTON.
The suit had been brought in the County Court, upon a bond dated on the 29th of May 1867 The defendant pleaded to the jurisdiction, on the ground that the bond declared on had been given in renewal of a debt contracted before January 1st, 1865. To this the plaintiff demurred.
In the County Court the demurrer was sustained. Upon appeal his Honor below overruled the demurrer, pro forma, and the plaintiff appealed.
It was agreed that if the demurrer were sustained, judgment should be rendered for the debt declared upon.
Smith, Barnes and Teates, for the appellant.
Peebles & Peebles, contra.

Opinion:
Reade J.
It ought to be, and it is with us, the gravest duty, to decide between the Constitution and a legislative enactment. It is settled that whenever such a question arises, every reasonable presumption is in favor of the validity of the enactment, and against tlie alleged repugnance. Nor is it ever to be presumed, that the Legislature intends an infringement of the Constitution, even when the infringement is pal pable; but it is to be set down to inadvertence, or mistake, or unconscious bias from pressing circumstances. The duty is not only grave but painful, when great public interests are involved, or the public mind is excited and anxious by reason of the multiplicity of individual interests which are at stake. But still the Judge has but one guide — duty. To maintain and enforce legislative enactments is important, but to maintain and defend the Constitution is paramount.
The Constitution of the United States provides that "no State shall pass any law impairing the obligation of contracts."
The obligation of a contract is, the duty of its performance — of a full and complete compliance with its terms.
Any statute which relieves a party from this duty, or enables him to evade it, is void.
An occasional, if not a frequent recurrence to fundamental principles is useful. Let us, therefore, consider why it was thought necessary by those who formed our government, to make this provision in the United States Constitution. Every word of that instrument was well-considered; every principle was founded in patriotism and virtue. Those who had fled from error, and staked all for truth and justice, — great and good men! framed a government in which virtue and intelligence were to be the powers, and the only powers; capital, privilege, monopoly, rank, had had their day, and were discarded. Upon a new soil and in fresh clime, a government was inaugurated, founded upon the virtue and intelligence of those wlm were of it. Very few were rich; the masses were poor; and those who were expected to come under it by immigration were to be poorer still; and the whole body were dependent upon industry and integrity for prosperity. Under these circumstances, what was necessary for the business and prosperity of the community ? If it had been left to the control of capital, the few who had it would have had a monopoly, and industry and enterprise would have been paralyzed. To prevent this, integrity was put in competition with capital— indeed almost to supply its place. Every man's word was to be his bond, and every bond — every contract — was to be inviolable. Not only was the capitalist assured that, if he would venture his capital for the interest of the community, he should have every guarantee for its safety, but the laborer was assured that industry, should have its reward; that in the absence of capital to " pay down," industry and enterprise need not falter, because a promise of reward should never be evaded or impaired. It will be seen, therefore, that the provision was not so much for the protection of capital, as for the encouragement of industry and enterprise. It was a guaranty of justice to all, and is expressly so against him who would obtain the profits of industry, and withhold the reward. It is a provision in favor of industry and honesty, and against idleness and treachery.
Probably the wisdom of our ancestors could not be more clearly vindicated than it is by the circumstances which now surround us. Let it be supposed that there are in the State 200,000 persons acting for themselves: one-third of them, the colored portion, are neither creditors nor debtors to any considerable amount, and are dependent upon their labor for subsistence; and that depends upon the inviolability of contracts. Another third, one-half of the whites, are small farmers and laborers, dependent upon the rewards of industry. The other third may represent the creditor and debtor classes. Of these there are, doubtless, meritorious cases on each side: On one side there may be the exacting Shylock creditor, and on the other the exhausted, unfortunate debtor; on one side there may be the widow or the orphan creditor, and on the other the showy, spendthrift debtor. It is impossible to make general rules to fit these individual cases; and it was wise to leave the contract inviolable, and the hardships to private adjustment. Probably the attempted interference in favor of one class against the other, has held out false, not to say unjust hopes, and has prevented the private adjustments which might have ¡been made. As it is, we find that eight years • of stay laws have left a considerable indebtedness, with interest and cost .accumulated, and creditors and sureties impoverished, without .any corresponding benefit to the principal debtors; some of whom cannot pay, and have sought relief from the Bankrupt .law; and some have delayed, and have now lost the opportunity for that relief, by reason of the false hopes held out by the stay law; and some of whom will not pay, although their means are abundant, and are used in speculation and extravagance.
Again: it was very well known to those who framed our Constitution, that with the most prudent and honest purposes, persons would sometimes become involved beyond their ability to pay, and that it would be crippling industry and enterprise to afford them no escap,e from misfortune; and, therefore, the same Constitution, which makes contracts inviolable by State laws, provides for a General bankrupt law, by means of which •a debtor may be absolved from his debts and take a new start.
Again: the laws, while they provide for the enforcement of contracts, are not used to the extent of oppressing the debtor, for there have always been exemptions of what were deemed necessaries. In our earlier days — times of great simplicity •and small estates — we had the exemptions of wearing apparel, wheel and cards, loom, bed and furniture, &c. As our fortunes increased, the exemptions increased, and provisions, furniture, &c., were added; and subsequently, as times and habits changed, other things were added. All of which met the approval of the public, and was not injurious to creditors, while the debtors were not reduced to want, nor left to broken spirits.
Now there is a commendable spirit, which finds expression in our new Constitution and in our legislation and in popu-ular approbation, to allow homesteads; for truly we may say, why allow a bed, without a shelter to keep off the rain!
Brit exemptions and homesteads on the one hand, and stay laws on the other, are very different things. The former .^allows a man to be comfortable and honest, and encourages industry, while the latter enables Mm to be profligate and dishonest; the former is for all, the latter for a favored few.
There has been no case before us requiring the decision of the question, whether the provision tor a homestead in our State Constitution is in violation of the Constitution of the United States. And although the advice of the Supreme Court was requested by resolution of the General Assembly, yet the Court is so constituted, that we have not felt at liberty to deliver any authoritative opinion upon the subject. But the fact may be stated, that our new'Constitution was approved by Congress, with that provision in it; and it is not to be supposed that it would have been done, if it had been thought to be in violation of the Constitution of the United States. And it is settled, that every presumption is to be made in its favor; as having the approbation of the Convention of the State, and of the Congress of the United States. And it may be repeated that exemptions have always existed, not to any considerable amount, to be sure, but still, in increasing amounts, keeping pace with the change in manners and customs, and the condition of the country. If an exemption of the value of $100 was necessary in our infancy as a people, with the simplest habits, and fell under the maxim, de minimis non curat lex, it may be that the exemption of a homstcad of $1000 value will be deemed less considerable now than $100 then. And it has the sanction not only of Congress and of the State Convention, but of the liberal spirit of the times as well. And it may well be supposed to be the earnest wish of the Government in all its departments, and of every enlightened and benevolent citizen, to see every man with a home for his wife and children, a home to adorn and to love — Ms home, his castle — " from turret to foundation stone
Although we are not permitted to declare our decision, in advance of a case between parties which may come before us, yet a measure which has the sanction of the State Constitution, of Congress, the guardian of the United States Constitution, and of an enlightened public sentiment, and which is founded ou justice, aud which gives to every man a home from which he cannot be driven, may well be supposed to find favor with the Court, no member of which has intimated an unfavorable opinion. If such should be the case, then every man will be saved from oppression. And, in the absence of any :stay lawj to prevent, every man will be obliged to do justice to his creditors, by surrendering to the satisfaction of his debts ,so much of liislproperty as is not exempted as his homestead.
We have been thus full in what may be regarded as an unusual discussion of the subject by the Court, because we .are aware that the effect of our decision will be felt very far beyond the case before us; because of the anxious state of •the public mind; and because, in declaring invalid a measure which was intended to afford relief, but which was not only Invalid but mischievous, and gave a stone instead of bread, we are anxious to relieve the public mind by directing attention to a measure — the Homestead — which may enure to the benefit of all.
We come now to the question: Does the ordinance, which we are considering, impair the obligation of contracts?
We do not propose to labor the subject. It is plain and incontrovertible. And the learning upon it is abundant and -common. Barnes v. Barnes, 8 Jon. 366.
We are obliged to concede that it was not the purpose of the Convention to impair the obligation of contracts, both because that is not to be presumed in any case, and because a different purpose is expressly declared. And we are to take the declared purpose as the real one. The purpose declared is, " to change the jurisdiction of the Courts," Ac. To do that, is quite within the province of legislation. But while pursuing that legitimate object, it turns out that the effect was to impair the obligation of contracts — a consequence which, as we are to presume, was not foreseen, and is to be set down to inadvertence, or the unconscious bias of pressing circumstances and As soon as it is discovered that the effect is to violate the «Constitution, no doubt the Legislature and every citizen will sustain the Court in its purpose to maintain the Constitution».
The second section of the ordinance of the Convention of 1865-66 entitled " An ordinance to change the jurisdiction of the Courts," <&c., as amended by the Convention of 1868, (to be found appended to the Code,) provides that all contracts, without regard to the terms of payment made by the parties, shall be payable in four annual installments. Now if the terms of the contract be that it is all payable at one and the same time, and the ordinance changes the payment to four different and distant times, it is a material alteration, and impairs its obligation.
Section sixteen provides that the second section shall not-apply to debts contracted since May 1st, 1865; so that the second section is liable to the two-fold objection of discriminating between classes, and of altering the terms, of contracts, and thus impairing their obligation, (1) as regards the particular of the time of payment, and (2) as regards the particular of the remedy for enforcement — alterations, not immaterial and reasonable but material and unreasonable.
There are several cases before us, of which this Opinion is-decisive. The particular point presented in this case is, whether a bond given since May 1st, 1865, in renewal of a debt-before that time, could be sued on in the County Court (this-suit having originated in the County Court.) The defendant pleaded to the jurisdiction, and the plaintiff demurred, and his: Honor overruled the demurrer and sustained the plea. In this-there was error. According to the agreement of the parties, judgment will be entered here for the plaintiff, for his debt and. interest.