Court Opinion

ID: 8185665
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:08:06.445682+00
Date Added: 2024-06-11T16:40:24.368190
License: Public Domain

PiNNey, J.
Except as to a matter of costs in the entry of the largest judgment against Louis Henes, the question involved in these appeals is whether ch. 334, Laws of 1897, as applied to the facts stated, is unconstitutional, as impairing the obligation of the contracts contained in the notes and warrants of attorney upon which the judgments above ■set forth were entered; the assignee claiming that this statute is a permitted change of the existing remedy, while the plaintiff bank claims that the statute is a law impairing the obligation of these contracts, and its substantial rights under 'them, and therefore void, under the provisions of the constitutions of the state and of the United States prohibiting the passage of any law impairing the obligation of contracts.
1. The act in question took effect April 30,1897, and is “An •act to amend chapter 80, of the revised statutes of the state of Wisconsin for the year 1878, entitled, ‘Of voluntary assignments.’ ” It provides that “ whenever the property of an insolvent debtor is attached or levied upon by virtue of any process in favor of a creditor, or a garnishment is made against such a debtor, such debtor may, within ten days *258thereafter, make an assignment of all his property and estate not exempt by law, for the equal benefit of all his-creditors, as provided by law, whereupon all such attack-"ments, levies, garnishments, or other process shall be dissolved and the property attached or levied upon shall be-turned over to such assignee or receiver.” The act is á general one, and is an amendment to and a part of the voluntary assignment law of the state, which, taken in connection with the act providing for the discharge of a debtor (Laws of 1889, ch. 385), is, in substance and effect, an insolvent or bankrupt law, and as such permitted, in the absence of federal legislation. The notes and warrants of attorney had; been given more than sixty days before the passage of the-act. The remedy given to the plaintiff at the time these-contracts were made was to enter judgment pursuant to the warrants of attorney, issue execution thereon, and levy the same upon the property of the debtor and sell it to satisfy the debt. This right, at the time the notes and warrants of attorney were given, could not be taken' away by the-making of a voluntary assignment by the debtor, if the notes and warrants of attorney upon which the judgment was entered had been given more than sixty days prior to the making of such assignment, even though the maker was insolvent at the time they were given and when the judgment was-entered. McCaul v. Thayer, 70 Wis. 138. Sec. 1693a, S. & B. Ann. Stats., provides that “ every execution levy made-under 'a judgment confessed against any such insolvent debtor, within sixty days prior to any assignment for the benefit of creditors, or under a judgment entered on a judgment note, by any such debtor, within sixty days prior to any such assignment, and the lien of any such judgment upon real estate, shall.be void and of no effect.”
In McCaul v. Thayer, supra, this section was before the court for consideration; and it was held that an execution levy made under a judgment entered within sixty days prior *259to an assignment for the benefit of creditors, upon a judgment note given by the assignor more than sixty days prior to such assignment, was not void. The court, by OetoN, J., said that the only mischiefs to be cured by the act were acts of the debtor by which he preferred creditors, and prevented “ the equal distribution of his property among all • of his creditors,” and that the entry of judgment at the instance of the plaintiff or creditor alone, “ upon a judgment note given,” was in no sense his act at the time of such entry. “ He is entirely passive. He can do nothing to aid it or to prevent it. He has given a power of attorney, wbitoh is irrevocable because coupled with an interest. The .entry of judgment on such a note by the creditor is not one of the evils or within the mischief to be cured, or named in the title, or within the purview of the law.” “ The rights of the parties had become fixed by the giving of such a note when it was lawful and could not possibly change the condition of the debtor as to his creditors, or prevent the equal distribution of his property among them. The entry of judgment is a mere legal consequence of the giving of the judgment note. It is not a new act by the debtor, but a natural and legal result, beyond his control. The judgment, so to speak, is embodied within the note, and a necessary part' and essential element of it, and the note changes its form into a judgment of record, under the statute.” And, further commenting upon such securities, he said: “A judgment nóte is a security, and a valuable one, to the holder, and it is so recited in the power of attorney. This method of business has grown into the very necessities of our business of banking, merchandising, commerce, and of buying and selling in all forms, and of exchange. It is the most common as well as the most valuable method of security in connection with commercial paper, and to destroy or discredit it would derange and unsettle the business of the country, and seriously affect the public interests.” The contention that the debtor *260•cpuld prevent the entry of judgment indirectly, by mating ¡an assignment, was combated, as not within the intention •of the legislature, as it would work .a violation of the contract eights of such a creditor. It was further laid down, that the power of attorney to enter judgment upon the note when due, and which gave the note the name and character of a judgment note, added value thereto in the market, as well as intrinsically, “ and that value neither the debtor nor the legislature has any right to lessen by prohibiting its use in •entering judgment, by any pretext of technical or legal fraud; ” and it was there held that the second clause of sec. 2, ch. 349, Laws of 1883, should be construed as if it read, or under a judgment entered on. a judgment note made by •any such debtor within sixty days prior to.any such assignment.” Under the decision in McCaul v. Thayer, 70 Wis. 138, judgment notes were thus placed upon a basis by which they ■were greatly increased in value, and a much more extended •use was made of them by merchants, bankers, and business men, as securities.
. The remedy given to the plaintiff by the law in force at •the-time these notes and warrants of attorney were given, .and which entered into and formed a part of the contracts, ■and made them particularly valuable, was to enter judgment, issue execution, and levy upon the property of the debtor, and sell the same to satisfy the-debt. The debtor could not defeat it by revoking the warrant of attorney. The notes .and warrants of attorney were potentially judgments upon •which an execution could be speedily issued and levied. “They were substantially preferences legally and properly .acquired by the plaintiff over all other creditors of the defendant. The time within which they might be questioned ¡by the assignee of the maker, under his voluntary assignment for the benefit of his creditors, had expired, and the ■preferences had become absolute, before the act of 1897 became operative. The effect of the statute upon these con*261tracts, according to its terms, was to enable the debtor (assignor) to revoke, the remedy thus given, and to render these securities as a means of reaching and selling his property to satisfy the judgments thereon of no value whatever. It authorized and empowered the debtor, at Ms option, to withdraw his property from a levy for that purpose, and' defeat the remedy which made them especially valuable;, and, if the contention of the assignee is maintained,- the-remedy secured by these contracts might thus be utterly defeated at the option of the assignor. The orders appealed' from, pursuant to the statute, dissolved the levy made, and rescued the property from the hands of the sheriff and the creditor thus rightfully pursuing it, to work out the remedy secured to him by the law of the contracts.
It is contended in support of the act that it is a part of the state system of insolvency or bankruptcy, and that it is legislation which relates to the remedy, and so within the constitutional competency of the legislature. In Edwards v. Kearzey, 96 U. S. 600, it was said: “The obligation of a contract includes everything within its obligatory scope. Among these elements nothing is more important than the means of enforcement. This is the breath of its vital existence. "Without it, the contract, as such, in the view of the law, ceases to be, and falls into the class of those £ imperfect obligations,’ as they are termed, which depend for their fulfillment upon the will and conscience of those upon whom they rest. The ideas of right and remedy are inseparable. ‘ Want of right and want of remedy are the same thing.’ . . . 1A statute providing that a previous contract of indebtment may be extinguished by a process of bankruptcy would involve its discharge, and a statute forbidding -the sale of any of the debtor’s property under a judgment upon such a contract would relate to the remedy.’ It -cannot be doubted, either upon principle or authority, that each of such laws-would violate the obligation of the contract, and the last not. *262less than the first. These propositions seem to us too clear to require discussion. It is also the settled doctrine of this court that the laws which subsist at the time and place of making a contract enter into and form a part of it, as if they were expressly referred to, or incorporated in its terms-. This rule embraces alike those which affect its validity, construction, discharge, and enforcement.”
In Green v. Biddle, 8 Wheat. 1, the court said: “ It is no answer that the acts of Kentucky now in question are regulations of the remedy, and not of the right to the lands. If these acts so change the nature and extent of existing remedies as materially to impair the rights and interests of the owner, they are just as much a violation of the compact as if they overturned his rights and interests.” And it was further said that: “ Whatever belongs to the remedy may be altered according to the will of the state, provided the alteration does not impair the obligation of a contract; but, if that effect is produced, it is immaterial whether it is done by acting on the remedy, or directly on the contract itself. In either case it is prohibited by the constitution,” — and that the test as to whether a contract has been impaired is whether its value has, by legislation, been diminished. It is not, by the constitution, to be impaired at all. This is not a question of degree or manner or cause, but of encroaching in any respect on its obligation,— dispensing with any part of its force. Planters' Bank v. Sharp, 6 How. 301. In Antoni v. Greenhow, 107 U. S. 769, it was said: “ It is competent for the states to change the form of the remedy, or to modify it otherwise as they may see fit, provided no substantial right secured by the contract is thereby impaired. . „ . Whenever the result last mentioned is produced, the act is within the prohibition of the constitution, and to that extent void.”
In Brine v. Insurance Co. 96 U. S. 627-637, it was held,, through Mr. .Justice Miller, that: “All laws of a state, exr *263isting at the time a mortgage or arty other contract is made which affect the rights of the parties to the contract, enter into and become a part of it, and are obligatory on all courts which assume to give a remedy on such contracts; ” that the ■construction, validity, and effect of contracts “ are governed by the place where they are made and are to be performed. - . . It is therefore said that these laws enter into, and become a part of, the contract. There is no doubt that a distinction has been drawn, or attempted to be drawn, between such laws as regulate the rights of the parties, and such as apply only to the remedy. It may be conceded that in some cases such a distinction exists. In the recent case of Tennessee v. Sneed, 96 U. S. 69, we held that, so long as theré remained a sufficient remedy on the contract, an act of the legislature changing the form of the remedy did not impair the obligation of the contract. But this doctrine was ■said to be subject to the limitation that there remained a remedy which was complete, and which secured all the substantial rights of the party. At all events, the decisions of this court are numerous that the laws which prescribe the mode of enforcing a contract, which are in existence when it is made, are so far a part of the contract that no changes in these laws which seriously interfere with that enforcement are valid, because they impair its obligation, within the meaning of the constitution of the United States. Edwards v. Kearzey, 96 U. S. 595.” And the learned justice, ■enforcing his argument, quoted from the opinion of Chief Justice TaNey in the case of Bronson v. Kinzie, 1 How. 316, as follows: “"Whatever belongs merely to the remedy may be altered according to the will of the state, provided the alteration does not impair the obligation of contracts; but, if that effect is produced, it is immaterial whether it is done by acting on the remedy, or directly on the contract itself. •In either case it is prohibited by the constitution.” And further: “It is manifest that the obligation of the con*264tract, and the rights of a party under it, may, in effect, be-destroyed by denying the remedy altogether, or may be-seriously impaired by bwrdening the proceedings with new conditions and restrictions, so as to malee the remedy hardly worth pursuing. And no one, we presume, would say that there is any substantial difference between a retrospective law declaring a particular contract or class of contracts to-be abrogated and void, and one which took away all remedy to enforce them, or incumbered it with conditions that rendered it useless or impracticable to pursue it.”
In Denny v. Bennett, 128 U. S. 497, quoting the language-of the court in Gilman v. Lockwood, 4 Wall. 409, it was said that “ state legislatures may pass insolvent laws, provided-there be no act of congress establishing a uniform system of bankruptcy conflicting with their provisions, and provided that the law itself be so framed that it does not impai/r the-obligation of contracts.” The whole subject of legislation, in violation of these constitutional provisions is elaborately considered in the recent case of Barnitz v. Beverly, 163 U. S. 118, in which it is laid down that: “ The obligation of a contract consists in its binding force on the party who makes-it. This ‘depends on the laws in existence when it is made. These are necessarily referred to in all contracts, and forming a part of them' as the measure of the obligation to perform them by the one party, and the right acquired by the-other. There can be no other standard by which to ascertain the extent of either than that which the terms of the contract indicate,, according to their settled legal meaning. When it becomes consummated the law defines the duty and the right, compels one party to perform the thing contracted for, and gives the other a right to enforce the performance by the remedies then in force. If any subsequent law affects to diminish the duty or to impair the right, it necessarily bears on the obligation of the contract, in favor of one party, to the injury of the other; hence any law *265•which in its operation amounts to a denial or obstruction of the rights accruing by a contract, though professing to act. only on the remedy, is directly obnoxious to the prohibition of the constitution. And it is obvious it can make no difference as to the character of the law, whether it be an insolvent law, or a law upon any other subject, having the effect indicated.” Denny v. Bennett, supra.
The extent of the power of the legislature over remedies-was fully considered and discussed in the case of Von Baumbach v. Bade, 9 Wis. 559, and cases cited; and the result was reached that the legislature possesses the power of changing or modifying laws governing proceedings in courts of justice, in respect to past as well as future contracts, and this power is unrestricted, except that a substantial remedy must be afforded according to the course of justice as it existed at the time the contract was made. Hasbrouck v. Shipman, 16 Wis. 296. The doctrine of the case of Edwards v. Kearzey, 96 U. S. 595,— that the remedy subsisting in a state-when and "where a contract is made and is to be performed is a part- of the obligation,— is now universal; and any legislation, though acting merely upon the remedy, that substantially impairs or lessens the value of the contract, is forbidden by the constitution, and therefore void. People ex rel. Reynolds v. Common Council of Buffalo, 140 N. Y. 307.
The situation when the judgments were entered was this r The maker of the notes and warrants of attorney had become insolvent. The creditor bank invoked the remedy existing when the contracts were made, which entered into and formed a part of them, and made them valuable securities, by which they had become valid preferences. The law authorizing the entry of judgment on them, and immediate execution and levy thereof upon the debtor’s property, had not been withdrawn. Judgments were entered, and levy was made accordingly upon a sufficient amount, it would seem, to pay a considerable part of the debt. The debtor *266hereupon elected to make, and did make, a voluntary assignment for tbe benefit of bis creditors. By virtue of tbe assignment and tbe operation of tbe act in question, tbe -creditor is deprived of tbe benefit of bis lawful remedy, which we tbink was an essential part of tbe contracts or securities. By tbe subsequent action of tbe courts, executing tbe statute, tbe fruit of sucb lawful remedy, out of which .to satisfy its debt, has been wholly wrested from its grasp, and turned over to tbe debtor’s assignee for equal distribution among all bis creditors, so that tbe amount which tbe creditor bank will probably receive from sucb property will be but a trifling sum. Tbe remedy, therefore, which entered into and formed an important part of tbe contracts evidenced by tbe notes and warrants of attorney, within tbe meaning and effect of the decisions referred to, is practically abrogated and taken away. Conceding that the legislation in question belongs to the class known as remedial, it is still evident that tbe value of these contracts was materially lessened by and through its operation, and their validity and binding force were impaired. It is needless to add that legislation having sucb an operation or effect upon prior contracts cannot be justified or sustained because it relates to or is amendatory of state legislation on tbe subject of insolvency or bankruptcy. Existing contracts may be impaired by sucb legislation as well as by any other. ¥e bold, therefore, that tbe provisions of the act in question as applicable to notes and warrants of attorney, and judgments and executions to enforce the same, given more than sixty days before a subsequent assignment for the benefit of creditors, impair the validity, force, and effect of sucb contracts, and are therefore void.
2. It was argued that tbe larger judgment should be set aside because costs were included in it; that tbe proceeding was a special proceeding under tbe statute, upon which, by law, no costs could be allowed. It is sufficient, upon this *267point, to notice that by the warrant oí attorney the defendant expressly stipulated for the entry of “ judgment with costs.” ' The supervision which courts exercise over judgments entered, as these were, upon warrants of attorney, is of an equitable character; and, as the costs were certainly reasonable in amount, the case does not present any equity or merit which should incline the court to vacate or set aside the judgment on that ground. Six days after the entry of the judgment the plaintiff bank remitted the item of “ $25 by statute,” taxed and included in the judgment, and declined to contend for it. Whatever of error or irregularity there may have been in this respect must be held to have been cured, if not by the stipulation for release of errors, certainly by promptly remitting the item objected to. In re Ellis, ante, p. 88.
It follows from these views that the order of the circuit court for Milwaukee county, directing the sheriff of Milwaukee county to forthwith turn over to said assignee, all and singular, the property levied upon by him under said executions, must be reversed, with costs, and the cause remanded with directions that said court cause said property, or its proceeds, to be restored to the sheriff of Milwaukee county, to be disposed of and applied in satisfaction of the executions mentioned; and that the order of the superior court appealed from by the Second, Ward Savings Bank of Milwaukee must be reversed, with costs, and the cause remanded to that court with directions to cause to be restored to the sheriff of Milwaukee county the property or its proceeds, turned over by the order of that court to Henry G. Schranch as assignee of Louis Henes, Jr., to the end that it may be applied in satisfaction of the said judgments in favor of the Second Ward Savings Banlc of Milwaukee against said Louis Henes, Jr., the assignor; and that the part of the order of said superior court refusing to vacate the said judgment and *268execution against the said Louis Henes, Jr., must be affirmed, with costs.
By the Court.— Judgment is ordered accordingly.