Denny v. Bennett

• Decision Date: 26 November 1888
• Parties: DENNY v. BENNETT. 1
• Court: U.S. Supreme Court

128 U.S. 489

9 S.Ct. 134

32 L.Ed. 491

DENNY v. BENNETT.¹

November 26, 1888.

C. D. O'Brien, for plaintiff in error.

[Argument of Counsel from page 490 intentionally omitted] Ambrose N. Merrick, for defendant in error.

MILLER, J.

This is a writ of error to the supreme court of the state of Minnesota. The principal point raised by the assignments of error is that an act of the legislature of that state approved March 7, 1881, c. 148, is repugnant to the constitution of the United States so far as it affects citizens of states other than Minnesota. That statute provides that, whenever the property of a debtor is seized by an attachment or execution against him, he may make an assignment of all his property and estate not exempt by law, for the equal benefit of all his creditors who shall file releases of their debts and claims, and his property shall be equitably distributed among such creditors. This is the only assignment of error, with the exception of one other, which will be considered further on, that, by any fair construction, can be said to come within the jurisdiction of this court, though others are set out in the brief of counsel, relative to fraud in the assignment made by the debtors in this instance, which raise no federal question.

The facts may be briefly stated as follows: On the 31st day of December, 1883, J. H. Purdy & Co. brought a suit in the Fourth judicial district court of Hennepin county, in the state of Minnesota, against Axel B. Van Norman and Gustave Van Norman, partners, under the firm name of Van Norman & Bro., and on the same day procured a writ of attachment to issue in that suit, which was levied upon a part of the goods of the defendants. On the same day that firm made a deed of assignment to Charles C. Bennett, the present defendant in error, reciting the issue and levy of this attachment, and assigning to him 'all the lands, tenements, hereditaments, and appurtenances, goods, chattels, choses in action, claims, demands, property, and effects of every description,' belonging to them, wherever situated. The instrument also provided that the assignee was 'to take possession of the property, and to sell and dispose of the same with all reasonable diligence, and to convert the same into money; and also to collect all such debts and demands hereby assigned as may be collectible, and with and out of the proceeds of such sales and collections to pay and discharge all the just and reasonable expenses, costs, and charges of executing the assignment,' including a reasonable compensation to the assignee for his services.

The assignment then directs the assignee to proceed as follows: 'To pay and discharge in full, if the residue of said proceeds be sufficient for that purpose, all the debts and liabilities now due, or to become due, from said party of the first part, to all their creditors who shall file releases of their debts and claims against the said party of the first part, as by law provided, together with all interest due, and to become due, therein; and if the residue of said proceeds shall not be sufficient to pay said debts and liabilities, and interest in full, then to apply the same, so far as they will extend, to the payment of the said debts and liabilities and interest proportionably to their respective amounts, and in accordance with the statute in such case made and provided; and if, after payment of all the costs, charges, and expenses attending the execution of said trust, and the payment and discharge in full of all the said lawful debts owing by the said party of the first part, there shall be any surplus of the said proceeds remaining in the hands of the party of the second part, then to repay such surplus to the party of the first part, their executors, administrators, or assigns.'

It appears that the goods and chattels mentioned in this deed of trust were, under its authority, delivered to Bennett, the assignee, or partly so, the sheriff having closed the doors of the store in which they were situated at the time that Denny, the plaintiff in error, seized them by virtue of a writ of attachment issued out of the circuit court of the United States for the district of Minnesota, of which he was marshal, in a suit brought by Lapp & Flershem against the firm of Van Norman & Bro. The latter action was also commenced on the 31st day of December, 1883. On January 21, 1884, after a refusal by the marshal to deliver the goods, Bennett, the assignee, made application to the United States circuit court to be made a party to the suit of Lapp & Flershem against Van Norman & Bro., and prayed for the dissolution of the attachment issued in favor of the plaintiffs therein. The court on February 18, 1884, made the following order: 'First, that Charles C. Bennett, assignee, do have, and he is hereby given, leave to intervene and become a party defendant herein; second, that the motion to dissolve the attachment be, and the same is, hereby, denied.' Although the assignee was thus permitted to come in and be made a party, it is not shown that he ever did so, or ever apperaed in the case after that time. There is no further record in this case of any proceedings in the circuit court of the United States, nor in the action of Purdy & Co. v. Van Norman & Bro., but the transcript then proceeds with the suit brought by the assignee against the marshal, Henry R. Denny, in the nature of trover and conversion, for damages on account of his unlawful seizure of these same goods while they were in the hands of said assignee, and for a conversion of the same by his refusal to return them to plaintiff. This suit was decided in favor of Bennett, the assignee, in the lower court, by a verdict of a jury, and, upon the judgment being carried by a writ of error to the supreme court of the state of Minnesota, it was there affirmed. In both of these courts the questions we have mentioned were raised by exceptions to the charge of the judge that the assignment was a valid one, and to the ruling that the decision of the circuit court of the United States on the motion to dissolve the attachment was not a bar to the present action by the assignee.

The question of the invalidity of this Minnesota statute, as it relates to the rights of creditors, is an interesting one. The argument in favor of that proposition is twofold: First, that it impairs the obligation of contracts; and, second, that such a statute can have no extraterritorial operation, and cannot, therefore, be binding on creditors living in a different state from that of the debtor and of the situs of his property. With regard to the first of these it may be conceded that, so far as an attempt might be made to apply this statute to contracts in existence before it was enacted, it would be liable to the objection raised, and therefore in such a case of no effect. But the doctrine has been long settled that statutes limiting the right of the creditor to enforce his claims against the property of the debtor, which are in existece at the time the contracts are made, are not void, but are within the legislative power of the states where the property and the debtor are to be found. The courts of the country abound in decisions of this class, exempting property from execution and attachment, no limit having been fixed to the amount,—providing for a valuation at which alone, or generally two-thirds of which, the property can be brought to a forced sale to discharge the debt,—granting stays of execution after judgment, and in numerous ways holding that, as to contracts made after the passage of such laws, the legislative enactments regulating the rights of the creditors in the enforcement of their claims are valid. These statutes, exempting the homestead of the debtor, perhaps with many acres of land adjoining it, the books and library of the professional man, the horse and buggy and surgical implements of the physician, or the household furniture, horses, cows, and other articles belonging to the debtor, have all been held to be valid, without reference to the residence of the creditor, as applied to contracts made after their passage. The principle is well stated in the case of Edwards v. Kearzey, 96 U. S. 595, in the following language 'The inhibition of the constitution is wholly prospective. The states may legislate as to contracts thereafter made, as they may see fit. It is only those in existence when the hostile law is passed that are protected from its effect.' See, also, Railroad Co. v. Rock, 4 Wall. 177; University v. People, 99 U. S. 309; Knox v Bank, 12 Wall. 379. The doctrine was very early announced in the case of Wales v. Stetson, 2 Mass. 143; and in the separate opinion of Mr. Justice STORY in Trustees v. Woodward, 4 Wheat. 518, (decided in 1819,) it was suggested that in a grant of a charter to a corporation a reservation of the right to repeal it would be valid. This has been acted upon, and such action has been held in many cases to be valid. The later case of Greenwood v. Freight Co., 105 U. S. 13, contains a review of this whole subject, so far as contracts are concerned.

No reason has been suggested why the legislature could not exempt all interests in landed estate from execution and sale under judgments against the owner, and perhaps all his personal property. However this may be, it is very certain that the established construction of the constitution of the United States against impairing the obligation of contracts requires that statutes of this class shall be construed to be parts of all contracts made when they are in existence, and therefore cannot be held to impair their obligation. The act in question in the present case does not exceed many of the class to which we have alluded in its effect in enabling the debtor to dispose of his property without regard to the ordinary judicial proceedings to subject it to forced sale. The power is conceded, when not forbidden by the statutes of a state, to a failing...