Court Cases Cited Within This Web Site
Ogden v. Saunders, 25 U.S. (Wheaton) 213 (1827)
 

An action of assumpsit. Saunders originally filed suit against Ogden in the Circuit Court of the United States, located in Louisiana. Saunders, a citizen of Kentucky, had alleged that Ogden, a citizen of Louisiana, had failed to fulfill promises made under certain bills of exchange. The original bills had been drawn in Kentucky and at that time Ogden was a citizen of New York.

Ogden pleaded insolvency and that his debts had been discharged under New York state laws, and had a certificate of discharge as evidence.

A jury trial rendered a decision in favor of Saunders and the Supreme Court heard the case on a writ of error. The question brought before the Court was whether the New York law was repugnant to the Constitution of the United States based upon:

1. That the power of establishing ‘uniform laws on the subject of bankruptcies throughout the United States,’ was exclusively vested in Congress.

2. That the State laws in question were ‘laws impairing the obligation of contracts,’ the power of passing which was expressly prohibited to the States.

In essence, as Justice Johnson wrote for the majority, “The question now to be considered is, whether a discharge of a debtor under a State insolvent law, would be valid against a creditor or citizen of another State, who has never voluntarily subjected himself to the State laws, otherwise than by the origin of his contract.” 

The Court affirmed the lower court ruling and stated that insolvency laws enacted before a contract was signed were part of the agreement and therefore did not impair the obligations of the contract. Laws enacted after a contract was signed could not retroactively affect those contracts.

In his dissenting opinion, Chief Justice Marshal discussed the nature of people, contracts, and government. He noted that when forming governments people do not waive their right to enforce contracts. Indeed, that right is transferred to the political trust. The state of nature required that this right remained and could be waived only by the individual. But how to enforce the contract? That right to coercion is what is transferred to the government. The right to contract remains with the individual. Remedy to enforce the contract must be sought from the government.

Full Text: Ogden v. Saunders, 25 U.S. (Wheaton) 213 (1827)