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

Citation:25 U.S. 213, 6 L.Ed. 606
Party Name:OGDEN, Plaintiff in Error, against SAUNDERS, Defendant in Error.
Case Date:March 13, 1827
Court:United States Supreme Court
 
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25 U.S. 213 (1827)

6 L.Ed. 606

OGDEN, Plaintiff in Error, against SAUNDERS, Defendant in Error.

United States Supreme Court.

March 13, 1827

[CONSTITUTIONAL LAW.]

ERROR to the District Court of Louisiana.

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

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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.

COUNSEL

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

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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. [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. [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. [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

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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. [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

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of the constitution had in view. For this purpose the prohibition has been considered as extending to contractsexecuted, 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. [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

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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. [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...

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