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Ogden v. Saunders. 12 W. consists of a single sentence, is to be taken together, and the intention is to be collected from the whole.
The first paragraph of the tenth section of the first article, which comprehends the provision under consideration, contains an enumeration of those cases in which the action of the state legislature is entirely prohibited. The second enumerates those in which the prohibition is modified. The first paragraph, consisting of total prohibi. tions, comprehends two classes of powers. Those of the first are political and general in their nature, being an exercise of sovereignty without affecting the rights of individuals. These are, the powers " to enter into any treaty, alliance, or confederation; grant letters of marque or reprisal, coin money, emit bills of credit.”
The second class of prohibited laws comprehends those whose operation consists in their action on * individuals. [ * 335 | These are laws which make any thing but gold and silver coin a tender in payment of debts, bills of attainder, ex post facto laws, or laws impairing the obligation of contracts, or which grant any title of nobility.
In all these cases, whether the thing probibited be the exercise of mere political power, or legislative action on individuals, the prohibition is complete and total. There is no exception from it. Legislation of every description is comprehended within it. A State is as entirely forbidden to pass laws impairing the obligation of contracts, as to make treaties, or coin money. The question recurs, what is a law impairing the obligation of contracts ?
In solving this question, all the acumen which controversy can give to the human mind, has been employed in scanning the whole sentence, and every word of it. Arguments have been drawn from the context, and from the particular terms in which the prohibition is expressed, for the purpose, on the one part, of showing its applioation to all laws which act upon contracts, whether prospectively or retrospectively; and, on the other, of limiting it to laws which act on contracts previously formed.
The first impression which the words make on the mind, would probably be that the prohibition was intended to be general. A con. tract is commonly understood to be the agreement of the parties ; and, if it be not illegal, to bind them to the extent of their stipulations. It requires reflection, it requires some intellectual effort, to efface this impression, and to come to the conclusion that the words contract and obligation, as used in the constitution, are not used in this sense. If, however, the result of this mental effort, fairly made, be the correction of this impression, it ought to be corrected.
So much of this prohibition as restrains the power of the States to
Ogden v. Saunders. 12 W. punish offenders in criminal cases, the prohibition to pass bills of attainder and ex post facto laws, is, in its very terms, confined to preexisting cases. A bill of attainder can be only for crimes already committed; and a law is not ex post facto, unless it looks back to an act done before its passage. Language is incapable of express
ing, in plainer terms, that the mind of the convention was 1 * 336 ] directed to retroactive * legislation. The thing forbidden is
retroaction. But that part of the clause which relates to the civil transactions of individuals is expressed in more general terms; in terms, which comprehend, in their ordinary signification, cases which occur after, as well as those which occur before, the passage of the act. It forbids a State to make any thing but gold and silver coin a tender in payment of debts, or to pass any law impairing the obligation of contracts. These prohibitions relate to kindred subjects. They contemplate legislative interference with private rights, and restrain that interference. In construing that part of the clause which respects tender laws, a distinction has never been attempted between debts existing at the time the law may be passed, and debts afterwards created. The prohibition has been considered as total; and yet the difference in principle between making property a tender in payment of debts, contracted after the passage of the act, and discharging those debts without payment, or by the surrender of property, between an absolute right to tender in payment, and a contingent right to tender in payment, or in discharge of the debt, is not clearly discernible. Nor is the difference in language so obvious, as to denote plainly a difference of intention in the framers of the instrument. “ No State shall make any thing but gold and silver coin a tender in payment of debts.” Does the word " debts” mean, generally, those due when the law applies to the case, or is it limited to debts due at the passage of the act? The same train of reasoning which would confine the subsequent words to contracts existing at the passage of the law, would go far in confining these words to debts existing at that time. Yet, this distinction has never, we believe, occurred to any person. How soon it may occur is not for us to determine. We think it would unquestionably defeat the object of the clause.
The counsel for the plaintiff insist that the word " impairing,” in the present tense, limits the signification of the provision to the operation of the act at the time of its passage; that no law can be
accurately said to impair the obligation of contracts, un[* 337 | less the contracts exist at the time. * The law cannot im
pair what does not exist. It cannot act on nonentities. There might be weight in this argument, if the prohibited laws Ogden v. Saunders. 12 W. were such only as operated of themselves, and immediately on the contract. But insolvent laws are to operate on a future, contingent, unforeseen event. The time to which the word “impairing” applies, is not the time of the passage of the act, but of its action on the contract. That is, the time present in contemplation of the prohibition. The law, at its passage, has no effect whatever on the contract. Thus, if a note be given in New York, for the payment of money, and the debtor removes out of that State into Connecticut, and becomes insolvent, it is not pretended that his debt can be discharged by the law of New York. Consequently, that law did not operate on the contract at its formation. When, then, does its operation commence? We answer, when it is applied to the contract. Then, if ever, and not till. then, it acts on the contract, and becomes a law impairing its obligation. Were its constitutionality, with respect to previous contracts, to be admitted, it would not impair their obligation until an insolvency should take place, and a certificate of discharge be granted. Till these events occur, its impairing faculty is suspended. A law, then, of this description, if it derogates from the obligation of a contract, when applied to it, is, grammatically speaking, as much a law impairing that obligation, though made previous to its formation, as if made subsequently.
A question of more difficulty has been pressed with great earnestness. It is, what is the original obligation of a contract made after the passage of such an act as the insolvent law of New York ? Is it unconditional to perform the very thing stipulated, or is the condition implied that, in the event of insolvency, the contract shall be satisfied by the surrender of property? The original obligation, whatever that may be, must be preserved by the constitution. Any law which lessens must impair it.
All admit that the constitution refers to and preserves the legal, not the moral obligation of a contract. * Obligations [ * 338 ) purely moral are to be enforced by the operation of internal and invisible agents, not by the agency of human laws. The restraints imposed on States by the constitution are intended for those objects which would, if not restrained, be the subject of state legislation. What, then, was the original legal obligation of the contract now under the consideration of the court ?
The plaintiff insists that the law enters into the contract so completely as to become a constituent part of it. That it is to be construed as if it contained an express stipulation to be discharged, should the debtor become insolvent, by the surrender of all his property for the benefit of his creditors, in pursuance of the act of the legislature.
Ogden v. Saunders. 12 W. · This is, unquestionably, pressing the argument very far; and the establishment of the principle leads inevitably to consequences which would affect society deeply and seriously.
Had an express condition been inserted in the contract, declaring that the debtor might be discharged from it at any time, by surrendering all his property to his creditors, this condition would have bound the creditor. It would have constituted the obligation of his contract; and a legislative act, annulling the condition, would impair the contract. Such an act would, as is admitted by all, be unconstitutional, because it operates on preëxisting agreements. If a law authorizing debtors to discharge themselves from their debts by surrendering their property, enters into the contract and forms a part of it, if it is equivalent to a stipulation between the parties, no repeal of the law can affect contracts made during its existence. The effort to give it that effect would impair their obligation. The counsel for the plaintiff perceive and avow this consequence, in effect, when they contend that, to deny the operation of the law on the contract under consideration, is to impair its obligation. Are gentlemen prepared to say that an insolvent law, once enacted, must, to a considerable extent, be permanent? That the legislature is incapable of varying it, so far as respects existing contracts ? So, too, if one of the conditions of an obligation for the pay
ment of money be, that, on the insolvency of the obligor, [ * 339 ] * or on any event agreed on by the parties, he should be at
liberty to discharge it by the tender of all or part of his property, no question could exist respecting the validity of the contract, or respecting its security from legislative interference. If it should be determined that a law authorizing the same tender, on the same contingency, enters into and forms a part of the contract, then a tender law, though expressly forbidden, with an obvious view to its prospective as well as retrospective operation, would, by becoming the contract of the parties, subject all contracts made after its passage to its control. If it be said that such a law would be obviously unconstitutional and void, and, therefore, could not be a constituent part of the contract, we answer that, if the insolvent law be unconstitutional, it is equally void, and equally incapable of becoming, by mere implication, a part of the contract. The plainness of the repugnancy does not change the question. That may be very clear to one intellect, which is far from being so to another. The law now under consideration is, in the opinion of one party, clearly consistent with the constitution, and, in the opinion of the other, as clearly repugnant to it. We do not admit the correctness of that reasoning which would settle this question, by introducing into the contract a stipulation not admitted by the parties.
Ogden v. Saunders. 12 W. This idea admits of being pressed still further. If one law enters into all subsequent contracts, so does every other law which relates to the subject. A legislative act, then, declaring that all contracts should be subject to legislative control, and should be discharged as the legislature might prescribe, would become a component part of every contract, and be one of its conditions. Thus, one of the most important features in the constitution of the United States, one which the state of the tiines most urgently required, one on which the good and the wise reposed confidently for securing the prosperity and harmony of our citizens, would lie prostrate, and be construed into an inanimate, inoperative, unmeaning clause.
Gentlemen are struck with the enormity of this result, and deny that their principle leads to it. They distinguish, or attempt to distinguish, between the incorporation of a *gen- [ * 340 ] eral law, such as has been stated, and the incorporation of a particular law, such as the insolvent law of New York, into the con. tract. But will reason sustain this distinction ? They say that men cannot be supposed to agree to so indefinite an article as such a general law would be, but may well be supposed to agree to an article, reasonable in itself, and the full extent of which is understood.
But the principle contended for does not make the insertion of this new term or condition into the contract to depend upon its reasonableness. It is inserted because the legislature has so enacted. If the enactinent of the legislature becomes a condition of the contract because it is an enactment, then it is a high prerogative, indeed, to decide that one enactment shall enter the contract, while another, proceeding from the same authority, shall be excluded from it.
The counsel for the plaintiff illustrates and supports this position by several legal principles, and by some decisions of this court, which have been relied on as being applicable to it.
The first case put is interest on a bond, payable on demand, which does not stipulate interest. This, he says, is not a part of the remedy, but a new term in the contract.
Let the correctness of this averment be tried by the course of proceeding in such cases.
The failure to pay, according to stipulation, is a breach of the contract, and the means used to enforce it constitute the remedy which society affords the injured party. If the obligation contains a penalty, this remedy is universally so regulated that the judgment shall be entered for the penalty, to be discharged by the payment of the principal and interest. But the case on which counsel has reasoned