He enters upon an examination of the nature of insolvent laws which States may enact, and bankrupt laws which Congress may enact; and finds that "there is such a connection between them as to render it difficult to say how far they may be blended together.... A bankrupt law may contain those regulations which are generally found in insolvent laws"; while "an insolvent law may contain those which are common to a bankrupt law." It is "obvious," then, that it would be a hardship to "deny to the state legislatures the power of acting on this subject, in consequence of the grant to Congress." The true rule—"certainly a convenient one"—is to "consider the power of the states as existing over such cases as the laws of the Union may not reach."[597]
But, whether this common-sense construction is adopted or not, it is undeniable that Congress may exercise a power granted to it or decline to exercise it. So, if Congress thinks that uniform bankrupt laws "ought not to be established" throughout the country, surely the State Legislatures ought not, on that account, to be prevented from passing bankrupt acts. The idea of Marshall, the statesman, was that it was better to have bankrupt laws of some kind than none at all. "It is not the mere existence of the power [in Congress], but its exercise, which is incompatible with the exercise of the same power by the states. It is not the right to establish these uniform laws, but their actual establishment, which is inconsistent with the partial acts of the states."[598]
Even should Congress pass a bankrupt law, that action does not extinguish, but only suspends, the power of the State to legislate on the same subject. When Congress repeals a National bankrupt law it merely "removes a disability" of the State created by the enactment of the National statute, and lasting only so long as that statute is in force. In short, "until the power to pass uniform laws on the subject of bankruptcies be 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."[599]
Having toilsomely reached this conclusion, Marshall comes to what he calls "the great question on which the cause must depend": Does the New York Bankrupt Law "impair the obligation of contracts"?[600]
What is the effect of that law? It "liberates the person of the debtor, and discharges him from all liability for any debt previously contracted, on his surrendering his property in the manner it prescribes." Here Marshall enters upon that series of expositions of the contract clause of the Constitution which, next to the Nationalism of his opinions, is, perhaps, the most conspicuous feature of his philosophy of government and human intercourse.[601] "What is the obligation of a contract? and what will impair it?"[602]
It would be hard to find words "more intelligible, or less liable to misconstruction, than those which are to be explained." With a tinge of patient impatience, the Chief Justice proceeds to define the words "contract," "impair," and "obligation," much as a weary school teacher might teach the simplest lesson to a particularly dull pupil.
"A contract is an agreement in which a party undertakes to do, or not to do, a particular thing. The law binds him to perform his undertaking, and this is, of course, the obligation of his contract. In the case at bar, the defendant has given his promissory note to pay the plaintiff a sum of money on or before a certain day. The contract binds him to pay that sum on that day; and this is its obligation. Any law which releases a part of this obligation, must, in the literal sense of the word, impair it. Much more must a law impair it which makes it totally invalid, and entirely discharges it.
"The words of the constitution, then, are express, and incapable of being misunderstood. They admit of no variety of construction, and are acknowledged to apply to that species of contract, an engagement between man and man, for the payment of money, which has been entered into by these parties."[603]
What are the arguments that such law does not violate the Constitution? One is that, since a contract "can only bind a man to pay to the full extent of his property, it is an implied condition that he may be discharged on surrendering the whole of it." This is simply not true, says Marshall. When a contract is made, the parties to it have in mind, not only existing property, but "future acquisitions. Industry, talents and integrity, constitute a fund which is as confidently trusted as property itself. Future acquisitions are, therefore, liable for contracts; and to release them from this liability impairs their obligation."[604]
Marshall brushes aside, almost brusquely, the argument that the only reason for the adoption of the contract clause by the Constitutional Convention was the paper money evil; that the States always had passed bankrupt and insolvent laws; and that if the framers of the Constitution had intended to deprive the States of this power, "insolvent laws would have been mentioned in the prohibition."