ERROR to the District Court of Louisiana.
This was an action of assumpsit, brought in the Court below 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 30th of 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 non-payment.
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 3d, 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. The question, which arose under this plea as to the validity of the law of New-York as being repugnant to the constitution of the United States, was argued at February term, 1824, by Mr. Clay, Mr. D. B. Ogden, and Mr. Haines, for the plaintiff in error, and by Mr. Webster and Mr. Wheaton, for the defendant in error, and the cause was continued for advisement until the present term. It was again argued at the present term, (in connexion with several other causes standing on the calendar, and involving the general question of the validity of the State bankrupt, or insolvent laws,) by Mr. Webster and Mr. Wheaton, against the validity, and by the Attorney General, Mr. E. Livingston, Mr. D. B. Ogden, Mr. Jones, and Mr. Sampson, for the validity.
The editor has endeavoured to incorporate the substance both of the former and the present argument, into the following summaries.
Feb. 19th, 20th, 21st, 22d.
Mr. Wheaton argued, that the State laws now in question were repugnant to the constitution of the United States, upon two grounds:
1st. That the power of establishing 'uniform laws on the subject of bankruptcies throughout the United States,' was exclusively vested in Congress.
2d. That the State laws in question were 'laws impairing the obligation of contracts,' the power of passing which was expressly prohibited to the States.
1. The State laws, the validity of which is now drawn in question, are, the act of the legislature of New-York of the 3d of April, 1801, for the relief of insolvent debtors on the application of three fourths of their creditors, by discharging their persons, and future property, from liability for their debts, upon a cessio bonorum, and the act of the 3d of April, 1813, granting the same relief upon the application of two thirds of the creditors. The judgment of one of the learned judges of this Court, in the case of Golden v. Prince, was referred to in this part of the argument, and its reasoning relied upon, to show that the power of establishing uniform laws on the subject of bankruptcies throughout the Union was, from its nature, an exclusive power, and that the exercise of a similar power on the part of the States was inconsistent.*fn1 a
2. These legislative acts are laws impairing the obligation of contracts. That they are such, in respect to contracts in existence when the laws are passed, has already been determined by the Court upon solemn argument.*fn2 b
It was also supposed to have been decided, that, in such a case, it was immaterial whether the contract was made before or after the passage of the law.*fn3 c
But the whole question might now be considered as open for discussion.
To determine it, the nature and terms of the constitutional prohibition must be examined. 'No State,' &c. 'shall coin money, emit bills of credit, make any thing but gold and silver coin a tender in the payment of debts, pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts.' These are comprehensive terms, studiously designed to restrain the State legislatures from acts of injustice, both in criminal and civil matters. And (1.) the prohibition of issuing bills of credit, or making any thing but gold and silver coin a tender in the payment of debts, was intended to cut up paper money by the roots. The commercial credit of the nation had severely suffered from this fatal scourge; and the anxiety to be relieved from it, was one of the most pressing motives which induced the formation of the new constitution. It might, perhaps, be doubted, whether the power of coining money, which was given to Congress, and denied to the States, taken in connexion with the prohibition to them to emit bills of credit, or make any thing but gold and silver coin a tender in the payment of debts, was not intended to give to Congress the exclusive power of regulating the whole currency of the country; although the framers of the constitution probably did not foresee how completely this provision would be evaded by the multiplication of banking corporations in the different States. The term 'bills of credit,' alone, would reach the ordinary case of paper money; but the prohibition of tender laws was meant to expand the same thought so as to reach valuation and appraisement laws, and all that prolific brood of similar pernicious enactments which disfigure the pages of our history from the peace of 1783 until the establishment of the present constitution in 1789. (2.) 'Bills of attainder, and ex post facto laws,' were prohibited, in order to restrain the State legislatures from oppressing individuals by arbitrary sentences, clothed with the forms of legislation, and from making retrospective laws applicable to criminal matters.*fn4 d
(3.) The prohibition of 'laws impairing the obligation of contracts,' was intended to prevent the remaining mischiefs which experience had shown to flow from legislative interferences with contracts, and to establish a great conservative principle, under which they might be protected from unjust acts of legislation in any form.
To give complete effect to this last salutary prohibition, the Court has constantly given it an interpretation sufficiently broad and liberal to accomplish the ends which the framers of the constitution had in view. For this purpose the prohibition has been considered as extending to contracts executed, as well as executory; to conveyances of land, as well as commercial contracts; to public grants from the State to corporations and individuals, as well as private contracts between citizens; to grants and charters in existence when the constitution was adopted, as well as those existing previously, and even before the revolution; and to compacts between the different States themselves.*fn5 e
In most of these cases, the impairing act was applied to a specific contract or grant, and affected only the rights of particular individuals. But the principles laid down by the Court apply to whole classes of contracts; and surely it will not be pretended, that a law repealing all charters of a certain description, or impairing a general description of contracts, or abolishing all debts of a certain nature, would not be reached by the prohibition. The constitution necessarily dealt in general terms; and such is the intrinsic ambiguity of all human language, that it could not entirely avoid difficulties of interpretation. But the fault of tautology has never been imputed to this instrument, and terms of such significant import would hardly have been added to this clause, if it had been intended merely to repeat and amplify the same thought which had already been expressed in the prohibition of paper money, and other tender laws. On the other hand, if it had been intended merely to prohibit those particular species of laws impairing the obligation of contracts, which the history of the times shows to have been the object of peculiar censure, they would have been mentioned by name. Paper money and tender laws may be, and undoubtedly are, laws impairing the obligation of contracts; but they were such notorious and flagrant evils, that it was deemed necessary to prohibit them expressly, and by name. But the Convention would have stopped there, had they not intended to include any, and every law, impairing the obligation of contracts. And if they had intended to include only such as instalment and suspension laws, they would have mentioned them specifically. It is believed that the reasoning of the Court in Sturges v. Crowninshield, is conclusive on this head. This reasoning receives confirmation from the historical fact, that in the original draughts of the proposed constitution, this prohibition of laws impairing the obligation of contracts was not included, although the other prohibitions were contained both in Mr. C. Pinckney's draught, and in that of the Committee of Nine. The prohibition now in question was subsequently added in the revised draught, which shows, at least, that it was studiously inserted.*fn6 f
Since, then, the Convention intended to prohibit every possible mode in which the obligation of contracts might be violated by State legislation, the question recurs, are State bankrupt laws within the prohibition? The clause must be construed in connexion with other parts of the constitution, and must be considered with reference to those extrinsic circumstances in the then condition of the country which affect the question. One of the great objects of the constitution was to restore violated faith, and to raise the country from that state of distress and degradation into which it had been plunged by the want of a regular administration of justice in the relation of debtor and creditor. The motives for giving the power of establishing bankrupt laws to Congress are explained in the cotemporaneous expositions of the constitution.*fn7 g
Had not this power been granted to the Union, it might have been argued with more show of reason, that the States were not meant to be prohibited from exercising the power so as to impair the obligation of contracts. In enumerating the prohibitions to the States, each particular class of laws was not specified, for the reasons before mentioned. The plan of the tramers of the constitution excluded this prolixity of detail. Even in the Federalist, the authors have only commented upon such parts as were subjected at the time to popular discussion. Their observations upon the present subject are very general and concise; not, as has been supposed, because the concession by the States was not so extensive as we now contend, but because it was almost universally regarded as indispensably necessary.
It is said, in a learned judgment delivered from a tribunal entitled to great respect, that all contracts are to be construed and executed according to the lex loci contractus, and the obligation of the contract is what the law of the place makes it. Hence it is inferred, that the insolvent laws of the State in which any contract is made, form a part of the obligation of the contract.*fn8 h
The principle may be admitted without conceding the inference. It is sought to be illustrated by supposing the law incorporated into the agreement to the parties. But it is only to suppose the clause of the constitution now in question to be also inserted in their agreement, and it will be seen that this imaginary reference of the contracting parties to any particular law, leaves the question just where it found it. To this reasoning may be opposed the authority of another learned judge of the same State, who, though he expresses an opinion that the prohibition ought to be applied to retrospective laws only, repudiates this argument. 'For,' (says he,) 'if parties are to be presumed to contract with reference to existing laws, they must be presumed to mean laws made in pursuance of the constitution.'*fn9 i
And it may be added, that the same argument would apply with equal force to a law making paper money, or any thing else but gold and silver coin, a tender in the payment of debts. But it will hardly be pretended, that the existence of such a law at the time and place where the debt was contracted, would prevent the creditor from recovering it in specie.
It may, indeed, be admitted, that there is a difficulty in distinguishing between the obligation of a contract, and the remedy given by the law to enforce it. It may be admitted, that the States have a right to modify the remedy, so far as respects their own Courts; that the lex fori may be changed in many respects; that the process for the collection of debts may be altered; still it does not follow, that a law taking away all remedy whatever, and, in effect, abolishing the debt, would be a valid act. Unless such an act be a law impairing the obligation of contracts, it is difficult to conceive of such a law. Wherever there is a right, there must be a remedy.*fn10 j
The remedy may be modified, but it may not be so modified as to impair or destroy the obligation. A discharge of the person only, upon a cessio bonorum, under a State insolvent law, may not impair the obligation of his contracts, and may be effectual within the territory of the State, and in the State Courts. But a discharge of the person, and the future acquisitions of property of the debtor, under a State bankrupt law, absolutely extinguishes the debt, and cannot, therefore, be valid in any place where the authority of the constitution of the United States extends. The distinction between bankrupt and insolvent laws is sufficiently clear for all practical purposes. Both in Great Britain and on the European continent, the bankrupt laws are limited to merchants and traders, and the discharge is absolute. On the other hand, both by the insolvent system of England, and the cessio bonorum of the countries governed by the Roman civil law, the benefit of the cession is extended to all classes of persons; but it discharges the person only, leaving the subsequent acquisitions of the debtor liable to the demands of his creditors.*fn11 k
The cessio bonorum does not, therefore, impair the obligation of the contract. It only suspends and modifies the remedy. 'Neither a civil nor a natural obligation (says Ayliffe) is dissolved by a cessio bonorum; though it produces a good exception in law, and suspends the force of an obligation for a time; the extinguishment of an obligation being one thing, and the cessation of it another; for, when an obligation is once extinct, it never revives again.'*fn12 l
Supposing, then, that the prohibition ought to be construed as extending to State bankrupt laws, what reason is there to believe that the Convention meant to restrict it to laws operating upon existing contracts only? They had already expressly prohibited retrospective laws in criminal matters; and retrospective laws, applicable to civil cases, hardly required any positive and express prohibition. In every system of jurisprudence such laws are considered as contrary to the first principles of natural justice; and even in those countries where the Courts do not feel themselves at liberty to disobey the will of the legislature when clearly expressed, however unreasonable or unjust, they will not give effect to it unless it is thus expressed.*fn13 m
Had retrospective laws, affecting vested rights acquired under contracts, been alone intended, more appropriate and restrictive terms would have been used. But, thus limited in its operation, the prohibition would have been wholly ineffectual. The prohibition of paper money, and tender laws, was certainly meant to apply to prospective, as well as retrospective acts. To prohibit debts from being compulsively satisfied with any thing but gold and silver coin, and yet to permit the States to make laws for discharging debts without payment of any kind, is an absurdity of which the Convention cannot be suspected. It is universally admitted, that the prohibition covers instalment and suspension laws. These confessedly involve all the mischiefs meant to be corrected; and yet we are told the States may pass them ad libitum, provided they only make them prospective in their operation. The history of the times will show that many of the laws which the Convention must have had in their eye, were prospective, either in effect, or in express terms.*fn14 n
The prohibition is associated in the same clause with other prohibitions, all intended to promote the same object, that of securing the observance of good faith in matters of contract. 'No State shall make any thing but gold and silver coin a tender in the payment of debts,' or 'pass any law impairing the obligation of contracts.' What debts? All debts, both those contracted before and after the passage of the tender law. What contracts? All contracts, both those made before, and those made after the impairing law.
What is this 'obligation of contracts,' which is prohibited from being impaired by any act of State legislation? We answer, it is the civil obligation, the binding efficacy, the coercive power, the legal duty of performing the contract. The constitution meant to preserve the inviolability of contracts, as secured by those eternal principles of equity and justice which run throughout every civilized code, which form a part of the law of nature and nations, and by which human society, in all countries and all ages, has been regulated and upheld. It is said that the obligation of contracts is derived from the municipal law alone: Obligatio est juris vinculum, quo necessitate astringimur alicujus raei solvendae secundum nostroe civitatis jure.*fn15 o
This is what we deny. It springs from a higher source: from those great principles of universal law, which are binding on societies of men as well as on individuals. The writers on natural law are full of this subject.*fn16 p
And the Court itself has given a practical exposition to the clause, which cannot be reconciled to the supposition, that the obligation of contracts depends alone on the municipal laws of the States. In the case of Green v. Biddle,*fn17 q
it was determined, that certain acts of Kentucky were repugnant to the constitution of the United States, as impairing the obligation of the compact of 1789, between the States of Virginia and Kentucky, respecting the titles to land in the latter State. Here the contract was a treaty between two sovereign States of the Union. Whence was its obligation derived but from the law of nature and nations?
When it is contended that the obligation of contracts depends upon universal law, it is not meant to assert that the State legislatures may not change their present municipal codes. But it is denied that they may change them so as to affect that 'great principle which the Convention intended to establish that contracts should be inviolable.'*fn18 r
Many perplexing cases may be imagined, where it would be difficult to ascertain the precise extent of the constitutional limitation upon the power of the States. In a new system of government, so complicated as ours, it will not be easy, nor is it necessary, to adjust by anticipation the precise limits of its conflicting authorities. 'Moral lines are strong and broad,' and it is not possible to mark them with mathematical precision. What we insist upon is, that the prohibition was designed to guarantee to the people of the whole Union, of each State, and to foreigners, the inviolability of contracts, the impartial administration of civil justice, the observance of good faith, that ligament of the social union, so as to enforce the execution of agreements in some effectual mode. The prohibition is universal. All manner of contracts are included in it, and their obligation is forbidden from being impaired by any legislative act whatsoever. 'No State shall pass any law impairing the obligation of contracts.' It is not merely any law impairing a particular contract, but it is any law impairing the obligation, or binding efficacy of contracts in general. It is any such law, general or special, applicable to a specific contract, or to all contracts, or to a particular class of contracts; to contracts made between citizens of the same State, or with citizens of different States, or aliens; between the State and individuals or corporations, and between the States themselves; whether the contract was in existence when the constitution was adopted, or subsequently made; and (as we contend) whether the law was made subsequent to the contract, or the contract to the law. It has, indeed, been attempted to carve out of the universality of the prohibition, an implied exception of such laws as were in existence when the constitution was formed, or which the States had been accustomed to pass in the ordinary course of their domestic legislation. But nothing can be more arbitrary than this distinction. It is said, that insolvent laws were in existence when the constitution was formed and adopted, and had existed from very early colonial times. So were paper money and tender laws, instalment and suspension laws. Yet these are confessedly meant to be prohibited; and whenever such laws have been inadvertently or designedly passed by any State since the adoption of the constitution, no care has been taken to make them prospective only in their operation. If it be said that paper money and tender laws are expressly prohibited, the answer is, that the extent of the prohibition does not depend upon the particular kind of law being specified; but that, if it is once ascertained that any law falls within the general prohibition, its being limited to future cases only will not rescue it from the grasp of that prohibition. The general legislative power of the States over contracts is left untouched by the clause in question. The States may still provide what shall, and what shall not, be the lawful subject of contracts; in what form they shall be made, and whether in writing, under seal, or by parol; and by what solemnities they shall be attested; who may contract, and who are disabled from contracting; what contracts are forbidden by the policy of the State, either as respects its internal commerce, its police, its health, its finances, its morals. In short, the dominion of the States over the entire field of civil legislation is complete, except so far as it has been surrendered, expressly, or by fair implication, to the national government, or as its exercise is expressly prohibited to the States. But still the question recurs, how far has it been surrendered, and how far has its exercise been thus prohibited? The States may enact laws forbidding certain kinds of contracts from being made; or any contract being made by certain individuals; or requiring them to be made in certain prescribed forms, and attested with certain solemnities, and proved by certain species of testimony. Contracts made contrary to these regulations may be void in their inception, and never have a legal obligation; or those which are permitted to be made, may be discharged by performance, by payment, or by prescription and the presumption arising from the lapse of time as a rule of evidence. The States may make any and all regulations respecting contracts, provided they do not include among these regulations a provision that lawful contracts shall have no obligation. The constitution makes the binding obligation an inseparable incident to the contract. Without doubt, the supreme power of the nation may make laws impairing the obligation of contracts. Congress, not being prohibited in the constitution, may make laws having that effect, wherever it is a necessary consequence of the exercise of any legislative power given by the constitution. Thus, the warmaking power necessarily involves in its exercise the dissolution of contracts of affreightment, and charter party, of insurance, and partnership, and other conventions connected with a commercial intercourse with the public enemy. But the radical vice of the opposite argument consists in assuming that the States are supreme in respect to this matter. They have parted with the power of making all laws impairing the obligation of contracts, and they have given the power to Congress, so far as it is involved in the enactment of bankrupt laws, or of any other law which Congress has authority to make.
As to what may be said in respect to the consequences of the decision the Court is called upon to pronounce, they have been very much exaggerated in all the discussions which have taken place on this subject. Few of the States have ever had bankrupt laws. Most of them have confined their regulations to a discharge of the person only. Others have already modified their insolvent laws, and conformed them to the recent ecisions of this Court. There is a general disposition to acquiesce in those decision. The person of the debtor is every where free. The statute of limitations is fast obliterating stale demands: and it is consolatory to believe, that although the perseverance of this high tribunal, in its former resolutions, might be attended with some temporary and partial evils, they would soon find their appropriate remedy in the exertion of the constitutional power of Congress. Whatever difficulties may attend the question, relating to a uniform code of bankrupt laws, they must ultimately be overcome by the legislative wisdom of the country. The establishment of such a code is imperiously demanded by our peculiar situation as a confederacy of numerous States, closely connected by an active commercial intercourse, with various partial and conflicting regulations concerning the relation of debtor and creditor; by the policy of reciprocating the laws of foreign countries upon the same subject; and by the general interests of commerce, interwoven as they are with our grandeur and power as a nation, and with all the sources of public and private prosperity.
The Attorney General, Mr. E. Livingston, Mr. Clay, Mr. D. B. Ogden, Mr. Jones, Mr. Sampson, and Mr. Haines, argued, contra, (1.) that the power of establishing 'uniform laws on the subject of bankruptcies throughout the United States,' as given to Congress in the constitution, was not exclusive of the States over the same subject. (2.) That the laws of the State of New-York, now in question, were not laws 'impairing the obligation of contracts,' in the sense of the constitution.
[The Editor regrets that, from the number of counsel who argued on this side of the question, and the great variety of topics insisted on by them, he has been obliged to condense the whole argument into the following summary, which he hopes will be found to contain the substance of their reasoning, although it does not distinctly assign to each his appropriate portion of the argument, and is far from doing justice to the learning, eloquence, and ability, with which the subject was discussed.]
1. It was stated to be the settled doctrine of this Court, that any State of the Union has a right to pass a bankrupt law, provided such law does not impair the obligation of contracts, and provided there be no act of Congress in force to establish a nuiform system of bankruptcy conflicting with such law. Although some of the powers of Congress are exclusive, from their nature, without any express prohibition of the exercise of the same powers by the States, the power of establishing bankrupt laws is not of this description.*fn19 s
The Court had determined that the right of the several States to pass bankrupt laws is not extinguished by the enactment of a uniform bankrupt law throughout the Union by Congress, but only suspended so far as the two laws conflict. One of the laws of New-York, now in question, was originally passed on the 21st of March, 1788, was re-enacted in 1801, among the revised laws of that year, and continued in force until long after the discharge of the plaintiff in error was obtained. And although a uniform bankrupt law of Congress was in force during a part of this period, it was repealed before the discharge; and, consequently, supposing the State insolvent law did conflict in any respect with the bankrupt law of Congress, it was only, so far, suspended in its operation, and upon the repeal of the law of Congress, was revived in all its effects. The other act, that of 1813, was passed after the repeal of the bankrupt law of Congress of 1800.
But supposing this to be an open question, in order to determine it, it was said to be necessary to look, not merely at the great federal objects for which the constitution was ordained, but to the antecedent condition of the parties to the compact. They were sovereign States, with all the powers of municipal government, which they had long exercised; and with regard to this particular power of passing insolvent and bankrupt laws, they had been in the actual exercise of it for many years before the adoption of the constitution, and even from the earliest colonial times. The English bankrupt laws, and the temporary acts which were occasionally passed by the British Parliament for the relief of insolvent debtors, were not extended to the colonies. The several States had insolvent laws in force at the adoption of the constitution, and they continued, after the adoption, to alter, revise, and re-enact those laws, manifestly unconscious that they had parted with this power. This was, indeed, no proof that they had not parted with it, if there was any other party having at once a right and an interest to make the objection. But the people of the Union, represented in Congress, so far from contesting the power of the States over this matter, had never exercised the power of making bankrupt laws, except in a single instance, and then with an express saving of the State insolvent laws.*fn20 t
So, the people of the several States, represented in their respective local legislatures, had all exercised this power. Here, then, was a significant declaration of the people that they had not parted with this power in their State capacities; and that the grant of a similar authority, in their new capacity of a federal union, did not, by the mere grant of it, exclude the exercise of it by them in their State capacities, at least until superseded by a general and permanent law of Congress. Cotemporaneous construction had always been considered as of great weight in matters of constitutional law; and in the question relating to the power of Congress to establish such corporations as the Bank of the United States, was considered as decisive. There are only three cases in which the States are excluded from the exercise of any power antecedently possessed by them (1.) When a power is granted to Congress in exclusive terms. (2.) When the States are expressly prohibited from exercising it in a specific form. (3.) When a power is granted to Congress, the cotemporaneous exercise of which by the States would be incompatible. It was not asserted on the other side, that the power now in question falls under either of the two first heads; nor could it, by any fair course of reasoning, be shown to fall under the third head, of being an incompatible power, except when the incompatibility arises from its actual exercise by Congress. The grant of the power of establishing 'a uniform rule of naturalization,' and 'uniform laws on the subject of bankruptcies,' being contained in the same clause, and expressed in similar terms, had justly been considered as subject to the same interpretation. Before the adoption of the constitution, the States had various incongruous rules of naturalization, and laws on the subject of bankruptcies, some of which discharged the person only of the debtor, and others his future acquisitions of property. Then came this provision of the constitution, which manifestly looks to the antecedent condition of things existing in the several States. The word uniform was significantly used as applicable to that condition of things. In any other view, the expression has no peculiar meaning, and does not qualify the general grant of power; for all the laws of Congress, on general subjects, are necessarily 'uniform throughout the United States.' The censure of the State regulations, implied in the terms in which the power to correct them is given to Congress, was pointed against their want of uniformity. The policy and necessity both of bankrupt and naturalization laws, was clearly recognised. The sole object of granting to Congress any power over these subjects, was to secure that uniformity which the conflicting regulations of the different States could not attain. But the terms in which the grant is conceived were not mandatory. Congress was left free to exercise it, or not, at its discretion; and the only consequence of an actual exercise of the power by Congress, was to supersede, during such exercise, the State laws, so far as they conflict with the laws of Congress.*fn21 u
2. The clause relied upon as virtually abolishing this power, is found in a subsequent and remote section of the constitution, wherein, after an enumeration of certain specified laws which the States may not pass, it is added, 'nor any law impairing the obligation of contracts.' From this it was inferred, that the States cannot pass bankrupt laws, although the power is not exclusive in Congress. The States may pass bankrupt laws, it had been said, provided they do not impair the obligation of contracts. But all bankrupt laws do impair the obligation of contracts; i. e. they discharge the debtor from his debts without payment; and, therefore, the States cannot pass them, even when the power is not actually exercised by Congress. It had, however, been conceded, that they may pass insolvent laws which discharge the person only, because these do not impair the obligation, but only affect the remedy. It had been said they affect the remedy only, because they still leave the obligation entire to be enforced against the future property of the debtor. But suppose the State law should deny the creditor any power of coercion whatever, whether against the body or the estate of the debtor, it would still act upon the remedy only, and yet would strip the contract of all its binding efficacy, except merely that moral obligation, that scintilla juris, which, though it might form a sufficient consideration for a new promise, was in itself no ground of action. As the obligation of the contract does not depend upon municipal law, the withdrawal of all the means of coercion which that law gives, cannot impair the obligation, since it only takes away the remedy. Thus, according to this distinction between the right and the remedy, creditors are left completely at the mercy of State legislation, notwithstanding the boasted efficacy of this constitutional prohibition.
But (it was asked) what is the true import of this clause, forbidding the States from passing 'any law impairing the obligation of contracts?' A contract is not merely that which the parties expressly stipulate. It is that also which the existing laws of the country where the contract is made annex as conditions to it at the time when it is formed. It had been admitted, that a State might prohibit contracts altogether. If so, it may permit them, sub modo, with such conditions as it thinks fit to annex; and the parties who make a contract in that State, make it subject to the conditions. These conditions enter into the contract, and form a part of it as completely as if they had been expressly stipulated by the parties themselves. These conditions are sometimes beneficial to one party, sometimes to the other: sometimes they add to the contract, sometimes they diminish it. But in every instance they receive the tacit assent of the parties, and are not considered as impairing the obligation of the contract. A. gives B. a bond for 1000 dollars, payable on demand. There is no stipulation for interest. But the law annexes the tacit condition that the obligee shall receive interest, and that at a certain fixed rate. So in the contract of exchange, the drawer of a bill does not stipulate to pay it if the drawee refuses. In the same manner, the liability of the endorser to the holder is implied by the law, and cannot be collected from the bill itself. Still less, is his right to be discharged for want of due notice of the dishonour of the bill to be found in the written contract. But the law implies it, and, therefore, it might be said to impair the obligation of the actual contract between the parties, which contained no such condition. How did it happen that this was not considered a violation of the constitution? It could only be because the law of the place has annexed that condition to the contract, and made it as much a part of the contract as if the parties had expressed it. The same principle applies to the custom of adding days of grace to the specified time of payment in bills and notes, which are various in different countries, and make the contract of the parties, whatever the law of the place where the payment is to be made, says shall be the contract.*fn22 v
So, where the law of the place gives a peculiar remedy to the creditor on a bill or note, more summary and strict than in ordinary cases, the party shall be intended to have renounced the benefit of the ordinary law, and to have submitted himself to the extraordinary process provided for the particular case.*fn23 w
And so of many other cases, in which whatever is considered as discharging the contract by the law of the place where it was made, or with a view to which it is made, is considered as discharging it every where else, in whatever jurisdiction the creditor may attempt to enforce it, although no such condition is expressed in the terms of the contract itself.*fn24 x
This proceeds, not upon the idea that the foreign law can impair the obligation of the contract, or the foreign Court refuse to execute it, but that they will give the same effect to it which is given by the law and the Courts of the country where it is made; they will regard that as the contract of the parties which the lex loca declares to be the contract of the parties.*fn25 y
So, in the present case, the contract being made in a State, where the local law, existing at the time, annexed to the contract the condition that, in certain events, beyond the control of the contracting parties, the contract should be discharged, the parties contracting in the place of the law, and with a knowledge of the law, are presumed to assent to it.
But, it had been said, that if the local law be a part of the contract, so also in the constitution. This might be admitted, without in any manner affecting the question. The constitution does not define 'the obligation of contracts.' It does not say that the express stipulations of the parties alone shall form the contract. The contract is formed of express and implied consent, of convention, and of law. The constitution contemplates it in its legal sense, and in all its parts. If, then, the local laws in force when the contract is made, form a part of the contract, this is the contract which the constitution says shall not be impaired. So that it was not the plaintiff in error who sought to impair the obligation of his contract. It was the creditor who would impair the obligation, by striking out of the contract one of the conditions annexed to it by the law of the place.
Admitting, then, that the States could not pass bankrupt laws which shall discharge antecedent contracts, it did not follow that they might not pass bankrupt laws under which debts subsequently contracted might be discharged. In the latter case, the law annexes conditions to the express contract of the parties, to which it implies their assent. All the different restraints on State legislation which are associated in the same prohibitory clause, were intended to prevent certain unjust, oppressive, and impolitic laws, both in civil and criminal matters. It had not been denied on the other side, that the prohibition of bills of attainder, and ex post facto laws, were exclusively aimed at acts retrospective, partial, and unjust in their operation; and it would not be difficult to show, that none of the other prohibitions were intended to affect the sovereign power of the States over their civil and criminal codes, when exercised, as all legislative power ought to be exercised, by general, impartial, and prospective regulations. The history of the times, and the cotemporaneous expositions of the clause, at the formation and adoption of the constitution, together with the subsequent judicial interpretations of it in cases which had since arisen, all concurred to prove, that the evils complained of, and the remedies meant to be applied for their correction, exclusively referred to legislative acts affecting vested rights, or past transactions.*fn26 z
The history of the legislation of the State whose acts were now under consideration, would afford a strong illustration of this topic of argument. A system of insolvent laws had existed in that State, with some short interruptions, for sixty years past; and subsequent to the adoption of the constitution, such laws had repeatedly passed the scrutiny of the Council of Revision, always composed of able statesmen and learned jurists, and, in some instances, of those who had taken an active part in the formation of the constitution, without even a suggestion that these acts were prohibited by the clause in question.*fn27 1
In every instance in which this Court had hitherto applied the prohibition to a State law, it was to some act operating upon antecedent existing contracts. Such, too, was the plain and obvious meaning of the words of the prohibition. How could any law be said to impair the obligation of a contract not in existence when the law was passed? The obligation must first be contracted before it can be impaired. Some right must be vested under a contract, before any party can have a right to complain of a law impairing its obligation. The party, who supposes himself to be injured, cannot complain of a law in existence when his contract was made, because (as had been shown) the law formed a part of that contract, and, therefore, could not impair its obligation.
It was asked, what is the contract, and what the obligation of the contract? And it was answered, that the contract was what the parties understood it to be, and they understood it as the law declares it to be. Whatever is expected on one side, and known to be expected on the other, is a part or condition of the contract.*fn28 2
The obligation of the contract is not the contract itself, but something arising out of it. The moral obligation is that which binds the conscience only. The legal obligation is that which the law imposes. It binds the contracting party to do that which the law says he shall do, under certain contingencies which may arise. There is nothing of mere human institution (and it is with this that the constitution deals) which binds to the performance of any contract, except the laws under which that contract is made, and the remedies provided by them to enforce its execution. The insolvent acts form a part of those laws, and of the remedies provided to enforce the contract. The obligation of a contract may be impaired by interference in favour of the creditor, as well as in favour of the debtor. But here the existing remedies secured to both by the law (which is a part of the contract) are preserved with integrity, and there is consequently no violation of the constitutional provision, which was intended equally to protect the rights of both debtor and creditor. Indeed, the proceedings under some of these laws are compulsory against the debtor, and force him to make a surrender and assignment of his property for the benefit of his creditors, on their application. Bankrupt and insolvent laws have existed, in various forms, in every age and every civilized and commercial country, as one of the means of securing a fair and impartial distribution of the effects of insolvents among all their creditors, or as a relief which society has found it necessary to extend to the honest debtor, who has become unable from misfortune to satisfy the demands of his creditors. The States have, therefore, the same right to pass these laws, (supposing the power not to be exclusively vested in Congress,) which they have to pass laws of limitation, or usury, or divorce, or any other ordinary regulation respecting contracts. All these laws might be said to have the effect of impairing the obligations of contracts, since they alter, increase, lessen, or diminish what would otherwise be the effect of the agreement of the parties, by annexing conditions other and different from those expressed by the parties. If it were possible to suppose a commercial contract made independent of any of of those regulations which the municipal code of every civilized country prescribes, it would be stripped of all these conditions, and reduced to the mere naked agreement of the parties, without any means of enforcing its performance. But the municipal law gives effect to the actual contract of the parties, by implying a multitude of clauses and conditions not expressed by them, and by providing adequate means to enforce it. Every municipal code contains a provision determining at what age a person shall be deemed capable of contracting, and the period of majority is different under different systems of law. This is a positive rule of society. In a state of nature, there is no definite age at which an individual becomes capable of contracting. Is not the whole of this subject under the control of State legislation; and would a law, extending the period of minority, be said to be a law impairing the obligation of contracts? So, also, the power of contracting which is permitted to a married woman is more or less limited under different systems of jurisprudence, and there is nothing in which the positive institutions of society are more diversified. And the contract of marriage itself is subject to be dissolved by the laws of the different States of the Union, under various circumstances and conditions. The policy of some States had made absolute divorces extremely difficult to be obtained, others had granted them with more facility. But could it be said that these laws, or any alteration of these laws, impaired the obligation of the contract of marriage? Was it not a constituent part of this contract, that it should be subject to be dissolved under the circumstances and according to the conditions prescribed in the laws of the State in force at the time when the marriage took place? In most of the States, the policy of the English statute of frauds and registry acts had been adopted, and certain contracts and conveyances were required to be in writing, and others to be registered. Might not the States require it as an essential condition to the validity of all contracts and all conveyances, that they should be in writing, and should be registered; and could this condition, annexed by the law to the contract of the parties, be said to impair its obligation? In short, it was insisted that the argument on the other side, when pushed to its legitimate consequences, would go to restrain State legislation upon almost every subject of property and internal police, and to fasten upon the States, against their sovereign will, immutable codes of civil jurisprudence, the inconvenience and mischiefs of which could not be corrected by any means within the constitutional power of Congress. On most of the subjects of ordinary civil legislation, Congress had no power at all; and on this particular subject of bankruptcy, there was little hope of its being exercised. So, that if the Court should pronounce the State bankrupt codes invalid, and Congress should refuse to supply their place by the establishment of uniform laws throughout the Union, the country would present the extraordinary spectacle of a great commercial nation, without laws on the subject of bankruptcy.
The question arising in this case is not more important, nor so important even, in its bearing on individual cases of private right, as in its character of a public political question. The constitution was intended to accomplish a great political object. Its design was not so much to prevent injustice or injury in one case, or in successive single cases, as it was to make general salutary provisions, which, in their operation, should give security to all contracts, stability to credit, uniformity among all the States, in those things which materially concerned the foreign commerce of the country, and their own credit, trade, and intercourse among themselves. The real question is, therefore, a much broader one than has been argued. It is this, whether the constitution has not, for general political purposes, ordained that bankrupt laws should be established only by national authority? We contend that such was the intention of the constitution; an intention, as we think, plainly manifested by a consideration of its several provisions.
The act of New-York, under which this question arises, provides, that a debtor may be discharged from all his debts, upon assigning his property to trustees for the use of his creditors. When applied to the discharge of debts, contracted before the date of the law, this Court has decided that the act is invalid.*fn29 3
The act itself makes no distinction between past and future debts, but provides for the discharge of both in the same manner. In the case, then, of a debt already existing, it is admitted, that the act does impair the obligation of contracts. We wish the full extent of this decision to be well considered. It is not, merely, that the legislature of the State cannot interfere, by law, in the particular case of A. or B., to injure or impair rights which have become vested under contracts; but it is, that they have no power, by general law, to regulate the manner in which all debtors may be discharged from subsisting contracts; in other words, they cannot pass general bankrupt laws, to be applied in presenti. Now, it is not contended that such laws are unjust, and ought not to be passed by any legislature. It is not said they are unwise or impolitic. On the contrary, we know the general experience is, that when bankrupt laws are established, they make no distinction between present and future debts. While all agree that special acts, made for individual cases, are unjust, all admit that a general law, made for all cases, may be both just and politic. The question, then, which meets us in the threshold, is this: if the constitution meant to leave the States the power of establishing systems of bankruptcy to act upon future debts, what great or unportant object, of a political nature, was answered, by denying the power of making such systems applicable to existing debts?
The argument used in Sturges v. Crowninshield, was, at least, a plausible and consistent argument. It maintained, that the prohibition of the constitution was levelled only against interferences in individual cases, and did not apply to general laws, whether those laws were retrospective or prospective in their operation. But the Court rejected that conclusion. It decided, that the constitution was intended to apply to general laws, or systems of bankruptcy; that an act, providing that all debtors might be discharged from all creditors, upon certain conditions, was of no more validity than an act, providing that a particular debtor, A., should be discharged on the same conditions from his particular creditor, B.
It being thus decided that general laws are thus within the prohibition of the constitution, it is for the plaintiff in error now to show, on what ground, consistent with the general objects of the constitution, he can establish a distinction, which can give effect to those general laws in their application to future debts, while it denies them effect in their application to subsisting debts. The words are, that 'no State shall pass any law impairing the obligation of contracts.' The general operation of all such laws is, to impair that obligation; that is, to discharge the obligation without fulfilling it. This is admitted; and the only ground taken for the distinction to staud on is, that when the law was in existence, at the time of the making the contract, the parties must be supposed to have reference to it, or, as it is usually expressed, the law is made a part of the contract. Before considering what foundation there is for this argument, it may be well to inquire, what is that obligation of contracts of which the constitution speaks, and whence is it derived?
The definition given by the Court in Sturges v. Crowninshield, is sufficient for our present purpose. 'A contract,' say the Court, 'is an agreement to do some particular thing; the law binds the party to perform this agreement, and this is the obligation of the contract.'
It may, indeed, probably, be correct to suppose the constitution used the words in somewhat of a more popular sense. We speak, for example, familiarly of a usurious contract, and yet we say, speaking technically, that a usurious agreement is no contract.
By the obligation of a contract, we should understand the constitution to mean, the duty of performing a legal agreement. If the contract be lawful, the party is bound to perform it. But bound by what? What is it that binds him? And this leads to what we regard as a principal fallacy in the argument on the other side. That argument supposes, and insists, that the whole obligation of a contract has its origin in the municipal law. This position we controvert. We do not say that it is that obligation which springs from conscience merely; but we deny that it is only such as springs from the particular law of the place where the contract is made. It must be a lawful contract, doubtless; that is, permitted and allowed; because society has a right to prohibit all such contracts, as well as all such actions, as it deems to be mischievous or injurious. But if the contract be such as the law of society tolerates in other words, if it be lawful, then we say, the duty of performing it springs from universal law. And this is the concurrent sense of all the writers of authority.
The duty of performing promises is thus shown to rest on universal law; and if, departing from this well established principle, we now follow the teachers who instruct us that the obligation of a contract has its origin in the law of a particular State, and is, in all cases, what that law makes it, and no more, and no less, we shall probably find ourselves involved in inexplicable difficulties. A man promises, for a valuable consideration, to pay money in New-York; is the obligation of that contract created by the laws of that State? or does it subsist independent of those laws? We contend that the obligation of a contract, that is, the duty of performing it, is not created by the law of the particular place where it is made, and dependent on that law for its existence; but that it may subsist, and does subsist, without that law, and independent of it. The obligation is in the contract itself, in the assent of the parties, and in the sanction of universal law. This is the doctrine of Grotius, Vattel, Burlemaqur, Pothier, and Rutherforth. The contract, doubtless, is necessarily to be enforced by the municipal law of the place where performance is demanded. The municipal law acts on the contract after it is made, to compel its execution, or give damages for its violation. But this is a very different thing from the same law, being the origin or fountain of the contract. Let us illustrate this matter by an example. Two persons contract together in New-York for the delivery, by one to the other, of a domestic animal or utensil of husbandry, or a weapon of war. This is a lawful contract, and while the parties remain in New-York, it is to be enforced by the laws of that State. But if they remove with the article to Pennsylvania or Maryland, there a new law comes to act upon the contract, and to apply other remedies if it be broken. Thus far the remedies are furnished by the laws of society. But suppose the same parties to go together to a savage wilderness, or a desert island, beyond the reach of the laws of any society; the obligation of the contract still subsists, and is as perfect as ever, and is now to be enforced by another law, that is the law of nature, and the party to whom the promise was made, has a right to take by force the animal, the utensil, or the weapon, that was promised to him. The right is as perfect here, as it was in Pennsylvania, or even in New-York; but this could not be so if the obligation were created by the law of New-York, or were dependent on that law for its existence, because the laws of that State can have no operation beyond its territory. Let us reverse this example. Suppose a contract to be made between two persons cast ashore on an uninhabited territory, or in a place over which no law of society extends. There are such places, and contracts have been made there by individuals casually there, and these contracts have been enforced in Courts of law in civilized communities. Whence do such contracts derive their obligation, if not from universal law?
If these considerations show us that the obligation of a lawful contract does not derive its force from the particular law of the place where made, but may exist where that law does not exist, and be enforced where that law has no validity, then it follows, we contend, that any statute which diminishes or lessens its obligation, does impair it, whether it precedes or succeeds the contract in date. The contract having an independent origin, whenever the law comes to exist together with it, and interferes with it, it lessens, we say, and impairs its own original and independent obligation. In the case before the Court, the contract did not owe its existence to the particular law of New-York; it did not depend on that law, but could be enforced without the territory of that State, as well as within it. Nevertheless, though legal, though thus independently existing, though thus binding the party every where, and capable of being enforced every where, yet, the statute of New-York says, that it shall be discharged without payment. This, we say, impairs the obligation of that contract. It is admitted to have been legal in its inception, legal in its full extent, and capable of being enforced by other tribunals according to its terms. An act, then, purporting to discharge it without payment, is, as we contend, an act impairing its obligation.
But here we meet the opposite argument, stated on different occasions in different terms, but usually summed up in this, that the law itself is a part of the contract, and, therefore, cannot impair it. What does this mean? Let us seek for clear ideas. It does not mean that the law gives any particular construction to the terms of the contract, or that it makes the promise, or the consideration, or the time of performance, other than they are expressed in the instrument itself. It can only mean, that it is to be taken as a part of the contract, or understanding of the parties, that the contract itself shall be enforced by such laws and regulations, respecting remedy, and for the enforcement of contracts, as are in being in the State where it is made at the time of entering into it. This is meant, or nothing very clearly intelligible is meant, by saying the law is part of the contract.
There is no authority in adjudged cases, for the plaintiff in error, but the State decisions which have been cited, and, as has already been stated, they all rest on this reason, that the law is part of the contract.
1st. That if the proposition were true, the consequence would not follow.
2d. That the proposition itself cannot be maintained.
1. If it were true that the law is to be considered as part of the contract, the consequence contended for would not follow; because, if this statute be part of the contract, so is every other legal or constitutional provision existing at the time which affects the contract, or which is capable of affecting it; and especially this very article of the constitution of the United States is part of the contract. The plaintiff in error argues in a complete circle. He supposes the parties to have had reference to it because it was a binding law, and yet he proves it to be a binding law only upon the ground that such reference was made to it. We come before the Court alleging the law to be void an unconstitutional; they stop the inquiry by opposing to us the law itself. Is this logical? Is it not precisely objectio ejus, cujus dissolutio petitur? If one bring a bill to set aside a judgment, is that judgment itself a good plea in bar to the bill? We propose to inquire if this law is of force to control our contract, or whether, by the constitution of the United States, such force be not denied to it. The plaintiff in error stops us by saying that it does control the contract, and so arrives shortly at the end of the debate. Is it not obvious, that supposing the act of New-York to be a part of the contract, the question still remains as undecided as ever. What is that act? Is it a law, or is it a nullity? A thing of force, or a thing of no force? Suppose the parties to have contemplated this act, what did they contemplate? its words only, or its legal effect? its words, or the force which the constitution of the United States allowed to it? If the parties contemplated any law, they contemplated all the law that bore on their contract, the aggregate of all the statute and constitutional provisions. To suppose that they had in view one statute, without regarding others, or that they contemplated a statute without considering that paramount constitutional provisions might control or qualify that statute, or abrogate it altogether, is unreasonable and inadmissible. 'This contract,' says one of the authorities relied on, 'is to be construed as if the law were specially recited in it.' Let it be so for the sake of argument. But it is also to be construed as if the prohibitory clause of the constitution were recited in it, and this brings us back again to the precise point from which we departed.
The constitution always accompanies the law, and the latter can have no force which the former does not allow to it. If the reasoning were thrown into the form of special pleading, it would stand thus: the plaintiff declares on his debt; the defendant pleads his discharge under the law; the plaintiff alleges the law unconstitutional; but the defendant says, you knew of its existence; to which the answer is obvious and irresistible, I knew its existence on the statute book of New-York, but I knew, at the same time, it was null and void under the constitution of the United States.
The language of another leading decision is, 'a law in force at the time of making the contract does not violate that contract;' but the very question is, whether there be any such law 'in force;' for if the States have no authority to pass such laws, then no such law can be in force. The constitution is a part of the contract as much as the law, and was as much in the contemplation of the parties. So that the proposition, if it be admitted, that the law is part of the contract, leaves us just where it found us, that is to say, under the necessity of comparing the law with the constitution, and of deciding by such comparison whether it be valid or invalid. If the law be unconstitutional, it is void, and no party can be supposed to have had reference to a void law. If it be constitutional, no reference to it need be supposed.
2. But the proposition itself cannot be maintained. The law is no part of the contract. What part is it? the promise? the consideration? the condition? Clearly, it is neither of these. It is no term of the contract. It acts upon the contract only when it is broken, or to discharge the party from its obligation after it is broken. The municipal law is the force of society employed to compel the performance of contracts. In every judgment in a suit on contract, the damages are given, and the imprisonment of the person or sale of goods awarded, not in performance of the contract, or as part of the contract, but as an indemnity for the breach of the contract. Even interest, which is a strong case, where it is not expressed in the contract itself, can only be given as damages. It is nearly absurd to say that a man's goods are sold on a fieri facias, or that he himself goes to gaol, in pursuance of his contract. These are the penalties which the law inflicts for the breach of his contract. Doubtless, parties, when they enter into contracts, may well consider both what their rights and what their liabilities will be by the law, if such contracts be broken; but this contemplation of consequences which can ensue only when the contract is broken, is no part of the contract itself. The law has nothing to do with the contract till it be broken; how then can it be said to form a part of the contract itself?
But there are other cogent and more specific reasons against considering the law as part of the contract. (1.) If the law be part of the contract, it cannot be repealed or altered; because, in such case, the repealing or modifying law itself would impair the obligation of the contract. The insolvent law of New-York, for example, authorizes the discharge of a debtor on the consent of two-thirds of his creditors. A subsequent act requires the consent of three-fourths; but if the existing law be part of the contract, this latter law would be void. In short, whatever is part of the contract cannot be varied but by consent of the parties; therefore the argument runs in absurdum; for it proves that no laws for enforcing the contract or giving remedies upon it, or any way affecting it, can be changed or modified between its creation and its end. If the law in question binds one party on the ground of assent to it, it binds both, and binds them until they agree to terminate its operation. (2.) If the party be bound by an implied assent to the law, as thereby making the law a part of the contract, how would it be if the parties had expressly dissented, and agreed that the law should make no part of the contract? Suppose the promise to have been, that the promissor would pay at all events, and not take advantage of the statute; still, would not be statute operate on the whole, on this particular agreement and all? and does not this show that the law is no part of the contract, but something above it? (3.) If the law of the place be part of the contract, one of its terms and conditions, how could it be enforced, as we all know it might be, in another jurisdiction, which should have no regard to the law of the place? Suppose the parties, after the contract, to remove to another State, do they carry the law with them as part of their contract? We all know they do not. Or take a common case; some States have laws abolishing imprisonment for debt; these laws, according to the argument, are all parts of the contract; how then can the party, when sued in another State, be imprisoned contrary to the terms of his contract? (4.) The argument proves too much, inasmuch as it applies as strongly to prior as to subsequent contracts. It is founded on a supposed assent to the exercise of legislative authority, without considering whether that exercise be legal or illegal. But it is equally fair to found the argument on an implied assent to the potential exercise of that authority. The implied reference to the control of legislative power, is as reasonable and as strong when that power is dormant, as while it is in exercise. In one case, the argument is, 'the law existed, you knew it, and acquiesced.' In the other, it is, 'the power to pass the law existed, you knew it, and took your chance.' There is as clear an assent in the one instance as in the other. Indeed, it is more reasonable and more sensible, to imply a general assent to all the laws of society, present and to come, from the fact of living in it, than it is to imply a particular assent to a particular existing enactment. The true view of the matter is, that every man is presumed to submit to all power which may be lawfully exercised over him, or his right, and no one should be presumed to submit to illegal acts of power, whether actual or contingent. (5.) But a main objection to this argument is, that it would render the whole constitutional provision idle and inoperative; and no explanatory words, if such words had been added in the constitution, could have prevented this consequence. The law, it is said, is part of the contract; it cannot, therefore, impair the contract, because a contract cannot impair itself. Now, if this argument be sound, the case would have been the same, whatever words the constitution had used. If, for example, it had declared that no State should pass any law impairing contracts prospectively or retrospectively; or law impairing contracts, whether existing or future; or whatever terms it had used to prohibit precisely such a law as is now before the Court, the prohibition would be totally nugatory if the law is to be taken as part of the contract; and the result would be, that, whatever may be the laws which the States by this clause of the constitution are prohibited from passing, yet, if they in fact do pass such laws, those laws are valid, and bind parties by a supposed assent.
But further, this idea, if well founded, would enable the States to defeat the whole constitutional provision by a general enactment. Suppose a State should declare, by law, that all contracts entered into therein, should be subject to such laws as the legislature, at any time, or from time to time, might see fit to pass. This law, according to the argument, would enter into the contract, become a part of it, and authorize the interference of the legislative power with it, for any and all purposes, wholly uncontrolled by the constitution of the United States.
So much for the argument that the law is a part of the contract. We think it is shown to be not so; and, if it were, the expected consequence would not follow.
The inquiry, then, recurs, whether the law in question be such a law as the legislature of New-York had authority to pass. The question is general. We differ from our learned adversaries on general principles. We differ as to the main scope and end of this constitutional provision. They think it entirely remedial: we regard it as preventive. They think it adopted to secure redress for violated private rights: to us it seems intended to guard against great public mischiefs. They argue it, as if it were designed as an indemnity or protection for injured private rights, in individual cases of meum and tuum: we look upon it as a great political provision, favourable to the commerce and credit of the whole country. Certainly we do not deny its application to cases of violated private right. Such cases are clearly and unquestionably within its operation. Still, we think its main scope to be general and political. And this, we think, is proved by reference to the history of the country, and to the great objects which were sought to be obtained by the establishment of the present government. Commerce, credit, and confidence, were the principal things which did not exist under the old confederation, and which it was a main object of the present constitution to create and establish. A vicious system of legislation, a system of paper money and tender laws, had completely paralyzed industry, threatened to beggar every man of property, and ultimately to ruin the country. The relation between debtor and creditor, always delicate, and always dangerous whenever it divides society, and draws out the respective parties into different ranks and classes, was in such a condition in the years 1787, '88, and '89, as to threaten the overthrow of all government; and a revolution was menaced, much more critical and alarming than that through which the country had recently passed. The object of the new constitution was to arrest these evils; to awaken industry by giving security to property; to establish confidence, credit. and commerce, by salutary laws, to be enforced by the power of the whole community. The revolutionary war was over the country had peace, but little domestic tranquillity; liberty, but few of its enjoyments, and none of its security. The States had struggled together, but their union was imperfect. They had freedom, but not an established course of justice. The constitution was therefore framed, as it professes, 'to form a more perfect union, to establish justice, to secure the blessings of liberty, and to insure domestic tranquillity.'
It is not pertinent to this occasion, to advert to all the means by which these desirable ends were to be obtained. Some of them, closely connected with the subject now under consideration, are obvious and prominent. The objects were, commerce, credit, and mutual confidence in matters of property; and these required, among other things, a uniform standard of value, or medium of payments. One of the first powers given to Congress, therefore, is that of coining money, and fixing the value of foreign coins; and one of the first restraints imposed on the States, is the total prohibition to coin money. These two provisions are industriously followed up and completed, by denying to the States all power of emitting bills of credit, or of making any thing but gold and silver a tender in the payment of debts. The whole control, therefore, over the standard of value, and medium of payments, is vested in the general government. And here the question instantly suggests itself, why should such pains be taken to confide in Congress alone this exclusive power of fixing on a standard value, and of prescribing the medium in which debts shall be paid, if it is, after all, to be left to every State to declare that debts may be discharged, and to prescribe how they may be discharged, without any payment at all? Why say that no man shall be obliged to take in discharge of a debt paper money issued by the authority of a State, and yet say, that by the same authority the debt may be discharged without any payment whatever?
We contend, that the constitution has not left its work thus unfinished. We contend, that, taking its provisions together, it is apparent it was intended to provide for two things, intimately connected with each other.
1. A uniform medium for the payment of debts.
2. A uniform manner of discharging debts when they are to be discharged without payment.
The arrangement of the grants and prohibition contained in the constitution, are fit to be regarded on this occasion. The grant to Congress, and the prohibition on the States, though they are certainly to be construed together, are not contained in the same clauses. The powers granted to Congress are enumerated one after another in the eighth section; the principal limitations on those powers, in the ninth section; and the prohibitions to the States, in the tenth section. Now, in order to understand whether any particular power be exclusively vested in Congress, it is necessary to read the terms of the grant, together with the terms of the prohibition. Take an example from that power of which we have been speaking, the coinage power. Here the grant to Congress is, 'To coin money, regulate the value thereof, and of foreign coins.' Now, the correllative prohibition on the States, though found in another section, is, undoubtedly, to be taken in immediate connexion with the foregoing, as much so as if it had been found in the same clause. The only just reading of these provisions, therefore, is this: 'Congress shall have power to coin money, regulate the value thereof, and of foreign coin; but no State shall coin money, emit bills of credit, or make any thing but gold and silver coin a tender in payment of debts.'
These provisions respect the medium of payment, or standard of value, and, thus collated, their joint result is clear and decisive. We think the result clear also, of those provisions which respect the discharge of debts without payment. Collated in like manner, they stand thus: 'Congress shall have power to establish uniform laws on the subject of bankruptcies throughout the United States; but no State shall pass any law impairing the obligation of contracts.' This collocation cannot be objected to if they refer to the same subject matter; and that they do refer to the same subject matter, we have the authority of this Court for saying, because this Court solemnly determined, in Sturges v. Crowninshield, that this prohibition on the States did apply to systems of bankruptcy. It must be now taken, therefore, that State bankrupt laws were in the mind of the Convention when the prohibition was adopted, and, therefore, the grant to Congress on the subject of bankrupt laws, and the prohibition to the State on the same subject, are properly to be taken and read together; and being thus read together, is not the intention clear to take away from the States the power of passing bankrupt laws, since, while enacted by them, such laws would not be uniform, and to confer the power exclusively on Congress, by whom uniform laws could be established?
Suppose the order of arrangement in the constitution had been otherwise than it is, and that the prohibitions to the States had preceded the grants of power to Congress, the two powers, when collated, would then have read thus: 'No State shall pass any law impairing the obligation of contracts; but Congress may establish uniform laws on the subject of bankruptcies.' Could any man have doubted, in that case, that the meaning was, that the States should not pass laws discharging debts without payment, but that Congress might establish uniform bankrupt acts? and yet this inversion of the order of the clauses does not alter their sense. We contend, that Congress alone possesses the power of establishing bankrupt laws; and although we are aware, that in Sturges v. Crowninshield, the Court decided, that such an exclusive power could not be inferred from the words of the grant in the seventh section, we yet would respectfully request the bench to reconsider this point. We think it could not have been intended that both the State and general government should exercise this power; and, therefore, that a grant to one implies the prohibition on the other. But not to press a topic which the Court has already had under its consideration, we contend, that even without reading the clauses of the constitution in the connexion which we have suggested, and which is believed to be the true one, the prohibition in the tenth section, taken by itself, does forbid the enactment of State bankrupt laws, as applied to future, as well as present debts. We argue this from the words of the prohibition; from the association they are found in, and from the objects intended.
1. The words are general. The States can pass no law impairing contracts; that is, any contract. In the nature of things a law may impair a future contract, and, therefore, such contract is within the protection of the constitution. The words being general, it is for the other side to show a limitation; and this, it is submitted, they have wholly failed to do, unless they shall have established the doctrine that the law itself is part of the contract. It may be added, that the particular expression of the constitution is worth regarding. The thing prohibited is called a law, not an act; a law, in its general acceptation, is a rule prescribed for future conduct, not a legislative interference with existing rights. The framers of the constitution would hardly have given the appellation of law to violent invasions of individual right, or individual property, by acts of legislative power. Although, doubtless, such acts fall within this prohibition, yet they are prohibited also by general principles, and by the constitutions of the States, and, therefore, further provision against such acts was not so necessary as against other mischiefs.
2. The most conclusive argument, perhaps, arises from the connexion in which the clause stands. The words of the prohibition, so far as it applies to civil rights, or rights of property, are, 'that no State shall coin money, emit bills of credit, make any thing but gold and silver coin a tender in the payment of debts, or pass any law impairing the obligation of contracts.' The prohibition of attainders, and ex post facto laws, refer entirely to criminal proceedings, and, therefore, should be considered as standing by themselves; but the other parts of the prohibition are connected by the subject matter, and ought, therefore, to be construed together. Taking the words thus together, according to their natural connexion, how is it possible to give a more limited construction to the term 'contracts,' in the last branch of the sentence, than to the word 'debts,' in that immediately preceding? Can a State make any thing but gold and silver a tender in payment of future debts? This nobody pretends. But what ground is there for a distinction? No State shall make any thing but gold and silver a tender in the payment of debts, nor pass any law impairing the obligation of contracts. Now, by what reasoning is it, made out that the debts here spoken of, are any debts, either existing or future; but that the contracts spoken of are subsisting contracts only? Such a distinction seems to us wholly arbitrary. We see no ground for it. Suppose the article, where it uses the word debts, had used the word contracts. The sense would have been the same then, as it now is; but the identity of terms would have made the nature of the distinction now contended for somewhat more obvious. Thus altered, the clause would read, that no State should make any thing but gold and silver a tender in discharge of contracts, nor pass any law impairing the obligation of contracts; yet the first of these expressions would have been held to apply to all contracts, and the last to subsisting contracts only. This shows the consequence of what is now contended for in a strong light. It is certain that the substitution of the word contracts, for debts, would not alter the sense; and an argument that could not be sustained if such substitution were made, cannot be sustained now. We maintain, therefore, that if tender laws may not be made for future debts, neither can bankrupt laws be made for future contracts. All the arguments ed here may be applied with equal force to tender laws for future debts. It may be said, for instance, that when it speaks of debts, the constitution means existing debts, and not mere possibilities of future debt; that the object was to preserve vested rights; and that if a man, after a tender law had passed, had contracted a debt, the manner in which that tender law authorized that debt to be discharged, became part of the contract, and that the whole debt, or whole obligation was thus qualified by the pre-existing law, and was no more than a contract to deliver so much paper money, or of whatever other article which might be made a tender, as the original bargain expressed. Arguments of this sort will not be found wanting in favour of tender laws, if the Court yield to similar arguments in favour of bankrupt laws.
These several prohibitions of the constitution stand in the same paragraph; they have the same purpose, and were introduced for the same object; they are expressed in words of similar import, in grammar, and in sense; they are subject to the same construction, and, we think, no reason has yet been given for imposing an important restriction on one part of them, which does not equally show, that the same restriction might be imposed also on the other part.
We have already endeavoured to maintain, that one great political object, intended by the constitution, would be defeated, if this construction were allowed to prevail. As an object of political regulation, it was not important to prevent the States from passing bankrupt laws applicable to present debts, while the power was left to them in regard to future debts; nor was it at all important, in a political point of view, to prohibit tender laws as to future debts, while it was yet left to the States to pass laws for the discharge of such debts, which, after all, are little different, in principle, from tender laws. Look at the law before the Court in this view. It provides that if the debtor will surrender, offer, or tender to trustees, for the benefit of his creditors, all his estate and effects, he shall be discharged from all his debts. If it had authorized a tender of any thing but money to any one creditor, though it were of a value equal to the debt, and thereupon provided for a discharge, it would have been clearly invalid. Yet it is maintained to be good, merely because it is made for all creditors, and seeks a discharge from all debts; although the thing tendered may not be equivalent to a shilling in the pound of those debts. This shows, again, very clearly how the constitution has failed of its purpose, if, having in terms prohibited all tender laws, and taken so much pains to establish a uniform medium of payment, it has yet left the States the power of discharging debts, as they may see fit, without any payment at all.
To recapitulate what has been said, we maintain; first, that the constitution, by its grants to Congress, and its prohibitions on the States, has sought to establish one uniform standard of value, or medium of payment. Second, that, by like means, it has endeavoured to provide for one uniform mode of discharging debts, when they are to be discharged without payment. Third, that these objects are connected, and that the first loses much of its importance, if the last, also, be not accomplished. Fourth, that reading the grant to Congress and the prohibition on the States together, the inference is strong that the constitution intended to confer an exclusive power to pass bankrupt laws on Congress. Fifth, that the prohibition, in the tenth section, reaches to all contracts existing or future, in the same way as the other prohibition in the same section extends to all debts existing or future. Sixthly, and that, upon any other construction, one great political object of the constitution will fail of its accomplishment.
The learned judges delivered their opinions as follows:
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 M'Millan v. M'Niel, (4 Wheat. Rep. 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 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 M'Millan v. M'Niel, unaffected by the circumstance that the law of Louisiana preceded a contract made in another State, since that law, having no extra-territorial 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 farther 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.
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 fulfil the intentions of those who framed the constitution of the United States. I am far from asserting that my labours 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 candour 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 fulfil 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 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 pre-existing 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 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 develope 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 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 it, is regarded and enforced every where, 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 every where.
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, form 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 they bear upon existing contracts; and, in the former case, in which the repeal 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 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, which ever 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 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 favourable to the validity of the latter than of the former; for in the one, the debtor surrenders every thing 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 exist 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 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 in so far 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 impain the obligation of contracts subsequently entered into; infine, 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 law constitutes the law of the contract so formed, and must govern it throughout. I hold the legal consequences to be the same, in which ever 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 any thing 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.
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 connexion 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 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 apply 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 offences 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 any thing 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 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 maturety considered as this constitution was by the enlightened statesmen who framed it, and so severely examined and criticised 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 fulfil 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.
But why, it has been asked, forbid the States to pass laws making any thing 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 endeavoured 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, 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 any thing but gold and silver coin a tender in payment of debts.
I shall now conclude this opinion, by repeating the acknowledgment which candour 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 favour 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 favour 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.
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 find,
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 ...