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 prohibition. It is therefore no objection to
the view I have taken of this clause in the Constitution that the
provision was unnecessary. The great principle asserted no doubt
is, as laid down by the Court in
Sturges v. Crowninshield,
the inviolability of contracts, and this principle is fully
maintained by confining the prohibition to laws affecting
antecedent contracts. It is the same principle we find,
contemporaneously, 13 July, 1787, 1 L.U.S. 475, asserted by the old
Congress in an ordinance for the government of the territory of the
United States northwest of the River Ohio. By one of the
fundamental articles it is provided that
"In the just preservation of rights and property, it is
understood and declared that no law ought ever to be made or have
force in the territory that shall in any manner whatever interfere
with or affect private contracts or engagements,
bona fide
and without fraud previously made,"
thereby pointedly making a distinction between laws affecting
contracts antecedently and subsequently made, and such a
distinction seems to me to be founded upon the soundest principles
of justice if there is anything in the argument that contracts are
made with reference to and derive their obligation from the
existing law.
That the prohibition upon the states to pass laws impairing the
obligation of contracts is applicable to private rights merely,
without reference to bankrupt laws, was evidently the understanding
of those distinguished commentators on the Constitution who wrote
the Federalist. In the 44th number of that work, p. 281, it is said
that
"Bills of attainder,
ex post facto laws, and laws
impairing the obligation of contracts are contrary to the first
principles of the social compact and to every principle of sound
legislation. The two former are expressly prohibited by the
declarations prefixed
Page 25 U. S. 305
to some of the state constitutions, and all of them are
prohibited by the spirit and scope of these fundamental charters.
Our own experience has taught us, nevertheless, that additional
defenses against these dangers ought not to be omitted. Very
properly, therefore, has the convention added this constitutional
bulwark in favor of personal security and private rights."
Had it been supposed that this restriction had for its object
the taking from the states the right of passing insolvent laws,
even when they went to discharge the contract, it is a little
surprising that no intimation of its application to that subject
should be found in these commentaries upon the Constitution. And it
is still more surprising that if it had been thought susceptible of
any such interpretation, that no objection should have been made in
any of the states to the Constitution on this ground when the
ingenuity of man was on the stretch in many states to defeat its
adoption, and particularly in the state of New York, where the law
now in question was in full force at the very time the state
convention was deliberating upon the adoption of the Constitution.
But if the prohibition is confined to retrospective laws, as it
naturally imports, it is not surprising that it should have passed
without objection, as it is the assertion of a principle
universally approved.
It was pressed upon the court with great confidence, and, as it
struck me at the time, with much force, that if this restriction
could not reach laws existing at the time the contract was made,
state legislatures might evade the prohibition (immediately
preceding) to make anything but gold and silver a tender in payment
of debts by making the law prospective in its operation, and
applicable to contracts thereafter to be made. But on reflection I
think, no such consequences are involved. When we look at the whole
clause in which these restrictions are contained, it will be seen
that the subjects embraced therein are evidently to be divided into
two classes, the one of a public and national character, the power
over which is entirely taken away from the states, and the other
relating to private and personal rights upon which the states may
legislate under the restrictions specified. The former are, "no
state shall enter any into treaty, alliance, or confederation,
grant
Page 25 U. S. 306
letters of marque and reprisal, coin money, emit bills of
credit." Thus far, there can be no question that they relate to
powers of a general and national character. The next in order is or
"make anything but gold and silver a tender in payment of debts;"
this is founded upon the same principles of public and national
policy as the prohibition to coin money and emit bills of credit,
and is so considered in the commentary on this clause in the number
of the Federalist I have referred to. It is there said the power to
make anything but gold and silver a tender in payment of debts is
withdrawn from the states on the same principles with that of
issuing a paper currency.
All these prohibitions, therefore, relate to powers of a public
nature and are general and universal in their application and
inseparably connected with national policy. The subject matter is
entirely withdrawn from state authority and state legislation. But
the succeeding prohibitions are of a different character; they
relate to personal security and private rights,
viz., or
"pass any bill of attainder,
ex post facto law, or law
impairing the obligation of contracts." The subject matter of such
laws is not withdrawn from the states, but the legislation thereon
must be under the restriction therein imposed. States may legislate
on the subject of contracts, but the laws must not impair the
obligation of such contracts. A tender of payment necessarily
refers to the time when the tender is made, and has no relation to
the time when the law authorizing it shall be passed or when the
debt was contracted. The prohibition is therefore general and
unlimited in its application. It has been urged in argument that
this prohibition to the states to pass laws impairing the
obligation of contracts had in view an object of great national
policy connected with the power to regulate commerce; that the
leading purpose was to take from the states the right of passing
bankrupt laws. And to illustrate and enforce this position, this
clause has been collated with that which gives to Congress the
power of passing uniform laws on the subject of bankruptcies, and
by transposition of the clause, the Constitution is made to read
Congress shall have power to establish uniform laws on the subject
of bankruptcies throughout the United States; but no state
Page 25 U. S. 307
shall pass any law impairing the obligation of contracts, and
this prohibition is made to mean no state shall pass any bankrupt
law.
No just objection can be made to this collocation if the grant
of the power to Congress, and the prohibition in question to the
states, relate to the same subject matter,
viz., bankrupt
laws. But it appears to me very difficult to maintain this
proposition. It is, in the first place, at variance with the
decision in
Sturges v. Crowninshield, where it is held
that this power is not taken from the states absolutely, but only
in a limited and modified sense. And in the next place it is not
reasonable to suppose that a denial of this power to the states
would have been couched in such ambiguous terms if, as has been
contended, the giving to Congress the exclusive power to pass
bankrupt laws, was the great and leading object of this
prohibition, and the preservation of private rights followed only
as an incident of minor importance, it is difficult to assign any
satisfactory reason why the denial of the power to the states was
not expressed in plain and unambiguous terms,
viz., no
state shall pass any bankrupt law. This would have been a more
natural and certainly a less doubtful form of expression, and
besides, if the object was to take from the states altogether the
right of passing bankrupt laws, or insolvent laws having the like
operation, why did not the denial of the power extend also to
naturalization laws? The grant of the power to Congress on this
subject is contained in the same clause, and substantially in the
same words, "To establish an uniform rule of naturalization, and
uniform laws on the subject of bankruptcies throughout the United
States." If the authority of Congress on the subject of
naturalization is exclusive, from the nature of the power, why is
it not also with respect to bankruptcies? And if in the one case
the denial of the power to the states was necessary, it was equally
so in the other.
I cannot think, therefore, that the prohibition to pass laws
impairing the obligation of contracts had any reference to a
general system of bankrupt or insolvent laws. Such a system,
established by the sovereign legislative power of the general or
state governments cannot in any just sense be said to
Page 25 U. S. 308
impair the obligation of contracts. In every government of laws
there must be a power somewhere to regulate civil contracts, and
where, under our system, is that power vested? It must be either in
the general or state governments. There is certainly no such power
granted to the general government, and all power not granted is
reserved to the states. The whole subject, therefore, of the
regulation of contracts must remain with the states, and be
governed by their laws respectively; and to deny to them the right
of prescribing the terms and conditions upon which persons shall be
bound by their contracts thereafter made, is imposing upon the
states a limitation, for which I find no authority in the
Constitution; and no contract can impose a civil obligation beyond
that prescribed by the existing law when the contract was made; nor
can such obligation be impaired by controlling and discharging the
contract according to the provisions of such law. Suppose a
contract for the payment of money should contain an express
stipulation by the creditor to accept a proportional part, in case
the debtor should become insolvent, and to discharge the contract,
can there be a doubt that such contract would be enforced? And what
is the law in question but such contract, when applied to the
undertaking of Ogden by accepting these bills. It is no strained
construction of the transaction, to consider the contract and the
law inseparable, when judging of the obligation imposed upon the
debtor, and if so the undertaking was conditional, and the holder
of the bills agreed to accept a part in case of the inability of
the acceptor, by reason of his insolvency, to pay the whole.
The unconstitutionality of this law is said to arise from its
exempting the property of the insolvent, acquired after his
discharge, from the payment of his antecedent debts. A discharge of
the person of the debtor is admitted to be no violation of the
contract. If this objection is well founded, it must be on the
ground that the obligation of every contract attaches upon the
property of the debtor, and any law exonerating it violates this
obligation. I do not mean that the position implies a lien by way
of mortgage or pledge on any specific property, but that all the
property which a debtor has, when called upon for payment, is
liable to be
Page 25 U. S. 309
taken in execution to satisfy the debt, and that a law releasing
any portion of it impairs the obligation of the contract. The force
and justice of this position, when applied to contracts existing at
the time the law is passed, is not now drawn in question. But its
correctness when applied to contracts thereafter made is denied.
The mode and manner and the extent to which property may be taken
in satisfaction of debts must be left to the sound discretion of
the legislature and regulated by its views of policy and expediency
in promoting the general welfare of the community, subject to such
regulation. It was the policy of the common law under the feudal
system to exempt lands altogether from being seized and applied in
satisfaction of debts; not even possession could be taken from the
tenant. There can be no natural right growing out of the relation
of debtor and creditor that will give the latter an unlimited claim
upon the property of the former. It is a matter entirely for the
regulation of civil society; nor is there any fundamental principle
of justice, growing out of such relation, that calls upon
government to enforce the payment of debts to the uttermost
farthing which the debtor may possess, and that the modification
and extent of such liability is a subject within the authority of
state legislation, seems to be admitted by the uninterrupted
exercise of it. I have not deemed it necessary to look into the
statute books of all the states on this subject, but think it may
be safely affirmed that in most if not all the states some
limitation of the right of the creditor over the property of the
debtor has been established. In New York, various articles of
personal property are exempted from execution. In Rhode Island,
real estate cannot at all be taken on judicial process for
satisfaction of a debt so long as the body of the debtor is to be
found within the state, and Virginia has adopted the English
process of
elegit, and a moiety only of the debtor's
freehold is delivered to the creditor until, out of the rents and
profits thereof, the debt is paid. Do these statute regulations
impair the obligation of contracts? I presume this will not be
contended for, and yet they would seem to me to fall within the
principle urged on the part of the defendant in error.
Page 25 U. S. 310
It is no satisfactory answer to say that such laws relate to the
remedy. The principle asserted is that the creditor has a right to
his debtor's property by virtue of the obligation of the contract,
to the full satisfaction of the debt, and if so, a law, which in
any shape exempts any portion of it, must impair the obligation of
the contract. Such a limitation and restriction upon the powers of
the state governments cannot, in my judgment, be supported, under
the prohibition to pass laws impairing the obligation of
contracts.
If the letter of the Constitution does not imperiously demand a
construction which denies to the states the power of passing
insolvent laws like the one in question, policy and expediency
require a contrary construction. Although there may be some
diversity of opinion as to the policy of establishing a general
bankrupt system in the United States, yet it is generally admitted
that such laws are useful, if not absolutely necessary, in a
commercial community. That it was the opinion of the framers of the
Constitution that the power to pass bankrupt laws ought somewhere
to exist, is clearly inferrable from the grant of such power to
Congress. A contrary conclusion would involve the greatest
absurdity. The specific power, however, granted to Congress never
did nor never could exist in the state governments. That power is
to establish uniform laws on the subject of bankruptcies throughout
the United States, which could only be done by a government having
coextensive jurisdiction. Congress not having as yet deemed it
expedient to exercise the power of reestablishing a uniform system
of bankruptcy, affords no well founded argument against the
expediency or necessity of such a system in any particular state. A
bankrupt law is most necessary in a commercial community, and as
different states in this respect do not stand on the same footing,
a system which might be adapted to one, might not suit all, which
would naturally present difficulties in forming any uniform system,
and Congress may, as heretofore, deem it expedient to leave each
state to establish such system as shall best suit its own local
circumstances and views of policy, knowing, at the same time, that
if any great public inconvenience shall grow out of the different
state laws, the evils
Page 25 U. S. 311
may be corrected by establishing a uniform system, according to
the provision of the Constitution, which will suspend the state
laws on the subject. If such should be the views entertained by
Congress and induce it to abstain from the exercise of the power,
the importance to the State of New York, as well as other states,
of establishing the validity of laws like the one in question, is
greatly increased. The long continuance of it there clearly
manifests the views of the state legislature with respect to the
policy and expediency of the law. And I cannot but feel strongly
impressed that the length of time which this law has been in
undisputed operation, and the repeated sanction it has received
from every department of the government, ought to have great weight
when judging of its constitutionality.
The provisions of the 61st section of the bankrupt law of 1800
appear to me to contain a clear expression of the opinion of
Congress in favor of the validity of this and similar laws in other
states. It cannot be presumed they were ignorant of the existence
of these laws or their extent and operation. And indeed the section
expressly assumes the existence of such laws by declaring that this
act shall not repeal or annul the laws of any state now in force,
or which may be thereafter enacted for the relief of insolvent
debtors, except so far as the same may affect persons within the
purview of the bankrupt act, and even with respect to such persons,
it provides that if the creditors shall not prosecute a commission
of bankruptcy within a limited time, they shall be entitled to
relief under the state laws for the relief of insolvent debtors.
And what relief did such laws give? Was it merely from imprisonment
only? Certainly not. The state laws here ratified and sanctioned,
or at least some of them, were such as had the full effect and
operation of a bankrupt law, to-wit, to discharge the debtor
absolutely from all future responsibility. It is true, if these
laws were unconstitutional and void, this section of the bankrupt
law could give them no validity. But it is not in this light the
argument is used. The reference is only to show the sense of
Congress with respect to the validity of such laws, and if it is
fair to presume Congress was acquainted with the extent and
operation of these laws, this clause is a direct affirmation of
their validity.
Page 25 U. S. 312
For it cannot be presumed that body would have expressly
ratified and sanctioned laws which they considered
unconstitutional.
In the case of
Sturges v. Crowninshield, as I have
before remarked, it is said that by this prohibition, Art. 1. sec.
10, in the Constitution, the convention appears to have intended to
establish a great principle "that contracts should be inviolable."
This was certainly, though a great, yet not a new, principle. It is
a principle inherent in every sound and just system of laws,
independent of express constitutional restraints. And if the
assertion of this principle was the object of the clause (as I
think it was), is it reasonable to conclude that the framers of the
Constitution supposed that a bankrupt or insolvent law, like the
one in question, would violate this principle? Can it be supposed
that the Constitution would have reserved the right, and impliedly
enjoined the duty upon Congress to pass a bankrupt law, if it had
been thought that such law would violate this great principle? If
the discharge of a party from the performance of his contracts,
when he has, by misfortunes, become incapable of fulfilling them,
is a violation of the eternal and unalterable principles of
justice, growing out of what has been called at the bar the
universal law, can it be that a power drawing after it such
consequences has been recognized and reserved in our Constitution?
Certainly not. And is the discharge of a contract any greater
violation of those sacred principles in a state legislature than in
that of the United States? No such distinction will be pretended.
But a bankrupt or insolvent law involves no such violation of the
great principles of justice, and this is not the light in which it
always has been, and ought to be, considered. Such law, in its
principle and object, has in view the benefit of both debtor and
creditor, and is no more than the just exercise of the sovereign
legislative power of the government to relieve a debtor from his
contracts, when necessity, and unforeseen misfortunes, have
rendered him incapable of performing them; and whether this power
is to be exercised by the states individually, or by the United
States, can make no difference in principle. In a government like
ours, where sovereignty, to a modified extent,
Page 25 U. S. 313
exists both in the states and in the United States. It was, in
the formation of the Constitution, a mere question of policy and
expediency where this power should be exercised, and there can be
no question but that so far as respects a bankrupt law, properly
speaking, the power ought to be exercised by the general
government. It is naturally connected with commerce, and should be
uniform throughout the United States. A bankrupt system deals with
commercial men, but this affords no reason why a state should not
exercise its sovereign power in relieving the necessities of men
who do not fall within the class of traders and who, from like
misfortune, have become incapable of performing their
contracts.
Without questioning the constitutional power of Congress to
extend a bankrupt law to all classes of debtors, the expediency of
such a measure may well be doubted. There is not the same necessity
of uniformity of system as to other classes than traders; their
dealings are generally local, and different considerations of
policy may influence different states on this subject, and should
Congress pass a bankrupt law confined to traders, it would still
leave the insolvent law of New York in force as to other classes of
debtors, subject to such alteration as that state shall deem
expedient.
Upon the whole, therefore, it having been settled by this Court
that the states have a right to pass bankrupt laws provided they do
not violate the prohibition against impairing the obligation of
contracts, and believing as I do, for the reasons I have given,
that the insolvent law in question, by which a debtor obtains a
discharge from all future responsibility upon contracts entered
into after the passage of the law and before his discharge does not
impair the obligation of his contracts, I am of opinion, that the
judgment of the court below ought to be reversed.
MR. JUSTICE TRIMBLE.
The question raised upon the record in this case and which has
been discussed at the bar may be stated thus: has a state, since
the adoption of the Constitution of the United States, authority to
pass a bankrupt
Page 25 U. S. 314
or insolvent law discharging the bankrupt or insolvent from all
contracts made within the state after the passage of the law upon
the bankrupt's or insolvent's surrendering his effects and
obtaining a certificate of discharge from the constituted
authorities of the state?
The counsel for the defendant in error have endeavored to
maintain the negative of the proposition on two grounds:
First. That the power conferred on Congress by the Constitution,
"to establish uniform laws on the subject of bankruptcies
throughout the United States" is in its nature an exclusive power,
that consequently no state has authority to pass a bankrupt law,
and that the law under consideration is a bankrupt law.
Secondly. That it is a law impairing the obligation of contracts
within the meaning of the Constitution.
In the case of
Sturges v.
Crowninshield, 4 Wheat. 122, this Court expressly
decided
"That since the adoption of the Constitution of the United
States, 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 a uniform system of bankruptcy conflicting with
such law."
This being a direct judgment of the Court, overruling the first
position assumed in argument, that judgment ought to prevail unless
it be very clearly shown to be erroneous.
Not having been a member of the Court when that judgment was
given, I will content myself with saying the argument has not
convinced me it is erroneous, and that on the contrary, I think the
opinion is fully sustained by a sound construction of the
Constitution.
There being no act of Congress in force to establish a uniform
system of bankruptcy, the first ground of argument must fail.
It is argued that the law under consideration is a law impairing
the obligation of contracts within the meaning of the Constitution.
The 10th section of the 1st Art. of the Constitution is in these
words:
"No state shall enter into any treaty, alliance, or
confederation, grant letters of marque and reprisal, coin money,
emit bills of credit, make anything
Page 25 U. S. 315
but gold and silver coin a tender in payment of debts, pass any
bill of attainder,
ex post facto law, or law impairing the
obligation of contracts, or grant any title of nobility."
In the case of
Sturges v. Crowninshield, the defendant
in the original suit had been discharged in New York under an
insolvent law of that state which purported to apply to past as
well as future contracts, and being sued on a contract made within
the state prior to the passage of the law, he pleaded his
certificate of discharge in bar of the action. In answer to the 3d
and 4th questions certified from the circuit court to this Court
for its final decision, drawing in question the constitutionality
of the law and the sufficiency of the plea in bar founded upon it,
this Court certified its opinion
"that the act of New York pleaded in this case so far as it
attempts to discharge the contract on which this suit was
instituted, is a law impairing the obligation of contracts within
the meaning of the Constitution of the United States, and that the
plea of the defendant is not a good and sufficient bar of the
plaintiff's action."
In the case of
McMillan v.
McNeal, 4 Wheat. 209, the defendant in the court
below pleaded a discharge obtained by him in Louisiana on 23
August, 1815, under the insolvent law of that state, passed in
1808, in bar of a suit instituted against him upon a contract made
in South Carolina in the year 1813. This Court decided that the
plea was no bar to the action and affirmed the judgment given below
for the plaintiff.
These cases do not decide the case at bar. In the first, the
discharge was pleaded in bar to a contract made prior to the
passage of the law, and in the second the discharge in one state
under its laws was pleaded to a contract made in another state.
They leave the question open whether a discharge obtained in a
state under an insolvent law of the state is a good bar to an
action brought on a contract made within the state after the
passage of the law.
In presenting this inquiry, it is immaterial whether the law
purports to apply to past as well as future contracts, or is wholly
prospective in its provisions.
Page 25 U. S. 316
It is not the terms of the law, but its effect that is inhibited
by the Constitution. A law may be in part constitutional and in
part unconstitutional. It may, when applied to a given case,
produce an effect which is prohibited by the Constitution, but it
may not, when applied to a case differently circumstanced, produce
such prohibited effect. Whether the law under consideration, in its
effects and operation upon the contract sued on in this case, be a
law impairing the obligation of this contract is the only necessary
inquiry.
In order to come to a just conclusion, we must ascertain, if we
can, the sense in which the terms "obligation of contracts" is used
in the Constitution. In attempting to do this, I will premise that
in construing an instrument of so much solemnity and importance,
effect should be given, if possible, to every word. No expression
should be regarded as a useless expletive, nor should it be
supposed without the most urgent necessity that the illustrious
framers of that instrument had from ignorance or inattention used
different words which are in effect merely tautologous.
I understand it to be admitted in argument and if not admitted,
it could not be reasonably contested, that in the nature of things,
there is a difference between a contract and the obligation of the
contract. The terms "contract" and "obligation," although sometimes
used loosely as convertible terms, do not properly impart the same
idea. The Constitution plainly presupposes that a contract and its
obligation are different things. Were they the same thing, and the
terms "contract" and "obligation" convertible, the Constitution,
instead of being read as it now is, "that no state shall pass any
law impairing the obligation of contracts," might with the same
meaning be read "that no state shall pass any law impairing the
obligation of obligations," or, "the contract of contracts," and to
give to the Constitution the same meaning which either of these
readings would import would be ascribing to its framers a useless
and palpably absurd tautology. The illustrious framers of the
Constitution could not be ignorant that there were or might be many
contracts without obligation and many obligations without
contracts. "A contract is defined to be an agreement in which a
party
Page 25 U. S. 317
undertakes to do or not to do a particular thing."
Sturges v.
Crowninshield, 4 Wheat. 197.
This definition is sufficient for all the purposes of the
present investigation, and its general accuracy is not contested by
either side.
From the very terms of the definition, it results incontestably
that the contract is the sole act of the parties, and depends
wholly on their will. The same words, used by the same parties with
the same objects in view, would be the same contract whether made
upon a desert island, in London, Constantinople, or New York. It
would be the same contract whether the law of the place where the
contract was made recognized its validity and furnished remedies to
enforce its performance or prohibited the contract and withheld all
remedy for its violation.
The language of the Constitution plainly supposes that the
obligation of a contract is something not wholly depending upon the
will of the parties. It incontestably supposes the obligation to be
something which attaches to and lays hold of the contract and
which, by some superior external power, regulates and controls the
conduct of the parties in relation to the contract; it evidently
supposes that superior external power to rest in the will of the
legislature.
What, then, is the obligation of contracts within the meaning of
the Constitution? From what source does that obligation arise?
The learned CHIEF JUSTICE, in delivering the opinion of the
Court in
Sturges v. Crowninshield, after having defined a
contract to be "an agreement wherein a party undertakes to do, or
not to do, a particular thing," proceeds to define the obligation
of the contract in these words: "the law binds him to perform his
engagement, and this is, of course, the obligation of the
contract."
The Institutes lib. 3. tit. 4 (Cooper's translation), says, "an
obligation is the chain of the law by which we are necessarily
bound to make some payment according to the law of the land."
Pothier, in his treatise concerning obligations, in speaking of
the obligation of contracts, calls it
"vinculum legis,"
the chain of the law. Paley 56 says, "To be obliged is
Page 25 U. S. 318
to be urged by a violent motive resulting from the command of
another." From these authorities, and many more might be cited, it
may be fairly concluded that the obligation of the contract
consists in the power and efficacy of the law which applies to and
enforces performance of the contracts or the payment of an
equivalent for nonperformance. The obligation does not inhere and
subsist in the contract itself,
proprio vigore, but in the
law applicable to the contract. This is the sense, I think, in
which the Constitution uses the term "obligation."
From what law and how is this obligation derived within the
meaning of the Constitution? Even if it be admitted that the moral
law necessarily attaches to the agreement, that would not bring it
within the meaning of the Constitution. Moral obligations are those
arising from the admonitions of conscience and accountability to
the Supreme Being. No human lawgiver can impair them. They are
entirely foreign from the purposes of the Constitution. The
Constitution evidently contemplates an obligation which might be
impaired by a law of the state, if not prohibited by the
Constitution.
It is argued that the obligation of contracts is founded in and
derived from general and universal law; that by these laws the
obligation of contracts is coextensive with the duty of
performance, and indeed the same thing; that the obligation is not
derived from nor depends upon the civil or municipal laws of the
state; and that this general universal duty, or obligation is what
the Constitution intends to guard and protect against the unjust
encroachments of state legislation. In support of this doctrine it
is said that no state perhaps ever declared by statute or positive
law that contracts shall be obligatory, but that all states,
assuming the preexistence of the obligation of contracts, have only
superadded by municipal law the means of carrying the preexisting
obligation into effect.
This argument struck me at first with great force, but upon
reflection I am convinced it is more specious than solid. If it
were admitted that in an enlarged and very general sense,
obligations have their foundation in natural or what is called, in
the argument "universal" law; that this
Page 25 U. S. 319
natural obligation is in the general assumed by states as
preexisting, and upon this assumption they have not thought it
necessary to pass declaratory laws in affirmance of the principles
of universal law; yet nothing favorable to the argument can result
from these admissions unless it be further admitted or proved that
a state has no authority to regulate, alter, or in any wise control
the operation of this universal law within the state by its own
peculiar municipal enactions. This is not admitted, and I think
cannot be proved.
I admit that men have, by the laws of nature, the right of
acquiring and possessing property and the right of contracting
engagements. I admit that these natural rights have their
correspondent natural obligations. I admit that in a state of
nature, when men have not submitted themselves to the controlling
authority of civil government, the natural obligation of contracts
is coextensive with the duty of performance. This natural
obligation is founded solely in the principles of natural or
universal law. What is this natural obligation? All writers who
treat on the subject of obligations agree that it consists in the
right of the one party to demand from the other party what is due,
and if it be withheld, in his right and supposed capacity to
enforce performance or to take an equivalent for nonperformance by
his own power. This natural obligation exists among sovereign and
independent states and nations and amongst men in a state of nature
who have no common superior, and over whom none claim or can
exercise a controlling legislative authority.
But when men form a social compact and organize a civil
government, they necessarily surrender the regulation and control
of these natural rights and obligations into the hands of the
government. Admitting it, then, to be true that in general men
derive the right of private property and of contracting engagements
from the principles of natural universal law; admitting that these
rights are in the general not derived from or created by society,
but are brought into it, and that no express declaratory municipal
law be necessary for their creation or recognition, yet, it is
equally true that these rights and the obligations resulting
Page 25 U. S. 320
from them are subject to be regulated, modified, and, sometimes,
absolutely restrained by the positive enactions of municipal law. I
think it incontestably true that the natural obligation of private
contracts between individuals in society ceases and is converted
into a civil obligation by the very act of surrendering the right
and power of enforcing performance into the hands of the
government. The right and power of enforcing performance exists, as
I think all must admit, only in the law of the land, and the
obligation resulting from this condition is a civil obligation.
As, in a state of nature, the natural obligation of a contract
consists in the right and potential capacity of the individual to
take or enforce the delivery of the thing due to him by the
contract or its equivalent, so in the social state, the obligation
of a contract consists in the efficacy of the civil law, which
attaches to the contract and enforces its performance or gives an
equivalent in lieu of performance. From these principles it seems
to result as a necessary corollary that the obligation of a
contract made within a sovereign state must be precisely that
allowed by the law of the state, and none other. I say "allowed"
because if there be nothing in the municipal law to the contrary,
the civil obligation being, by the very nature of government,
substituted for and put in the place of natural obligation would be
coextensive with it; but if by positive enactions, the civil
obligation is regulated and modified so as that it does not
correspond with the natural obligation, it is plain the extent of
the obligation must depend wholly upon the municipal law. If the
positive law of the state declares the contract shall have no
obligation, it can have no obligation, whatever may be the
principles of natural law in relation to such a contract. This
doctrine has been held and maintained by all states and nations.
The power of controlling, modifying, and even of taking away all
obligation from such contracts as, independent of positive
enactions to the contrary, would have been obligatory has been
exercised by all independent sovereigns, and it has been
universally held that the courts of one sovereign will, upon
principles of comity and common justice, enforce contracts made
within the dominions of another sovereign so far as they were
obligatory by the
Page 25 U. S. 321
law of the country where made; but no instance is recollected
and none is believed to exist where the courts of one sovereign
have held a contract, made within the dominions of another,
obligatory against or beyond the obligation assigned to it by the
municipal law of its proper country. As a general proposition of
law it cannot be maintained that the obligation of contracts
depends upon and is derived from universal law, independent of and
against the civil law of the state in which they are made. In
relation to the states of this Union, I am persuaded that the
position that the obligation of contracts is derived from universal
law, urged by the learned counsel in argument with great force, has
been stated by them much too broadly. If true, the states can have
no control over contracts. If it be true that the "obligation of
contracts," within the meaning of the Constitution, is derived
solely from general and universal law, independent of the laws of
the state, then it must follow that all contracts made in the same
or similar terms must, whenever, or wherever made, have the same
obligation. If this universal natural obligation is that intended
by the Constitution, as it is the same not only everywhere but at
all times, it must follow that every description of contract which
could be enforced at any time or place upon the principles of
universal law must necessarily be enforced at all other times and
in every state upon the same principles in despite of any positive
law of the state to the contrary.
The arguments based on the notion of the obligation of universal
law, if adopted, would deprive the states of all power of
legislation upon the subject of contracts other than merely
furnishing the remedies or means of carrying this obligation of
universal law into effect. I cannot believe that such consequences
were intended to be produced by the Constitution.
I conclude that so far as relates to private contracts between
individual and individual, it is the civil obligation of contracts,
that obligation which is recognized by, and results from, the law
of the state in which the contract is made, which is within the
meaning of the Constitution. If
Page 25 U. S. 322
so, it follows that the states have, since the adoption of the
Constitution, the authority to prescribe and declare by their laws
prospectively what shall be the obligation of all contracts made
within them. Such a power seems to be almost indispensable to the
very existence of the states, and is necessary to the safety and
welfare of the people. The whole frame and theory of the
Constitution seems to favor this construction. The states were in
the full enjoyment and exercise of all the powers of legislation on
the subject of contracts before the adoption of the Constitution.
The people of the states in that instrument transfer to and vest in
the Congress no portion of this power except in the single instance
of the authority given to pass uniform laws on the subject of
bankruptcies throughout the United States, to which may be added,
such as results by necessary implication in carrying the granted
power into effect. The whole of this power is left with the states
as the Constitution found it, with the single exception that in the
exercise of their general authority they shall pass no law
"impairing the obligation of contracts."
The construction insisted upon by those who maintain that
prospective laws of the sort now under consideration are
unconstitutional would, as I think, transform a special limitation
upon the general powers of the states into a general restriction.
It would convert by construction the exception into a general rule,
against the best settled rules of construction. The people of the
states, under every variety of change of circumstances, must remain
unalterably, according to this construction, under the dominion of
this supposed universal law and the obligations resulting from it.
Upon no acknowledged principle can a special exception, out of a
general authority, be extended by construction so as to annihilate
or embarrass the exercise of the general authority. But to obviate
the force of this view of the subject, the learned counsel admit
that the legislature of a state has authority to provide by law
what contracts shall not be obligatory, and to declare that no
remedy shall exist for the enforcement of such as the legislative
wisdom deems injurious. They say the obligation of a contract is
coeval with its existence, that the moment an agreement is
made,
Page 25 U. S. 323
obligation attaches to it, and they endeavor to maintain a
distinction between such laws as declare that certain contracts
shall not be obligatory at all, and such as declare they shall not
be obligatory, or (what is the same thing in effect) shall be
discharged upon the happening of a future event. The former, they
say, were no contracts in contemplation of law, were wholly
forbidden, and, therefore, never obligatory; the latter were
obligatory at their creation, and that obligation is protected by
the Constitution from being impaired by any future operation of the
law.
This course of reasoning is ingenious and perplexing, but I am
greatly mistaken if it will not be found, upon examination, to be
unsatisfactory and inconclusive. If it were admitted that generally
the civil obligation of a contract made in a state attaches to it
when it is made, and that this obligation, whatever it be, cannot
be defeated by any effect or operation of law which does not attach
to it at its creation, the admission would avail nothing. It is as
well a maxim of political law as of reason that the whole must
necessarily contain all the parts, and, consequently a power
competent to declare a contract shall have no obligation must
necessarily be competent to declare it shall have only a
conditional or qualified obligation.
If, as the argument admits, a contract never had any obligation,
because the preexisting law of the state declaring it should have
none attached to it at the moment of its creation, why will not a
preexisting law, declaring it shall have only a qualified
obligation, attach to it in like manner at the moment of its
creation? A law declaring that a contract shall not be enforced
upon the happening of a future event is a law declaring the
contract shall have only a qualified or conditional obligation. If
such law be passed before the contract is made, does not the same
attach to it the moment it is made, and is not the obligation of
the contract, whatever may be its terms, qualified from the
beginning by force and operation of the existing law? If it is not,
then it is absolute in despite of the law, and the obligation does
not result from the law of the land, but from some other law.
The passing of a law declaring that a contract shall have no
obligation or shall have obligation generally but cease to
Page 25 U. S. 324
be obligatory in specified events is but the exertion of the
same power. The difference exists not in the character of the
power, but the degree of its exertion and the manner of its
operation.
In the case at bar, the contract was made in the state, and the
law of the state at the time it was made, in effect, provided that
the obligation of the contract should not be absolute, but
qualified by the condition that the party should be discharged upon
his becoming insolvent and complying with the requisitions of the
insolvent law. This qualification attached to the contract by law
the moment the contract was made, became inseparable from it, and
traveled with it through all its stages of existence until the
condition was consummated by the final certificate of
discharge.
It is argued that this cannot be so, because the contract would
be enforced and must necessarily be enforced in other states where
no such insolvent law exists. This argument is founded upon a
misapprehension of the nature of the qualification itself. It is in
nature of a condition subsequent, annexed by operation of law to
the contract at the moment of its creation.
The condition is that upon the happening of all the events
contemplated by the law, and upon their verification in the manner
prescribed by the law itself by the constituted authorities of the
state, the contract shall not thereafter be obligatory. Unless all
these take place; unless the discharge is actually obtained within
the state according to its laws, the contingency has not happened,
and the contract remains obligatory both in the state and
elsewhere.
It has been often said that the laws of a state in which a
contract is made, enter into, and make part of the contract, and
some who have advocated the constitutionality of prospective laws
of the character now under consideration have placed the question
on that ground. The advocates of the other side, availing
themselves of the infirmity of this argument, have answered
triumphantly,
"admitting this to be so, the Constitution is the supreme law of
every state, and must therefore, upon the same principle, enter
into every contract and overrule the local laws."
My answer to this
Page 25 U. S. 325
view of both sides of the question is that the argument and the
answer to it are equally destitute of truth.
I have already shown that the contract is nothing but the
agreement of the parties, and that if the parties, in making their
agreement, use the same words with the same object in view where
there is no law or where the law recognizes the agreement and
furnishes remedies for its enforcement or where the law forbids or
withholds all remedy for the enforcement of the agreement, it is
the very same contract in all these predicaments. I have endeavored
to show, and I think successfully, that the obligation of
contracts, in the sense of the Constitution, consists not in the
contract itself, but in a superior external force controlling the
conduct of the parties in relation to the contract, and that this
superior external force is the law of the state, either tacitly or
expressly recognizing the contract and furnishing means whereby it
may be enforced. It is this superior external force, existing
potentially or actually applied, "which binds a man to perform his
engagements;" which, according to Justinian, is "the chain of the
law by which we are necessarily bound to make some payment --
according to the law of the land," and which, according to Paley,
being "a violent motive, resulting from the command of another,"
obliges the party to perform his contract. The law of the state,
although it constitutes the obligation of the contract, is no part
of the contract itself, nor is the Constitution either a part of
the contract or the supreme law of the state in the sense in which
the argument supposes. The Constitution is the supreme law of the
land upon all subjects upon which it speaks. It is the sovereign
will of the whole people. Whatever this sovereign will enjoins or
forbids must necessarily be supreme, and must counteract the
subordinate legislative will of the United States and of the
states.
But on subjects in relation to which the sovereign will is not
declared or fairly and necessarily implied, the Constitution cannot
with any semblance of truth be said to be the supreme law. It could
not with any semblance of truth be said that the Constitution of
the United States is the supreme law of any state in relation to
the solemnities requisite for conveying real estate, or the
responsibilities or obligations
Page 25 U. S. 326
consequent upon the use of certain words in such conveyance. The
Constitution contains no law, no declaration of the sovereign will,
upon these subjects, and cannot, in the nature of things in
relation to them be the supreme law. Even if it were true, then,
that the law of a state in which a contract is made is part of the
contract, it would not be true that the Constitution would be part
of the contract. The Constitution nowhere professes to give the law
of contracts or to declare what shall or shall not be the
obligation of contracts. It evidently presupposes the existence of
contracts by the act of the parties and the existence of their
obligation, not by authority of the Constitution, but by authority
of law, and the preexistence of both the contracts and their
obligation being thus supposed, the sovereign will is announced
that "no state shall pass any law impairing the obligation of
contracts."
If it be once ascertained that a contract existed and that an
obligation, general or qualified, of whatsoever kind, had once
attached or belonged to the contract by law, then and not till then
does the supreme law speak by declaring that obligation shall not
be impaired.
It is admitted in argument that statutes of frauds and
perjuries, statutes of usury, and of limitation, are not laws
impairing the obligation of contracts. They are laws operating
prospectively upon contracts thereafter made. It is said, however,
they do not apply in principle to this case, because the statutes
of frauds and perjuries apply only to the remedies, and because in
that case and under the statutes of usury, the contracts were void
from the beginning, were not recognized by law as contracts, and
had no obligation, and that the statutes of limitation create rules
of evidence only.
Although these observations are true, they do not furnish the
true reason, nor indeed any reason, why these laws do not impair
the obligation of contracts. The true and only reason is that they
operate on contracts made after the passage of the laws, and not
upon existing contracts. And hence THE CHIEF JUSTICE very properly
remarks of both usury laws and laws of limitation in delivering the
opinion in
Sturges v. Crowninshield that if they should be
made to
Page 25 U. S. 327
operate upon contracts already entered into, they would be
unconstitutional and void. If a statute of frauds and perjuries
should pass in a state formerly having no such laws, purporting to
operate upon existing contracts, as well as upon those made after
its passage, could it be doubted that so far as the law applied to
and operated upon existing contracts, it would be a law "impairing
the obligation of contracts?" Here, then, we have the true reason
and principle of the Constitution. The great principle intended to
be established by the Constitution was the inviolability of the
obligation of contracts, as the obligation existed and was
recognized by the laws in force at the time the contracts were
made. It furnished to the legislatures of the states a simple and
obvious rule of justice, which, however theretofore violated,
should by no means be thereafter violated, and whilst it leaves
them at full liberty to legislate upon the subject of all future
contracts, and assign to them either no obligation or such
qualified obligation as in their opinion may consist with sound
policy and the good of the people, it prohibits them from
retrospecting upon existing obligations upon any pretext whatever.
Whether the law professes to apply to the contract itself, to fix a
rule of evidence, a rule of interpretation, or to regulate the
remedy, it is equally within the true meaning of the Constitution
if it in effect impairs the obligation of existing contracts, and
in my opinion is out of its true meaning if the law is made to
operate on future contracts only. I do not mean to say that every
alteration of the existing remedies would impair the obligation of
contracts, but I do say with great confidence that a law taking
away all remedy from existing contracts would be manifestly a law
impairing the obligation of contracts. The moral obligation would
remain, but the legal or civil obligation would be gone if such a
law should be permitted to operate. The natural obligation would be
gone, because the laws forbid the party to enforce performance by
his own power. On the other hand, a great variety of instances may
readily be imagined in which the legislature of a state might
alter, modify, or repeal existing remedies and enact others in
their stead without the slightest ground for a supposition
Page 25 U. S. 328
that the new law impaired the obligation of contracts. If there
be intermediate cases of a more doubtful character, it will be time
enough to decide them when they arise.
It is argued that as the clause declaring that "no state shall
pass any law impairing the obligation of contracts" is associated
in the same section of the Constitution with the prohibition to
"coin money, emit bills of credit," or "make anything but gold and
silver coin a legal tender in payment of debts," and as these all
evidently apply to legislation in reference to future as well as
existing contracts, and operate prospectively, to prohibit the
action of the law without regard to the time of its passage, the
same construction should be given to the clause under
consideration.
This argument admits of several answers. First, as regards the
prohibition to coin money and emit bills of credit. The
Constitution had already conferred on Congress the whole power of
coining money and regulating the current coin. The grant of this
power to Congress and the prohibitions upon the states evidently
take away from the states all power of legislation and action on
the subject, and must of course apply to the future action of laws,
either then made or to be made. Indeed the language plainly
indicates that it is the act of "coining money" and the act of
emitting bills of credit which is forbidden, without any reference
to the time of passing the law, whether before or after the
adoption of the Constitution. The other prohibition, to "make
anything but gold or silver coin a tender in payment of debts," is
but a member of the same subject of currency committed to the
general government and prohibited to the states. And the same
remark applies to it already made as to the other two. The
prohibition is not that no state shall pass any law, but that even
if a law does exist, the "state shall not make anything but gold
and silver coin a legal tender." The language plainly imports that
the prohibited tender shall not be made a legal tender, whether a
law of the state exists or not. The whole subject of tender, except
in gold and silver, is withdrawn from the states. These cases
cannot, therefore, furnish a sound rule of interpretation for that
clause which prohibits the states from passing laws "impairing the
obligation of contracts." This
Page 25 U. S. 329
clause relates to a subject confessedly left wholly with the
states, with a single exception; they relate to subjects wholly
withdrawn from the states, with the exception that they may pass
laws on the subject of tender in gold and silver coin only.
The principle that the association of one clause with another of
like kind may aid in its construction is deemed sound, but I think
it has been misapplied in the argument. The principle applied to
the immediate associates of the words under consideration, is I
think decisive of this question. The immediate associates are the
prohibitions to pass bills of attainder and
ex post facto
laws. The language and order of the whole clause is no state shall
"pass any bill of attainder,
ex post facto law, or law
impairing the obligation of contracts." If the maxim
noscitur a
sociis be applied to this case, there would seem to be an end
of the question. The two former members of the clause undeniably
prohibit retroactive legislation upon the existing state of things,
at the passage of the prohibited laws. The associated idea is that
the latter member of the same clause should have a similar effect
upon the subject matter to which it relates. I suppose this was the
understanding of the American people when they adopted the
Constitution. I am justified in this supposition by the
contemporary construction given to the whole of this clause by that
justly celebrated work, styled the Federalist, written at the time
for the purpose of recommending the Constitution to the favor and
acceptance of the people. In No. 44, p. 281, commenting upon this
very clause and all its members, the following observations are
made:
"Bills of attainder,
ex post facto laws, and laws
impairing the obligation of contracts are contrary to the first
principles of the social compact and to every principle of sound
legislation. The two former are expressly prohibited by the
declarations prefixed to some of the state Constitutions, and all
of them are prohibited by the spirit and scope of these fundamental
charters."
Did the American people believe -- could they believe -- these
heavy denunciations were leveled against laws which
Page 25 U. S. 330
fairly prescribed and plainly pointed out to the people rules
for their future conduct and the rights, duties and obligations,
growing out of their future words or actions? They must have
understood that these denunciations were just as regarded bills of
attainder and
ex post facto laws, because they were
exercises of arbitrary power perverting the justice and order of
existing things by the reflex action of these laws. And would they
not naturally and necessarily conclude the denunciations were
equally just as regarded laws passed to impair the obligation of
existing contracts for the same reason?
The writer proceeds:
"Our own experience has taught us, nevertheless, that additional
fences against these dangers ought not to be omitted. Very
properly, therefore, has the convention added this constitutional
bulwark in favor of personal security and private rights, and I am
much deceived if they have not in so doing as faithfully consulted
the genuine sentiments as the undoubted interests of their
constituents. The sober people of America are weary of the
fluctuating policy which has directed the public councils. They
have seen with regret and with indignation that sudden changes and
legislative interferences in cases affecting personal rights become
jobs in the hands of enterprising and influential speculators, and
shares to the more industrious and less informed part of the
community. They have seen too that one legislative interference is
but the link of a long chain of repetitions, every subsequent
interference being naturally produced by the effects of the
preceding. They very rightly infer, therefore, that some thorough
reform is wanting which will banish speculations on public
measures, inspire a general prudence and industry, and give a
regular course to the business of society."
I cannot understand this language otherwise than as putting
bills of attainder,
ex post facto laws, and laws impairing
the obligation of contracts all upon the same footing and
deprecating them all for the same cause. The language shows clearly
that the whole clause was understood at the time of the adoption of
the Constitution to have been introduced into the instrument in the
very same spirit and for the very same purpose -- namely for the
protection of personal
Page 25 U. S. 331
security and of private rights. The language repels the idea,
that the member of the clause immediately under consideration was
introduced into the Constitution upon any grand principle of
national policy, independent of the protection of private rights,
so far as such an idea can be repelled, by the total omission to
suggest any such independent grand principle of national policy and
by placing it upon totally different ground.
It proves that the sages who formed and recommended the
Constitution to the favor and adoption of the American people did
not consider the protection of private rights, more than the
protection of personal security, as too insignificant for their
serious regard, as was urged with great earnestness in argument. In
my judgment, the language of the authors of the Federalist proves
that they at least understood that the protection of personal
security and of private rights from the despotic and iniquitous
operation of retrospective legislation was, itself and alone, the
grand principle intended to be established. It was a principle of
the utmost importance to a free people about to establish a
national government "to establish justice" and, "to secure to
themselves and their posterity the blessings of liberty." This
principle is, I think, fully and completely sustained by the
construction of the Constitution which I have endeavored to
maintain.
In my judgment, the most natural and obvious import of the words
themselves prohibiting the passing of laws "impairing the
obligation of contracts," the natural association of that member of
the clause with the two immediately preceding members of the same
clause, forbidding the passing of "bills of attainder" and "
ex
post facto laws;" the consecutive order of the several members
of the clause; the manifest purposes and objects for which the
whole clause was introduced into the Constitution, and the
cotemporary exposition of the whole clause all warrant the
conclusion that a state has authority, since the adoption of the
Constitution, to pass a law whereby a contract made within the
state after the passage of the law, may be discharged, upon the
party obtaining a certificate of discharge as an insolvent, in the
manner prescribed by the law of the state.
Page 25 U. S. 332
MR. CHIEF JUSTICE MARSHALL.
It is well known that the Court has been divided in opinion on
this case. Three judges, MR. JUSTICE DUVALL, MR. JUSTICE STORY, and
myself, do not concur in the judgment which has been pronounced. We
have taken a different view of the very interesting question which
has been discussed with so much talent as well as labor at the bar,
and I am directed to state the course of reasoning on which we have
formed the opinion that the discharge pleaded by the defendant is
no bar to the action.
The single question for consideration is whether the act of the
State of New York is consistent with or repugnant to the
Constitution of the United States?
This Court has so often expressed the sentiments of profound and
respectful reverence with which it approaches questions of this
character as to make it unnecessary now to say more than that if it
be right that the power of preserving the Constitution from
legislative infraction should reside anywhere, it cannot be wrong
-- it must be right -- that those whom the delicate and important
duty is conferred should perform it according to their best
judgment.
Much too has been said concerning the principles of construction
which ought to be applied to the Constitution of the United
States.
On this subject also, the Court has taken such frequent occasion
to declare its opinion as to make it unnecessary, at least, to
enter again into an elaborate discussion of it. To say that the
intention of the instrument must prevail; that this intention must
be collected from its words; that its words are to be understood in
that sense in which they are generally used by those for whom the
instrument was intended; that its provisions are neither to be
restricted into insignificance nor extended to objects not
comprehended in them, nor contemplated by its framers is to repeat
what has been already said more at large and is all that can be
necessary.
As preliminary to a more particular investigation of the clause
in the Constitution on which the case now under consideration is
supposed to depend, it may be proper to inquire
Page 25 U. S. 333
how far it is affected by the former decisions of this
Court.
In
Sturges v. Crowninshield it was determined that an
act which discharged the debtor from a contract entered into
previous to its passage was repugnant to the Constitution. The
reasoning which conducted the Court to that conclusion might
perhaps conduct it further, and with that reasoning (for myself
alone this expression is used), I have never yet seen cause to be
dissatisfied. But that decision is not supposed to be a precedent
for
Ogden v. Saunders because the two cases differ from
each other in a material fact, and it is a general rule, expressly
recognized by the Court in Sturges v. Crowninshield, that the
positive authority of a decision is coextensive only with the facts
on which it is made. In
Sturges v. Crowninshield, the law
acted on a contract which was made before its passage; in this
case, the contract was entered into after the passage of the
law
In
McNeil v. McMillan, the contract, though subsequent
to the passage of the act, was made in a different state by persons
residing in that state, and, consequently, without any view to the
law the benefit of which was claimed by the debtor.
Farmers' & Mechanics' Bank of Pennsylvania v. Smith
differed from
Sturges v. Crowninshield only in this, that
the plaintiff and defendant were both residents of the state in
which the law was enacted and in which it was applied. The Court
was of opinion that this difference was unimportant.
It has then been decided that an act which discharges the debtor
from preexisting contracts is void and that an act which operates
on future contracts is inapplicable to a contract made in a
different state, at whatever time it may have been entered
into.
Neither of these decisions comprehends the question now
presented to the Court. It is consequently open for discussion.
The provision of the Constitution is that "no state shall pass
any law . . . impairing the obligation of contracts." The plaintiff
in error contends that this provision inhibits the passage of
retrospective laws only -- of such as act on contracts
Page 25 U. S. 334
in existence at their passage. The defendant in error maintains
that it comprehends all future laws, whether prospective or
retrospective, and withdraws every contract from state legislation
the obligation of which has become complete.
That there is an essential difference in principle between laws
which act on past and those which act on future contracts; that
those of the first description can seldom be justified, while those
of the last are proper subjects of ordinary legislative discretion
must be admitted. A constitutional restriction, therefore, on the
power to pass laws of the one class may very well consist with
entire legislative freedom respecting those of the other. Yet when
we consider the nature of our Union; that it is intended to make
us, in a great measure, one people, as to commercial objects; that
so far as respects the intercommunication of individuals, the lines
of separation between states are, in many respects, obliterated, it
would not be matter of surprise if on the delicate subject of
contracts once formed the interference of state legislation should
be greatly abridged or entirely forbidden. In the nature of the
provision, then, there seems to be nothing which ought to influence
our construction of the words, and in making that construction, the
whole clause, which consists of a single sentence, is to be taken
together and the intention is to be collected from the whole.
The first paragraph of the tenth section of the first article,
which comprehends the provision under consideration, contains an
enumeration of those cases in which the action of the state
legislature is entirely prohibited. The second enumerates those in
which the prohibition is modified. The first paragraph, consisting
of total prohibitions, comprehends two classes of powers. Those of
the first are political and general in their nature, being an
exercise of sovereignty without affecting the rights of
individuals. These are the powers "to enter into any treaty,
alliance, or confederation; grant letters of marque or reprisal,
coin money, emit bills of credit."
The second class of prohibited laws comprehends those whose
operation consists in their action on individuals.
Page 25 U. S. 335
These are laws which make anything but gold and silver coin a
tender in payment of debts, bills of attainder,
ex post
facto laws, or laws impairing the obligation of contracts, or
which grant any title of nobility.
In all these cases, whether the thing prohibited be the exercise
of mere political power or legislative action on individuals, the
prohibition is complete and total. There is no exception from it.
Legislation of every description is comprehended within it. A state
is as entirely forbidden to pass laws impairing the obligation of
contracts as to make treaties or coin money. The question recurs
what is a law impairing the obligation of contracts?
In solving this question, all the acumen which controversy can
give to the human mind has been employed in scanning the whole
sentence and every word of it. Arguments have been drawn from the
context and from the particular terms in which the prohibition is
expressed for the purpose, on the one part, of showing its
application to all laws which act upon contracts, whether
prospectively or retrospectively, and, on the other of limiting it
to laws which act on contracts previously formed.
The first impression which the words make on the mind would
probably be that the prohibition was intended to be general. A
contract is commonly understood to be the agreement of the parties,
and if it be not illegal, to bind them to the extent of their
stipulations. It requires reflection, it requires some intellectual
effort, to efface this impression and to come to the conclusion
that the words "contract" and "obligation," as used in the
Constitution, are not used in this sense. If, however, the result
of this mental effort, fairly made, be the correction of this
impression, it ought to be corrected.
So much of this prohibition as restrains the power of the states
to punish offenders in criminal cases, the prohibition to pass
bills of attainder and
ex post facto laws, is in its very
terms confined to preexisting cases. A bill of attainder can be
only for crimes already committed, and a law is not
ex post
facto unless it looks back to an act done before its passage.
Language is incapable of expressing, in plainer terms that the mind
of the convention was directed to retroactive
Page 25 U. S. 336
legislation. The thing forbidden is retroaction. But that part
of the clause which relates to the civil transactions of
individuals is expressed in more general terms -- in terms which
comprehend, in their ordinary signification, cases which occur
after, as well as those which occur before, the passage of the act.
It forbids a state to make anything but gold and silver coin a
tender in payment of debts or to pass any law impairing the
obligation of contracts. These prohibitions relate to kindred
subjects. They contemplate legislative interference with private
rights, and restrain that interference. In construing that part of
the clause which respects tender laws, a distinction has never been
attempted between debts existing at the time the law may be passed,
and debts afterwards created. The prohibition has been considered
as total, and yet the difference in principle between making
property a tender in payment of debts contracted after the passage
of the act and discharging those debts without payment or by the
surrender of property between an absolute right to tender in
payment and a contingent right to tender in payment or in discharge
of the debt is not clearly discernible. Nor is the difference in
language so obvious as to denote plainly a difference of intention
in the framers of the instrument. "No state shall make anything but
gold and silver coin a tender in payment of debts." Does the word
"debts" mean generally those due when the law applies to the case,
or is it limited to debts due at the passage of the act? The same
train of reasoning which would confine the subsequent words to
contracts existing at the passage of the law would go far in
confining these words to debts existing at that time. Yet this
distinction has never, we believe, occurred to any person. How soon
it may occur is not for us to determine. We think it would
unquestionably defeat the object of the clause.
The counsel for the plaintiff insist that the word "impairing,"
in the present tense, limits the signification of the provision to
the operation of the act at the time of its passage; that no law
can be accurately said to impair the obligation of contracts unless
the contracts exist at the time.
Page 25 U. S. 337
The law cannot impair what does not exist. It cannot act on
nonentities.
There might be weight in this argument if the prohibited laws
were such only as operated of themselves and immediately on the
contract. But insolvent laws are to operate on a future,
contingent, unforeseen event. The time to which the word
"impairing" applies is not the time of the passage of the act, but
of its action on the contract. That is, the time present in
contemplation of the prohibition. The law, at its passage, has no
effect whatever on the contract. Thus, if a note be given in New
York for the payment of money, and the debtor removes out of that
state into Connecticut and becomes insolvent, it is not pretended
that his debt can be discharged by the law of New York.
Consequently that law did not operate on the contract at its
formation. When, then, does its operation commence? We answer when
it is applied to the contract. Then, if ever, and not till then, it
acts on the contract and becomes a law impairing its obligation.
Were its constitutionality, with respect to previous contracts to
be admitted, it would not impair their obligation until an
insolvency should take place and a certificate of discharge be
granted. Till these events occur, its impairing faculty is
suspended. A law, then, of this description, if it derogates from
the obligation of a contract when applied to it, is, grammatically
speaking, as much a law impairing that obligation, though made
previous to its formation, as if made subsequently.
A question of more difficulty has been pressed with great
earnestness. It is what is the original obligation of a contract
made after the passage of such an act as the insolvent law of New
York? Is it unconditional to perform the very thing stipulated, or
is the condition implied that in the event of insolvency, the
contract shall be satisfied by the surrender of property? The
original obligation, whatever that may be, must be preserved by the
Constitution. Any law which lessens must impair it.
All admit that the Constitution refers to and preserves the
legal, not the moral, obligation of a contract. Obligations
Page 25 U. S. 338
purely moral, are to be enforced by the operation of internal
and invisible agents, not by the agency of human laws. The
restraints imposed on states by the Constitution are intended for
those objects which would, if not restrained, be the subject of
state legislation. What, then, was the original legal obligation of
the contract now under the consideration of the Court?
The plaintiff insists that the law enters into the contract so
completely as to become a constituent part of it. That it is to be
construed as if it contained an express stipulation to be
discharged should the debtor become insolvent by the surrender of
all his property for the benefit of his creditors in pursuance of
the act of the legislature.
This is unquestionably pressing the argument very far, and the
establishment of the principle leads inevitably to consequences
which would affect society deeply and seriously.
Had an express condition been inserted in the contract declaring
that the debtor might be discharged from it at any time by
surrendering all his property to his creditors, this condition
would have bound the creditor. It would have constituted the
obligation of his contract, and a legislative act annulling the
condition would impair the contract. Such an act would, as is
admitted by all, be unconstitutional, because it operates on
preexisting agreements. If a law authorizing debtors to discharge
themselves from their debts by surrendering their property enters
into the contract and forms a part of it, if it is equivalent to a
stipulation between the parties, no repeal of the law can affect
contracts made during its existence. The effort to give it that
effect would impair their obligation. The counsel for the plaintiff
perceive and avow this consequence, in effect, when they contend
that to deny the operation of the law on the contract under
consideration is to impair its obligation. Are gentlemen prepared
to say that an insolvent law, once enacted, must, to a considerable
extent, be permanent? That the legislature is incapable of varying
it so far as respects existing contracts?
So too if one of the conditions of an obligation for the payment
of money be that on the insolvency of the obligor
Page 25 U. S. 339
or on any event agreed on by the parties, he should be at
liberty to discharge it by the tender of all or part of his
property, no question could exist respecting the validity of the
contract or respecting its security from legislative interference.
If it should be determined that a law authorizing the same tender
on the same contingency enters into and forms a part of the
contract, then, a tender law, though expressly forbidden, with an
obvious view to its prospective, as well as retrospective
operation, would, by becoming the contract of the parties, subject
all contracts made after its passage to its control. If it be said
that such a law would be obviously unconstitutional and void, and
therefore could not be a constituent part of the contract, we
answer that if the insolvent law be unconstitutional, it is equally
void and equally incapable of becoming by mere implication a part
of the contract. The plainness of the repugnancy does not change
the question. That may be very clear to one intellect which is far
from being so to another. The law now under consideration is, in
the opinion of one party, clearly consistent with the Constitution,
and in the opinion of the other as clearly repugnant to it. We do
not admit the correctness of that reasoning which would settle this
question by introducing into the contract a stipulation not
admitted by the parties.
This idea admits of being pressed still further. If one law
enters into all subsequent contracts, so does every other law which
relates to the subject. A legislative act, then, declaring that all
contracts should be subject to legislative control and should be
discharged as the legislature might prescribe would become a
component part of every contract and be one of its conditions.
Thus, one of the most important features in the Constitution of the
United States, one which the state of the times most urgently
required, one on which the good and the wise reposed confidently
for securing the prosperity and harmony of our citizens, would lie
prostrate and be construed into an inanimate, inoperative,
unmeaning clause.
Gentlemen are struck with the enormity of this result, and deny
that their principle leads to it. They distinguish, or attempt to
distinguish, between the incorporation of a
Page 25 U. S. 340
general law such as has been stated and the incorporation of a
particular law such as the insolvent law of New York into the
contract. But will reason sustain this distinction? They say that
men cannot be supposed to agree to so indefinite an article as such
a general law would be, but may well be supposed to agree to an
article, reasonable in itself, and the full extent of which is
understood.
But the principle contended for does not make the insertion of
this new term or condition into the contract, to depend upon its
reasonableness. It is inserted because the legislature has so
enacted. If the enactment of the legislature becomes a condition of
the contract because it is an enactment, then it is a high
prerogative indeed to decide that one enactment shall enter the
contract, while another, proceeding from the same authority, shall
be excluded from it.
The counsel for the plaintiff illustrates and supports this
position by several legal principles and by some decisions of this
Court which have been relied on as being applicable to it.
The first case put is interest on a bond payable on demand which
does not stipulate interest. This, he says, is not a part of the
remedy, but a new term in the contract.
Let the correctness of this averment be tried by the course of
proceeding in such cases.
The failure to pay according to stipulation is a breach of the
contract, and the means used to enforce it constitute the remedy
which society affords the injured party. If the obligation contains
a penalty, this remedy is universally so regulated that the
judgment shall be entered for the penalty, to be discharged by the
payment of the principal and interest. But the case on which
counsel has reasoned is a single bill. In this case, the party who
has broken his contract is liable for damages. The proceeding to
obtain those damages is as much a part of the remedy as the
proceeding to obtain the debt. They are claimed in the same
declaration, and as being distinct from each other. The damages
must be assessed by a jury, whereas if interest formed a part of
the debt, it would be recovered as part of it. The declaration
would claim it as a part of the debt, and yet if a suitor were to
declare on such a bond as containing this new term
Page 25 U. S. 341
for the payment of interest, he would not be permitted to give a
bond in evidence in which this supposed term was not written. Any
law regulating the proceedings of courts on this subject would be a
law regulating the remedy.
The liability of the drawer of a bill of exchange stands upon
the same principle with every other implied contract. He has
received the money of the person in whose favor the bill is drawn,
and promises that it shall be returned by the drawee. If the drawee
fail to pay the bill, then the promise of the drawer is broken, and
for this breach of contract he is liable. The same principle
applies to the endorser. His contract is not written, but his name
is evidence of his promise that the bill shall be paid, and of his
having received value for it. He is in effect a new drawer, and has
made a new contract. The law does not require that this contract
shall be in writing, and in determining what evidence shall be
sufficient to prove it, does not introduce new conditions not
actually made by the parties. The same reasoning applies to the
principle which requires notice. The original contract is not
written at large. It is founded on the acts of the parties, and its
extent is measured by those acts. A. draws on B. in favor of C. for
value received. The bill is evidence that he has received value and
has promised that it shall be paid. He has funds in the hands of
the drawer, and has a right to expect that his promise will be
performed. He has also a right to expect notice of its
nonperformance because his conduct may be materially influenced by
this failure of the drawee. He ought to have notice that his bill
is disgraced, because this notice enables him to take measures for
his own security. It is reasonable that he should stipulate for
this notice, and the law presumes that he did stipulate for it.
A great mass of human transactions depends upon implied
contracts; upon contracts which are not written, but which grow out
of the acts of the parties. In such cases, the parties are supposed
to have made those stipulations which, as honest, fair, and just
men, they ought to have made. When the law assumes that they have
made these stipulations, it does not vary their contract or
introduce new terms into it, but declares that certain acts,
unexplained by compact, impose
Page 25 U. S. 342
certain duties and that the parties had stipulated for their
performance. The difference is obvious between this and the
introduction of a new condition into a contract drawn out in
writing, in which the parties have expressed everything that is to
be done by either.
The usage of banks by which days of grace are allowed on notes
payable and negotiable in bank is of the same character. Days of
grace, from their very term, originate partly in convenience and
partly in the indulgence of the creditor. By the terms of the note,
the debtor has to the last hour of the day on which it becomes
payable to comply with it, and it would often be inconvenient to
take any steps after the close of day. It is often convenient to
postpone subsequent proceedings till the next day. Usage has
extended this time of grace generally to three days, and in some
banks to four. This usage is made a part of the contract, not by
the interference of the legislature but by the act of the parties.
The case cited from
22 U. S. 9 Wheat.
581 is a note discounted in bank. In all such cases, the bank
receives and the maker of the note pays interest for the days of
grace. This would be illegal and usurious if the money was not lent
for these additional days. The extent of the loan, therefore, is
regulated by the act of the parties, and this part of the contract
is founded on their act. Since, by contract, the maker is not
liable for his note until the days of grace are expired, he has not
broken his contract until they expire. The duty of giving notice to
the endorser of his failure, does not arise until the failure has
taken place, and consequently the promise of the bank to give such
notice is performed if it be given when the event has happened.
The case of
Bank of Columbia v.
Oakley, 4 Wheat. 235, was one in which the
legislature had given a summary remedy to the bank for a broken
contract and had placed that remedy in the hands of the bank
itself. The case did not turn on the question whether the law of
Maryland was introduced into the contract, but whether a party
might not by his own conduct renounce his claim to the trial by
jury in a particular case. The Court likened it to submissions to
arbitration and to stipulation and forthcoming bonds. The principle
settled
Page 25 U. S. 343
in that case is that a party may renounce a benefit and that
Oakley had exercised this right.
The cases from Strange and East turn upon a principle which is
generally recognized but which is entirely distinct from that which
they are cited to support. It is that a man who is discharged by
the tribunals of his own country, acting under its laws, may plead
that discharge in any other country. The principle is that laws act
upon a contract, not that they enter into it and become a
stipulation of the parties. Society affords a remedy for breaches
of contract. If that remedy has been applied, the claim to it is
extinguished. The external action of law upon contracts by
administering the remedy for their breach or otherwise is the usual
exercise of legislative power. The interference with those
contracts by introducing conditions into them not agreed to by the
parties would be a very unusual and a very extraordinary exercise
of the legislative power which ought not to be gratuitously
attributed to laws that do not profess to claim it. If the law
becomes a part of the contract, change of place would not expunge
the condition. A contract made in New York would be the same in any
other state as in New York, and would still retain the stipulation
originally introduced into it that the debtor should be discharged
by the surrender of his estate.
It is not, we think, true that contracts are entered into in
contemplation of the insolvency of the obligor. They are framed
with the expectation that they will be literally performed.
Insolvency is undoubtedly a casualty which is possible but is never
expected. In the ordinary course of human transactions, if even
suspected, provision is made for it by taking security against it.
When it comes unlooked for, it would be entirely contrary to reason
to consider it as a part of the contract.
We have, then, no hesitation in saying that however law may act
upon contracts, it does not enter into them and become a part of
the agreement. The effect of such a principle would be a
mischievous abridgment of legislative power over subjects within
the proper jurisdiction of states by arresting their power to
repeal or modify such laws with respect to existing contracts.
Page 25 U. S. 344
But although the argument is not sustainable in this form, it
assumes another in which it is more plausible. Contract, it is
said, being the creature of society, derives its obligation from
the law, and although the law may not enter into the agreement so
as to form a constituent part of it, still it acts externally upon
the contract and determines how far the principle of coercion shall
be applied to it, and this being universally understood, no
individual can complain justly of its application to himself in a
case where it was known when the contract was formed.
This argument has been illustrated by references to the statutes
of frauds, of usury, and of limitations. The construction of the
words in the Constitution respecting contracts for which the
defendants contend would, it has been said, withdraw all these
subjects from state legislation. The acknowledgment that they
remain within it is urged as an admission that contract is not
withdrawn by the Constitution, but remains under state control,
subject to this restriction only -- that no law shall be passed
impairing the obligation of contracts in existence at its
passage.
The defendants maintain that an error lies at the very
foundation of this argument. It assumes that contract is the mere
creature of society, and derives all its obligation from human
legislation. That it is not the stipulation an individual makes
which binds him, but some declaration of the supreme power of a
state to which he belongs that he shall perform what he has
undertaken to perform. That though this original declaration may be
lost in remote antiquity, it must be presumed as the origin of the
obligation of contracts. This postulate the defendants deny, and we
think with great reason.
It is an argument of no inconsiderable weight against it that we
find no trace of such an enactment. So far back as human research
carries us, we find the judicial power as a part of the executive,
administering justice by the application of remedies to violated
rights or broken contracts. We find that power applying these
remedies on the idea of a preexisting obligation on every man to do
what he has promised on consideration to do; that the breach of
this obligation is an injury for which the injured party has a just
claim
Page 25 U. S. 345
to compensation, and that society ought to afford him a remedy
for that injury. We find allusions to the mode of acquiring
property, but we find no allusion, from the earliest time, to any
supposed act of the governing power giving obligation to contracts.
On the contrary, the proceedings respecting them of which we know
anything evince the idea of a preexisting intrinsic obligation
which human law enforces. If on tracing the right to contract and
the obligations created by contract to their source we find them to
exist anterior to and independent of society, we may reasonably
conclude that those original and preexisting principles are, like
many other natural rights, brought with man into society, and
although they may be controlled, are not given by human
legislation.
In the rudest state of nature, a man governs himself, and labors
for his own purposes. That which he acquires is his own, at least
while in his possession, and he may transfer it to another. This
transfer passes his right to that other. Hence the right to barter.
One man may have acquired more skins than are necessary for his
protection from the cold; another more food than is necessary for
his immediate use. They agree each to supply the wants of the other
from his surplus. Is this contract without obligation? If one of
them, having received and eaten the food he needed, refuses to
deliver the skin, may not the other rightfully compel him to
deliver it? Or two persons agree to unite their strength and skill
to hunt together for their mutual advantage, engaging to divide the
animal they shall master. Can one of them rightfully take the
whole? or, should he attempt it, may not the other force him to a
division? If the answer to these questions must affirm the duty of
keeping faith between these parties and the right to enforce it if
violated, the answer admits the obligation of contracts, because
upon that obligation depends the right to enforce them. Superior
strength may give the power, but cannot give the right. The
rightfulness of coercion must depend on the preexisting obligation
to do that for which compulsion is used. It is no objection to the
principle that the injured party may be the weakest. In society,
the
Page 25 U. S. 346
wrongdoer may be too powerful for the law. He may deride its
coercive power, yet his contracts are obligatory, and, if society
acquire the power of coercion, that power will be applied without
previously enacting that his contract is obligatory.
Independent nations are individuals in a state of nature. Whence
is derived the obligation of their contracts? They admit the
existence of no superior legislative power which is to give them
validity, yet their validity is acknowledged by all. If one of
these contracts be broken, all admit the right of the injured party
to demand reparation for the injury and to enforce that reparation
if it be withheld. He may not have the power to enforce it, but the
whole civilized world concurs in saying that the power, if
possessed, is rightfully used.
In a state of nature, these individuals may contract, their
contracts are obligatory, and force may rightfully be employed to
coerce the party who has broken his engagement.
What is the effect of society upon these rights? When men unite
together and form a government, do they surrender their right to
contract as well as their right to enforce the observance of
contracts? For what purpose should they make this surrender?
Government cannot exercise this power for individuals. It is better
that they should exercise it for themselves. For what purpose,
then, should the surrender be made? It can only be that government
may give it back again. As we have no evidence of the surrender or
of the restoration of the right, as this operation of surrender and
restoration would be an idle and useless ceremony, the rational
inference seems to be that neither has ever been made; that
individuals do not derive from government their right to contract,
but bring that right with them into society; that obligation is not
conferred on contracts by positive law, but is intrinsic, and is
conferred by the act of the parties. This results from the right
which every man retains to acquire property, to dispose of that
property according to his own judgment and to pledge himself for a
future act. These rights are not given by society, but are brought
into it. The right of coercion is necessarily
Page 25 U. S. 347
surrendered to government, and this surrender imposes on
government the correlative duty of furnishing a remedy. The right
to regulate contracts, to prescribe rules by which they shall be
evidenced, to prohibit such as may be deemed mischievous, is
unquestionable, and has been universally exercised. So far as this
power has restrained the original right of individuals to bind
themselves by contract, it is restrained, but beyond these actual
restraints, the original power remains unimpaired.
This reasoning is undoubtedly much strengthened by the authority
of those writers on natural and national law whose opinions have
been viewed with profound respect by the wisest men of the present
and of past ages.
Supposing the obligation of the contract to be derived from the
agreement of the parties, we will inquire how far law acts
externally on it, and may control that obligation. That law may
have, on future contracts, all the effect which the counsel for the
plaintiff in error claim will not be denied. That it is capable of
discharging the debtor under the circumstances, and on the
conditions prescribed in the statute which has been pleaded in this
case, will not be controverted. But as this is an operation which
was not intended by the parties nor contemplated by them, the
particular act can be entitled to this operation only when it has
the full force of law. A law may determine the obligation of a
contract on the happening of a contingency, because it is the law.
If it be not the law, it cannot have this effect. When its
existence as law is denied, that existence cannot be proved by
showing what are the qualities of a law. Law has been defined by a
writer, whose definitions especially have been the theme of almost
universal panegyric, "to be a rule of civil conduct prescribed by
the supreme power in a state." In our system, the legislature of a
state is the supreme power in all cases where its action is not
restrained by the Constitution of the United States. Where it is so
restrained, the legislature ceases to be the supreme power, and its
acts are not law. It is, then, begging the question to say that
because contracts may be discharged by a law previously enacted,
this contract may be discharged by this act of the Legislature of
New York, for the question returns
Page 25 U. S. 348
upon us is this act a law? Is it consistent with or repugnant to
the Constitution of the United States? This question is to be
solved only by the Constitution itself.
In examining it, we readily admit that the whole subject of
contracts is under the control of society, and that all the power
of society over it resides in the state legislatures except in
those special cases where restraint is imposed by the Constitution
of the United States. The particular restraint now under
consideration is on the power to impair the obligation of
contracts. The extent of this restraint cannot be ascertained by
showing that the legislature may prescribe the circumstances on
which the original validity of a contract shall be made to depend.
If the legislative will be that certain agreements shall be in
writing, that they shall be sealed, that they shall be attested by
a certain number of witnesses, that they shall be recorded, or that
they shall assume any prescribed form before they become
obligatory, all these are regulations which society may rightfully
make and which do not come within the restrictions of the
Constitution because they do not impair the obligation of the
contract. The obligation must exist before it can be impaired, and
a prohibition to impair it, when made, does not imply an inability
to prescribe those circumstances which shall create its obligation.
The statutes of frauds, therefore, which have been enacted in the
several states and which are acknowledged to flow from the proper
exercise of state sovereignty, prescribe regulations which must
precede the obligation of the contract, and, consequently cannot
impair that obligation. Acts of this description, therefore, are
most clearly not within the prohibition of the Constitution.
The acts against usury are of the same character. They declare
the contract to be void in the beginning. They deny that the
instrument ever became a contract. They deny it all original
obligation, and cannot impair that which never came into
existence.
Acts of limitations approach more nearly to the subject of
consideration, but are not identified with it. They defeat a
contract once obligatory, and may therefore be supposed to partake
of the character of laws which impair its
Page 25 U. S. 349
obligation. But a practical view of the subject will show us
that the two laws stand upon distinct principles.
In the case of
Sturges v. Crowninshield, it was
observed by the Court that these statutes relate only to the
remedies which are furnished in the courts, and their language is
generally confined to the remedy. They do not purport to dispense
with the performance of a contract, but proceed on the presumption
that a certain length of time, unexplained by circumstances, is
reasonable evidence of a performance. It is on this idea alone that
it is possible to sustain the decision that a bare acknowledgment
of the debt, unaccompanied with any new promise, shall remove the
bar created by the act. It would be a mischief not to be tolerated
if contracts might be set up at any distance of time, when the
evidence of payment might be lost and the estates of the dead, or
even of the living, be subjected to these stale obligations. The
principle is, without the aid of a statute, adopted by the courts
as a rule of justice. The legislature has enacted no statute of
limitations as a bar to suits on sealed instruments. Yet twenty
years of unexplained silence on the part of the creditor is
evidence of payment. On parol contracts or on written contracts not
under seal, which are considered in a less solemn point of view
than sealed instruments, the legislature has supposed that a
shorter time might amount to evidence of performance, and has so
enacted. All have acquiesced in these enactments, but have never
considered them as being of that class of laws which impair the
obligation of contracts. In prescribing the evidence which shall be
received in its courts and the effect of that evidence, the state
is exercising its acknowledged powers. It is likewise in the
exercise of its legitimate powers when it is regulating the remedy
and mode of proceeding in its courts.
The counsel for the plaintiff in error insist that the right to
regulate the remedy and to modify the obligation of the contract
are the same; that obligation and remedy are identical; that they
are synonymous -- two words conveying the same idea.
The answer given to this proposition by the defendant's counsel
seems to be conclusive. They originate at different times. The
obligation to perform is coeval with the
Page 25 U. S. 350
undertaking to perform; it originates with the contract itself
and operates anterior to the time of performance. The remedy acts
upon a broken contract and enforces a preexisting obligation.
If there be anything in the observations made in a preceding
part of this opinion respecting the source from which contracts
derive their obligation, the proposition we are now considering
cannot be true. It was shown, we think, satisfactorily that the
right to contract is the attribute of a free agent, and that he may
rightfully coerce performance from another free agent who violates
his faith. Contracts have consequently an intrinsic obligation.
When men come into society, they can no longer exercise this
original and natural right of coercion. It would be incompatible
with general peace, and is therefore surrendered. Society prohibits
the use of private individual coercion, and gives in its place a
more safe and more certain remedy. But the right to contract is not
surrendered with the right to coerce performance. It is still
incident to that degree of free agency which the laws leave to
every individual, and the obligation of the contract is a necessary
consequence of the right to make it. Laws regulate this right, but,
where not regulated, it is retained in its original extent.
Obligation and remedy, then, are not identical; they originate at
different times and are derived from different sources.
But although the identity of obligation and remedy be disproved,
it may be and has been urged that they are precisely commensurate
with each other, and are such sympathetic essences, if the
expression may be allowed, that the action of law upon the remedy
is immediately felt by the obligation -- that they live, languish,
and die together. The use made of this argument is to show the
absurdity and self-contradiction of the construction which
maintains the inviolability of obligation while it leaves the
remedy to the state governments.
We do not perceive this absurdity or self-contradiction.
Our country exhibits the extraordinary spectacle of distinct and
in many respects independent governments over the same territory
and the same people. The local governments are restrained from
impairing the obligation of contracts,
Page 25 U. S. 351
but they furnish the remedy to enforce them, and administer that
remedy in tribunals constituted by themselves. It has been shown
that the obligation is distinct from the remedy, and it would seem
to follow that law might act on the remedy without acting on the
obligation. To afford a remedy is certainly the high duty of those
who govern to those who are governed. A failure in the performance
of this duty subjects the government to the just reproach of the
world. But the Constitution has not undertaken to enforce its
performance. That instrument treats the states with the respect
which is due to intelligent beings understanding their duties and
willing to perform them; not as insane beings who must be compelled
to act for self-preservation. Its language is the language of
restraint, not of coercion. It prohibits the states from passing
any law impairing the obligation of contracts; it does not enjoin
them to enforce contracts. Should a state be sufficiently insane to
shut up or abolish its courts, and thereby withhold all remedy,
would this annihilation of remedy annihilate the obligation also of
contracts? We know it would not. If the debtor should come within
the jurisdiction of any court of another state, the remedy would be
immediately applied and the inherent obligation of the contract
enforced. This cannot be ascribed to a renewal of the obligation
for passing the line of a state cannot recreate an obligation which
was extinguished. It must be the original obligation derived from
the agreement of the parties and which exists unimpaired though the
remedy was withdrawn.
But we are told that the power of the state over the remedy may
be used to the destruction of all beneficial results from the
right, and hence it is inferred that the construction which
maintains the inviolability of the obligation must be extended to
the power of regulating the remedy.
The difficulty which this view of the subject presents does not
proceed from the identity or connection of right and remedy, but
from the existence of distinct governments acting on kindred
subjects. The Constitution contemplates restraint as to the
obligation of contracts, not as to the application of remedy. If
this restraint affects a power which the Constitution did not mean
to touch, it can
Page 25 U. S. 352
only be when that power is used as an instrument of hostility to
invade the inviolability of contract, which is placed beyond its
reach. A state may use many of its acknowledged powers in such
manner as to come in conflict with the provisions of the
Constitution. Thus the power over its domestic police, the power to
regulate commerce purely internal, may be so exercised as to
interfere with regulations of commerce with foreign nations, or
between the states. In such cases, the power which is supreme must
control that which is not supreme when they come in conflict. But
this principle does not involve any self-contradiction or deny the
existence of the several powers in the respective governments. So
if a state shall not merely modify or withhold a particular remedy,
but shall apply it in such manner as to extinguish the obligation
without performance, it would be an abuse of power which could
scarcely be misunderstood, but which would not prove that remedy
could not be regulated without regulating obligation.
The counsel for the plaintiff in error put a case of more
difficulty, and urge it as a conclusive argument against the
existence of a distinct line dividing obligation from remedy. It is
this. The law affords remedy by giving execution against the person
or the property or both. The same power which can withdraw the
remedy against the person, can withdraw that against the property
or that against both, and thus effectually defeat the obligation.
The Constitution, we are told, deals not with form, but with
substance, and cannot be presumed, if it designed to protect the
obligation of contracts from state legislation, to have left it
thus obviously exposed to destruction.
The answer is that if the law goes further and annuls the
obligation without affording the remedy which satisfies it, if its
action on the remedy be such as palpably to impair the obligation
of the contract, the very case arises which we suppose to be within
the Constitution. If it leaves the obligation untouched but
withholds the remedy or affords one which is merely nominal, it is
like all other cases of misgovernment, and leaves the debtor still
liable to his creditor, should he be found, or should his property
be found, where the laws afford a remedy. If that high sense of
duty
Page 25 U. S. 353
which men selected for the government of their fellow citizens
must be supposed to feel furnishes no security against a course of
legislation which must end in self-destruction; if the solemn oath
taken by every member to support the Constitution of the United
States furnishes no security against intentional attempts to
violate its spirit while evading its letter, the question how far
the Constitution interposes a shield for the protection of an
injured individual who demands from a court of justice that remedy
which every government ought to afford will depend on the law
itself which shall be brought under consideration. The anticipation
of such a case would be unnecessarily disrespectful, and an opinion
on it would be at least premature. But however the question might
be decided, should it be even determined that such a law would be a
successful evasion of the Constitution, it does not follow that an
act which operates directly on the contract after it is made is not
within the restriction imposed on the states by that instrument.
The validity of a law acting directly on the obligation is not
proved by showing that the Constitution has provided no means for
compelling the states to enforce it.
We perceive, then, no reason for the opinion that the
prohibition "to pass any law impairing the obligation of contracts"
is incompatible with the fair exercise of that discretion which the
state legislatures possess in common with all governments to
regulate the remedies afforded by their own courts. We think that
obligation and remedy are distinguishable from each other. That the
first is created by the act of the parties, the last is afforded by
government. The words of the restriction we have been considering
countenance, we think, this idea. No state shall "pass any law
impairing the obligation of contracts." These words seems to us to
import that the obligation is intrinsic, that it is created by the
contract itself, not that it is dependent on the laws made to
enforce it. When we advert to the course of reading generally
pursued by American statesmen in early life, we must suppose that
the framers of our Constitution were intimately acquainted with the
writings of those wise and learned men whose treatises on the laws
of
Page 25 U. S. 354
nature and nations have guided public opinion on the subjects of
obligation and contract. If we turn to those treatises, we find
them to concur in the declaration that contracts possess an
original intrinsic obligation, derived from the acts of free agents
and not given by government. We must suppose that the framers of
our Constitution took the same view of the subject, and the
language they have used confirms this opinion.
The propositions we have endeavored to maintain of the truth of
which we are ourselves convinced are these:
That the words of the clause in the Constitution which we are
considering, taken in their natural and obvious sense admit of a
prospective, as well as of a retrospective operation.
That an act of the legislature does not enter into the contract
and become one of the conditions stipulated by the parties, nor
does it act externally on the agreement unless it have the full
force of law.
That contracts derive their obligation from the act of the
parties, not from the grant of government, and that the right of
government to regulate the manner in which they shall be formed or
to prohibit such as may be against the policy of the state is
entirely consistent with their inviolability after they have been
formed.
That the obligation of a contract is not identified with the
means which government may furnish to enforce it, and that a
prohibition to pass any law impairing it does not imply a
prohibition to vary the remedy, nor does a power to vary the remedy
imply a power to impair the obligation derived from the act of the
parties.
We cannot look back to the history of the times when the august
spectacle was exhibited of the assemblage of a whole people by
their representatives in convention in order to unite thirteen
independent sovereignties under one government so far as might be
necessary for the purposes of union without being sensible of the
great importance which was at that time attached to the tenth
section of the first article. The power of changing the relative
situation of debtor and creditor, of interfering with contracts, a
power which comes home to every man, touches the interest of
all,
Page 25 U. S. 355
and controls the conduct of every individual in those things
which he supposes to be proper for his own exclusive management,
had been used to such an excess by the state legislatures, as to
break in upon the ordinary intercourse of society, and destroy all
confidence between man and man. The mischief had become so great,
so alarming, as not only to impair commercial intercourse and
threaten the existence of credit, but to sap the morals of the
people and destroy the sanctity of private faith. To guard against
the continuance of the evil was an object of deep interest with all
the truly wise as well as the virtuous of this great community, and
was one of the important benefits expected from a reform of the
government.
To impose restraints on state legislation as respected this
delicate and interesting subject was thought necessary by all those
patriots who could take an enlightened and comprehensive view of
our situation, and the principle obtained an early admission into
the various schemes of government which were submitted to the
convention. In framing an instrument which was intended to be
perpetual, the presumption is strong that every important principle
introduced into it is intended to be perpetual also; that a
principle expressed in terms to operate in all future time is
intended so to operate. But if the construction for which the
plaintiff's counsel contend be the true one, the Constitution will
have imposed a restriction in language indicating perpetuity which
every state in the Union may elude at pleasure. The obligation of
contracts in force at any given time is but of short duration, and
if the inhibition be of retrospective laws only, a very short lapse
of time will remove every subject on which the act is forbidden to
operate and make this provision of the Constitution so far useless.
Instead of introducing a great principle prohibiting all laws of
this obnoxious character, the Constitution will only suspend their
operation for a moment or except from it preexisting cases. The
object would scarcely seem to be of sufficient importance to have
found a place in that instrument.
This construction would change the character of the provision
and convert an inhibition to pass laws impairing the obligation of
contracts into an inhibition to pass retrospective
Page 25 U. S. 356
laws. Had this been the intention of the convention, is it not
reasonable to believe that it would have been so expressed? Had the
intention been to confine the restriction to laws which were
retrospective in their operation, language could have been found
and would have been used to convey this idea. The very word would
have occurred to the framers of the instrument, and we should have
probably found it in the clause. Instead of the general prohibition
to pass any "law impairing the obligation of contracts," the
prohibition would have been to the passage of any retrospective
law. Or if the intention had been not to embrace all retrospective
laws, but those only which related to contracts, still the word
would have been introduced and the state legislatures would have
been forbidden "to pass any retrospective law impairing the
obligation of contracts," or "to pass any law impairing the
obligation of contracts previously made." Words which directly and
plainly express the cardinal intent always present themselves to
those who are preparing an important instrument, and will always be
used by them. Undoubtedly there is an imperfection in human
language which often exposes the same sentence to different
constructions. But it is rare indeed for a person of clear and
distinct perceptions, intending to convey one principal idea, so to
express himself as to leave any doubt respecting that idea. It may
be uncertain whether his words comprehend other things not
immediately in his mind, but it can seldom be uncertain whether he
intends the particular thing to which his mind is specially
directed. If the mind of the convention in framing this prohibition
had been directed not generally to the operation of laws upon the
obligation of contracts, but particularly to their retrospective
operation, it is scarcely conceivable that some word would not have
been used indicating this idea. In instruments prepared on great
consideration, general terms comprehending a whole subject are
seldom employed to designate a particular, we might say a minute,
portion of that subject. The general language of the clause is such
as might be suggested by a general intent to prohibit state
legislation on the subject to which that language is applied -- the
obligation of
Page 25 U. S. 357
contracts, not such as would be suggested by a particular intent
to prohibit retrospective legislation.
It is also worthy of consideration that those laws which had
effected all that mischief the Constitution intended to prevent
were prospective as well as retrospective in their operation. They
embraced future contracts as well as those previously formed. There
is the less reason for imputing to the convention an intention not
manifested by their language to confine a restriction intended to
guard against the recurrence of those mischiefs to retrospective
legislation. For these reasons, we are of opinion that on this
point the District Court of Louisiana has decided rightly.
Judgment having been entered in favor of the validity of a
certificate of discharge under the state laws in those cases
(argued in connection with
Ogden v. Saunders) where the
contract was made between citizens of the state under whose law the
discharge was obtained and in whose courts the certificate was
pleaded, the cause was further argued by the same counsel upon the
points reserved as to the effect of such a discharge in respect to
a contract made with a citizen of another state, and where the
certificate was pleaded in the courts of another state, or of the
United States.
To render the judgment which was finally pronounced in the cause
intelligible, it is necessary to state that in addition to the plea
of the certificate of discharge under the insolvent law of the
state of New York of 1801, the defendant below, Ogden, pleaded the
statute of limitations (of New York),
nonassumpsit infra sex
annos.
To this plea, the plaintiff below, Saunders replied, that
previous to the running of the statute, to-wit, in April, 1810, the
defendant, Ogden, removed from the state of New York to New Orleans
in the State of Louisiana, where he continued to reside until the
commencement of this suit.
The jury found the facts of the drawing and acceptance of the
bills, of the discharge under the insolvent law of New York, and of
the defendant's removing to Louisiana at the time stated in the
plaintiff's replication, in the form
Page 25 U. S. 358
of what was probably intended to be a special verdict,
submitting the law to the court:
"If the law be for the plaintiff, then it finds for the
plaintiff the amount of the several acceptances, with the interest
and costs; but if the law on the said facts be for the defendant,
then the jury finds for the defendant, with costs."
A judgment was rendered by the court below upon this verdict.
And the cause being brought by writ of error before this Court,
among the errors assigned was the following:
"That the judgment of the court is for a greater sum than is
found by the jury; the whole amount of the bills set forth in the
petition being $2,183, amounting, with interest from the time of
the judicial demand, to $2,652.34. Whereas the judgment is for the
sum of $4,017,64 damages,"
&c.
MR. JUSTICE JOHNSON.
I am instructed by the majority of the Court finally to dispose
of this cause. The present majority is not the same which
determined the general question on the constitutionality of state
insolvent laws with reference to the violation of the obligation of
contracts. I now stand united with the minority on the former
question, and therefore feel it due to myself and the community to
maintain my consistency.
The question now to be considered is whether a discharge of a
debtor under a state insolvent law would be valid against a
creditor or citizen of another state, who has never voluntarily
subjected himself to the state laws otherwise than by the origin of
his contract.
As between its own citizens, whatever be the origin of the
contract, there is now no question to be made on the effect of such
a discharge; nor is it to be questioned that a discharge not valid
under the Constitution in the courts of the United States is
equally invalid in the state courts. The question to be considered
goes to the invalidity of the discharge altogether, and therefore
steers clear of that provision in the Constitution which purports
to give validity in every state to the records, judicial
proceedings, and so forth, of each state.
The question now to be considered was anticipated in
Page 25 U. S. 359
the case of
Sturges v. Crowninshield, when the Court,
in the close of the opinion delivered, declared that it means to
confine its views to the case then under consideration, and not to
commit itself as to those in which the interests and rights of a
citizen of another state are implicated.
The question is one partly international, partly constitutional.
My opinion on the subject is briefly this:
That the provision in the Constitution which gives the power to
the general government to establish tribunals of its own in every
state in order that the citizens of other states or sovereignties
might therein prosecute their rights under the jurisdiction of the
United States had for its object an harmonious distribution of
justice throughout the Union; to confine the states, in the
exercise of their judicial sovereignty, to cases between their own
citizens; to prevent, in fact, the exercise of that very power over
the rights of citizens of other states which the origin of the
contract might be supposed to give to each state; and thus to
obviate that
conflictus legum which has employed the pens
of Huberus and various others and which anyone who studies the
subject will plainly perceive it is infinitely more easy to prevent
than to adjust.
These conflicts of power and right necessarily arise only after
contracts are entered into. Contracts, then, become the appropriate
subjects of judicial cognizance, and if the just claims which they
give rise to are violated by arbitrary laws, or if the course of
distributive justice be turned aside or obstructed by legislative
interference, it becomes a subject of jealousy, irritation, and
national complaint or retaliation.
It is not unimportant to observe that the Constitution was
adopted at the very period when the courts of Great Britain were
engaged in adjusting the conflicts of right which arose upon their
own bankrupt law among the subjects of that Crown in the several
dominions of Scotland, Ireland, and the West Indies. The first case
we have on the effect of foreign discharges, that of
Ballantine
v. Golding, occurred in 1783, and the law could hardly be held
settled before the case of
Hunter v. Potts, which was
decided in 1791.
Page 25 U. S. 360
Anyone who will take the trouble to investigate the subject
will, I think, be satisfied that although the British courts
profess to decide upon a principle of universal law when
adjudicating upon the effect of a foreign discharge, neither the
passage in Vattel to which they constantly refer nor the practice
and doctrines of other nations will sustain them in the principle
to the extent in which they assert it. It was all-important to a
great commercial nation, the creditors of all the rest of the
world, to maintain the doctrine as one of universal obligation that
the assignment of the bankrupt's effects under a law of the country
of the contract should carry the interest in his debts, wherever
his debtor may reside, and that no foreign discharge of his debtor
should operate against debts contracted with the bankrupt in his
own country. But I think it perfectly clear that in the United
States a different doctrine has been established, and since the
power to discharge the bankrupt is asserted on the same principle
with the power to assign his debts, that the departure from it in
the one instance carries with it a negation of the principle
altogether.
It is vain to deny that it is now the established doctrine in
England that the discharge of a bankrupt shall be effectual against
contracts of the state that give the discharge, whatsoever be the
allegiance or country of the creditor. But I think it equally clear
that this is a rule peculiar to her jurisprudence, and that
reciprocity is the general rule of other countries; that the effect
given to such discharge is so much a matter of comity, that the
states of the European continent, in all cases reserve the right of
deciding whether reciprocity will not operate injuriously upon
their own citizens.
Huberus, in his third axiom on this subject, puts the effect of
such laws upon the ground of courtesy, and recognizes the
reservation that I have mentioned; other writers do the same.
I will now examine the American decisions on this subject, and
first, in direct hostility with the received doctrines of the
British courts, it has been solemnly adjudged in this Court, and I
believe in every state court of the Union, that notwithstanding the
laws of bankruptcy in
Page 25 U. S. 361
England, a creditor of the bankrupt may levy an attachment on a
debt due the bankrupt in this country and appropriate the proceeds
to his own debt.
In the case of
Harrison v.
Sterry, 5 Cranch 298,
9 U. S. 302, a
case decided in this Court in 1809 upon full argument and great
deliberation and in which all the English cases were quoted, it is
expressly adjudged
"that in the case of a contract made with foreigners in a
foreign country, the bankrupt laws of the foreign country are
incapable of operating a legal transfer of property in the United
States,"
and judgment was given in favor of the attaching creditors
against the claim of the foreign assignees.
In that case also another important doctrine is established in
hostility with the British doctrine. For the United States had
interposed a claim against the English assignees in order to obtain
satisfaction from the proceeds of the bankrupt's effects in this
country for a debt contracted in Great Britain. And this Court
decreed accordingly, expressly restricting the power of the country
of the contract to its concoction and exposition.
The language of the Court is
"The law of the place where a contract is made is, generally
speaking, the law of the contract -- that is, it is the law by
which the contract is expounded. But the right of priority forms no
part of the contract itself. It is extrinsic, and is rather a
personal privilege, dependent on the laws of the place where the
property lies and where the court sits which decides the
cause."
And accordingly, the law of the United States was sustained
which gave the debts due the bankrupt here to satisfy a debt
contracted in England, to the prejudice of the law of England,
which gave the same debt to the assignees of the bankrupt.
It cannot be necessary to go further than this case to establish
that, so far as relates to the foreign creditor, this country does
not recognize the English doctrine that the bankrupt law of the
country of the contract is paramount in disposing of the rights of
the bankrupt.
The United States passes a law which asserts the right to
Page 25 U. S. 362
appropriate a debt due a foreign bankrupt to satisfying a debt
due itself, and incurred by that bankrupt in his own country. The
assignees of that bankrupt question this right and claim the debt
as legally vested in them by the law of the country of the
contract, and maintain that the debt due the United States, being
contracted in Great Britain, was subject to the laws of Great
Britain, and therefore entitled only to share in common with other
creditors in the proceeds of the bankrupt's effects; that the debt
so appropriated by the law of the United States to its exclusive
benefit was, as to all the bankrupt's contracts, or certainly as to
all English contracts, vested in the assignees, on international
principles, principles which gave effect to the English bankrupt
laws so vesting that debt paramount to the laws of other
countries.
In giving effect to the law of the United States, this Court
overrules that doctrine and, in the act of passing that law, this
government asserts both the power over the subject and the right to
exercise that power without a violation of national comity, or has
at least taken its stand against that comity and asserted a right
to protect its own interests which, in principle, is equally
applicable to the interests of its own citizens.
It has had, in fact, regard to the
lex loci rei sitae
as existing in the person and funds of the debtor of the bankrupt,
and the rights of self-preservation, and duty of protection to its
own citizens, and the actual allegiance of the creditor and debtor,
not the metaphysical allegiance of the contract, on which the
foreign power is asserted.
It would be in vain to assign the decision of this Court in
Harrison v. Sterry or the passing of the law of the United
States to the general preference which the government may assert in
the payment of its own debt, since that preference can only exist
to the prejudice of its own citizens, whereas the precedence there
claimed and conceded operated to the prejudice of British
creditors.
The case of
Baker v. Wheaton, adjudged in the courts of
Massachusetts in the time of Chief Justice Parsons, 5 Mass. 509, is
a very strong case upon this subject. That also was argued with
great care, and all the British cases
Page 25 U. S. 363
reviewed; the court took time to deliberate, and the same
doctrine was maintained, in the same year and the same month with
Harrison v. Sterry, and certainly without any
communication between the two courts.
The case was this: one Wheaton gave a promissory note to one
Chandler, both being at that time citizens and inhabitants of Rhode
Island. Wheaton was discharged under the bankrupt laws of Rhode
Island, both still continuing citizens and inhabitants of the same
state, and the note remaining the property of Chandler. Subsequent
to the discharge, Chandler endorses the note to Baker, and Wheaton
is arrested in Massachusetts. He pleads the discharge in bar, and
the court, in deciding, expresses itself thus.
"When, therefore, the defendant was discharged from that
contract,
lege loci, the promisee was bound by that
discharge, as he was a party to the laws of that state, and
assenting to their operation. But if, when the contract was made,
the promisee had not been a citizen of Rhode Island, he would not
have been bound by the laws of it or any other state, and holding
this note at the time of the discharge, he might afterwards
maintain an action upon it in the courts of this state."
And again, page 311:
"If the note had been transferred to the plaintiff, a citizen of
this state, whilst it remained due and undischarged by the
insolvent laws of Rhode Island, those laws could not affect his
rights in the courts of law in this state, because he is not bound
by them."
This, it will be observed, regards a contract acknowledged to be
of Rhode Island origin.
There is another case reported in the decisions of the same
state, 10 vol., p. 337, which carries this doctrine still further,
and, I apprehend, to a length which cannot be maintained.
This was the case of
Watson v. Bourne, in which Watson,
a citizen of Massachusetts, had sued Bourne in a state court and
obtained judgment. Bourne was discharged under the insolvent laws
of that state, and being afterwards found in Massachusetts, was
arrested on an action of debt upon the judgment. He pleads the
discharge; plaintiff replies that he, plaintiff, was a citizen of
Massachusetts, and therefore, not precluded by the discharge. The
origin of the
Page 25 U. S. 364
debt does not appear from the report, and the argument turned
wholly on the question whether by entering judgment in the court of
the state, he had not subjected his rights to the state laws
pro tanto.
The court overruled the plea and recognized the doctrine in
Baker v. Wheaton by declaring
"that a discharge of that nature can only operate where the law
is made by an authority common to the creditor and debtor in all
respects, where both are citizens or subjects."
I have little doubt that the court was wrong in denying the
effect of the discharge as against judgments rendered in the state
courts, when the party goes voluntarily and unnecessarily into
those courts, but the decision shows in other respects how
decidedly the British doctrine is repelled in the courts of that
state.
The British doctrine is also unequivocally repelled in a very
learned opinion delivered by Mr. Justice Nott in the court of the
last resort in South Carolina, and in which the whole court,
consisting of the common law judges of the state, concurred. This
was in the case of
Assignees of Topham v. Chapman, in
which the rights of the attaching creditor were maintained against
those of the assignees of the bankrupt, 1 Constitutional Reports
253, and that the same rule was recognized at an early day in the
court of Pennsylvania appears from the leading case of
Phillips
v. Hunter, 2 H.Black. 402, in which a British creditor who had
recovered of a debtor of the bankrupt in Pennsylvania was compelled
by the British courts to refund to the assignees in England as for
money had and received to their use.
I think it, then, fully established that in the United States, a
creditor of the foreign bankrupt may attach the debt due the
foreign bankrupt and apply the money to the satisfaction of his
peculiar debt, to the prejudice of the rights of the assignees or
other creditors.
I do not here speak of assignees or rights created under the
bankrupt's own deed; those stand on a different ground, and do not
affect this question. I confine myself to assignments or transfers
resting on the operation of the laws of the country independent of
the bankrupt's deed, to the
Page 25 U. S. 365
rights and liabilities of debtor, creditor, bankrupt, and
assignees as created by law.
What is the actual bearing of this right to attach so generally
recognized by our decisions?
It imports a general abandonment of the British principles, for
according to their laws, the assignee alone has the power to
release the debtor. But the right to attach necessarily implies the
right to release the debtor, and that right is here asserted under
the laws of a state which is not the state of the contract.
So also the creditor of the bankrupt is, by the laws of his
country, entitled to no more than a ratable participation in the
bankrupt's effects. But the right to attach imports a right to
exclusive satisfaction if the effects so attached should prove
adequate to make satisfaction.
The right to attach also imports the right to sue the bankrupt,
and who would impute to the bankrupt law of another country the
power to restrain the citizens of these states in the exercise of
their right to go into the tribunals of their own country for the
recovery of debts, wherever they may have originated? Yet
universally, after the law takes the bankrupt into its own hands,
his creditors are prohibited from suing.
Thus much for the law of this case in an international view. I
will consider it with reference to the provisions of the
Constitution.
I have said above that I had no doubt the erection of a distinct
tribunal for the resort of citizens of other states was introduced
ex industria into the Constitution to prevent, among other
evils, the assertion of a power over the rights of the citizens of
other states upon the metaphysical ideas of the British courts on
the subject of jurisdiction over contracts. And there was good
reason for it, for upon that principle it is that a power is
asserted over the rights of creditors which involves a mere mockery
of justice.
Thus in the case of
Burrows v. Jemino, reported in 2
Strange and better reported in Moseley, and some other books, the
creditor, residing in England, was cited, probably by a placard on
a door-post in Leghorn, to appear there to
Page 25 U. S. 366
answer to his debtor, and his debt passed upon by the court
perhaps without his having ever heard of the institution of legal
process to destroy it.
The Scotch, if I remember correctly, attach the summons on the
flagstaff, or in the market place at the shore of Leith, and the
civil law process by proclamation, or
viis et modis, is
not much better as the means of subjecting the rights of foreign
creditors to their tribunals.
All this mockery of justice, and the jealousies, recriminations,
and, perhaps retaliations which might grow out of it, are avoided
if the power of the states over contracts, after they become the
subject exclusively of judicial cognizance, is limited to the
controversies of their own citizens.
And it does appear to me almost incontrovertible that the states
cannot proceed one step further without exercising a power
incompatible with the acknowledged powers of other states or of the
United States, and with the rights of the citizens of other
states.
Every bankrupt or insolvent system in the world must partake of
the character of a judicial investigation. Parties whose rights are
to be affected are entitled to a hearing. Hence every system, in
common with the particular system now before us, professes to
summon the creditors before some tribunal to show cause against
granting a discharge to the bankrupt.
But on what principle can a citizen of another state be forced
into the courts of a state for this investigation? The judgment to
be passed is to prostrate his rights, and on the subject of these
rights the Constitution exempts him from the jurisdiction of the
state tribunals, without regard to the place where the contract may
originate. In the only tribunal to which he owes allegiance, the
state insolvent or bankrupt laws, cannot be carried into effect;
they have a law of their own on the subject, and a certificate of
discharge under any other law would not be acknowledged as valid
even in the courts of the state in which the court of the United
States that grants it, is held. Where is the reciprocity? Where the
reason upon which the state courts
Page 25 U. S. 367
can thus exercise a power over the suitors of that court when
that court possesses no such power over the suitors of the state
courts?
In fact, the Constitution takes away the only ground upon which
this eminent dominion over particular contracts can be claimed,
which is that of sovereignty. For the constitutional suitors in the
courts of the United States are not only exempted from the
necessity of resorting to the state tribunals, but actually cannot
be forced into them. If, then, the law of the English courts had
ever been practically adopted in this country in the state
tribunals, the Constitution has produced such a radical
modification of state power over even their own contracts, in the
hands of individuals not subject to their jurisdiction, as to
furnish ground for excepting the rights of such individuals from
the power which the states unquestionably possess over their own
contracts and their own citizens.
Follow out the contrary doctrine in its consequences and see the
absurdity it will produce.
The Constitution has constituted courts professedly independent
of state power in their judicial course, and yet the judgments of
those courts are to be vacated and their prisoners set at large
under the power of the state courts or of the state laws, without
the possibility of protecting themselves from its exercise.
I cannot acquiesce in an incompatibility so obvious.
No one has ever imagined that a prisoner in confinement under
process from the courts of the United States could avail himself of
the insolvent laws of the state in which the court sits. And the
reason is that those laws are municipal and peculiar and
appertaining exclusively to the exercise of state power in that
sphere in which it is sovereign -- that is, between its own
citizens, between suitors subjected to state power exclusively, in
their controversies between themselves.
In the courts of the United States no higher power is asserted
than that of discharging the individual in confinement under its
own process. This affects not to interfere with the rights of
creditors in the state courts against the same individual. Perfect
reciprocity would seem to indicate
Page 25 U. S. 368
that no greater power should be exercised under state authority
over the rights of suitors who belong to the United States
jurisdiction. Even although the principle asserted in the British
courts of supreme and exclusive power over their own contracts had
obtained in the courts of the United States, I must think that
power has undergone a radical modification by the judicial powers
granted to the United States.
I therefore consider the discharge under a state law as
incompetent to discharge a debt due a citizen of another state, and
it follows that the plea of a discharge here set up is insufficient
to bar the rights of the plaintiff.
It becomes necessary, therefore, to consider the other errors
assigned in behalf of the defendant, and first as to the plea of
the act of limitations.
The statute pleaded here is not the act of Louisiana, but that
of New York, and the question is not raised by the facts or
averments whether he could avail himself of that law if the full
time had run out before his departure from New York, as was
supposed in argument. The plea is obviously founded on the idea
that the statute of the state of the contract was generally
pleadable in any other state, a doctrine that will not bear
argument.
The remaining error assigned has regard to the sum for which the
judgment is entered, it being for a greater amount than the nominal
amount of the bills of exchange on which the suit was brought and
which are found by the verdict.
There has been a defect of explanation on this subject, but from
the best information afforded us, we consider the amount for which
judgment is entered as made up of principal, interest, and damages,
and the latter as being legally incident to the finding of the
bills of exchange and their nonpayment, and assessed by the court
under a local practice consonant with that by which the amount of
written contracts is determined, by reference to the prothonotary,
in many other of our courts. We therefore see no error in it. The
judgment below will therefore, be affirmed.
And the purport of this adjudication, as I understand it, is
that as between citizens of the same state, a discharge of a
bankrupt by the laws of that state is valid as it affects
posterior
Page 25 U. S. 369
contracts; that as against creditors, citizens of other states,
it is invalid as to all contracts.
The propositions which I have endeavored to maintain in the
opinion which I have delivered are these:
1st. That the power given to the United States to pass bankrupt
laws is not exclusive.
2d. That the fair and ordinary exercise of that power by the
states does not necessarily involve a violation of the obligation
of contracts,
multo fortiori of posterior contracts.
3d. 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 arises a
conflict of sovereign power and a collision with the judicial
powers granted to the United States which renders the exercise of
such a power incompatible with the rights of other states and with
the Constitution of the United States.
MR. JUSTICE WASHINGTON, MR. JUSTICE THOMPSON, and MR. JUSTICE
TRIMBLE dissented.
MR. CHIEF JUSTICE MARSHALL, MR. JUSTICE DUVALL, and MR. JUSTICE
STORY assented to the judgment, which was entered for the defendant
in error.
Judgment affirmed.