Ogden v. Saunders
Encyclopedia
Ogden v. Saunders, 25 U.S. 213
(1827), was a United States Supreme Court
case that determined the scope of a bankruptcy law in contrast to a clause of the Constitution of the United States. It was the only Constitutional decision from which Chief Justice John Marshall
dissented during his tenure on the court.
demanding payment in accordance with a contract
. Ogden was a citizen of Louisiana
who lived in New York
at the signing of the contract and claimed bankruptcy as a defense under a New York bankruptcy law passed in 1801.
Saunders was represented by Daniel Webster
, among others. Webster argued to the Court that the clause of the Constitution barring states from impairing the obligations of contracts is applicable not just to past contracts, but also to future contracts. Ogden's attorneys included Henry Clay
. The case was initially argued in 1824, and then again in 1827.
of the Constitution. It hinged on whether Congress
had exclusive power to pass bankruptcy
laws, which itself depended on what was meant by the clause prohibiting states from passing laws impairing the "obligations of contracts." The court's decision, authored by Justice Bushrod Washington
, found that the clause prevented states from passing only laws affecting contracts already signed; laws that affected future contracts were construed to become part of the contracts themselves. Since the statute was part of the conditions of any prospective contract, the parties to the contract were presumed to have considered the law in signing the contract; the obligation, then, incorporated the possibility of bankruptcy rather than being impaired by it. The other three Justices joining the Majority were William Johnson
, Smith Thompson
, and Robert Trimble
. However, there was also a secondary issue in the case, and on that issue Justice Johnson joined the three justices whom he had opposed regarding the main issue.
authored the dissenting opinion. He held that the Contract Clause gave the federal legislature the exclusive power over bankruptcy laws, rejecting the argument that state laws became part of contracts signed within the state thereafter. Marshall was joined in his dissent by Associate Justices Gabriel Duvall
and Joseph Story
.
Near the end of his opinion the Chief Justice recapitulates what is perhaps the central contention of his opinion:
"contracts derive their obligation from the act of the parties, not from the grant of government".
The Chief Justice in the course of his opinion uses the "will theory of contract".
The fact that the state may define how contracts can be formed, how defaults can be remedied, and even exclude from the outset certain types of contract, usurious ones for example, does not make contract a creature of the state.
The obligation of any particular contract is what the parties determine it to be.
Thus, if Ogden owes Saunders a certain amount in legal tender coin, it is not within the authority of the state, under the US Constitution,
to alter that obligation so that, for example, Ogden may simply hand over his property to Saunders in settlement of the debt.
This case was the only one in his long career when Marshall found himself on the losing side in a constitutional case. He took this opportunity to set forth his general principles of constitutional interpretation:
In his Ogden dissent, Marshall also adopted a definition of the word "law" that would later be denounced by the individualist anarchist Lysander Spooner
.
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1827), was a United States Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
case that determined the scope of a bankruptcy law in contrast to a clause of the Constitution of the United States. It was the only Constitutional decision from which Chief Justice John Marshall
John Marshall
John Marshall was the Chief Justice of the United States whose court opinions helped lay the basis for American constitutional law and made the Supreme Court of the United States a coequal branch of government along with the legislative and executive branches...
dissented during his tenure on the court.
Parties
Saunders was a citizen of KentuckyKentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
demanding payment in accordance with a contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
. Ogden was a citizen of Louisiana
Louisiana
Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...
who lived in New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
at the signing of the contract and claimed bankruptcy as a defense under a New York bankruptcy law passed in 1801.
Saunders was represented by Daniel Webster
Daniel Webster
Daniel Webster was a leading American statesman and senator from Massachusetts during the period leading up to the Civil War. He first rose to regional prominence through his defense of New England shipping interests...
, among others. Webster argued to the Court that the clause of the Constitution barring states from impairing the obligations of contracts is applicable not just to past contracts, but also to future contracts. Ogden's attorneys included Henry Clay
Henry Clay
Henry Clay, Sr. , was a lawyer, politician and skilled orator who represented Kentucky separately in both the Senate and in the House of Representatives...
. The case was initially argued in 1824, and then again in 1827.
Ruling
The main issue of the case was whether or not the New York law violated the Obligation of Contracts ClauseContract Clause
The Contract Clause appears in the United States Constitution, Article I, section 10, clause 1. It states:The Contract Clause prohibits states from enacting any law that retroactively impairs contract rights...
of the Constitution. It hinged on whether Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
had exclusive power to pass bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
laws, which itself depended on what was meant by the clause prohibiting states from passing laws impairing the "obligations of contracts." The court's decision, authored by Justice Bushrod Washington
Bushrod Washington
Bushrod Washington was a U.S. Supreme Court associate justice and the nephew of George Washington.Washington was born in Westmoreland County, Virginia, and was the son of John Augustine Washington, brother of the first president. Bushrod attended Delamere, an academy administered by the Rev....
, found that the clause prevented states from passing only laws affecting contracts already signed; laws that affected future contracts were construed to become part of the contracts themselves. Since the statute was part of the conditions of any prospective contract, the parties to the contract were presumed to have considered the law in signing the contract; the obligation, then, incorporated the possibility of bankruptcy rather than being impaired by it. The other three Justices joining the Majority were William Johnson
William Johnson (judge)
William Johnson was a state legislator and judge in South Carolina, and an Associate Justice of the United States Supreme Court from 1804 to his death in 1834.-Youth and early career:...
, Smith Thompson
Smith Thompson
Smith Thompson was a United States Secretary of the Navy from 1818 to 1823, and a United States Supreme Court Associate Justice from 1823 until his death in 1843....
, and Robert Trimble
Robert Trimble
Robert Trimble was an attorney, judge, and a justice of the United States Supreme Court.-Early life and family:...
. However, there was also a secondary issue in the case, and on that issue Justice Johnson joined the three justices whom he had opposed regarding the main issue.
Dissent
Chief Justice John MarshallJohn Marshall
John Marshall was the Chief Justice of the United States whose court opinions helped lay the basis for American constitutional law and made the Supreme Court of the United States a coequal branch of government along with the legislative and executive branches...
authored the dissenting opinion. He held that the Contract Clause gave the federal legislature the exclusive power over bankruptcy laws, rejecting the argument that state laws became part of contracts signed within the state thereafter. Marshall was joined in his dissent by Associate Justices Gabriel Duvall
Gabriel Duvall
Gabriel Duvall was an American politician and jurist.-Career:Born in Prince George's County, Maryland, Duvall read law to enter the Bar in 1778. He married Florence Adams Washburne , the daughter of General Henry Gilman Washburne and Florence Adams Washburne, on 1778...
and Joseph Story
Joseph Story
Joseph Story was an American lawyer and jurist who served on the Supreme Court of the United States from 1811 to 1845. He is most remembered today for his opinions in Martin v. Hunter's Lessee and The Amistad, along with his magisterial Commentaries on the Constitution of the United States, first...
.
Near the end of his opinion the Chief Justice recapitulates what is perhaps the central contention of his opinion:
"contracts derive their obligation from the act of the parties, not from the grant of government".
The Chief Justice in the course of his opinion uses the "will theory of contract".
The fact that the state may define how contracts can be formed, how defaults can be remedied, and even exclude from the outset certain types of contract, usurious ones for example, does not make contract a creature of the state.
The obligation of any particular contract is what the parties determine it to be.
Thus, if Ogden owes Saunders a certain amount in legal tender coin, it is not within the authority of the state, under the US Constitution,
to alter that obligation so that, for example, Ogden may simply hand over his property to Saunders in settlement of the debt.
This case was the only one in his long career when Marshall found himself on the losing side in a constitutional case. He took this opportunity to set forth his general principles of constitutional interpretation:
In his Ogden dissent, Marshall also adopted a definition of the word "law" that would later be denounced by the individualist anarchist Lysander Spooner
Lysander Spooner
Lysander Spooner was an American individualist anarchist, political philosopher, Deist, abolitionist, supporter of the labor movement, legal theorist, and entrepreneur of the nineteenth century. He is also known for competing with the U.S...
.