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WILLIAM HOUSTON AND OTHERS, AND FRANCIS FISK AND OTHERS, PLAINTIFFS IN ERROR, v. THE CITY BANK OF NEW ORLEANS.

January 1, 1848

WILLIAM HOUSTON AND OTHERS, AND FRANCIS FISK AND OTHERS, PLAINTIFFS IN ERROR,
v.
THE CITY BANK OF NEW ORLEANS.



THIS case was brought up, by a writ of error issued under the twenty-fifth section of the Judiciary Act, from the Supreme Court of the State of Louisiana.

The facts in the case are fully set forth in the opinion of the court.

It was argued by Mr. Johnson and Mr. Clay, for the plaintiffs in error, and Mr. Sergeant, for the defendants in error.

Mr. Johnson stated the case on behalf of the plaintiffs in error, who were purchasers of certain property which was exposed to public sale by order of the District Court of the United States. The question was, whether a mortgage upon the property, held by the City Bank, was an existing lien at the time of filing the bill, or whether the lien had been destroyed by the proceedings in bankruptcy.

He then proceeded to lay down four propositions:––

1. That the District Court had jurisdiction to decree a sale, with or without the assent of the mortgagee, and the purchaser gets an absolute title against all persons claiming by or through the bankrupt.

2. If wrong in this proposition, and the District Court had no authority to sell without the assent of the mortgagee, then it had power to sell with that assent; and as the property did not sell for enough to pay the first mortgagee, who assented to the sale, the title to the purchaser becomes absolute.

3. If wrong in this, then that the conduct of the City Bank, the junior mortgagee, furnishes presumptive evidence of its assent also to the sale.

4. That the cancellation of the mortgage of the bank under a mandamus, as between the mortgagee and those claiming under him, vested an absolute title in the purchaser.

(As the decision of the court turned entirely upon the first point, the argument of Mr. Johnson, and also those of the other counsel, upon the other points, are omitted.)

I. The District Court had power to decree a sale, with or without the assent of the mortgagee. This involves two branches:––

1st. Had Congress the constitutional power to pass such an act?

2d. Did they, by the act, vest the power in the District Court?

1st. The power of Congress was denied during the passage of the act, but this court has affirmed it by decreeing under it. It is only necessary to refer to the language of the Constitution, and it will be seen that the terms of the grant are of the broadest character. The power is to pass all laws; the only restriction is that they shall be uniform. But as the court has already decided the constitutionality of the law, by acting under it, the inquiry need not be pursued.

2d. Did Congress, by the act, vest the power in question in the District Court?

We have seen, that the power of Congress over the subject of bankruptcy is total and absolute, with the single limitation, that the laws must be uniform; and an examination of the law will show that Congress intended to exercise the whole of its power. This is a cardinal principle in the interpretation of the statute. If the legislative power was intended to be exhausted, we can judge how much was given to the courts. We say, that jurisdiction over the whole subject of bankruptcy was conferred.

The title of the act is coextensive with the power of Congress. It is ' to establish a uniform system,' &c. The first section is so, too. The second avoids certain deeds, &c., and the proviso says that liens or mortgages, &c., shall not be impaired. The only effect of this is to preserve the rights themselves; but it gives no direction how the rights are to be enforced. It means that the courts of the United States are to protect them, as well as the State courts; and the uniform rule by which this is to be done can only be found in the former, acting as they do from one common source of construction and authority, namely, this court. The exception itself in favor of these rights shows that Congress intended to occupy the whole ground. Every thing which is not excepted passes under the act. The rights themselves, therefore, being the only matters which are excepted, the mode of enforcing those rights by an application to the State courts is not saved. Not being excepted, it is gone. If Congress had intended that the State courts should retain their jurisdiction over mortgages, and have the power of foreclosing them, the law would have said so. The argument upon the other side must be, that all these encumbrances were excluded from the operation of the law entirely. But the bankrupt is obliged to make a return of all his property of every kind, under the penalty of losing the benefit of the law. He must include his mortgaged property, and the whole must be adjudicated by one head. Other sections, in addition to the proviso, show a design of giving the control of the whole subject to the District Court. All property of the bankrupt, all his rights in every species of estate, real, personal, and mixed, all his debts, are portions of the matter which is thrown into this court. Debts are provable and proved there. If such a surrender be not made, the bankrupt is not to have the benefit of the act. This shows that all the debts are to be paid out of the property. The fifth, seventh, ninth, tenth, and fifteenth sections all tend to show the control of the District Court over the entire subject; the sixth and eighth, more especially. Let us revert to the question before the court, and see what it is. Had the District Court authority to decree a sale of mortgaged property, so as to give the purchaser a good title? This is the question. The language of the Constitution is very different as to the two subjects of naturalization and bankruptcy. Over the first the power of Congress is only to establish a uniform rule, leaving it to the State, as well as federal, courts to enforce the rule. The jurisdiction of State courts is not taken away. But over the subject of bankruptcy the power is to establish uniform laws. They must be the same everywhere. It would be strange, if the United States courts were not vested with power to decide all questions which may occur under these laws. The object was uniformity. In fact, this was the condition upon which the power was held by the federal government. The act of Congress says that the District Court shall have jurisdiction over all matters arising under the act, all 'cases and controversies,' all 'acts, matters, and things,' &c., until a final distribution. Is this a power merely to sell an estate subject to liens? If a clear title could not be obtained, the property would be sacrificed. The fact that claims may exist upon the property, and the legality of those claims, are wholly different things. A bankrupt may make fraudulent mortgages, or give illegal claims to his wife. Who is to decide the question of their legality, unless it be the District Court? Until the question was settled, the property would not sell. So much for the sixth section. But the eighth removes all doubt, for it allows the Circuit Court to entertain a bill in equity in all cases arising under laws, treaties, &c. The third section vests the rights of a bankrupt in the assignee. Could he not have filed a bill in the Circuit Court to have the mortgaged property sold? The mortgagee also might file a bill. If the assignee were to assert, and prove, that the mortgage was void, either in his bill or answer, would not the court set it aside? But the jurisdiction of the Circuit Court is concurrent with the District Court, not superior to it. The District Court has, therefore, the same power.

The decisions of this court in 3 Howard, 203 and 426, settle the question. But the opinion is said to be obiter. It is strange, that the highest court in the land, vested with power to decide constitutional questions, should listen for many hours to arguments, write out its opinion, and that such opinion should be disregarded as obiter. It was wise to settle the law then. As soon as the act of 1841 passed, numerous cases occurred under it. Doubts grew up. Judges decided differently. Property to the amount of thousands of dollars was distributed under the law. It was the duty of this court, as guardians of the commonwealth, to settle all these difficulties, and guard against conflicts between the authorities of the States and United States. But the doctrines asserted in Ex parte Christy, 3 Howard, 203, have ceased to be obiter. Even if we admit that the precise point now before us was not before the court in that case, yet it came up afterwards, in 3 Howard, 426. At page 434, the court say, that they concur in the principles and reasoning of Ex parte Christy. The dismission of the bill depended upon the case coming within the preceding case of Ex parte Christy, and the decision was made upon this ground. This was not, therefore, an obiter opinion. At page 440, Mr. Justice Catron never doubted the power of the District Court over mortgaged property, provided the jurisdiction of a State court had not first attached. As this did not occur in the present case, it appears to be free from all objection.

Mr. Sergeant, for defendants in error.

This case is brought to this court under the twenty-fifth section of the Judiciary Act, and the only point open is the one which arises under that section. It has been said by the counsel on the other side, that the whole case is before this court, and the authority of Osborne v. Bank of United States cited in support of the position. But that case was not brought here under the twenty-fifth section. This court cannot decide that the court below was right on the constitutional point, and then proceed to reverse the decision for other reasons. Only one of the points stated by the opposite counsel is before the court now. The other three are not. All questions relating to the respective rights of different mortgagees is a Louisiana question, to be decided by the State courts. Whether or not the bank assented to the sale is not a point which this court is at liberty to examine under the record, nor whether the proceedings in the State courts, in order to obtain the cancellation of the mortgages, were regular or not. These are questions for the courts of the State exclusively. The only question now before us is the right of the District Court, under the act of Congress, to force to a conclusion all matters between a mortgagor and mortgagee. How has the exercise of this power worked in the present case? The bankrupt was worth $350,000, and borrowed $200,000 on mortgage. The property, under the forced sale, sold for $120,000 only, not one third of what the assignee had valued it at. (Mr. Sergeant here recited the facts in the case.)

The question before us may be divided into two branches:––

1st. Had the District Court jurisdiction over mortgages?

2d. Had it jurisdiction in this case, and in the mode pursued?

1st. Before the case of Ex parte Christy, different constructions had been given to the act of Congress, and we are still in the midst of the conflict. Where was the necessity of deciding in advance? The act of Congress could as well be carried out in one way as in the other. If the settlement of questions relating to mortgages had been left to State courts, it would not have protracted the settlement of a bankrupt's estate. The necessity of the case does not demand that this power should be vested in the District Courts. The existence of different opinions shows a doubt of the existence of such a power; and a decision in favor of this ultra power will make a law odious which was not so before. It makes the law interfere with State jurisdiction. If this mortgage had been left to the ordinary course of proceeding in Louisiana, the case would have been settled long ago. But instead of that, we are here now, disputing about an act of Congress. What is it? The proviso in the second section controls and limits the whole act. It declares that nothing shall annul, destroy, or impair the rights of married women, or liens or mortgages. Without this proviso, the law could not have been passed. It was put in because the States required it to be so. The reservation is, that liens shall not be impaired. Suppose a lien existed upon property, and the person who held the lien was put into possession, and an order of the District Court forces him to sell it when he does not wish to do so. Is not his lien impaired? The creditor is in possession of property, under a contract that he shall keep it until the debtor pays him what is due, and the court sends an officer to take it away. Has he not a less right than the contract gives him? So, also, the construction contended for on the other side requires the District Court to settle the rights of married women. What right has this court to meddle with the subject, whilst a woman is yet under coverture? Who is to represent her? The proviso saves equally rights under contracts and rights under the law. Your aid is not asked to protect them. All liens are preserved which are valid by the laws of the respective States. Who is to judge of their validity? The State courts, or the judges of this court in their circuits? Whichever tribunal decides, it must look only to State laws. Where, then, is the evil of allowing State courts to interpret State laws?

It is not correct to say, as the opposite counsel has done, that where Congress has plenary power and passes an act, therefore the act must be construed to the full extent of the power which Congress possessed. This has not been the doctrine of Congress nor of the people. Half a century ago, this court decided that they would take jurisdiction only so far as Congress had delegated it. The Judiciary Act of 1789 limits the power of this court, which has never gone beyond it. Doubtful words must not be construed to enlarge jurisdiction until the people alter the Constitution of the United States. If there be a doubt, the test must then be applied, whether a necessary implication exists, or whether the laws of the United States can be enforced without the jurisdiction claimed. This is the rule in all cases of limited jurisdiction. Apply it to this case. Has Congress said clearly that this power is given to the District Court? On the contrary, some of the judges of this court have denied the power, which shows that it is not clearly granted.

The second, third, and eleventh sections all have the same object in view, namely, the preservation of rights which exist under State laws; and the only inquiry is into the validity of these rights under those laws. The United States are jealous of their Constitution, and have courts of their own to protect it. Is it unreasonable to concede the same feeling to the States, and to allow their own courts to decide upon rights flowing from State ...


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