THE CASE OF OGDEN AND SAUNDERS.*

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 AttorneyGeneral, 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.

An Argument made in the Case of Ogden and Saunders, in the Supreme Court of the United States, January Term, 1827.

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.* 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 words, 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

VOL. VI.

* Sturges v. Crowninshield, 4 Wheat. Rep. 122.

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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? Aud 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 munici pal 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 Pennsyl vania, 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. 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?

Let us

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