M'Carty v. Gibson
M'Carty v. Gibson
Opinion of the Court
it is a well established doctrine of the ]aw 0f nations, that the entire discharge of a contract by the laws of a country in which the contract was not made or to be performed, will not be a discharge in any other country. Story’s Conflict of Laws 283.
How far this doctrine is to be recognized by the Courts of any State of this Union, or by the Courts of the United States, in passing upon the legal effect of such a discharge, obtained in any State other than that in which the contract was made or to be performed, whether it is competent for the several States to pass bankrupt or insolvent laws, by which to discharge debtors from the obligation of their contracts ; and if so, upon what contracts and persons such laws are to operate, are questions which have given rise to much discussion, and led to many decisions in the Supreme Court of the United States, and also in the State Courts of several of our sister States. The case of Ogden v. Saunders, 12 Wheat. R. 213, though preceded by some cases in which a contrary doctrine was maintained, is now, I believe, generally relied on, as having settled in the affirmative, the question as to the constitutionality of such laws, so far as they may provide for a discharge of the obligation of debts and contracts made and entered into subsequent to their enactment. As to the extent to which discharges obtained in pursuance of such laws, are to be allowed to operate — Judge Story in his work on the Constitution, 3d vol. 256, briefly sets forth the result of the decision in Ogden v. Saunders, and other decisions of the Supreme Court not in conflict with it, as being; (1.) That they apply to all contracts made within the State, between citizens of the State. (2.) That they do not apply to contracts made within the State, between a citizen of the State
It is admitted by the appellant that the debt forming the origin of this suit was contracted, and the bond by which it is evidenced, was executed in Virginia, at a time when all of the contracting parties were residents of the State ; and it is no where alleged that the parties had any other State in contemplation as the place for the performance of the contract, the payment of the debt. The surviving obligor in the bond having moved out of the State of Virginia into the State of Maryland, leaving the debt wholly unpaid, his creditor brought suit against him in a County Court of the last mentioned State, and obtained judgment. The debtor is still a resident of Mamyland; and the present suit is an attachment in chancery — seeking to subject to the payment of the debt certain debts alleged to be due by the home defendants to the absent debtor.
It is admitted that the debt is still unpaid; and the only defence relied on by the absent debtor, is an order of the County Court of Alleghany in Maryland, for his discharge as an insolvent debtor. The order seems to have been regularly obtained upon proceedings had in pursuance of certain acts of Assembly of that State for the relief of insolvent debtors. The fifth section of the act of 1805 authorizes the Court to order an insolvent debtor, who has taken certain steps prescribed in the preceding sections of the act, to be discharged from all debts, covenants, contracts, promises and agreements due from, or owing, or contracted by him before the passage of the act, or at the time of his application, “ provided that any property which he shall hereafter acquire by gift, descent, or in his own right by bequest, devise, or in any course of distribution, shall be liable to the payment of said debts.” The funds in the hands of the garnishees were not acquired in any of the modes mentioned in the proviso : whether they are liable, there
In the case of Boyle v. Zacharie and Turner, 6 Peters’ R. 635, the legal effect of a discharge under the same laws of Maryland, by virtue of which the appellant procured the order for his discharge, was the subject of decision.
In that case the debt was contracted in Louisiana, with a citizen of that State, by a citizen of Maryland. Upon a suit brought in the Circuit Court of the United States for the State of Maryland, judgment was confessed by the debtor, “ subject to the legal operation of the defendant’s discharge under the insolvent laws of Maryland.” An execution having been sued out and levied on property of the debtor which had not been acquired in any of the modes that would, under the proviso in the insolvent laws relating to future acquisitions of property, make it liable to the execution, an injunction was obtained to stay proceedings on the execution. On an appeal from an order of the Circuit Court dissolving the injunction, the Supreme Court decided that the discharge was inoperative; and Judge Story, in delivering the opinion of the Court, stated that “ the ultimate opinion delivered by Mr. Justice Johnson, in the case of Ogden v. Saunders, was concurred in and adopted by the three Judges who were in the minority upon the general question of the constitutionality of State insolvent laws, so largely discussed in that case;” “that so far as decisions upon the subject of State insolvent laws had been made by the Court, they were to be deemed final and conclusive ;” and that the memo-
In the case of Cook v. Moffat & als., 5 How. R. 295, decided by the Supreme Court at its January term 1847, the decision turned upon the validity of a discharge obtained under the same laws of Maryland. In that case the creditor was a citizen of New York, where the debt was contracted, and the debtor a resident of Maryland. Whilst there was much conflict of opinion among the Judges as to the reasoning upon which the decision ought to rest, there was no difference of opinion as to the result. They were unanimous in deciding that the discharge was of no avail as a defence to the suit brought in the Circuit Court for the district of Maryland. The decision in Boyle v. Zacharie and Turner was approved; and by a majority of the Court the further doctrine was maintained that such a discharge could not be pleaded even in the forums of the State which enacted the law under which it was obtained.
Unless then there be peculiar circumstances attending the case of the appellant, imparting to his discharge special efficacy, and taking it from without the influence of these authorities, his appeal here must fail. Indeed, I understand it to be conceded by the counsel for the appellant, that such must be the result, unless the part taken by the appellee in the proceedings in Maryland, is to make this case an exception to the general rule. It is argued that Gibson, by instituting suit upon his bond, and obtaining judgment thereon, by praying his debtor in custody on the surrender by his bail, by filing, under the statute, allegations impeaching
Thus regarding the decision in Clay v. Smith, I do not think it can be relied on as authority to sustain the validity of the discharge in this case, when pleaded in a Virginia forum, as a bar to a suit founded upon a contract originating in this State, between parties, who at the date of the contract, were citizens. Gibson has done nothing from which it can be inferred that he assented to the discharge of his debtor under the laws of Maryland. So far as by his own acts he became a party to the proceedings, he took part in opposition to, and not as assenting to or ratifying the discharge.
The same principle was recognized in the case of Striker v. Mott, 6 Wend. R. 465. And in this Court, in the cases of M'Call v. Peachy, 1 Call 55, and Clarke v. Conn, 1 Munf. 160, the general principle was asserted, that when the Court had not jurisdiction of the subject matter, the consent of parties cannot give it.
In this aspect of the case, it does not seem to. be material whether the want of jurisdiction in the County Court of Maryland to make an order for the discharge of a debtor, reaching to contracts made in other States, and between citizens of such other States, be placed on the ground assumed in the third resolution of the Supreme Court, in the case of Ogden v. Saunders, to wit, that “ the exercise of such a power is incompatible with the rights of other States, and with the constitution of the United Statesor on the general doctrine of international law, that the discharge of a contract by the laws of a country in which the contract was not made or to be performed, will not be a discharge in any other country. Upon the first hypothesis there would be an inhibition to the jurisdiction of the Court, which the mere appearance of the party to oppose the discharge could not remove ; and upon the second, a mere want of
I do not deem it necessary to express any opinion as to the propriety of the decision, in the foregoing case, upon the first question therein presented, but I rely upon the reasoning of the Court upon the second branch of the case, as strong in support of the view I have taken of the effect that Gibson’s appearance to contest his debtor’s discharge, ought to have upon his rights.
I have not seen any decision of the Supreme Court of the United States, or of any of the State Courts, maintaining the proposition that a discharge of an insolvent debtor, under the laws of one State would, of itself, be valid as a discharge of a contract made in another State between citizens of such other State; and there has not, in my opinion, been any thing in the conduct of the creditor to bring him within the influence of the case of Clay v. Smith, or to debar him of the privilege of insisting upon the invalidity of the discharge before a Virginia forum. I am of opinion therefore to affirm the decree.
The other Judges concurred in the opinion of Judge Daniel.
Decree affirmed.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.