Eustis v. Bolles

• Decision Date: 06 March 1888
• Citation: 16 N.E. 286,146 Mass. 413
• Parties: EUSTIS v. BOLLES et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

146 Mass. 413

16 N.E. 286

EUSTIS v. BOLLES et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 6, 1888

COUNSEL

Conrad Reno, for plaintiff.

The defense of the defendants Bolles and Wilde is a discharge in composition proceedings under and by virtue of the "Composition Acts," so called, being chapter 236 of the Acts of 1884, and chapter 353 of the Acts of 1885. The defenses of the defendant Hall are that he did not sign the note in question, and was not a member of the firm of B Callender & Co. at the time it was signed. It appears from the report that the defendant Hall was a member of the firm of B. Callender & Co. for 10 years at least prior to July 2 1877, and that when the plaintiff took the note in suit on January 1, 1880, he believed said Hall was still a member of said firm at that time, having never received notice of his withdrawal, though he had had dealings with the firm before the time of his alleged withdrawal. Upon this state of facts it seems clear that the plaintiff is entitled to recover against Hall, though notice of his withdrawal from the firm was published at the time. Elkinton v. Booth, 143 Mass. 479, 10 N.E. 460; Lovejoy v. Spafford, 93 U.S 430, 439, 440; Vernon v. Manhattan Co., 22 Wend 183; Bristol v. Sprague, 8 Wend. 423, 424; Pope v. Risley, 23 Mo. 185; Clapp v. Rogers, 12 N.Y. 283, 288, 289; Story, Partn. §§ 160, 161; Lyon v. Johnson, 28 Conn. 1. The answer of defendant Hall does not specially set up nor rely upon a discharge in bankruptcy, nor did he ask leave to amend his answer upon that point. Such discharge is a "substantive fact," in avoidance of the action, which cannot be proved under a general denial, but must be specially pleaded. Pub.St. c. 167, § 20; Whitney v. Rhoades, 3 Allen, 471; Marvin v. Mandell, 125 Mass. 562, 563; Mulry v. Insurance Co., 5 Gray, 541; Eyster v. Gaff, 91 U.S. 521, 525; Dimock v. Copper Co., 117 U.S. 559, 6 S.Ct. 855. This discharge in bankruptcy is no defense upon the merits, because it does not appear that before the filing of said Hall's petition in bankruptcy the firm of B. Callender & Co. had made a general assignment for the benefit of its creditors. Bank v. Gerry, 13 N.E. 453. The single defense of these defendants is their discharge under and by virtue of the composition acts. To the validity of this defense of composition the reply of the plaintiff is that said composition acts are unconstitutional, and as such they are in legal contemplation as inoperative as if they had never been passed. Norton v. Shelby Co., 118 U.S. 425, 442, 6 S.Ct. 1121; Barry v. Edmunds, 116 U.S. 550, 6 S.Ct. 501; Kinneen v. Wells, 144 Mass. 497, 11 N.E. 819; Kelly v. Bemis, 4 Gray, 83; Clark v. Miller, 54 N.Y. 528; Cooley, Const.Lim. 188, (5th Ed. 224;) Sturges v. Crowningshield, 4 Wheat. 122; Kimberly v. Ely, 6 Pick. 440; Ogden v. Saunders, 12 Wheat. 213. The first ground upon which the plaintiff contends that the composition acts are unconstitutional is that they impair the obligation of his contract, and therefore violate article 1, § 10, Fed. Const. In questions of this character, the decisions of the federal supreme court are "authoritative and binding upon state judges." Per Chief Justice MORTON, in Eliot v. McCormick, 144 Mass. 10, 10 N.E. 705; Fleming v. Clark, 12 Allen, 191; Kelley v. Drury, 9 Allen, 27; Marsh v. Putnam, 3 Gray, 551, 554.

The note in suit was executed and delivered to the plaintiff four years prior to the passage of the first composition act, and was a pre-existing contract. It has been decided by this court that "an insolvent law of any state can have no operation upon a pre-existing contract," and "that such a law is unconstitutional and void, and that this effect is avoided only when the debtor and creditor are domiciled in the state where such law already exists at the time of the contract." Kimberly v. Ely, 6 Pick. 440, 451, 452; Agnew v. Platt, 15 Pick. 417, 421. The plaintiff submits that the obligation of his contract has been impaired in two particulars: (1) That said acts have had the effect to force or interpolate into the plaintiff's contract a clause or condition operating to his substantial prejudice, which did not enter into or form a part of it at the time of making, either expressly by the act of the parties, or impliedly by the law in force at the time when and the place where the contract was made and was to be performed; (2) that said acts have so affected the plaintiff's remedy, as it subsisted in Massachusetts when his contract was made, and when it was to be performed, "as substantially to impair and lessen the value of the contract." It seems clear that these two ways (expressly or by implication) are the only ways in which a clause or condition can form any part of an express contract between individuals. Hence the composition acts, being passed after the making of the contracts in suit, can form no part of such contract, and if they purport to change the nature or legal effect, or to incorporate into said contract a clause or condition to the substantial prejudice of either party, they impair the obligation of the contract, and are void. King v. Bank, 15 Mass. 447; Com. v. Essex Co., 13 Gray, 239, 253; Bronson v. Kinzie, 1 How. 311; McCraken v. Hayward, 2 How. 608, 612; Hartman v. Greenhow, 102 U.S. 672; Poindexter v. Greenhow, 114 U.S. 270, 5 S.Ct. 903; Kimberly v. Ely, 6 Pick. 440; Blanchard v. Russell, 13 Mass. 1, 16, 17; Sturges v. Crowningshield, 4 Wheat. 122; Bank v. Smith, 6 Wheat. 131; Ogden v. Saunders, 12 Wheat. 213; In re Wendell, 19 Johns. 153; Salters v. Tobias, 3 Paige, 338; Bryar v. Willcocks, 3 Cow. 164; Hundly v. Chaney, 65 Cal. 363, 4 P. 238; Conway v. Seamons, 55 Vt. 8; Betts v. Bagley, 12 Pick. 572, 580; Cook v. Googins, 126 Mass. 410; Cummings v. Cummings, 143 Mass. 340, 342, 9 N.E. 730; Com. v. Bridge, 2 Gray, 339, 347-350; Edwards v. Kearzey, 96 U.S. 595; Seibert v. Lewis, 122 U.S. 284, 7 S.Ct. 1190; Gelpckel v. Dubuque, 1 Wall. 175, 206; Walker v. Whitehead, 16 Wall. 314; Hawthorne v. Calef, 2 Wall. 10. The obligation of the contract, as it existed by the acts of the parties, and by the operation of the law in force when and where it was made, was that the defendants should pay the full face value of the note at maturity, unless (1) the plaintiff should give the defendant a technical release of the debt under seal,--a written receipt in full of all demands being not sufficient upon an undisputed claim, (Tyler v. Association, (Mass.) 13 N.E. 360; Weber v. Couch, 134 Mass. 26; Curran v. Rummell, 118 Mass. 482; Harriman v. Harriman, 12 Gray, 341; Kimberly v. Ely, 6 Pick. 440; Grinnell v. Spink, 128 Mass. 25;) or (2) unless the plaintiff should voluntarily sign, and thus become a party to, a composition deed or agreement, ( Battles v. Fobes, 21 Pick. 239, 240, 2 Metc. 93, 95; Eaton v. Lincoln, 13 Mass. 424; Bigelow v. Baldwin, 1 Gray, 245; Turner v. Comer, 6 Gray, 530; Perkins v. Lockwood, 100 Mass. 249; Huckins v. Hunt, 138 Mass. 366; Walker v. Mayo, 143 Mass. 42, 8 N.E. 873; Baxter v. Bell, 86 N.Y. 195; Bank v. Kohner, 85 N.Y. 189;) or (3) unless the plaintiff should accept some thing of value other than money as an accord and satisfaction of his claim, (Harriman v. Harriman, 12 Gray, 341; Perkins v. Lockwood, 100 Mass. 249;) or (4) unless the defendants should obtain a discharge in insolvency after a full surrender and distribution of all their present possessions ratably among their creditors. Although 99 creditors might consent to take less than their shares of the debtor's entire assets, such assent did not force or oblige the hundredth creditor to accept less than his share of such assets. Gen.St. c. 118, §§ 44, 46; Pub.St. c. 157, §§ 46, 92; Gray v. Bennett, 3 Metc. 522, 524, 525, 531; Purple v. Cooke, 4 Gray, 120-122; Stearns v. Harris, 8 Allen, 597, 598; Barton v. White, 144 Mass. 281, 10 N.E. 840.

In the case at bar the plaintiff has not given a technical release. He has not signed a composition deed or agreement, there has been no accord and satisfaction, and the defendants have not obtained a discharge in insolvency after a full surrender and distribution of all their present possessions. The composition act adds a fifth condition, upon which the defendants may extinguish the debt without a payment of the full face value of the note in suit, namely, if the defendants can procure the assent of a certain majority of their creditors to accept less than the face value of their claims, in composition proceedings. St.1884, c. 236; St.1885 c. 353. In other words, the composition acts provide in effect that if the debtor can procure the assent of a majority in number and value of his creditors, who prove their claims, to accept 50 cents on the dollar of their claims in full satisfaction and discharge, he can force and compel all the other creditors to accept that amount in full satisfaction and discharge of their claims, although the debtor may have sufficient assets to pay 60 or even 100 cents on the dollar of all his debts. In the case at bar, this provision has operated upon a pre-existing contract, and to the substantial prejudice of the creditor's rights as they existed under the law in force when and where his contract was made. See additional cases: Hepburn v. Griswold, 8 Wall. 603; Legal-Tender Cases, 12 Wall. 457, 549; Effinger v. Kenney, 115 U.S. 566, 574, 6 S.Ct. 179; Railroad Co. v. King, 91 U.S. 3-5; Ogden v. Saunders, 12 Wheat. 213, 338; Edwards v. Kearzey, 95 U.S. 595, 600. It was a rule of law in Massachusetts, when the contract in suit was made, (1880,) that a composition deed or agreement was binding only on the creditors who signed it, and that the signing by a majority of creditors did not compel the minority creditors to accept in full satisfaction and discharge of their...