By: Donald L Swanson
Bankruptcy laws must (and do) change.
That’s because the U.S. economy is always changing: it has been in an ever-expanding mode—punctuated by recessions and depressions from time-to-time—throughout the course of its existence.
One example of change is abolition of the debtors prison remedy.
It’s hard to imagine that imprisonment for debt in these United States was, in the first half-century of our existence, a ubiquitous thing. And getting rid of the debtor prison remedy proved to be no easy task—it finally happened toward the end of the 1830s.
The U.S. Supreme Court opinion of Beers v. Haughton, 34 U.S. 329 (1835), is one of the nails in the coffin of the debtor prison remedy.
Here’s what happened.
In 1830, plaintiffs (citizens of the State of New York) brought suit on a contract obligation in the U.S. Circuit Court for the District of Ohio and obtained judgment against defendant Joseph Harris (a citizen of the State of Ohio) for $2,846.56.
Then, Plaintiff filed a “writ of capias ad satisfaciendum” for the arrest and imprisonment of Harris, which writ was returned as, “not found.”
Harris raised several defenses to arrest and imprisonment in the federal court action, including:
1. Although defendants might be committed to prison under New York law, a local court rule in the Ohio federal court provides that an individual shall not be kept imprisoned, when a state insolvency law has released that individual from imprisonment; and
2. Under Ohio law, Harris is protected from arrest and imprisonment for debt because, while previously imprisoned for debt in Ohio, he signed a statement itemizing creditors and debts (including plaintiffs’ claim), whereupon an Ohio state court ordered and adjudged that Harris be discharged from arrest on account of any itemized debt.
The federal court in Ohio sustained such defenses and granted Harris his freedom, shielding him from arrest and imprisonment for the claims of the New York citizens. The New York citizens then appealed to the U.S. Supreme Court. The Supreme Court affirmed.
The question before the U.S. Supreme Court in Beers v. Haughton is whether the discharge-from-imprisonment order of the Ohio state court is binding on the plaintiffs from New York in federal court?
The majority opinion affirms the federal Circuit Court’s no-imprisonment decision because:
- The Ohio legislature possesses full constitutional authority to pass laws releasing an insolvent debtor from prison and protecting a debtor from arrest or imprisonment, since the right to imprison constitutes no part of the contract and a discharge of the debtor from imprisonment does not impair the obligation of the contract;
- Such state laws have no operation upon the process or proceedings in the courts of the United States because state laws cannot control the exercise of the powers of the national government or limit the national courts—the whole efficacy of such laws in the courts of the United States depends upon the enactments of congress; but
- Congress may adopt such state laws directly, or authorize courts of the United States to adopt them, which is precisely what happened here—the federal court in Ohio adopted Ohio’s substantive law on imprisonment for debt, based on an explicit authorization from Congress to do so.
The majority opinion is an innovation, the dissenting opinions say:
- It gives to federal courts the power, by local rule, to introduce and enforce state insolvency systems;
- It authorizes federal courts to abolish all remedies a creditor may have against the body of the debtor, based exclusively on a state insolvency law; and
- The policy question of whether to abolish imprisonment for debt is not before the Court.
The citizens of Ohio have full power to adopt such laws on imprisonment of debtors, for application between themselves and in their own courts, as the wisdom of their legislature may dictate. But the present question is between the citizens of Ohio (who are bound by Ohio state laws) and citizens of New York (who are not).
This Court, in Saunders v. Ogden, previously declared that, as between parties of different states, state insolvency laws have no application:
- “All this mockery of justice, and the jealousies, recriminations and perhaps retaliations which might grow out of it, are avoided, if the power of the states over contracts . . . is limited to the controversies of their own citizens”;
- “No one has ever imagined that a prisoner in confinement, under process from the courts of the United States, could avail himself of the insolvent laws of the state in which the court sits”; and
- “when in the exercise of that power (passing insolvent laws), the states pass beyond their own limits . . . and act upon the rights of citizens of other states; then arises a conflict of sovereign power, and a collision with the judicial powers granted to the United States, which renders the exercise of such a power incompatible with the rights of other states, and of the constitution of the United States.”
Moreover, if a state law is incompatible with the constitution of the union, it must be inoperative till the constitution is amended. Here is how the local rule of the federal Circuit Court in Ohio (which provides the operative defense in this case) is unconstitutional:
- The legislative and judicial power combined, cannot cure a defect which the supreme law of the land declares to be fatal to a state law; and
- An Ohio law, adopted by a rule of a federal circuit court in Ohio, cannot be the operative rule of law in a suit between citizens of New York a citizen of Ohio.
The ruling of the U.S. Circuit Court in Ohio, which keeps Harris out of debtor prison, should have been reversed.
The debtor prison remedy was in its death throes, in 1835. People had grown weary of both the expense and the human tragedy of such a remedy. And the U.S. Supreme Court helps to hasten its end with the Beers v. Haughton opinion.
And Beers v. Haughton is an illustration of how a bad law and bad policy, that had been in existence for a very long time, finally comes to an end.
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