Court Opinion

ID: 3867699
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:01:45.322365+00
Date Added: 2024-06-11T14:14:59.473616
License: Public Domain

The petitioner, who has been brought before us on a writ ofhabeas corpus, seeks to be liberated from the Providence County jail, where he is imprisoned on an execution against the American Steam  Gas Pipe Company, a manufacturing corporation created by the General Assembly and established in the city of Providence. The petitioner is or was a member of the corporation, and was committed under chapter 128 of the Revised Statutes and chapter 142 of the General Statutes: the certificate required to exempt him from personal liability never having been filed in the city clerk's office as provided by those statutes. The legality of the commitment, as originally made, is not now questioned; the petitioner claims release under an act recently passed, to wit, chapter 600 of the Public Laws. The first section of the act is as follows: —
"No person shall hereafter be imprisoned or be continued in prison, nor shall the property of any such person be attached, upon an execution issued upon a judgment obtained against a corporation of which such person is or was a stockholder."
The section completely abolishes the remedy at law given by previous statutes for the enforcement of a stockholder's liability. The committing creditor contends that the section should be construed as applying only prospectively, and not, retrospectively, to a case like the case at bar, where the remedy is in process of enforcement, and the stockholder has already been committed. The language of the section is in my opinion too plain to admit of such a construction. The section was I have no doubt designed to apply to a case like the case at bar, if not enacted directly in view of its applying to the case at bar.
The committing creditor contends that if the section is applicable in the case at bar, it is unconstitutional, because it impairs the obligation of the contract under which the petitioner was committed. This point cannot be properly considered without considering it in connection with the second section of chapter 600, which gives a new remedy in substitution for the remedy abolished by the first section. The second section is as follows: — *Page 353 
"All proceedings to enforce the liability of a stockholder for the debts of a corporation shall be either by suit in equity, conducted according to the practice and course of equity, or by an action of debt upon the judgment obtained against such corporation; and in any such suit or action such stockholder may contest the validity of the claim upon which the judgment against such corporation was obtained, upon any ground upon which such corporation could have contested the same in the action in which such judgment was recovered."
By the third section of chapter 600 all acts and parts of acts inconsistent therewith are repealed.
The new remedy given by the second section is not the remedy by suit in equity, for that existed under the previous statutes, but the remedy by "an action of debt upon the judgment obtained against the corporation." The petitioner contends that this remedy, or this together with the remedy by suit in equity, is a sufficient substitute for the remedy abolished by the first section, and that therefore the committing creditor cannot justly complain that the obligation of his contract with the corporation is impaired.
Previous to the enactment of chapter 600, the remedy at law was a service of the execution, issued against the corporation, upon the persons and property of the stockholders, in the same manner as if the execution were an execution against them for their individual debts. The remedy, once the judgment was recovered against the corporation, was perfect; for the execution, issuing thereon against the corporation, could be served upon the person or property of any stockholder within the state. Under the law, as altered by chapter 600, if chapter 600 is constitutional, an execution issuing against the corporation can be served only upon the corporate property. Upon such an execution the person or property of the stockholder can no longer be touched. If the creditor wishes to pursue the stockholder at law, he must bring an action of debt against him upon the judgment recovered against the corporation, and must fight the action through again to final judgment against the stockholder, who is authorized to contest his claim upon any ground upon which it would have been contested by the corporation. It must be confessed that the alteration of the law is very detrimental to the creditor. The *Page 354 
question is whether, considering the fact that the remedy in equity remains, the obligation of the contract must be held to have been impaired by so detrimental a change in the remedy given for its enforcement at law.
There are cases which maintain that any change in existing remedies is permissible so long as existing contracts are not left without the means of enforcement. If this view is correct, chapter 600 is clearly not unconstitutional. I think the view is erroneous. What is the obligation of a contract? Without pretending to answer the question in full, I reply that the obligation of a contract is that which obliges the parties to perform it, and that which obliges the parties to perform it is the law which may be resorted to in case of default, to compel the defaulting party either to perform it or to make compensation for not performing it. It follows that any change of the law which impairs the compulsive or remedial efficacy of the law in this respect, necessarily impairs the obligation of any contract which has been entered into under it. A contract is legally obligatory only because of the remedies given to enforce it. An oral guaranty, for instance, does not bind the guarantor, simply because no action can be maintained on it. And this is the doctrine of the Supreme Court of the United States, as declared in Curran v. The State of Arkansas, 15 How. U.S. 304. The court there said, p. 319: "The obligation of a contract, in the sense in which these words are used in the Constitution, is that duty of performing it which is recognized and enforced by the laws. And if the law is so changed that the means of legally enforcing this duty are materially impaired, the obligation of the contract no longer remains the same." The same court, in the earlier case of McCracken v. Hayward, 2 How. U.S. 608, 612, said: "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 form 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 *Page 355 
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 diminish the duty or 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 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." See Bronson v. Kinzie, 1 How. U.S. 311;Gantly's Lessee v. Ewing, 3 How. U.S. 707, 717; Pomeroy's Const. Law, § 619 et seq. The same view has been expressed by several state courts. Oliver v. McClure, 28 Ark. 555, and cases there cited; Rosier v. Hale et al. 10 Iowa, 470. InScobey v. Gibson, 17 Ind. 572, the court remarked: "Any legislation, professedly directed to the remedy, which deprives the party of one substantially as efficient as that existing at the making of the contract, does impair the obligation of the contract." And in Townsend v. Townsend, 1 Peck (Tenn.), 1, the language of the court was: "The law is the source of the obligation, and the extent of the obligation is defined by the law in use at the time the contract is made. If this law direct a specific execution, and a subsequent act declare that there shall not be a specific execution, the obligation of the contract is lessened and impaired." And the court added: "The legislature may alter remedies; but they must not, so far as regards antecedent contracts, be rendered less efficacious or more dilatory than those in being when the contract was made, if such alteration be the direct and special object of the legislature apparent in the act."
It is true the doctrine is not to be pressed to an extreme; for the law is reasonable as well as logical; and, accordingly, it has been held that an alteration of the law which only affects the forum, or form of procedure, but leaves the substance of the remedy unimpaired, or that merely changes a rule of evidence, or the police regulations of the state, though it may incidentally affect the rights of parties under existing contracts, is not necessarily unconstitutional on that account. Cooley's Const. Limit. 284 et seq. I am not prepared even to say that a law is void which abolishes a remedy, if it substitutes another substantially as efficient. But the change effected by chapter 600 cannot be *Page 356 
classed with these permissible changes. It abolishes a remedy that is convenient and summary, and substitutes for it a remedy which is far more dilatory, expensive, and uncertain. And this change appears to have been directly designed by the legislature. It is vain to argue that the creditor is not worsened by it. His contract is no longer as effectively obligatory. I cannot avoid the conclusion (the new remedy notwithstanding), that its obligation is impaired. The fact that the remedy in equity is still preserved does not prevent this, for the remedy at law was as simple as it was formidable, and for that reason, after judgment recovered against the corporation, was far more efficient than the remedy in equity. I therefore think chapter 600 is, so far as regards prior contracts, unconstitutional.
But because this is so, does it follow that the petitioner is not entitled to be released. Is it not possible that chapter 600 may be constitutional in so far as it prohibits imprisonment on an execution against the corporation, though, as respects existing contracts, it is unconstitutional in its further prohibitions? The committing creditor contends that the act is a connected whole, and, therefore, cannot be sustained at all unless it can be wholly sustained. Much can be said in favor of this view; but supposing the different clauses of the act are not so interdependent, and that the provision against imprisonment may be separated from the rest, the question then is, whether the provision in itself is constitutional or not. In considering this question it will be well first to see exactly what is the effect of the provision. It utterly takes away the right of imprisonment on an execution against the corporation. It does not even reserve the right to the creditor upon proof of fraud. If the right has already been exercised, and a stockholder has been imprisoned before the enactment of chapter 600, he is to be liberated at once without making any assignment, and without undergoing any judicial examination. The petitioner is so imprisoned. If chapter 600 is constitutional he is liberated by the simple fiat of the legislature, though he may have abundant means and may have them so invested or so concealed that they cannot be reached by any process running simply against his property. If he had no property when he was imprisoned, and had been guilty of no fraud, there was nothing to prevent his then taking the poor *Page 357 
debtors' oath. The question recurs, whether a provision which has or may have such an effect is constitutional?
I think it is settled that a state has the power, even as regards existing contracts, to abolish imprisonment for debt, in the manner in which it is usually abolished; that is to say, excepting in cases of fraud on the part of the debtor, committed either in contracting the debt or in concealing or withholding his property. I think it is also settled that a state has the power to authorize the liberation of a debtor lawfully imprisoned for debt, upon judicial proof of his insolvency, and on his making an assignment for his creditors. Sturges v.Crowningshield, 4 Wheat. 122, 200; Mason v. Haile, 12 Wheat. 370; Beers et al. v. Haughton, 9 Pet. 329, 359; Gray,Sherwood  Co. v. Munroe et al. 1 McLean, 528; Woodfin v.Hooper, 4 Humph. 13; Newton v. Tibbats, 7 Ark. 150;Bronson v. Newberry, 2 Dougl. Mich. 38; Donnelly v.Corbett, 7 N.Y. 500. The law is so settled on perfectly valid reasons. If a debtor has no property wherewith to pay his debt, imprisoning him cannot oblige him to pay it, and, therefore, it does not impair the obligation of his contract to exempt or release him from imprisonment. It is true, imprisoning him may induce his relatives or friends to pay the debt in order to ransom him from confinement; but certainly the state is not required to perpetuate the remedy on that account, for it is not to be supposed that anything so barbaric was within its original design.
But this reasoning does not apply where the debtor has property, especially if the property is concealed, intangible, or out of the jurisdiction. It is a mockery in such a case to say the creditor is not prejudiced because the debt and the debtor's property remain, for it is only through the debtor that the property can be reached. It may be, indeed, that the law, pledging the body of the stockholder, was the very ground upon which the credit was given; for, at a time like this, when coupon bonds are so plentiful, nothing would be easier than for a wealthy man, if there were no imprisonment for debt, to defy his creditors while retaining his property. It is true, in the case at bar, there is no proof that the petitioner has property, except the fact that he has not taken the poor debtors' oath; but there is likewise no proof of the contrary; and the law allows him to go at large *Page 358 
without first proving his insolvency, and does not allow the creditor to detain him, even upon proof that he is abundantly solvent. Can it be that such a law is constitutional? It has been decided by the Supreme Court of the United States that the contract with the corporation is virtually a contract with the stockholders. Hawthorne v. Calef, 2 Wall. 10. The obligation of the contract, considered as a contract binding the stockholders, is defined by the liabilities annexed to it by statute, and the statute expressly subjects the stockholders, on execution against the corporation, to liability in their persons as well as in their property. How, then, can it be held that the obligation of the contract is not impaired by an act which unconditionally exempts or releases the person of the stockholder from this liability? I think that upon principle the exemption or release cannot be sustained, and that the act which authorizes it must be held to be unconstitutional.
I am aware that this conclusion is not supported by the authority of any decision which is exactly in point; but that, on the contrary, there are many cases, some of them in the Supreme Court of the United States, in which it has been broadly declared that a state has the power to abolish the remedy by imprisonment, even without reservation in respect of antecedent contracts. I think, however, it will be found, on examination, that this language was used, in most of the cases, when a more guarded expression would have answered as well, and where, for anything that appears, the distinctions which we have indicated were not present to the mind of the court. See Bronson v. Newberry, 2 Dougl. (Mich.) 38, and the extract from Judge Swift's commentaries there cited. I think, too, if we look through the language to the grounds of decision, — the ratio decidendi, as it has been termed, — the conclusion which I have reached is inevitable.
I must therefore withhold my concurrence with the opinions of a majority of the court.
Order entered December 15, 1877.
October Term A.D. 1877. This cause came on to be heard atthis term upon said petition, and the writ issued thereon, andthe return made thereto, and it appeared that said petitionerclaimed to be discharged from his commitments on executions setout in *Page 359 the return to said writ by virtue and force of the first sectionof the act of the General Assembly passed at the January Session
A.D. 1877, to wit, March 27, 1877, entitled "An act definingand limiting the mode of enforcing the liability of stockholdersfor the debts of corporations, and being chapter 600 of theGeneral Statutes or Public Laws of this state, and that suchdischarge was opposed by the committing creditors respectively onthe ground that said section of said act of the General Assemblyis repugnant to and in violation of section ten of article one ofthe Constitution of the United States of America as impairing theobligation of their respective judgments upon which suchcommitments were had, and of their respective contracts on whichsuch judgments were founded, and therefore unconstitutional andvoid. And counsel for the respective parties were fully heardthereon. And now, after consideration thereof, it is adjudgedthat said section of said chapter 600 is valid andconstitutional, and that said petitioner, by force and virtue ofsaid section one of said chapter 600, is entitled to bedischarged from further custody under said commitments. And it isordered that he be forthwith discharged therefrom accordingly.
Thereupon the committing creditors, December 26, 1877, sued out a writ of error to the Supreme Court of the United States.