Upon questions adjourned from the district to the circuit court
under the "act to establish a uniform system of bankruptcy
throughout the United States," the district judge cannot sit as a
member of the circuit court, and consequently the points adjourned
cannot be brought before this Court by a certificate of
Nor will an appeal or writ of error lie from the decision of the
circuit court, and it is conclusive upon the district judge.
MR. CHIEF JUSTICE TANEY delivered the opinion of the Court.
In the case of William Nelson, petitioner in bankruptcy in the
Kentucky District against Daniel Carland, an opposing creditor,
several points were adjourned by the district to the circuit court.
Upon the hearing in the last-mentioned court, the district judge as
well as the Justice of the Supreme Court sat in the case, and being
opposed in opinion upon the questions adjourned, they were
certified to this Court upon the motion of the counsel for the
The first question that presents itself upon this certificate is
whether the Supreme Court has jurisdiction in the matter in this
form of proceeding. And after examining the printed argument filed
by the counsel for the petitioner and carefully considering the
subject, the Court is of opinion that the district judge cannot sit
as a member of the circuit court upon questions adjourned to that
court under the "act to establish a uniform system of bankruptcy
throughout the United States," and that consequently the points
adjourned cannot be brought before this Court by a certificate of
division. Nor will an appeal or writ of error lie from the decision
of the circuit court, and it is conclusive upon the district
In delivering the opinion of the Court, it is, however, proper
for me to say that I dissent from that part of it which
Page 42 U. S. 266
the district judge from sitting as a member of the circuit court
in a case of this description. Yet I concur in the judgment
dismissing these proceedings, being of opinion that the Act of
Congress of 1802, authorizing the certificate of division where the
judges of the circuit court are opposed in opinion, does not apply
to the peculiar and summary jurisdiction directed to be exercised
in cases of bankruptcy.
The proceedings must therefore be
Dismissed for want of jurisdiction.
MR. JUSTICE CATRON dissented.
On a petition for a discharge, the district judge adjourned into
the circuit court the question whether the act of 1841,
establishing a uniform system of bankruptcy, was constitutional, or
otherwise. The judges were divided in opinion on the question, and
a certificate of division was made to the Supreme Court, calling
upon this Court to decide the question and return it so decided, to
be entered as the judgment of the circuit court.
The district judge may adjourn into the circuit court any
question, whether he has or has not doubts regarding its decision.
Its importance is a sufficient reason. That he properly adjourned
the question whether the bankrupt law was or was not constitutional
is free from doubt. Of this question the circuit court had full and
proper jurisdiction, and the decision of it would have been
conclusive of the case before us.
Was it a "question" on which the judges could divide in
The Act of April 29, 1802, provides:
"That whenever any question shall occur before a circuit court
upon which the opinion of the judges shall be opposed, the point
upon which the disagreement shall happen shall during the same
term, upon the request of either party or their counsel, be stated
under the direction of the judges and certified under the seal of
the court to the Supreme Court, at its next session to be held
thereafter, and shall, by the said Court be finally decided. And
the decision of the Supreme Court and their order in the premises
shall be remitted to the circuit court and be there entered of
record, and shall have effect according to the nature of the said
judgment and order, provided that nothing herein contained
Page 42 U. S. 267
shall prevent the cause from proceeding if, in the opinion of
the court, further proceedings can be had without prejudice to the
The act declares, when any "question shall occur before the
circuit court," &c., then, on a division, a certificate shall
be made at the request of either party. No matter in what form of
proceeding it occurs, be it at law or in equity, divisions are
nearly as frequent in causes in equity as at law. Under the
bankrupt law, the proceedings are in the form prescribed to courts
Now "did a question occur," in the circuit court? It must be
admitted that one of the gravest occurred that could be presented
to a court of justice; there it was to be decided, and the case
concluded by its decision. The judges were opposed, and it could
not be decided; then it was their duty, at the request of either
party, to send it to this Court to decide for the circuit court,
where the decision of the Supreme Court is to be entered as the
judgment of the circuit court.
So far the case presented seems to be sufficiently clear, but it
is met by another consideration, and that is whether the circuit
court, in a question adjourned under the 6th section of the
bankrupt law, consists of the two judges, or of the circuit judge
only. In all other cases in the circuit courts of the United States
except in writs of error and appeals from the district court to the
circuit court (an exception made by positive legislation), the two
judges have equal powers -- they constitute the circuit court
usually, and must do so when a division takes place; does the
bankrupt law cut off these powers of the district judge? The law
does not so provide, and can it be justly inferred? If the district
judge cannot be a member of the court on the hearing of the
adjourned question, then no division, of course, can take place. To
come at the inference of his exclusion, the intention of Congress
must be ascertained from the whole scope of the act.
Great questions were involved in its construction. It was to be
administered by more than thirty judges, acting separately; no
appeal to the circuit court was allowed save in a single case --
that of a refusal to finally discharge the bankrupt from his debts
(sec. 4), and then the circuit court is commanded, if the bankrupt
shall be found entitled to the benefits of the act, "to make a
Page 42 U. S. 268
decree of discharge and grant a certificate, as provided in this
act." No appeal is allowed to this Court from the decree of the
circuit court; the creditor is not allowed an appeal, either from
the district court to the circuit court or to the Supreme Court, in
any case. Nor is the debtor allowed an appeal from the decree of
the circuit court refusing his discharge. Such is the unanimous
opinion of my brethren now present, and with which opinion I
concur. If the discharge is objected to by the creditors, and the
district court refuses it, the debtor may then demand a trial by
jury and try the matter over again; if the jury decides against him
also, he may then appeal to the circuit court, and there elect to
submit the matter a third time, either to the court or to another
jury, and this finding is conclusive, whether by the court or a
jury. It is not possible, therefore, to reach this Court by appeal
in a bankrupt case. This is clear, and my brethren think it equally
clear that no adjourned question can be brought here by a division
of opinion; it follows this Court has no revising power over the
numerous and conflicting constructions of the bankrupt law.
In some circuits it is held that one indebted
"in consequence of a defalcation as a public officer or as
executor, or administrator, guardian, or trustee, or while acting
in any other fiduciary capacity,"
can be discharged from all his other debts, and that the less
favored creditors may take all his property unless the government,
ward &c., see proper to come in for distribution, when the
fiduciary claim will also be extinguished. In other circuits, those
indebted to any amount in a fiduciary capacity are all excluded as
a class; the fact appearing on the face of the petition, it is
dismissed of course. Such is the construction of the act in the
eighth circuit; it has excluded from applying great numbers in the
Eighth and other circuits, who would have been admitted had they
applied in circuits where the law is construed otherwise. This
question also has been brought here by a division of opinion from
the District of Kentucky at the instance of the district and
circuit judges, acting together as the circuit court, the question
having been adjourned into that court by the district judge.
In the case of William Nelson, the question occurred in the same
court whether the bankrupt law was unconstitutional and void or
otherwise. It was adjourned, as already stated, into the
Page 42 U. S. 269
circuit court by the district judge, and there the judges were
opposed in opinion, and certified the question to this Court for
its decision. This was done at the instance of the bar of St.
Louis, the district judge of Missouri having pronounced the
bankrupt act a mere insolvent law, such as was never contemplated
by the framers of the Constitution, and therefore void. The
following are some of his reasons for entertaining this
"Is this act of Congress, under which the petitioner claims a
discharge from his debts, authorized by the Constitution? In order
to determine this, it will be necessary to notice several of its
"It provides in substance that any person, whether a trader or
not, who is indebted, except in a few enumerated cases, may file
his petition in the district court of the United States for the
benefit of the act at any time he may please, without the consent
or action of any of his creditors, and obtain by a decree of the
court, a discharge from all his debts. This decree is to be had
without the consent of any of his creditors being required, even if
they do not participate in the proceedings or receive a dividend
from the property. The decree is to be deemed a full and complete
discharge from all his debts, contracts, and engagements provable
under the act, whether contracted before or after the passage of
the act. If he has property, he surrenders it; if he has none, it
is the same thing as it regards his discharge."
"In examining this question, we should ascertain, if possible,
what was the object the convention had in view by inserting the
provision. The phraseology adopted would indicate a part of the
object: 'To establish uniform laws on the subject of bankruptcies
throughout the United States.' It was apprehended, at least, that
they would not be uniform unless Congress had the power to make
them so. In addition to this, we are told by Mr. Madison (Fed. No.
" The power of establishing uniform laws of bankruptcy is so
intimately connected with the regulation of commerce, and will
prevent so many frauds where the parties or their property may lie
or be removed into different states, that the expediency of it
seems not likely to be drawn into question."
"To have a system that would be uniform and would prevent frauds
&c., seems to have been the object. The proposition was
Page 42 U. S. 270
referred to the committee of detail, of which Mr. Rutledge was
chairman, and reported as it now stands in the Constitution. In
ascertaining what were the mischiefs to be remedied or the objects
to be effected, the convention doubtless looked to the condition of
things, and of course to the institutions and laws of the various
states. But for a definition of that or any other legal term, or to
ascertain the nature and extent of the powers they were about to
grant, by particular words or phrases, they would hardly look to
the laws of the states. There was far less intercourse in those
days than at present. There were no steamboats, railroads, or
"The laws of the several states could not have been generally
known to the members of the convention from the different states;
even the best lawyers could not have been acquainted with the laws
of the states in which they did not practice. They are not so even
at this day. If they had been acquainted with the laws of all the
states, to which would they have referred in preference to all the
rest, for definitions, or the meaning and extent of legal terms?
The convention well knew it was making a Constitution for the whole
Union; that the terms they might use should be known and
understood, and must be interpreted and explained in every state.
They were therefore exceedingly exact in the use of words and
phrases: every word of legal import, every phrase was weighed and
considered, and a phrase of only a few words was frequently
referred to a committee, as was done in this case, and examined and
reported on. They were frequently obliged to use legal terms; they
were making a law; this was a legal term -- 'bankrupt laws'; what
was to be done to prevent confusion and uncertainty? and above all,
to mark exactly and with legal precision the extent of the powers
they were about to grant, that neither more nor less power might be
granted than was desired?"
"Our ancestors had removed from England; the United States had
then lately been English colonies and part of the British empire.
The English laws and system of jurisprudence had been substantially
adopted in every state in the Union. Every person at all conversant
with legal subjects, and every lawyer, of course, was acquainted
with the English laws. This knowledge
Page 42 U. S. 271
was equally extensive in every state. It is so to this day.
Here, then, was a law with which all were acquainted, and to which
all could refer. There could be no mistake if reference was made to
it for the meaning of terms. And to it they did accordingly refer.
We do so to this day. Ask a lawyer the meaning of a legal term, and
where does he look for an answer? To the statutes of Massachusetts
or Georgia -- New York, Pennsylvania, or Virginia? Certainly not.
In most instances, he would look in vain."
"The proposition in regard to bankruptcies was made by Mr.
Charles Pinkney, of South Carolina, in the words we now find in the
Constitution. It was referred to the committee of detail,
consisting of Mr. Rutledge of South Carolina, Mr. Randolph of
Virginia, Mr. Gorham of Massachusetts, Mr. Ellsworth of
Connecticut, and Mr. Wilson of Pennsylvania, and they reported it
in the words in which it was referred. Now several of these states
never had anything like a bankrupt law. To which then did they
refer, or could they refer, to ascertain the meaning and extent of
the terms they were employing? The lawyer, if he is not familiar
with the term, will refer to Blackstone's Commentaries or to an
English Law Dictionary, where he will readily find it. If he
referred to the statutes of the different states, he might get as
many definitions as there were states, supposing they had any law
on the subject."
"The first Continental Congress, in 1774, declared, among other
" That the respective colonies were entitled to the benefit of
such of the English statutes as existed at the time of their
colonization and which they had, by experience, found to be
applicable to their several local and other circumstances."
"1 Journal of Congress 28, Phila. ed. of 1800."
"Many of the states had adopted, in a body, the English
statutes, only excepting such as were local to that Kingdom or not
applicable to their situation."
"The Supreme Court of the United States, in Patterson v.
5 Pet. 233, said that"
"the English statutes passed before the emigration of our
ancestors, and applicable to our situation and in amendment of the
law, constituted a part of the common law of the county."
"We know as matter of history that the members of the
Page 42 U. S. 272
who took part in debate, were intimately acquainted with the
English laws. The committee above mentioned possessed several of
the most eminent lawyers in America, and who have held the highest
legal stations. Reference was often made by them to the English
laws for the meaning of terms or phrases they were using. Thus,
when it was proposed to define and limit treason against the United
States, Mr. Randolph and Mr. Ellsworth (two of the committee), Mr.
Madison, Mr. Mason, and Mr. Gouverneur Morris all referred to the
Act of Parliament of 25 Edward 3, and the convention, at last,
adopted the precise phraseology of that act. Madison Papers 1770.
Again, when the phrase 'ex post facto
' was under
consideration, Mr. Dickerson stated that, on examining Blackstone's
Commentaries, he found the term related to criminal cases only.
Mad.Pap. 1450. And the Supreme Court has since confirmed the
signification of the terms to the definition given by Blackstone.
Mr. Hamilton, who was a member of the convention, in speaking of
the 'Habeas Corpus' provision in the Constitution, refers to and
quotes Blackstone's Commentaries. Fed. No. 84."
This general principle being established, we may go a step
further and show that, in point of fact, the convention had the
English statutes in view, in determining the nature and extent of
the power they were granting to Congress, when the bankrupt clause
was under consideration.
"Mr. Sherman observed 'that bankruptcies were, in some cases
punishable with death by the laws of England, and he did not choose
to grant a power, by which that might be done here.' 3 Mad.Pap.
1481. It thus appears that the law of England were the laws
referred to in regard to the definition and nature of the powers
they were conferring."
"It may also be remarked that Blackstone's Commentaries were in
the hands of the members and frequently referred to. This book
contained a definition of a bankrupt and a summary of the English
laws on the subject. What then was the English law to which the
convention referred when they adopted the clause in regard to
bankrupts? The English system, when the convention sat, had been in
operation for several generations, and provided in substance a
proceeding by a creditor against a debtor who was a trader,
distribution of bankrupt's effects
Page 42 U. S. 273
equally among his creditors; a discharge to be obtained by the
debtor from his debts, upon obtaining the consent of a given
majority of his creditors."
"It was a proceeding for the benefit of creditors, as are all
laws for the collection of debts, of which this was one, but with
liberality towards the debtor who, by misfortunes so frequently
attending trade, became unable to pay his debts, in allowing him a
discharge from those debts upon obtaining the consent thereto of a
given majority of his creditors. Even this provision for a
discharge, we are told by Blackstone, was intended for the benefit
of creditors, as it influenced debtors to act with economy,
industry, and honesty, and make a full surrender of their property,
without which they could not hope to obtain the consent of their
"The whole system was founded on the principle that a trader who
owed debts in various parts of the country and was fraudulently
making way with his property, instead of paying his debts with it,
should have that property taken away and placed in the hands of
trustees or other officers, with which his debts should be paid and
each of his creditors, whether absent or present, have his fair
"We are told by Mr. Madison, who has not inaptly been called the
Father of the Constitution, that a uniform system of
"would prevent so many frauds, when the parties, or their
property, may lie or be removed into different states, that the
expediency of it seems not likely to be drawn in question."
"Fed. No. 42. This reason for the adoption of the clause in
regard to bankrupts was published by Mr. Madison after the
Constitution was proposed by the convention, but before it was
adopted by the states; was intended to explain the grant of power
to Congress, and to induce the states to accept the Constitution;
and no doubt had its effect. The frauds of whom -- the removal of
whose property, are here spoken of? Certainly the frauds of the
debtor -- the property of the debtor."
"We have another almost contemporaneous exposition of this grant
of power to Congress. It is the Act of Congress of 1800, 'To
establish a uniform system of bankruptcy throughout the United
States.' It is altogether, in its principle and material features,
like the English system; a proceeding by creditors against debtors
who are traders; distribution of bankrupt's effects
Page 42 U. S. 274
equally among creditors; a discharge of the bankrupt from his
debts, on the consent obtained of a given majority of his
"I have now, I think, shown that the bankrupt system intended by
the framers of the Constitution, and to establish which power was
given to Congress, was a system for the benefit of creditors, to
enable them to collect their just debts and to prevent the frauds
of debtors who might remove their property and themselves into
"I will now show that the act we are considering is solely and
entirely for the benefit of debtors and to enable them to avoid
their debts, and therefore opposed to the whole intent, spirit, and
object of a bankrupt law. For this purpose I will here further
notice some of its provisions."
"1. The debtor selects his own time to commence proceedings --
when he may have entirely squandered his property, and when nothing
can be found. It is not even necessary that he should have been
sued or threatened with a suit or ever asked for the debt."
"2. He is allowed to select the state and county where he will
commence proceedings. For this purpose he can change his residence
or business to any place he may think most favorable. He can thus
go where nobody is likely to detect his frauds."
"3. He may have spent all his property in idleness, riotous
living, debauchery, or gambling, in stocks, or wild speculations;
it will not affect him, and he is entitled to his discharge equally
with the most prudent, industrious, and economical person."
"4. If he does not surrender to his creditors one cent's worth
of property, he may have property reserved to him, to the amount of
$300, for his own use, and also his wearing apparel and that of his
family, which has been held by some to include jewelry."
"5. If a majority of his creditors should object to his
discharge, it will only give him an additional privilege -- that of
demanding a jury and taking the cause away from the court. Or he
may appeal, even before the cause is tried, and is allowed ten days
to appeal in. No such privileges are given to creditors."
"6. After the court disposes of the matter or decides the cause
against him and refuses the discharge, he can then have it referred
to a jury, although already tried and decided by the court,
Page 42 U. S. 275
which heretofore has never been allowed in any case either in
law or equity. The creditor is allowed no such privilege."
"7. In such cases, no provision is made by the act to allow the
creditors a trial by jury."
"8. An appeal is given to the debtor -- none is allowed by the
act to a creditor."
"9. When the cause is removed into the appellate court, the
debtor can demand either a trial by jury or a trial by the court.
The creditor has no such privilege."
"10. The debtor may take the chance of a decision in his favor
by the court; if in his favor, it will be conclusive. If the court
decides against him, then he may demand a jury and have another
chance. If the court decides against him, he can have another
chance by appeal. In the appellate court, if he thinks the court is
likely from previous decision to be against him, he can take the
chance of a jury. If he thinks the jury is likely to be against
him, he can take his chance with the court. If some of these
chances do not hit, there is no 'uncertainty in the law.' The
creditor has no choice; any decision against him is to be final,
and scarcely any in his favor is allowed to be final or
"11. The English bankrupt law and the act of 1800 gave the
appointment of the assignee to the creditors, because they alone
were interested. No such privilege is given by this act."
"12. The commissioner is to be appointed in the county where the
"13. There is no punishment for frauds."
"14. To conclude, the debtor is to get a discharge from all his
debts, without the consent of any creditor. It applies to debts
contracted before the passage of the act, and of which creditors
could have had no idea at the time they gave the credit."
"May I not here inquire whether it is fair to construe this
grant of power, intended for the benefit of creditors and to enable
them to collect their just debts, so as to authorize the passage of
a law solely for the benefit of debtors and to enable them to avoid
and discharge their debts?"
"Again: a clause had been introduced into the Constitution
prohibiting the states from passing any law impairing the
obligation of contracts, because, as was said by the members of
Page 42 U. S. 276
convention, it was immoral, contrary to the first principles of
justice, and a power that ought not to be exercised by any
legislative body. Would the states have ratified the Constitution,
and submitted to such a prohibition on themselves, for such
reasons, if they had understood that Congress could, at its
pleasure, under color of bankrupt laws, authorize the abrogation of
Pursuant to the opinion, decrees were entered, dismissing the
first cases presented for final discharges in the District of
Missouri, and some twelve hundred more, depending in that court,
will be dismissed unless the decrees are reversed which have been
entered. It was thought by the circuit judge, due to the county at
large and to the parties concerned, that this important question
should meet with the speedy decision of this Court, and therefore
it was brought here.
No law that Congress ever passed has in it to a greater degree
the elements of various construction and confusion than the
bankrupt law of 1841, when administered by more than thirty judges,
acting separately, if all are exempt from the revising power of
this tribunal, created for the purpose (amongst others) of
producing uniformity of decision and construction in all cases over
which its jurisdiction extends.
I think Congress intended, by the 6th section of the bankrupt
law, to give the district judge the power to adjourn questions into
the circuit court, 1. for the purpose of obtaining the aid and
assistance of the circuit judge, and, 2. to make up a division of
opinion on great questions, so that the decision of the Supreme
Court might be had. This was contemplated by Congress, or it was
intended that in no bankrupt case should this Court have a revising
power, although in every district in the United States the law
might be differently construed, and the wildest prediction could
hardly have exceeded the reality. So far from being "a uniform
system of bankruptcy," in its administration, it has become, by the
various and conflicting constructions put upon it, little more
uniform than the different and conflicting state insolvent laws.
This result could not have escaped those who passed the law; it was
too prominently manifest to be overlooked; I cannot, therefore,
bring my mind to the belief that the revising power of this Court
was intended to be cut off. And, as the most expeditious and
convenient mode of revision was by
Page 42 U. S. 277
a division of opinion, I think Congress intended that should be
the mode. Notwithstanding the question was sent to this Court, the
case might progress below at the election of the district court; so
the recited act of 1802 provides; and then the creditor and debtor
would have equal opportunities to redress a perverted construction.
But as the matter now stands, the remedy is with Congress, either
to give this Court jurisdiction or to withhold it.
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Kentucky, and on the points and questions on which the judges of
the said circuit court were opposed in opinion, and which were
certified to this Court for its opinion, and was argued by counsel.
On consideration whereof, it is now here ordered and adjudged by
this Court that this cause be and the same is hereby dismissed for
the want of jurisdiction, and that this cause be and the same is
hereby remanded to the said circuit court, for such proceedings to
be had therein as to law and justice may appertain.
While this volume was in press, we received the following
opinion delivered by Judge Catron in his judicial district, which
we insert as being of general interest.
N THE MATTER OF EDWARD KLEIN"
"This is an appeal from the District Court of Missouri in a case
of bankruptcy on the voluntary petition of the appellant to be
discharged from his debts on the surrender of his property
according to the Act of Congress of 1841. The proceeding being in
all respects regular, the petitioner moved for his discharge; the
district court refused to grant such motion"
"because it considered the act of Congress under which said
Klein asked to be discharged from all his debts, as being against
the Constitution of the United States, and therefore the court had
no power to grant such discharge."
"The ground of this judgment the circuit court is called upon to
revise. I am relieved from setting forth at any length the opinion
of the district judge because this has been already done in an
opinion delivered by me in the Supreme Court of the United States
at its last term, when an attempt was made to bring the present
question before that Court to have it decided for the purposes of
"By the Constitution, Congress is vested with power 'to
establish uniform laws on the subject of bankruptcies throughout
the United States.' The district judge was of opinion that the
extent of the power is limited to the principle on which the
English bankrupt system was founded, and to that system
Page 42 U. S. 278
the convention referred, when it adopted the clause above
recited, for its definition. That system provided a proceeding by a
creditor against a debtor who was a trader, a distribution of a
bankrupt's effects equally among his creditors, and a discharge of
the debtor from his contracts upon obtaining the consent of a given
majority of his creditors. That it was a proceeding for the benefit
of creditors, the whole system being founded on the principle that
a trader who owed debts in various parts of the country and was
fraudulently making away with his property, instead of paying his
debts with it, should have the property taken away and placed in
the hands of trustees or other officers, with which his debts
should be paid, and each of his creditors, whether present or
absent, have his fair dividend, and that the bankrupt law of 1800
is a fair exposition of the constitutional provision."
"Briefly: that a bankrupt law was one by which honest creditors
could force fraudulent debtors, who were traders, to surrender all
their property, to pay ratably all their just debts, but that a law
made solely and entirely for the benefit of debtors, and which
enabled them, at their own election, to avoid their debts was
opposed to the whole intent, spirit, and object of a bankrupt
"I state thus much of the grounds on which my brother judge's
decree was founded from his printed opinion because this case has
not been argued on part of the creditors, for whom no counsel
appeared in this Court, nor did there in the court below, as I am
informed. The accuracy, industry, and unquestioned ability of the
district judge have, I do not doubt, brought forward the best
reasons that exist in support of the judgment he gave. The tenor
and true spirit of the English bankrupt laws such as they were when
our federal Constitution was adopted he has given, and I agree with
him that the act of 1841, insofar as it permitted the debtor, at
his own sole election, to come into court and coerce an extinction
of his debts and abrogation of his contracts contrary to the will
of his creditors was in violation of the leading principles on
which the English laws were founded. Our law contemplated a
proceeding by a debtor against his creditors, provided the debtor
was insolvent; by the English law, the creditor alone could
originate the proceeding, and it mattered not whether the defendant
was insolvent or otherwise; if he did the fraudulent act, it made
him a bankrupt -- a fraudulent trader. Then by the English laws, 'a
fraudulent trader' could only be a bankrupt; with him as debtor and
with his creditors could courts deal, and this at the election of
the creditors -- the debtor having no election to ask for
distribution or for a discharge from his debts. If the power
conferred on Congress carries with it these restrictions, then the
district court properly refused to discharge the applicant Klein,
because the act of Congress was unconstitutional in his case. But
other and controlling considerations enter into the construction of
the power: it is general and unlimited, it gives the unrestricted
authority to Congress over the entire subject, as the Parliament of
Great Britain had it, and as the sovereign states of this Union had
it before the time when the Constitution was adopted. To go no
further, what was the power of the states on the subject of
bankruptcies? They could and constantly did permit the debtor to
come involuntarily and surrender his property and ask a discharge
from his debts; the property was distributed generally among the
creditors, and the debts of the petitioner annulled.
Page 42 U. S. 279
Nor does the Constitution prohibit the states from passing such
laws. New York, Pennsylvania, Louisiana, and others, now have them
in full operation. The insolvent laws of Pennsylvania are in
substance, and to a great extent in detail, similar to the Act of
Congress of 1841, and no doubt furnished some of the ideas that
were incorporated into the act. That Pennsylvania had power to pass
these laws no one ever doubted, so far as she was not restricted by
the Constitution of the United States. The Supreme Court held, in
the case of Ogden v. Saunders,
213, that the states retained the power and could exercise it by
law, and that the law would operate to discharge the contract
between debtor and creditor, they being inhabitants of the
particular state at the date of the proceeding, if the contract had
been made there after passing the law. In such case, the parties
contracted subject to the law, and it entered into the contract.
The case of Boyle v. Zacharie and
6 Pet. 635, settled the contested question
of power, and that it remained with the states to this limited
extent. But the restrictions depend on general principles of
international law and other parts of the Constitution -- especially
that which prohibits the states from passing any law impairing the
obligations of contracts, as will be seen by reference to the
leading case on the subject, of Sturges v.
4 Wheat. 122. What the states might
do before the adoption of the Constitution may well be ascertained
from what they now do in virtue of their respective powers. They
may frame a bankrupt law in any form they see proper; this has
never been questioned so far as my knowledge extends. The
controversies in the Supreme Court turned on the question whether
the Constitution inhibited the states (there being no acts of
Congress opposed to it) from legislating on the subject of
bankruptcies, or whether the power was exclusive in Congress. In
the state tribunals, the debtor comes involuntarily and forces the
creditor to prove his debt or be barred. One not a trader may
apply; neither is the consent of the creditors (or any portion of
them) necessary to authorize a discharge from the contracts of the
debtor. So he may have no property to divide, and many debts to
annul, from which he seeks a discharge, and from which he is
discharged. These powers clearly belonged to the state governments
before Congress was invested with them, and this was done without
"The district court relied confidently on the ground, that
Congress can pass no law violating contracts, and that the clause
of the Constitution conferred no such authority, because the
English bankrupt laws, by which the power is supposed to be
restricted, only permitted the contract to be annulled at the
election of four parts in five of the creditors in number and
value, and therefore they annulled it by a new contract. This
argument proceeds on the assumption that a proceeding in bankruptcy
can only be had at the election of, and for the benefit of
creditors, and that every material step is their joint act, to
which the debtor is compelled to submit. For the present it will
only be necessary to say that one prominent reason why the power is
given to Congress was to secure to the people of the United States,
as one people, a uniform law, by which a debtor might be discharged
from the obligation of his contracts, and his future acquisitions
exempted from his previous engagements; that the rights of debtor
and creditor, equally entered into the mind of the framers of
Page 42 U. S. 280
Constitution. The great object was to deprive the states of the
dangerous power to abolish debts. Few provisions in the
Constitution have had more beneficial consequences than this, and
the kindred inhibition on the states that they should pass no law
impairing the obligation of contracts."
"The inhabitants of states producing largely must be creditors;
the inhabitants of those that are consumers will be debtors;
bankrupt laws of the latter states might ruin the producers and
creditors; they having no interest or power in the government of
the consuming states, and it being the interest of the latter to
annul the debts of nonresidents, no remedy would exist for the
grossest oppression. No laws of relief would be more effectual in
times of pressure by foreign creditors, nor more likely to be
adopted. If one state adopted such a measure, it would furnish a
fair occasion for others to do the same on the plausible pretext of
self-defense; others would be forced into a similar bad policy,
until discredit and ruin would overspread the entire land by an
extinction of all debts, and a consequent prostration of morals,
public and private, on the subject of contracts. This evil had to a
certain extent occurred, and was fresh in the minds of the framers
of the Constitution, and no doubt it would again occur in some of
the states but for the provisions under consideration standing in
the way of abrogating the private contracts of nonresidents."
"But if Congress passed the law, it must be uniform throughout
the United States, then the entire people are equally represented,
and have the power to protect themselves against hasty and mistaken
legislation by its repeal if found oppressive in practice."
"Legislation by Congress on the subject of bankruptcies is of
much less consequence than its prohibition on part of the states.
They can pass no law affecting a nonresident, because no
jurisdiction exists of his person; they can impair no contract made
out of the state, because it was not made subject to the state
insolvent law. The power, as it stands restricted by the decision
in Ogden v. Saunders,
is almost harmless; those whom the
state bankrupt law can most affect have the popular vote in the
state legislature, and may repeal the law; the foreigner has little
interest in its existence, as he cannot be affected by it further
than that the debtor may be deprived of his property. Another
reason why Congress was vested with the power was to prevent
dangerous conflicts of jurisdiction among the states. A discharge
in one sovereignty from contracts is by the laws of nations not
recognized as a discharge in another sovereignty, save on the
grounds of comity; an assignee under the British bankrupt laws is
not recognized in this country as owner of the debts of the
bankrupt, and an attaching creditor or the government may disregard
a title set up by the foreign assignee. Harrison v.
5 Cranch 298. The states in this respect
are foreign to each other, and would be little likely to extend
comity to the discharge of each others, from which great confusion
might follow and much ill will."
"In considering the question before me, I have not pretended to
give a definition, but purposely avoided any attempt to define the
mere word, BANKRUPTCY. It is employed in the Constitution in the
plural, and as part of an expression -- 'the subject of
bankruptcies.' The ideas attached to the word in this connection
are numerous and complicated; they form a subject of extensive
Page 42 U. S. 281
and complicated legislation; of this subject, Congress has
general jurisdiction, and the true inquiry is to what limits is
that jurisdiction restricted?"
"I hold it extends to all cases where the law causes to be
distributed, the property of the debtor among his creditors -- this
is its least limit. Its greatest is a discharge of the debtor from
his contracts. And all intermediate legislation, affecting
substance and form but tending to further the great end of the
subject -- distribution and discharge -- are in the competency and
discretion of Congress."
"With the policy of a law, letting in all classes, others as
well as traders; and permitting the bankrupt to come in
voluntarily, and be discharged without the consent of his
creditors, the courts have no concern; it belongs to the
"I have spoken of state bankrupt laws. I deem every state law a
bankrupt law in substance and fact that causes to be distributed by
a tribunal the property of a debtor among his creditors, and it is
especially such if it causes the debtor to be discharged from his
contracts within the limits prescribed by the case of Ogden v.
Such a law may be denominated an insolvent law;
still it deals directly with the subject of bankruptcies, and is a
bankrupt law in the sense of the Constitution, and if Congress
should pass a similar law, it would suspend the state law while the
act of Congress continued in force."
"This Court deeming the act of 1841 constitutional, it is
ordered that the decree of the district court dismissing the
proceeding be reversed and the petitioner, Klein, be discharged
from his debts and receive his certificate. The same order is
directed in the case of Christopher Rhodes, dismissed also on
constitutional grounds by the district court."