Court Opinion

ID: 8185666
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:08:06.448409+00
Date Added: 2024-06-11T16:40:24.371779
License: Public Domain

Cassoday, C. J.
(dissenting). The power of a state legislature to pass state insolvent laws was determined by the supreme court of the United States seventy years ago, but only after one of the most able and persistent controversies ever experienced by that exalted tribunal. Ogden v. Saunders, 12 Wheat. 213-369. It was there held that (1) in the absence of legislation by congress on the subject a state had the authority to pass such a law; (2) that “a bankrupt or insolvent law of any state which discharges both the person of the debtor, and his future acquisitions of property, is not ‘ a law impairing the obligation of contracts,’ so far as respects debts contracted subsequent to the passage of such law; ” (3) but that a “ certificate of discharge, under such a law, cannot be pleaded in bar of an action brought by a citizen of another state, in the courts of the United States, or of any other state than that where the discharge was obtained.” There were at the time only seven members of the court, and Mr. Justice JOHNSON wrote the only opinion in support of the third proposition quoted, and was the only member of the court concurring in all three propositions stated. IVlARsnALL, Duval, and Story dissented from the first and second propositions, and Washington Thompson and Trimble dissented from the third proposition. The three propositions thus determined in that case have since been repeatedly acquiesced in by the whole court as the settled law of this country on the subject. Boyle v. Zacharie, 6 Pet. 348, 635, 648; Cook v. Moffat, 5 How. 310.
Thus, it appears that the opinions of Mr. Justice Johnson were the controlling opinions in the case, and hence what he said about impairing the obligation of contracts may be-*269instructive. “Eight and obligation are considered by all ■ethical writers as correlative terms. Whatever I by my contract give another a right to require of me, I by that act lay myself under an obligation to yield or bestow. The obligation of every contract will then consist of that right or power over my .will or actions which I by my contract confer on •another. And that right and power will be found to be measured neither by moral law alone, nor universal law alone, nor by the laws of society alone, but by a combination of the three,-— an operation in which the moral law is explained and applied by the law of nature, and both modified and adapted to the exigencies of society by positive law. The constitution was framed for society, and an advanced state of society, in which I will undertake to say that •all the contracts of men receive a relative, and not a positive, interpretation; for the rights of all must be held and ■enjoyed in subserviency to the good of the whole. The state construes them, the state applies them, the state controls them, and the state decides how far the social exercise of the rights they give us over each other can be justly asserted. ... In the concoction of their contracts, they are controlled by the laws of the society of which they are members, and for the construction and enforcement of their ■contracts they rest upon the functionaries of its government. They can enter into no contract which the laws of that community forbid, and the ^validity and effect of their contracts is what the existing laws give to them. The remedy is no longer retained in their own hands, but surrendered to the community, to a power competent to do justice, and bound to discharge towards them the acknowledged duties of government to society, according to received principles of equal justice. . . . When that state of things has arrived in which the community has fairly and fully discharged its duties to the creditor, and in which pursuing the debtor any longer would destroy the one, without benefiting the other, *270must always be a question to be determined by the common guardian of the rights of both, and in this originates the power exercised by governments in favor of insolvents.”' Ogden v. Saunders, 12 Wheat. 281-283. And then, after stating that his views thus expressed were as applicable to contracts prior to the enactment as to those subsequently made, he said: “Whenever an individual enters into a contract, I think his assent is to be inferred, to abide by those rules in the administration of justice which belong to the jurisprudence of the country of the contract. . And, when compelled to pursue his debtor in other states, he is equally bound to acquiesce in the law of the forum to which he subjects himself. The law of the contract remains the same everywhere, and it will be the same in every tribunal; but the remedy necessarily varies, and with it the effect of the constitutional pledge, which can only have relation to the laws of distributive justice known to the policy of each state severally. It is very true that inconveniences may occasionally grow out of irregularities in the administration of justice by the states. Rut the citizen of the same state is' referred to his influence over his own institutions for his security, and the citizens of the other states have the institutions and powers of the general government to resort to. And this is all the security the constitution ever intended to hold out against the undue exercise of the power of the states over their own contracts and their own jurisprudence.” Id. 285.
And so it was held by the same court, prior to that decision, that while a state statute could not discharge a debtor from liability on debts contracted before its passage, and thus destroy the creditor’s right to satisfaction out of the debtor’s subsequent acquisitions of property, yet that it might take away his remedy, given by statute, to imprison the debtor, since such imprisonment was no part of the contract, and hence the debtor’s release therefrom did not im*271pair the contract. Sturges v. Crowninshield, 4 Wheat. 122. Thus, it is held by the same court that a state may, by statute, “reduce the rate of interest upon judgments previously obtained in its courts,” without impairing the obligation of. contracts— since such interest is given by statute, and not by contract. Morley v. L. S. & M. S. R. Co. 146 U. S. 162. So where the statute gave a lien for labor and materials contracted for, it has been held that “ the lien is no part of the contract, but a merely incidental accompaniment, deriving its vitality from positive enactment, and liable always to be controlled, modified, or taken away by subsequent enactment.” Frost v. Ilsley, 54 Me. 345. So it was held by this court nearly forty years ago that an act of the legislature extending the time to answer in actions to foreclose a bond and mortgage previously given, from twenty days to six months, and also enlarging the time required for notice of sale of the mortgaged premises, was a valid enactment; that “the legislature maj'' alter or vary existing remedies as they please, provided that in so doing their nature and extent are not so changed as materially to impair the rights and interests of the parties.” Von Baumbach v. Bade, 9 Wis. 560. This was held on the theory that a state statute may impair the remedy on an existing contract, without necessarily impairing the contract itself; that “the only limit or qualification to. this power is that the legislature must confine their action within the bounds of reason and justice, and not so prolong the time in which legal proceedings are to be had as to render them futile and useless in the hands of the creditor, or to seriously impair his rights and securities.” Id.
In the case at bar the note and warrant of attorney were dated August 15, 1896. Ch. 334, Laws of 1897, was published and went into effect April 30,1897,'and, among other things, provided that all attachments, levies, garnishments, *272■or other process against an insolvent debtor, within ten days prior to an assignment for the benefit of creditors, made by such debtor, shall be dissolved, and the property attached or levied upon be turned over to the assignee. The judgment in question was entered upon the warrant of attorney May 4, 1897. On the same day execution was issued thereon, and levied on certain personal property of the debtor. Six days thereafter the debtor made a voluntary assignment for the benefit of his creditors. It is conceded that the judgment was rightfully entered, because it was so expressly stipulated in the contract; but, although the contract released all intervening errors in the entering of the judgment or the issuing of the execution, yet the only right to execution was by existing remedial statutes, and not by virtue of the contract itself. The act does not undertake to discharge the debtor from subsequent debts,— much less from prior debts. In 1883 insolvent debtors were prohibited from giving preferences to one creditor over another in making assignments. Later statutes limited to a certain extent the right of creditors of such insolvent debtors'to obtain preferences in certain ways, and within a specified time prior to the making of such assignment by the debtors. S. & B. Ann. Stats, sec. 1693a. The act in question was manifestly designed to narrow such limits still further, and to secure, at least to some extent, a more equal distribution of the estates of insolvent debtors. The insolvent laws of several states expressly provide for dissolving attachments and releasing levies on the property of insolvent debtors under certain conditions. It Avould seem that in some of them the question here presented, as to prior contracts, must have arisen and been adjudicated soon after such enactments; but we have been referred to no case, and I have not had the time to search for any. Upon general principles and under the authorities cited, it seems to me that state legislatures have the power, *273'by the enactment of general laws, to secure an equal distribution of the estate of an insolvent debtor, even as to prior •debts or nonresident creditors.
There is another line of cases supporting these views. It has been held by numerous decisions, state and federal, that the discharge of the debtor under a state insolvent law in the state of his domicile will not release him from debts owing to nonresidents, even where such insolvent laws were enacted prior to the contract, unless the nonresident creditor has proven his claim, or become a party to the proceedings. Cook v. Moffat, 5 How. 295; Baldwin v. Hale, 1 Wall. 223; Gilman v. Lockwood, 4 Wall. 409; Stirn v. McQuade, 66 N. H. 403; Kelley v. Drury, 9 Allen, 27; Guernsey v. Wood, 130 Mass. 503; Phœnix Nat. Bank v. Batcheller, 151 Mass. 589. In other words, such nonresident creditor, not proving his claim nor becoming a party to the proceedings, is no more affected by the insolvency proceedings than a creditor whose debt was contracted prior to the enactment of the insolvent law. In Denny v. Bennett, 128 U. S. 489, Purdy & Co. sued Yan Mor man & Bro. in a state court of Minnesota, and attached a part of their goods December 31, 1883. On the same day Yan Mor man & Bro. made an assignment to Bennett, under the state law, for the benefit of such creditors as proved up their claims. On the same day Lopp & Elersham sued Yan Morman & Bro. in the United States circuit court, and the United States marshal, Denny, attached a portion of their goods, but they did not prove up their claim in the insolvency proceedings. Thereupon the assignee, Bennett, sued the United States marshal, Denny, for the value of the goods so taken by him, and obtained judgment in the state court, which was affirmed in the supreme court of Minnesota. And that judgment was affirmed on writ of error by the supreme court of the United States, where it was held, in effect, that a discharge from debts under the insolvent laws of a state did not release debts due *274to a citizen of another state, who had not proved up his-claim, nor submitted to the jurisdiction of the state court; that the assignee, Bennett, under the state law, was entitled to the property, against such foreign creditor so attaching the same in the United States circuit court, and the depriving of sueh foreign creditor of any remed/y, as against the goods so attached and assigned, was permissible, and did not impair the obligations of such cont/ract. Such lien by such attachment in a suit in favor of a nonresident in the federal court was no more subject to be dissolved by the insolvency proceedings than an attachment or levy in the state court in favor of a resident creditor upon a contract made' prior to the insolvent statute. The same court has since held, in effect, that a deed of conveyance made by an insolvent debtor to a nonresident creditor by way of preference may be avoided by .state insolvency proceedings within the time limited therein, notwithstanding such foreign creditors were not served with process, and could not have been compelled to become parties to the insolvency proceedings, even if they had been served. Brown v. Smart, 69 Md. 320; S. C. affirmed, 145 U. S. 454. This was on the theory that the property and debtor were within the state, and the jurisdiction was in rem.
As indicated, the act in question does not undertake to discharge the insolvent debtor, nor to exempt his subsequent acquisition of property, but merely to prevent preferences, to the extent mentioned, out of such of the insolvent’s estate as it existed at the time of making the assignment. It merely suspends the ordinary effect of such levy during the ten days immediately preceding such assignment. In my judgment, and in view of the adjudications cited, the act did not impair the obligation of contracts, even as to the debt previously contracted.