A first debt is a first mortgage; a second debt is a second mortgage; a third debt is a third mortgage; and so on indefinitely.
The first mortgage must be paid in full, before anything is paid on the second. The second must be paid in full, before anything is paid on the third; and so on indefinitely.
When the mortgaged property is exhausted, the debt is cancelled; there is no other property that the contract binds.
If, therefore, a debtor, at the time his debt becomes due, pays to the extent of his ability, and has been guilty of no fraud, fault, or neglect, during the time his debt had to run, he is thenceforth discharged from all legal obligation.
If this principle were acknowledged, we should have no occasion, and no use, for insolvent or bankrupt laws.
Of course, persons who have never asked themselves what the natural "obligation of contracts" is, will raise numerous objections to the principle, that a legal contract binds nothing else than rights of property. But their objections are all shallow and fallacious.
I have not space here to go into all the arguments that may be necessary to prove that contracts can have no legal effect, except to bind rights of property; or to show the truth of that principle in its application to all contracts whatsoever. To do this would require a somewhat elaborate treatise. Such a treatise I hope sometime to publish. For the present, I only assert the principle; and assert that the ignorance of this truth is at least one of the reasons why courts and lawyers have never been able to agree as to what "the obligation of contracts" was.
In all the cases that have now been mentioned,—that is, of minors (so-called), married women, corporations, insolvents, and in all other like cases—the tricks, or pretences, by which the courts attempt to uphold the validity of all laws that forbid persons to exercise their natural right to make their own contracts, or that annul, or impair, the natural "obligation" of their contracts, are these:
1. They say that, if a law forbids any particular contract to be made, such contract, being then an illegal one, can have no "obligation." Consequently, say they, the law cannot be said to impair it; because the law cannot impair an "obligation," that has never had an existence.
They say this of all contracts, that are arbitrarily forbidden; although, naturally and intrinsically, they have as valid an obligation as any others that men ever enter into, or as any that courts enforce.