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Adams v. Storey

This objection goes only to such of these laws as affect antecedent contracts. It may very safely be assumed, that most, if not all of the insolvent laws of this country, fall within this description, and an interposition by the legislature in this way seems absolutely necessary, if not inevitable, wherever imprisonment for debt is allowed. Such laws cannot therefore be regarded as contrary to the first principles of the social compact, or opposed to those sound and wholesome rules of legislation which were intended to be preserved pure and inviolate by those who made the constitution. A power to pass such laws necessarily results from the antecedent state of things, and from the existence of a system, which, if left to itself, without occasional controls on the part of the legislature, would produce permanent individual distress and ruin, and to an extent, highly injurious, not only to the state itself, but to the very parties, who might, in the moment of passion or disappointment, resort to it as a mean of coercion. This attribute of sovereignty, for as such it is regarded by the Court, it was better that the states should retain, than to have relinquished it to the federal government. By the former it would be exercised within a less extended sphere, and of course with not so much danger of injury to the parties concerned, as if the same duty had been performed by the Congress of the United States.

If then the passing of laws affecting in this way, past as well as future debts, has been in use within this state ever since its independence, and for many years while a colony, and if such practice has not only been acquiesced in, but was absolutely necessary, may it not be fairly presumed that every contract within this state, or to be enforced here, is made under a full knowledge of such practice, which must now be deemed a perfect right; and that this being known and understood by both parties at the time, the creditor has no right to complain if his debtor shall one day be liberated by

Adams o. Storey.

virtue of an insolvent law which may be in force at the time of the contract, or which may be afterwards passed ; not from the obligation or payment of the debt; but from personal confinement, on condition of making payment as far as he is able ? · The Court has proceeded on a belief, that most, if not all, of the states had been in the habit of extending their insolvent laws to all debts without any regard to the time of contracting them. Time has not been afforded during a very busy term to examine the statutes of the different states, even if they had been within reach of the Court, to see if there were any exceptions. There may be some difference in these laws, as to the mode of proceeding, and in the effect of a discharge obtained under them. In some cases, the debtor is alone the actor in obtaining it; in others, a part of his creditors unite with him; by some again the person only is exonerated, either from all his creditors, or from those who have sued him. By others, all future acquisitions as well as the body are placed out of the reach of the creditors; but the principle on which they proceed is the same in all, that is, a right in the legislature to relieve insolvent debtors from imprisonment by some general law. The degree of interference is of no importance as it affects this question. Every kind of interference, however limited in degree, must, on the principle on which the plaintiffs rely, be a violation of the constitution. If these laws had been of the odious character which is now attached to them, is it not probable that at least some one state would have checked the further enacting of them by an article in the bill of rights prefixed to its constitution? No such limitation however is to be found, nor any expression bearing on the subject.

Referring those who may wish to pursue the inquiry for the laws of the other states on this subject to their several statute books, the Court will only notice some of those which have been passed by the colony and by the state of New-York. In 1755 a general act for the relief of insolvent debtors was

Adams v. Storey.

passed. In May, 1761, another passed requiring the assent of three-fourths of the creditors in value, which expired in 1770. From that time until 1784 no general system was in force, but many acts were occasionally passed for the relief of individuals. In 1784 a general system was again adopted similar to the one which had expired in 1770. In 1788, another general insolvent law passed. This was revived in 1801. In April, 1811, the law passed, under which the present discharge was obtained, which permitted the debtor alone to petition, without the concurrence of any creditor. In 1812, the last law was repealed, and the consent of three-fourths of the creditors again required. In 1813, the system now in force was adopted, which requires the co-operation of twothirds, instead of three-fourths, of the creditors. By not one of these laws are debts previously contracted, excepted from its operation. Let it also be remembered, that frequently as the attention of the council of revision of this state, composed of the Governor, Chancellor, and Judges of the Supreme Court, has been called to this subject, this objection has never occurred to them, watchful and able as they ever have been to discover and check every aberration in the legislature from a correct and constitutional course of duty.'

But if it be on account of their relation back, that insolvent laws are regarded as impairing the obligation of contracts, bankrupt laws are liable to the same objection; and such was the character of the only one which Congress ever passed. Now, although there be no constitutional restraint in terms, on that body, from passing laws interfering with private contracts, it is not to be presumed they would, knowingly, give their sanction to any act of this kind. Nor, even in passing a bankrupt law, would they have done it in a form liable to so serious an imputation, if they had believed they were impairing the obligation of contracts, especially as that power might have been exercised free from every objection of this nature. This is some

Adams v. Storey.

proof that laws of this description are not regarded by Congress as any violation of contracts, merely on account of their retrospective influence. The contract in truth remains in full force, while payment thereof by the policy and humanity of most civilized nations must, in case of misfortune, be sought for out of the estate of the debtor, who, as well as his future property, is, in general, released.

After all that has been said, the Court considers this question as one of considerable difficulty, and regrets that it has not yet received a decision at Washington, which would produce uniformity of judgment; at least in the Courts of the United States.

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But if these constitutional objections are removed, it is alleged, that the contract being made and being payable in Boston, cannot be affected by any discharge obtained under the laws of the state of New-York.

Under this head of argument the Court has been reminded of a rule, which, it is presumed, when properly understood, will be acknowledged by every one; that is, that the lex loci contractus must be resorted to, in order to ascertain the meaning of every agreement made abroad. This does not proceed from mere comity or courtesy towards other nations, but from the immutable principles of justice, which would be violated by applying to a foreign contract, when deciding on its obligation and effect, any other law than that of the place where it was made—sor how palpably unjust would it be for this Court to pronounce void, a bond executed at Canton and payable there, because by it should be reserved a greater interest, which might be lawful there, than seven per cent. per annum, which would render it usurious in this state? This is the meaning of the rule, and it is a salutary and just one. But out of it have arisen some dicta, which are ripening very fast into decisions of the most mischievous tendency, and between whicb and the

Adams v. Storey

rule itself it is difficult to perceive any connexion. It has been said that, as the nature and validity of a contract must be settled by the law of the place where it was made, so, also, it cannot be affected by any discharge of the debtor under the bankrupt or insolvent laws of the place where he resides, or of the country to which he belongs; or in other words, that a contract, made in a foreign state, and with a view to its code, can only be discharged pursuant to, that is, as the rule is now applied, under the bankrupt laws of such state. -Accordingly, suits have recently been maintained against bankrupts and insolvents, whenever they have been arrested by process out of the Court of any other state than the one in which they became so. Thus a citizen of Pennsylvania has not been permitted to sue in New-York a debtor who may reside, and have been liberated under a law of the latter state ; but if he can be found in Massachusetts, or elsewhere, his certificate, it is said, will be of no avail, provided the contract were made in Philadelphia, or elsewhere in the commonwealth of Pennsylvania. This is not exactly the case here, but as these decisions are supposed to have a considerable bearing on it, the Court will be expected to express an opinion on them. It has no hesitation in saying, that it considers them as forming part of a class of cases, which, it will one day be lamented should ever have found their way into the commercial code of this country. They appear to proceed on a misapprehension of the rights of independent nations; but principally on a mistake in applying the lex loci contractus, as well to the remedy, as to the construction and validity of the agreement, contrary to all the adjudged cases on this head. They maintain that a debtor can never, under any circumstances, be discharged against the will of his foreign creditors, if his contracts with them be made where they reside, and with a view to the laws of their country, by any proceedings under the insolvent laws of the state of which the debtor is a member, but only by a

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