To carry into effect the obligations of parties is the perfect right of communities of which those parties are members, and within which their obligations are made, and within which it may have been stipulated that they should be fulfilled; the enforcement of obligations, when intended to be performed according to the laws of other communities, constitutes a right and a duty recognized by the comity existing amongst all civilized governments. The case under consideration being one of a contract, which, though made in Maryland, was to be performed in the State of New York, the Circuit Court decided very properly that it could not be discharged by the insolvent laws of Maryland. But to prevent a misapprehension of the grounds on which this decision of the Circuit Court is approved, by myself, at least, and that, by assenting to that judgment, I may not hereafter be considered as concluded from an application of what is deemed the correct principle, when a case proper for its application may arise, the aforegoing explanation has been deemed proper.

Mr. Justice Woodbury:

The judgment which has just been pronounced meets with my concurrence; but I have the misfortune to differ as to some of the views that have been expressed in rendering it.

ter has been comprehended; for whilst it would | from authorizing an infringement, insists upon be presumptuous not to ascribe any perplexity a fulfillment, of the contract, an exact compliin this respect rather to my own infirmity than ance with its true obligations. To prevent this, to a defect in the work of much wiser men, I then, would be to impair the obligations of the must be permitted to say, that I have great contract, to set up some new and retroactive difficulty in reconciling the case of Ogden v. rule for its interpretation, and thereby to inSaunders with other decisions of this court, or flict a wrong on a portion, if not on all, of the in reconciling it even with itself. These con- contracting parties. clusions, too, are in accordance with the very perspicuous opinions of Justices Washington and Thompson in the case last mentioned, and with the opinion of Justice Story in that of Houston v. Moore. Yet, if it be asked whether the States can now enact bankrupt laws within the sense and meaning of the power granted to Congress, I answer that they cannot. This reply, however, is by no means a deduction from the terms of the grant to Congress, as expressed in the eighth section of the first article of the Constitution. That provision, I maintain, for aught that its language imports, leaves the States precisely where it found them, except so far as they might be affected by an actual exercise of authority by Congress. The States were found in the habitual practice of bankrupt systems; and as long as they should not be controlled in that practice, by the action of Congress, they would have remained in possession of the right to continue their familiar practice, so far as the mere language of the eighth section of the first article of the Constitution would affect them. But the Constitution has proceeded beyond the potential restriction of the section just mentioned, and in so doing has abridged the power it found in practice in the States. It has, in section tenth of the same article, declared that no State shall have power to pass any "law impairing the obligation of contracts;" and in this inhibition, as I hold, is to be found the true limit upon the power of passing bankrupt laws, previously exercised by the States. Bankrupt laws, as understood at the time of adopting the Constitution, and at all other periods of time, have been interpreted to mean laws which discharge or annihilate the contract itself, with all its obligations; and if the Constitution had stopped short at providing for a discretionary power in Congress to enact such laws, and *The lex loci contractus, which must [*315 should have omitted any restraint upon the govern its construction and obligations, is thereStates, having found the latter exerting the fore the law of New York, unless on its face power of passing bankrupt laws, it would have the contract was to be performed elsewhere. left them, by the mere fact of this omission, This is the rule in almost every country which still with the power, by retroactive legislation, possesses any civilized jurisprudence. 16 Johns. of dissolving and abrogating contracts. By 233; 3 Caines, 154; Story on Bills of Exchange, 314*] connecting the power given to Con- secs. 146, 158, 168; 2 Barn. & Ald. 301; 1 Barn. gress to pass bankrupt laws with the inhibition | & Cress. 16; Story's Conflict of Laws, secs. 272upon the States contained in the tenth section of the first article, all power in the latter to enact bankrupt laws as laws operating upon contracts previously existing has been taken away. But a power to discharge a contract made under a system of laws established and known to all, as public laws are inferred and indeed are necessarily admitted to be-laws which may permit, nay, which under certain circumstances may command, such discharge -presents a wholly different aspect of things -one implying no bankrupt power, no power that is retroactive, and incompatible with either the legal or moral obligations involved in the contract; an aspect of things, which, so far

As a matter of fact, the merchandise which is set out as the ground of action in the declaration in this case was sold in New York, by a citizen resident and doing business there, and the note given for it and offered in evidence was delivered to him there. Consequently, in point of law, the contract must be deemed a foreign one, or, in common parlance, a New York, and not a Maryland, contract. 6 Peters, 644; 3 Wheat. 101, 146; 3 Met. 207; 3 Johns. Ch. 587.

329; 5 Clark & Fin. 1-13; 13 Mass. 1; 6 Cranch, 221; 6 Peters, 172; 7 Ibid, 435; 8 Ibid. 361; 13 Ibid. 65; Peters's C. C. 302; 4 Dall. 325; Baldwin's C. C. 130, 537; 2 Mason's C. C. 151; see more cases, in Towne v. Smith, 1 Wood. & M. 115.

As a question, then, of international law, without reference to any constitutional question, such a contract and its obligations cannot. be affected by the legislation of bankrupt systems of other States. It is understood that the whole court concur in the opinion, that this reasoning and these decisions would be sufficient to dispose of the present case without going into other questionable matters; and, accordingly,

no expression of approbation or disapprobation | al, whether they apply to future or past conof former decisions in this tribunal, concerning tracts. Because they do not interfere at all bankrupt discharges, seems to have been neces- with the debt due, the contract itself or its sary on this occasion. obligations, but merely the remedy on it, or the form of legal process, and thus they should govern in that respect no foreign forums, but merely its own courts, as the local and territorial tribunals who issue the precept or process. 4 Wheat. 112, 122, 209; 6 Ibid. 131; 12 Ibid. 213, 272; 2 Kent's Com. 392; Adams v. Storey, Paine's C. C. 79; Campbell et al. v. Claudius, Peters's C. C. 484; 4 Wash. C. C. 424.

But as the majority of the court have deemed it proper to express some opinions upon them, it devolves on me the necessity of stating very briefly and very generally two or three of my own in relation to this subject, which in some respects do not accord with those of the majority.

What has been and what has not been decided heretofore in respect to the operation of Without feeling justified on this occasion in insolvent and bankrupt discharges, in the vari-going more at large into these questions, and ous cases which have come before this court, it some others of an interesting character conis somewhat difficult to eviscerate, amidst so nected with them, I may be permitted to add, many conflicting and diversified views among that these rules seem to me to have in their its judges. But without going into an analysis favor over some others at least this merit. They of them now, and without stating in detail give full effect to State powers and State how far my individual opinions coincide or rights over this important matter, when not differ with what is supposed to have been ad-regulated by Congress. They produce uniformjudicated in each case, I would say, that, in-ity among the State and the United States dependent of any binding precedents, the true courts. They conform to the practice in other rules on this subject seem to me to be these: countries, and are easily understood and easily. 1. That the States possess a constitutional enforced. right to pass laws, whether called insolvent or bankrupt, discharging contracts subsequently made, provided no concurrent legislation by Congress exists at the same time on the subject, and that such laws cannot be considered as impairing the obligation of contracts, which are made under and subject to them, and when Congress is expressly empowered by the Constitution to pass similar laws. 12 Wheat. 23; Bronson v. Kinzie et al. 1 Howard, 311; 2 Ibid. 612.

Order.

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the District of Maryland, and was argued by counsel; on consideration whereof, it is now here ordered and adjudged by this court, that the judgment of the said Circuit Court in this cause be, and the same is hereby affirmed, with costs and damages at the rate of six per centum per annum.

*THE PRESIDENT, DIRECTORS AND [*317 COMPANY OF THE COMMERCIAL BANK OF CINCINNATI, Plaintiffs in Error,

2. That such laws are to be regarded as if a part of the subsequent contract, incorporated into it; and hence, that the contract, being construed according to the lex loci contractus, should be discharged by a certificate of bankruptcy given to the obligor in the State where the contract was made and was to be performed. 316*] *And this whether the action on it is brought in that State or another, or in the EUNICE BUCKINGHAM'S EXECUTORS, Decourts of the United States or those of the States, and whether the obligee reside in that

V.

fendants in Error.

State law, admitted valid.

To bring a case to this court from the highest court of a State, under the twenty-fifth section of the record, 1st. That some of the questions stated the Judiciary Act, it must appear on the face of in that section did arise in the State court; and, 2d. That the question was decided in the State court, as required in the section.

State or elsewhere. Considered as a part of This court cannot question construction of the contract itself, it is inseparable from it, and follows it into all hands and all places. 5 Mass. R. 509; 13 Ibid. 4; 13 Pick. 60; 3 Burge's Col. & For. Laws, 876; 3 Story's Conflict of Laws, secs. 281-284; 2 Kent's Com. 390; 2 Mason's C. C. 175; Towne et al. v. Smith, 1 Wood. & M. 115. And though in other States and in other forums it may be a matter of comity merely, in one sense of the word, to respect and enforce foreign contracts and their obligations, yet courts will always do it as right whenever the contracts are valid at home, and not immoral or against public policy elsewhere. 1 Dall. 229; 3 Ibid. 369; Story's Confil. of Laws, secs. 331-335; 3 Burge's Col. & For. Laws, 876, 925; 2 Kent's Com. 392; 4 D. & E. 182; 5 East, 124; 2 Hen. Bl. 553; 1 Knapp's P. C. 265; Adams v. Storey, Paine's C. C. 79.

3. That the ancient State insolvent laws, which were often called here "poor debtor's acts," and in England "lord's acts," and usually discharged only the body from imprisonment, instead of the contract (2 Tidd's Practice, 978; 6 D. & E. 366), were and still are constitution

It is not enough that the record shows that the plaintiff in error contended and claimed that the judgment of the court impaired the obligation of stitution of the United States, and that this claim a contract, and violated the provisions of the Conwas overruled by the court, but it must appear, by clear and necessary intendment, that the question

NOTE.-Jurisdiction of United States Supreme

Court.

It is the peculiar province and privilege of the State courts to construe their own statutes, and it is no part of the functions of the Supreme Court to review their decisions, except when specially authorized by statute. Adams v. Preston, 22 How. 473; Congdon Mining Co. v. Goodman, 2 Black. 574; Scott v. Jones. 5 How. 343; Smith v. Adsit, 16 Wall. 185; Klinger v. Missouri, 13 Wall. 257.

What adjudications of State courts can be brought up for review in the Supreme Court of the United States by writ of error to those courts, see note to 62 L. R. A. 513.

must have been raised, and must have been decided, in order to induce the judgment.

Hence, where the Legislature of Ohio, in the year 1824, passed a general law relating to banks, and afterwards, in 1829, chartered another bank; and the question before the State court was, whether or not some of the provisions of the Act of 1824 applied to the bank subsequently chartered, the question was one of construction of the State statutes, and not of their validity. This court has no jurisdiction over such a case.

case was brought up, by a writ of error issacu under the twenty-fifth section of the Judiciary Act, from the Supreme Court o the State of Ohio.

The Reporter finds the following statement of the case prepared by Mr. Justice Grier, and prefixed to the opinion of the court, as pronounced by him:

and the court here overruled the defense so set up, and held, that under and by virtue of the Act of the General Assembly of the State of Ohio, passed January 28th, 1824, and of the said charter of the plaintiffs in error, the defendants in error were entitled to the interest and additional damages allowed to the defendants in error by the Supreme Court for Hamilton County, as stated in the bill of exceptions. The first section of the said Act of the General Assembly of the State of Ohio, of January 28th, 1824, is as follows: "That in all actions brought against any bank or banker, whether of a public or private character, to recover money due from such bank or banker, upon notes or bills by him or them issued, the plaintiff may file his declaration for money had and received Eunice Buckingham, the plaintiff below, generally, and upon trial may give in evidence brought an action of assumpsit against the to support the action any notes or bills of such plaintiffs in error in the Court of Common bank or banker which said plaintiff may hold Pleas of Hamilton County, and filed her dec-at the time of trial, and may recover the amount laration claiming to recover twenty thousand thereof, with interest from the time the same dollars for bills or bank notes of the Commer-shall have been presented for payment, and paycial Bank, of which she was owner, and of ment thereof refused, or from the time that which demand had been made of the officers of the bank and payment refused, and claiming interest thereon at six per cent. from the suspension of specie payments, and also twelve per cent. additional damages from the time of demand and refusal. The cause was afterwards removed to the Supreme Court of Ohio, who gave judgment in her favor; and thereupon the defendant removed the case by writ of error to the Supreme Court in bank, by whom the judgment was affirmed, and the plaintiffs in error afterwards sued out a writ of error to this court.

The Supreme Court entered on their record the following certificate, which contains a sufficient statement of the points arising in the

case:

such bank or banker shall have ceased or refused to redeem his notes with good and lawful money of the United States.' And the eleventh section of which is as follows: "That when any bank or banker shall commence and continue to redeem their notes or bills with lawful money, the interest on their notes or bills shall cease from the commencement of such redemption, by their giving six weeks' previous notice, in some newspaper having a general circulation in the county where such bank or banker transacts banking business, of the time they intend to redeem their notes or bills with lawful money.' It was contended and claimed in this court, by said plaintiffs in error, that the said Act of the General Assembly of Ohio, of January 28th, 1824, as applied to the said provisions of this charter, impaired the obligation thereof, and violated the provisions of the Constitution of the United States; which claim so set up was overruled *by the court. And it is [*319 further certified by the court here, that on the trial and hearing of this case in this court, the validity of the said act of the Legislature before mentioned was drawn in question, on the ground that the same, as applied to the charter of the plaintiffs in error, impaired the obligations thereof, and was repugnant to the Constitution of the United States, and that the decision of this court was in favor of the validity of the said act of the Legislature as so applied."

The cause was argued by Mr. Stanberry (Attorney-General of Ohio), and Mr. Gilpin for the plaintiffs in error, and Mr. Charles C. Convers for the defendants in error.

"And upon the application of said plaintiffs in error, it is certified by the court here, that the said plaintiffs in error, on the trial and hearing of this case in said Supreme Court for Hamilton County, and also in this court, set up and relied upon the charter granted to them by the General Assembly of the State of Ohio, on the 11th day of February, A. D. 1829; which 318*] charter contains the following *provision: the fourth section provides, 'that said bank shall not at any time suspend or refuse payment, in gold or silver, of any of its notes, bills, or other obligations, due and payable, or of any moneys received on deposit; and in case the officers of the same, in the usual banking hours, at the office of discount and deposit, shall refuse or delay payment in gold or silver of any note or bill of said bank there presented for payment, or the payment of any money previously deposited therein, and there demanded by any person or persons entitled to receive the same, said bank shall be liable to pay as additional damages at the rate of twelve per The first question which presents itself is as centum per annum on the amount thereof for to the jurisdiction of this court. It is claimed the time during which such payment shall be re- for the plaintiffs in error, that the jurisdiction fused or delayed,' and insisted, that, by the arises upon that clause of the Judiciary Act of provisions above set forth, the said plaintiffs in 1789 which provides for the case where the vaerror ought not to be held liable to pay for in-lidity of a statute of a State is drawn in questerest or damages in case of suspension of specie payments, or upon demand and refusal of pay. ment of their notes or bills, at a greater rate than at the rate of twelve per centum per annum,

As the case went off upon the question of jurisdiction, only so much of the arguments of the counsel is given as relates to that point.

Mr. Stanberry, for plaintiffs in error:

tion, as repugnant to the Constitution of the United States, and the decision of the State court is in favor of its validity.

It appears very clearly in the record, that the

validity of a statute of Ohio was drawn in question in the State court, on the ground that the same, as applied to the charter of the plaintiffs in error, impaired the obligation thereof, and that the decision was in favor of the validity of

the statute.

The defendants in error are understood to claim that, inasmuch as this statute was in existence at, and prior to, the granting of the charter, it cannot be held to impair the obligation of the charter; in other words, that this prohibition of the Constitution is to be confined to retrospective legislation.

Authority for this distinction is supposed to be found in the opinions of the majority of the judges in Odgen v. Saunders, 12 Wheat. 213. There is no question that, in Odgen v. Saunders, the majority of the court proceeded upon a distinction between a statute prior and one subsequent to the contract, holding that a statute in force when the contract is made cannot be said to impair the obligation of the contract, for the reason that such pre-existing statute being a part of the law of the land at the time of the contract, the parties are supposed to acquiesce in it, and in fact to make it part of their contract.

In the first place, it is to be observed of this case of Odgen v. Saunders, that the distinction it enforces is opposed to the reasoning of the court in Sturges v. Crowninshield, 4 Wheat. 122, and to the language of the court in McMillan v. McNiell, 4 Wheat. 209. 320*] *As a general distinction, applicable to all laws, it certainly is not sound, for it would quite set aside this most important restraint upon State legislation. It can only have reference to such laws as provide for the manner of enforcing or discharging future contracts, and which may be said to be in the view of the parties when they afterwards enter into the class of contracts provided for in the previous legislation.

In this view, Odgen v. Saunders perhaps settles a just distinction, as applicable to the sort of statute then before the court. The question here was as to the validity of a State bankrupt law, in reference to a subsquent contract. It might well be said, that the parties tacitly adopted and recognized this law, or this mode of discharging their contract, when it was entered into.

no sense can it be said that the law of 1824 entered into or became part of the charter. If the charter had been silent as to the rate of interest in the particular case of a refusal to redeem, the general law of 1824 would have settled it, and might well have been considered as entering into the charter and constituting one of its terms, for then there would have been no inconsistency or repugnancy between the general law and the charter stipulations.

It is obvious, then, that the charter is impaired by the law of 1824, when the court add to the twelve per cent, provided for by the charter the six per cent, provided for in that law.

Taking it as granted that a charter or contract is so impaired by a pre-existing law, the case is certainly within the mischief, if it be not within the meaning, of the constitutional prohibition.

*

A charter is granted by a State, explicitly defining what shall be the consequences of suspension of specie payments, and fixing a certain limit to the liability of the stockholders in that event. This is the contract made between the State and the stockholders. It has no reference to any prior laws, but is a law in itself, superior to all other laws upon the subject matter so provided for by its stipulations. Upon [*321 a case made between the bank and å holder of its paper, a claim is made to recover eighteen per cent. for suspension or specie payments, instead of the twelve per cent. provided by the charter. This claim is founded upon a statute of the State passed five years before the date of the charter. The bank questions the validity of this statute, so applied to its charter, on the ground that it impairs the charter, in adding to the rate of interest fixed for suspension. The court decides in favor of the validity of the statute as so applied; the charter is no protection, and the liability of the bank is extended beyond the terms of the charter.

It may be said that all this is the act or error of the court, not of the Legislature; that it is simply an error in the construction of the terms of the charter.

Undoubtedly, contracts are liable to be impaired by the errors of the judiciary. It is not for such errors that resort can be had to this court from State tribunals. If a contract be impaired by the application, on the part of the court, of some legal principle, or by misconstruction of the terms of the contract, a case does not arise for the jurisdiction of this court; but if the contract is impaired by the application of a State law, then the jurisdiction does

But in the case at bar, no such intendment can be made, and it is impossible to suppose that the statute of 1824 was adopted by the parties, or in any way entered into the contract or charter made in 1829. The charter was whol-attach. ly independent of the statute.

The prohibition in the Constitution is in Again, this charter was granted by the State. terms the most general. "No State shall pass It does not stand on the footing of a contract any law impairing the obligation of contracts." between individuals, who are supposed to be This is a clause which does not execute itself, bound by the existing laws as to contracts, and nor is any mode pointed out in the Constitution to adopt and acquiesce in them. Here the State by which the prohibition is to be enforced. It is one of the contracting parties, and the con-is worked out by the Judiciary Act, by means tract itself is a law. If the charter granted in 1829 provides, as we claim it does, that in case of refusal to pay its notes in gold and silver the rate of interest shall be twelve per cent., it surely cannot be intended that the parties submitted themselves to the prior law of 1824, so as to increase the rate of interest upon such refusal to eighteen per cent., or six per cent. in addition to the rate stipulated by the charter. In

of a case, and the decision of that case by the highest court of the State. That court must first decide upon the question as to the application of the State law; and the decision must affirm its validity. To bring the jurisdiction of the federal tribunal into exercise, to bring about the condition of things to which the constitutional prohibition applies, the lawmaking and law-expounding authorities of the

State must concur. The law of the State can in no way impair a contract without the agency of the State judiciary. When the law is so applied, and adjudged to be valid by the State court, as to impair a contract, the case arises under the Constitution.

Now, if the constitutional prohibition were confined to State laws, which impaired contracts proprio vigore, the argument against its application to subsequent contract would be very cogent. It might then be asked, with confidence, how can a law per se impair a contract not in existence when it was enacted? But we have seen that the case does not arise upon the law itself, nor until the act of the court concurs with the act of the Legislature. The instant this double agency unites in the application of a law to a contract, so as to impair its terms, that instant it becomes, in the meaning of the Constitution, a law impairing the obligation of the contract.

The constitutional prohibition must be understood, as not applying to the law itself, but to its application by the court. What is said by 322*] *the majority of the judges in Ogden v. Saunders proceeds on that ground. Mr. Justice Trimble, one of the majority, uses this language (p. 316):

Suppose this statute had been subsequent in date to the charter, and the court had then applied it to the charter, so as to impair the express stipulations as to interest; the case would have been clearly within the constitutional prohibition. Now, in the supposed case, if it clearly appeared that the court of the State had misunderstood the law in making such application, if it were manifest that the Legislature had no intention, in passing the law, to impair the charter, or in any way to apply it to the charter, would all that oust the jurisdiction of this court, or take the case out of the constitutional prohibition? Surely not. It is the fact, not the intention; the effect and application of the law, not the law itself, or the motive with which it was passed, that we must look to.

*Besides, after the application of the [*323 law to the charter by the State tribunal, the organ to expound and apply the State law, it must be taken conclusively that the law was intended to apply to the contract, and no argument, however cogent, would avail against such conclusion.

Mr. Convers, for defendants in error:

The contract, the alleged violation of which by legislative power is here complained of, is "It is not the terms of the law, but its the act of incorporation of the plaintiffs in effect, that is inhibited by the Constitution. A error, passed by the General Assembly of the law may be in part constitutional and in part State of Ohio, in the ordinary form of legislaunconstitutional. It may, when applied to a tion, on the 11th day of February, 1829. The given case, produce an effect which is pro-law of the State of Ohio, by which it is claimed hibited by the Constitution, but it may not, that the obligation of this supposed contract when applied to a case differently circum- was impaired, is the "Act to regulate judicial stanced, produce such prohibited effect. proceedings where banks and bankers are parWhether the law under consideration, in its ties, and to prohibit issuing bank bills of cereffects and operation upon the contract sued on tain descriptions," passed on the 28th of Janin this case, be a law impairing the obligation uary, 1824. The plaintiffs in error are here to of this contract, is the only necessary inquiry." assert, before this court, that the State of Ohio, We are then to understand, from this clear | in passing a law, in 1824, impaired, by the statement of the constitutional prohibition, "passing" of that law, the obligation of a that it is not necessary to show that the State charter granted afterwards, in 1829; that the law is unconsitutional per se; that, in fact, it contract, although not in existence at the time may be constitutional for some purposes and of the passage of the law complained of, nor unconstitutional for other purposes, just as it for five years thereafter, was nevertheless "imhappens to be applied by the court to the par-paired" by the prior passing of this pre-existticular case or contract. It is not the purpose or intent of the law ab origine, but its effect or application by the court, which is to be regarded.

This being so, what imaginable difference is there between its application to contracts made before or after its enactment? None whatever, except in such cases as Ogden v. Saunders, where the pre-existing law is of such a character as that the parties to the subsequent contract must have made their contract in reference to it, and tacitly adopted it into the terms of the contract. Such a pre-existing law is, in fact, a part of the whole body of law, which creates and defines the obligation of contracts.

ing law!

Two questions, arising from the record, present themselves for consideration—

First. Assuming that the Supreme Court of Ohio erred in its construction of the two statutes referred to, can this court correct the error?

Second. Is there any error in that construction of these statutes which was, adopted by the Supreme Court of Ohio, and applied to the case?

I. Can this court correct the supposed error of the Supreme Court of Ohio?

I claim, for the defendants in error, that this court cannot reverse the judgment of the Supreme Court of Ohio, for the errors here alleged against this record.

But, with reference to the contract in this case, where no such intendment can be made, The clause of the Constitution of the United where all other laws are set aside by the legis- States under which such reversal is asked, is lative authority itself in the grant of the charter, as follows: "No State shall pass any law imwhich stands as the very law for the very case, pairing the obligation of contracts. I mainwhat imaginable difference is there in its vio-tain that this provision applies only to statutes lation by the application of a pre-existing or passed after a contract has been made, and subsequent law? At the best, it is a contract which, when effect is given to them, according violated by a law of the State, not directly and to the legislative intent, impair the obligation by its terms, but by its effect, as applied to this of the contract-making its terms different charter. from what they were, as previously settled by