Baldwin v. Hale

• Decision Date: 01 December 1863
• Citation: 68 U.S. 223,1 Wall. 223,17 L.Ed. 531
• Parties: BALDWIN v. HALE
• Court: U.S. Supreme Court

68 U.S. 223

17 L.Ed. 531

1 Wall. 223

BALDWIN v. HALE.

December Term, 1863

THIS was a writ of error to the Circuit Court for the District of Massachusetts; the case, as appearing from an agreed statement of facts, being thus:

J. W. Baldwin, a citizen of Massachusetts, made, at Boston, in that State, his promissory note, payable there, in these words:

$2000.

BOSTON, February 21, 1854.

Six months after date I promise to pay to the order of myself, two thousand dollars, payable in Boston, value received.

J. W. BALDWIN.

And duly indorsed it to Hale, the plaintiff, then and afterwards a citizen of Vermont. After the date of the note, but before any suit was brought upon it, Baldwin, upon due proceedings in the Court of Insolvency of the State of Massachusetts, obtained a certificate of discharge from his debts; the certificate embracing by its terms all contracts to be performed within the State of Massachusetts. Hale did not prove his debt, nor take any part in the proceedings.

Suit having been afterwards brought against Baldwin by Hale, the indorsee and holder of the note, and still, as originally, a citizen of Vermont, the question was whether the certificate was a bar to the action.

The court below ruled that it was not, and the correctness of the ruling was now before this court on error.

Messrs. Hutchins & Wheeler for the plaintiff in error: It is settled that State insolvent laws not operating retrospectively (such being the character of those under which the discharge here pleaded was granted), do not fall within the constitutional prohibition against the violation of contracts. Otherwise such State insolvent laws would not have been held valid and binding as between the citizens of the States enacting them, as they have been ever since Ogden v. Saunders.¹ The law, then, under which the discharge here pleaded was granted, possesses all the validity and force which the State of Massachusetts, with uncontrolled power of legislation on the subject and in the absence of any constitutional restraint, could impart to it. We do not suggest that this or any State law relating to property possesses extra-territorial force: the legislative sovereignty of each State is confined to its limits. Beyond these the laws of some other local jurisdiction prevail.

The question, then, presented for decision, being not one of constitutional law, but rather of public or international law, we set out with the principle, well settled, that contracts take their legal construction and validity or invalidity from the 'law of the place' to which they belong; including, under this term, both the place of origin and of execution, where they are not the same. We do not find that contracts as such take any attribute from the circumstance that the domicile or allegiance of the contracting parties is different, unless they are alien enemies.

When the place both of the origin and the execution of the contract is the same, then the contract is to be governed wholly by the law of that place.²

Upon the same principle, it is held that a contract discharged by the law of the place which governs it, is discharged everywhere; and conversely, a contract not discharged by the law of that place, is nowhere discharged.³

It seems, therefore, that where, as here, the contract, the discharge, and the party pleading it, come wholly under and within the same jurisdiction, all the conditions necessary to subject the contract to the law of that jurisdiction exist,—so that the discharge should be deemed effectual in bar of any action upon it. And upon this state of facts the Supreme Court of Massachusetts, while announcing their purpose to follow, strictly, decisions by this court of constitutional questions, have yet held such a discharge as was here given to be a good defence in a suit brought by a non-resident creditor. They say in Scribner et al. v. Fisher,⁴ that the question raised here in the case at bar, has never been passed on by the court at all. The judgment below must therefore be reversed, unless this court should overrule the doctrine of the Massachusetts case, and determine that it is in conflict with its own decisions, and it cannot do this without contradicting at the same time the declaration to the contrary of the Massachusetts court itself.

Ogden v. Saunders, which will be relied on by the other side, settled, no doubt, that the insolvent laws of the State of the origin of a contract, are not competent to discharge a contract when entered into by one of its citizens with a citizen of another State, where no place of performance is fixed, otherwise than by the origin of the contract; but that case did not make the citizenship of the contracting parties, instead of the law of the contract itself, the test for determining whether it was liable to be defeated by a discharge in insolvency. To have done so, would have been to establish a test of the legal obligation of contracts hitherto unknown to the law.

We admit that some influence might, in the absence of authority to the contrary, be ascribed to the fact of the foreign domicile of a creditor, but not that such influence can be exerted over the contract, where no locus is given to it by the parties themselves. It fails altogether as a test, where the parties contract with the express reference to a place of performance, and embody this provision in the contract, as was done by the parties in the case at bar.

Mr. F. A. Brooks for the creditor, Hale: It is not contended that this note would have been barred by the discharge (it being given by a citizen of Massachusetts to a citizen of Vermont), had it not been payable in Massachusetts; but it is said that this makes it a Massachusetts contract, and subjects the claim to the operation of the insolvent laws of that State, although given to a citizen of Vermont. But this question has been decided. It is not the question where the note is payable or where it is dated, but whether the contract is between a citizen of Massachusetts and of Vermont, and if so, an insolvent law of Massachusetts cannot discharge it. It is a question of citizenship. Many cases decide this.⁵ The Massachusetts case of Scribner v. Fisher⁶ is opposed; but we submit that the case is not law. Metcalf, J., dissented, and the true view we conceive is contained in his opinion. An insolvent law of one State cannot discharge the contracts of citizens of other States, because it has no jurisdiction over the citizens of other States. It has no authority to issue notice or process, or in any way to bind the citizens of other States by its proceedings. Its laws can have no extra-territorial operation.⁷ A citizen of Vermont, by making his note payable in Massachusetts, does not thereby subject himself to the jurisdiction of Massachusetts laws. Even presentment at the place appointed for payment is not necessary to charge a maker of a note.⁸

Mr. Justice CLIFFORD, after stating the case, delivered the opinion of the court:

Contract was made in Boston and was to be performed at the place where it was made, and upon that ground it is contended by the defendant that the certificate of discharge is a complete bar to the action. But the case shows that the plaintiff was a citizen of Vermont, and inasmuch as he did not prove his debt against the defendant's estate in insolvency, nor in any manner become a party to those proceedings, he insists that the certificate of discharge is a matter inter alios, and wholly insufficient to support the defence.

Adopting the views of the court in Scribner et al. v. Fisher, 2 Gray, 43, the defendant concedes that the law is so, as between citizens of different States, except in cases where it appears by the terms of the contract that it was made and must be performed in the State enacting such insolvent law. Where the contract was made and is by its terms to be performed in the State in which the certificate of discharge was obtained, the argument is, that the discharge is entirely consistent with the contract, and that the certificate operates as a bar to the right of recovery everywhere, irrespective of the citizenship of the promisee. Plaintiff admits that a majority of the Supreme Court of Massachusetts, in the case referred to, attempted to maintain that distinction, but he insists that it is without any foundation in principle, and that the decisions of this court in analogous cases are directly the other way.

Controversies involving the constitutional effect and operation of State insolvent laws have frequently been under consideration in this court, and unless it be claimed that constitutional questions must always remain open, it must be conceded, we think, that there are some things connected with the general subject that ought to be regarded as settled and forever closed.

State legislatures have authority to pass a bankrupt or insolvent law, provided there be no act of Congress in force establishing a uniform system of bankruptcy, conflicting with such law; and, provided the law itself be so framed that it does not impair the obligation of contracts. Such was the decision of this court in Sturges v. Crowninshield, 4 Wheat., 122, and the authority of that decision has never been successfully questioned. Suit was brought in that case against the defendant as the maker of two promissory notes. They were both dated at New York, on the 22d day of March, 1811, and the defendant pleaded his discharge under an act for the benefit of insolvent debtors and their creditors, passed by the legislature of New York subsequently to the date of the notes in controversy. Contracts in that case, it will be observed, were made prior to the passage of the law, and the court held, for that reasons, that the law, or that feature of it, was unconstitutional and void, as impairing the obligation of contracts within the meaning of the Constitution of the United States. Suggestion is made that the ruling of the court in the case of McMillan v....