OGDEN V. SAUNDERS, 25 U. S. 213 (1827) -- US Supreme Court Cases from Justia & Oyez

A bankrupt or insolvent law of any state which discharges both the person of the debtor and his future acquisitions of property is not "a law impairing the obligation of contracts" so far as respects debts contracted subsequent to the passage of such law in those cases where the contract was made between citizens of the state under whose laws the discharge was obtained and in whose courts the discharge may be pleaded.

The power given to the United States by the Constitution, "to establish uniform laws on the subject of bankruptcies throughout the United States" is not exclusive of the right of the states to legislate on the same subject except when the power is actually in exercise by Congress and the laws of the state are in conflict with the law of the United States.

But when in the exercise of that power the states pass beyond their own limits and the rights of their own citizens and act upon the rights of citizens of other states, there arise a conflict of sovereign power and a collision with the judicial powers granted to the United States which render the exercise of such a power incompatible with the rights of other states and with the Constitution of the United States.

This was an action of assumpsit, brought in the court below

Page 25 U. S. 214

by the defendant in error, Saunders, a citizen of Kentucky, against the plaintiff in error, Ogden, a citizen of Louisiana. The plaintiff below declared upon certain bills of exchange drawn on the 30 September, 1806, by one Jordan, at Lexington, in the State of Kentucky, upon the defendant below, Ogden, in the City of New York, the defendant then being a citizen and resident of the State of New York, accepted by him at the City of New York and protested for nonpayment.

The defendant below pleaded several pleas, among which was a certificate of discharge under the act of the Legislature of the State of New York of April 3, 1801, for the relief of insolvent debtors, commonly called the Three-Fourths Act.

The jury found the facts in the form of a special verdict, on which the court rendered a judgment for the plaintiff below, and the cause was brought by writ of error before this Court.

Page 25 U. S. 254

The learned judges delivered their opinions as follows:

MR. JUSTICE WASHINGTON.

The first and most important point to be decided in this cause turns essentially upon the question, whether the obligation of a contract is impaired by a state bankrupt or insolvent law which discharges the person and the future acquisitions of the debtor from his liability under a contract entered into in that state after the passage of the act.

This question has never before been distinctly presented to the consideration of this Court and decided, although it has been supposed by the judges of a highly respectable state court, that it was decided in the case of McMillan v. McNiel, 4 Wheat. 209. That was the case of a debt contracted by two citizens of South Carolina in that state, the discharge of which had a view to no other state. The debtor afterwards removed to the Territory of Louisiana, where he was regularly discharged as an insolvent from all his debts under an act of the legislature of that state passed prior to the time when the debt in question was contracted. To an action brought by the creditor in the District Court of Louisiana, the defendant plead in bar his discharge under the law of that territory, and it was contended by the counsel for the debtor in this Court that the law under which the debtor was discharged having passed before the contract was made, it could not be said to impair its obligation. The cause was argued on one side only, and it would seem from the report of the case that no written opinion was prepared by the Court. THE CHIEF JUSTICE stated that the circumstance of the state law under which the debt was attempted to be discharged having been passed before the debt was contracted made no difference in the application of the principle, which had been asserted by the

Page 25 U. S. 255

Court in the case of Sturges v. Crowninshield. The correctness of this position is believed to be incontrovertible. The principle alluded to was that a state bankrupt law which impairs the obligation of a contract is unconstitutional in its application to such contract. In that case, it is true, the contract preceded in order of time the act of assembly under which the debtor was discharged, although it was not thought necessary to notice that circumstance in the opinion which was pronounced. The principle, however, remained in the opinion of the Court delivered in McMillan v. McNiel, unaffected by the circumstance that the law of Louisiana preceded a contract made in another state, since that law, having no extraterritorial force, never did at any time govern or affect the obligation of such contract. It could not, therefore, be correctly said to be prior to the contract in reference to its obligation, since if, upon legal principles, it could affect the contract, that could not happen until the debtor became a citizen of Louisiana, and that was subsequent to the contract. But I hold the principle to be well established that a discharge under the bankrupt laws of one government does not affect contracts made or to be executed under another, whether the law be prior or subsequent in the date to that of the contract, and this I take to be the only point really decided in the case alluded to. Whether THE CHIEF JUSTICE was correctly understood by the reporter when he is supposed to have said "that this case was not distinguishable in principle from the preceding case of Sturges v. Crowninshield" it is not material at this time to inquire, because I understand the meaning of these expressions to go no further than to intimate that there was no distinction between the cases as to the constitutional objection, since it professed to discharge a debt contracted in another state, which, at the time it was contracted, was not within its operation nor subject to be discharged by it. The case now to be decided is that of a debt contracted in the State of New York by a citizen of that state, from which he was discharged, so far as he constitutionally could be, under a bankrupt law of that state in force at the time when the debt was contracted. It is a case, therefore, that bears no resemblance to the one just noticed.

Page 25 U. S. 256

I come now to the consideration of the question, which for the first time has been directly brought before this Court for judgment. I approach it with more than ordinary sensibility not only on account of its importance, which must be acknowledged by all, but of its intrinsic difficulty, which every step I have taken in arriving at a conclusion with which my judgment could in any way be satisfied has convinced me attends it. I have examined both sides of this great question with the most sedulous care and the most anxious desire to discover which of them, when adopted, would be most likely to fulfill the intentions of those who framed the Constitution of the United States. I am far from asserting that my labors have resulted in entire success. They have led me to the only conclusion by which I can stand with any degree of confidence, and yet I should be disingenuous were I to declare from this place that I embrace it without hesitation and without a doubt of its correctness. The most that candor will permit me to say upon the subject is that I see, or think I see, my way more clear on the side which my judgment leads me to adopt than on the other, and it must remain for others to decide whether the guide I have chosen has been a safe one or not.

It has constantly appeared to me throughout the different investigations of this question to which it has been my duty to attend that the error of those who controvert the constitutionality of the bankrupt law under consideration, in its application to this case, if they be in error at all, has arisen from not distinguishing accurately between a law which impairs a contract and one which impairs its obligation. A contract is defined by all to be an agreement to do or not to do some particular act, and in the construction of this agreement, depending essentially upon the will of the parties between whom it is formed, we seek for their intention with a view to fulfill it. Any law, then, which enlarges, abridges, or in any manner changes this intention, when it is discovered, necessarily impairs the contract itself, which is but the evidence of that intention. The manner, or the degree in which this change is effected can in no respect influence this conclusion, for whether the law affect the validity, the construction, the duration, the mode of

Page 25 U. S. 257

discharge, or the evidence of the agreement, it impairs the contract, though it may not do so to the same extent in all the supposed cases. Thus, a law which declares that no action shall be brought whereby to charge a person upon his agreement to pay the debt of another, or upon an agreement relating to lands, unless the same be reduced to writing impairs a contract made by parol, whether the law precede or follow the making of such contract, and if the argument that this law also impairs, in the former case, the obligation of the contract be sound, it must follow that the statute of frauds, and all other statutes which in any manner meddle with contracts, impair their obligation and are consequently within the operation of this section and article of the Constitution. It will not do to answer that in the particular case put and in others of the same nature, there is no contract to impair, since the preexisting law denies all remedy for its enforcement, or forbids the making of it, since it is impossible to deny that the parties have expressed their will in the form of a contract notwithstanding the law denies to it any valid obligation.

This leads us to a critical examination of the particular phraseology of that part of the above section which relates to contracts. It is a law which impairs the obligation of contracts, and not the contracts themselves, which is interdicted. It is not to be doubted that this term "obligation," when applied to contracts, was well considered and weighed by those who framed the Constitution and was intended to convey a different meaning from what the prohibition would have imported without it. It is this meaning of which we are all in search.

What is it, then, which constitutes the obligation of a contract? The answer is given by THE CHIEF JUSTICE in the case of Sturges v. Crowninshield, to which I readily assent now as I did then; it is the law which binds the parties to perform their agreement. The law, then, which has this binding obligation, must govern and control the contract in every shape in which it is intended to bear upon it, whether it affect its validity, construction, or discharge.

But the question which law is referred to in the above

Page 25 U. S. 258

definition still remains to be solved. It cannot for a moment be conceded that the mere moral law is intended, since the obligation which that imposes is altogether of the imperfect kind, which the parties to it are free to obey or not as they please. It cannot be supposed that it was with this law the grave authors of this instrument were dealing.

The universal law of all civilized nations which declares that men shall perform that to which they have agreed has been supposed by the counsel who have argued this cause for the defendant in error to be the law which is alluded to, and I have no objection to acknowledging its obligation, whilst I must deny that it is that which exclusively governs the contract. It is upon this law that the obligation which nations acknowledge to perform their compacts with each other is founded, and I therefore feel no objection to answer the question asked by the same counsel -- what law it is which constitutes the obligation of the compact between Virginia and Kentucky? -- by admitting that it is this common law of nations which requires them to perform it. I admit further that it is this law which creates the obligation of a contract made upon a desert spot, where no municipal law exists, and (which was another case put by the same counsel) which contract, by the tacit assent of all nations, their tribunals are authorized to enforce.

But can it be seriously insisted that this, any more than the moral law upon which it is founded, was exclusively in the contemplation of those who framed this Constitution? What is the language of this universal law? It is simply that all men are bound to perform their contracts. The injunction is as absolute as the contracts to which it applies. It admits of no qualification and no restraint, either as to its validity, construction, or discharge, further than may be necessary to develop the intention of the parties to the contract. And if it be true that this is exclusively the law to which the Constitution refers us, it is very apparent that the sphere of state legislation upon subjects connected with the contracts of individuals would be abridged beyond what it can for a moment be believed the sovereign states of this Union would have consented to, for it will be found upon examination that there are few laws which concern the general

Page 25 U. S. 259

police of a state or the government of its citizens in their intercourse with each other or with strangers which may not in some way or other affect the contracts which they have entered into or may thereafter form. For what the laws of evidence, or which concern remedies -- frauds and perjuries -- laws of registration, and those which affect landlord and tenant, sales at auction, acts of limitation, and those which limit the fees of professional men, and the charges of tavern keepers, and a multitude of others which crowed the codes of every state, but laws which may affect the validity, construction, or duration, or discharge of contracts? Whilst I admit, then, that this common law of nations, which has been mentioned, may form in part the obligation of a contract, I must unhesitatingly insist that this law is to be taken in strict subordination to the municipal laws of the land where the contract is made or is to be executed. The former can be satisfied by nothing short of performance; the latter may affect and control the validity, construction, evidence, remedy, performance and discharge of the contract. The former is the common law of all civilized nations and of each of them; the latter is the peculiar law of each, and is paramount to the former whenever they come in collision with each other.

It is, then, the municipal law of the state, whether that be written or unwritten, which is emphatically the law of the contract made within the state, and must govern it throughout wherever its performance is sought to be enforced.

It forms, in my humble opinion, a part of the contract and travels with it wherever the parties to it may be found. It is so regarded by all the civilized nations of the world, and is enforced by the tribunals of those nations according to its own forms unless the parties to it have otherwise agreed, as where the contract is to be executed in or refers to the laws of some other country than that in which it is formed or where it is of an immoral character or contravenes the policy of the nation to whose tribunals the appeal is made, in which latter cases the remedy which the comity of nations affords for enforcing the obligation of contracts wherever formed is denied. Free from these objections, this law, which accompanies the contract as forming a part of

Page 25 U. S. 260

it, is regarded and enforced everywhere, whether it affect the validity, construction, or discharge of the contract. It is upon this principle of universal law that the discharge of the contract, or of one of the parties to it, by the bankrupt laws of the country where it was made operates as a discharge everywhere.

If then, it be true that the law of the country where the contract is made or to be executed forms a part of that contract and of its obligation, it would seem to be somewhat of a solecism to say that it does, at the same time, impair that obligation.

But it is contended that if the municipal law of the state where the contract is so made forms a part of it, so does that clause of the Constitution which prohibits the states from passing laws to impair the obligation of contracts, and consequently that the law is rendered inoperative by force of its controlling associate. All this I admit, provided it be first proved that the law so incorporated with and forming a part of the contract does in effect impair its obligation, and before this can be proved, it must be affirmed and satisfactorily made out that if, by the terms of the contract, it is agreed that on the happening of a certain event -- as upon the future insolvency of one of the parties and his surrender of all his property for the benefit of his creditors -- the contract shall be considered as performed and at an end, this stipulation would impair the obligation of the contract. If this proposition can be successfully affirmed, I can only say that the soundness of it is beyond the reach of my mind to understand.

Again it is insisted that if the law of the contract forms a part of it, the law itself cannot be repealed without impairing the obligation of the contract. This proposition I must be permitted to deny. It may be repealed at any time at the will of the legislature, and then it ceases to form any part of those contracts which may afterwards be entered into. The repeal is no more void than a new law would be which operates upon contracts to affect their validity, construction, or duration. Both are valid (if the view which I take of this case be correct), as they may affect contracts afterwards formed; but neither are so if it bears upon existing contracts, and in the former case, in which the repeal

Page 25 U. S. 261

contains no enactment, the Constitution would forbid the application of the repealing law to past contracts, and to those only.

To illustrate this argument, let us take four laws, which, either by new enactments, or by the repeal of former laws, may affect contracts as to their validity, construction, evidence, or remedy.

Laws against usury are of the first description.

A law which converts a penalty stipulated for by the parties as the only atonement for a breach of the contract into a mere agreement for a just compensation, to be measured by the legal rate of interest, is of the second.

The statute of frauds and the statute of limitations may be cited as examples of the two last.

The validity of these laws can never be questioned by those who accompany me in the view which I take of the question under consideration, unless they operate, by their express provisions, upon contracts previously entered into, and even then they are void only so far as they do so operate, because in that case and in that case only do they impair the obligation of those contracts. But if they equally impair the obligation of contracts subsequently made, which they must do if this be the operation of a bankrupt law upon such contracts, it would seem to follow that all such laws, whether in the form of new enactments, or of repealing laws producing the same legal consequences, are made void by the Constitution, and yet the counsel for the defendants in error have not ventured to maintain so alarming a proposition.

If it be conceded that those laws are not repugnant to the Constitution so far as they apply to subsequent contracts, I am yet to be instructed how to distinguish between those laws and the one now under consideration. How has this been attempted by the learned counsel who have argued this cause upon the ground of such a distinction?

They have insisted that the effect of the law first supposed is to annihilate the contract in its birth, or rather to prevent it from having a legal existence, and consequently that there is no obligation to be impaired. But this is clearly not so, since it may legitimately avoid all contracts afterwards

Page 25 U. S. 262

entered into which reserve to the lender a higher rate of interest than this law permits.

The validity of the second law is admitted, and yet this can only be in its application to subsequent contracts, for it has not and I think it cannot for a moment be maintained that a law which in express terms varies the construction of an existing contract or which, repealing a former law, is made to produce the same effect does not impair the obligation of that contract.

The statute of frauds and the statute of limitations, which have been put as examples of the third and fourth classes of laws, are also admitted to be valid because they merely concern the modes of proceeding in the trial of causes. The former, supplying a rule of evidence, and the latter, forming a part of the remedy given by the legislature to enforce the obligation and likewise providing a rule of evidence.

All this I admit. But how does it happen that these laws, like those which affect the validity and construction of contracts, are valid as to subsequent, and yet void as to prior and subsisting contracts? For we are informed by the learned judge who delivered the opinion of this Court in the case of Sturges v. Crowninshield that

"if, in a state where six years may be pleaded in bar to an action of assumpsit, a law should pass declaring that contracts already in existence, not barred by the statute, should be construed within it, there could be little doubt of its unconstitutionality."

It is thus most apparent that whichever way we turn, whether to laws affecting the validity, construction, or discharges of contracts or the evidence or remedy to be employed in enforcing them, we are met by this overruling and admitted distinction between those which operate retrospectively and those which operate prospectively. In all of them the law is pronounced to be void in the first class of cases and not so in the second.

Let us stop, then, to make a more critical examination of the act of limitations, which, although it concerns the remedy, or, if it must be conceded, the evidence, is yet void or otherwise, as it is made to apply retroactively, or prospectively, and see if it can, upon any intelligible principle, be distinguished

Page 25 U. S. 263

from a bankrupt law when applied in the same manner. What is the effect of the former? The answer is to discharge the debtor and all his future acquisitions from his contract, because he is permitted to plead it in bar of any remedy which can be instituted against him, and consequently in bar or destruction of the obligation which his contract imposed upon him. What is the effect of a discharge under a bankrupt law? I can answer this question in no other terms than those which are given to the former question. If there be a difference, it is one which, in the eye of justice at least, is more favorable to the validity of the latter than of the former, for in the one, the debtor surrenders everything which he possesses towards the discharge of his obligation, and in the other he surrenders nothing, and sullenly shelters himself behind a legal objection with which the law has provided him for the purpose of protecting his person and his present as well as his future acquisitions against the performance of his contract.

It is said that the former does not discharge him absolutely from his contract, because it leaves a shadow sufficiently substantial to raise a consideration for a new promise to pay. And is not this equally the case with a certificated bankrupt, who afterwards promises to pay a debt from which his certificate had discharged him? In the former case, it is said, the defendant must plead the statute in order to bar the remedy and to exempt him from his obligation. And so, I answer, he must plead his discharge under the bankrupt law and his conformity to it in order to bar the remedy of his creditor and to secure to himself a like exemption. I have, in short, sought in vain for some other grounds on which to distinguish the two laws from each other than those which were suggested at the bar. I can imagine no other, and I confidently believe that none exists which will bear the test of a critical examination.

To the decision of this Court made in the case of Sturges v. Crowninshield, and to the reasoning of the learned judge who delivered that opinion, I entirely submit, although I did not then, nor can I now bring my mind to concur in that part of it which admits the constitutional power of the state legislatures to pass bankrupt laws, by which I understand those laws which discharge the person and the future

Page 25 U. S. 264

acquisitions of the bankrupt from his debts. I have always thought that the power to pass such a law was exclusively vested by the Constitution in the Legislature of the United States. But it becomes me to believe that this opinion was and is incorrect, since it stands condemned by the decision of a majority of this Court, solemnly pronounced.

After making this acknowledgment, I refer again to the above decision with some degree of confidence, in support of the opinion to which I am now inclined to come that a bankrupt law which operates prospectively, or insofar as it does so operate, does not violate the Constitution of the United States. It is there stated

"that until the power to pass uniform laws on the subject of bankruptcies be exercised by Congress, the states are not forbidden to pass a bankrupt law, provided it contain no principle which violates the tenth section of the first article of the Constitution of the United States."

The question in that case was whether the law of New York passed on the third of April, 1811, which liberates not only the person of the debtor but discharges him from all liability for any debt contracted previous as well as subsequent to his discharge on his surrendering his property for the use of his creditors was a valid law under the Constitution in its application to a debt contracted prior to its passage? The Court decided that it was not upon the single ground that it impaired the obligation of that contract. And if it be true that the states cannot pass a similar law to operate upon contracts subsequently entered into, it follows inevitably either that they cannot pass such laws at all, contrary to the express declaration of the Court as before quoted, or that such laws do not impair the obligation of contracts subsequently entered into; in fine, it is a self-evident proposition that every contract that can be formed must either precede or follow any law by which it may be affected.

I have, throughout the preceding part of this opinion, considered the municipal law of the country where the contract is made as incorporated with the contract, whether it affects its validity, construction, or discharge. But I think it quite immaterial to stickle for this position if it be conceded to me what can scarcely be denied -- that this munich pal

Page 25 U. S. 265

law constitutes the law of the contract so formed, and must govern it throughout. I hold the legal consequences to be the same, in whichever view the law, as it affects the contract, is considered.

I come now to a more particular examination and construction of the section under which this question arises, and I am free to acknowledge that the collocation of the subjects for which it provides has made an irresistible impression upon my mind, much stronger, I am persuaded, than I can find language to communicate to the minds of others.

It declares that "no state shall coin money, emit bills of credit, make anything but gold and silver coin a tender in payment of debts." These prohibitions, associated with the powers granted to Congress "to coin money, and to regulate the value thereof, and of foreign coin," most obviously constitute members of the same family, being upon the same subject and governed by the same policy.

This policy was to provide a fixed and uniform standard of value throughout the United States by which the commercial and other dealings between the citizens thereof, or between them and foreigners, as well as the monied transactions of the government, should be regulated. For it might well be asked why vest in Congress the power to establish a uniform standard of value by the means pointed out if the states might use the same means, and thus defeat the uniformity of the standard, and, consequently, the standard itself? And why establish a standard at all, for the government of the various contracts which might be entered into, if those contracts might afterwards be discharged by a different standard, or by that which is not money, under the authority of state tender laws? It is obvious, therefore, that these prohibitions in the 10th section are entirely homogeneous, and are essential to the establishment of a uniform standard of value in the formation and discharge of contracts. It is for this reason, independent of the general phraseology which is employed, that the prohibition in regard to state tender laws will admit of no construction which would confine it to state laws which have a retrospective operation.

Page 25 U. S. 266

The next class of prohibitions contained in this section consists of bills of attainder, ex post facto laws, and laws impairing the obligation of contracts.

Here, too, we observe, as I think, members of the same family brought together in the most intimate connection with each other. The states are forbidden to pass any bill of attainder or ex post facto law, by which a man shall be punished criminally or penally by loss of life of his liberty, property, or reputation for an act which, at the time of its commission, violated no existing law of the land. Why did the authors of the Constitution turn their attention to this subject, which, at the first blush, would appear to be peculiarly fit to be left to the discretion of those who have the police and good government of the state under their management and control? The only answer to be given is because laws of this character are oppressive, unjust, and tyrannical, and as such are condemned by the universal sentence of civilized man. The injustice and tyranny which characterizes ex post facto laws consists altogether in their retrospective operation, which applies with equal force, although not exclusively, to bills of attainder.

But if it was deemed wise and proper to prohibit state legislation as to retrospective laws, which concern almost exclusively the citizens and inhabitants of the particular state in which this legislation takes place, how much more did it concern the private and political interests of the citizens of all the states in their commercial and ordinary intercourse with each other that the same prohibition should be extended civilly to the contracts which they might enter into?

If it were proper to prohibit a state legislature to pass a retrospective law which should take from the pocket of one of its own citizens a single dollar as a punishment for an act which was innocent at the time it was committed, how much more proper was it to prohibit laws of the same character precisely which might deprive the citizens of other states, and foreigners, as well as citizens of the same state, of thousands to which by their contracts they were justly entitled and which they might possibly have realized but for such state interference? How natural, then, was it, under

Page 25 U. S. 267

the influence of these considerations, to interdict similar legislation in regard to contracts by providing that no state should pass laws impairing the obligation of past contracts? It is true that the two first of these prohibitions applies to laws of a criminal, and the last to laws of a civil, character, but if I am correct in my view of the spirit and motives of these prohibitions, they agree in the principle which suggested them. They are founded upon the same reason, and the application of it is at least as strong to the last as it is to the two first prohibitions.

But these reasons are altogether inapplicable to laws of a prospective character. There is nothing unjust or tyrannical in punishing offenses prohibited by law and committed in violation of that law. Nor can it be unjust or oppressive to declare by law that contracts subsequently entered into may be discharged in a way different from that which the parties have provided but which they know, or may know, are liable under certain circumstances to be discharged in a manner contrary to the provisions of their contract.

Thinking, as I have always done, that the power to pass bankrupt laws was intended by the authors of the Constitution to be exclusive in Congress, or at least that they expected the power vested in that body would be exercised so as effectually to prevent its exercise by the states, it is the more probable that in reference to all other interferences of the state legislatures upon the subject of contracts, retrospective laws were alone in the contemplation of the convention.

In the construction of this clause of the tenth section of the Constitution, one of the counsel for the defendant supposed himself at liberty so to transpose the provisions contained in it, as to place the prohibition to pass laws impairing the obligation of contracts in juxtaposition with the other prohibition to pass laws making anything but gold and silver coin a tender in payment of debts, inasmuch as the two provisions relate to the subject of contracts.

That the derangement of the words and even sentences of a law may sometimes be tolerated in order to arrive at the apparent meaning of the legislature, to be gathered from

Page 25 U. S. 268

other parts or from the entire scope of the law I shall not deny. But I should deem it a very hazardous rule to adopt in the construction of an instrument so maturely considered as this Constitution was by the enlightened statesmen who framed it, and so severely examined and criticized by its opponents in the numerous state conventions which finally adopted it. And if, by the construction of this sentence, arranged as it is, or as the learned counsel would have it to be, it could have been made out that the power to pass prospective laws affecting contracts was denied to the states, it is most wonderful that not one voice was raised against the provision in any of those conventions by the jealous advocates of state rights, nor even an amendment proposed to explain the clause and to exclude a construction which trenches so extensively upon the sphere of state legislation.

But although the transposition which is contended for may be tolerated in cases where the obvious intention of the legislature can in no other way be fulfilled, it can never be admitted in those where consistent meaning can be given to the whole clause as it authors thought proper to arrange it, and where the only doubt is whether the construction which the transposition countenances, or that which results from the reading which the legislature has thought proper to adopt, is most likely to fulfill the supposed intention of the legislature. Now although it is true that the prohibition to pass tender laws of a particular description and laws impairing the obligation of contracts relate, both of them, to contracts, yet the principle which governs each of them, clearly to be inferred from the subjects with which they stand associated, is altogether different; that of the first forming part of a system for fixing a uniform standard of value, and of the last being founded on a denunciation of retrospective laws. It is therefore the safest course, in my humble opinion, to construe this clause of the section according to the arrangement which the convention has thought proper to make of its different provisions. To insist upon a transposition, with a view to warrant one construction rather than the other, falls little short, in my opinion, of a begging of the whole question in controversy.

Page 25 U. S. 269

But why, it has been asked, forbid the states to pass laws making anything but gold and silver coin a tender in payment of debts contracted subsequent as well as prior to the law which authorizes it, and yet confine the prohibition to pass laws impairing the obligation of contracts to past contracts, or in other words to future bankrupt laws, when the consequence resulting from each is the same, the latter being considered by the counsel as being in truth nothing less than tender laws in disguise.

An answer to this question has in part been anticipated by some of the preceding observations. The power to pass bankrupt laws having been vested in Congress, either as an exclusive power or under the belief that it would certainly be exercised, it is highly probable that state legislation upon that subject was not within the contemplation of the convention, or if it was it is quite unlikely that the exercise of the power by the state legislatures would have been prohibited by the use of terms which, I have endeavored to show, are inapplicable to laws intended to operate prospectively. For had the prohibition been to pass laws impairing contracts, instead of the obligation of contracts, I admit that it would have borne the construction which is contended for, since it is clear that the agreement of the parties in the first case would be impaired as much by a prior as it would be by a subsequent bankrupt law. It has, besides, been attempted to be shown that the limited restriction upon state legislation imposed by the former prohibition might be submitted to by the states, whilst the extensive operation of the latter would have hazarded, to say the least of it, the adoption of the Constitution by the state conventions.

But an answer still more satisfactory to my mind is this: tender laws of the description stated in this section, are always unjust, and where there is an existing bankrupt law at the time the contract is made, they can seldom be useful to the honest debtor. They violate the agreement of the parties to it without the semblance of an apology for the measure, since they operate to discharge the debtor from his undertaking upon terms variant from those by which he bound himself, to the injury of the creditor and unsupported

Page 25 U. S. 270

in many cases by the plea of necessity. They extend relief to the opulent debtor, who does not stand in need of it, as well as to the one who is, by misfortunes, often unavoidable, reduced to poverty and disabled from complying with his engagements. In relation to subsequent contracts, they are unjust when extended to the former class of debtors and useless to the second, since they may be relieved by conforming to the requisitions of the state bankrupt law where there is one. Being discharged by this law from all his antecedent debts, and having his future acquisitions secured to him an opportunity is afforded him to become once more a useful member of society.

If this view of the subject be correct, it will be difficult to prove that a prospective bankrupt law resembles in any of its features a law which should make anything but gold and silver coin a tender in payment of debts.

I shall now conclude this opinion by repeating the acknowledgment which candor compelled me to make in its commencement that the question which I have been examining is involved in difficulty and doubt. But if I could rest my opinion in favor of the constitutionality of the law on which the question arises on no other ground than this doubt so felt and acknowledged, that alone would in my estimation be a satisfactory vindication of it. It is but a decent respect due to the wisdom, the integrity, and the patriotism of the legislative body by which any law is passed to presume in favor of its validity until its violation of the Constitution is proved beyond all reasonable doubt. This has always been the language of this Court when that subject has called for its decision, and I know that it expresses the honest sentiments of each and every member of this bench. I am perfectly satisfied that it is entertained by those of them from whom it is the misfortune of the majority of the Court to differ on the present occasion, and that they feel no reasonable doubt of the correctness of the conclusion to which their best judgment has conducted them.

My opinion is that the judgment of the court below ought to be reversed, and judgment given for the plaintiff in error.

Page 25 U. S. 271

MR. JUSTICE JOHNSON.

This suit was instituted in Louisiana in the Circuit Court of the United States by Saunders, the defendant here, against Ogden upon certain bills of exchange. Ogden, the defendant there, pleads in bar to the action a discharge obtained in due form of law from the courts of the State of New York, which discharge purports to release him from all debts and demands existing against him on a specified day. This demand is one of that description, and the act under which the discharge was obtained was the act of New York of 1801, a date long prior to that of the cause of action on which this suit was instituted. The discharge is set forth in the plea, and represents Ogden as "an insolvent debtor, being, on the day and year therein after mentioned, in prison, in the City and County of New York on execution issued against him on some civil action," &c. It does not appear that any suit had ever been instituted against him by this party or on this cause of action prior to the present. The cause below was decided upon a special verdict, in which the jury finds

1st. That the acceptance of the bills on which the action was instituted was made by Ogden in the City of New York on the days they severally bear date, the said defendant then residing in the City of New York and continuing to reside there until a day not specified.

2d. That under the laws of the State of New York in such case provided, and referred to in the discharge (which laws are specially found, &c., meaning the state law of 1801), application was made for and the defendant obtained the discharge hereunto annexed.

3d. That by the laws of New York, actions on bills of exchange, and acceptances thereof are limited to the term of six years, and

4th. That at the time the said bills were drawn and accepted, the drawee and the drawer of the same were residents and citizens of the State of Kentucky.

On this state of facts, the court below gave judgment against Ogden, the discharged debtor.

We are not in possession of the grounds of the decision below, and it has been argued here as having been given upon the general nullity of the discharge on the ground of its unconstitutionality. But it is obvious that it might also have

Page 25 U. S. 272

proceeded upon the ground of its nullity as to citizens of other states who have never, by any act of their own, submitted themselves to the lex fori of the state that gives the discharge -- considering the right given by the Constitution to go into the courts of the United States upon any contracts, whatever be their lex loci, as modifying and limiting the general power which states are acknowledged to possess over contracts formed under control of their peculiar laws.

This question, however, has not been argued, and must not now be considered as disposed of by this decision.

The abstract question of the general power of the states to pass laws for the relief of insolvent debtors will be alone considered. And here, in order to ascertain with precision what we are to decide, it is first proper to consider what this Court has already decided on this subject. And this brings under review the two cases of Sturges v. Crowninshield and McMillan v. McNeal, adjudged in the year 1819 and contained in the 4th vol. of the reports. If the marginal note to the report, or summary of the effect of the case of McMillan v. McNeal, presented a correct view of the report of that decision, it is obvious that there would remain very little if anything for this Court to decide. But by comparing the note of the reporter with the facts of the case, it will be found that there is a generality of expression admitted into the former which the case itself does not justify. The principle recognized and affirmed in McMillan v. McNeal is one of universal law, and so obvious and incontestable that it need be only understood to be assented to. It is nothing more than this,

"That insolvent laws have no extraterritorial operation upon the contracts of other states; that the principle is applicable as well to the discharges given under the laws of the states as of foreign countries; and that the anterior or posterior character of the law under which the discharge is given with reference to the date of the contract makes no discrimination in the application of that principle."

The report of the case of Sturges v. Crowninshield needs also some explanation. The Court was, in that case, greatly divided in its views of the doctrine, and the judgment partakes as much of a compromise as of a legal adjudication.

Page 25 U. S. 273

The minority thought it better to yield something than risk the whole. And, its their course of reasoning led it to the general maintenance of the state power over the subject, controlled and limited alone by the oath administered to all their public functionaries to maintain the Constitution of the United States, yet, as denying the power to act upon anterior contracts could do no harm, but in fact imposed a restriction conceived in the true spirit of the Constitution, it was satisfied to acquiesce in it, provided the decision were so guarded as to secure the power over posterior contracts, as well from the positive terms of the adjudication as from inferences deducible from the reasoning of the Court.

The case of Sturges v. Crowninshield, then, must, in its authority, be limited to the terms of the certificate, and that certificate affirms two propositions.

1. That a state has authority to pass a bankrupt law provided such law does not impair the obligation of contracts within the meaning of the Constitution and provided there be no act of Congress in force to establish an uniform system of bankruptcy conflicting with such law.

2. That a law of this description, acting upon prior contracts, is a law impairing the obligation of contracts within the meaning of the Constitution.

Whatever inferences or whatever doctrines the opinion of the Court in that case may seem to support, the concluding words of that opinion were intended to control and to confine the authority of the adjudication to the limits of the certificate.

I should therefore have supposed that the question of exclusive power in Congress to pass a bankrupt law was not now open, but it has been often glanced at in argument, and I have no objection to express my individual opinion upon it. Not having recorded my views on this point in the case of Crowninshield, I avail myself of this occasion to do so.

So far, then, am I from admitting that the Constitution affords any ground for this doctrine that I never had a doubt that the leading object of the Constitution was to bring in aid of the states a power over this subject, which their individual powers never could attain to; so far from limiting, modifying,

Page 25 U. S. 274

and attenuating legislative power in its known and ordinary exercise in favor of unfortunate debtors that its sole object was to extend and perfect it as far as the combined powers of the states, represented by the general government, could extend it. Without that provision, no power would have existed that could extend a discharge beyond the limits of the state in which it was given, but with that provision it might be made coextensive with the United States. This was conducing to one of the great ends of the Constitution -- one which it never loses sight of in any of its provisions -- that of making an American citizen as free in one state as he was in another. And when we are told that this instrument is to be construed with a view to its federative objects, I reply that this view alone of the subject is in accordance with its federative character.

Another object in perfect accordance with this may have been that of exercising a salutary control over the power of the states whenever that power should be exercised without due regard to the fair exercise of distributive justice. The general tendency of the legislation of the states at that time to favor the debtor was a consideration which entered deeply into many of the provisions of the Constitution. And as the power of the states over the law of their respective forums remained untouched by any other provision of the Constitution, when vesting in Congress the power to pass a bankrupt law, it was worthy of the wisdom of the convention to add to it the power to make that system uniform and universal. Yet on this subject the use of the term "uniform," instead of "general," may well raise a doubt whether it meant more than that such a law should not be partial, but have an equal and uniform application in every part of the Union. This is in perfect accordance with the spirit in which various other provisions of the Constitution are conceived.

For these two objects there appears to have been much reason for vesting this power in Congress; but for extending to the grant the effect of exclusiveness over the power of the states appears to me not only without reason, but to be repelled by weighty considerations.

1. There is nothing which, on the face of the Constitution, bears the semblance of direct prohibition on the states to

Page 25 U. S. 275

exercise this power, and it would seem strange that if such a prohibition had been in the contemplation of the convention when appropriating an entire section to the enumeration of prohibitions on the states, they had forgotten this if they had intended to enact it.

The antithetical language adopted in that section as to every other subject to which the power of Congress had been previously extended affords a strong reason to conclude that some direct and express allusion to the power to pass a bankrupt law would have been here inserted also if they had not intended that this power should be concurrently or at least subordinately exercised by the states. It cannot be correct reasoning to rely upon this fact as a ground to infer that the prohibition must be found in some provision not having that antithetical character, since this supposes an intention to insert the prohibition, which intention can only be assumed. Its omission is a just reason for forming no other conclusion than that it was purposely omitted. But

2. It is insisted that though not express, the prohibition is to be inferred from the grant to Congress to establish uniform laws on the subject of bankruptcies throughout the United States, and that this grant, standing in connection with that to establish an uniform rule of naturalization, which is, in its nature, exclusive, must receive a similar construction.

There are many answers to be given to this argument, and the first is that a mere grant of a state power does not in itself necessarily imply an abandonment or relinquishment of the power granted, or we should be involved in the absurdity of denying to the states the power of taxation and sundry other powers ceded to the general government. But much less can such a consequence follow from vesting in the general government a power which no state possessed, and which, all of them combined, could not exercise to meet the end proposed in the Constitution. For if every state in the Union were to pass a bankrupt law in the same unvarying words, although this would undoubtedly be an uniform system of bankruptcy in its literal sense, it would be very far from answering the grant to Congress. There would still need some act of Congress or some treaty

Page 25 U. S. 276

under sanction of an act of Congress to give discharges in one state a full operation in the other. Thus then the inference which we are called upon to make will be found not to rest upon any actual cession of state power, but upon the creation of a new power which no state ever pretended to possess -- a power which, so far from necessarily diminishing or impairing the state power over the subject, might find its full exercise in simply recognizing as valid in every state all discharges which shall be honestly obtained under the existing laws of any state.

Again, the inference proposed to be deduced from this grant to Congress will be found much broader than the principle in which the deduction is claimed. For in this as in many other instances in the Constitution, the grant implies only the right to assume and exercise a power over the subject. Why then should the state powers cease before Congress shall have acted upon the subject, or why should that be converted into a present and absolute relinquishment of power, which is, in its nature, merely potential, and dependent on the discretion of Congress whether, and when, to enter on the exercise of a power that may supersede it?

Let anyone turn his eye back to the time when this grant was made and say if the situation of the people admitted of an abandonment of a power so familiar to the jurisprudence of every state, so universally sustained in its reasonable exercise by the opinion and practice of mankind, and so vitally important to a people overwhelmed in debt and urged to enterprise by the activity of mind that is generated by revolutions and free governments.

I will with confidence affirm that the Constitution had never been adopted had it then been imagined that this question would ever have been made or that the exercise of this power in the states should ever have depended upon the views of the tribunals to which that Constitution was about to give existence. The argument proposed to be drawn from a comparison of this power with that of Congress over naturalization is not a fair one, for the cases are not parallel, and if they were it is by no means settled that the states would have been precluded from this power

Page 25 U. S. 277

if Congress had not assumed it. But admitting argumenti gratia that they would, still there are considerations bearing upon the one power which have no application to the other. Our foreign intercourse being exclusively committed to the general government, it is peculiarly their province to determine who are entitled to the privileges of American citizens and the protection of the American government. And the citizens of any one state being entitled by the Constitution to enjoy the rights of citizenship in every other state, that fact creates an interest in this particular in each other's acts which does not exist with regard to their bankrupt laws, since state acts of naturalization would thus be extraterritorial in their operation and have an influence on the most vital interests of other states.

On these grounds state laws of naturalization may be brought under one of the four heads or classes of powers precluded to the states, to-wit, that of incompatibility, and on this ground alone, if any, could the states be debarred from exercising this power had Congress not proceeded to assume it. There is therefore nothing in that argument.

The argument deduced from the commercial character of bankrupt laws is still more unfortunate. It is but necessary to follow it out, and the inference, if any, deducible from it will be found to be direct and conclusive in favor of the state rights over this subject. For if, in consideration of the power vested in Congress over foreign commerce and the commerce between the states, it was proper to vest a power over bankruptcies that should pervade the states, it would seem that by leaving the regulation of internal commerce in the power of the states, it became equally proper to leave the exercise of this power within their own limits unimpaired.

With regard to the universal understanding of the American people on this subject there cannot be two opinions. If ever contemporaneous exposition and the clear understanding of the contracting parties or of the legislating power (it is no matter in which light it be considered) could be resorted to as the means of expounding an instrument, the continuing and unimpaired existence of this power in the states ought never to have been controverted. Nor was it controverted

Page 25 U. S. 278

until the repeal of the bankrupt act of 1800 or until a state of things arose in which the means of compelling a resort to the exercise of this power by the United States became a subject of much interest. Previously to that period, the states remained in the peaceable exercise of this power, under circumstances entitled to great consideration. In every state in the Union was the adoption of the Constitution resisted by men of the keenest and most comprehensive minds, and if an argument such as this, so calculated to fasten on the minds of a people jealous of state rights and deeply involved in debt, could have been imagined, it never would have escaped them. Yet nowhere does it appear to have been thought of, and after adopting the Constitution in every part of the Union, we find the very framers of it everywhere among the leading men in public life, and legislating or adjudicating under the most solemn oath to maintain the Constitution of the United States, yet nowhere imagining that in the exercise of this power they violated their oaths or transcended their rights. Everywhere, too, the principle was practically acquiesced in that taking away the power to pass a law on a particular subject was equivalent to a repeal of existing laws on that subject. Yet in no instance was it contended that the bankrupt laws of the states were repealed, while those on navigation, commerce, the admiralty jurisdiction, and various others, were at once abandoned without the formality of a repeal. With regard to their bankrupt or insolvent laws, they went on carrying them into effect and abrogating and reenacting them without a doubt of their full and unimpaired power over the subject. Finally, when the bankrupt law of 1800 was enacted, the only power that seemed interested in denying the right to the states formally pronounced a full and absolute recognition of that right. It is impossible for language to be more full and explicit on the subject than is the sixth section of this act of Congress. It acknowledges both the validity of existing laws and the right of passing future laws. The practical construction given by that act to the Constitution is precisely this that it amounts only to a right to assume the power to legislate on the subject, and therefore abrogates or suspends the existing laws only so far as they may

Page 25 U. S. 279

clash with the provisions of the act of Congress. This construction was universally acquiesced in, for it was that on which there had previously prevailed but one opinion from the date of the Constitution.

Much alarm has been expressed respecting the inharmonious operation of so many systems, all operating at the same time. But I must say that I cannot discover any real ground for these apprehensions. Nothing but a future operation is here contended for, and nothing is easier than to avoid those rocks and quicksands which are visible to all. Most of the dangers are imaginary, for the interests of each community, its respect for the opinion of mankind, and a remnant of moral feeling which will not cease to operate in the worst of times will always present important barriers against the gross violation of principle. How is the general government itself made up but of the same materials which separately make up the governments of the states?

It is a very important fact, and calculated to dissipate the fears of those who seriously apprehend danger from this quarter, that the powers assumed and exercised by the states over this subject did not compose any part of the grounds of complaint by Great Britain, when negotiating with our government on the subject of violations of the treaty of peace. Nor is it immaterial as an historical fact to show the evils against which the Constitution really intended to provide a remedy. Indeed it is a solecism to suppose that the permanent laws of any government, particularly those which relate to the administration of justice between individuals, can be radically unequal or even unwise. It is scarcely ever so in despotic governments, much less in those in which the good of the whole is the predominating principle. The danger to be apprehended is from temporary provisions and desultory legislation, and this seldom has a view to future contracts.

At all events, whatever be the degree of evil to be produced by such laws, the limits of its action are necessarily confined to the territory of those who inflict it. The ultimate object in denying to the states this power would seem to be to give the evil a wider range, if it be one, by extending the benefit of discharges over the whole of the Union.

Page 25 U. S. 280

But it is impossible to suppose that the framers of the Constitution could have regarded the exercise of this power as an evil in the abstract, else they would hardly have engrafted it upon that instrument which was to become the great safeguard of public justice and public morals.

And had they been so jealous of the exercise of this power in the states, it is not credible that they would have left unimpaired those unquestionable powers over the administration of justice which the states do exercise, and which, in their immoral exercise, might leave to the creditor the mere shadow of justice. The debtor's person, no one doubts, may be exempted from execution. But there is high precedent for exempting his lands, and public feeling would fully sustain an exemption of his slaves. What is to prevent the extension of exemption until nothing is left but the mere mockery of a judgment, without the means of enforcing its satisfaction?

But it is not only in their execution laws that the creditor has been left to the justice and honor of the states for his security. Every judiciary in the Union owes its existence to some legislative act; what is to prevent a repeal of that act? and then, what becomes of his remedy, if he has not access to the courts of the Union? Or what is to prevent the extension of the right to imparl? of the time to plead? of the interval between the sittings of the state courts? Where is the remedy against all this? and why were not these powers taken also from the states, if they could not be trusted with the subordinate and incidental power here denied them? The truth is, the convention saw all this, and saw the impossibility of providing an adequate remedy for such mischiefs if it was not to be found ultimately in the wisdom and virtue of the state rulers under the salutary control of that republican form of government which it guarantees to every state. For the foreigner and the citizens of other states, it provides the safeguard of a tribunal which cannot be controlled by state laws in the application of the remedy, and for the protection of all was interposed that oath which it requires to be administered to all the public functionaries as well of the states as the United States. It may be called the ruling principle of

Page 25 U. S. 281

the Constitution to interfere as little as possible between the citizen and his own state government, and hence, with a few safeguards of a very general nature, the executive, legislative, and judicial functions of the states are left as they were as to their own citizens and as to all internal concerns. It is not pretended that this discharge could operate upon the rights of the citizen of any other state unless his contract was entered into in the state that gave it or unless he had voluntarily submitted himself to the lex fori of the state before the discharge, in both which instances he is subjected to its effects by his own voluntary act.

For these considerations, I pronounce the exclusive power of Congress over the relief of insolvents untenable, and the dangers apprehended from the contrary doctrine unreal.

We will next inquire whether the states are precluded from the exercise of this power by that clause in the Constitution which declares that no state shall "pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts."

This law of the State of New York is supposed to have violated the obligation of a contract by releasing Ogden from a debt which he had not satisfied, and the decision turns upon the question, first, in what consists the obligation of a contract? and secondly whether the act of New York will amount to a violation of that obligation in the sense of the Constitution.

The first of these questions has been so often examined and considered in this and other courts of the United States, and so little progress has yet been made in fixing the precise meaning of the words "obligation of a contract," that I should turn in despair from the inquiry were I not convinced that the difficulties the question presents are mostly factitious and the result of refinement and technicality, or of attempts at definition made in terms defective both in precision and comprehensiveness. Right or wrong, I come to my conclusion on their meaning, as applied to executory contracts, the subject now before us, by a simple and shorthanded exposition.

Right and obligation are considered by all ethical writers

Page 25 U. S. 282

as correlative terms: whatever I by my contract give another a right to require of me, I by that act lay myself under an obligation to yield or bestow. The obligation of every contract will then consist of that right or power over my will or actions which I, by my contract, confer on another. And that right and power will be found to be measured neither by moral law alone, nor universal law alone, nor by the laws of society alone, but by a combination of the three -- an operation in which the moral law is explained and applied by the law of nature, and both modified and adapted to the exigencies of society by positive law. The Constitution was framed for society, and an advanced State of society, in which I will undertake to say that all the contracts of men receive a relative, and not a positive interpretation, for the rights of all must be held and enjoyed in subserviency to the good of the whole. The state construes them, the state applies them, the state controls them, and the state decides how far the social exercise of the rights they give us over each other can be justly asserted. I say the social exercise of these rights because in a state of nature, they are asserted over a fellow creature, but in a state of society over a fellow citizen. Yet it is worthy of observation how closely the analogy is preserved between the assertion of these rights in a state of nature and a state of society in their application to the class of contracts under consideration.

Two men, A. and B., having no previous connection with each other (we may suppose them even of hostile nations), are thrown upon a desert island. The first, having had the good fortune to procure food, bestows a part of it upon the other, and he contracts to return an equivalent in kind. It is obvious here that B. subjects himself to something more than the moral obligation of his contract, and that the law of nature and the sense of mankind, would justify A. in resorting to any means in his power to compel a compliance with this contract. But if it should appear that B., by sickness, by accident, or circumstances beyond human control, however superinduced, could not possibly comply with his contract, the decision would be otherwise, and the exercise of compulsory power over B. would be followed with the indignation of mankind. He has carried the power conferred

Page 25 U. S. 283

on him over the will or actions of another beyond their legitimate extent, and done injustice in his turn. "Summum jus est summa injuria."

The progress of parties from the initiation to the consummation of their rights is exactly parallel to this in a state of society. With this difference, that in the concoction of their contracts, they are controlled by the laws of the society of which they are members, and for the construction and enforcement of their contracts they rest upon the functionaries of its government. They can enter into no contract which the laws of that community forbid, and the validity and effect of their contracts is what the existing laws give to them. The remedy is no longer retained in their own hands, but surrendered to the community, to a power competent to do justice and bound to discharge towards them the acknowledged duties of government to society according to received principles of equal justice. The public duty in this respect is the substitute for that right which they possessed in a state of nature, to enforce the fulfillment of contracts, and if, even in a state of nature, limits were prescribed by the reason and nature of things, to the exercise of individual power in enacting the fulfillment of contracts, much more will they be in a state of society. For it is among the duties of society to enforce the rights of humanity, and both the debtor and the society have their interests in the administration of justice and in the general good -- interests which must not be swallowed up and lost sight of while yielding attention to the claim of the creditor. The debtor may plead the visitations of providence, and the society has an interest in preserving every member of the community from despondency -- in relieving him from a hopeless state of prostration in which he would be useless to himself, his family, and the community. When that state of things has arrived in which the community has fairly and fully discharged its duties to the creditor and in which pursuing the debtor any longer would destroy the one without benefiting the other must always be a question to be determined by the common guardian of the rights of both, and in this originates the power exercised by governments in favor of insolvents.

Page 25 U. S. 284

It grows out of the administration of justice and is a necessary appendage to it.

There was a time when a different idea prevailed, and then it was supposed that the rights of the creditor required the sale of the debtor and his family. A similar notion now prevails on the coast of Africa, and is often exercised there by brute force. It is worthy only of the country in which it now exists and of that state of society in which it once originated and prevailed.

"Lex non cogit ad impossibilia" is a maxim applied by law to the contracts of parties in a hundred ways. And where is the objection, in a moral or political view, to applying it to the exercise of the power to relieve insolvents? It is in analogy with this maxim that the power to relieve them is exercised, and if it never was imagined that in other cases this maxim violated the obligation of contracts, I see no reason why the fair, ordinary, and reasonable exercise of it in this instance should be subjected to that imputation.

If it be objected to these views of the subject that they are as applicable to contracts prior to the law as to those posterior to it and therefore inconsistent with the decision in the case of Sturges v. Crowninshield, my reply is that I think this no objection to its correctness. I entertained this opinion then, and have seen no reason to doubt it since. But if applicable to the case of prior debts, multo fortiori will it be so to those contracted subsequent to such a law; the posterior date of the contract removes all doubt of its being in the fair and unexceptionable administration of justice that the discharge is awarded.

I must not be understood here as reasoning upon the assumption that the remedy is grafted into the contract. I hold the doctrine untenable, and infinitely more restrictive on state power than the doctrine contended for by the opposite party. Since if the remedy enters into the contract, then the states lose all power to alter their laws for the administration of justice. Yet, I freely admit that the remedy enters into the views of the parties when contracting; that the Constitution pledges the states to every creditor for the full, and fair, and candid exercise of state power to the

Page 25 U. S. 285

ends of justice according to its ordinary administration, uninfluenced by views to lighten or lessen or defer the obligation to which each contract fairly and legally subjects the individual who enters into it. Whenever an individual enters into a contract, I think his assent is to be inferred, to abide by those rules in the administration of justice which belong to the jurisprudence of the country of the contract. And when compelled to pursue his debtor in other states, he is equally bound to acquiesce in the law of the forum to which he subjects himself. The law of the contract remains the same everywhere, and it will be the same in every tribunal; but the remedy necessarily varies, and with it the effect of the constitutional pledge, which can only have relation to the laws of distributive justice known to the policy of each state severally. It is very true that inconveniences may occasionally grow out of irregularities in the administration of justice by the states. But the citizen of the same state is referred to his influence over his own institutions for his security, and the citizens of the other states have the institutions and powers of the general government to resort to. And this is all the security the Constitution ever intended to hold out against the undue exercise of the power of the states over their own contracts and their own jurisprudence.

But since a knowledge of the laws, policy, and jurisprudence of a state is necessarily imputed to everyone entering into contracts within its jurisdiction, of what surprise can he complain, or what violation of public faith, who still enters into contracts under that knowledge? It is no reply to urge that at the same time knowing of the Constitution, he had a right to suppose the discharge void and inoperative, since this would be but speculating on a legal opinion in which, if he proves mistaken, he has still nothing to complain of but his own temerity, and concerning which all that come after this decision, at least, cannot complain of being misled by their ignorance or misapprehensions. Their knowledge of the existing laws of the state will henceforward be unqualified, and was so, in the view of the law, before this decision was made.

It is now about twelve or fourteen years since I was called

Page 25 U. S. 286

upon on my circuit in the case of Gell, Canonge & Co. v. L. Jacobs, to review all this doctrine. The cause was ably argued by gentlemen whose talents are well known in this capitol, and the opinions which I then formed I have seen no reason since to distrust.

It appears to me that a great part of the difficulties of the cause arise from not giving sufficient weight to the general intent of this clause in the Constitution and subjecting it to a severe literal construction which would be better adapted to special pleadings.

By classing bills of attainder, ex post facto laws, and laws impairing the obligation of contracts together, the general intent becomes very apparent; it is a general provision against arbitrary and tyrannical legislation over existing rights, whether of person or property. It is true that some confusion has arisen from an opinion which seems early and without due examination to have found its way into this Court; that the phrase "ex post facto" was confined to laws affecting criminal acts alone. The fact, upon examination, will be found otherwise, for neither in its signification or uses is it thus restricted. It applies to civil as well as to criminal acts 1 Shep.Touch. 68, 70, 73, and with this enlarged signification attached to that phrase, the purport of the clause would be

"that the states shall pass no law attaching to the acts of individuals other effects or consequences than those attaches to them by the laws existing at their date, and all contracts thus construed shall be enforced according to their just and reasonable purport."

But to assign to contracts universally a literal purport and to exact for them a rigid literal fulfillment could not have been the intent of the Constitution. It is repelled by a hundred examples. Societies exercise a positive control as well over the inception, construction, and fulfillment of contracts as over the form and measure of the remedy to enforce them.

As instances of the first, take the contract imputed to the drawer of a bill or endorser of a note, with its modifications; the deviations of the law from the literal contract of the parties to a penal bond, a mortgage, a policy of insurance, bottomry bond, and various others that might be

Page 25 U. S. 287

enumerated. And for instances of discretion exercised in applying the remedy, take the time for which executors are exempted from suit; the exemption of members of legislatures; of judges; of persons attending courts, or going to elections; the preferences given in the marshaling of assets; sales on credit for a present debt; shutting of courts altogether against gaming debts and usurious contracts, and above all, acts of limitation. I hold it impossible to maintain the constitutionality of an act of limitation if the modification of the remedy against debtors, implied in the discharge of insolvents, is unconstitutional. I have seen no distinction between the cases that can bear examination.

It is in vain to say that acts of limitation appertain to the remedy only; both descriptions of laws appertain to the remedy, and exactly in the same way; they put a period to the remedy, and upon the same terms, by what has been called, a tender of paper money in the form of a plea, and to the advantage of the insolvent laws, since if the debtor can pay, he has been made to pay. But the door of justice is shut in the face of the creditor in the other instance, without an inquiry on the subject of the debtor's capacity to pay. And it is equally vain to say that the act of limitation raises a presumption of payment, since it cannot be taken advantage of on the general issue without provision by statute, and the only legal form of a plea implies an acknowledgment that the debt has not been paid.

Yet so universal is the assent of mankind in favor of limitation acts that it is the opinion of profound politicians that no nation could subsist without one.

The right, then, of the creditor to the aid of the public arm for the recovery of contracts is not absolute and unlimited, but may be modified by the necessities or policy of societies. And this, together with the contract itself, must be taken by the individual, subject to such restrictions and conditions as are imposed by the laws of the country. The right to pass bankrupt laws is asserted by every civilized nation in the world. And in no writer, I will venture to say, has it ever been suggested that the power of annulling such contracts, universally exercised under their bankrupt or insolvent systems, involves a violation of the obligation of contracts.

Page 25 U. S. 288

In international law, the subject is perfectly understood and the right generally acquiesced in, and yet the denial of justice is, by the same code, an acknowledged cause of war.

But it is contended that if the obligation of a contract has relation at all to the laws which give or modify the remedy, then the obligation of a contract is ambulatory and uncertain, and will mean a different thing in every state in which it may be necessary to enforce the contract.

There is no question that this effect follows, and yet after this concession it will still remain to be shown how any violation of the obligation of the contract can arise from that cause. It is a casualty well known to the creditor when he enters into the contract, and if obliged to prosecute his rights in another state, what more can he claim of that state than that its courts shall be open to him on the same terms on which they are open to other individuals? It is only by voluntarily subjecting himself to the lex fori of a state that he can be brought within the provisions of its statutes in favor of debtors, since in no other instance does any state pretend to a right to discharge the contracts entered into in another state. He who enters into a pecuniary contract knowing that he may have to pursue his debtor if he flees from justice casts himself in fact upon the justice of nations.

It has also been urged with an earnestness that could only proceed from deep conviction that insolvent laws were tender laws of the worse description, and that it is impossible to maintain the constitutionality of insolvent laws that have a future operation without asserting the right of the states to pass tender laws, provided such laws are confined to a future operation.

Yet to all this there appears to be a simple and conclusive answer. The prohibition in the Constitution to make anything but gold or silver coin a tender in payment of debts is express and universal. The framers of the Constitution regarded it as an evil to be repelled without modification; they have therefore left nothing to be inferred or deduced from construction on this subject. But the contrary is the fact with regard to insolvent laws; it contains no express

Page 25 U. S. 289

prohibition to pass such laws, and we are called upon here to deduce such a prohibition from a clause which is anything but explicit and which already has been judicially declared to embrace a great variety of other subjects. The inquiry, then, is open and indispensable in relation to insolvent laws, prospective or retrospective, whether they do, in the sense of the Constitution, violate the obligation of contracts. There would be much in the argument if there was no express prohibition against passing tender laws, but with such express prohibition the cases have no analogy. And independent of the different provisions in the Constitution, there is a distinction existing between tender laws and insolvent laws in their object and policy which sufficiently points out the principle upon which the Constitution acts upon them as several and distinct; a tender law supposes a capacity in the debtor to pay and satisfy the debt in some way, but the discharge of an insolvent is founded in his incapacity ever to pay, which incapacity is judicially determined according to the laws of the state that passes it. The one imports a positive violation of the contract, since all contracts to pay, not expressed otherwise, have relation to payment in the current coin of the country; the other imports an impossibility that the creditor ever can fulfill the contract.

If it be urged that to assume this impossibility is itself an arbitrary act, that parties have in view something more than present possessions, that they look to future acquisitions, that industry, talents and integrity are as confidently trusted as property itself, and to release them from this liability impairs the obligation of contracts, plausible as the argument may seem, I think the answer is obvious and incontrovertible.

Why may not the community set bounds to the will of the contracting parties in this as in every other instance? That will is controlled in the instances of gaming debts, usurious contracts, marriage, brokerage bonds, and various others, and why may not the community also declare that

"look to what you will, no contract formed within the territory which we govern shall be valid as against future acquisitions; . . . we have an interest in the happiness, and services, and families of this community which shall not be superseded by individual

Page 25 U. S. 290

views."

Who can doubt the power of the state to prohibit her citizens from running in debt altogether? A measure a thousand times wiser than that impulse to speculation and ruin which has hitherto been communicated to individuals by our public policy. And if to be prohibited altogether, where is the limit which may not be set both to the acts and the views of the contracting parties?

When considering the first question in this cause, I took occasion to remark on the evidence of contemporaneous exposition deducible from well known facts. Every candid mind will admit that this is a very different thing from contending that the frequent repetition of wrong will create a right. It proceeds upon the presumption that the cotemporaries of the Constitution have claims to our deference on the question of right, because they had the best opportunities of informing themselves of the understanding of the framers of the Constitution and of the sense put upon it by the people when it was adopted by them, and in this point of view it is obvious that the consideration bears as strongly upon the second point in the cause as on the first. For had there been any possible ground to think otherwise, who could suppose that such men, and so many of them, acting under the most solemn oath and generally acting rather under a feeling of jealousy of the power of the general government than otherwise, would universally have acted upon the conviction that the power to relieve insolvents by a discharge from the debt had not been taken from the states by the article prohibiting the violation of contracts? The whole history of the times up to a time subsequent to the repeal of the bankrupt law indicates a settled knowledge of the contrary.

If it be objected to the views which I have taken of this subject that they imply a departure from the direct and literal meaning of terms in order to substitute an artificial or complicated exposition, my reply is that the error is on the other side; qui haeret in liter a, haeret in cortice. All the notions of society, particularly in its jurisprudence, are more or less artificial; our Constitution nowhere speaks the language of men in a state of nature; let anyone attempt a literal exposition of the phrase which immediately precedes the one under

Page 25 U. S. 291

consideration -- I mean "ex post facto" -- and he will soon acknowledge a failure. Or let him reflect on the mysteries that hang around the little slip of paper which lawyers know by the title of a bail piece. The truth is that even compared with the principles of natural law, scarcely any contract imposes an obligation conformable to the literal meaning of terms. He who enters into a contract to follow the plough for the year is not held to its literal performance, since many casualties may intervene which would release him from the obligation without actual performance. There is a very striking illustration of this principle to be found in many instances in the books. I mean those cases in which parties are released from their contracts by a declaration of war or where laws are passed rendering that unlawful, even incidentally, which was lawful at the time of the contract. Now in both these instances it is the government that puts an end to the contract, and yet no one ever imagined that it thereby violates the obligation of a contract.

It is therefore far from being true as a general proposition "that a government necessarily violates the obligation of a contract which it puts an end to without performance." It is the motive, the policy, the object that must characterize the legislative act to affect it with the imputation of violating the obligation of contracts.

In the effort to get rid of the universal vote of mankind in favor of limitation acts and laws against gaming, usury, marriage, brokerage, buying and selling of offices, and many of the same description, we have heard it argued that as to limitation acts, the creditor has nothing to complain of, because time is allowed him of which, if he does not avail himself, it is his own neglect, and as to all others, there is no contract violated because there was none ever incurred. But it is obvious that this mode of answering the argument involves a surrender to us of our whole ground. It admits the right of the government to limit and define the power of contracting and the extent of the creditor's remedy against his debtor; to regard other rights besides his, and to modify his rights so as not to let them override entirely the general interests of society, the interests of the community itself in the talents and services of the debtor, the regard due to his

Page 25 U. S. 292

happiness and to the claims of his family upon him and upon the government.

No one questions the duty of the government to protect and enforce the just rights of every individual over all within its control. What we contend for is no more than this that it is equally the duty and right of governments to impose limits to the avarice and tyranny of individuals so as not to suffer oppression to be exercised under the semblance of right and justice. It is true that in the exercise of this power, governments themselves may sometimes be the authors of oppression and injustice; but wherever the Constitution could impose limits to such power it has done so, and if it has not been able to impose effectual and universal restraints, it arises only from the extreme difficulty of regulating the movements of sovereign power, and the absolute necessity, after every effort that can be made to govern effectually, that will still exist to leave some space for the exercise of discretion and the influence of justice and wisdom.

MR. JUSTICE THOMPSON.

This action is founded on several bills of exchange bearing date in September, 1806, drawn by J. Jordan upon Ogden, the plaintiff in error, in favor of Saunders, the defendant in error. The drawer and payee, at the date of the bills, were citizens of and resident in Kentucky. Ogden was a citizen of and resident in New York, where the bills were presented and accepted by him, but were not paid when they came to maturity, and are still unpaid. Ogden sets up in bar of this action his discharge under the insolvent law of the state of New York, passed in April, 1801, as one of the revised laws of that state. His discharge was duly obtained on 19 April, 1808, he having assigned all his property for the benefit of his creditors and having in all respects complied with the laws of New York for giving relief in cases of insolvency. These proceedings, according to those laws, discharged the insolvent from all debts due at the time of the assignment or contracted for before that time, though payable afterwards, except in some specified cases which do not affect the present question. From this brief statement it appears that Ogden, being sued upon his acceptances of

Page 25 U. S. 293

the bills in question, the contract was made and to be executed within the state of New York, and was made subsequent to the passage of the law under which he was discharged. Under these circumstances, the general question presented for decision is whether this discharge can be set up in bar of the present suit. It is not pretended but that if the law under which the discharge was obtained is valid and the discharge is to have its effect according to the provisions of that law, it is an effectual bar to any recovery against Ogden. But it is alleged that this law is void under the prohibition in the Constitution of the United States, Art. I. sec. 10, which declares that "no state shall pass any law impairing the obligation of contracts." So that the inquiry here is whether the law of New York under which the discharge was obtained is repugnant to this clause in the Constitution, and upon the most mature consideration I have arrived at the conclusion that the law is not void and that the discharge set up by the plaintiff in error is an effectual protection against any liability upon the bills in question.

In considering this question, I have assumed that the point now presented is altogether undecided and entirely open for discussion. Although several cases have been before this Court which may have a bearing upon the question, yet upon the argument the particular point now raised has been treated by the counsel as still open for decision, and so considered by the Court by permitting its discussion. Although the law under which Ogden was discharged appears by the record to have been passed in the year 1801, yet it is proper to notice that this was a mere revision and reenactment of a law which was in force as early, at least, as from the year 1788, and which has continued in force from that time to the present (except from 3 April, 1811, until 14 February, 1812), in all its material provisions which have any bearing upon the present question. To declare a law null and void after such a lapse of time and thereby prostrate a system which has been in operation for nearly forty years ought to be called for by some urgent necessity and founded upon reasons and principles scarcely admitting of doubt. In our complex system of government we must expect that questions involving

Page 25 U. S. 294

the jurisdictional limits between the general and state governments will frequently arise, and they are always questions of great delicacy and can never be met without feeling deeply and sensibly impressed with the sentiment that this is the point upon which the harmony of our system is most exposed to interruption. Whenever such a question is presented for decision, I cannot better express my views of the leading principles which ought to govern this Court than in the language of the Court itself in the case of Fletcher v. Peck, 6 Cranch 128.

"The question [says the Court] whether a law be void for its repugnancy to the Constitution is at all times a question of much delicacy which ought seldom or ever be decided in the affirmative in a doubtful case. The Court, when impelled by duty to render such a judgment, would be unworthy of its station could it be unmindful of the solemn obligation which that station imposes. But it is not on slight implication and vague conjecture that the legislature is to be pronounced to have transcended its powers, and its acts to be considered void. The opposition between the Constitution and the law should be such that the judge feels a clear and strong conviction of their incompatibility with each other."

If such be the rule by which the examination of this case is to be governed and tried (and that it is no one can doubt), I am certainly not prepared to say that it is not at least a doubtful case, or that I feel a clear conviction that the law in question is incompatible with the Constitution of the United States.

In the discussion at the bar, this has rightly been considered a question relating to the division of power between the general and state governments. And in the consideration of all such questions, it cannot be too often repeated (although universally admitted) or too deeply impressed on the mind that all the powers of the general government are derived solely from the Constitution, and that whatever power is not conferred by that charter is reserved to the states respectively or to the people. The State of New York, when the law in question was passed (for I consider this a mere continuation of the insolvent act of 1788) was

Page 25 U. S. 295

in the due and rightful exercise of its powers as an independent government, and unless this power has been surrendered by the Constitution of the United States, it still remains in the state. And in this view, whether the law in question be called a bankrupt or an insolvent law is wholly immaterial; it was such a law as a sovereign state had a right to pass, and the simple inquiry is whether that right has been surrendered. No difficulty arises here out of any inquiry about express or implied powers granted by the Constitution. If the states have no authority to pass laws like this, it must be in consequence of the express provision "that no state shall pass any law impairing the obligation of contracts."

It is admitted, and has so been decided by this Court, that a state law discharging insolvent debtors from their contracts, entered into antecedent to the passing of the law, falls within this clause in the Constitution and is void. In the case now before the Court, the contract was made subsequent to the passage of the law, and this, it is believed, forms a solid ground of distinction, whether tested by the letter or the spirit and policy of the prohibition. It was not denied on the argument, and I presume cannot be, but that a law may be void in part and good in part -- or in other words that it may be void so far as it has a retrospective application to past contracts and valid as applied prospectively to future contracts. The distinction was taken by the court in the Third Circuit in the case of Golden v. Prince, 5 Hall's L.J. 502, and which I believe was the first case that brought into discussion the validity of a state law analogous to the one now under consideration. It was there held that the law was unconstitutional in relation to that particular case because it impaired the obligation of the contract by discharging the debtor from the payment of his debts due or contracted for before the passage of the law. But it was admitted that a law, prospective in its operation, under which a contract afterwards made might be avoided in a way different from that provided by the parties, would be clearly constitutional. And how is this distinction to be sustained except on the ground that contracts are deemed to be made in reference to the existing law and to be governed,

Page 25 U. S. 296

regulated, and controlled by its provisions? As the question before the court was the validity of an insolvent law which discharged the debtor from all contracts, the distinction must have been made in reference to the operation of the discharge upon contracts made before and such as were made after the passage of the law, and is therefore a case bearing directly upon the question now before the Court. That the power given by the Constitution to Congress to establish uniform laws on the subject of bankruptcies throughout the United States does not withdraw the subject entirely from the states is settled by the case of Sturges v. Crowninshield, 4 Wheat. 191. It is there expressly held that

"until the power to pass uniform laws on the subject of bankruptcies is exercised by Congress, the states are not forbidden to pass a bankrupt law, provided it contain no principle which violates the 10th section of the first article of the Constitution of the United States."

And this case also decides that the right of the states to pass bankrupt laws is not extinguished, but is only suspended by the enactment of a general bankrupt law by Congress, and that a repeal of that law removes disability to the exercise of the power by the states, so that the question now before the Court is narrowed down to the single inquiry whether a state bankrupt law, operating prospectively upon contracts made after its enactment, impairs the obligation of such contract within the sense and meaning of the Constitution of the United States.

This clause in the Constitution has given rise to much discussion, and great diversity of opinion has been entertained as to its true interpretation. Its application to some cases may be plain and palpable, to others more doubtful. But so far as relates to the particular question now under consideration, the weight of judicial opinions in the state courts is altogether in favor of the constitutionality of the law so far as my examination has extended. And indeed, I am not aware of a single contrary opinion. 13 Mass. 1; 16 Johns. 233; 7 Johns.Ch. 299; 5 Binn. 264; 5 Hall's L.J. 520; 6th ed. 475; Niles; Reg. 15th of September, 1821; Townsend v. Townsend.

In proceeding to a more particular examination of the

Page 25 U. S. 297

true import of the clause "no state shall pass any law impairing the obligation of contracts," the inquiries which seem naturally to arise are what is a contract, what its obligation, and what may be said to impair it. As to what constitutes a contract, no diversity of opinion exists; all the elementary writers on the subject, sanctioned by judicial decisions, consider it briefly and simply an agreement in which a competent party undertakes to do or not to do a particular thing; but all know that the agreement does not always -- nay, seldom, if ever, upon its face -- specify the full extent of the terms and conditions of the contract; many things are necessarily implied and to be governed by some rule not contained in the agreement, and this rule can be no other than the existing law when the contract is made or to be executed. Take, for example, the familiar case of an agreement to pay a certain sum of money with interest. The amount or rate of such interest is to be ascertained by some standard out of the agreement, and the law presumes the parties meant the common rate of interest established in the country where the contract was to be performed. This standard is not looked to for the purpose of removing any doubt or ambiguity arising on the contract itself, but to ascertain the extent of its obligation, or, to put a case more analogous, suppose a statute should declare generally that all contracts for the payment of money should bear interest after the day of payment fixed in the contract, and a note, where such law was in force, should be made payable in a given number of days after date. Such note would surely draw interest from the day it became payable, although the note upon its face made no provision for interest, and the obligation of the contract to pay the interest would be as complete and binding as to pay the principal; but such would not be its operation without looking out of the instrument itself to the law which created the obligation to pay interest.

The same rule applies to contracts of every description, and parties must be understood as making their contracts with reference to existing laws and impliedly assenting that such contracts are to be construed, governed, and controlled by such laws. Contracts absolute and unconditional

Page 25 U. S. 298

upon their face are often considered subject to an implied condition which the law establishes as applicable to such cases. Suppose a state law should declare that in all conveyances thereafter to be made of real estate, the land should be held as security for the payment of the consideration money and liable to be sold in case default should be made in payment; would such a law be unconstitutional? And yet it would vary the contract from that which was made by the parties, if judged of by the face of the deed alone, and would be making a contract conditional which the parties had made absolute, and would certainly be impairing such contract unless it was deemed to have been made subject to the provisions of such law and with reference thereto and that the law was impliedly adopted as forming the obligation and terms of the contract. The whole doctrine of the lex loci is founded on this principle.

The language of the court in the Third Circuit in the case of Campanque v. Burnell, 1 Washington C.C. 341, is very strong on this point. Those laws, say the court, which in any manner affect the contract, whether in its construction, the mode of discharging it, or which control the obligation which the contract imposes, are essentially incorporated with the contract itself. The contract is a law which the parties impose upon themselves, subject, however, to the paramount law -- the law of the country where the contract is made. And when to be enforced by foreign tribunals, such tribunals aim only to give effect to the contracts according to the laws which gave them validity. So also in this Court, in the case of Renner v. Bank of Columbia, 9 Wheat. 586, the language of the Court is to the same effect, and shows that we may look out of the contract to any known law or custom with reference to which the parties may be presumed to have contracted in order to ascertain their intention and the legal and binding force and obligation of their contract. Bank of Columbia v. Oakley, 4 Wheat. 235, is another case recognizing the same principle. And in the case of Dartmouth College v. Woodward, 4 Wheat. 695, it is well observed by one of the judges of this Court "that all contracts recognized as valid in any

Page 25 U. S. 299

country, obtain their obligation and construction jure loci contractus." And this doctrine is universally recognized both in the English and American courts.

If contracts are not made with reference to existing laws and to be governed and regulated by such laws, the agreement of parties under the extended construction now claimed for this clause in the Constitution may control state laws on the subject of contracts altogether. A parol agreement for the sale of land is a contract, and if the agreement alone makes the contract, and it derives its obligation solely from such agreement, without reference to the existing law, it would seem to follow that any law which had declared such contract void or had denied a remedy for breach thereof would impair its obligation. A construction involving such consequences is certainly inadmissible. Any contract not sanctioned by existing laws creates no civil obligation, and any contract discharged in the mode and manner provided by the existing law where it was made cannot upon any just principles of reasoning be said to impair such contract.

It will, I believe, be found on examination that the course of legislation in some of the states between debtor and creditor, which formed the grounds of so much complaint, and which probably gave rise to this prohibition in the Constitution, consisted principally, if not entirely, of laws having a retrospective operation upon antecedent debts.

If a contract does not derive its obligation from the positive law of the country where it is made, where is to be found the rule that such obligation does not attach until the contracting party has attained a certain age? In what code of natural law or in what system of universal law out of which it is said at the bar spring the eternal and unalterable principles of right and of justice, will be found a rule that such obligation does not attach so as to bind a party under the age of twenty-one years? No one will pretend that a law exonerating a party from contracts entered into before arriving at such age would be invalid. And yet it would impair the obligation of the contract if such obligation is derived from any other source than the existing law of the place where made. Would it not be within the legitimate

Page 25 U. S. 300

powers of a state legislature to declare prospectively that no one should be made responsible upon contracts entered into before arriving at the age of twenty-five years. This, I presume, cannot be doubted. But to apply such a law to past contracts entered into when twenty-one years was the limit would clearly be a violation of the obligation of the contract. No such distinction, however, could exist unless the obligation of the contract grows out of the existing law and with reference to which the contract must be deemed to have been made.

The true import of the term "obligation," as used in the Constitution, may admit of some doubt. That it refers to the civil, or legal, and not moral obligation is admitted by all. But whether the remedy upon the contract is entirely excluded from the operation of this provision is a point on which some diversity of opinion has been entertained.

That it is not intended to interfere with or limit state legislation in relation to the remedy in the ordinary prosecution of suits no one can doubt. And indeed such a principle is indispensable to facilitate commercial intercourse between the citizens or subjects of different governments, and is sanctioned by all civilized nations, and if, according to the language of these cases, this principle extends to the obligation as well as the construction of contracts, it would seem to follow as a necessary conclusion that it must embrace all the consequences growing out of the laws of the country where the contract is made, for it is the law which creates the obligation, and whenever, therefore, the lex loci provides for the dissolution of the contract in any prescribed mode, the parties are presumed to have acted subject to such contingency. And hence, in the English courts, wherever the operation of a foreign discharge under a bankrupt law has been brought under consideration, they have given to it the same effect that it would have had in the country where the contract was made. And the same rule has been recognized and adopted in the courts of this country almost universally, where the question has arisen. But whether a law might not so change the nature and extent of existing remedies, and thereby so materially impair the right as to fall within the scope

Page 25 U. S. 301

of this prohibition if it extended to remedies upon antecedent contracts is by no means clear. If the law, whatever it may be, relating to the remedy has a prospective operation only, no objection can arise to it under this clause in the Constitution. It is a question that must rest in the sound discretion of the state legislature. But men, when entering into contracts, can hardly be presumed entirely regardless of the remedy which the law provides in case of a breach of the contract, and the means of obtaining satisfaction for such breach enters essentially into consideration in making the contract. If, at the time of making the contract, it be known that the person only of the debtor, and not his property or his personal property only, and not his lands or a certain part of either, is to be resorted to for satisfaction, no ground of complaint can exist, the contract having been made with full knowledge of all these things; but if, at the time the contract is made, not only the person but all the property, both real and personal, of the debtor might be resorted to for satisfaction and a law should be passed placing beyond the reach of the creditor the whole or the principal part of the debtor's property, it would be difficult to sustain the constitutionality of such a law. The statute of limitations is conceded to relate to the remedy. Suppose, when a contract was made, the limitation was six years, and it should be reduced to six months, or any shorter period and applied to antecedent contracts, would it not be repugnant to the Constitution? But if the legislature of a state should choose to adopt, prospectively, six months as the limitation, who could question the authority so to do? And suppose further that the unconstitutionality of the law in question is admitted, could the State of New York pass a law limiting the right of recovery against any insolvent who had been duly discharged according to the provisions of the insolvent act to ten days from the passage of such law. And yet this would be a statute of limitation, and affect the remedy only. The law now in question is nothing more than taking away all remedy, and whether it be the whole or some material part thereof would seem to differ in degree only, and not in principle, and if to have a retrospective operation,

Page 25 U. S. 302

might well be considered as falling within the spirit and policy of the prohibition.

In the case of Sturges v. Crowninshield, the Court, in explaining the meaning of the terms "obligation of a contract," said,

"A contract is an agreement in which a party undertakes to do or not to do a particular thing. The law binds him to perform his undertaking, and this is, of course, the obligation of his contract."

That is, as I understand it, the law of the contract forms its obligation, and if so, the contract is fulfilled and its obligation discharged by complying with whatever the existing law required in relation to such contract, and it would seem to me to follow that if the law looking to the contingency of the debtor's becoming unable to pay the whole debt should provide for his discharge on payment of a part, this would enter into the law of the contract, and the obligation to pay would, of course, be subject to such contingency.

It is unnecessary, however, on the present occasion, to attempt to draw with precision the line between the right and the remedy or to determine whether the prohibition in the Constitution extends to the former and not to the latter, or whether to a certain extent it embraces both, for the law in question strikes at the very root of the cause of action and takes away both right and remedy, and the question still remains does the prohibition extend to a state bankrupt or insolvent law, like the one in question, when applied to contracts entered into subsequent to its passage. Whether this is technically a bankrupt or an insolvent law is of little importance. Its operation, if valid, is to discharge the debtor absolutely from all future liability on surrendering up his property, and in that respect is a bankrupt law according to the universal understanding in England, where a bankrupt system is in operation. It is not, however, limited to traders, but extends to every class of citizens, and in this respect is more analogous to the English insolvent laws, which only authorize the discharge of the debtor from imprisonment.

If this provision in the Constitution was unambiguous and its meaning entirely free from doubt, there would be no door left open for construction or any proper ground upon which

Page 25 U. S. 303

the intention of the framers of the Constitution could be inquired into; this Court would be bound to give to it its full operation whatever might be the views entertained of its expediency. But the diversity of opinion entertained of its construction will fairly justly an inquiry into the intention as well as the reason and policy of the provision; all which in my judgment will warrant its being confined to laws affecting contracts made antecedent to the passage of such laws. Such would appear to be the plain and natural interpretation of the words "no state shall pass any law impairing the obligation of contracts."

The law must have a present effect upon some contract in existence, to bring it within the plain meaning of the language employed. There would be no propriety in saying that a law impaired or in any manner whatever modified or altered what did not exist. The most obvious and natural application of the words themselves is to laws having a retrospective operation upon existing contracts, and this construction is fortified by the associate prohibitions "no state shall pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts." The two first are confessedly restricted to retrospective laws concerning crimes and penalties affecting the personal security of individuals. And no good reason is perceived why the last should not be restricted to retrospective laws relating to private rights growing out of the contracts of parties. The one provision is intended to protect the person of the citizen from punishment criminally for any act not unlawful when committed, and the other to protect the rights of property as secured by contracts sanctioned by existing laws. No one supposes that a state legislature is under any restriction in declaring prospectively any acts criminal which its own wisdom and policy may deem expedient. And why not apply the same rule of construction and operation to the other provision relating to the rights of property? Neither provision can strictly be considered as introducing any new principle, but only for greater security and safety to incorporate into this charter provisions admitted by all to be among the first principles of our government. No state court would, I presume, sanction and enforce an ex post facto law if no

Page 25 U. S. 304

such prohibition was contained in the Constitution of the United States; so neither would retrospective laws taking away vested rights be enforced. Such laws are repugnant to those fundamental principles upon which every just system of laws is founded. It is an elementary principle adopted and sanctioned by the courts of justice in this country and in Great Britain whenever such laws have come under consideration, and yet retrospective laws are clearly within this p

United States Supreme Court Cases & Opinions

Justia Legal Web Design US Court Forms Oyez US Supreme Court Multimedia

OGDEN V. SAUNDERS, 25 U. S. 213 (1827)

Case Resources

U.S. Supreme Court

Ogden v. Saunders, 25 U.S. 12 Wheat. 213 213 (1827)