territory be within the limits of an organized county of one of the United States.63

U. S. v. Forty-three Gallons of Whiskey, 93 U. S. 188. As to the term "Indian country," see Ex parte Crow Dog, 109 U. S. 556; U. S. v. Le Bris, 121 id. 278. The subject of the exercise by the states of their powers of taxation, and of police regulation, as affecting commerce, is more fully treated in other chapters of this book.

CHAPTER V.

THE IMPAIRMENT OF THE OBLIGATION OF CONTRACTS.

56. The prohibition affects only state laws.

57. The term "law" defined.

58. Judgments of state courts not conclusive either as to the non-existence or non-impairment of contracts.

59. The obligation of a contract defined.

60. Legislation as to remedies.

61. The term "contracts'' defined.

62. State insolvent laws.

63. Judgments as contracts.

64. Municipal taxation.

65. History of the prohibition.

66. State grants.

67. Express contracts of exemption from taxation.

68. Express grants of peculiar privileges.

69. Contracts between a state and its political subdivisions.

70. Implied contracts in charters of incorporation.

71. Implied corporate exemption from taxation.

72. Implied grants of peculiar privileges.

73. Exemption from the operation of the police power.

74. Contracts as to matters of public concern.

75. The withdrawal by a state of its consent to be sued.

76. The force and effect of the prohibition as construed by the Supreme Court.

The prohibition affects only state laws.

56. Section 10 of Article I of the Constitution declares that "no state shall . pass any law impairing the obligation of contracts." This prohibition does not in terms affect the exercise of legislative power by the government of the United States, and not only is there not in the Constitution any similar prohibition with regard to the United States, but by the grant of power to Congress, "to establish . . . uniform laws on the subject of bankruptcies throughout the United States," authority is ex

pressly conferred to impair the obligation of contracts between debtors and creditors; 2 and under the doctrine of the implied powers, as construed by the court, Congress may impair the obligation of contracts by authorizing the issue of notes which shall be a legal tender in satisfaction of antecedently contracted debts. The constitutional prohibition is likewise inoperative with regard to the acts of any political organization which at the time of the adoption of the act in question is not one of the United States; thus, the Constitution having, under the resolution of the Convention of 1787 and the Act of Congress of February, 1788, gone into effect on the first Wednesday of March, 1789, a statute enacted by the state of Virginia in 1788 was not affected by the constitutional prohibition.* So, also, a statute enacted by the republic of Texas before its admission into the United States as the state of Texas could not be held to be void for repugnancy to this clause of the Constitution.5

The term "law" defined.

57. The prohibition of the passage by a state of any "law impairing the obligation of contracts," would, if strictly construed, include under the word "law" only statutes enacted by state legislatures, but it has been determined that the word "law" comprehends, in addition to acts of legislation, state constitutions and constitutional amendments; judicial decisions of state courts of last

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2 Sturges v. Crowninshield, 4 Wheat. 122, 194. See also Hanover Nat. Bank v. Moyses, 186 U. S. 181, 188; 30 Stat. 544, c. 541; 32 Stat. 797, c. 487. Supra, Chap. II.

League v. De Young, 11 How. 185, 203. See also Scott v. Jones, 5 How. 343, 378.

R. Co. v. McClure, 10 Wall. 511; White v. Hart, 13 id. 646; Gunn v. Barry, 15 id. 610; County of Moultrie v. Rockingham T. C. S. Bank, 92 U. S. 631; Edwards v. Kearzey, 96 id. 595; Keith v. Clark, 97 id. 454; N. O. G. Co. v. L. L. Co., 115 id. 650; Fisk v. Jefferson Police Jury,

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resort, rendered subsequently to the making of the contract in question, and antecedently to the suit in which the court determines the invalidity of the contract, and altering by construction the constitution and statutes of the state in force when the contract was made; and, in general, any act or order, from whatever source emanating, to which a state, by its enforcement thereof, gives the force of a law; as, for instance, a by-law or ordinance of a municipal corporation, or a statute enacted by the congress of the Confederacy, and enforced during the war of the rebellion by a court of a state within the insurgent lines. Obviously the law, which is alleged to have impaired the obligation of the contract must have been enacted subsequently to the making of the contract, for a law enacted antecedently to the making of the contract can be said to have entered into, and become part of, the contract.10 The judgment of the state court in the cause,

116 id. 131; Shreveport v. Cole, 129 id. 36; Bier v. McGehee, 148 id. 137; Hanford v. Davies, 163 id. 273; H. & T. C. Ry. v. Texas, 170 id. 243.

'Gelpcke v. Dubuque, 1 Wall. 175; Havemeyer v. Iowa County, 3 id. 294; Chicago v. Sheldon, 9 id. 50; The City v. Lamson, ibid. 477; Olcott v. The Supervisors, 16 id. 678; Douglass v. County of Pike, 101 U. S. 677; County of Ralls v. Douglass, 105 id. 728; Pleasant Township v. A. L. I. Co., 138 id. 67; Loeb v. Columbia Township Trustees, 179 id. 472, 492; Wilkes County v. Coler, 180 id. 506. This doctrine was first suggested by Taney, C. J., who said, in O. L. I. & T. Co. v. Debolt, 16 How. 432: "The sound and true rule is, that if the contract when made was valid by the laws of the state, as then expounded by all the departments of its government and administered in its courts of justice, its validity and obligation cannot be impaired by any subsequent act of the legislature of the state or decision of its courts, altering the construction of the law;" and in Gelpcke v. Dubuque, 1 Wall. 206, Swayne, J., quoted the dictum of Taney, C. J., and declared it to be "the law of this court."'

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* Walla Walla v. W. W. W. Co., 172 U. S. 1; St. P. G. L. Co. v. St. Paul, 181 id. 142; Detroit v. D. C. S. R.. 184 id. 368.

Williams v. Bruffy, 96 U. S. 176; Ford v. Surget, 97 id. 594; Stevens v. Griffith, 111 id. 48.

10 L. W. Co. v. Easton, 121 U. S. 388, 391; Denny v. Bennett, 128 id. 489; Lake County v. Rollins, 130 id. 662; Pleasant Township v. A. L. I. Co., 138 id. 67; Brown v. Smart, 145 id. 454; Bier v. McGehee, 148

determining the particular contract to be invalid, cannot be said to be a law impairing the obligation of the contract, for otherwise the federal court of last resort would be called upon to "re-examine the judgments of the state courts in every case involving the enforcement of contracts." As Harlan, J., said, in L. W. Co. v. Easton,11 "The state court may erroneously determine questions arising under a contract, which constitute the basis of the suit before it; it may hold a contract to be void, which, in our opinion, is valid; it may adjudge a contract to be valid, which, in our opinion, is void; or its interpretation of the contract may, in our opinion, be radically wrong; but, in neither of such cases, would the judgment be reviewable by this court under the clause of the Constitution protecting the obligation of contracts against impairment by state legislation, and under the existing statutes defining and regulating its jurisdiction, unless that judgment in terms, or by its necessary operation, gives effect to some provision of the state constitution, or some legislative enactment of the state, which is claimed by the unsuccessful party to impair the obligation of the particular contract in question." 12 It must, therefore, appear in

id. 137; P. I. Co. v. Tennessee, 161 id. 193; G. & S. I. R. v. Hewes, 183 id. 66; Pinney v. Nelson, ibid. 144; D. G. Co. v. U. S. G. Co., 187 id. 611; O. W. Co. v. Oshkosh, 187 id. 437; Blackstone v. Miller, 188 id. 189. See also C., M. & St. P. Ry. v. Solan, 169 id. 133; K. W. Co. v. Knoxville, 189 id. 434.

11 121 U. S. 388, 392.

12 See also R. Co. v. Rock, 4 Wall. 177, 181; R. Co. v. McClure, 10 id. 511, 515; Knox v. Exchange Bank, 12 id. 379, 383; Delmas v. Ins. Co., 14 id. 661, 665; University v. People, 99 U. S. 309, 319; C. L. I. Co. v. Needles, 113 id. 574; N. O. W. W. v. L. S. Co., 125 id. 18; Kreiger v. Shelby R., ibid. 39; H. Bridge Co. v. Henderson City, 141 id. 679; St. P., M. & M. Ry. v. Todd County, 142 id. 282; Missouri v. Harris, 144 id. 210; Wood v. Brady, 150 id. 18; C. L. Co. v. Laidley, 159 id. 103; Hanford v. Davies, 163 id. 273; Turner v. Wilkes County Comrs., 173 id. 461; Wilkes County v. Coler, 180 id. 506; G. & S. I. R. v. Hewes, 183 id. 66; N. O. W. Co. v. Louisiana, 185 id. 336; N. M. B. & L. Assn. v. Brahan, 193 id. 635.