Owens v. Bowie

Eccleston, J..,. delivered the opinion of the court. The appellants- and Evan Evans, who has since died, sold ⁴⁶⁵ and delivered goods to Osborn Sprigg, in the city of Washington, in the District of Columbia, for which a promissory note was executed in Maryland. In 1843 a judgment was obtained upon this note in Prince Georges county court, by the appellants and Evan Evans against Osborn Sprigg, on which judgment an attachment was issued the 1st of December 1846, and sometime after the 2nd day of that month, and prior to the' first Monday of April 1847, was laid in the hands of R. Bowie and R. W. Bowie, who wére summoned and appeared as garnishees.- Osborn Sprigg applied for the benefit of the insolvent laws on the 2nd of December 1846, on which day he conveyed all his property to C. C.- Magruder, his trustee, and was finally discharged on the first Monday of April .1847. When the attachment issued the garnishee, R. Bowie, owed to Sprigg more money than was sufficient to pay the claim of the plaintiffs.

After the first Monday of April 1847, a large' portion of the debt due from R. Bowie was- paid to the trustee of the insolvent.- This debt was a judgment transferred by Robert W. Bowie to 0. Sprigg, which transfer was placed in the hands of his trustee on the 2nd of December 1846. The plaintiffs, Edward and John Owens, were citizens of the District of Columbia at the time of selling the goods, and so continued to be up to the issuing of this attachment. Evan Evans was likewise a citizen of said district when the sale was made, and resided there until his death.

In' argument two questions were presented:—1st. Allowing the original contract to have been made in the District of Columbia, and there to be fulfilled, notwithstanding the promissory note was executed in this State, and a judgment obtained upon that note in a Maryland court, the' plaintiffs being citizens of the District of Columbia and the defendant a citizen of this State, whether, by an attachment on that judgment levied upon the assets of Sprigg, after his petition for the benefit of the insolvent laws, the plaintiffs acquired any preference over domestic judgment creditors? 2nd. Conceding that the discharge of the insolvent did not ⁴⁶⁶ impair the right of the non-resident creditors upon judgment in the State court, to obtain, by attachment or execution, a preference over domestic judgment creditors, did the appellants, under the circumstances of this case, acquire such a right to the funds attached by them, in consequence of the priority of their attachment, as gave them a preference over the attachments of the other non-resident creditors named in the agreement or statement of facts set out in the record? In discussing the first question, we understood the argument on behalf of the appellee as conceding, that the contract on which the original judgment was founded, was to be considered as a District of Columbia contract.

Any other view of the subject would be in conflict with the decisions in Frey vs. Kirk, 4 G. & J., 509 ; Boyle vs. Zacharie and Turner, 6 Pet. R., 643; Cook vs. Moffatt and Curtis, 5 How. R., 307; and Larrabee vs. Talbott, 5 Gill, 435 . It was contended, however, that although in a suit upon such a contract, a discharge under our insolvent laws could not prevent the recovery of an absolute and unqualified judgment, yet when that is rendered in a court of this State, the original contract is thereby extinguished for all purposes, and the judgment is then a Maryland contract, and as such, subject to our insolvent laws.

Not only is the right to obtain an absolute judgment on a contract of this sort, in opposition to an insolvent discharge, fully and distinctly announced by the learned judge, in Larrabee vs. Talbott, at page 437; but the authority to placean execution under .such judgment upon any property of the insolvent debtor, to be found undistributed in the hands of his trustee, is also clearly stated. These principles, if admitted to be correct, sustain the claim of the present appellants. But it has been said by the appellee’s counsel, that there was no judgment in that case-, and the facts did not call for such a decision. Admitting this to be so, still if the doctrine advanced be correct, we should feel ourselves as much bound to yield' our assent as if the- decision had been made upon matters directly in issue.

The principles alluded to are introduced by the judge, as having been- “settled by the adjudica ⁴⁶⁷ tions of the Supreme Court,” and we can have no better authority, especially on questions arising under the constitution of the United States. In Boyle vs. Zacharie and Turner, it was insisted on the part of the defence, that the contract on which the judgment was rendered, was a Maryland and not a Louisiana contract: it was held, however, to be the latter. In that case a judgment was obtained in this State in the circuit court of the United States, the plaintiffs being citizens of Louisiana. On the 23rd of December 1819, the suit was instituted.

On the 31st of the same month, Boyle, the defendant, applied for the benefit of the insolvent laws of Maryland, and was eventually discharged. On the 1st of May 1821, judgment was confessed, and, by consent of parties, the following memorandum was entered of record: “The judgment subject to the legal operation of the defendant’s discharge under the insolvent laws of Maryland.” The judgment was once renewed by scire facias, and eventually a fi. fa. was issued and levied upon a ship belonging to Boyle. He then filed a bill for an injunction to prevent the sale of the ship. The principal ground relied upon was, that this property was exempted from the levy, by his discharge as an insolvent.

The injunction was granted, but when the answer came in, it was dissolved and the bill dismissed, which decision the Supreme Court affirmed. Here we have a judgment obtained in Maryland, by non-residents, upon a Louisiana contract, enforced against a citizen of this State discharged by our insolvent laws. In Woodhull and Davis, vs. Wagner, 1 Baldwin’s Rep., 296, a judgment was obtained in Pennsylvania, in the circuit court of the United States, upon a New York contract. The defendant was arrested under a ca. sa., and applied for his release, in consequence of having been discharged under the insolvent laws of Pennsylvania.

The application was resisted, upon the ground that the debt was contracted in New York, upon which the discharge had no effect. This view being sustained by the court, the defendant was remanded to custody. This question came before the present distinguished chief ⁴⁶⁸ justice of the Supreme Court, in the case of White, Warner & Co., vs. Winn and Ross. The material facts may be found stated in Kettlewell vs. Stewart, 8 Gill, at page 499; then follows the opinion.

For the present purpose it is sufficient to say, that the plaintiffs, who y?eje citizens of Pennsylvania, obtained a judgment in the eir.cuit .court of the United States in Maryland, against Jones, on the 1,5th of January 1847, who had applied for the benefit .of the insolvent laws. Upon this judgment an attachment was issued, and laid in the hands of Winn and Ross, who were the permanent trustees of Jones, the insolvent. The question being whether the plaintiffs were entitled to condemnation of the property under their attachment, the chief justice says, on page 501: “They may assert their remedy against property in the hands .of the permanent trustees, over which th,e insolvent had a control at the time of his application, and which, but for his application, might have been subjected to their execution.” B.ut th.e property attached did not belong to Jones at the time of his application. On the 26th of October 1846, Jpn.es had .conveyed all his property to Winn and Ross in trust, to pay his .creditors, giving preference to such as should release him.

This deed, the plaintiffs insisted, was void under the statute of 13 JEliz. The court, however, thought otherwise, but was of opinion, that under the facts admitted, the conveyance .created undue and improper preferences within the meaning of the act of 1834, ch. 203, and that the property thereby conveyed had vested in Winn and Ross, as permanent trustees of J.ones. It thus appears, that independently of our insolvent system the deed of October was valid. If then the plaintiffs thought proper to call to their aid the insolvent laws, for the purpose of invalidating the deed, they could only do so upon the terms of submitting to the distribution of the insolvent’s assets, according to the provisions of those laws.

In speaking of the dilemma in which the plaintiffs were placed, the court say: “If they deny the validity of the proceedings on Jones’ application for the benefit of the insolvent laws, the deed will afford a sufficient protection against them. If they insist that ⁴⁶⁹ the deed is avoided by the provisions of the insolvent laws, they must claim under the permanent trustees such interest only as by that law is awarded to them.” The result was that they were required to “elect to be non-suited, or to take a dividend of the funds in the hands of the trustees.” The language first quoted, from page 501 of 8th Gill, fully sustains the position stated in Larrabee vs. Talbott, as likewise do the cases of Boyle vs. Zacharie and Turner, and Woodhull and Davis, vs. Wagner. But it has been most earnestly insisted, that these cases can have no influence on the question, because the judgments in them were obtained in the United States .courts, contending that there is a most important difference between those judgments and such as are rendered in the courts of the State. Admitting to the fullest extent that where the contracts were to have been paid or executed beyond the limits of this State, the judgments rendered thereon in the United States courts might be enforced against the property of insolvent defendants, regardless of our act of insolvency, but insisting that judgments under like circumstances in the State courts mnsi be subject to the insolvent laws of the State.

An examination of the authorities will show clearly, that no such distinction is recognized. How can it be otherwise? Whilst the courts of the general government will follow the decisions of the State tribunals in regard to State laws not unconstitutional, the State courts are bound by the adjudications of the Supreme Court, upon all questions arising under the constitution of the United States. The subject before us is of this latter description.

After commenting upon many decisions in regard to State insolvent laws, in summing up what may be considered the result of them, among other principles stated by Judge Baldwin in the 1st vol. of his reports, at page 301, is the following : “ That it makes no difference whether the suit is brought in a State court or the court of the United States; the rule is the same as to rendering judgment or issuing process.” Again, on page 302, the judge says, “the discharge of the ⁴⁷⁰ defendant by the insolvent laws of Pennsylvania can have no operation on the contract or the remedies to enforce performance.” In Cook vs. Moffatt et al., at page 308, the court say, “The constitution of the United States is the supreme law of the land, and binds every forum, -whether it derives its authority from a 'State or from the United States. When this court has declared State legislation to be in conflict with the constitution of the United States, and therefore void, the State tribunals are bound to conform to such decision. A bankrupt law which comes within this category cannot be pleaded as a discharge even in the forums of the State which enacted it.” A decision of'our own court in Frey vs. Kirk, 4 G. & J., 520 , is to the same effect. The contract in that case was to have -been performed in Pennsylvania, and the defendant’s discharge, under the insolvent laws of Maryland, was relied upon in defence, but to no effect.

The opinion of the court shows, that in the argument it had been supposed a different constitutional rule operated in the United States courts from that which prevailed in the courts of the State where the debt- or is sued, and by whose laws he is discharged. Ogden and Saunders is considered as not sustaining such a position, and the court then say, “If it were otherwise we should feel some difficulty in sanctioning the doctrine, that a creditor, by pursuing his debtor by suit in the courts of the State granting the discharge, thereby stripped himself of any rights secured to him by the constitution of the United States, or in any manner waived them.” These authorities we deem quite sufficient to show, that in regard to the right to levy upon property of an insolvent defendant by way of execution, there is no difference whether the judgment, on which the process is issued, be rendered in a State court or in a circuit court of the United States, where the plaintiff is a non-resident, and whose original claim was to have been executed beyond the limits of the State in which the judgment-was rendered and the defendant obtained his ⁴⁷¹ discharge as an insolvent. If this be true, then, to establish the right of the present plaintiffs to a judgment in their favor upon this attachment, it is only necessary to refer again to the cases of Woodhull and Davis vs. Wagner; White, Warner and Co., vs. Winn and Ross, and Boyle vs. Zacharie and Turner, in each of which a judgment was obtained in the circuit court of the United States, in the State where the defendant was discharged as an insolvent. In the first and third of these cases executions were issued and sustained, expressly upon the ground that the contracts were to have been performed out of the States where the defendants were discharged.

The second case recognized the principle, that the plaintiffs might have attached property in the hands of the insolvent’s trustees, over which he had a control at the time of his application, and which would have been subject to their execution but for his application. In opposition to these views, and in support of the doctrine contended for on behalf of the defendants, that the original contract is entirely extinguished by the judgment, and that the judgment is a Maryland contract, subject to our insolvent laws, reference has been made to the case of Green vs. Sarmiento, 3 Wash. C. C. Rep., 17 . That was an action of debt, brought in Pennsylvania upon a judgment rendered in New York in 1797.

The original contract was made at Teneriffe. In 1801 the defendant was discharged at Teneriffe as a bankrupt, which discharge he pleaded in defence. It was contended on the part of the plaintiff, that the original contract was completely extinguished by the judgment, and could not be noticed in reference to any question to which it might previously have given rise, and therefore the debt must be considered as having accrued under the judgment in New York. The court say, “This is certainly true, where the judgment is conclusive and unexaminable in a court of coordinate jurisdiction; nor do the court mean to intimate, that the rule would not be the same in a case where the judgment is only prima facie evidence of a debt.

But since this latter point has. not been- considered, and' the court are1 prepared to ⁴⁷² give an opinion upon the great question which has been discussed, of the conclusiveness of a judgment of a State court in every other State of the Unipn, it is thought best to decide it now.” “The' great question,” whether the New York judgment was conclusive in Pennsylvania or not, being established in the affirmative, the' principle then adopted by the court seems to be, that whatever effect a bankrupt discharge at Teneriffe could have on the original contract if obtained prior to the judgment and pleaded in bar to an original suit upon the contract, yet, after the New York judgment, in the suit upon that in Pennsylvania, the discharge at Teneriffe could not avail the defendant. As a foreign discharge it could have no influence' upon the judgment, which was prior to it, and based upon a contract, which, at the time of its rendition^ was unaffected by bankruptcy. To allow the discharge to affect the contract, so as to defeat the judgment, would be to destroy its conclusive character, by allowing the defendant to go behind the judgment for the purpose of annulling it, when the facts show, that the judgment was obtained upon a valid contract, in full force at the time of its- rendition. If the case of Green vs. Sarmiento is to be considered as establishing the doctrine, that a judgment so completely and entirely extinguishes the contract on which it is founded, that the judgment becomes the contract, and therefore the place of the judgment is-t.hepZace of the' contract; and that the orignal contract cannot be looked to as having any effect or influence upon the rights of the parties; a decision in Massachusetts, and several in New York, will be found directly in opposition.- D. T. Wendell's case, 19 Johns., 153 ; Betts vs. Bagley, 12 Pick., 572 ; Wyman vs. Mitchel, 1 Cowen, 316; Raymond vs. Merchant, 3 Cowen, 147; Johnson vs. Fitzhugh, 3 Barb., Ch.

R., 360; Dresser vs. Brooks, 3 Barb., S. C. Rep., 429; Clark vs. Rowling, 3 Comstock's R., 216. Some of these cases have gone to the extent of allowing a defendant to look behind a judgment at the nature and place of the contract, for the purpose of availing himself of the benefit of an insolvent or bankrupt discharge,- under circumstances ⁴⁷³ ■where the discharge could have no influence if the judgment was to be considered as the contract, in some of them the plaintiffs were permitted to do likewise, for the purpose of showing, that a discharge relied upon by the defendant could not relieve him, because the original contract was such as not to be affected by the discharge, although it would have discharged the judgment if that had been the contract. We wish to be understood as referring to those cases with no other view but to show, that where there has been a judgment the original' contract may be looked at for a purpose not inconsistent with the validity of the judgment, but designed to Carry it into effect. On pages 480 and 481, of 12 Pick., Chief Justice Shaw says, “Although a judgment, to some purposes, is considered as a merger of the former, and as constituting a new' cause of action, yet, when' the essential rights of parties aré influenced by the nature of the original contract the court will look into the judgment for the purpose of ascertaining what the nature of such original contract was.” He refers to Wyman vs. Mitchell, 1 Cowen, 316, and adds, “Any other decision would carry the technical doctrine of merger to air inconvenient extent, and cause it to work injustice.” This' language of Judge Shaw is cited with approbation in 3 Barb., S. C. R., 450.

The cases in regard to how far a judgment will operate as a merger or an' extinguishment óf the original cause of action will be found collected and examined with much care by Judge Gridley, in Dresser vs. Brooks, already referred to. On page 447, he says, “That the original debt still exists in the judgment, and that the judgment is but the original debt in a new form.” In Clark vs. Rowling, at page 320 of 3 Comstock’s Rep., the court admitted, that notes as evidence of an indebtedness were merged in the judgment, which, as a greater security, extinguished the lesser, but they did not assent to the proposition, that the judgment, to all intents, became a new debt, and so fully merged or extinguished the notes, that the court could not look behind the judgment for the purpose of pro ⁴⁷⁴ tecting the defendants in an equity connected with the original contract. They say, “A judgment, instead of being regarded strictly as a new debt, is sometimes held to be merely the old debt in a new form, so as to prevent a technical merger from working injustice. And this exception to the doctrine contended for by the plaintiff, has obtained, especially in cases of insolvency and bankruptcy, for the protection as well of the creditor as the debtor, and has been applied impartially for the benefit of both.” From the dissenting opinion of Ch.

J. Bronson it will be seen, that his views on the subject of merger or extinguishment, to some extent, differ from those of a majority of the court. He thought the judgment in that case prevented the