Nelson v. Carland
Opinion of the Court
delivered the opinion of the court.
In the case of William Nelson, petitioner in bankruptcy in the 'Kentucky district, against Daniel Garland, an opposing creditor, several points were adjourned by the District to' the Circuit Court. Upon the hearing in the last-mentioned court, the district judge, as well as the justice of the Supreme Court, sat in the case; and being opposed in opinion upon the questions adjourned, they were certified to this court upon the motion of the counsel, for the petitioner.
The first question that presents itself upon this .certificate, is, whether the Supreme Court have jurisdiction in' the- matter in this form of proceeding.' And after examining-the printed argument filed by the counsel for the petitioner, and carefully, considering the subject, the court are of opinion that the district judge cannot sit as a member of the Circuit Court, upon, questions adjourned to that court, under the “ Act to establish a uniform system of bankruptcy throughout the United States;” and that, consequently, the points adjourned cannot be brought before this court by a "certificate of division. Nor will an appeal or writ of error lie from the decision of the Circuit Court; and it is-conclusive upon the district judge.
In delivering the opinion of the court, it is, however, proper for me'to say, that I dissent from that part of it which excludes
The proceedings must therefore be dismissed for. want óf juris- ■ diction.
Dissenting Opinion
dissented.
On a petition for a discharge, the district judge adjourned into the Circuit Court the question- — Whether the act óf 1841, establishing a itaiform system of bankruptcy, was constitutional, of otherwise. The"judges were divided in opinion on the question, and a certificate, of division was made to the Supreme Court; calling upon this court to decide the' question, and return it so decided, to be entered as-the judgment of the Circuit Court!
The district- judge may adjourn into the Circuit Court any question, whether he has, or has not, doubts regarding its decision. Its importance is a sufficient reason. . That he properly adjourned the question, whether the bankrupt law was or was not constitutional,.is free from doubt.. Of this question, the Circuit Court had full ánd proper jurisdiction; and the decision of it would have been conclusive of the case before us.
Was it a “question” on which-the judges could divide.in opinion ?
The abt of April 29, 1802, provides: That whenever any question shall occur before a. Circuit Court, upon which the opi-' ilion of the judges shall'be opposed, the point upon which, the disagreement shall happen, shall during tlie same term, upon the request of either, party, or their counsel, be stated under the direction of the judges,, and.certified under the seal of the court, tó fhe. Supréme Court, at their next session to .be held thereafter; and shall, by the said court, be finally decided. And the decision of- the Supreme Court, and their order in the premises, shall be remitted to the Circuit Court, and be- there entered of record,' and shall have effect according to the nature of thé said judgment and order: Provided, That nothing herein contained
The act declares, when any “ question shall occur before the Circuit Court,” &c., then, ón a division, a certificate shall be made at the request of either party. No matter in what form of proceeding it occurs, be it at law or in equity; divisions are nearly as frequent in causes in equity as at law. Under the bankrupt law, the proceedings are in the form prescribed to courts of equity.
Now, “did a-question occur,” in the Circuit Court? It must be admitted that one of the gravest occurred that, could be presented to a court of justice: there’ jt was to be decided, and the case, concluded by its decision. The judges were opposed, and it could not be decided: then it was their duty, at the request of either party, to send it to this court, to decide for the Circuit • Court; where the decision of the Supreme Court is to be entered as the judgment of the Circuit Court.
So far the case presented, seems to be sufficiently clear; but it is met by another consideration; and that is, whether the Circuit' Court, in a question adjourned under'the 6th section of the bankrupt law, consists of the two judges, or of the circuit judge only.' In all other cases, in the Circuit Courts of the United States, except in writs of error and appeals from the. District Court to the Circuit Court, (an exception made by positive legislation;) the two judges have equal powers — they constitute the Circuit Court usually; and must do so when a ' division takes place: does.the bankrupt law cut off these powers of the district. judge ?' The law does not so provide; and can it be justly inferred ? If the district judge cannot be a memoer of the court on. the- hearing of the adjourned question, then no division, of course can take place. To come at the inference of his exclusion, the intention of Congress must be ascertained from the whole scope of the act.
Great questions were involved in its construction. It was to be administered by rflore than thirty judges, acting separately; no appeal to the Circuit Court was allowed, save in a single case: that of a refusal to finally discharge the bankrupt from his debts, (sec. 4;) and then the Circuit Court is commanded, if the bankrupt shall be found entitled to the benefits of the act, “ to make a
In the case of William Nelson, the question occurred in the same court, whether the bankrupt law was unconstitutional and oid, or otherwise. It was adjourned, as already stated, .into the
“Is this act of Congress, under which the petitionér claims a discharge from his debts, authorized by the Constitution ?' In order to determine this, it will be necessary to notice several of ■ its provisions.
“ It provides, in substance, that any person, whether a trader or not, who is indebted, except in a few enumerated cases, may . file his petition .in the District Court of the United States, for the benefit of the act, at any time he may please, without the consent or action of any of his creditors, and obtain by a decree of the court, a discharge from all his debts. This decree is to be had without the consent of any of his creditors being required, even if they do not participate in the proceedings or receive a dividend from the property. The decree is to be deemed a full and com-' píete discharge from all his debts, contracts, and engagements, proveable under the act, whether contracted before or after the passage of the act. If he has property, he surrenders it; if he has none, it is the same thing as it .regards his discharge.
“ In examining this question, we should ascertain, if possible, what was the object -the convention had in view by inserting the provision. The phraseology adopted would indicate a part of the object: ‘ To establish uniform laws on the subject of bankruptcies throughout the United- States.’ It was apprehended, at least, that they would not be uniform, unless. Congress had the ■power to make them so. In addition to this,.we are told by Mr. Madison (Fed. No. 42) that‘the power of establishing uniform laws of bankruptcy, is so intimately connected with the regulation ■ of commerce, and will prevent so many frauds where the parties or their.property may lie or be removed into-different states, that the expediency of it seems not likely to be drawn into question.’ To have a system that would be uniform and would prevent frauds, &c., seems to have been the objpet. The proposition was
• “ The laws of the several states could not have been generally known to the members of the conventioafrom the different; states; even the best lawyers could not have been acquainted with the laws of the states in which they did not practise. They are not so, even at this day. If they had been acquainted with the laws of all the states, to which would they have referred in preference to all the rest, for definitions, or the meaning and extent of legal terms ? The convention well knew it was making a Constitution fdr the .whole Union; that the terms they might use should be known and understood, and must be interpreted and explained in every state. They were, therefore, exceedingly exact in the use of words and phrases: every word of legal import, every phrase'was weighed and considered; and a phrase of only a féw words was frequently referred' to a committee, as. was done in this case, and examined and reported on. They were frequently obliged to use legal terms; they were making a law; this was a legal term — bankrupt laws: what was to bé done to prevent confusion and uncertainty ? and, above all, to mark exactly and with legal precision the extent of the powers they were about to-grant, that- neither more nor less power might be granted than was desired ?
“Our ancestors had removed from England; the United States had then7 lately been English colonies and part of the British empire. The English laws, and system of jurisprudence had been substantially adopted in every state in the Union. Every person at all conversant with legal subjects, and every lawyer of course, was acquainted with thé English laws. This know
“The proposition' in. regard to bankruptcies was made by Mr. Charles Pinkney, of South Carolina, in the words - we now find in the Constitution. It was. referred tó the committee- of detail, consisting of Mr. Rutledge of South Carolina, Mr. Randolph of Virginia, Mr. Gorham of Massachusetts, Mr." Ellsworth óf Connecticut, and Mr. Wilson of Pennsylvania; and they reported it in the words in. which- it was referred. Now, several of these states never had any thing like, a bankrupt law. To which then did they refer, or could ■ they refer, to ascertain the meaning and extent of the terms they were employing ? The lawyer, if he is not familiar with the term, will refer to Rlackstqne’s Commentaries, or to an English Law Dictionary, where he will readily find it. If he referred to the statutes of the different states, he might get as many definitions .as there-were states, supposing they had any law off the subject.
“The first Continental Congress, in 1774, declared, among other things, ‘that the respective colonies were entitled to the benefit of such-qf the English statutes as. existed at the time of their colonization, and which they had, by experience, found to be. applicable to their several local ¿nd other circumstances.’ 1 Journal of Congress, 28, Phila. ed. of 1800.
“Many of the. states had adopted, in a body, the English statutes, only excepting such as were local to that kingdom* or not applicable to their situation.
“ The Supreme Court of the United States, in Patterson «. Winn, 5 Peters, 233, say, that ‘the English statutes, passed before the emigration of our ancestors, and applicable to our situation, and in' amendment of the law, constituted a part of the common law of the country.’
. “ We know, as matter of history, that the members of the coa
This, general principle being established, we may go a step further, and show that, in point of fact, the convention had the English statutes in view, in determining the nature and extent of thepower they were granting to Congress, when the bankrupt clause was under consideration.
“Mr. Sherman observed ‘that bankruptcies were, in some cases punishable with death by the laws of England, and he did not choose to grant a power, by which that fnight be done here.’ ’ 3' Mad. Pap. 1481. ■ ■ It thus appears, that ihe law of England were the laws referred to in regard to the definition and na- - ture of the powers they viere conferring.
“ It may also be remarked, that Blackstone’s Commentaries were in the hands of the members, and frequently referred- to. This book contained a definition of a bankrupt, and a summary of the English laws on the subject. What then was the English' law to which the convention referred when they adopted the clause in regard to bankrupts ? The English system, when the convention .sat, had been in operation for several generations; and'provided,'in substance, a proceeding by a creditor against a -debtor, .who was'a trader; distribution of bankrupt’s effects..
“It was a proceeding for the benefit of creditors, as are all laws for the collection of debts, .of which this was one; but with liberality towards the debtor, who, by misfortunes so frequently attending trade, became unable to pay his debts, in allowing him a discharge from those debts, upon obtaining the consent thereto of a given majority of his creditors. Even this provision for a' discharge, we are told by Blackstone, was intended for the benefit of creditors, as it influenced debtors to act with economy, industry, and honesty, and make a full surrender of their property, without which they could not hope to obtain the consent of their creditors.
“The whole system-was founded on the principle, that a trader, who. owed debts in various parts 01 the country, and was fraudulently making way with his property, instead of paying his debts.with it, should have that property taken away and placed in the hands of trustees or other officers, with which his debts should be paid, and each of his creditors, whether absent- or present, have his fair dividend. .
“We are told by Mr. Madison, who has, not inaptly, been called the Father of the Constitution, that a uniform system of bankruptcy ‘would prevent so many frauds, when the parties, or their property, may lie or, be removed into different states, that the expediency of .it seems not likely to. be drawn in question.’ Fed. No. 42. This reason for the adoption of the clause in regard to bankrupts was published by Mr. Madison after the Constitution was proposed by the convention, but before it was adopted by the states;.was intended to explain the grant of power to Congress, and to induce the states to accept the Constitution; and no doubt had its effect. The frauds of. whom-* — the removal of whose property, are here spoken of? Certainly the frauds of the debtor — the property of the debtor.
“ We have another almost contemporaneous exposition of this •grant of power to Congress. It-is the áct of Congress of 1800, ‘To establish a uniform system of bankruptcy throughout the United States.’ It is altogether, in its principle and material features, like the English system; á proceeding by creditors against debtors who are traders; distribution of bankrupt’s effects
“I have now,I think,shown that the bankrupt system intended by the framers of the Constitution, and to establish which, power was given to Congress, was a system for the -benefit of creditors, to enable them to collect their just debts, and to prevent the frauds of debtors who might remove their property and themselves into different states. .
“ I will now show that the act we are considering is solely and entirely for the benefit of debtors, and to enable them- to avoid their debts; and therefore opposed to the whole intent, spirit, and object of a bankrupt law. For this purpose I will here further notice some of its provisions.
“ 1. The debtor selects his own time to commence proceedings— when he may have entirely squandered his property, and when nothing can be found. It is not even necessary that he should have been sued, or threatened with a suit, or ever asked for the debt..
“2. He is allowed to select the state and county where he will commence proceedings. For this purpose he can change his residence or business to any place he may think most favourable. He can thus go where nobody is likely to. detect his frauds.
“3.- He'may have spent all his property in idleness, riotous living, debauchery, or gambling, in stocks, or wild speculations: it w-ili not affect him; and he is entitled to his discharge, equally with the most prudent, industrious, and economical person.
“4. If he does not surrender to his creditors one cent’s, worth of property, he may have property reserved to him, to the amount of $300, for his own use; and also his wearing -apparel, and that of his family, which has been held, by some, to include jewelry.
. “5. If a majority of his creditors should object to his discharge, it will only give him an additional privilege — that of demanding a jury, and taking the cause away from the court. Or he may appeal, even before the' cause is tried, and is allowed ten days to appeal in. No such privileges are given to creditors.
“ 6. After the court disposes of the matter, or"decides the cause against him, and refuses the discharge, he can then have it referred to a.jury, although already tried and decided by the court,
“ 7. -In such cases, nd provision is made by the act to allow the creditors a trial by jury.
“8. An appeal is giveti to the debtor — none is allowed by the act fo a'creditor.
“9. When the cause is removed into the appellate court, the debtor can demand either a trial by jury or a trial by the court. The creditor has no such privilege.
“10. The debtor may take the chance of a decision in his favour by the court; if in his favour, it will be conclusive. If the court decides against him, then he may demand a jury, and have another chance. If the court decides against him, he can have another- chance by appeal. In the' appellate court, if he thinks the court is likely, from previous decision, to be against him, he can take the chance of a jury. If he thinks, the jury is likely to be against him, he can take his chance with the court. If some of these chances do not hit, there is no ‘ uncertainty in the law.’ The creditor has no choice; any decision against him is to be final, and scarcely any in his favour is allowed to be final or conclusive.
“11. The English bankrupt law and the act of 1800 gave the appointment of the assignee to the creditors, because they alone were interested. No-such privilege is given by this act.
“12. The commissioner is to be appointed in the county where the bankrupt lives.
“13. There is no punishrnent for frauds.
“14. To. conclude, the debtor is to get a discharge from all his debts, without- the consent of any creditor. It applies to debts contracted before the passage of the act, and of which creditors could have had no idea at the time they gave the credit.
“ May I not here inquire, whether it is fair to construe thi° grant of power, intended for the benefit of creditors, and to enable them to collect their just debts, so as to authorize the passage of" a .law solely for the benefit of debtors, and to enable them to avoid and discharge their debts ?
“Again: a clause had been introduced into the Constitution, prohibiting the states from passing any law impairing the obligation of contracts, because," as was said by the members of the
Pursuant to the opinión, decrees were entered, dismissing the first cases presented for final discharges in the district of Missouri; and some twelve hundred'more, depending in that court, will be. dismissed, unless the-.decrees are reversed which have, been entered. It was thought, by the circuit judge, due to the county at large, and to the parties ■ concerned, that this important question should meet with the speedy decision of this court; and therefore it was brought here.
No law that Congress ever passed, has in it to a greater degree, the' elements of various construction and confusion, than the bankrupt-law óf 1841, when administered by more than .thirty judges, acting separately; if all are exempt from the revising power of this tribunal, created for the purpose (amongst others) of producing uniformity of decision and construction in all cases over which its jurisdiction extends.
I think Congress intended, by the 6th section of the bankrupt' law, to gii 3 the district judge the power to adjourn questions into the Circuit Court, 1. For the purpose of obtaining the.aid and assistance of the circuit judge; and, 2. To make up a division of opinion on great questions, so that the decision of the Supreme Court might be had. This was contemplated by. Congress ; or it was intended that in no bankrupt case should this court , have a revising power, although in every district in tlie United States the law might .be differently construed: and the. wildest prediction could hardly have exceeded the reality. So far from being “a uniform system of bankruptcy/’ in its- administration, it has become, by the various and conflicting constructions put upon it, little more uniform than the different and conflicting state insolvent laws. This result could not have escaped those who passed the law; it was too prominently manifest to be overlooked; I-cannot, therefore,bring my mind to the belief that the revising power of this court was intended to be cut off. And, as the most expeditions' and convenient mode o. revision was by
order:
This cause came on to be heard on the transcript of the record from; the Circuit Court of the United States for the district of Kentucky, and on the. points and questions on which the judges of the said Circuit Court were opposed in opinion, and which were certified'to this court for its opinion, and was argued by counsel. On consideration whereof, it is now here ordered and adjudged by this court, that this cause be and the same is hereby dismissed, for the want of jurisdiction, and that this cause be and the same is hereby remanded- to the said Circuit Court, for such proceedings to be had therein as to law and justice may appertain.
While this volume was in press, we received the following opinion delivered-by Judge Catron in his judicial district, which we insert as being.of general interest.
In the matter .of Edward Klein.
This is an appeal from the District Court of Missouri, in • a case of bank-, ruptcy, on the voluntary petition of the appellant, to be discharged from his debts, on the stirrender of his property, according to' the act- of Congress of 1841. The proceeding being in all respects regular, the petitioner moved for his discharge: the District Court refused to grant such motibn, “because it considered the act of Congress under which said Klein asked to be discharged from all his debts, as-being against the Constitution of.the United States; and therefore the court had no power to grant such discharge.”
The ground of., this judgment the Circuit Court is called upon to revise. I am relieved -from setting forth at any length the opinion o'f the district judge, because this has been already done, in an opinion delivered by me in the Supreme Court of the United States at its last term, when an attempt was made to bring the present question before that court to-haye it decided-for the purl poses of this case.
By the Constitution, Congress is vested .with power “to. establish uniform laws. on the • subject of bankruptcies throughout the United States.” The district judge was of opinion, that the extent of the power is limited to the principle on which the. English'bankrupt system was founded; and-to that system
Briefly: That a bankrupt law, was one, by which honest creditors could force fraudulent debtors, who were traders, to surrender all their property,- to pay rateably all their just debts : but that a law made solely and-entirely for the benefit of debtors, and which enabled them at their own election, to avoid their debts,- was opposed to the whole intent, spirit, and object of a bankrupt law.
I' state thus much of the grounds on which my brother judge’s decree was founded from his printed opinion, because this case has not been argued on part of the creditors; for whom no counsel appeared in this court, nor did there in the court below, as I am informed. . The accuracy, industry, and unquestioned ability of the district judge, have, I do not doubt, brought forward the best reasons that exist, in support of the judgment he gave. The tenor, and true spirit, of the English bankrupt laws, such as they were when our Federal Constitution was adopted, he has given; and I agree with him, that the act of 1841, in so far as it permitted the debtor at his own sole election, to come into-court and coerce an extinction of his debts, and abrogation of his contracts, ' contrary to the wili of his creditors, was in violation of the leading principles on which the English laws were founded. Our law contemplated a‘ proceeding by a debtor against-his creditors; provided the debtor was insolvent: by the English law, the creditor qlone could originate the proceeding; and it mattered not, whether the defendant was insolvent or otherwise; if he did the fraudulent act, it made him a bankrupt — a fraudulent trader. Then by the English laws, “ a fraudulent trader” could only be a bankrupt; with him as debtor; and With his creditors, could courts deal; and this at the election of the creditors — the debtor, having no election to .ask for distribution or for a discharge iron) his debts. If the power conferred on Congress, carries with it these restrictions, then the District Court properly refused to discharge the applicant Klein, because the act of-Congress was unconstitutional in his case. But other and controlling considerations enter into the .construction of the power: it is general and unlimited, it gives the unrestricted authority to Congress over-tjie entire subject, as.the Parliament of Great Britain had-it; and as the sovereign states of this Union had it before the time when the Constitution was adopted.. To go no further: what was the power of the states on thg subject of-bankruptcies! They could, and constantly did, permit the debtor to come involuntarily and surrender his property, and ask a discharge from his debts; the property was distributed generally among the creditors, and the debts of the petitioner an
The District Court relied confidently on the ground, that Congress can pass no law violating contracts; and that the clause of the Constitution conferred no such authority, because-the English bankrupt laws, by Which the power is supposed to be restricted, only permitted the contract to be annulled at the election of four parts in five of the creditors in number and value; and therefore they annulled it by a new contract. This argument proceeds on the assumption, that a proceeding in bankruptcy can only be had, at the election of, and for the benefit of creditors; and that every material step, is Iheir joint act; to tyhich the debtor is compelled to submit. For the present it will only be necessary to say, that one prominent reason, why the power is given ,to Congress, was to secure to the people of the United States, as one people, a uniform law, by which a debtor might be discharged from the obligation of his contracts; and his future acquisitions exempted from his previous engagements: that the rights of debtor and creditor, equally entered into the mind of the frámers of the
The inhabitants of-states producing largely, must be creditors ; the inhabitants of those that are consumers, will be debtors; bankrupt laws of the latter states,might ruin the producers and creditors ; -they having no interest or power in the government of the consuming states, and it being the interest of the latter to annul the, debts of non-residents, .no remedy'would exist for the grossest op pression. No laws of relief would be more effectual in times of pressure by' foreign creditors; nor more likely to be adopted. If one state adopted such "a measure, it would furnish a fair occasion for others to do the same, on the plau sible pretext of self-defence; others would be forced.into a similar bad policy, until discredit and ruin would overspread the entire land, by an 'extinction of all debts; and a consequent prostration of morals, public and private, on the subject of contracts.' This evil had to a certain extent occurred, and was fresh in the minds of the framers of the-Constitution; and no doubt it would again occur in some of the' states, but for the provisions under consideration standing in the way, of abrogating the private contracts of non-residents.
But if Congress passed. the law, it must be uniform- throughout the United. States; then the entire people are equally represented, and have the power .to - protect themselves against hasty and mistaken legislation, by it's repeal, if found oppressive in practice.
- Legislation by Congress on thesubjectof bankruptcies, is of much less consequence,' than its prohibition on part of the-states. They can pass no -law-affecting a non-resident, because no jurisdiction exists of his person; they can inipair no contract made out'of the state, because it was not made subject to the state insolvent law. The power, as it stands' restricted by the decision in Ogden v. Saunders, is almost harmless;' those whom the state bankrupt law can ■most affect,-have the popular vote in the state legislature, dnd may repeal the law; the foreigner has-little* interest in its existence, as he cannot be affected ' by it, furth'er'than that the debtor may be .deprived of his property.- Another reason why Congress was vested with the power,-was to prevent dangerous conflicts of jurisdiction among the states. . A discharge in one sovereignty from contracts,-is by the laws of nations not recognised as a discharge in-another sovereignty,- save on the grounds of comity; an assignee under the British .bankrupt laws, is not recognised in this country.as owner of the debts of the bankrupt;-and an attaching creditor, or the government may disregard.ii title set tip by .-the'foreign assignee. Harrison v. Sterry, 5. Cranch, 298. The státes in' this respect are foreign to each other, and w;ould be little likely to extend comity to. .the discharge 'of each others;. from. which, great confusion might follow, and much ill will.
. In considering the question before me, I have not pretended to give a definition ; (but purposely avoided any attempt to' define) the mere word, •-bas-káupTCY, It is employed in the .Constitution in the plural, -and as part of an expression';“ the subject of-bankruptcies.”- The ideas attached to the word in this connection, are numerous and complicated ; they form a subject, of exten
Í hold, it extends to all cases where the law causes to be distributed, the property of the debtor among his creditorsthis is its least limit. Its.greatest, is a discharge of the debtor from his contracts. And all intermediate legislation, affecting substance and form, but tending to further the,great end of the subject - — distribution and discharge — are in the competency and discretion of Congress.
With the policy of a law,"letting in all classes, others-as-well as traders; and permitting the bankrupt to come in voluntarily, arid be discharged without the consent of his creditors, the courts have no concern; it belongs to the lawmakers.
I have spoken of átate bankrupt laws. I deem every state law, a bankrupt law, in substance and fact, that causes to be distributed by a tribunal, the property of a debtor among his creditors; and'it is especially such,'if it causes the'debtor to.be discharged from his contracts, within the limits prescribed by thc.case of Ogden v. Saunders. Such a law may be denominated an insolvent law; still it deals directly with the subject of bankruptcies, and is .a bankrupt law, in the sense of the Constitution; and if Congress should pass a similar law, it would suspend the state law, while the-act of Congress continued in force.
This court deeming the act of.1841; constitutional, it is ordered, that the decree of the District Court dismissing the proceeding be reversed, and the petitioner, Klein, be discharged from, his debts, and receive his-certificate. The same order is directed in the case of Christopher Rhodes; dismissed also on constitutional grounds by the District Court.
Reference
- Full Case Name
- William Nelson, a Petitioner in Bankruptcy, v. Daniel Carland, an Opposing Creditor
- Cited By
- 36 cases
- Status
- Published