Smith v. Mead

Hosmer, Ch. J.

The first enquiry in this case, is, by what law the contract made between the parties is to be governed.

The promissory note was executed in Canada⅞ in discharge of an antecedent debt, and was made payable on demand. It is an established principle, that contracts are to be construed according to the laws of the state in which they are made, unless it is perceived from their tenor, that they were entered into with a view to the laws of some other state. Blanchard v. Russell, 13 Mass. Rep. 4 . Burrows v. Jemino, 2 Stra. 733. 3 Dall. 374 , in a note. Male v. Roberts, 3 Esp. Rep. 163. Thompson v. Ketcham, 4 Johns. Rep. 285. Smith v. Smith, 2 Johns. Rep. 235. Hicks v. Brown, 12 Johns. Rep. 142. Robinson v. Bland, 2 Burr. 1077. Powers v. Linch, 3 Mass. Rep. 77 . The note was not made payable in New-York, but, by legal consequence, in Canada, and was, immediately after its execution, sueable in the courts of that country. The preceding contract was extinguished; and the plea avers nothing in respect of the place where the note was to be paid. I do not say, that such an averment would be admissible ; but the discussion oT this question is unnecessary. 1 am clear, that the insolvent law of New-York, if it were valid, was not referred to, by the parties to the contract; and that the discharge under it is without any effect.

Another and much more interesting question has been argued ; and, as it fairly arises on the pleadings, although it is «not indispensibly necessary, I will express an opinion upon it.

The constitution of the United States declares, that no state *256 shall pass a law “ impairing the obligation of contracts.” Does the law of Mew- York fall within this prohibition 1

The obligation of a contract consists in that which a person has undertaken to perform. If he has agreed to pay a certain sum, at a specified period, “bis contract binds him to pay that sum, on that day; and this is its obligation.” A law lessening, or invalidating, the obligation of a contract, unquestionably impairs it. The above meaning and application of the expression “ impairing the obligation of a contract,” is too obvious to be reasonably questioned, and has been established by the authoritative exposition of the court of dernier resort in Sturges v. Crowninshield, 4 Wheat. Rep, 197.

The case just cited, and that of McMillan v. McNeill, in the same book, although not precisely parallel with the one before us, have conclusively settled the question under discussion. , In both the cases, the defendant pleaded in bar a discharge, obtained under “ an act for the benefit of insolvent debtors and their creditors,” passed by the legislature of New-York, on the third day of April, 1811. In the former case, the court adjudged in the following words, “ that since the adoption of the constitution of the United States, a state has authority to pass a bankrupt law, provided such law does not impair the obligation of contracts within the meaning of the constitution, and provided there be no act of Congress in force to establish a uniform system of bankruptcy conflicting with such law;” and, “that the act of New-York, which is pleaded in this case, so far as it attempts to discharge the contract on which this suit is instituted, is a law impairing the obligation of contracts within the meaning of the constitution of the United States ; and that the plea of the defendant is a good and sufficient bar of the plaintiff’s action.” And in the latter case, it was decided, “ that the circumstance of the state law, under which the debt was attempted to be discharged, having been passed before the debt was contracted, made no difference in the application of the principles, and was not distinguished from the preceding case of Sturges v. Crowninshield." It must be admitted, that the law of New-York, referred to in the cases cited, so far asrespects the question of unconstitutionality, is obnoxious to the same objections, and no other, as the more recent act is, under which the defendant obtained his discharge. I waive entering into a discussion of the points made in the preceding cases, which have been press *257 sed upon the court. Concurring, as I entirely do, with the reasoning and-opinion expressed in them, and considering it as the voice of the court entrusted to decide ultimately on the question before them, I deem it unnecessary to be mbre particular.

It has been argued, however, on the foundation of Blanchard v. Russell , decided before the cases in the supreme court of the United Slates, and of the more recent determination in Mather v. Bush, that a law, which'is in force whew a contract is made, cannot be said to have that effect, that is. “ of impairing the obligation of contracts “ forthe contract is presumed to be made in reference to it, and the parties are legally conusant of it at the time.” Blanchard v. Russell, 13 Mass. Rep. 16 . Mather & al. v. Bush, 16 Johns. Rep. 237. The principle is unquestionably correct; for it presupposes, an existing law, both in form and essence ; but the fallacy consists in the application of it to a case like the present. An act passed in opposition to the constitution of the United States, by the state of New-York, is no law ; it is void, a total nullity, and utterly unreal and unsubstantial, in the strictest sense of the expression. So far from being a rule of action, it literally is nothing. From such premises it seems impossible to imply any thing in opposition to the plain terms of an explicit Contract. The agreement is absolute; and shall it be varied, by an unconstitutional act, which, to every substantial intent, is a nonentity ? It is to pay a specific sum, without any qualification ; and may it be impaired, or invalidated, under the supposition, that the parties intended it ? . I cannot admit that an invalid act, which really is nothing, under the idea of its having been referred to, by silent implication, should be permitted to contravene the most plain and intelligible expression of the mind.

The defendant has contended, in this case, that the making a contract in the state of New- York, admitting the act to be constitutional, is in effect the same as if the agreement had explicitly referred to the act, or even recited it at length. To this proposition I cannot assent. If the parties to a contract should refer to a law of Great-Britain, so as to render it Obvious that they meant to incorporate it into their agreement, having recognized the law expressly, they would bind themselves by its provisions. But without this explicit reference, the law, as inefficacious here as an unconstitutional act, and no more, *258 would have effect. The proposition I would advance, is this, that an unconstitutional act of either of the United States, can no more, by inference, be considered as having been referred to, by contracting parties, than if it were a foreign edict, or law of Great-Britain. The parties are not to be presumed ignorant that the law is unconstitutional. They, then, must be supposed to know and estimate it, at its value, as being an act void and inefficacious ; and with this impression on their minds, it is difficult to conceive, that they should silently refer to it, in any other manner than by intelligible language.

On both grounds, I am of opinion that the defendant’s plea is insufficient, and that the plaintiff is entitled to judgment.

Peters, Chapman and Brainard, Js. were of the same opinion.