The Life of John Marshall Volume IV Part 21

Such, then, was the situation that produced those opinions of Marshall on insolvency, on contract, and on a National bank, delivered during February and March of 1819; such the National conditions which confronted him during the preceding summer and autumn. He could do nothing to ameliorate these conditions, nothing to relieve the universal unhappiness, nothing to appease the popular discontent. But he could establish great National principles, which would give steadiness to American business, vitality to the National Government; and which would encourage the people to practice honesty, prudence, and thrift. And just this John Marshall did. When considering the enduring work he performed at this time, we must have in our thought the circ.u.mstances that made that work vitally necessary.

One of the earliest cases decided by the Supreme Court in 1819 involved the Bankrupt Law of New York. On November 25, 1817, Josiah Sturges[593]

of Ma.s.sachusetts sued Richard Crownins.h.i.+eld of New York in the United States Circuit Court for the District of Ma.s.sachusetts to recover upon two promissory notes for the sum of $771.86 each, executed March 22, 1811, just twelve days before the pa.s.sage, April 3, 1811, of the New York statute for the relief of insolvent debtors. The defendant pleaded his discharge under that act. The judges were divided in opinion on the questions whether a State can pa.s.s a bankrupt act, whether the New York law was a bankrupt act, and whether it impaired the obligations of a contract. These questions were, accordingly, certified to the Supreme Court.

The case was there argued long and exhaustively by David Daggett and Joseph Hopkinson for Sturges and by David B. Ogden and William Hunter for Crownins.h.i.+eld. In weight of reasoning and full citation of authority, the discussion was inferior only to those contests before the Supreme Bench which have found a place in history.

On February 17, 1819, Marshall delivered the unanimous opinion of the court.[594] Do the words of the Const.i.tution, "Congress shall have power ... to establish ... uniform laws on the subject of bankruptcies throughout the United States" take from the States the right to pa.s.s such laws?

Before the adoption of the Const.i.tution, begins Marshall, the States "united for some purposes, but, in most respects, sovereign," could "exercise almost every legislative power." The powers of the States under the Const.i.tution were not defined in that instrument. "These powers proceed, not from the people of America, but from the people of the several states; and remain, after the adoption of the const.i.tution, what they were before, except so far as they may be abridged" by the Nation's fundamental law.

While the "mere grant of a power to Congress" does not necessarily mean that the States are forbidden to exercise the same power, such concurrent power does not extend to "every possible case" not expressly prohibited by the Const.i.tution. "The confusion resulting from such a practice would be endless." As a general principle, declares the Chief Justice, "whenever the terms in which a power is granted to Congress, or the nature of the power, required 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."[595]

[Ill.u.s.tration: _John Marshall_ _From the bust in the Court Room of the United States Supreme Court_]

Does this general principle apply to bankrupt laws? a.s.suredly it does. Congress is empowered to "establish uniform laws on the subject throughout the United States." Uniform National legislation is "incompatible with state legislation" on the same subject. Marshall draws a distinction between bankrupt and insolvency laws, although "the line of part.i.tion between them is not so distinctly marked" that it can be said, "with positive precision, what belongs exclusively to the one, and not to the other cla.s.s of laws."[596]

He enters upon an examination of the nature of insolvent laws which States may enact, and bankrupt laws which Congress may enact; and finds that "there is such a connection between them as to render it difficult to say how far they may be blended together.... A bankrupt law may contain those regulations which are generally found in insolvent laws"; while "an insolvent law may contain those which are common to a bankrupt law." It is "obvious," then, that it would be a hards.h.i.+p to "deny to the state legislatures the power of acting on this subject, in consequence of the grant to Congress." The true rule--"certainly a convenient one"--is to "consider the power of the states as existing over such cases as the laws of the Union may not reach."[597]

But, whether this common-sense construction is adopted or not, it is undeniable that Congress may exercise a power granted to it or decline to exercise it. So, if Congress thinks that uniform bankrupt laws "ought not to be established" throughout the country, surely the State Legislatures ought not, on that account, to be prevented from pa.s.sing bankrupt acts. The idea of Marshall, the statesman, was that it was better to have bankrupt laws of some kind than none at all. "It is not the mere existence of the power [in Congress], but its exercise, which is incompatible with the exercise of the same power by the states. It is not the right to establish these uniform laws, but their actual establishment, which is inconsistent with the partial acts of the states."[598]

Even should Congress pa.s.s a bankrupt law, that action does not extinguish, but only suspends, the power of the State to legislate on the same subject. When Congress repeals a National bankrupt law it merely "removes a disability" of the State created by the enactment of the National statute, and lasting only so long as that statute is in force. In short, "until the power to pa.s.s uniform laws on the subject of bankruptcies be exercised by Congress, the states are not forbidden to pa.s.s a bankrupt law, provided it contain no principle which violates the 10th section of the first article of the const.i.tution of the United States."[599]

Having toilsomely reached this conclusion, Marshall comes to what he calls "the great question on which the cause must depend": Does the New York Bankrupt Law "impair the obligation of contracts"?[600]

What is the effect of that law? It "liberates the person of the debtor, and discharges him from all liability for any debt previously contracted, on his surrendering his property in the manner it prescribes." Here Marshall enters upon that series of expositions of the contract clause of the Const.i.tution which, next to the Nationalism of his opinions, is, perhaps, the most conspicuous feature of his philosophy of government and human intercourse.[601] "What is the obligation of a contract? and what will impair it?"[602]

It would be hard to find words "more intelligible, or less liable to misconstruction, than those which are to be explained." With a tinge of patient impatience, the Chief Justice proceeds to define the words "contract," "impair," and "obligation," much as a weary school teacher might teach the simplest lesson to a particularly dull pupil.

"A contract is an agreement in which a party undertakes to do, or not to do, a particular thing. The law binds him to perform his undertaking, and this is, of course, the obligation of his contract. In the case at bar, the defendant has given his promissory note to pay the plaintiff a sum of money on or before a certain day. The contract binds him to pay that sum on that day; and this is its obligation. Any law which releases a part of this obligation, must, in the literal sense of the word, impair it. Much more must a law impair it which makes it totally invalid, and entirely discharges it.

"The words of the const.i.tution, then, are express, and incapable of being misunderstood. They admit of no variety of construction, and are acknowledged to apply to that species of contract, an engagement between man and man, for the payment of money, which has been entered into by these parties."[603]

What are the arguments that such law does not violate the Const.i.tution?

One is that, since a contract "can only bind a man to pay to the full extent of his property, it is an implied condition that he may be discharged on surrendering the whole of it." This is simply not true, says Marshall. When a contract is made, the parties to it have in mind, not only existing property, but "future acquisitions. Industry, talents and integrity, const.i.tute a fund which is as confidently trusted as property itself. Future acquisitions are, therefore, liable for contracts; and to release them from this liability impairs their obligation."[604]

Marshall brushes aside, almost brusquely, the argument that the only reason for the adoption of the contract clause by the Const.i.tutional Convention was the paper money evil; that the States always had pa.s.sed bankrupt and insolvent laws; and that if the framers of the Const.i.tution had intended to deprive the States of this power, "insolvent laws would have been mentioned in the prohibition."

No power whatever, he repeats, is conferred on the States by the Const.i.tution. That instrument found them "in possession" of practically all legislative power and either prohibited "its future exercise entirely," or restrained it "so far as national policy may require."

While the Const.i.tution permits States to pa.s.s bankrupt laws "until that power shall be exercised by Congress," the fundamental law positively forbids the States to "introduce into such laws a clause which discharges the obligations the bankrupt has entered into. It is not admitted that, without this principle, an act cannot be a bankrupt law; and if it were, that admission would not change the const.i.tution, nor exempt such acts from its prohibitions."[605]

There was, said Marshall, nothing in the argument that, if the framers of the Const.i.tution had intended to "prohibit the States from pa.s.sing insolvent laws," they would have plainly said so. "It was not necessary, nor would it have been safe" for them to have enumerated "particular subjects to which the principle they intended to establish should apply."

On this subject, as on every other dealt with in the Const.i.tution, fundamental principles are set out. What is the one involved in this case? It is "the inviolability of contracts. This principle was to be protected in whatsoever form it might be a.s.sailed. To what purpose enumerate the particular modes of violation which should be forbidden, when it was intended to forbid all?... The plain and simple declaration, that no state shall pa.s.s any law impairing the obligation of contracts, includes insolvent laws and all other laws, so far as they infringe the principle the convention intended to hold sacred, and no farther."[606]

At this point Marshall displays the humanitarian which, in his character, was inferior only to the statesman. He was against imprisonment for debt, one of the many brutal customs still practiced.

"The convention did not intend to prohibit the pa.s.sage of all insolvent laws," he avows. "To punish honest insolvency by imprisonment for life, and to make this a const.i.tutional principle, would be an excess of inhumanity which will not readily be imputed to the ill.u.s.trious patriots who framed our const.i.tution, nor to the people who adopted it....

Confinement of the debtor may be a punishment for not performing his contract, or may be allowed as a means of inducing him to perform it.

But the state may refuse to inflict this punishment, or may withhold this means and leave the contract in full force. Imprisonment is no part of the contract, and simply to release the prisoner does not impair its obligation."[607]

Following his provoking custom of taking up a point with which he had already dealt, Marshall harks back to the subject of the reason for inserting the contract clause into the Const.i.tution. He restates the argument against applying that provision to State insolvent laws--that, from the beginning, the Colonies and States had enacted such legislation; that the history of the times shows that "the mind of the convention was directed to other laws which were fraudulent in their character, which enabled the debtor to escape from his obligation, and yet hold his property, not to this, which is beneficial in its operation."

But, he continues, "the spirit of ... a const.i.tution" is not to be determined solely by a partial view of the history of the times when it was adopted--"the spirit is to be collected chiefly from its words." And "it would be dangerous in the extreme to infer from extrinsic circ.u.mstances, that a case for which the words of an instrument expressly provide, shall be exempted from its operation." Where language is obscure, where words conflict, "construction becomes necessary." But, when language is clear, words harmonious, the plain meaning of that language and of those words is not "to be disregarded, because we believe the framers of that instrument could not intend what they say."[608]

The practice of the Colonies, and of the States before the Const.i.tution was adopted, was a weak argument at best. For example, the Colonies and States had issued paper money, emitted bills of credit, and done other things, all of which the Const.i.tution prohibits. "If the long exercise of the power to emit bills of credit did not restrain the convention from prohibiting its future exercise, neither can it be said that the long exercise of the power to impair the obligation of contracts, should prevent a similar prohibition." The fact that insolvent laws are not forbidden "by name" does not exclude them from the operation of the contract clause of the Const.i.tution. It is "a principle which is to be forbidden; and this principle is described in as appropriate terms as our language affords."[609]

Perhaps paper money was the chief and impelling reason for making the contract clause a part of the National Const.i.tution. But can the operation of that clause be confined to paper money? "No court can be justified in restricting such comprehensive words to a particular mischief to which no allusion is made." The words must be given "their full and obvious meaning."[610] Doubtless the evils of paper money directed the Convention to the subject of contracts; but it did far more than to make paper money impossible thereafter. "In the opinion of the convention, much more remained to be done. The same mischief might be effected by other means. To restore public confidence completely, it was necessary not only to prohibit the use of particular means by which it might be effected, but to prohibit the use of any means by which the same mischief might be produced. The convention appears to have intended to establish a great principle, that contracts should be inviolable. The const.i.tution therefore declares, that no state shall pa.s.s 'any law impairing the obligation of contracts.'"[611] From all this it follows that the New York Bankruptcy Act of 1812 is unconst.i.tutional because it impaired the obligations of a contract.

The opinion of the Chief Justice aroused great excitement.[612] It, of course, alarmed those who had been using State insolvent laws to avoid payment of their debts, while retaining much of their wealth. It also was unwelcome to the great body of honest, though imprudent, debtors who were struggling to lighten their burdens by legislation. But the more thoughtful, even among radicals, welcomed Marshall's p.r.o.nouncement.

Niles approved it heartily.[613]

Gradually, surely, Marshall's simple doctrine grew in favor throughout the whole country, and is to-day a vital and enduring element of American thought and character as well as of Const.i.tutional law.

As in Fletcher _vs._ Peck, the principle of the inviolability of contracts was applied where a State and individuals are parties, so the same principle was now a.s.serted in Sturges _vs._ Crownins.h.i.+eld as to State laws impairing the obligation of contracts between man and man. At the same session, in the celebrated Dartmouth College case,[614]

Marshall announced that this principle also covers charters granted by States. Thus did he develop the idea of good faith and stability of engagement as a life-giving principle of the American Const.i.tution.

FOOTNOTES:

[437] M'Culloch _vs._ Maryland, see _infra_, chap. VI.

[438] See vol. II, 60, of this work.

[439] Sumner: _History of American Currency_, 63.

[440] See Memorial of the Bank for a recharter, April 20, 1808 (_Am.

State Papers, Finance_, II, 301), and second Memorial, Dec. 18, 1810 (_ib._ 451-52). Every statement in these pet.i.tions was true. See also Dewey: _Financial History of the United States_, 100, 101.

[441] See vol. II, 70-71, of this work.

[442] _Annals_, 1st Cong. 2d. Sess. 1945. By far the strongest objection to a National bank, however, was that it was a monopoly inconsistent with free inst.i.tutions.

[443] Jefferson to Gallatin, Dec. 13, 1803, _Works_: Ford: X, 57.

[444] "Fully two thirds of the Bank stock ... were owned in England."

(Adams: _U.S._ V, 328.)

[445] Dewey, 127; and Pitkin: _Statistical View of the Commerce of the United States_, 130-32.

[446] Adams: _U.S._ V, 328-29.

[447] _Annals_, 11th Cong. 3d Sess. 118-21.

[448] _Ib._ 153, 201, 308; and see Pitkin, 421.

[449] Adams: _U.S._ V, 327-28. "They induced one State legislature after another to instruct their senators on the subject." Pitkin, 422.

[450] Ambler: _Ritchie_, 26-27, 52.