Elton v. O'Connor
| Decision Date | 15 May 1896 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Grand Forks County; Templeton, J.
Edwin T. Spafford was adjudged an insolvent and James Elton became his assignee in insolvency. From an order denying a motion to have certain levies made by M. J. O'Connor, as sheriff set aside, the assignee appeals.
Cochrane & Feetham, for appellant.
At the time of the levy in this case, the title to the property was not in the execution debtor but in the assignee. Perry Mfg. Co. v. Brown, 2 Woodb. and M. 449, 19 Fed. Cases 11,015; Geilinger v. Phillippi, 133 U.S. 246, 10 S C. Rep. 268. Before the execution levy an adjudication of insolvency had been entered upon the petition of the debtor. The deed of assignment was executed two days after the levy and this deed related back to the commencement of the proceedings. Sections 6036, Rev. Codes. The creditor was not in time to gain the advantage given by the trial court. Perry Mg. Co. v. Brown, 19 Fed. Cases, 11,015, Perry v. Smith, 1 Woodb. and M. 115, Fed Cases, No. 14,115; Farrens v. Hammond, 10 F. 900; Judd v. Ives, 4 Metc. 401; Gallup v. Robinson, 11 Gray 20; Williams v. Merritt, 103 Mass. 147. The reason that non-residents of the state are not barred by its insolvency discharge is that these laws are local, they are made for the relief of citizens residing within the limits of the state which enacts them and cannot be made to effect the rights of citizens of other states. Ogden v. Saunders, 6 L.Ed. 659; Collins v. Randolph, 3 Green, (Ia.) 303, 29 Alb. L. Jr. 188; Hawley v. Hunt, 27 Ia. 307; Bedell v. Scruton, 54 Vt. 494. But where the non-resident creditor submits his controversy and contracts to the arbitration of our law and courts by becoming a party to the proceeding he is bound by the decree entered therein. Gillman v. Lockman, 4 Wall. 409, 18 L.Ed. 432; Clay v. Smith, 7 L.Ed. 723; Baldwin v. Hall, 1 Wall. 223, 17 L.Ed. 531; Baldwin v. Bank, 1 Wall. 234, 17 L.Ed. 534. The contract upon which the execution creditor in this case obtained his judgment was entered into before the passage of the insolvency law, therefore the provisions of our insolvency law as to the discharge of the debt is void as to this creditor. Denny v. Bennett, 32 L.Ed. 401, 9 S. C. Rep. 134; Baldwin v. Buswell, 52 Vt. 65. And because to enforce the discharge feature of this law against prior contracts would be to violate the obligation of such contract, regardless of the residence of the creditor. Ogden v. Saunders, 6 L.Ed. 606, 12 Wheat. 213; Roosevelt v. Cebra, 17 Johns. 108; Matter of Wendell, 19 Johns. 153; Reno on Non-residents, § 268. The non-resident creditor can come into court and prove his claim, obtain his pro rata of assetts, at the same time call the courts attention to the fact that his debt was contracted prior to the passage of the insolvent law and claim and obtain his constitutional privilege of not having his contract discharged. Talcott v. Harris, 93 N.Y. 567; Chapman v. Forsythe, 11 L.Ed. 238; Reno on Non-residents, § 268; Kimberly v. Ely, 6 Pick. 440; Allen v. Roosevelt, 14 Wend. 100; Woodbridge v. Wright, 3 Conn. 523; Embry v. Palmer, 107 U.S. 3; Montague v. Massey, 76 Va. 397; Reynolds v. Adden, 136 U.S. 348.
F. H. McDermont, for respondent.
The state insolvency law impairs the obligation of a pre-existing contract in that it takes away the remedy for its enforcement. The remedy at the time a contract is made enters into and forms a part of it. Green v. Biddell, 8 Wheat. 1; Sturgis v. Crowninshield, 4 Wheat. 122; Ogden v. Saunders, 12 Wheat. 213; Bronson v. Kinsie, 1 How. 311: Von Hoffman v. Quincy, 4 Wall. 535; Walker v. Whitehead, 16 Wall. 314; Edwards v. Kearsey, 96; U.S. 595; Pinney v. Pinney, 4 L. R. A., 348. Section 6085 Rev. Codes provides that all debts proved against the estate shall be wholly and absolutely discharged, not all debts contracted subsequent to the taking effect of the law, and proved. Therefore, if a claim is proved against the estate, it will be discharged as a whole however small a distributive share it may draw. To stay out and not prove, is to be deprived of all remedy or indefinitely stay process. Deering v. Boyle, 12 Am. Rep. 480; Aycock v. Martin, 92 Am. Dec. 56; Coffman v. Bank, 90 Am. Dec. 311. If an existing creditor participates in insolvency proceedings under a law subsequently enacted, he is bound by its provisions and if he accepts its benefits he must submit to its burdens. Baldwin v. Hale, 1 Wall. 223; Gillman v. Lockwood, 4 wall. 409; Brown v. Smart, 145 U.S. 454; Berpee v. Sparhaeok, 108 Mass. 111; Hawley v. Hunt, 1 Am. Rep. 273; Pratt v. Chase, 44 N.Y. 597; Sloan v. Chiniquy, 22 F. 213; Conway v. Seamons, 45 Am. Rep. 579; Clay v. Smith, 3 Pet. 411; 11 Am. and Eng. Enc. L. 226; Eustis v. Bolles, 146 Mass. 413; overruling Kimberly v. Ely, 6 Pick. 440; Beal v. Burchstead, 10 Cush. 523; Fisher v. Currier, 7 Metc. 424; Van Hook v. Whitlock, 7 Paige, Ch. 373.
The appeal in this case is from an order sustaining certain levies of execution upon the property of a judgment debtor after the institution of insolvency proceedings. The judgment debtor filed his petition to be adjudged an insolvent under the provisions of Ch. 38 of the Rev. Codes on the 14th day of January, 1896. On the same day he was adjudged an insolvent. Subsequently the necessary steps were taken to carry forward the insolvency proceedings to the point where an assignment could be executed; and on the 5th day of March, 1896, the clerk of the District Court, under the provisions of § 6036, executed to the assignee chosen by the creditors an assignment in due form according to the requirements of that section. Intermediate the inception of the insolvency proceedings and the time of the execution of this assignment certain creditors, whose claims accrued before the insolvency law went into effect, and who seem to have been non-residents, levied upon the insolvent's property several writs of execution. A motion having been made by the assignee to have these levies set aside on the ground that the property was no longer subject to seizure as the property of the debtor, but had passed to the assignee under the insolvency proceedings, the District Court held that such levies were valid, and therefore denied such motion. From the order denying this motion an appeal has been perfected, and the case is now before us for review. The position taken by the counsel for the respondent is that the insolvency law is unconstitutional as to claims of the creditors for whom the levies were made, for the reason that they accrued before the law went into effect, and that they are now compelled either to refrain from sharing in the distribution of the assigned estate, or to lose their demands as a result of accepting dividends, and that in this way their situation has been so radically altered to their detriment, as compared with their rights when these contracts were entered into, as to make the statute vulnerable so far as their claims are concerned to the constitutional objection that it impairs the obligation of their contracts. The levies in this case must be treated as having been made after the title to the property had vested in the assignee if the insolvency law is valid as to the creditors in question with respect to all its features save the discharge feature. The statute in terms declares that the assignment, when finally made, "shall relate back to the commencement of the proceedings in insolvency, and by operation of law shall vest the title to all such property, both real and personal, in the assignee, although the same is then held under any process as the property of the debtor." Revised Codes, § 6036. If the creditors in this case secured a valid lien upon the property, they could have secured such lien, as well after the formal execution of the assignment, as before. The date of the transfer of the title is the commencement of the insolvency proceedings, provided they are prosecuted, and not abandoned. The decision in this case necessarily proceeds upon the theory of the invalidity as to the creditors in question of the entire body of the insolvency law. While the writer of this opinion has long regarded as unanswerable the argument of Mr. Webster in Ogden v. Saunders, against the power of a state to enact insolvency laws authorizing the discharge of debtors from personal liability, yet the law must be deemed to be settled against this view. Butler v. Goreley, 146 U.S. 303, 13 S.Ct. 84, 36 L.Ed. 981, and cases cited. It is true that as to contracts entered into before the enactment of such a statute it is ineffectual in so far as it attempts to release the debtor without full payment. Sturges v. Crowninshield, 17 U.S. 122, 4 Wheat. 122, 4 L.Ed. 529; Bank v. Smith, 19 U.S. 131, 6 Wheat. 131, 5 L.Ed. 224. But with respect to contracts made subsequently to the adoption of the statute in the state in which such insolvency law exists, or which are entered into with reference to such law, the rule now firmly established is that such legislation is valid. Ogden v. Saunders, 25 U.S. 213, 12 Wheat. 213, 6 L.Ed. 606; Boyle v. Zacharie, 6 Peters 348; Butler v. Goreley, 146 U.S. 303, 13 S.Ct. 84, 36 L.Ed. 981 and cases cited; Denny v. Bennett, 128 U.S. 489, 9 S.Ct. 134, 32 L.Ed. 491. A creditor who cannot be affected by the discharge in insolvency proceedings, either because his contract was made before the insolvency law was passed, or for the reason that his contract was entered into with reference to the laws of another state, has no right, on that account, to ignore the whole law. He cannot treat the entire act as unconstitutional, and levy upon the property of his debtor after...
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