Sturges v. Crowninshield.

system, and the insolvent laws which are occasionally passed (commonly called the Lords' acts), for the relief of debtors, as to the imprisonment of their persons, upon their making an assignment of all their property for the benefit of their creditors. The same distinction prevails on the continent of Europe, between the bankrupt system, which discharges both the person and future property, and the cessio bonorum, which discharges the person only, leaving the future acquisitions of property liable for the debt. If this law of New York were an insolvent law, it might co-exist with a uniform bankrupt code: but the provisions of this law are such that it cannot co-exist with a uniform system of bankruptcy. It, therefore, follows, that it is a bankrupt law, in the sense of the constitution. If the power of making laws on the subject of bankruptcies be exclusive, its nature, as such, was irrevocably fixed, at the establishment of the new constitution. On the other hand, if it be a concurrent power, it has always been, and must always be, concurrent. There is nothing contingent in it; nor can it shift and alternate.

But whether this be a bankrupt or an insolvent law, and whether the power of passing bankrupt laws be exclusive or concurrent, we insist, that this law is repugnamt to the constitution, as being a law impairing the obligation of contracts. It has been urged, that parties contracting in a state where a bankrupt law is in force, make their contract with a view to that law, so that the law makes a part of the contract. But this is assuming the law to be constitutional; for if it be unconstitutional, it is a void law, as *184] being repugnant *to the supreme law and parties cannot be presumed to contract with a view to acts of the local legislature, which, though clothed with the forms of law, are nullities, so far as they attempt to impair the obligation of contracts. The idea of a contract made with reference to a law which impairs the obligation of contracts, is absurd and incomprehensible. The constitution was intended to secure the inviolability of contracts, according to the immutable principles of justice. To restrict the operation of the clause of the constitution which prohibits the states from making any law impairing the obligation of contracts, to laws affecting contracts existing at the time the law is passed, would be to confine the operation of this salutary prohibition within very narrow limits. Is it credible, that the convention meant to prohibit the states from making laws impairing the obligation of past contracts, and to leave them free to impair the obligation of future contracts? The prohibition against thus impairing existing rights of property, would have been almost superfluous, since the principles of universal jurisprudence had already prohibited such retrospective, legislation upon vested rights. (a) But the terms of the prohibition are adapted to include both prospective and retrospective laws impairing the obligation of contracts. Suppose, a state should enact a law, providing that any debt, which might thereafter be contracted, should be discharged, upon *185] payment by the debtor of half the amount. This law would be *man

ifestly repugnant to the constitution: nor could it be said, that the creditor would be bound by this law, because it was in existence, at the time when the contract was made; since the obligation of the contract is guarantied by the constitution, which is the supreme law. Such a state law

(a) See ante, p. 134.

r

Sturges v. Crowninshield.

would not have the binding force of the lex loci contractús, as between citizens of different states; because, being repugnant to the constitution of the United States, it is, in effect, no law. Nor would it be obligatory between citizens of the same state, as à domestic regulation; because all the citizens of the United States are entitled to the benefit of this clause of the constitution, which was not meant merely to protect the citizens of one state from the injustice of the government of another, but to guaranty to the whole people of the Union the inviolability of contracts by the state legislatures. It was not intended to have an internal or federal operation merely, but to act, like all the other sanctions of the constitution, directly upon the whole body of the nation. The operation of this law, and of all laws which'discharge the debt as well as the person of the debtor, is to compel the creditor to release his debt, upon receiving a dividend which may be less than his demand, or even without any dividend, if the bankrupt's estate will not yield one. The obligation of the contract is as much impaired, as if the law had provided in terms, that the debtor should be discharged from the debt by paying half, or any other proportion, of the sum due; or that he should be discharged, without paying any part of the debt. The law, in this [*186 *case, not only impairs, but it annuls, the obligation of the contract—— ·vi legis abolitum est.

But will it be pretended, that the states have a right to pass laws for the abolition of debts, even if such laws have only a prospective operation? Or can it be supposed, that they have authority to pass instalment or suspension laws (which are contended, by the defendant's counsel, to be the evil meant to be guarded against by the constitutional prohibition), provided such laws are only applied to contracts made subsequent to the passage of the laws? During the pressure of the late war, the legislature of the state of North Carolina passed an act, providing that any court rendering judgment against a debtor for debt or damages, between the 31st of December 1812, and the 1st of February 1814, should stay the execution until the first term of the court after the last-mentioned day, upon the defendant's giving two freeholders as sureties for the debt. The supreme court of North Carolina determined the act to be unconstitutional, upon the ground of its impairing the obligation of contracts. Though it is not of binding authority as a precedent, the principles of this decision are strongly applicable to the present case. (a) But we insist, in the case now before the court, that [*187 *even admitting the act now in question to be constitutional, as to all contracts made after it was passed, it is clearly repugnant to the constitution as to all contracts previously made, as it is a law impairing the obligation of those contracts.

It is, however, said, that this law does not impair the obligation of the contract, but merely deprives the creditor of the usual means of enforcing it; since it may be revived by a new promise, for which the moral obligation, which is still left, is a sufficient consideration. But it cannot be con

(a) Crittenden v. Jones, 5 Hall's L. J. 520; s. c. 1 Car. L. Repos. 385. In this case the court says, "whatever law relieves one party from any article of a stipulation, voluntarily and legally entered into by him with another, without the direct assent of the latter, impairs its obligation; because the rights of the creditor are thereby destroyed, and these are ever correspondent to, and co-extensive with, the duty of the debtor."

Sturges v. Crowninshield.

ceived, that the constitution meant to prohibit the passage of laws.impairing the moral obligation of contracts, since this obligation can only be enforced, in foro conscientiæ, and it depends solely upon the volition of the party whether he will make that new promise which is necessary to revive the debt. The legal obligation being gone for ever, unless the party chooses to revive it, it is not only impaired, but absolutely extinguished and destroyed. It does not require, as in the case of a debt barred by the statute of limitations, a mere slight acknowledgment that the debt has not been paid or satisfied: but an express promise is indispensably necessary, to revive a debt barred by a bankrupt certificate, which does not proceed on the presumption of payment; but, on the contrary, supposes the debt not to have been satisfied, and absolves the debtor expressly from the performance of his contract. The present inability of the debtor to perform his contract, arising from poverty, is, indeed, the motive or ground of the legislative interference to dispense with its performance; but this ground is taken away, when that inability *ceases; and it can only justify the discharge of his person *188] from arrest and imprisonment, but cannot authorize the discharge of his future acquisitions of property. Such a discharge impairs all that remains of the obligation of the contract. If the right of coercing the `debtor by imprisonment is taken away; if his property, assigned for the benefit of his creditors, is not sufficient to pay all his debts; and if the property which he may afterwards acquire, of whatever nature, or by whatever title, is not liable for his debts; surely, the obligation of the contract is impaired. If its terms and conditions are not changed, they remain unperformed; which is the same thing to the creditor. If the time of performance is not enlarged, the obligation of performance is entirely dispensed with; which is a still greater infringement of his rights. It is said, that imprisonment for debt is not a common-law remedy for the non-performance of contracts, and makes no part of their obligation. Be it so but the responsibility of the debtor as to his property is coeval with the common law, and exists in every other system of jurisprudence. It is the fund to which the creditor has a natural right to resort for payment. The liability of the person of the debtor to arrest and imprisonment may be modified, changed or entirely taken away, according to the discretion of the local legislature. It has been, in all ages and countries, subjected to the sovereign discretion of the legislative will; and has been permitted, in various degrees, from the extreme severity of the Roman jurisprudence, which gave the creditor an absolute power over the liberty, and even life, *of his *189] debtor, to the mild system which prevails on the continent of Europe, which confines imprisonment for debt to commercial contracts and cases of fraud or breach of trust. It has also been urged, that the same reasoning which tends to establish the position, that the obligation of contracts is impaired by bankrupt laws, would extend to statutes of limitation, which make an essential part of the jurisprudence of every state. We answer, that there is a material distinction between statutes of limitation and bank, rupt laws. A law of limitations, or prescription, does not strike at the validity of the contract. It is of the remedy, and not of the essence or obligation of the coutract. It is a mere rule of evidence; and is founded on the presumption, arising from the lapse of time, that the debt has been paid or satisfied. This legal presumption may be negatived by positive evidence.

Sturges v. Crowninshield.

It is not a presumptio juris et de jure, which is conclusive, and cannot be contradicted; for it may be repelled by any, the slightest evidence, amounting to an admission that the debt has not been paid, even though that admission be qualified by the declaration of the party that he means to insist upon the statute. The statute may also be prevented from running, and the demand perpetuated, by the act of the creditor himself. It is a rule of evidence, or legal presumption, which is incorporated into every system of jurisprudence, independent of positive institution. It was a part of the civil law, and is still a part of the common law. It is adopted by courts of equity, by analogy from the statute of limitations. The particular length of *time which shall bar the right of action, is indeed prescribed in some [*190 cases by the legislature; and if the period of limitation were to be arbitrarily altered by the legislature, so as to take away vested rights, under contracts existing at the time the law was passed, the law would be so far unconstitutional: not that the constitutional prohibition is in general confined to existing contracts; but because, in this particular case, a new rule of evidence or legal presumption could not justly be applied, to deprive the parties of rights already acquired under the old rule. The same principle applies to laws for altering the rate of interest. They cannot have a retrospective operation. But generally speaking, "the constitution could net have an eye to such details, so long as contracts were submitted, without legislative interference, to the ordinary and regular course of justice, and the existing remedies were preserved in substance, and with integrity." Per Mr. Justice (now Chancellor) KENT, in Holmes v. Lansing, 3 Johns. Cas. 73. But this bankrupt law is not a mere matter of detail, and a part of the lex fori; it is a legislative interference with the ordinary and regular course of justice; and the existing remedies, so far from being preserved in substance, and with integrity, are entirely abolished. It is incredible, that the convention intended to provide against such evils as suspension or instalment laws, and to leave untouched the much greater evils of local bankrupt laws of this character. In truth, the framers of the constitution did not mean to limit their prohibition to any particular description of legislative acts. They meant to incorporate into the constitution a provident principle, which should apply to every possible case that might arise. [*191 The inviolability of contracts from state legislation, is guarantied by the Union to all its citizens.

But it is said, that this prohibition is of a moral, as well as legal nature; aud is equally binding upon congress, as upon the state legislatures, though congress is not expressly mentioned in the prohibition: that, consequently, if a bankrupt law be a law impairing the obligation of contracts, congress ought no more to assume the right of passing such a law then the states. The answer to this objection is, that congress is expressly vested with the power of passing bankrupt laws, and is not prohibited from passing laws impairing the obligation of contracts, and may, consequently, pass a bankrupt law which does impair it; whilst the states have not reserved the power of passing bankrupt laws, and are expressly prohibited from passing laws impairing the obligation of contracts. (a)

(a) This case was elaborately argued in the circuit court, by Mr. Saltonstall, for che plaintiff, upon the same grounds and principles as were maintained in this court.

Sturges v. Crowninshield.

February 17th, 1819. MARSHALL, Ch. J., delivered the opinion of the court. This case is adjourned from the court of the United States for the first circuit and the district of Massachusetts, on several points on which the judges of that court were divided, which are stated *in the record for the opinion of this court.

*192]

.

The first is, whether, since the adoption of the constitution of the United States, any state has authority to pass a bankrupt law, or whether the power is exclusively vested in the congress of the United States? This question depends on the following clause, in the 8th section of the first article of the constitution of the United States. "The congress shall have power," &c., to "establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies, throughout the United States." The counsel for the plaintiff contend, that the grant of this power to congress, without limitation, takes it entirely from the several states. In support of this proposition, they argue, that every power given to congress is necessarily supreme; and, if, from its nature, or from the words of grant, it is apparently intended to be exclusive, it is as much so, as if the states were expressly forbidden to exercise it. These propositions have been enforced and illustrated by many arguments, drawn from different parts of the constitution. That the power is both unlimited and supreme, is not questioned. That it is exclusive, is denied by the counsel for the defendant.

In considering this question, it must be recollected, that previous to the formation of the new constitution, we were divided into independent states, united for some purposes, but in most respects, sovereign. These states could exercise almost every legislative power, and among others, that *193] of passing bankrupt *laws. When the American people created a national legislature, with certain enumerated powers, it was neither necessary nor proper to define the powers retained by the states. These powers proceed, not from the people of America, but from the people of the several states; and remain, after the adoption of the constitution, what they were before, except so far as they may be abridged by that instrument. In some instances, as in making treaties, we find an express prohibition; and this shows the sense of the convention to have been, that the mere grant of a power to congress, did not imply a prohibition on the states to exercise the same power. But it has never been supposed, that this concurrent power of legislation extended to every possible case in which its exercise by the states has not been expressly prohibited. The confusion resulting from such a practice would be endless. The principle laid down by the counsel for the plaintiff, in this respect, is undoubtedly correct. Whenever the terms in which a power is granted to congress, or the nature of the power, require that it should be exercised exclusively by congress, the subject is as completely taken from the state legislatures, as if they had been expressly forbidden to act on it.1

Is the power to establish uniform laws on the subject of bankruptcies, throughout the United States, of this description? The peculiar terms of

The reporter has been favored with the perusal of a note of his instructive and able argument, which, as the case was not decided in the court below, does not appear in Mason's reports.

1 United States v. New Bedford Bridge, 1 W. & M. 401.