Fogler v. Clark

Peters, C. J. The plaintiff, a creditor whose debt accrued against the defendant before the passage of the insolvent law, having proved his debt against the defendant’s estate in insolvency and received dividends thereon, seeks to recover the balance of his debt, on the ground that the law is, as to his claim, unconstitutional, the questiou being whether he is or not estopped by these facts from asserting such unconstitutionality. The plaintiff relies upon two early Massachusetts cases to support his proposition, Kimberly v. Ely, 6 Pick. 440 ; Agnew v. Platt, 15 Pick. 417. These cases were prior to the case of Clay v. Smith, 3 Pet. 411, the authoritative decision on the question, arid have been since overruled by the Massachusetts court. Morse v. City of Lowell, 7 Met. 152; Bucklin v. Bucklin, 97 Mass. 256, and cases there cited. The United States Supreme Court has adhered to its first opinion. Chapman v. Forsyth, 2 How. 202; Baldwin v. Hale, 1 Wall. 223; Gilman v. Lockwood, 4 Wall. 234. Kent and Story and other writers state it as an unquestioned rule that a creditor may waive his privileged claim by being a party to the insolvency proceeding. It would, surely, detract greatly from the beneficent operation of the insolvency laws, if home creditors aré to be inhibited from collecting, and foreign or non resident creditors are allowed to collect, their debts against an insolvency estate, while both classes of the creditors of such estate are admitted to a common management and control of its affairs. The plaintiff, however, insists that a difference exists between [241] a case, like his, where the creditor is a party to a procedure which is void because unconstitutional, and a case where the claim is merely privileged because of a fiduciary character, or where the operation of the law is not wide enough to include a non resident creditor. The position contended for is, that an unconstitutional law cannot be made constitutional by admissions ; that it cannot be waived. We do not fully concede these propositions. Of course, a void enactment does not become valid because a party admits it to be valid. But a party may, in many cases, be prevented by his acts from setting up the defense of unconstitutionality. He cannot, as the illustration goes, avail himself of the insolvency law, both as a shield and a sword. Seeking the enjoyment of its advantages, he takes its disadvantages as well. Proclaiming its validity, he cannot at the same time deny its validity. It should be remarked at this place that the insolvency law is not unconstitutional. It would, however, be an unconstitutional act to apply its operation to the extent of discharging the plaintiff’s claim, were he not a party to the procedure. But it would be just as unconstitutional to enforce the provisions of the act against non assenting creditors who reside out of the state. In either case it would impair the contract. The distinction insisted upon by the plaintiff does not appear to have received favor and scarcely recognition in the authorities on the subject. The law which was so severely denounced as unconstitutional in the ease of Kimberly v. Ely, supra, was an insolvent law of the state of New York, and was as valid in its general application as any state insolvent law. The case of Van Hook v. Whitlock, 7 Paige, 373, was where the claim in litigation accrued before the law was passed, and the court there says, "They (creditors) have deprived themselves of the right to object to the constitutionality of the assignment.’’ The same case was, for the same reason, affirmed in 26 Wend. 43, where it was said that the effect of becoming a party to the procedure is as great at all events as an agreement would be in a private assignment or [242] composition. It was there further remarked that the obligation of the debtor ceases not from the unconstitutional law, but from the voluntary consent and agreement of the creditors. In Lee v. Tillotson, 24 Wend. 337, it was held that a party having waived a constitutional provision cannot subsequently ask for its protection. "A contrary argument,” says Cowen, J., "would deprive a criminal of the power to plead guilty, on the ground that the constitution has secured him a trial by jury.” In Daniels v. Tearney, 102 U. S. 426, the court says, " It is well settled as a general proposition, subject to exceptions, that when a party has availed himself for his benefit of an unconstitutional law, he cannot in a subsequent litigation with others not in that position, aver its unconstitutionality as a defense.” The case at bar is stronger than that. It is a case of judicial estoppel, or an estoppel by judicial proceedings. Mr. Cooley, after enumerating the classes of cases where, for different causes; the insolvent law is not allowed to apply, says : " If, however, the creditor, in any of these cases makes himself a party to proceedings under the insolvent law, he will be bound thereby like any other party to judicial proceedings, and is not to be heard afterwards to object that his debt was protected by the constitution from the reach of the law.” Cool. Con. Lim. (5th ed.) 358; Whar. Conf. Laws, § 528. It strikes us that the only hardship which the plaintiff can complain of is that the legislature did not, in its thoughtfulness, include a claim like his in that clause which allows certain privileged creditors to prove their claims, the dividend received to be only a payment on the debt, and not a discharge of the debtor therefrom. R. S., ch. 70, § 47;. ■ Plaintiff nonsuit.' Walton, Danforth, Libbey, Emery' and Haskell, JJ., concurred.