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Ogden v. Saunders

Supreme Court of the United States

March 13, 1827, Decided

No Number in Original

Opinion

 [*254]   [**620]  Mr. Justice WASHINGTON. The first and most important point to be decided in this cause turns essentially upon the question, whether the obligation of a contract is impaired by a State bankrupt or insolvent law, which discharges the person and the future acquisitions of the debtor from his liability under a contract entered into in that State after the passage of the act?

This question has never before been distinctly presented to the consideration of this Court, and decided, although it has been supposed by the judges of a highly respectable State Court, that it was decided in the case of M'Millan v. M'Niel, (4 Wheat. Rep. 209.) That was the case of a debt contracted by two citizens of South Carolina, in that State, the discharge of which [***78]  had a view to not other State. The debtor afterwards removed to the territory of Louisiana, where he was regularly discharged, as an insolvent, from all his debts, under an act of the legislature of that State, passed prior to the time when the debt in question was contracted. To an action brought by the creditor in the District Court of Louisiana, the defendant plead in bar his discharge, under the law of that territory, and it was contended by the counsel for the debtor in this Court, that the law under which the debtor was discharged, having passed before the contract was made, it could not be said to impair its obligation. The cause was argued on one side only and it would seem from the report of the case, that no written opinion was prepared by the Court. The Chief Justice stated that the circumstance of the State law, under which the debt was attempted to be discharged, having been passed before the debt was contracted, made no difference in the application of the principle, which had been asserted by the  [*255]  Court in the case of Sturges v. Crowninshield. The correctness of this position is believed to be incontrovertible. The principle alluded to was, that a State [***79]  bankrupt law, which impairs the obligation of a contract, is unconstituional in its application to such contract. In that case, it is true, the contract preceded in order of time the act of assembly, under which the debtor was discharged, although it was not thought necessary to notice that circumstance in the opinion which was pronounced. The principle, however, remained in the opinion of the Court, delivered in M'Millian v. M'Niel, unaffected by the circumstance that the law of Louisiana preceded a contract made in another State, since that law, having no extra-territorial force, never did at any time govern or affect the obligation of such contract. It could not, therefore, be correctly said to be prior to the contract, in reference to its obligation, since if, upon legal principles, it could affect the contract, that could not happen until the debtor became a citizen of Louisiana, and that was subsequent to the contract. But I hold the principle to be well established, that a discharge under the bankrupt laws of one government, does not affect contracts made or to be executed under another, whether the law be prior or subsequent in the date to that of the contract; and this [***80]  I take to be the only point really decided in the case alluded to. Whether the Chief Justice was correctly understood by the Reporter, when he is supposed to have said, "that this case was not distinguishable in principle from the preceding case of Sturges v. Crowninshield," it is not material at this time to inquire, because I understand the meaning of these expressions to go no farther than to intimate, that there was no distinction between the cases as to the constitutional objection, since it professed to discharge a debt contracted in another State, which, at the time it was contracted, was not within its operation, nor subject to be discharged by it. The case now to be decided, is that of a debt contracted in the State of New-York, by a citizen of that State, from which he was discharged, so far as he constitutionally could be, under a bankrupt law of that State, in force at the time when the debt was contracted. It is a case, therefore, that bears no resemblance to the one just noticed.

 [*256]  I come now to the consideration of the question, which, for the first time, has been directly brought before this Court for judgment. I approach it with more than ordinary sensibility,  [***81]  not only on account of its importance, which must be acknowledged by all, but of its intrinsic difficulty, which every step I have taken in arriving at a conclusion with which my judgment could in any way be satisfied, has convinced me attends it. I have examined both sides of this great question with the most sedulous care, and the most anxious desire to discover which of them, when adopted, would be most likely to fulfil the intentions of those who framed the constitution of the United States. I am far from asserting that my labours have resulted in entire success. They have led me to the only conclusion by which I can stand with any degree of confidence; and yet, I should be disingenous were I to declare, from this place, that I embrace it without hesitation, and without a doubt of its correctness. The most that candour will permit me to say upon the subject is, that I see, or think I see, my way more clear on the side which my judgment leads me to adopt, than on the other, and it must remain for others to decide whether the guide I have chosen has been a safe one or not.

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25 U.S. 213 *; 6 L. Ed. 606 **; 1827 U.S. LEXIS 394 ***; 12 Wheat. 213

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

Prior History:  [***1]  ERROR to the District Court of Louisiana.

This was an action of assumpsit, brought in the Court below 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 that 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 [***2]  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 incoporate the substance both of the former and the present argument, into the following summaries.

CORE TERMS

contracts, contractual obligation, impairing, bankruptcy law, parties, discharged, bankrupt, declare, insolvency laws, cases, rights, supposed, state law, admit, words, terms, insolvent, principles, surrender, Crowninshield, regulated, powers, void, universal law, existing law, state power, confine, provisions, pass a law, prohibitions

Business & Corporate Compliance, Contract Formation, Acceptance, General Overview, Constitutional Law, Congressional Duties & Powers, Contracts Clause, Contracts Law, Offers, Contracts Law, Standards of Performance, Discharge & Termination, Statute of Frauds, Governments, Legislation, Effect & Operation, Contract Conditions & Provisions, Contract Conditions & Provisions, Courts, Judicial Comity, Creditors & Debtors, Bankruptcy Clause