Pacific Coast Law Journal.

VOL. 2.

NOVEMBER 2, 1878.

No. 10.

Current Topics.

A SUBSCRIBER sends us the following statement, and we respectfully invite the views of attorneys upon the query presented by it:

GEO. H. WILLIAMS, PLAINTIFF, VS. J. B. ARMSTRONG, ADMINISTRATOR OF THE ESTATE OF GEO. H. MARR, DECEASED. (Suit for $36.)

This was an action brought in the Justices' Court of Santa Rosa Township, Sonoma County, California, by plaintiff, upon a claim which had been presented to the administrator by the original claimant, and sued upon by him; but when his testimony was offered, an objection was made to his competency, which objection was sustained, and the original claimant then submitted to a nonsuit without prejudice, and immediately after assigned the claim to this plaintiff for a valuable consideration. Williams then brought suit upon the claim assigned him, in the Justices' Court of said township, and upon the trial offered his assignor as a witness.

Counsel for defendant objected, upon the grounds of his incompetency under Subdivision 3, Section 1880, Code of Civil Procedure, which is as follows: "The following persons can not be witnesses: Parties to an action or proceeding, or in whose behalf an action or proceeding is prosecuted against an executor or an administrator upon a claim or demand against the estate of the deceased," and claimed

that the statute could not be evaded by an assignment, and that the assignor was still unable to testify, as he could not do indirectly what the law said he could not do directly. The Justice of the Peace sustained the objection, and judgment rendered for defendant, and the plaintiff appealed to the County Court of Sonoma County, and a new trial was granted, and the assignor allowed to testify. If the decision of the County Judge be correct, then the law cited is inoperative wherever claimants assign their demands, and claimants can testify for their assignees. In other words, the assignee is in a better position than his assignor.

Whose decision is correct, that of the Justice of the Peace or of the County Judge?

IN Farquhar vs. Fidelity Insurance Co. (18 Alb. L. J. 330), it was recently held by the United States Circuit Court, District of Pennsylvania, that a note payable to bearer containing, in addition to the agreement to pay principal and interest, a promise to pay an attorney's commission of five per cent. for collection, together with all taxes and charges in the nature thereof, immediately upon their assessment, did not possess the character of negotiable paper. The court says:

"Overlooking the clause touching attorney's commission, how can it be said that the notes are either unconditional or certain in amount, in view of the stipulation for the payment of taxes or charges in the nature thereof, assessed upon the principal or interest? Liable to taxation as the property and in the hands of the holders (and this is the import of the stipulation); in some places they would probably be free from this charge, while in others they may be subjected to indefinite and varying rates of taxation, so that the amount to be paid by the maker, either before or at the maturity of the notes, would fluctuate according to collateral circumstances, and be dependent upon the domicile of the holder. And of these contemplated charges or additions to the nominal consideration, the notes themselves indicate no

standard of measurement. They could only be ascertained by reference to intrinsic circumstances, and thus the amount to be paid by the maker is left undeterminate, and subject to possible contention. Instruments whose consideration is thus fluctuating and indefinite, and which are laden with such embarrassments to their circulation, could not perform the functions, and therefore do not possess the character of negotiable paper."

OUR INSOLVENT LAWS.

Under the powers conferred by Section 8, Article 1, of the Constitution of the United States, Congress could establish uniform laws on the subject of bankruptcies throughout the United States. When, by virtue of the authority so conferred; Congress passed the Bankrupt Act of March 2, 1867 (I refer to this act only, as I have not deemed it necessary, for the purposes of this article, to discuss those acts preceding it), there existed, in several of the States, statutes known as "insolvent laws," having the same object in view as embraced and meant by the Federal law. The Legislature of our State had, as early as the 4th day of May, 1852, passed an act for the relief of insolvent debtors, and protection of creditors. This act was amended in 1860 and 1867, and a supplemental act was passed in 1876, which might be properly termed the involuntary provisions of the act.

By the provisions of the Act of 1852, every insolvent debtor may be discharged from his debts upon executing an assignment of all his property for the benefit of all his creditors.

Article 1, Section 10, of the Constitution of the United States declares, that no State shall pass any law impairing the obligations of contracts. The relief extended insolvent debtors under the early insolvent laws had the effect to release the debtor from imprisonment, as well

as from all future liability on his contracts, upon the sur render and assignment of all his property to his creditors. In the case of Sturges vs. Crowninshield (4 Wheat. 122), one of the earliest cases upon this subject, the defendant pleaded his discharge under the State insolvent laws. An objection was taken to the plea, on the grounds that the laws were unconstitutional, because they contravene both provisions of the Federal Constitution-the one giving Congress power to pass uniform laws on the subject of bankruptcies throughout the United States, and the other declaring that States could make uo law impairing the obligations of contracts. The contract in this case was made prior to the insolvent laws. It was held by Chief Justice MARSHALL, that the States had ample power and authority to pass insolvent laws, provided Congress had not exercised its right under the Constitution, and provided the statutes then enacted did not impair the obligations of contracts; and it was accordingly held, in this case, that an act of the Legislature providing for the discharge of a debtor from all liability for debts contracted previous to his discharge, on surrendering his property for the benefit of his creditors, is a law impairing the obligations of contracts. This opinion was affirmed in Farmers' and Mechanics' Bank vs. Smith (6 Wheaton, 131).

In the two cases referred to, the debt was contracted prior to the enactment of the insolvent law. The question as to the application of such a rule to contracts made subsequent to the enactment of such laws was not raised and discussed by that court until later. In Ogden vs. Saunders (12 Wheat. 213), all the prior decisions were examined and reviewed, and the court announced its decision, though by no means unanimous, that "a bankrupt or insolvent law of any State which discharges the person of a debtor and his future acquisitions is not a law impairing the obligations of contracts, so far as it respects debts subsequent to the passage of such law." But they say, also, that a discharge under such laws can not be pleaded as to non-residents. (Cook vs. Moffat, 5 Howard, 295.)

We can not, in this article, discuss this branch of the subject, but it is reserved for future consideration. So then it may be considered settled that our State had ample power to pass her insolvent laws if, at the time they were enacted, there was no Act of Congress existing upon the same subject. That can not be claimed, except, perhaps, as to some of the amendments. It may be considered settled, also, that her insolvent acts do not contravene any of the provisions of the Federal Constitution, so far as contracts are concerned that were made subsequent to the date of enactment of such insolvent laws.

This determination of the court was reached, and rests upon the principle that all such contracts are made with ref erence to the laws of a State where and when contracted; and it is only upon such a theory that they hold that the obligations of contracts made subsequent to the passage of the insolvent laws are not impaired in the sense of the Federal Constitution.

Now, having thus premised, we call attention to the object of this article. Were all debts made and existing prior to June 7, 1878-the date of the repeal of the National Bankrupt Act-contracted with reference to the insolvent laws of our State? If not, then do they not fall within the class that are excepted from the operation of the insolvent laws as being made without reference to an existing law? Can it be said that the insolvent laws of this, or any other, State have had such an existence since the operation of the National Bankrupt Act as that it must be construed that all contracts were made with reference to them? They certainly did not enter into, and become a part of, the contract. Such must be the case, or the rule does not apply. By the Bankrupt Act the State insolvent laws were made inoperative. It is true they were not abrogated, but the authorities say they were completely suspended and wholly inoperative. Any and all proceedings under them were void. (Martin vs. Berry, 37 Cal. 208.) It is no argument to contend that the rule should apply because the bankrupt acts