Thus the extinction of the second Bank of the United States by State legislation appeared to be inevitable. The past management of it had well deserved this fate; but earnest efforts were now in operation to recover it from former blunders and to retrieve its fortunes. The period of corruption was over, and a new, able, and honest management was about to take charge. If, however, the States could destroy this National fiscal agency, it mattered not how well it might thereafter be conducted, for nothing could be more certain than that the local influence of State banks always would be great enough to induce State Legislatures to lay impossible burdens on the National Bank.
Such, then, was the situation that produced those opinions of Marshall on insolvency, on contract, and on a National bank, delivered during February and March of 1819; such the National conditions which confronted him during the preceding summer and autumn. He could do nothing to ameliorate these conditions, nothing to relieve the universal unhappiness, nothing to appease the popular discontent. But he could establish great National principles, which would give steadiness to American business, vitality to the National Government; and which would encourage the people to practice honesty, prudence, and thrift. And just this John Marshall did. When considering the enduring work he performed at this time, we must have in our thought the circumstances that made that work vitally necessary.
One of the earliest cases decided by the Supreme Court in 1819 involved the Bankrupt Law of New York. On November 25, 1817, Josiah Sturges[593] of Massachusetts sued Richard Crowninshield of New York in the United States Circuit Court for the District of Massachusetts to recover upon two promissory notes for the sum of $771.86 each, executed March 22, 1811, just twelve days before the passage, April 3, 1811, of the New York statute for the relief of insolvent debtors. The defendant pleaded his discharge under that act. The judges were divided in opinion on the questions whether a State can pass a bankrupt act, whether the New York law was a bankrupt act, and whether it impaired the obligations of a contract. These questions were, accordingly, certified to the Supreme Court.
The case was there argued long and exhaustively by David Daggett and Joseph Hopkinson for Sturges and by David B. Ogden and William Hunter for Crowninshield. In weight of reasoning and full citation of authority, the discussion was inferior only to those contests before the Supreme Bench which have found a place in history.
On February 17, 1819, Marshall delivered the unanimous opinion of the court.[594] Do the words of the Constitution, "Congress shall have power ... to establish ... uniform laws on the subject of bankruptcies throughout the United States" take from the States the right to pass such laws?
Before the adoption of the Constitution, begins Marshall, the States "united for some purposes, but, in most respects, sovereign," could "exercise almost every legislative power." The powers of the States under the Constitution were not defined in that instrument. "These powers proceed, not from the people of America, but from the people of the several states; and remain, after the adoption of the constitution, what they were before, except so far as they may be abridged" by the Nation's fundamental law.
While the "mere grant of a power to Congress" does not necessarily mean that the States are forbidden to exercise the same power, such concurrent power does not extend to "every possible case" not expressly prohibited by the Constitution. "The confusion resulting from such a practice would be endless." As a general principle, declares the Chief Justice, "whenever the terms in which a power is granted to Congress, or the nature of the power, required that it should be exercised exclusively by Congress, the subject is as completely taken from the state legislatures as if they had been expressly forbidden to act on it."[595]
John Marshall
From the bust in the Court Room of the United States Supreme Court
Does this general principle apply to bankrupt laws? Assuredly it does. Congress is empowered to "establish uniform laws on the subject throughout the United States." Uniform National legislation is "incompatible with state legislation" on the same subject. Marshall draws a distinction between bankrupt and insolvency laws, although "the line of partition between them is not so distinctly marked" that it can be said, "with positive precision, what belongs exclusively to the one, and not to the other class of laws."[596]