Mather & Strong v. Bush

| N.Y. Sup. Ct. | May 15, 1819

Spencer, Ch. J. delivered the opinion of the Court.

A motion has been made in this case, to set aside the execution, on the ground, that since the rendition of the judgment, the defendant has been duly and regularly discharged, under the insolvent act of this state, passed the 12th of- ■ April, 1813. (1 JV. R. L. 460.) It appears that the contract on which the judgment was founded was entered into in March, 1816 ; and that the discharge of the defendant under the insolvent act, was granted on the 16th of August, 1817. It further appears, that the parties were both citizens of this state, resident therein when the original contract was made, on which the judgment was rendered, and have ever since continued to be resident within the state.

Were it not for the decisions pronounced in the Supreme; Court of the United States, at the last term, we should not hesitate, for a moment, in ordering the execution in this cause to be set aside, as irregularly and illegally issued ; and nothing but the consideration, that that Court has a paramount and controling jurisdiction in cases involving a construction of the constitution of the United States, has induced this Court to permit the question, as to the constitutionally of the insolvent law, to be argued. It cannot be doubted, that if the point which the present motion involves, ■could be thrown into the form of pleading, so that a record could be made up, if this Court should pronounce a judgment adverse to the claim or title set up by the plaintiff under the constitution, a writ of error might be brought and ultimately carried to the Supreme Court of the United States. If, then, that Court has pronounced judgment on the precise point arising in this case, though we have the power of disregarding it, our duty to the suitors in this Court, and the respect which we feel and owe to the Court of the last resort, must induce us, whatever may be our individual opinions, to surrender them up, and yield that obedience which the constitution and laws of the United States exact of us.

In the principal case of Sturges v. Crowninshield, the ■contract was entered into prior to the act of the 3d of April, 1811; and the defendant set up in bar of the suit, a discharge from his debts under that act; and it is not to be denied, that the act of 1811, made important changes in the insolvent system of this state. It authorized a discharge, on the petition of the debtor only; whereas, before that period, the concurrence of three-fourths in value of the creditors, was required, to give to an insolvent a discharge from his debts; and the act of the 12th of April, 1813, requires two-thirds in value of the creditors to join in a petition with the insolvent.

The Supreme Court of the United States held the discharge to be void, and, so far as it attempted to discharge the defendant from the debt, that the act of 1811, was contrary to that part of the 10th section of the first article of the constitution, which prohibits a state from passing any law impairing the obligation of contracts. The case of M'Millan v. M'Neil, was subsequently decided. In that case both the parties resided in South Carolina, and the debt demanded was contracted in that state. M‘Millan removed into the state of Louisiana, where jje was discharged on a cessio bonorutn, as well his person as his property, from all debts then existing, due or owing by him. The Court held, that this case was not distinguishable •in princible from the preceding one; and that the circumstance .that the state law under which the debt was attempted to he discharged, was passed before the debt was contracted, made no difference in the application of the principle.

We are decidedly of opinion, that neither of these cases decide the question presented in this case, and that there is si material and manifest distinction between them. In the leading case, the Court cautiously declare, “ that their opinion is confined to the case actually under consideration.” This is intelligible language, and it was meant, we presume, -to admonish state courts, that notwithstanding the train of -reasoning adopted, in announcing the decision of that Court, ■the Court itself did not mean to express- an opinion upon cases differently circumstanced. Another qualification of the opinion is not quite so obvious, that “ it is 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.” It cannot be conceded, that the legislative power can control the judgment of a court upon a question involving a construction of the constitution; but, most probably, the observation had reference to the fom and mode of proceeding. It is, however, unnecessary to pursue the inquiry, as the .legislature have not interposed in any way.

It has been contended, very earnestly, that it necessarily results from the two cases adjudged in the Supreme Court of the United States, that an insolvent or bankrupt law of the State, would be a violation of the constitution, as im-pairing the obligation of contracts, if such law discharged ■the debtor absolutely from his debts, notwithstanding both debtor and creditor were citizens of the state whose legis-lature passed such law; and, notwithstanding the contract -was made after the enactment of the insolvent or bankrupt law, and was to be performed within the.state.

Having already observed, that we bow to the supremacy of the, Supreme Court of the United States ; and feeling a disposition to give a full and fair effect to their, decision on this question, so far, and so far only, as we perceive they have actually decided, it would be unfit and irregular td analyze (he reasoning and illustrations of that Court,-in the opinion delivered, any farther than to show that the point now presented was not intended to be decided.

The Court, very correctly, define a contract to be, “ ari agreement in which a party undertakes to do, or not to do, a particular thing; the law binds him to perform his undertaking, and this is, of course, the obligation of his contract.”

But if a law, of binding force and influence upon the contracting parties, as citizens of the same State, co-exists with the contract, which provides, that if the party, “ who undertakes to do, or not to do, a particular thing,” shall, by misfortune, become utterly unable to perform his undertaking, and that if he shall, in a certain manner prescribed, make a fair and honest cession of all his estate, for the benefit of all his creditors, that then he shall be absolutely absolved from all his debts, is not the agreement by which he undertook to do, or not to do, a particular thing, qualified by such a law ; and is there not an implied condition, that the party shall be absolved from its performance, if the event takes place which the existing law declares shall dispense with the performance of the contract according to the letter ?

We think this question must be answered in the affirmative ; and then it necessarily results, that such an insolvent or bankrupt law, in force when the contract was made, does not, in the sense or meaning of the constitutional provision, impair the obligation of such contract. On this point, the Supreme Judicial Court of Massachusetts have unanimously expressed an opinion which commands our full assent. In the case of Blanchard v. Russell, (13 Mass. Rep. 16.) they say, “ a law which is in force when a contract is made, cannot be said to have that effect j (of impairing,the obligation of contracts ;) for the contract being made under the law, is presumed to be made with reference to it, and the parties are legally conusant of it" at the time. The contract in such case ,is not impaired by the law, for the law is a part of the contract*”

It is believed, that this position is Universally recognized in courts of justice. Huberus, (vol. 2s bi L tit. 3.) in a very learned disquisition on the effect of the lex loci contractus, lays down the proposition that, “ by the Courtesy of nations, whatever laws are carried into execution within the limits of any government, are considered as having the same effect every where, so far as they do not occasion a prejudice to the rights of other governments or their citizens.” In the case of Talleyrand v. Boulanger, (3 Ves. jun. 449.) Lord Chancellor Thurlow observed, that it would be contrary to all the principles which guide the "courts of one country, in deciding upon contracts made in another, to give a greater effect to the contract than it would have by the laws of the country where it took place. In the case of Melan v. The Duke De Fitzjames, (1 Bos. & Pul. 138.) on a motion to discharge the defendant on common bail, it appeared that the contract was entered into in France, and although it purported to be a personal engagement to pay a sum of money, it was shown that by the laws of France, the defendant could not be arrested or imprisoned on such a contract ; and the Court discharged the defendant, on his entering a common appearance. Chief Justice Eyre held, that when the ground of the debt is a transaction in a foreign country, it does not originate in the laws of England, but in the law of that country which created the obligation; and he said he could not conceive, that what is no personal obligation in the country in which it arises, can ever be raised into a personal obligation by the laws of another. Hoo&e, Justice, observed, if the law of France has said that the person shall not be liable on such a contract, it is the same as if the laxo of France had been expressly inserten %n the Contract / if (he says,) it had been specially agreed betxoeen the parties not to consider the Duke1 s person liable, and under those circumstances he had come over here, there Would have been no difference betxoeen us ; for if it were agreed there that the person should not be liable, it would not be liable here. Heath, Justice, differed from the other judges, considering the contract a personal one, and that the remedy must be pursued according to the law of the country where the parties reside. He concurred in the general principle, that in construing contracts, the laws of the country in which they were made must govern, for, (he says,) all contracts have,a reference to such laws. It appears to us, that this reasoning is conclusive upon the point before us. It cannot be controverted, that the parties to a contract are to be deemed acquainted with the laws of that state of which they are citizens, and in which they are contracting. They must be deemed conusant of those laws which regulate, control, Or affect their contracts; and in construing , a contract for the payment of money, thus entered into, it must be understood in reference to any existing law which bears upon it, and may modify or control it. It is the same, then, in effect, as if the insolvent act of April, - 1813,-had been expressly inserted in the contract, on which the judgment in this case was rendered; and the substance of the agreement between the parties is, that the contract shall be literally fulfilled, unless the defendant becomes an insolvent debtor within the meaning of the act of 1813, and is duly discharged from his debts. Would the obligation of the contract be impaired, if the insolvent act of 1813 had been actually embodied- into the contract? Would the objection to the constitutionality of that act be listened to in any court of justice, where the party to, whom the undertaking was made had received it, and contracted upon that condition.? We apprehend not„

The opinion of the Supreme Court further states, “ that it is not true that the parties have in view only the property in possession when the contract is formed, or that its, obligation does not extend to future acquisitions :■ industry, talents, and integrity, constitute a fund, which, is as confidently. trusted to as property itself; future acquisitions, are, therefore, liable for contracts, and to release them: from this liability impairs their obligation.” These observations are exclusively applicable to the case then under consideration, in which the la.w was posterior to. the contract under which the defendant set up, as a. bar to. the suit, his discharge. But, with, all deference, they would not be correct, if applied to the present case-; for if the parties contract in reference to the existing laws, of the State,, they have not in view future acquisitions, if an, insolvency occurs, and the debtor complies with the requisitions of the 1 aw, and is discharged under it from all his debts. How-could the creditor, under such circumstances, have in view after acquired property, when the law admonished him that such property would be intangible for debts contracted-before the discharge ?■ With respect to the industry, talents, and integrity which are supposed, to constitute a fund, which is as confidently trusted to as property itself; if the debtor ,had an idea, that after being irretrievably ruined, and borne down, by the magnitude and weight of his debts, his future acquisitions- would be liable to be seized upon, as soon as they were gotten, it is very easy to conceive that every incentive to industry would be utterly extinguished, and. further acquisitions would be of little or no value.

The Supreme Court of the United States, to leave no doubt that they had not in view a case like the present, observe •: “ Although the states may, until that power shall be - exercised by Congress, pass laws concerning bankrupts, yet they- cannot, constitutionally, introduce into such laws a clause which discharges the obligations a bankrupt has entered into thus plainly indicating, that a bankrupt law, which a state may pass, must, to have the effect of- discharging the obligations of debtors, be prospective, not retrospective.

The opinion distinguishes between a case impairing the obligation of a contract, and operating directly upon it, and-a law affecting or modifying the remedy upon the contract; the latter is admitted to be under the control,of'the legislative power of a state ; and, although we may not feel the-full force of the distinction, it does not become us to analyze the opinion, or to reason upon it, any farther than to observe, that the remedy is essential, in -many cases, to the contract; and. to modify it, so as to frustrate- the contract, or. render it less valuable, would have the indirect effect-to, impair its obligation.

In many of the states, real property- cannot be sold- on execution ; and when there is a failure of personal property to satisfy the creditor, rin some of the states, the real property of the debtor must either be left untouched, or be-, taken at the appraisal of-indifferent men; and in some one ' pr more of the states, real property is extended, and the. creditor is to be satisfied out of the rents and profits. It is not supposed that the Court meant to say, that these laws were unconstitutional. It is true, that they relate to the remedy which a creditor may use to enforce the payment of his debt; and if the law existed when the contract was made, the creditor could not complain, for he contracted with reference to the law, and knew, or ought to have known, that the real property of his debtor could not be sold; but if a law were to be passed posterior to the contract, either withdrawing the debtor’s real property from a liability to satisfy his creditor, or obliging him to go unpaid, unless he would accept land not contracted to be taken, instead of money which was stipulated to be paid, the creditor might complain, with some justice, perhaps, that his contract was impaired.

Many cases might be put in which the lex loci becomes, impliedly, part and parcel of the res gesta. If a sum of money is stipulated to be paid on a day certain, and the contract is silent as to interest, the law attaches on the contract, and declares interest shall be paid thereafter; for this the parties have tacitly made part of the contract. So, also, in all cases of implied promises, the law raises them, and the parties have virtually, though not actually, so contracted j as in actions for money had and received, or goods sold, when there had been no express convention of the parties.

In the case of M‘Millan v. M‘Niell, the parties having contracted in South-Carolina, had no reference to the laws of Louisiana, and the laws of the latte"? state formed no part of the contract; nor did they attach upon, or control it, in its concoction. The application, therefore, of the laws and proceedings of Louisiana, to a contract made in South-Carolina, between citizens of that state, and annulling the contract at the instance of the debtor, when the creditor was beyond the control, and out of the reach, of their jurisdiction, was, assuredly, a case widely different from that under consideration; and it was, in our apprehension, correct to say, that the law of Louisiana, having been passed before the debt was contracted in South-Carolina, made no difference in the application of the principle laid down in Sturges v. Crowninshield. On the whole, after our laws of insolvency have been continued, with very little variation, except as to. the aCt of 1811, from the period of the formation of the constitution of the United States; after we have repeatedly pronounced regular and fair discharges under them, to be valid and effectual, for such a series of years ; and when the cases decided by the Supreme Court of the United States are so perfectly distinguishable from the case now presented, it is too much to ask this Court to take a step in advance of the Supreme Court of the United States, and to anticipate their decision, on a question certainly not decided. We are, therefore, unanimously,of opinion, that the execution issued in this case be set aside, with costs. We reserve our opinions, until the next term, upon the motions to set aside the executions issued on judgments, from which the defendants were discharged under the act of the 3d of April, 1811; and also upon the motions for leave to issue writs of scire facias : those cases require more consideration, than the limited time of this term will enable us to bestow.

Yates, J. not having heard the argument, gave no opi-. mon«,

Motion granted.