Donnelly v. Corbett et al.

Donnelly v. Corbett et al. Foreign insolvent discharge. — Attachment. The courts of one state clo not give effect to an insolvent discharge obtained in another, as to a creditor who does not reside within the jurisdiction, and whose debt was not there contracted, though judgment was obtained against the debtor in the courts of the state, where the discharge was granted. An application for an attachment against a non-resident debtor, which positively avers the debt and the consideration, is not vitiated by an allegation that the indebtedness arose upon a judgment obtained therefor in another state, at a particular time and place, “ as these deponents believe.” Appeal from the general term of the Court of Common Pleas of the city of New York, where a judgment upon a verdict in favor of the plaintiff had been affirmed. This was an action brought by the plaintiff as the surviving member of the firm of Donnelly & Hyatt, upon a bond given by the defendants, to discharge an attachment against the goods of the defendant Corbett, as a non-resident debtor. * appeared on the trial, that on the 24th -* March 1837, Corbett, a resident of South Carolina, purchased a bill of goods of the firm of Donnelly & Hyatt, merchants of New York, amounting to $962.62, and gave them his note for the amount thereof, at eight months, payable at the bank of South Carolina, at Charleston. The note having been dishonored, the firm of Donnelly & Hyatt, brought suit in the court of common pleas of Charleston, South Carolina, and recovered judgment thereon, upon which, in August 1843, he issued a ccd. set., by virtue of which, Corbett was taken in execution. The latter, on the 11th March 1844, obtained a discharge from imprisonment, and from his debts, under the insolvent law of the state of South Carolina, upon his own petition; but neither the plaintiff, nor his deceased partner, were parties to the proceeding, nor received any dividend from the assigned estate. On the 13th March 1846, the plaintiff applied to Judge Edmonds, for an attachment against the property of Corbett, as a non-resident debtor. The affidavit for the attachment set forth:— That Corbett was • indebted to the plaintiff, as the survivor of Hyatt, in the sum of $1520.95; “ that such demand arises upon a judgment which, deponent has been informed and believes, was obtained, in or about the year 1843, by this deponent and the said Hyatt in his lifetime, in a court of competent jurisdiction in the state of South Carolina, in the United States, against the said Corbett, such judgment being rendered upon a promissory note for $962.62, dated at the city of New York, the 24th day of March 1837, &c.; and that the ^grounds upon which the said application is r founded are true, to wit, that the said James ^ Corbett is indebted to this deponent, as such survivor, in said sum of money, upon said judgment, and that such judgment was rendered upon a contract made in the city, county and state of New York.” The defendant gave bond to discharge the attachment, and the plaintiff having obtained judgment in the attachment suit, this action was brought against the obligors in the bond. The court, upon the trial, held, that the insolvent discharge obtained in South Carolina, was invalid as against the plaintiff; and that the affidavit upon which the attachment was granted was sufficient: to which the defendants excepted. And the judgment entered upon the verdict in favor of the plaintiff having been affirmed at general term, the defendant took this appeal. Hill, for the appellant. See Ballard v. Webster, 9 Abb. Pr. 404; Ritchie v. Garrison, 10 Ibid. 246. [MAJORITY — *Gardiner, J.] *Gardiner, J. There is some difficulty in ascertaining the precise position occupied by the supreme court of the United States upon the subject of state insolvent laws. We are authorized, I think, to assume, that such laws, when enacted in good faith, are valid, so far as they affect the remedy to enforce the contract. (Sturges v. Crowningshield, 4 Wheat. 122; McMillan v. McNiel; 4 Id. 209; Ogden v. Saunders, 12 Id. 213; Cook v. Moffatt, 5 How. 295.) That they were void, as impairing the obli- * 504 1 £a^on 03^ contrac*s! *whenever they assume to -* discharge the obligation of the debtor, was affirmed by Chief Justice Marshall, in the case from 4 Wheaton, above cited, without qualification. In Saunders v. Ogden, the decision was against the validity of the law relied upon by the defendant, in that particular case; but the opinion of the majority of the judges, then delivered, confined the principle settled, to contracts made by citizens of different states, and, in argument, affirmed the constitutionality of state laws absolving the debtor from contracts made subsequently to the passage, between citizens of the same state. In the case before us, the defendant purchased merchandise in the city of New York, for which he gave his note to the plaintiff, the vendor, payable in South Carolina, where the vendee then and subsequently resided. The debt, consequently, was contracted at the place of residence of the creditor, by a citizen of another state, to be paid at the domicil of the debtor. The case is, therefore, within the general doctrine established in Ogden v. Saunders. The purport of that adjudication, as stated by Judge Johnson, was, “ that as between citizens of the same state, a discharge of a bankrupt by the laws of that state is valid, as it affects posterior contracts; as against citizens of other states, it is invalid, as to all contracts’1 According to this authority, the insolvent law invoked by the defendant was void as against the plaintiff, a foreign creditor. Again, independent of authority, the law of the place of the contract, as well as of its performance, bound this defendant to the fulfilment of his promise; another law of South Carolina, in reference to a distinct subject, assumed to discharge him from this obligation, without performance. If annulling a contract impairs its obligation, such a law would conflict with the constitution of the United States. It has been said, in reference to contracts between citizens of the same states, that bankrupt laws in force at the time of the agreement, became a part of the contract ■ — and that the same rule, should apply to laws at the place of performance, in cases like the present. This argument has never been deemed satisfactory. *For, if existing insolvent laws constitute an element of the agreement, why should not the *- ° right to enact them, in the discretion of the legislature, especially, when given by a written constitution, be recognised in the same manner. There is no more difficulty in finding a place for such an acknowledgment, or, indeed, for a state constitution, in the undertaking of a debtor, than for a state bankrupt law. In either case, upon the hypothesis under consideration, the creditor is bound in virtue of his own assent. He may, therefore, as well be concluded by a recognition of a right to legislate prospectively upon this subject, as by a recognition of a law in force at the time of the contract. Every insolvent law, consequently, enacted in pursuance of such a constitution, in the ordinary course of legislation, would be valid, whether passed previous or subsequent to the creation of the debt. The United States court, however, have uniformly held otherwise, as to all laws discharging the debtor, passed subsequent to the contract. (6 Peters 348; 12 Wheaton 213.) Again, if the insolvent law of South Carolina constituted a part of the undertaking of the defendant, so, for the same reason, did the constitution of the United States. The substance of the contract between the parties would then be, that the maker should pay the money specified in the note, unless discharged by some law of the place, by performance, not in conflict with the supreme law of the land. This would lead us, through a circle, back to the- question, whether annulling the contract, without satisfaction and against the will of the creditor, impaired its obligation. The notion, however, that insolvent laws constitute a part of the agreement of parties, under any circumstances, has been considered as fallacious by judges of the court in which the doctrine was first broached. (5 Howard 311.) The permission by these laws accorded to a debtor to absolve himself, is an act of sovereignty, induced by considerations of public expediency. It is the exercise of a power not derived from or dependent upon contract, but beyond and in hostility to it. * koa i *The public good, or the exigencies of a state, tiUt> J may require the taking of private property, without the consent of the owner, or the discharge of a debt, without the consent of the creditor; but the idea that the justification, in either case, rests on contract, or depends upon the assent of the holder, has scarcely the merit of plausibility. It is true, that in this case, the discharge of the debtor was obtained in South Carolina, the place designated in the contract for its performance. It may also be admitted, that the law of that state must govern in ascertaining the “ validity, nature, obligation and interpretation of the contract." (Story’s Conflict of Laws 280.) In these particulars, the law of New York and of the place of performance was identical. The obligation of the debtor to pay according to his agreement, was recognised by the courts of South Carolina, by rendering judgment and issuing process against the defendant to enforce it. He was subsequently discharged, upon his own application, according to the provisions of an insolvent law of that state, not upon the ground of a condition to that effect in the contract, but because the state, in the exercise of its sovereignty, had so ordained. I do not perceive, that we are required by authority, principle or comity, to give that law an extra-territorial effect, under the circumstances disclosed by this bill of exceptions. It is, however, insisted by the defendant, that conceding that the law of South Carolina was inoperative as to the plaintiff, ex proprio vigore, by reason óf his being a citizen of another state, still, as it was optional with him, whether he would resort to the laws authorizing the imprisonment of his debtor or not, by electing to do so, he consented to be bound by them, and thus renounced his constitutional immunity. The plaintiff sued in the state court, and thereby consented to avail himself of the remedies provided by the laws of the state in reference to the collection of his demand; one of these was imprisonment of the debtor. Of course, any law existing at the time, or enacted subsequently to the making of the contract, affecting *that remedy, was obligatory upon the plaintiff, and ' all other suitors in the same forum; the subject was one pertaining to state legislation exclusively. The law in question went beyond this, and not only relieved the defendant from imprisonment, but assumed to discharge him from all obligation to comply with his agreement. The contract and the remedies to enforce it, are distinct subjects, and cannot be made identical, because treated of in the same statute. The cases to which we have been referred/ to sustain the position, “that all acts in pari materia are to be taken together as if they were one* law” (1 Doug. 50, 12), have no - application. The common law which obliges the debtor to satisfy the debt is not in pari materia with a statute which avoids the contract against the will of the creditor, and without any satisfaction whatever; and it would be a singular rule of evidence, which would infer from the attempt of this plaintiff to enforce the payment of the note in question, in the state court, an assent to a law which, on the petition of the debtor, would absolve him from its payment altogether. It has been held, that a party may waive a constitutional as well as a statute privilege, designed for his own benefit. (24 Wend. 337; Clay v. Smith, 3 Peters 412.) The act of waiving must, however, be unequivocal. In the first case cited, the consent was in writing; in the second, the creditor made himself a party to the proceedings, and received a dividend under the state bankrupt law. It has never yet been decided, that a foreign creditor, by suing for a debt in a state court, adopted its insolvent laws, and thereby waived his constitutional immunity. The papers on which the attachment issued were sufficient to confer jurisdiction. The application states “ that such demand arose upon a judgment, which your applicant is informed and believes was obtained in or about the year 1842.” The information and belief refer to the time of the rendition of the judgment, not to the fact of its existence, or to the circumstance that the indebtedness of the defendant arose before it. Accord- * 508 1 fac*s last mentioned are deposed -* to positively, in the affidavit of the plaintiff accompanying the application. The judgment of the common pleas should be affirmed. Judgment affirmed. Welles and Watson, JJ., dissented.