GOTTHILF v. SILLS

Print this transcript Transcript: 

Argument of O. John Rogge

Chief Justice Earl Warren: Number 50, Morris Gotthilf, Petitioner, versus Benjamin Sills, et al.

Mr. Rogge.

Mr. O. John Rogge: Mr. Chief Justice, may it please the Court.

This case presents the question whether the body execution statute of the State of New York violates the Due Process Clause of the Fourteenth Amendment.

It is my position that it does and in support of that position, I am going to suggest an approach to the Due Process Clause which I think is in accord with its intervening and historical development which is at one and the same time less inclusive than what has been called the incorporation theory based upon the dissenting opinion of Mr. Justice Black with the concurrence of Mr. Justice Douglas and also the concurrence on this point of Justices Murphy and Rutledge in Adamson against California and on the other hand, is more inclusive.

I say less inclusive because I don't think it's historically correct to say that the framers of the Fourteenth Amendment in 1866 anymore than the barons already made almost three quarters of a millennium earlier when they exacted from King John.

He promised not to go against them except by the law of the land that they thought about it specifically what it meant other than it meant to do right.

I don't think it's historically correct to say therefore that the Due Process Clause of the Fourteenth Amendment by itself incorporated the first state amendments and made them applicable to the States.

On the other hand, I submit that the Due Process Clause does represent the better angel of our nature and therefore shouldn't be limited to the first state amendment.

For example, there is a provision in the Fourteenth Amendment for equal protection of the laws.

If it were not there, can there be any doubt but that today justice that's not even handed would be struck down under the Due Process Clause of the Fourteenth Amendment.

There is in the Thirteenth Amendment, for instance, the provision against involuntary servitude except for those who've been convicted of a crime after a due trial.

If it were not there, can it be any doubt -- can there be any doubt but that today under the Due Process Clause of the Fourteenth Amendment?

There couldn't be involuntary servitude.

On that basis -- on that approach, I submit that the body execution statute of the State of New York violates the Due Process Clause of the Fourteenth Amendment on five different grounds.

It violates it because it imposes the punishment without the incidence of a criminal trial.

There was a default judgment in this case never anything more.

It violates the Due Process Clause in the second place because the body execution statute which was Section 764 of the Civil Practice Act bears no reasonable relationship to the ends, the Legislature had in mind when they enacted.

It violates the Due Process Clause in the third place because when this body execution statute is taken together with a couple of sections of the New York Correction Law, it denies the petitioner of equal protection of the laws.

A rich man won't have to go to jail for six months the way my client will if he goes back to New York.

He's not in New York.

He had to leave New York a minute that order for body execution was entered.

Therefore, it violates the Due Process Clause because it denied him the equal protection of the laws.

In the fourth place, this Section violates the Due Process Clause because it imposes upon him a cruel and an unusual punishment.

And in the fifth place, it violates the Due Process Clause because it imposes upon him involuntary services.

Now, before I get to the merits of the case, there are two nagging procedural questions that I'd like to deal with.

The Attorney General of the State of New York says that I did and exhaust state court remedies in New York.

I say that I did.

He says that I don't have a final judgment.

I say that I do but I say it doesn't make any difference.

You had in this case a judgment of the trial court, Mr. Justice Gellinoff who ordered that execution be issued here and against the person of Morris Gotthilf defendant herein without notice to said defendant.

Had my client stayed in New York?

He didn't.

The sheriff could had seized him and put him in prison for six months.

I say that under any normal concept and indeed, under the language of the New York Court of Appeals itself in those few instances where it took time out to give us -- give us a few lines of opinion that was the final judgment.

Certainly that it's the final judgment under 28 U.S.C. Section 1257.

Now, if it's' a final judgment, then I submit that I exhausted state court remedies by trying to go to the New York Court of Appeals and the only two ways that I could go there, if it's a final judgment, (a) by docketing an appeal of the right because I have a constitutional question, (b) by making emotion for leave to go there supported by printed affidavits and a printed brief.

These were denied, dismissed by the Court of Appeals on the ground that I didn't have a final judgment.

If I didn't' have a final judgment, then I say I didn't have a right to go there and under those circumstances, I exhausted state court remedies by going to the Appellate Division, First Department.

So I say to the Attorney General of the State of New York and the courts of the State of New York, they can play games with words if they wanted.

Whether or not it -- they call it a final judgment, makes no difference, if it's final, I exhausted state court remedies by trying to go to the Court of Appeals.

If by some part of New York law that final judgment isn't the final judgment, then I exhausted state court remedies by going to the Appellate Division, Second Department.

But beyond all this, I say that what I really come down to here is the language of 28 U.S.C. Section 1257 and then under that, it is a final judgment and here, I would rely especially on the case that the New York Attorney General cites in his brief, Republic Natural Gas Company against Oklahoma and I deal with it in the reply brief on page 14 where this Court, speaking through Mr. Justice Frankfurter, said, "There had been instances where the Court has entertained an appeal of an order that otherwise might be deemed interlocutory because the controversy had proceeded to a point where a losing party would be irreparably injured if review were unavailing."

If this Court does not give relief, my client, the petitioner, Gotthilf, can never go back to the State of New York because there is an order for body execution under which he'd have to go to jail for six months.

There is no escape from that.

He can't make bar.

Justice Potter Stewart: But what if he pays the -- what if he pays the money he has?

Mr. O. John Rogge: That's the only way he could have escaped it.

He hasn't got it, so he has to go to jail.

The rich man might be able to pass.

So he's denied if, Your Honor please, the equal protection of the law.

Unknown Speaker: What if -- what if --

Justice Potter Stewart: I don't -- I follow that.

Mr. O. John Rogge: The judgment like this, rendered against a rich man, he could pay it.

So he wouldn't have to go to jail.

My client can't pay it, therefore, he has to go to jail for six months.

Justice Potter Stewart: Well, on that logic, the person has denied equal protection if -- if his only asset is his automobile and then -- so his automobile has to be sold of fair judgment and the rich man might have a thousand dollars in addition so that his automobile doesn't have to be sold.

Mr. O. John Rogge: Yes, he --

Justice Potter Stewart: That doesn't deny equal protection of law, doesn't it?

Mr. O. John Rogge: He doesn't have to -- he doesn't have to go to jail.

My client has to go to jail for six months.

Justice Potter Stewart: If he doesn't pay what he owes that -- and he's been --

Mr. O. John Rogge: He doesn't pay this --

Justice Potter Stewart: -- found to be guilty of fraud.

Mr. O. John Rogge: -- default judgment, he has to go to jail for six months.

Even in a criminal case that couldn't happen without a trial.

This is punishable, the same as criminal punishment without the benefits of a criminal trial.

Justice Arthur J. Goldberg: What about the (Inaudible)

Mr. O. John Rogge: Why do I have to go to that?

I've got a final judgment.

I exhausted state court remedies.

Justice Potter Stewart: In addition, your -- your client is not in confinement, is he?

He's not in Florida.

Mr. O. John Rogge: That's right.

He's not in New York.

He is in Florida.

I mean, I'm here, this case is ready for decision.I either get relief now or my client never have it.

And Your Honor is right.

The answer to your question, Mr. Justice Goldberg, he's not in custody.

Justice Arthur J. Goldberg: (Inaudible)

Mr. O. John Rogge: In the meantime, he'd be in jail.

Now, there is a second procedural question here.

The money execution statute which was Section 764 of the Civil Practice Act was superseded on September 1, 1963 by something that New York lawyers called CPLR, Civil Practice Law and Rules.

And if you look at the cross-reference table in the beginning, they tell you that Section 764 has been omitted.

But they cross-reference you to Section 6111 and I say that's even worse because that Section provides that in the discretion of the Court, this order of arrest may be granted without notice before or after service of summons and at anytime before or after judgment.

Now, they call that a provisional remedy.

I say what's provisional about that, because the same people can seize him, lodge him in the same jail for the same length of time.

This time I say to the State of New York, let's not play games with words.

You have the same situation today that you did before September 1, 1963, so that we really get down to the question whether my client is to have relief here and now by a holding that Section 764 violates the Due Process Clause of the Fourteenth Amendment.

Unknown Speaker: (Inaudible)

Mr. O. John Rogge: There was one other possibility if this was a non final judgment.

Unknown Speaker: (Inaudible)

Mr. O. John Rogge: The Court of Appeals in this case without any reasoning.

If you will look at the Court of Appeals --

Unknown Speaker: (Inaudible)

Mr. O. John Rogge: That's one it said in this particular case contrary to what -- contrary to its own language in any case where it had ever spoken out, but this wasn't something as of right.

Here, I would have to go to an Appellant Division to which I had gone twice before, first to try to get the default set aside.

And they affirmed no opinion, not a line of opinion, not a sentence.

I then go back to the trial court, an argue that Section 764 is unconstitutional at least in a memorandum opinion Mr. Justice Gellinoff gives me one sentence.

He said Section 764 of the CPA constitutional.

Once again, I go back to the Appellate Division.

Once again, there is an affirmance and ones again not a line of opinion.

Now, what the Attorney General suggests is that I could have gone to that Court if it were a non-final judgment and I say that looking at New York opinions up to that point and by any rational approach, this was a final judgment.

You couldn't get anything more final.

There was nothing more that remained to be done.

Justice William J. Brennan: (Inaudible)

Mr. O. John Rogge: They didn't' say that.

They dismissed the appeal after the time to ask the Appellate Division for leave to appeal, something which I think would have made me look fully channelling.

To go to a court that has -- before whom I've been twice and they haven't given me a line of opinion.

And if you look at the opinions of the Court of Appeals up to this point if nothing more remained to be done and nothing more remained to be done, you'll have under any rational approach of final order because if the sheriff could have seized my man, he could have gone to jail immediately and he would have lodged there for six months.

Now, I submit that I did everything that could reasonably be affected, to exhaust state court remedy unless one has to file appeals in every reviewing court inside and I hope that you don't miss the right way.

But I say one thing more, I had and under the Attorney General's hypothesis, that it wasn't the final judgment and I had no right to go to the Court of Appeals, and I --

Justice Byron R. White: (Inaudible)

Mr. O. John Rogge: Unless the Appellate Division -- and this is really --

Justice Byron R. White: (Inaudible)

Mr. O. John Rogge: And when I submit that under any reasonable approach, I did everything that could reasonably be expected and exhausting state court remedies and I submit to Your Honor that under the decision of this Court in Local 174 against Lucas Flour Company where they distinguished the case, the Garmon case that New York's Attorney General relies on, emphasizes that I didn't have the right to go to the Court of Appeals.

All that I could -- all that I could additionally have done and Your Honor is right I could have done that, is to go to a court which summarily threw me out and do what to my mind look like the foulest thing of saying, "Please, now, I want something that you don't want to pay any attention too and you give me leave to go to the Court of Appeals."

This would have been a futile thing to do.

It could have been done.

By now, it's not there.

Justice Byron R. White: (Inaudible)

Mr. O. John Rogge: I think it is.

I mean this is something -- if this is some -- then -- then I've exhausted, I -- I say yes, Your Honor.

Justice Byron R. White: (Inaudible)

Mr. O. John Rogge: I would say that's right.

Yes.

I would like to emphasize that I did everything that a person could reasonably be expected to do to exhaust state court remedies there and furthermore that they exhausted the petitioner.

Justice Byron R. White: (Inaudible)

Mr. O. John Rogge: I think there might be circumstances and this case is one of them.

And I say here I fall under the republic case that there are instances whether the Court has entertained an appeal from an order that might otherwise be deemed interlocutory.

I did.

I submit what could reasonably be expected.

I went to the Court of Appeals and the only two ways that I thought you could go there on the assumption that this was a final order which is what it looked like under the decisions of the Court of Appeals.

I am now in a position where if I have to have relief, I have to have at the hands of this Court.

There's no other place I can go.

There's no -- and my client will forever be precluded from going back to the State of New York.

He had to put on his hat back and back and what is likely of the State and he can't go back.

Justice Byron R. White: Do you -- I gather there's been a constitutional (Inaudible)

Mr. O. John Rogge: Yes.

Justice Byron R. White: That it had to say (Inaudible)

Mr. O. John Rogge: Right, right, right.

No -- and he could post bond and double the amount which my client handled.

Justice Byron R. White: (Inaudible)

Mr. O. John Rogge: Oh, yes, yes.

That's known under the situation in this case.

Now, what you have here --

Justice Potter Stewart: Did he actually -- did he actually spend his time in jail?

Mr. O. John Rogge: Unless he either make bond and double the amount or paid.

Justice Potter Stewart: Are there some talk in the briefs about the freedom of the Liberties.

Mr. O. John Rogge: Liberties of the jail.

Justice Potter Stewart: Yes.

Mr. O. John Rogge: I think you make bond and double the amount.

Justice Potter Stewart: You have to do that too.

Mr. O. John Rogge: Yes and he can't do it.

Justice Potter Stewart: Where is he in Florida?

Mr. O. John Rogge: I beg your pardon.

Justice Potter Stewart: Where is he in Florida?

Mr. O. John Rogge: I didn't get it.

Justice Potter Stewart: Where is he in Florida?

I just wondered where he was.

Mr. O. John Rogge: He -- what he has done, I don't have his address with me.

I have it at the office.

But here was a man who was a leading CPA and who is now as he can, trying to practice accounting in the -- and I think he's in North Miami.

And he's been there since this judgment was entered.

Now, I'd like to go back just a moment to the controversy itself.

The original controversy arose out of a factoring agreement and the one who actually lend the money was the corporation, the corporate defendant of which the petitioner was Chairman of the Board.

And there was at one time when the plaintiff corporation was embedded to the defendant corporation in the amount of sum $22,000 and for this, they had a collateral sum $28,000 which according to the defendant $23,000 that was worth was collateral.

They entered into an agreement by which the individual plaintiffs in that action were to pay $13,000 and I think they did and the defendant was to make certain collections and turn them over for taxes, and I understand he didn't.

However, that maybe, there isn't any question but what the judgment here is the result of a default order and that arose of a misunderstanding between counsels.

The, then, counsel for the petitioner Archibald Palmer swears that he had an understanding with counsel for the plaintiff that the default would only be entered as to the corporate defendant and not the individual.

Mr. Theodore Charnas whose admission I moved this morning and for whom I have a high regard says he never had any such understanding.

Now, it's inconceivable to me that a lawyer for a client who has a good defense and the defense there among other things despite all the charges and counter charges.

The defense among other things would have been to whatever the petitioner did, he did in a corporate capacity as Chairman of the Board, indeed the complaint itself have allegations saying that the defendant by Gotthilf, the petitioner here did certain things.

I mean it's conceivable to me that a lawyer would have consented to a default order not only to the corporation but also to the individual defendant.

However, that maybe, I don't know what the facts are.

They're disputed one side on the other.

Suffice it to say that the default order was entered as to both the corporate and the individual defendant.

And thereafter on an appeal to the Appellate Division to try and get that, default order set aside.

The Appellate Division affirmed without opinion.

Unknown Speaker: (Inaudible)

Mr. O. John Rogge: In that appeal to the Appellate Division, I argue that the default should be set aside.

I did not -- at that point, we still weren't faced with the motion for body execution.

Now, when I raised the point about Section 764, there wouldn't have been any point at that point.

I mean 764 is for body execution, not I think the body.

It was not raised there.

We now get back to the trial court.

And now, I do make a full scale argument and incidentally under the statute, they could have picked up the petitioner without notice except that, as I recall it, I had an understanding with Mr. Charnas that he would do it on motion so that I could make my constitutional argument, and he did make it on motion.

And at that point, I did have a full scale argument before on Mr. Justice Gellinoff that Section 764 violated the Due Process Clause.

And as I say, he gave me one line in his memorandum on that.

And I argued that same question in just as extensive of brief before the Appellate Division, First Department and they didn't give me a line.

They simply said affirmed no thing.

Justice Arthur J. Goldberg: (Inaudible)

Mr. O. John Rogge: You do if Your Honor please and I want to say to Your Honor that this business of the judge's discretion in this particular thing was a fearful situation.

There was a petitioner with his wife pleading with Mr. Justice Gellinoff.

He wanted to know where is the car, where is the pearl, where are the jewels, where are the sons, where are the family who can come forward here with money.

And he ended up by saying, "Pay half of it now and good security for the balance or you go to jail."

Justice Arthur J. Goldberg: Is there anything (Inaudible)

Mr. O. John Rogge: Not one word that I can find it.

It simply says in his discretion, and it was a practical thing in this particular case.

I, of course, go much beyond that or the five reasons that I've advanced here.

I think the only way to handle this situation and to declare of Section 764 violative of the Due Process Clause with the Fourteenth Amendment on one or more of the five grounds that I have mentioned.

Justice Potter Stewart: These States have provisions for body execution.

Mr. O. John Rogge: About half in limited classifications.

Justice Potter Stewart: And New York is in limited classification.

Mr. O. John Rogge: New York is one of that limited category cases which still has this out motive thing that you can either say to it better, the judge can.

Your Honor please, it's not handing to them on a silver platter, handing it to them a golden platter and that's what the plaintiff and plaintiff's lawyer wanted in this case.

They wanted the judge, there are ways you can go, I mean the rest of it where we try to collect that that there are supplementary proceedings, there are attachment, there are garnishments, there are these various ways in which we can find out whether the debtor has money or property or anything else and seize it."

But no, not here, the creditor wanted the whole amount handed on, on a golden platter and Mr. Justice Gellinoff accommodated him in violation of the Fourteenth Amendment.

Chief Justice Earl Warren: Mr. Charnas.

Argument of Theodore Charnas

Mr. Theodore Charnas: Mr. Chief Justice, gentlemen, may it please the Court.

I have a very -- the remarked made by my adversary to the effect that the Court of Appeals was playing games.

That the creditor was playing games.

I say to you that if there were any games played here, they were played deliberately and willfully by this judgment debtor who is a common swindler, now residing in Miami sounding himself in Florida, safe from body arrest and who have the temerity in an action which we instituted on this judgment in Florida to assert as an affirmative defense that there was pending an appeal before this Court.

This appeal number 50 which he says in his answer is an appeal from the judgment, and there was nothing before you insofar as the petitioner is concerned seeking a review of the judgment.

The whole point of my adversary's remark has been that the Section 764 is unconstitutional.

The order for arrest should be vacated.

This is the kind of a swindler that we're dealing with.

This man got here.

If anybody is the suppliant before this Court, it is this poor creditor, Gotthilf swindler the creditor as I will show you by telling you the facts.

And it is the creditor who had to retain counsel through all these appeals, print records without any possibility of getting the cost back, while this better is down in trial that are defending the action on the judgment.

Now, it's very -- all very well to dismiss very hourly the threshold question of jurisdiction.

But I don't believe that my opponent can get by it.

In the first place, this is not a final order.

This is an order which is an organic part of the judgment.

It has to deal with the collection of the judgment.

This Court in prior decisions has talked about the unitary aspect of the judgment and the proceedings taken to effect collection of the judgment.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: It isn't --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: The -- of course sir, of course as a matter of fact, the only way in which one can be relieved of this body execution is not the tool alternatives either go to jail or pay, there's a final alternative.

Tell the truth, make an honest disclosure.

Since 1940 when the words subject to the discretion of the Court where incited to the Civil Practice Act, there is not one case in the State of New York where a poor debtor who made bear his status to the Court was in conservative.

Justice Arthur J. Goldberg: Where is that (Inaudible)

Mr. Theodore Charnas: The -- the -- about the discretion?

Justice Arthur J. Goldberg: No, this is --

Mr. Theodore Charnas: 764

Justice Arthur J. Goldberg: -- the full disclosure (Inaudible)

Mr. Theodore Charnas: This is not in the statute Judge Goldberg, but it is -- runs right through the case law.

I can cite case after case.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: I believe -- I believe I have such a case which is not quoted in my brief but which is referred to in another case heard by this Court and which again was not cited in my brief because all this was really taken up by the Attorney General who filed his brief amicus on the subject of -- of jurisdiction.

And I wonder if I might refer to the Court to the case of Fox against Capital Company, 299 U.S. 106, an opinion by Justice Cardozo where the question of finality of an ordered came up, in -- in proceeding supplemental to execution.

A debtor was arise it, and proceedings supplemental to execution because he failed to make an honest disclosure.

And Judge Cardozo said, "The rule is settled in this Court but except the connection with an appeal from a final judgment or decree, a party to a suit may not review or appeal from an order finding over imprisoning him for the commission of the civil content."

In other words, that's as far as it went.

Now, I'm not directly answering your questions and I realized that, but there isn't stainer case mentioned cited in these Fox against Capital case to which I like -- would like to refer to the Court.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: (Inaudible) a moment and find it.

May I submit it in writing after the argument Mr. Chief Justice?

Now, I say it is clearly not a final order.

My opponent raises his hands and says, "What was the -- what was there left for the debtor?"

This is the ultimate thing, the threat of imprisonment.

There was no threat of imprisonment here if he told the truth.

Justice Gellinoff said, "Make bare your status.

If you make bare your status, tell us what you've got.

There will be no arrest provided you make a reasonable offer."

This, the debtor refused to do.

Now, the second point on the question of jurisdiction has to do with what was discussed a moment ago in connection with exhausting state remedies.

Now, what did my opponent do?

He didn't like the Appellate Division of the First Department of the State of New York.

They had -- they treated him summarily and while Justice Gellinoff had given him one line, they didn't give him any lines.

They had -- they denied his motion to vacate -- his appeal from the order of the lower court, denying his application to vacate the default.

So he bypassed them.

He bypassed them because he didn't like them and he -- he hedged -- he hedged in the Court of Appeals.

He filed one notice of appeal as of the right in the New York Court of Appeals asserting a constitutional issue and at the same time, moved for a leave to appeal in the Court of Appeals on the ground that substantial justice here called for an appeal.

Now, he had the right.

He had the alternative remedy at that time.

He had the opportunity to go into the Appellate Division and ask for certification of a constitutional question.

And here again I say that the general practice in the State of New York is that, when an application is made to an Appellate Division for leave to appeal on a certified question, it is the general practice for the Appellate Division if it believes that the question has any substance to certify the question.

And finally I would say, since that -- insofar as jurisdiction is concerned, that since this Court has a rule that only final orders are to be considered by this Court, nothing, no reason, no valid reason is given for departure, nothing at all, and very solemn indeed if ever has this Court given -- taken jurisdiction where a -- where a petitioner has failed to exhaust the remedies available to him in the lower court.

Now, this means this avenue, this ability to go to the Appellate Division and a certified question was opened to him, he rejected it.

Now, what really were the facts here?

For this -- this poor debtor that my opponent has been talking about, Sills of Cambridge is a small tailoring company.

They were factored by Charge-IT Systems Inc.

Mr. Gotthilf was Chairman of the Board and run Charge-IT Systems Inc.

Sills of Chamber to the Corporation deposited some $28,000 worth of accounts receivable with Charged-IT Systems and they paid well for the advances given by Charge-IT Systems against this collateral.

There came a time when there was a dispute.

Cambridge -- Sills of Cambridge Inc. said, "You're overcharging us" and there was a big fight and Charge-IT Systems raised the question about the value of the collateral and they agreed to settle it on this basis.

The two Sills brothers personally who have not previously been personally obligated agreed to pay $13,000 to Charge-IT Systems.

Charge-IT Systems agreed to continue to collect the collateral and because Sills of Cambridge was indebted to the Internal Revenue Service, Gotthilf, that's Charge-IT Systems, agreed to remit from the receipts from the collateral periodically to the Internal Revenue Service so that Sills of Cambridge could be credited with this payment.

Gotthilf drew the agreement.

It was executed.

It's a -- it was next of the complaint in this case.

The Sills brothers paid promptly and over a period of 10 months, they've paid the full $13,000.

And each month, they received their copy of a letter signed by Gotthilf reporting that the copy of a letter sent to the Internal Revenue Service which in substance ran something like this, "Dear Mr. Sprinson," Mr. Sprinson being the man in-charge of the Internal Revenue Service pursuant to our letter of so and so."

You will find enclosed here with our check, so and so for $400 ode covering the payments we received in September from the customer showing on the X list."

We got a thin copy of such a letter.

And in our naïve pay, we assumed that the check had gone out, that the original had gone to the Internal Revenue Service, and so the Sills brothers paid the money periodically.

And then lo and behold, it was discovered that no such payments were ever made for the Internal Revenue Service, nothing at all.

So Gotthilf got his $13,000, kept the money he collected from the collateral, is now residing himself in Florida and my opponent says, "Look what we are doing to this poor exhausted individual, this indigent man whom we are playing alive apparently in the Supreme Court of the United States."

But we started an action and that we alleged this in the action and we got a verified answer and Gotthilf, we sued Gotthilf.

We sued Gotthilf because there was separate torts committed by Gotthilf and committed by the Corporation that he was chair -- of which he was the Chairman of the Board.

And Gotthilf didn't deny our allegations that the checks and letters were never sent to the Internal Revenue Service, not at all.

He said that Sills of Cambridge had deceived him into entering into the agreement.

Therefore, he had kept the proceeds of the -- of the collateral.

He never disavowed the contract.

He continued very politely to pocket the $13,000, but this he asserted as an affirmative defense.

A motion was made to examine him before trial.

He default it.

We telephoned Mr. Palmer's office, he's then attorney that day.

Mr. Palmer said he had abandoned the case.

Now, the argument was raised subsequently by Mr. Palmer that an agreement has been made between Mr. Palmer and myself, that I would abandon the action as against Mr. Gotthilf personally.

I sworn then, I sworn the Appellate Division and I take oath before you gentlemen.

There was never such an agreement.

It would have been preposterous.

Why should I have tried to collect from a corporation which by that time I knew was the fund, Charge-IT Systems be fund?

Why should I chase Charge-IT Systems and not Gotthilf?

It would have been clearly idiotic.

But lower court believed me, the Appellate Division and I asked you.

In any event, we move to examine before trial, he defaulted.

We then move to strike his answer, all noticed, he defaulted.

We have served it with the order.

We then move for an inquest.

And an inquest is the taking of testimony before a judge with the presentation of proof of damage.

We did that.

We brought in -- we brought in the president of our cooperation of sales.

We brought in Mr. Sprinson of the Internal Revenue Service who testified that they've never gotten the money.

Now, strangely enough, Mr. Palmer was given -- who had been given notice of the inquest by me appeared at the inquest and the judge presiding turned to him and said, "We invite you to participate.

We invite you to take part in these proceedings."

He declined.

He turned and walked away and willfully defaulted.

Now, it may be argued that what else could he do?

Well, he could do this if there were no damages.

He was in a position to cross-examine and to present even such proof as he care to present.

But he walked away from the inquest.

So of course the judgment was entered, predicated upon fraud and when the appeal was taken on due notice, the Appellate Division of the First Department affirmed, so that the judgment stood.

Now, the question arose.

How do you get this judgment to like it?

We, then, found Section 764 of the Civil Practice Act which states to the Court may, in its discretion, incarcerate a debtor in certain types of actions.

One of those actions is an action for fraud.

This was clearly an action for fraud.

Now, we didn't go out and arrest this man and take him off the street.

We served him with notice and we went before a Supreme Court judge.

One would think that a debtor in this position would say to a court that, "This is what I have.

This is what I earn.

This is what I expect to pay.

This is how I expect to do the proper thing, the right thing.

This is how I want to win the approval of the Court."

All he did in his affidavit was say that it was a default judgment that it have entered against him, that it was improper, something to the effect that this was a great country and he didn't believe that this should be done to him.

Justice John M. Harlan: Where is that affidavit?

Mr. Theodore Charnas: There is such an affidavit in the record sir.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: I believe so sir.

I believe so.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: Now, this is in the -- in the record.

In the record at page 14 and 15 where he tells a story and incidentally at this point he says on page 15 at paragraph 18, "I am present.

I am available for supplementary proceedings."

But in the reply brief that we received from his counsel, there was the statement that at that time, Gotthilf was on the run.

He says at another point in this affidavit.

He would be available for examination something about the proceedings.

He would do the proper thing if the Court only was kind to him, but he's flat.

In any event, he did not initially present an affidavit that made any impression on the Court.

Now, the judge did not summarily say to him --

Justice Hugo L. Black: May I ask you under your state law?

Mr. Theodore Charnas: Yes sir.

Pardon sir?

Justice Hugo L. Black: May I ask you under your state law?

I've just read this.

I've had a hard time finding what just your law is on this.

Mr. Theodore Charnas: We do too sir.

Justice Hugo L. Black: Suppose he had come in and said, "I have no money.

Mr. Theodore Charnas: He wouldn't --

Justice Hugo L. Black: I didn't get any money."

Mr. Theodore Charnas: On the -- our case law judge, no judge would have sent him to jail.

Justice Hugo L. Black: So where is that in the statute and --

Mr. Theodore Charnas: It is --

Justice Hugo L. Black: -- where is that in any indication?

Mr. Theodore Charnas: It is --

Justice Hugo L. Black: -- that he could have put up that defense.

Mr. Theodore Charnas: It is not in the statute.

It is not in that statute, but there is a Section of a debtor and creditor law to which I advert in my brief.

Justice Hugo L. Black: Is it cited?

Mr. Theodore Charnas: It is cited sir --

Justice Hugo L. Black: -- quoted.

Mr. Theodore Charnas: It is -- Pardon?

Justice Hugo L. Black: Is it quoted in your brief?

Mr. Theodore Charnas: It is not quoted but it is cited.

The debtor and creditor law which says, that if a man is incarcerated, a non-petition shows that he has no asset.

He must be released.

Now, I say that an examination of our case law will show that if a man makes the statement that he has no asset, that man will not be incarcerated.

This is our practice in New York.

Justice Hugo L. Black: What if given an order, directing him to come in and answer that way before this arrest order was made a notice to that effect.

Mr. Theodore Charnas: A notice was given to him in the order in which the Court handed down.

Let me explain.

When this man, Gotthilf, submitted this people affidavit in our position to the motion to -- for a body execution, the judge didn't say, "Send him to jail."

The judge handed down a decision, an opinion which is in the record at page -- page 44 or 45 -- 45 and the judge said, "The defendant will be granted an opportunity of a --" forgive me.

Let me go back a sentence.

All that he appeals to the discretion of the Court --

Justice Hugo L. Black: It's page 44?

Mr. Theodore Charnas: 45, the top --

Justice Hugo L. Black: 45.

Mr. Theodore Charnas: -- of the page.

The second line, although he appeals to the discretion of the Court, the defendant has neglected to bear completely his present financial status and future prospects and to present any plan for payment of the judgment.

Now, the Court said, "The defendant will be granted an opportunity to do so, by serving and filing an additional affidavit."

This certainly was no summary act on the part of --

Justice Hugo L. Black: Yes, but to make an -- under your law, now what I am trying to find that, does your law provide law for putting a man in prison for failing to pay his debts?

Mr. Theodore Charnas: I say it does not and the -- I guess this is a crucial question in this appeal.

I say it does not, first, because the term imprisonment for debt would seem to exclude any alternatives except the payment of the debt or imprisonment.

In other words, either you pay or you go to jail.

This is not our practice.

All you have to do to avoid jail is to make an honest disclosure that you have no assets.

As a matter of fact, if there is anything --

Justice Hugo L. Black: Pardon me but our judge here that you have a rule and practice as a mean of excise in this case, say to a man, "Well now, before we decide whether we put him in jail or not, we will give you a chance to agree to pay this in the future."

Mr. Theodore Charnas: If you have means, show us what you've got.

What have you got?

Now, he submitted a second affidavit at this point and he showed that in the -- in a month and a half prior to this session of -- with the judge, he had earned approximately $1300.

Well, what happened -- $1300 or $3000, forgive me, I maybe and I believe it is $3000, $3100.

Well, what did they do with the $3100?

And wouldn't you think that if a man were in this position that he would come before a judge, he was inclined to grant him all of the consideration possible that he would come forth and say, "I will pay $500 on account."

I tell you that as a -- as the chairman of the Association of -- of National Accountants which as he -- what he described his self at.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: Yes, now, just --

Justice Byron R. White: You don't argue or you don't (Inaudible)

Mr. Theodore Charnas: His supplemental affidavit about --

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: About the $3100 certainly, it's here.

Unknown Speaker: (Inaudible)

Mr. Theodore Charnas: Yes.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: Well, this is what he was doing.

He did not disclose what he has.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: Well, he's just gotten $3100.

If -- if we were to accept the word, just the bear word of any debtor who said, "I have nothing," this would be impossible.

He didn't disclose how he live, how he ate, how he supported his wife, how much rent he paid and then he proposed to enter into a game with the Court.

Justice Arthur J. Goldberg: Mr. Charnas, so your argument is (Inaudible)

Mr. Theodore Charnas: Well --

Justice Arthur J. Goldberg: This was a violation (Inaudible)

Mr. Theodore Charnas: Your Honor, this --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: You are entirely correct and in preparing this argument, I may say very frankly that the question presented itself to me, how does this kind of procedure line up with the procedure for contempt?

I tried to see how I could present it to you in some credible fashion.

Now, take a man who owes money and as a judgment against him and he's examined in proceedings supplementary to execution.

The man is -- an inquiry has had and assumed that the man refuses to make a disclosure.

The attorney for the creditor takes him before the Court.

The Court says, "Tell a story.

The fellow is not candid."

The Court says, "I will send you to jail."

Now mind you, this is in the case of a judgment arising from an action ex-contract to whether there isn't the slightest question of any wrong doing inso -- or any malice which is founded in the judgment per se.

And yet, in this contempt, no one would question the authority.

At least, I haven't heard anybody lately question the authority of the Court to send this disobedience, this obstructive debtor.

Justice Arthur J. Goldberg: That didn't hold the key to release the (Voice Overlap) --

Mr. Theodore Charnas: In his own hand.

So does this one under the case law, so does this --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Theodore Charnas: Well, I -- I believe -- I believe Judge that I am not going to say that there -- that the contempt procedure is on all force with this.

I realized that there are areas of difference and nevertheless, I feel something different.

Why should a debt or an obligation arising out of a fraud?

Why should that be treated with any less respect than an ordinary debt arising from a contract --

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: There is nothing in the statute but there is in the cases insofar as our interpretation of them as being synonymous with the cases having to do with contempt.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: That's right, proving that he can't pay it.

All he has to do is say, "I can't pay and I haven't got it and I'll show you why."

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: Yes, not -- not by the -- not by the conclusory statement Judge, but by presenting facts to show why.

In other words, if I were to examine the supplemental proceedings in my --

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: There is a --

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: There is a Section of the debtor and creditor law.

I think at Section 122.

I don't -- I'm not sure to which I refer in my brief where that is the fact, namely, that upon presentation of proof by a person incarcerated that he has no asset in a situation like this, he would be released.

Justice Hugo L. Black: Well, you do have here, do you not?

Whatever you call it, I'm not sure.

An order what you call a body execution --

Mr. Theodore Charnas: Yes sir.

Justice Hugo L. Black: -- that's the corrective judgment, isn't it?

It's not for the -- because he failed to testify, is it?

Is there any statement in the record in the order that shows he is ordered to go to jail because he failed to testify?

Mr. Theodore Charnas: There is a -- that question points up this problem.

But their only difference between this situation and the contempt is that in the contempt, you have a direct order by a court directing the defendant to do so and so failing which contempt issue is incarceration.

In our situation --

Justice Hugo L. Black: The Court directed him to pay money in your State with the burden and -- would the burden be on him to show that he didn't have money, a burden on the State to show he did have money before they put him in jail?

Mr. Theodore Charnas: The burden would be on a person who wanted to show that he had assets.

But how could that person show it unless he examined it.

Justice Hugo L. Black: Well I -- your order, however, I didn't see anything under -- because the order is based on the failure to give everything.

Mr. Theodore Charnas: There --

Justice Hugo L. Black: Maybe it's not materially your point that I don't -- I don't understand.

Mr. Theodore Charnas: It is -- it is significant.

The very fact that you asked the question makes it significant.

The -- the point -- the point that I'm trying to make is, that it is true that there is no direct order here by the judge who said, "Make a disclosure."

But the judge didn't need that sanction.

In the contempt, the Court had the inherent power to send this man to jail.

Justice Hugo L. Black: For what?

Mr. Theodore Charnas: For failure to comply with the court order.

Justice Hugo L. Black: Which order?

Mr. Theodore Charnas: If the Court should give an order where there are contempts.

Justice Hugo L. Black: Which order here?

Mr. Theodore Charnas: In this case, there is no order and it isn't necessary because the Legislature gave the Court a power through Section 764 to send him to jail --

Justice Hugo L. Black: For failing to pay a debt?

Mr. Theodore Charnas: -- if -- if the Court -- at the Court's discretion and the issue arises around when is the -- as when is the discretion exercised.

Now, up until 1936 or 1940, the words subject to the Court's discretion were not found in the law.

Early -- early in the century, courts interpreted this language that you may put a debtor in jail under these circumstances to mean that there was no discretion.

This was automatic.

In 1905, for example, there is such a case cited by my opponent in 1905 with any cites of -- with great (Inaudible) over the situation.

But the fact is that in 1940 that -- even before 1940, the case law that developed indicated that where the Court found that the debtor was being honest with the Court, the Court would exercise its discretion in not sending him to jail.

And in 1940, the words subject to the discretion of the Court were incorporated within the statute and they have been consistently so interpreted by the cases.

Justice Hugo L. Black: How would that -- suppose -- suppose it'd be true that the law is now, if the judge is restricted by five or what restriction is, by putting a man in jail for debt to his discretion, how would that enable you to escape the constitutional question you have presented, wholly it is limited to discretion?

Is that what you're saying your statute is that it authorizes the judge to use, say, a body execution, which I understand is put him to jail because of the judgment?

Is the fact that the judge cannot only does that in his discretion, does that save the statute from challenge?

Mr. Theodore Charnas: Certainly does because that's not imprisonment for debt.

Imprisonment for debt is you either pay or go to jail.

In this situation, tell the truth to the judge --

Justice Hugo L. Black: (Voice Overlap) --

Mr. Theodore Charnas: -- the judge wouldn't send you to jail.

Justice Hugo L. Black: -- then you get to the fact that that's not the order.

Now, of course, if these were recognized and had been labeled for before a crime, undoubtedly, you're going to have a precise statute before you put a man behind the bar.

Here, you -- you say that by looking through the petitioner which inclined that -- maybe the judge wouldn't have done it (Voice Overlap) --

Mr. Theodore Charnas: I say there is no case in the State of New York and it is the established case law that no debtor who tells the Court the truth with relation to his circumstances has been incarcerated.

I don't mean to presume, there's a red light here.

Unknown Speaker: (Inaudible)

Mr. Theodore Charnas: Your Honor has phrased that far better than I could.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: That is correct.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: That is correct, sir.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: That -- this Court means one of three things, pay, make an honest disclosure or go to jail.

Your Honor phrased it.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: He has three alternatives, not two but three and that's why I say this is not an imprisonment for debt.

Justice Byron R. White: (Inaudible)

Mr. Theodore Charnas: I do, I do from a -- a sincere review of the case.

Chief Justice Earl Warren: Are those cases in the brief?

Mr. Theodore Charnas: Yes, sir.

I might say that they are closely related to the -- to the contempt which Judge Goldberg commented on.

But I've tried to be very honest with the Court, indicating that I believe there's a tremendous area of -- of similarity recognizing on the other hand that they have debt.

Chief Justice Earl Warren: Very well.

Mr. Theodore Charnas: Thank you very much.

Justice Hugo L. Black: I suppose -- suppose you would agree with (Inaudible) New York had (Inaudible) committed a crime to engage in this alleged fraud that these provisions for which you've referred will be too indefinite to justify conviction on, wouldn't you?

Mr. Theodore Charnas: Oh, I don't see how New York could make it a crime under the circumstances.

The only sanction -- this is a sanction to compel debtor to make an honest disclosure.

It's not the kind of thing that says, "It's either or, either jail or pay."

Justice Arthur J. Goldberg: Mr. Charnas, (Inaudible) --

Mr. Theodore Charnas: I beg your pardon?

Justice Arthur J. Goldberg: -- is it not the -- is it not the judge or (Inaudible) his discretion that he reveals that you are earning so much money whether $300 (Inaudible) if you don't continue that failure?

Mr. Theodore Charnas: Well, I don't think that would be the normal way of handling this because this is an unusual situation where the -- this is not the kind of thing where you bring -- where you have a debtor before a judge and the judge says, "Well, disclose what you've got, and on the basis of what you tell me," the judge might say, "Well, if you don't pay $10 a week, I would consider this to be flouting the dignity of the Court.

I'm going to send you to jail."

Now, that might well be, sir.

That might very well be the situation even here, but this is the most unusual situation, this man, fleeing the State before that making no disclosure and leaving us here while he's in Florida.

Thank you very much.

Chief Justice Earl Warren: Mr. Rogge.

Rebuttal of O. John Rogge

Mr. O. John Rogge: May it please the Court.

I want to challenge the statements that there is any case either in the Court of Appeals or any place else in the State of New York which says that if you make a full disclosure, you don't have to go to jail.

There isn't any such case or I've overlooked it.

Now, when counsel says, "Full disclosure wasn't made them in this affidavit," he's also attacking me because I sat down with the client and helped him prepare those affidavits.

And Your Honors will find the first one at pages -- of the record, pages 10 to 15.

And I end up by saying there and I thought this was a good affidavit.

He has to point out he is a certified public accountant.

And he says, "I am present and available for any supplementary proceedings which the attorneys for the plaintiff may wish to conduct and I will continue to be present."

He offers to pull his bond to be present.

The judge said that it isn't good enough.

I prepared a supplementary affidavit and this is one at pages 21 and 22, and I think I know how to ask questions.

I asked him, "What's he got, does he have office furniture?

Does he have an automobile?

Does his wife have a fur coat?"

Incidentally, the judge asked all those questions in chambers too.

He didn't have anything except his income.

So I prepared a supplemental affidavit in which I -- in which I say to the judge in his file, "I have no assets and the only income that I received is from my business."

He puts in there what his income is for the last four years.

This was a disastrous venture form.

He lost everything he had and his wife had.

I then go in and I argued with him.

I said, "Let's offer a 25% of net income."

He then wanted -- before or after taxes.

I said, "Don't push with that, offer a straight 25% from now on of what you make."

But I said, "Let's put in a final paragraph."

And he did.

I said, "My heart pumps me to add two further flaws," and they both stand from the fear that I have not appealed.

He's only speaking, if you please, that I have not appealed through Your Honors' discretion despite the fact that I have offered to do a little more than I think I can.

The first thought is that he at my offer of 25% of my net income is not high enough in the Court's opinion that I will try to comply with what the Court suggests.

It ought to be.

And the Court wouldn't make a suggestion except yes.

The judge didn't say this to me.

He said, "From my experience, I know this kind of people.

They'll pay if I enter the order."

That was the judge.

He goes on here to say in this affidavit, the second thought is this, "If the Court does grant the motion for body execution, my life is through.

I'll have to leave the State or go to jail," and he does leave the State.

I challenged all the statements that he didn't bare his status because I was there with him in questioning.

And the judge put the same questions.

The judge asked about fur coat, about jewels.

The judge went further to ask some questions.

I didn't -- what about his sons?

Don't they have money?

Are there any relatives or families that have money and still in spite of all of these, the judge enters this body execution order under which he can either pay or go to jail for six months.

There isn't any alternative, at least there wasn't in the way in which this judge applied 764 and that's the question that is before this Court.

It was either you pay half now, you flip security for the balance or you go to jail for six months.

And that's what I'm challenging.