Court Opinion

ID: 7183494
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:50:23.627788+00
Date Added: 2024-06-11T16:15:59.706269
License: Public Domain

Ogden, J.
The defendant, a citizen of Louisiana, resists a suit instituted by the plaintiffs, citizens of Kentucky, to recover the amount of a draft accepted by a commercial firm of which he was a member, on a plea in the following-words : “That since the execution and protest of said draft, to wit, some time in the year 1850, defendant made a cession of all his property to his creditors, under the provisions of the Act of February 20th, 1817, relative to the voluntary surrender of property, and of the Acts amendatory thereof, and of the Civil Code of Louisiana, to which proceedings the plaintiffs were made parties, under the provisions of said laws—that a stay of all proceedings against the person and property of defendant was granted by order of the Fifth District Court of Now Orleans, before which said cession was made, and that said order has never been sot aside.” The present suit is alleged to be in violation of that order and of the law under which the contract sued on was made. The bill is dated at New Orleans, drawn by L. Janin, a citizen of Louisiana, on Laforest *337& Squires, at New Orleans, and made payable to the order of Benjamin Winchester, and has on it the blank endorsements of Benjamin Winchester and Miles Taylor. The parties, whose names are to the bill, were all citizens of Louisiana at the time, and the acceptors were commission merchants residing and doing business in New Orleans. The bill was accepted and endorsed for the accommodation of the drawer, precisely in the shape in which it appeal’s now in the record. Logan Runton, also a citizen of Louisiana, became the owner of it, and sent it to Kentucky, where it was bought by the plaintiffs. The name of Runton is not on the bill.
The case has been argued with much zeal and ability on the question of the effect and validity of the insolvent laws of the State, and the judicial proceedings which have taken place under them, as affecting the right of the plaintiffs, citizens of another State, under the circumstances of this case, to prosecute this suit in a Court of this State, notwithstanding the order staying all proceedings against the person and property of the defendant. A question, however, has been raised in this Court which does not seem to have been' considered in the Court below, and which it is necessary first to dispose o£ It is denied that the plaintiffs were duly made parties to the proceedings in bankruptcy, instituted by the defendant. This was undoubtedly essential to give validity to the plea which has been set up. The bill is found in the Schedule of defendant’s liabilities, and the holder of it is represented to be A. S. Trotter, agent of the Northern Bank of Kentucky. Trotter is not represented as either being present, or residing in New Orleans, and the personal service on him, which the plaintiffs contend should have been shown, we think was not necessary. Counsel was appointed to represent the absent creditors, and that is the only formality required by law to make absent creditors parties in cases of voluntary surrenders. Acts of 1817, p. 130. The bill was then in suit in the United States Court in New Orleans, in the name of the present plaintiffs, and in the description a special reference was made to that suit. The plaintiffs were, therefore, legally parties to the proceedings, and we will now proceed to consider the argument and authorities which have been submitted to us on the merits of the plea.
The order of the Court, made under the authority of a sovereign State, accepting the surrender of defendant’s property and staying all proceedings against him, must preclude any creditor from instituting a suit in a Court of this State, unless the law itself is a nullity. The argument of the counsel for plaintiffs is not understood as contending for the absolute nullity of the law, for it seems to be conceded everywhere to be now well settled, that State insolvent or bankrupt laws, as to contracts posterior to those laws, are valid and binding between citizens of the State where such laws exist as to contracts made and to be performed in the State. But the State, in its sovereign capacity, can exorcise the fullest authority over its own tribunals, and prohibit citizens of other States from suing in them on contracts made, either in or out of the State, unless there is some superior power by which her authority in this respect is circumscribed. The State has declared her will on this subject. Her insolvent laws expressly extend their operation to all persons, whether citizens of other States or foreigners; and all contracts are declared to be affected by them, whether made in or out of the State, or to bo performed in or out of the State. The plaintiffs claim an exemption from the operation of this law as regards them, which they can only be entitled to by showing either that the *338-Whole law is repugnant to the constitution of the United States, and, therefore, l ’ void, or that by the effect of some clause in the constitution, so much of the jw ag them from suing in the Courts of the State, is inoperative. The right of the several States to pass bankrupt laws so long as Congress refrained from exercising the power given to them, by the constitution, of passing uniform bankrupt laws, has never been questioned since the decision in the case of Stwges v. Crowninshield, 4 Wheaton. It was there held that the States might pass bankrupt laws, provided they did not violate the 10th sect, of the 1st article of the constitution of the United States, which declares that no State shall pass a law impairing the obligation of contracts. Judge Mm'shall, in delivering the opinion of the Court in that case, says, the constitution did not grant to the States the power of passing bankrupt laws, it found them in possession of that power, and restrained them so far as to prevent them from passing laws impairing the obligation of contracts. He also, declares, in that opinion, that the insolvent laws existing in the different States at the adoption of the constitution, which went further than discharging the person from imprisonment, were obnoxious to the constitutional prohibition. According to the opinion-expressed in that case, the insolvent laws of this State would be repugnant to the constitution of the United States, and would be void, as well in regard to our own citizens as in regard to the citizens of other States. It is, however, well known that the whole subject of the constitutionality and effect of State bankrupt laws came afterwards under review in the leading case of Ogden v. Saunders, 12th Wheaton—and that it was then decided by the Court, that a discharge under a State law, when the contract was made between citizens of the State under whose law the discharge was obtained, should be held to be valid. In regard to citizens of other States, the Court says: “But when the State passes beyond its own limits and acts upon the rights of the citizens of other States, there arises a conflict of sovereign power, and a collision with the Judicial powers granted to the United States, which renders the exercise of such a power incompatible with the rights of other States and with the constitution of the United States.” Judge Marshall, who had delivered the opinion of the Court in the case of Stwges v. Crowninshield, assented to this judgment, and the constitutionality and validity of State bankrupt laws in its effects on posterior contracts to the extent of even entirely discharging the obligation, was established by that decision. The case of Ogden v. Samiders presented the question, whether Ogden, who had obtained a discharge in New York under her insolvent laws, could successfully plead that discharge in bar of a suit instituted against him in the United States Court at New Orleans by Saunders on a bill drawn by Jourdcm, at Lexington, in Kentucky, on Ogden, then a citizen and resident of New York, and there accepted by him. The Court held that the fair and ordinary exercise, by the States, of the power to pass bankrupt laws, did not necessarily involve a violation of the obligation of contracts, but that the exercise of that power, as regarded the rights of Saunders, a citizen of a different State from the one under whose laws the discharge had been granted, was incompatible with the rights of other Slates—and held the discharge set up to be invalid. From the language made use of in the propositions, as-above stated by the Court, it would seem that they considered the rights of the State to pass such' laws as only circumscribed in so much as by the constitution of the United States the Federal Courts were clothed with the power of deciding controversies between citizens of different States. In the *339previous case of Sturges v. Oroioninshield, where the same law of New York was held to be unconstitutional, and where the conti'act wras in fact made prior to the law granting the discharge, Judge Marshall had deemed it proper to say that the opinion -was confined to a case in which a creditor sues in a Court, the proceedings of which the Legislature, whose act is pleaded, had not a right to control; thereby strongly intimating the opinion that the Legislature of the State would necessarily exercise an absolute control, so far as concerned the Courts of the State. It is principally on the reasoning adopted by the Court in the case of Ogden v. Saunders, and on the authority of the case of Zaeha/rie v. Boyle, 6 Peters R. 635, together with a decision of Judge Woodbwnj, in the Cii'cuit Court of the United States, and numerous decisions of State Courts— that the plaintiffs’ counsel have based their argument to contend that defendant is amenable before our own Courts at the suit of citizens of another State. We have examined the cases referred to, and particularly the case of Towns et al v. Smith, 1 Woodbury & Minot, 118, in which Judge Woodbury has reviewed, at great length, all the decisions on that subject. The result of that examination is, we think it to be settled by judicial authority, 1st. That the insolvent or bankrupt laws of a State, if not suspended by the enactment of a uniform bankrupt law by Congress, are constitutional and valid as to all posterior contracts entered into between citizens of the State where such law's exist, and equally so whether they affect the obligation or the remedy only. 2d. That a discharge granted under such laws, as between citizens of the State where the discharge is granted, and as to contracts made and to be executed there, is valid and binding every where. 3d. That it is only in regard to contracts made between citizens of different States, and not stipulated to be performed in the State where the discharge is granted, that the validity of such discharge can be questioned, if at all, in the Courts of the State where it was granted, although in the Courts of the Circuits of the United States, according to their existing jurisprudence, a discharge, under those circumstances, would not be held good as a plea in bar.
The two first propositions are established by all the authorities, and their correctness now can scarcely be questioned. The third proposition is the one which directly involves the right of the plaintiffs to maintain this action. Their counsel contend that their case is not embraced by it; that the contract sued on was made between a citizen of Louisiana and citizens of Kentucky, and that as no place of performance is indicated in the contract, Louisiana cannot be considered as the place w’here it was to be performed. They deny, however, the correctness of the legal proposition itself, and say it is immaterial whether the contract was made directly with the citizen of another State or not, and that it w'ould make no difference even if Louisiana was to be considered as the place of performance; and they contend that, although this suit could not be entertained in the Federal Court for the reason that their title to the bill, as showrn on its face, is traced through an immediate endorsee, residing in the same State w'ith the maker, yet they are entitled, under the facts and law of the case, to maintain their action in the State tribunals. The first branch of the proposition which is denied by them, viz : that it is only in regard to contracts between citizens of different States that the validity of a discharge, under a State insolvent law, can be questioned, appears to us to be fully established in the case of Ogden v. Saunders. The case of Braynard v. Marshall, 8 Pickering, 194, in which it was held that if a note had either been given to a person belonging to *340another State, or had been endorsed to one before the discharge issued, the discharge would be no bar when the contract was sued on in the Courts of another State, from that in which the discharge is granted, is not applicable in principle to this case, and if it was, does not appear to be consistent with the doctrine laid down in the case of Ogden v. Saunders. Judge Stm'y, who was one of the Judges who decided that case, has expressed his opinion to that effect. Story on Bills of Exchange, Secs. 166,16V, 168, 169. The second branch of the proposition, viz: that when even the contract is made directly with a citizen of another State, if it is stipulated to be performed within the State where the contract is made, and where the discharge is granted, it is not obnoxious to the constitutional prohibition against a State’s passing- laws impairing the obligation of contracts, is fairly deducible from the reasoning of Judge Story in the case of Boyle v. Zacharie & Turner, 4 Peters’ R., 644. In that case Zachwrie & Turner having obtained a judgment in the United States District Court at New Orleans against Boyle, who was a citizen of Maryland, for money advanced by them on account of Boyle, in New Orleans, and which Boyle assumed to pay them, proceeded to execute their judgment, and were enjoined by a bill in equity in the Circuit Court of Maryland, on the ground that Boyle had obtained a discharge under the Insolvent Act of Maryland. The Court considered the constitutionality of the State insolvent law as settled by the decision in the case of Ogden against Scmnders, but it was contended that the contract upon which the judgment was founded was, in contemplation of law, a Maryland contract, and not a Louisiana contract, and was, therefore, discharged under the Insolvent Act of Maryland. Judge Story answered the objection by showing that the contract, on the part of Boyle, was to pay Zaehm'ie and Turner for advances made by them for him in New Orleans, and that the payment, unless otherwise stipulated, would also be understood to be made in New Orleans. He therefore treated the contract as a Louisiana contract, and not as a Maryland contract. It therefore must have been considered by the Court that if Maryland had been the place of performance of the contract by the agreement of the parties, the contract would have been a Maryland contract, and discharged under the insolvent laws. And that view is entirely consonant with the reasoning of the Court by which, in the case of Ogden v. Scmnders, they came to a conclusion in favor of the constitutionality of State bankrupt laws. In the present case, we are of opinion that the contract sued on was a Louisiana contract. It was executed in Louisiana; was made between citizens of Louisiana; and, not being otherwise stipulated, the payments would be understood as intended to bo made in Louisiana. We have considered the case as if a discharge had been granted to the defendant by his creditors, because, although a discharge has not been granted, it has been contended that the stay of proceedings granted to the defendant, and the exemption of his future acquisitions to a certain extent from the pursuit of his creditors, which is the consequence flowing from the eessio honorum, does itself materially impair the obligation, and that such is the effect practically, there can be little doubt. We are of opinion, however, that, according to the principles now settled by the highest authority, the validity and effect of our State insolvent laws, and of the judicial proceedings under them, which are pleaded by the defendant, cannot be denied in the Courts of our State under the circumstances of this case. It is not necessary to decide whetherwe could properly, under any circumstances, nullify the laws of the State so far as they only deny a remedy in our Courts to the citizens of otjier States, by placing *341them in the same situation with our own citizens. We are not able to see how such laws could bo considered as impairing the obligation of contracts entered into between our citizens and the citizens of other States, particularly as the Constitution of the United States has provided tribunals under its own authority for the enforcement of such contracts.
It is, therefore, ordered, adjudged and decreed that the judgment of the Court below be affirmed, with costs.
Slidell, C. J.
I consider the general rule well settled that State insolvent laws, discharging the obligations of future contracts, are constitutional. It seems to me equally clear that the defendant in this case is protected by our State law. A resident and citizen of Louisiana, he accepted at New Orleans a bill draitn here by a citizen of this State, in favor of and endorsed by a citizen of this State, and negotiated here to a citizen of this State, who afterwards transferred it to the plaintiffs, residents of Kentucky. Not only was the acceptance made here, but the reasonable expectation of all partios must have been that it was to he paid here, where the acceptor lived, and was established as a merchant. I cannot understand by what right this transferee of a Louisiana creditor can ask a Court of Louisiana to disregard its own insolvent laws, and violate a cessió ionorum, and a stay of proceeding regularly adjudged in a Court of Louisiana. Such a doctrine, it seems to me, would involve principles subversive of State sovereignty, and for which I find no sufficient warrant in the Constitution of the United States.
I have, therefore, no hesitation in concurring in the affirmance of the decree.