Ogden v. Saunders. characterize the legislative act, to affect it with the imputation of violating the obligation of contracts. In the effort to get rid of the universal vote of mankind in favor of limitation acts, and laws against gaming, usury, marriage-brokage, buying and selling of offices, and many of the same description, we have heard it argued, that, as to limitation acts, the creditor has nothing to complain of, because time is allowed him, of which, if he does not avail himself, it is his own neglect; and as to all others, there is no contract violated, because there was none ever incurred. But it is obvious, that this mode of answering the argument involves a surrender to us of our whole ground. It admits the right of the government to limit and define the power of contracting, and the extent of the creditor's remedy against his debtor; to regard other rights besides his, and to modify his rights, so as not to let them override entirely the general interests of society, the interests of the community itself in the talents and services of the debtor, the regard due to his *happiness, and to the claims of his family upon him and upon the government. [*292 No one questions the duty of the government to protect and enforce the just rights of every individual over all within its control. What we contend for, is no more than this, that it is equally the duty and right of governments to impose limits to the avarice and tyranny of individuals, so as not to suffer oppression to be exercised under the semblance of right and justice. It is true, that in the exercise of this power, governments themselves may sometimes be the authors of oppression and injustice; but whenever the constitution could impose limits to such power, it has done so; and if it has not been able to impose effectual and universal restraints, it arises only from the extreme difficulty of regulating the movements of sovereign power; and the absolute necessity, after every effort that can be made to govern effectually, that will still exist, to leave some space for the exercise of discretion, and the influence of justice and wisdom. THOMPSON, Justice.-This action is founded on several bills of exchange, bearing date in September 1806, drawn by J. Jordan, upon Ogden, the plaintiff in error, in favor of Saunders, the defendant in error. The drawer and payee, at the date of the bills, were citizens of, and resident in, Kentucky. Ogden was a citizen of, and resident in, New York, where the bills were presented and accepted by him, but were not paid when they came to maturity, and are still unpaid. Ogden sets up, in bar of this action, his discharge under the insolvent law of the state of New York, passed in April 1801, as one of the revised laws of that state. His discharge was duly obtained on the 19th of April 1808, he having assigned all his property for the benefit of his creditors, and having, in all respects, complied with the laws of New York for giving relief in cases of insolvency. These proceedings, according to those laws, discharged the insolvent from all debts due at the time of the assignment, or contracted for before that time, though payable afterwards, except in some specified cases, which do not affect the present question. From this brief statement, it appears, that Ogden, being sued upon his acceptances of the bills in question, the contract was made, and to be executed within the state of New York, and was made subsequent [*293 to the passage of the law under which he was discharged. Under these Ogden v. Saunders. circumstances, the general question presented for decision is, whether this discharge can be set up in bar of the present suit. It is not pretended, but that if the law under which the discharge was obtained, is valid, and the discharge is to have its effect, according to the provisions of that law, it is an effectual bar to any recovery against Ogden. But it is alleged, that this law is void, under the prohibition in the constitution of the United States (art. 1, § 10), which declares, that "no state shall pass any law impairing the obligation of contracts." So that the inquiry here is, whether the law of New York, under which the discharge was obtained, is repugnant to this clause in the constitution; and, upon the most mature consideration, I have arrived at the conclusion, that the law is not void, and that the discharge set up by the plaintiff in error is an effectual protection against any liability upon the bills in question. In considering this question, I have assumed, that the point now presented is altogether undecided, and entirely open for discussion. Although several cases have been before this court which may have a bearing upon the question, yet, upon the argument, the particular point now raised has been treated by the counsel as still open for decision, and so considered by the court, by permitting its discussion. Although the law under which Ogden was discharged appears, by the record, to have been passed in the year 1801, yet, it is proper to notice, that this was a mere revision and re-enactment of a law which was in force as early, at least, as from the year 1788, and which has continued in force from that time to the present (except from the 3d of April 1811, until the 14th of February 1812), in all its material provisions, which have any bearing upon the present question. To declare a law null and void, after such a lapse of time, and thereby prostrate a system which has been in operation for nearly forty years, ought to be called for by some urgent necessity, and founded upon reasons and principles scarcely admitting of doubt. In our complex system of government, we must expect that questions involving *the jurisdictional limits between the general and *294] state governments, will frequently arise; and they are always questions of great delicacy, and can never be met, without feeling deeply and sensibly impressed with the sentiment, that this is the point upon which the harmony of our system is most exposed to interruption. Whenever such a question is presented for decision, I cannot better express my views of the leading principles which ought to govern this court, than in the language of the court itself, in the case of Fletcher v. Peck, 6 Cranch 128: "The question (says the court) whether a law be void for its repugnancy to the constitution, is, at all times, a question of much delicacy, which ought seldom or ever be decided in the affirmative, in a doubtful case. The court, when impelled by duty to render such a judgment, would be unworthy of its station, could it be unmindful of the solemn obligation which that station imposes. But, it is not on slight implication, and vague conjecture, that the legislature is to be pronounced to have transcended its powers, and its acts to be considered void. The opposition between the constitution and the law should be such, that the judge feels a clear and strong conviction of their incompatibility with each other." If such be the rule by which the examination of this case is to be governed and tried (and that it is, no one can doubt), I am certainly not prepared to say, that it is not, at least, a Ogden v. Saunders. doubtful case, or that I feel a clear conviction that the law in question is incompatible with the constitution of the United States. [*295 In the discussion at the bar, this has rightly been considered a question relating to the division of power between the general and state governments. And in the consideration of all such questions, it cannot be too often repeated (although universally admitted), or too deeply impressed on the mind, that all the powers of the general government are derived solely from the constitution; and that whatever power is not conferred by that charter, is reserved to the states respectively, or to the people. The state of New York, when the law in question was passed (for I consider this a mere continuation of the insolvent act of 1788), was in the due and rightful exercise of its powers as an independent government; and unless this power has been surrendered by the constitution of the United States, it still remains in the state. And in this view, whether the law in question be called a bankrupt or an insolvent law, is wholly immaterial; it was such a law as a sovereign state had a right to pass; and the simple inquiry is, whether that right has been surrendered. No difficulty arises here out of any inquiry about express or implied powers granted by the constitution. If the states have no authority to pass laws like this, it must be in consequence of the express provision, "that no state shall pass any law impairing the obligation of contracts." It is admitted, and has been so decided by this court, that a state law, discharging insolvent debtors from their contracts, entered into antecedent to the passing of the law, falls within this clause in the constitution, and is void. In the case now before the court, the contract was made subsequent to the passage of the law; and this, it is believed, forms a solid ground of distinction, whether tested by the letter, or the spirit and policy of the prohibition. It was not denied on the argument, and I presume, cannot be, but that a law may be void in part and good in part; or, in other words, that it may be void, so far as it has a retrospective application to past contracts, and valid, as applied prospectively to future contracts. The distinction was taken by the court in the third circuit, in the case of Golden v. Prince (3 W. C. C. 313), and which, I believe, was the first case that brought into discussion the validity of a state law analogous to the one now under consideration. It was there held, that the law was unconstitutional, in relation to that particular case, because it impaired the obligation of the contract, by discharging the debtor from the payment of his debts, due or contracted for before the passage of the law. But it was admitted, that a law, prospective in its operation, under which a contract afterwards made might be avoided, in a way different from that provided by the parties, would be clearly constitutional. And how is this distinction to be sustained, except on the ground that contracts are deemed to be made in reference to the existing law, and to be governed, *regulated and controlled by its provisions? As the question before the court was the validity of an [*296 insolvent law, which discharged the debtor from all contracts, the distinction must have been made in reference to the operation of the discharge upon contracts made before, and such as were made after, the passage of the law, and is, therefore, a case bearing directly upon the question now before the That the power given by the constitution to congress, to establish uniform laws on the subject of bankruptcies throughout the United States, court. Ogden v. Saunders. does not withdraw the subject entirely from the states, is settled by the case of Sturges v. Crowninshield, 4 Wheat. 191. It is there expressly held, that "until the power to pass uniform laws on the subject of bankruptcies is exercised by congress, the states are not forbidden to pass a bankrupt law, provided it contain no principle which violates the 10th section of the first article of the constitution of the United States." And this case also decides, that the right of the states to pass bankrupt laws is not extinguished, but is only suspended by the enactment of a general bankrupt law by congress, and that a repeal of that law removes disability to the exercise of the power by the states; so that the question now before the court, is narrowed down to the single inquiry, whether a state bankrupt law, operating prospectively upon contracts made after its enactment, impairs the obligation of such contract, within the sense and meaning of the constitution of the United States. This clause in the constitution has given rise to much discussion, and great diversity of opinion has been entertained as to its true interpretation. Its application to some cases may be plain and palpable, to others more. doubtful. But so far as relates to the particular question now under consideration, the weight of judicial opinions in the state courts is altogether in favor of the constitutionality of the law, so far as my examination has extended. And, indeed, I am not aware of a single contrary opinion. (13 Mass. 1; 16 Johns. 233; 7 Johns. Ch. 299; 5 Binn. 264; 5 Hall's L. J. 530; 6 Ibid. 475; Niles' Reg. 15th of September 1821; Townsend v. Townsend, Peck 1.) In proceeding to a more particular examination of the *true import *297] of the clause "no state shall pass any law impairing the obligation of contracts," the inquiries which seem naturally to arise are, what is a contract? what its obligation? and what may be said to impair it? As to what constitutes a contract, no diversity of opinion exists; all the elementary writers on the subject, sanctioned by judicial decisions, consider it briefly and simply an agreement in which a competent party undertakes to do, or not to do, a particular thing; but all know, that the agreement does not always, nay, seldom, if ever, upon its face, specify the full extent of the terms and conditions of the contract; many things are necessarily implied, and to be governed by some rule not contained in the agreement; and this rule can be no other than the existing law when the contract is made, or to be executed. Take, for example, the familiar case of an agreement to pay a certain sum of money, with interest. The amount, or rate of such interest, is to be ascertained by some standard, out of the agreement, and the law presumes the parties meant the common rate of interest established in the country where the contract was to be performed. This standard is not looked to for the purpose of removing any doubt or ambiguity arising on the contract itself, but to ascertain the extent of its obligation; or, to put a case more analogous, suppose, a statute should declare generally, that all contracts for the payment of money should bear interest, after the day of payment fixed in the contract, and a note, where such law was in force, should be made payable in a given number of days after date. Such note would surely draw interest from the day it became payable, although the note upon its face made no provision for interest; and the obligation of the contract to pay the interest would be as complete and binding as to pay Ogden v. Saunders. the principal; but such would not be its operation, without looking out of the instrument itself, to the law which created the obligation to pay interest. The same rule applies to contracts of every description; and parties must be understood as making their contracts with reference to existing laws, and impliedly assenting that such contracts are to be construed, governed and controlled, by such laws. Contracts, absolute and unconditional *upon their face, are often considered subject to an implied condition which [*298 the law establishes as applicable to such cases. Suppose, a state law should declare, that in all conveyances thereafter to be made, of real estate, the land. should be held as security for the payment of the consideration-money, and liable to be sold, in case default should be made in payment: would such a law be unconstitutional? And yet it would vary the contract from that which was made by the parties, if judged of by the face of the deed alone, and would be making a contract conditional, which the parties had made absolute, and would certainly be impairing such contract, unless it was deemed to have been made subject to the provisions of such law, and with reference thereto, and that the law was impliedly adopted as forming the obligation and terms of the contract. The whole doctrine of the lex loci is founded on this principle. The language of the court, in the third circuit, in the case of Camfranque v. Burnell, 1 W. C. C. 341, is very strong on this point. Those laws, say the court, which in any manner affect the contract, whether in its construction, the mode of discharging it, or which control the obligation which the contract imposes, are essentially incorporated with the contract. itself. The contract is a law which the parties impose upon themselves, subject, however, to the paramount law-the law of the country where the contract is made. And when to be enforced by foreign tribunals, such tribunals aim only to give effect to the contracts, according to the laws which gave them validity. So also, in this court, in the case of Renner v. Bank of Columbia, 9 Wheat. 586, the language of the court is to the same effect, and shows that we may look out of the contract, to any known law or custom, with reference, to which the parties may be presumed to have contracted, in order to ascertain their intention, and the legal and binding force, and obligation of their contract. The Bank of Columbia v. Okely, 4 Wheat. 235, is another case recognising the same principle. And in the case of Dartmouth College v. Woodward, Ibid. 695, it is well observed by one of the judges of this court, "that all contracts recognised as valid in any country, obtain their obligation and construction jure loci contractus." And this doctrine is universally recognised, both in the [*299 English and American courts. If contracts are not made with reference to existing laws, and to be gov erned and regulated by such laws, the agreement of parties, under the extended construction now claimed for this clause in the constitution, may control state laws on the subject of contracts altogether. A parol agreement for the sale of land is a contract, and if the agreement alone makes the contract, and it derives its obligation solely from such agreement, without reference to the existing law, it would seem to follow, that any law which had declared such contract void, or had denied a remedy for breach thereof, would impair its obligation. A construction involving such consequences is certainly inadmissible. Any contract, not sanctioned by existing laws, |