
    The Farmers’ & Mechanics’ Bank against Smith.
    
      Monday, March 31.
    The act of 13th March, 18J 2, was constitutional.
    The states have power to pass bankrupt laws as long as Congress does not legislate on the subject»
    A state bankrupt law is not a law impairing the obligation of contracts, within the spirit and meaning of the constitutions of the United States a<‘d state of Pennsylvania.
    Demurrer.
    THE defendant was sued as indorser of a promissory-note, which fell due in August, 1811. He pleaded in bar a certificate of discharge, under the act of assembly of this state, passed on the 13th March, 1812, entitled, “ An act for “the relief of insolvent debtors, residing in the city and “ county of Philadelphia, and their creditors.” To this plea the plaintiff demurred, assigning for cause of demurrer, 1st, that it was a law impairing contracts; 2d, that it was a bankrupt law, which the Congress of the United States, alone, can enact. The defendant joined in demurrer.
    This law was confined in its operation to the city and county of Philadelphia, and was repealed at the ensuing session of the legislature. It provided for the appointment of commissioners; of curators to take charge of the petitioner’s property ; and eventually of assignees, to whom all the petitioner’s property was to be assigned; and who were to distribute the same among the creditors. Certain acts of traders and others, authorised compulsory proceedings against them to ascertain their insolvency, and to enforce in that case a surrender of their property. On complying with the provisions of the act, a certificate was to be given to the insolvent which it was declared should discharge his person, and also should ube construed to discharge such insolvent “ from all debts and demands due from him, or for which he “ was liable at the date of such certificate, or contracted or “ originating before that time.”
    
      Wallace and Binney, for the plaintiff.
    The question is, whether the act of the 13th March, 1812, is not a violation of the constitution of the United States, and of the state of Pennsylvania.
    
    1. It is a bankrupt law. It discharges not merely the person, but the debt itself. By the constitution of the United States this power is given to Congress. Art. 1. sect. 8. provides, that Congress shall have power to “ establish uniform “laws on the subject of bankruptcies throughout the United “ States.” Congress have exclusive power in three cases ; 1. When expressly given. 2. When the power is given in general to the United States, and the individual states are expressly prohibited from the exercise of it. 3. Where the power of the individual states is incompatible with that given to the United States. The two first are evident. Under the last, fall naturalisation laws and bankrupt laws ; because the exercise of these powers by a state, would prevent uniformity throughout the United States. The constitution of the United States gives no power to the several states to-act, until Congress makes a law on the subject; there is no such distinction suggested. Federalist, Vol. i. No. 32. p. 227. No. 42. p. 325. No. 41. p. 305. Vol. ii. No. 82. p. 264.
    2. This law manifestly impairs contracts, and, therefore, violates the 10th sect, of the 1st art. of the constitution of the United States, which provides, that “ no state shall pass any “ law impairing the obligation of contractsand also, the provision of the 17th sect, of the 9th art. of the constitution of Pennsylvania, which declares, that “no ex post facto law, “ nor any law impairing contracts shall be made.” The United States are not prohibited from passing a law impairing contracts, because power is given to them to pass bankrupt laws. They cited the case of Golder v. Prince, decided in the Circuit Court of the United States, at Philadelphia, in April, 1814, by Judge Washington.
    
      
      Sergeant and Ingersoll, for the defendant.
    This law has been acted upon to a great extent, and has been acquiesced in by this Court in questions of bail, and others of frequent recurrence. If the law is now determined to be void, all that has been done under it is void: and the consequences would be pernicious in the extreme. It is^a well settled principle of our Courts, that no law will be declared unconstitutional, unless in a very clear case. 6 Cranch, 128. The objections to this law will be considered as they are stated.
    1. Is a bankrupt law made by a State, while there is no national bankrupt law in existence, void ? Practical construction on constitutional questions ought to have great weight; and several states, as for instance, New Tori, Rhode Island, and Maryland, have all passed bankrupt laws, while Congress had no such law. And this practical construction is right. All powers not delegated to the United States, or prohibited to the several states, are reserved to the latter, or to the people. Constitution of the United States, art. 9. sect. 10. 1 Federalist, No. 32. p. 201. Now the powers given to the United States, are exclusive only in two cases : 1. when expressly so given ; 2. where, from the nature of the case, they must be exclusive. In some cases where the constitution has given express powers to the United States, it has prohibited those powers to the states, for example, coining money, laying imposts on imports or exports, or engaging in war. Therefore, the principle is, that an affirmative power given to the United States, does not imply a negative to the states, unless the exercise of those powers by both, be incompatible ; and in such case, it is implied, that the states shall not exercise that power at the same time with the United States'. Congress are not compelled to pass a bankrupt law if it is in their opinion inexpedient; and if they do not, it is hard to see why the states may not. As soon, however, as they choose to do so, then the states are excluded. It is the opinion of Kent C. J. 9 Johns. 574i. that all power remains in the states not given to the United States in express terms, or by necessary implication. The states may go on to exercise the power, till it comes practically in collision with the laws of the United States. In the present case there is no collision. Thus Congress has power to fix the standard of weights and measures, but they have never done it. In the mean time the states do it. Congress has power > “ to provide for organising, arming, and disciplining the “ militia.” Yet the states exercise most of these powers, and Congress never has thought proper to pass laws for organising and disciplining the militia. On the subject of naturalisation, it is decided, that the states may exercise powers not repugnant to the laws of Congress. Collet v. Collet. In United States v. Vilatto,
      
       Judge Iredell thinks the power of naturalisation was exclusive in the United States, as soon as it was exercised by Congress. The act of Congress of 1802, declares that foreigners shall be naturalised, thus, and “ not otherwise.”
    2. Is this law void, as impairing contracts ? It cannot be. The construction contended for is too extensive. It would annul all acts of limitation, of insolvency, acts giving stay of execution, and for divorce ; in a word, every law which varies the situation of debtor and creditor. In 6 Cranch, 144, S. it seems thought by Johnson J. that the intent of the constitution in this provision, was to guard individuals against acts of state, passed in their own favour. It is not easy to define the extent or limits of this clause; but its spirit can never go to prohibit such laws, as, in sound legislation are deemed proper for the common good.
    
      Reply.
    
    We agree, that a case should be clear, in which a law is declared to be void. If there be doubt, the law must stand; but where it is clear, the constitution of the United States must be supported. Pennsylvania never passed a law, discharging the insolvent from his debts, till this act of 1812; and this was limited in its sphere of operation, and but of short duration. It must be considered as a bankrupt law. It is a close imitation of the English bankrupt laws, except that it is not confined to traders. We contend that contracts are impaired by it, and that the state has no power to pass a bankrupt law.
    1. What is impairing ? It is diminishing the force of the obligation. When a debt is discharged without payment, it is certainly impaired. Total dissolution, is impairing a fortiori. The case is certainly within the words of the constitution. If these words are to be limited, it lies on the adverse party to say how. It appears, too, to be one of the cases which the framers of the constitution had in view ; because, Congress is expressly authorised to legislate on the subject, and was not restricted, as the states were, from passing a law impairing contracts. The reason why this restriction was not imposed on Congress, was, because the convention knew that a bankrupt law did impair contracts. Judge Johnson’s opinion was in a case where he differed from a majority of the Court, and he did not pretend to give any accurate meaning to the words used in the constitution. But Marshall C. J. declares, that the words are general, and apply to contracts of every description. As to the cases of limitation acts, insolvent and divorce laws, and laws for stay of execution, they are not like the present. Acts of limitation, or for stay of execution, do not destroy the remedy altogether ; they are not in words, or spirit, impairing a contract.
    2. It is true, the practical construction may have been against us, though we are not well informed of the acts of other states. The constitutional question arose before Judge Story, but was not decided ; the case went off on another point. Gallison,s Rep. 371.
    
      
       2 Dali. 2Si.
      
    
    
      
      
        Ib. 370.
      
    
   Tilghman C. J.

I agree with the counsel for the plaintiff, in considering the act of assembly, on which the question in this case arises, as a bankrupt act. Such, it certainly is, in its nature, although confined in its operation, to a particular part of the state. It has the leading features of a bankrupt law; the discharge from all debts, in consideration of the surrender of the property of the debtor; and it possesses the details usually found in bankrupt laws, for carrying the main design into effect. The validity of this law is contested, as violating the constitution of the United States in two respects j tst, In assuming a power which has been exclusively vested in the Congress of the United States. 2. In impairing the obligation of contracts, contrary to the express prohibition of the 10th sect, of the 1st art. of the constitution.

1. Congress has power, “to establish uniform laws on “the subject of bankruptcies, throughout the United States,” Constitution, art. 1. sect. 8. Hence it is contended, that no state has power to pass a law on the subject of bankruptcy. There would be great strength in this argument, if Congress had exercised their power, by passing a bankrupt law; because then, the uniformity which they were authorised to es» tahlish, would be broken in upon, by the act of an individual state. But it is to be considered, whether the power of Con- » • « * gress is exclusive, even when they do not think proper to ex~ ercise it; for thus the matter is at present circumstanced. Antecedent to the adoption of the Federal constitution, the power of the several states was supreme and unlimited. It follows, therefore, that all power, not transferred to the United States, remains in the states and the people, according to their several constitutions. This would have been the sound construction of the constitution, without amendment. But the jealousy of those, who feared that the federal government would absorb all the power of the states, caused it to be expressly recognised in the 11th and 12th articles of amendment. Supposing, then, that there has been ceded to Congress, the exclusive power to regulate the subject of bankruptcy, whenever they shall think it expedient to exercise it, is it to be inferred, that the states have debarred themselves from all exercise of power on the same subject, when Congress do not think it expedient to act ? I can perceive no just ground for the inference. The exercise of this power by the states, under such circumstances, could have no interference with the power delegated to Congress, and it would present a situation of things, very ill suited to the commercial habits of many of the states. For, such are the hazards, to which those who engage in trade and commerce, are unavoidably exposed, that, I believe, it has been found necessary, in all commercial countries, to relieve the unfortunate from the burthen of their debts, upon the surrender of all their property. There seem to be but three cases, in which the several states have no power to legislate. 1. Where they are expressly prohibited. 2. Where exclusive power is expressly vested in the United States. 3. Where the power vested in the United States is, in its nature, exclusive. The subject of bankruptcy does not fall within the first or second of those cases. And if it falls within the third, it is only during those times in which Congress exercise their power on the same subject. The states are not to be divested of their power by inferences, unless the inferences be inevitable. Now, that is not the case here. On the contrary, the power contended for, on behalf of the states, is in perfect harmony with the power granted to Congress; a power to legislate, on a subject of necessity, at a time when Congress do not think it expedient to act. I think the constitution has received a practical construction on this point, although I know that the weighty opinion of Judge Washington has lately been pronounced to the contrary, (Golder v. Prince, April, 1814, in the Circuit Court of the United States, at Philadelphia.) But to that opinion, is opposed the strong argument of the Supreme Court of New York, in Livingston v. Van Ingen, in which it was adopted as a principle, that in cases where power is affirmatively vested in Congress, and not expressly taken away from the states, they may go on to legislate, until their laws come in collision with the acts of Congress. By practical construction, however, I do not mean judicial decision, but practice sanctioned by general consent. In the same section of the constitution from which Congress derive their power to establish an uniform system on the subject of bankruptcies, they have also given to them the power of fixing the standard of weights and measures. This they have never done, but the states have regulated them at their pleasure, and I believe, without question. In the same section also, there is granted to Congress, the power to provide for organising, arming, and disciplining the militia ; and yet all the states have passed laws on those subjects, much to the public benefit, and in harmony with the acts of Congress. From all these considerations, although I will not sav that a case admits of no doubt, in which men of great talents have doubted, yet I have no hesitation in giving it as my opinion, that the act of assembly in question is valid, unless it can be brought within the prohibition of the constitution, which relates to the impairing of the obligation of contracts.

2. It cannot be denied, that, taking the words, in their literal, and fullest extent, contracts are impaired by a bankrupt law. But conventions, intended to regulate the conduct of nations, are not to be construed as articles of agreement at common law. It is of little importance to the public, whether a tract of land belongs to A, or B. In deciding their titles, strict rules of construction may be adhered to — > and it is best that they should be adhered to, though sometimes at the expense of justice, because certainty of title is thereby produced, and individual inconvenience is richly compensated by general good. But where multitudes are affected by the construction of an instrument, great regard should be paid to spirit, and intention. In deciding this question, then, it will be important to consider the situation of the United States at the time of framing their present constitution, and the probable intent of the makers. ' The commercial states had a great preponderance, and it was the interest of commerce, which led to the calling of that convention which formed the constitution. It is not going too far, to assume, that a bankrupt law was thought indispensable; because it is expressly provided for. Yet, it could hardly be unknown to the members of the convention, that in constructing a system, to pervade every part of the union, there would be great difference of opinion, and, probably, great delay. So it has turned out.

It was not until 13 years after the constitution went into operation, that a bankrupt act was passed by Congress. When passed, it continued but five years, and ever since the states have been left to act for themselves. Now, it ought not to> be supposed, unless clearly expressed, that the states were to be without bankrupt laws, during those periods in which Congress did not think proper to make them. Especially, as the convention had the matter directly before them, and had given power on the subject to Congress, in express terms. Why were not the states restrained from the exercise of this power, in terms equally express, if it was really the intent to restrain them ? It must not be imagined, that it was in contemplation, to cover a secret meaning under expressions of general and doubtful import. I presume, it will hardly be contended, that the words, impairing the obligation of contracts, are to be understood in their greatest extent. If they are, the consequences are alarming. For, all acts inspecting divorce, all acts of limitations, all acts by which private property has been taken for public use, or for the use of chartered companies, for roads, canals, &c. would be void; because, in all those cases, contracts are impaired. It would be questionable too, whether all insolvent laws, discharging the person of debtor from imprisonment, would not be void. Because these laws deprive the creditor of one very powerful engine For enforcing payment; an engine which operates on the feelings of friends and relations, and often extorts payment where debtors have no property of their own. So that although the contract is not immediately impaired, yet the m< ans of enforcing it are lessened ; and when this is done, subsequently to the making of the contract, it places the ereditor on a worse footing than that on which it was by both parties intended that he should stand, when the contract was made. The same remarks will apply to laws giving a stay of execution, after judgment; for by those, contrary to the intent of the parties, the creditor is kept out of his money.

I believe all the states have passed insolvent laws, and Congress has passed one, for the district of Columbia, the validity of which has never been questioned. This act was not made under the express power given to Congress to pass a bankrupt law, (because that was to be general and uniform, throughout the Union), but under the power vested in them, to legislate for the district of Columbia. Had it been thought that an insolvent law, was the impairing of a contract, within the meaning of the constitution, we can hardly suppose, that Congress would have passed one for Columbia, although not prohibited expressly by the constitution; because, to say the least of it, it would have been setting a very bad example.

But, it may be asked, by what rule shall the meaning of these words “ impairing the obligation of contracts,” be restricted or limited, if they are not taken in their full extent ? I confess, that to lay down a rule which would decide all cases, appears to me to be very difficult, perhaps impossible. One may be certain, that particular cases are not within the meaning of a law, without being able to enumerate all the cases that are within it. To attempt such enumerations, is unnecessary and dangerous, lest some should be omitted. It is safer to decide on each case, as it arises. It is probable, that, so far as respects contracts between individuals, the principal mischiefs which the convention meant to remedy, were those which arose, from tender laws, and laws by which creditors who sued for their debts, were compelled to take property upon an appraisement. Tender laws, are expressly mentioned; yet they would have been included in the general words, for they certainly alter the obligation of the contract. Laws of this kind, impair the contract, by giving an advantage t© the debtor, without any consideration in favour of the creditor. Bankrupt laws are essentially different. They afford, in many instances, advantages to both debtor and creditor; the debtor's discharged, on condition of surrendering his property, without delay, for the benefit of his creditors. The creditor is often a great loser. But he is sometimes a gainer,, by the means which are offered him of compelling the debtor to a full discovery of his property, and obtaining possession, of it, more quickly than in the usual course of law. The bankrupt system has been adopted in countries the most tenacious of the right of creditors, of which England and Holland are' an example, so that without straining, it might be considered as an excepted case, when “ laws impairing the obligation of contracts,” were mentioned. So it seems to have struck both individuals and public bodies, about the time of the adoption of the Federal Constitution. I well remember, that very soon after its adoption the subject was brought before the legislature of Maryland, upon the petition of a gentleman who prayed to be discharged from his debts on the surrender of his property for the benefit of his creditors. Several members of that legislature had been in the convention by which the Constitution had been recently formed. Doubts were entertained as to the right of the state to pass the law; but the prevailing opinion was in favour of the right, and the petition was granted. From that time to this, Maryland has been in the habit of making such laws. I am not exactly informed how many other states have followed her example ; but I understand that Rhode Island and New York are among the number. Judicial decision is not wanting in favour of such right. Judge Washington, as I have mentioned, is against it. The Supreme Court of New York were for it, in the case of Penniman v. Megs, 9 Johns. 325. This Court has never decided directly upon the point; but they have discharged, without bail, where persons have been sued here, who had been discharged from the obligation of their contracts by laws of other states. I refer to the cases of Hilliard & Pippet v. Greenleaf 5 Binn. 336, in a note, and Boggs, &c. v. Teackle, 5 Binn. 332. We are now called upon to decide whether an act of assembly of this Commonwealth be void, because of its violating the Constitution of the United States. That this Court possesses the power, and that it is bound in duty, to declare a law void, when it violates the Const!tution of this state or of the United States, has not been denied by the counsel for the plaintiff. It is a point on , . , _ ,, . . , . , . . . . which I am well satisfied ; but at the same time it is certain, that it is a power of high responsibility, and not to be exercised but in cases free from doubt. Such has been the opinion frequently expressed by Judges of the highest respectability in different states, and sanctioned by the Supreme Court of the United States. I will not pretend to say, that the meaning of that part of the Constitution, on which this question arises, is clear. But I may safely say, that it is doubtful. According to the established principles of construction, therefore, in doubtful cases, I am of opinion that the law of the state is valid. It follows, that judgment should be entered for the defendant.

I am authorised to say, and I say it with great pleasure, that my brother, Duncan, is of the same sentiment as the rest of the Court, although he gave no formal opinion, not having heard the argument.

Gibson J. declared that he concurred in the opinion of the Chief Justice very fully*.

Judgment for the defendant.  