Hanover National Bank of the City of New York v. Max Moyses

• Decision Date: 02 June 1902
• Docket Number: No. 203,203
• Citation: 22 S.Ct. 857,186 U.S. 181,46 L.Ed. 1113
• Parties: HANOVER NATIONAL BANK OF THE CITY OF NEW YORK, Plff. in Err. , v. MAX MOYSES
• Court: U.S. Supreme Court

186 U.S. 181

22 S.Ct. 857

46 L.Ed. 1113

HANOVER NATIONAL BANK OF THE CITY OF NEW YORK, Plff. in Err.,

v MAX MOYSES.

No. 203.

Argued April 7, 1902.

Decided June 2, 1902.

This was an action brought by the Hanover National Bank of New York against Max Moyses in the circuit court of the United1t18 States for the eastern district of Tennessee, November 20, 1899, on a judgment recovered against him in the circuit court of Washington county, Mississippi, December 12, 1892.

The amended declaration averred the execution of a certain promissory note by defendant payable to the bank of Greenville, Mississippi; the indorsement thereof to plaintiff in New York; default in payment, suit in the Statecourt of Mississippi having jurisdiction In personam against defendant, who was then a citizen and resident thereof; recovery of judgment; and that the judgment 'still remains in full force and effect, unappealed from, unreversed, or otherwise vacated, and the plaintiff hath not obtained any execution or satisfaction thereof.'It was also averred that after the rendition of the judgment in Mississippi, defendant changed his domicil and residence to the state of Tennessee, and thereafter, ' not being a merchant or a trader, nor engaged in business or in any commercial pursuits, nor using the trade of merchandise, and being without mercantile business of any kind, filed his voluntary petition in bankruptcy in the district court of the United States for the southern division of said eastern district of Tennessee, under the act of Congress of the United States of America, approved July 1st, 1898, entitled 'An Act to Establish a Uniform System of Bankruptcy Throughout the United States," and was adjudged bankrupt, and 'since August 1st, 1898,''granted an adjudication of his discharge in bankruptcy from all his debts, including that herein sued for.'

It was admitted that the discharge was 'good and effectual if said act of Congress and the proceedings thereunder are valid,' but charged that the act was void because in violation of the Federal Constitution in many particulars set forth.

Plaintiff also stated that it was and had continued to be domiciled in and resident in New York; that it was not a party to siad proceedings in bankruptcy, nor did it enter its appearance therein for any purpose, nor did it prove its claim, nor did it in any way subject itself to the jurisdiction of the district court in said proceedings; that plaintiff was not served with process of any kind on said petition for adjudication, and had no notice, personal or otherwise, of the said proceedings by voluntary petition for adjudication; nor was any notice of the proceeding to adjudicate defendant a bankrupt given plaintiff, or anyone else, 'nor is any notice of any kind of such proceeding to adjudicate a person a bankrupt upon his voluntary petition required by said act of Congress, and in this said act of Congress violates the Fifth Amendment,' as does the 'adjudication of defendant as a bankrupt;' that the situs of the promissory note, on which the judgment was rendered, was never within the jurisdiction of the district court; and that the court never acquired jurisdiction of plaintiff, nor of the debt sued on.

Demurrer was filed to the amended declaration, the demurrer sustained, and final judgment entered dismissing the suit.The circuit court stated that it took this action on the authority of Leidigh Carriage Co. v. Stengel, 37 C. C. A. 210, 95 Fed. 637.Thereupon the bank brought this writ of error.

Errors were specified as follows: That the discharge under the act of Congress of July 1, 1898, was a nullity, because:

'1.Said act violates the 5th Amendment to the Constitution of the United States in this:

'(a) It does not provide for notice as required by due process of law to the creditor in voluntary proceedings for adjudication of bankruptcy and for the discharge of the debt of the creditor.

'(b) Ten days' notice by mail to creditors to oppose discharge is so unreasonably short as to be a denial of notice.

'(c) The grounds of opposition to a discharge are so unreasonaby limited as, substantially, to deny the right of opposition to a discharge.Thereby the act is also practically a legislative promulgation of a discharge contrary to art. 3, § 1, of the Federal Constitution.

'2.Said act violates art. 1, § 8, ¶4, of the Constitution in this:

'(a) It does not establish uniform laws on the subject of bankruptcies throughout the United States.

'(b) It delegates certain legislative powers to the several states in respect to bankruptcy proceedings.

'(c) It provides that others than traders may be adjudged bankrupts, and that this may be done on voluntary petitions.'

Messrs. Marcellus Green and Garner Wynn Green for plaintiff in error.

Messrs. George T. White and Francis Martin for defendant in error.

Mr. Chief Justice Fullerdelivered the opinion of the court:

By the 4th clause of § 8 of art. 1 of the Constitution the power is vested in Congress'to establish . . . uniform laws on the subject of bankruptcies throughout the United States.'This power was first exercised in 1800. 2 Stat. at L. 19, chap. 19.In 1803 that law was repealed.2 Stat. at L. 248, chap. 6.In 1841 it was again exercised by an act which was repealed in 1843. 5 Stat. at L. 440, chap. 9;5 Stat. at L. 614, chap. 82.It was again exercised in 1867 by an act which, after being several times amended, was finally repealed in 1878. 14 Stat. at L. 517, chap. 176;20 Stat. at L. 99, chap. 160.And on July 1, 1898, the present act was approved.

The act of 1800 applied to 'any merchant, or other person, residing within the United States, actually using the trade of merchandise, by buying or selling in gross, or by retail, or dealing in exchange, or as a banker, broker, factor, underwriter, or marine insurer,' and to involuntary bankruptcy.

In Adams v. Storey, 1 Paine, 79, Fed. Cas. No. 66, Mr. Justice Livingston said on circuit: 'So exclusively have bankrupt laws operated on traders, that it may well be doubted whether an act of Congress subjecting to such a law every description of persons within the United States would comport with the spirit of the powers vested in them in relation to this subject.'But this doubt was resolved otherwise, and the acts of 1841 and 1867 extended to persons other than merchants or traders, and provided for voluntary proceedings on the part of the debtor, as does the act of 1898.

It is true that from the first bankrupt act passed in England, 34 & 35 Hen. VIII. chap. 4, to the days of Queen Victoria, the English bankrupt acts applied only to traders, but, as Mr. Justice Story, in his Commentaries on the Constitution, pointed out, 'this is a mere matter of policy, and by no means enters into the nature of such laws.There is nothing in the nature or reason of such laws to prevent their being applied to any other class of unfortunate and meritorious debtors.'§ 1113.

The whole subject is reviewed by that learned commentator in chapter XVI.§§ 1102 to 1115 of his work and he says (§ 1111) in respect of 'what laws are to be deemed bankrupt laws within the meaning of the Constitution:' 'Attempts have been made to distinguish between bankrupt laws and insolvent laws.For example, it has been said that laws which merely liberate the person of the debtor are insolvent laws, and those which discharge the contract are bankrupt laws.But it would be very difficult to sustain this distinction by any uniformity of laws at home or abroad. . . .Again, it has been said that insolvent laws act on imprisoned debtors only at their own instance, and bankrupt laws only at the instance of creditors.But, however true this may have been in past times, as the actual course of English legislation, it is not true, and never was true, as a distinction in colonial legislation.In England it was an accident in the system, and not a material ground to discriminate, who were to be deemed in a legal sense insolvents, or bankrupts.And if an act of Congress should be passed, which should authorize a commission of bankruptcy to issue at the instance of the debtor, no court would on this account be warranted in saying that the act was unconstitutional, and the commission a nullity.It is believed that no laws ever were passed in America by the colonies or states, which had the technical denomination of 'bankrupt laws.'But insolvent laws, quite coextensive with the English bankrupt system in their operations and objects, have not been unfrequent in colonial and state legislation.No distinction was ever practically, or even theoretically, attempted to be made between bankruptcies and insolvencies.And a historical review of the colonial and state legislation will abundantly show that a bankrupt law may contain those regulations which are generally found in insolvent laws, and that an insolvent law may contain those which are common to bankrupt laws.'[186]

Sturges v. Crowninshield, 4 Wheat. 122, 195, 4 L. ed. 529, 548, was cited, where Chief Justice Marshall said: 'The bankrupt law is said to grow out of the exigencies of commerce, and to be applicable solely to traders; but it is not easy to say who must be excluded from, or may be included within, this description.It is, like every other part of the subject, one on which the legislature may exercise an extensive discretion.This difficulty of discriminating with any accuracy between insolvent and bankrupt laws would lead to the opinion that a bankrupt law may contain those regulations which are generally found in insolvent laws; and that an insolvent law may contain those which are common to a bankrupt law.'

In the case, Re Klein, Fed. Cas. No. 7,865, decided in the circuit court for the district of Missouri, and reported in a note to Nelson v. Carland, 1 How. 265, 277, 11 L. ed. 126, 130, Mr. Justice Catron held the bankrupt act of 1841 to be constitutional, although it was not restricted to traders, and...