Court Opinion

ID: 6580996
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:38:16.243401+00
Date Added: 2024-06-11T15:57:16.996549
License: Public Domain

Granger, J.
This is an action of debt brought by the State of Connecticut, to recover the amount of a bond given by the defendant, to'the State in consideration of a loan made to him from the school fund of the State.
The defendant pleaded a special plea in bar, setting up a discharge in bankruptcy, the plaintiff demurred to the plea generally, issue was joined on this demurrer, and the questions arising under that issue are reserved for the- advice of this court. The main question presented for our decision is, whether under the facts of this case the certificate of discharge is a bar to the plaintiff’s claim.
The statute upon which the defendant relies is section 5119 of the bankruptcy act of 1867, which provides that “a discharge in bankruptcy duly granted shall, subject to the limitations imposed by the two preceding sections, release the bankrupt from all debts, claims, liabilities and demands, which were or might have been proved against his estate in bankruptcy. It may be pleaded by a simple averment that on the day of its date such discharge was granted to the bankrupt, setting a full copy of the same forth in its terms, as a full and complete bar to all suits brought on any such debts, claims, liabilities, or demands. The certificate shall be conclusive evidence in favor of such bankrupt of the fact and regularity of such discharge.”
The construction of this statute gives rise to the questions presented in this case, and the first inquiry is, whether the statute embraces either the government or sovereignty of the United States or the government or sovereignty of the several states. It may be stated we think as a universal rule in the construction of statutes limiting rights, that they are not to *405be construed to embrace the government or sovereignty unless by express terms or necessary implication -such appears to have been the clear intention of the legislature, and the rights of the government are not to be impaired by a statute unless its terms are clear and explicit, and admit of no other construction.
The same rules of construction are applicable to the sovereignty of the United States and that of the several states as govern the interpretation of statutes in England. Mr. Justice Blackstone states the rule to be, “that the King is not bound by any act of Parliament unless he be named therein by special and particular words. The most general words that can be devised, as any person or persons, bodies politic and corporate, affect not him in the least, if "they may tend to restrain or diminish any of his rights or interests.” 1 Black. Com., 262.
Chancellor Kent lays down the rule in nearly the same terms. He says—“ It is likewise a general rule in the interpretation of statutes limiting rights and interests, not to construe them to einbrace the sovereign power or government, unless the same be expressly named therein, or intended by necessary implication.” 1 Kent Com., 460. The numerous cases cited upon the brief of the plaintiff’s counsel sustain the rule.
The United States is not named in the bankruptcy act of 1867, in any of its provisions except the one which provides that all debts due the United States, and all taxes and assessments under the laws thereof, shall be entitled to priority or preference. United States v. Herron, 20 Wall., 251. And the same language is used in section 5101, giving priority to debts due the State in which proceedings in bankruptcy are pending. It is apparent that the intention of the framers of the act was that the United States and the several states should stand upon the same footing as creditors of the bankrupt, giving debts due to each respectively the same priority and preference, and nowhere referring to them as ordinary or common creditors. And in the language of Judge Clifford, “many of the provisions of the act describing the rights» *406duties, and obligations of creditors are in their nature inapplicable to the United States, and if held to include the United States could not fail to become a constant and irremediable source of trouble.”
We think it is clear upon principle and authority, that the bankruptcy act of 1867 was intended to operate upon the citizens and corporations of the several states, and not upon the states, either in their united or separate sovereign capacities ; and in the case of United States v. Herron, above cited, the Supreme Court held that the general government was not affected by a discharge in bankruptcy, although the debt was provable against his estate. Other cases might be cited to the same effect, but this is sufficient upon this point.
The claim is made by the counsel for the defendant that the State of Connecticut is not acting in its sovereign capacity in this case; that it is a mere money lender, and that in this respect it stands upon the footing of an ordinary creditor having a provable debt against the estate of a bankrupt. This ’position is untenable. That the State of Connecticut is a sovereign power, as well as every other state, limited only by the constitution of the United States, seems to be the well settled opinion of most jurists and statesmen; but this point need not be discussed, as the defendant does not deny the sovereignty of the state, but only that it acts in its sovereign capacity in its management of the school fund, and in collecting this debt which was a school fund loan.
A brief consideration of the creation of this fund conclusively shows that it was established and has ever been carefully guarded by the State acting in its sovereign capacity. In 1786 Connecticut ceded to the United States all her right and title in the public lands, with the reservation of a tract of about three and a half millions of acres in Ohio, lying within her ancient charter limits, which was known as the “Connecticut Reserve.” In 1795 a committee was appointed by the General Assembly to sell the lands reserved, and the avails were to be appropriated for the support of common schools. The lands were sold for the sum of twelve hundred thousand dollars. This constituted the school fund, and was managed by the committee who made sale of lands by authority of the *407State, down to the year 1800, when other persons, including the state treasurer, were appointed “ Managers of the School Eund,” and in 1810 the first sole Commissioner of the School Eund was appointed by the legislature. By Art. 8, Sec. 2, of the constitution of the State, the school fund is made perpetual, and it is provided that “no law shall ever be made authorizing said fund to be diverted to any other use than the encouragement and support of public or common schools.” This fund may well then be regarded as a fund created and maintained by unequivocal acts of sovereignty. The land from which it was derived belonged to the people of the state, the fountain head of sovereignty. It was established by act of the people through their General Assembly, and was made perpetual by them by their direct action in adopting the constitution; and it is emphatically a fund of the people, in their sovereign capacity, and is managed and controlled by them through the instrumentality of the state government or sovereignty. It has always been, and we trust always will be, the peculiar and anxious care of the State to see to it that no detriment befalls this fund, and if there is a fund that ought not to be affected by the bankruptcy of its debtors, this certainly is one; but the sacredness of the fund of course cannot change the rules of law. This fund being, as we have shown, a fund owned by the people of the state, and the state sovereignty acting for all the people, in seeking the payment of this claim, ought not to be affected by the defendant’s discharge in bankruptcy, unless the law is clear and imperative; but so far is it from being so, that we think it is clearly the contrary. The cases cited show that the United States is not affected by such discharge, and we think it follows as a legitimate result that, if the whole sovereignty is not affected, none of the component parts should be. If the general government can collect its claims, notwithstanding the discharge, upon every just principle the state governments ought to have the same right. The same construction should be applied in the one as in the other.
We advise the Superior Court that the plea is insufficient.
In this opinion the other judges concurred.