AN ARGUMENT MADE IN THE CASE OF OGDEN AND SAUNDERS, IN THE SUPREME COURT
OF THE UNITED STATES, JANUARY TERM, 1827.
[This was an action of _assumpsit_, brought originally in the Circuit
Court of Louisiana, by Saunders, a citizen of Kentucky, against 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, 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.
Mr. Wheaton opened the argument for the defendant in error; he was
followed by the counsel for the plaintiff in error; and Mr. Webster
replied as follows.]
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 concern
the foreign commerce of the country, and their own credit, trade, and
intercourse with each other. 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 in several of its 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.[1] 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 wrords, 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 that they are unwise or impolitic. On the contrary, we know the
general practice to be, 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 on 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 important object
of a political nature is 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 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 stand on is, that, when the
law was in existence at the time of the making of 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 is indeed probable that the Constitution used the words in a somewhat
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 us 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 inextricable 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, Burlamaqui, 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, a 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 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 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
everywhere, and capable of being enforced everywhere, 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.
Here, however, 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 is 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.