‘The Contract Clause and the Evolution of American Federalism, 1789-1815 Steven R. Boyd William and Mary Quarterly, Third Series, Volume 44, Issue 3, The Constitution of the United States (Tul., 1987), 529-548. Stable URL: Lhutp:flinks,jstor-org/sici?sici~0043-5597% 281981072923 A44%3AI%GICSI9GIATCCATES3E2.0.CO%3B2-T ‘Your use of the ISTOR archive indicates your acceptance of ISTOR’s Terms and Conditions of Use, available at up: srw jstor org/aboutterms.html. ISTOR's Terms and Conditions of Use provides, in part, at unless you have obtained prior permission, you may aot download an entite issue of a journal or multiple copies of articles, and ‘you may use content in the ISTOR archive only for your personal, non-commercial use Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the sereen or pfinted page of such transmission. Willan and Mary Quarterly is published by Omonundio Institute of Early American History and Culture. Please contact the publisher for further permissions regarding the use of this work. Publisher contact informacion may be ‘obtained ac hip: / ww jstor.org/jouralsiomohundro hia William and Mary Quarterly ©1987 Omohundro Institute of Barly American History and Culeure ISTOR and the JSTOR logo are trademarks of JSTOR, and are Registered in the U.S, Patent and Trademark Otic. For more information on ISTOR contact jstor-nfo@umnich edu, (©2003 JSTOR hup:thewwjstor orgy “Tue Fan 14 13:30:53 2003The Contract Clause and the Evolution of American Federalism, 1789-1815 Steven R. Boyd hat no state "shall enter into any Treary, Alliance, or Confeder- tion, grane Letters of Marque and Reprisal; coin Money; emic Bills of Credie, make any Thing but gold and silver Coin a Tender in Payment of Debs, pass any Bill of Atzainder, ex post facto Law, or Law impairing che Obligation of Contracts, or grant any Title of Nobility.” One portion of that section, the prohibition on states passing laws that irapair che obligation of contracts, has proven particulaely important ia American constitutional history and in che development of American federalism.t Few men at che time of the adoption of the Constication foresaw this ccucial roie for the contract clause. Ir attracted litle comment during the ratification debace, while those who did consider it usually linked ie with ehe companion prohibition on bills of credit or the ban on “any Thing but gold and silver" being made “a Tender in Payment of Debes."? They made this connection because during the Confederation debtors in some states used depreciated paper money © pay their obligations. This action, sanctioned by various states chat declaced their A RTICLE [, Section 10, of the Uniced States Constitution declares Me, Bayd is aa associate professor af history ar the Universiey of Texas a¢ San. Antonio, He wishes co thank Robest Becker, Jauies Broussard, John P. Kaminski, and Sandra Van Burkleo for assistance ia preparing this article >The standard work on che contract clause is Benjaruia Fletcher Wright, Toe Contract Clause of the Constituren (Cambridge, Mass, (938). Forrest McDonald's Novis Ordo Selorum The intellectual Origins of the Constitution (Lasvreace, Kaa, 1985}, esp. 270-273, focuses on che Caastisurianal Convention and the question ‘of che auchorstip of the clanse. On che developmear of the clause ducing the eael¥ natianal period see, in aediion ra Weigh, Peter Magrich, Viazon Laur and Politics inv the New Republi: The Cate of Pustcher «. Beck (Providence, RL, 1968). On. federalism see Marin Diamoad, “What che Framers Meane by Federalise,” io Robere A. Goldwin, ed., A Nation of State: Biays gn the Amusican Fadoral Systeme (Chicago, 1963) See, for exumple,A Citizen of Philadelphia" [Pelacah Webster), “Remarks on the Addeess of Sixteen Members,” io Merrill Jensen, Jota P. Kaminski, and Gaspase J. Salading, eds, The Decamencary History of the Rasifcation of the Consstuston (Madison, Wis., 6976- XII, 302, hereafcer cited as Fatony of Ratification530 WILLIAM AND MARY QUARTERLY paper issues (0 be legal cendes, was part of a broad pattern of stare interference in private conuacts? The proponents of constitutional change argued chat such policies were unjust, iniquitous, and unaccept- able In fact, opposition to debrar-ariented state policies was a major factor in the call for che Federsl Convention. [n the fall of 1787 James Madison advised Thomas Jefferson hac the “mutability of the laws of the Seates,” especially laws involving paper emissions and affecting contrects, “contcib- uced more (0 that uneasiness which produced che Convention, snd prepared the public mind for a general reform” chan any other single source.* James Wilson lacer declared on the foot of the Pennsylvania stare convendon, “If oaly che following lines [including che contract clause] were insezted in chis Constieucion, | think it would be worth our adopcion."® Historiaas generally have agreed with Madison that the staves’ economic policies plaved an importane role in the decision to call the convention. Charles A. Beard, for example, declared thac “of the forces which crested the Constieatian, those property interests seeking protection against omnipotent legislauuces wece the most active."® Beard concluded, citing Madison as well as Alexander Hamilton and Joha Marshell, thac che contract clause was “designed to bring under the ban substantially ali legislation which affected personaly adversely."” Merril! Jensen and Forrest McDonald shared Beard’s view, Both stressed che importance che framers aeached to the prevention of such stace legislation and che rale of the contract clause in accomplishing that end.” Indeed, with the exception of Benjamin Fletcher Weighc, who demonstrated that Chief Justice Marshal's expansion of the clause to include public contracts ear councer (othe expectations of some of the framers, most historians have assumed that the federal courts’ interpretation of the contract clause realized the feamers’ incentions.® The brief discussion of che clause during the ratif- ‘cation debate, because it did not explicitly conteadice this ides, seems co reinforce the peevailing interpretation, “Allan Nevis, The American States daving and after the Revolusion, ©775-1789 New York, 1324), "Madison t0 Jefferson, Oct. 24, Nov. 1, ¢781, in History of Ravifeation, XM, 407. "Thad, I, 500. The lines, which included dhe coatcace clause, were “No state shall hetentcee emit bull f eedst; make any thing bue gold 204 silver coin, a fender in payonens of debes; pats any bills of acasnder, ex post facta law, oF Jato imparring the ebligation of onsvaces" (hid “Beard, Aa Economfc Enierprtation of the Constitution of the United States (New York, £913) 178 "ibid, 1. ‘Jensen, The Making af the American Constitution (New York, 1964}, 97; McDonald, £ Plaritus Unam: The Formation of the Amorican Republi, 1776-1790 (Boscon, 1965), 186-087. *Wrighe, Conssaet Clouse, hap.‘THE CONTRACT CLAUSE 531 If, however, one examines the early history of the contract clause from the Consticutional Convencion chrough the ratification debates and into the inital legislative, executive, and judicial interpretations, a far more complex pictuce emerges. Federalists and Antifederalises held a wide range of opinions aboue the meaaing of the clause. Forthermore, ducing the first quarter century under che Constiaution ao one idea of the meaning of the clause held sway. Instead, state legislatures pursued a variety of contradictory policies. These polices in cura illustrate chat chere was no siagle, moaolichic intent of che framers, The men who wrote che Constitution, like dhe men who adopced aad implemented ic, held a vast range of ideas (including, some of them, no opinion at all) of what the various parts of che Constitution meant. The initial accempts «0 bring sveaning to the ianguane of the document cook place, for issues related to the contract clause, in the states and caly secondacily in the federal coucts. Furthermore, within che states all chree branches of government grappled with notions of the meaning of the clause prevaiene in each state. In acting upon these conficting concep- ions, staze policymakers also sought co establish their conception of proper federal stace relations. The ultimate confgucation of the system of federalism, which Madison insisted was acither wholly national nor wholly federal, lay in the balance as state policymakers debaced the resniag of the conerace clause, The clause meant differcae things co different men in 1787-1788 and throughout the carly national period. To Federalist William Gardoer, a Portsmouth, New Hampshire, mecehant, it meant that the election of "ancicommercial” and “dogmaticat” Antifederalists ro the stave legislatures was of litle consequence. The “wings of the legislatuce” had been “preity ‘well clipped,” he advised Nicholas Gilman, a New Hampshire Fedecalis, former member of the Consticucional Convention, and lacer a member of the First Congcess. Once the “much wished for federal government" was set in "modion,” « would ender the stave legislatures impotent, cheie “vafic" members incapable of inflicting damage.'® Six weeks later, William R. Davie, who had served as one of North Carolina's delegates co che Federal Convention, offered a far difierenc notion of the meaning of the clause. At the North Carolina convention, during a discussion of the paper money provision of Articie I, Section 10, he insisted chac che clause would noc affect chat stace’s existing paper money or public securities. The clause applied, be assured the delegaces, “merely to contracts beeween individuals.” le was chis eiced meaning, Davie added, char made the clause che “best in che Consticucion."'t Alchouh Gatdner and Davie agreed an the meric of the concract clause, their understandings of it varied enormously. Gardner praised the Con *Gardoer «0 Gillman, June 14, 1788, Gesdner Papers, New-York Hiscorical Sociery, New York City. ' Max Farcend, ed, The Records of the Paderal Convantion of 0287.4 vals. rev. ed, eNew Haven, Cann, £437) Il, 350.532 WILLIAM AND MARY QUARTERLY stitution because ic materially cesteicted the power of the state legislatures. Davie, om the ocher hand, insisced that the clause applied only co private contracts, leaving the seace legislatures free co act in a broad range of areas. This ambiguity was in pare a resuie af che way io which the contract clause became 4 part of the Constitution. When delegates 10 the Federal Convention assembled in May 1787, none of che resolutions the considered resembled Avccle I, Section 16. The Vieginia Plan, which formed the basis for discussion for the first ceo months of the convention, proposed co empower the national legislacure “to negauive all laws passed by the several States contravening, in the opinion of the national lenisla- ture, the articles of union; or aay reaties subsisting under authoriey of che Union." Alchough that broad grant of authority was orginally agceed to without debare or dissent, the delegates eliminated ic on July 17.48 Every subsequent attempt %0 add it co the Consticution failed. Inscead of a _general festeaint on state action imposed at the discretion of the national legislature, che Constitution they drafted imposed more precise limies enforceable only in cesponse 10 specific scae action. ‘The resteiction on the states that denied co chem the power to impair che obligation of contracts was first proposed late in the deliberations, on ‘Auguse 28, whea Rufus King of Massachusetts “moved 40 add, in the ‘words used in the Ordinance of Conalces)s establishing new States, 4 prohibition oa the States to interfere in private coneracts."4 King’s reference was to the Northwest Ordinance, which deciared that “a0 law ougbe ever ta be made or have force in the said terricory chat shall in acy manner whacever, interfere with or affect private contracts, or engage ‘mencs bona fide, snd without fraud previously performed,"!% “Two delegates spoke against King's motion. Gouverneur Mortis of Peansyivania choughe it “wouid be going coo far," for there were “a thousand laws relating co brinaig actions—limications of actions & which alfece contracts.” George Mason of Virginia raised. a similar objection, while Madison, although in favor of the motion, still preferred a “negative ‘on the Stace laws [which] could alone secure the effect.” la response to these objections, Wilson asserted chat only “retrospective” interferences ‘would be pechibiced. Madison countered chat retrospective interferences ‘were alteady precluded by che “prokibicion of ex post facto iaws, which will oblige the Judges co declate such incesferences null & void.” The delegates then approved by 4 vote of seven states to three an amendment ‘offered by John Rutledge of South Carolina that transformed King’s resolution into a denial of the right of the scares co pass bills of accaindes or retrospective faws.26 That prohibicioa was materially expanded by the pd, |, 235, bid, Ti, aaa “staid, 439. The Paople Shall fudge: Readings in the Formasion of Amertcas Policy (Chicago, 949), Ly 252-253. Farrand, ed, Records, Hl, 439-450THE CONTRACT CLAUSE 333 commiecee on style to prohibit che states {com “altering or impairing the obligation of contracts." On September t4 che delegaces deleted the word ‘aicering” and the conteact clause became part of the Constitution !? Alehough the debates in Philadelphia shed litle light on the framers! understanding of the clause, the arguments of Federalsts and Antifederal- ists during the concest over tatiication, comments by other absecvers, and calls for legislative action after individual stare catficasions and betore the inauguration of the new government all indicate « diversity of opinions about the meaning and prospective impact of the clause. One version of what the clause meant linked i to ehe othec monetary provisions in Article [, Section ro, William Maclaine of North Caralina, for example, tied it to the prohibition of further emissions of state paper money.1® So did Pelatiah Webster, « Philadelphia merchane and pamphle- seer, who argued that the Constitution “obliged people to “fulfil their contracts, and not avoid chem by cenders of any thing less than the value stipulated." A group of citizens from Norchampcon County, Pennsylva- fia, also understood che Constitution in these terms.2° On the other band, Roger Sherman and Oliver Ellsworth, two of Conneccicut’s delegates ta the convention, declared in letter co the governor that Acccle |, Section 10, denied to the states the power to impaic “the obligation of contracts by ex post facto laws." Others assumed that the probibition applied only co state interferences in private contracts. Gov, Edmuad Randolph of Virginia, 2 member of the Federal Convention and the Virginia scate convention, iasiseed that the clause applied oaly £0 “private conceacts."” So did William R. Davie, who declared in the North Carolina convention that the elause ooly limiced state authority to incecfere in “contracts berween individuais."25 Precisely what kiods of incerference in private concrac:s would be precluded was ¢ matter of some discussion. Ia Federaftrr No, 4 Madison insisted that the “sober people” of America were “weary” of state legislative interferences in “cases affecting personal rishes."2+ One specific iad of intecterence Madison condemned was installment legislation. Of a *786 Virginia court bill chac allowed debtors t0 pay theit obligations to three annual installments, he remarked that “such an interposition of the law ia private contracts is not to be vindicated on any legisiative principle Ibid, $97, O15, “Jonarhan Elliot, ed., The Debates in che Serra! State Cossontions on the Adiption of the Federal Constitution... 5 vols. 24 ed. (Philadelphia, (861), WV, 477 "A Citizen of Phuladelpbia,” "Remarks on che Address of Sixteen Members,” in History of Ratsfeation, Rll yo Ibid, Ui, 6a8 A: Sherman and Pllsworeh co Gav, Samuel Huaringcou, Sepe. 26, 1787, shi, XU, 476 = Elliot, ed., Debates, WV, 4977 Farrand, ed, Reerds, I, 350. HJacob E! Code, ed., The Federalist (Middletown, Cou, 1961) 400-302.334 WILLIAM AND MARY QUARTERLY ‘within my knowledge." [oscallmenc laws like che Virginia bill, stay laws (postponing che time for the payment of debts beyond their concraccual limits}, and commodity payment iaws (allowing payment in specitied commodities at a proportion of their appraised value} were all, Madison recalled lace in life, laws impaiting the obligation of contzaccs as he understood che baa. 2 Others seemingly sgceed. Wilson, for example, in discussing types of sate legislation that were proscribed, insisted 10 the Penasyivania stare convencion thac the Constitution prohibited noc oaiy installment laws but “other acts of a similar effect."%” Chacies Coceswarth Pinckney, a Souch Carolina framer, remarked ia an “Excract of a letter from en’ eminent Member of the late Convention at Philadelphis,” published io the Charleston Columbian Herald, that the Constitution was an honest one aad. thar the Iimications on che states found in Article I, Section 10, meanc“that in future we shall be free feom. che apprchensions of paper money, pine barren acts (commodiey payment laws], and inscallmene laws."8 Antoine de la Forest, the French vice consul ia New York City, reported «0 the come de Moaumorin in September 1787 that “the creation of Paper money, the laws that stay the operation of obligations and Coneracts, those that authorize the payment of debis in property or depreciated paper, can no longer tale place.” Some public figures, while agreeing that che Consticucion probibired these cypes of legislation ia che future, insisted that the state legislatures nonetheless could and should act co protect the interest of debeors while they still hed power to do s0. In Georgia, for example, “Tullius” weote in an essey published in che Gazette of the State of Georgia in June 1788 chat “che period is now fase approaching when, from the limiced authoriey left in each individual state by the new Constitution, we shall be deprived of the power and opportunity, which aow present themselves, of doing an act which will at once be an imporcant piece of justice to many of our best citizens and, at the same time, bring the most extensive advantages to the scace at large." The act co which “Tullius” alluded was one “lately talked of in conversation,” namely, 2 law for the paymeec of debts in inscalimencs “Tullius” calied 00 the Georgia executive council 1o summon che lesisha~ tuce into session so that it could enact such a law before the ratification of the Constitution by nine states would deny forever any state fegislatuce the righe to so interfere in debtor-creditor relations °° There is no indication that the executive council considered this proposai, buc Edward Telfair, governor of Georsia in 1786-1787 and James Madison ca James Madison, Se, Dec. 12, 1786, im Robere A. Rucland 1 ah, eds, The Papert of James Madson, 1X (Chicago, 1975), 205. "Preface to Debates in the Convention of 787," Faregod, ed y Reeds, Lil, 548. History of Ratification, (0, 519 albed., XIML, 2740. La Forest to come de Montmorin, Sept. 28, 1787, sb, 259, ibid, I, 300-301‘THE CONTRACT CLAUSE 535 1785-1794, did respond unofficially. Writing as “A Planter,” Telfaic acmued that once the Consticucion was adopted, any state legislation contraty (© it—inclucing the proposed installment messure—would not ‘continue ia force.” In liew of an ineffective installment law, Teffait proposed an allocmenc system, or commodity payment plaa, by which debtors could transfer a portion of cheit property at its real value 10 creditors before the commencestent of the new government. This mea- sure, «0, required prompt action, for it also would be prohibited by Aric I, Section co 5! Despite such urgings, che executive council did noc call the legislature inco special session. By Jaausey 789, when the legisiacure did meet, che oppartanity to act had passed. Proponenis of debcor relief were more successful ia South Caratina, where ia November £788 the legislature enacted an installment law that sade all debts conteacted before January 1, 1787, recoverable in five annual insaliments beginning in March 1789. A similar measure, passed the year before, made the firs installment due in March 1788. The 1788, legislation provided chat any payments made under che 178} law would be credited under the new act. As in Georgia, some Federalists argued that the new law was unconstitutional since the Constitution prohibited such Jegislacion. Proponents of the measure, Federalist and Andfederalise alike, angued the contcary, insisting chat the Constitution would not bind che states until the new government was set in motion, and that stace laws passed before that dace would nat be affected by ehe constivutioaal ban.2# ‘The simple language of che Coastitution, along with statements made by its proponents during che convention and ratification debates, indicates a widespread belief thac certaia forms of debror-relief lenislavion chat had bees permissible ducing the Confederation ers would be precluded following establishment of the new federal government in t789. Some Federalists and Ancifederalises uaderstoad the clause t@ encompass fat more than chat. A New Hampshiee Federalist, for example, argued in the Portsmouth New-Hampsbire Spy (November 3, 1787) that the Canstias- tion “expressly prohibits chose destructive laws ia che several staces which alter or impair che obligation of contracts, so that in fucuse anyone may be certain of an exact fulfilment of any conceact that may be entered inca ot the penalty that may be stipulated in ease of failuce." ‘This writer was not precise, but che inference feom his sracement is thac the states’ power to pass bankruptcy and insolvency legislation, as well as step, installment, and commodity payment laws, would be eliminated by the Coastution. ‘Although no other Federalist made such a broad astertion of che Shi, youesan, "An Act fo Regulate the Payment and Recovery of Debts..." ia Thomas Gooperand David I. MeCord, e68., The Stareter at Large of South Caralina, 19 vole (Columbia, $.C,, 1836-841), V. 88-92. The debates xe printed in the Cay Gazette or the Daily Advertier (Charleston), Oct, 24,27, 28, 1788. For discussion, ‘of South Carolina's debtor polices see Jerame J, Nadeihatr, The Disorders of Wer. The Revalusion in Seuth Catoline (Oran, Maine, (98), 192-200.536 WILLIAM AND MARY QUARTERLY inclusive force of Anticie I, Section 10, several Ancfederalists did, Luther Martin, a Maryland delegate co ehe Constitutional Convention, ia a speech to the Maryiand legislature later published as an Aatifederatist pamphlec, suggested thar che Conscicucion cheeatened chat stace’s existing insolvency legislacion.®® A Pennsylvania Ancifederalis, “Delibecator,” warned chat under the Constiution “no state can give’eelief co inscivenc debtors, however distressing their situation may be; since Congress will have che exclusive right of establishing uniform laws on the subject of bankeuprcies throughour the United States; and the particular states are expressly prohibiced from passing aay law impairing che obligation of contracts."** Richard Henry Lee ukiinacely conchided chat the power of Congress «© pass uniform codes of bankruptey posed a threat to the states’ bankruptcy power and therefore opposed it. And Antifederalists in the New York state convention sent circular Leiter (0 che sate legislacures that included an amendment stipulating dhe “the Power of Congress to pass uniform Laws concerning Bankeupccy shall oniy extend co Meschants and other Traders; and that the States respectively may pass Laws for the relief of other Insolvent Debtors." Did the clause apply to public contracts o¢ only co privace ones? Did ic extend to all debror-relief legislation or only co particular kinds? Did ic affect legislation enacted before the Constitution was ratified or only laws passed afterward? The language of che Consticution led mea co different conclusions, And white William Symmes, an Antifederalise delezaze to the Massachusetts convention, acknowledged chat he did nor “at present understand what effect ic [che coacsace clause] will have,” bis modesty was arypical 2” [no large measure unaware of this diversity of views, most men believed that they understood the clause. They also assumed chat theie understanding coincided with thac of the majority of the framers and anticipated that it would be the basis of public policy in che icumediate facure. “The Marci scouine Lnformacion Delivered to the Legislacure of the Stare ‘of Maryland Herbere J Storiog, ed., The Complore Ari (Chicaeo, 1983),'U 15-82 2 Frvenean's Journal (Philadelphis), Feb. 20, 1788, ibid, Ul, «Bo. Stbid, I, 343-344 WLiada Geant De Pausy, The Elisenth Pullen: New York State and the Federal Comttusion (ithaca, N-Y., 1966), appendix B, 303. » Semmes co Petes Osgood, Jt Nov. 15, (787, in History of Ratification, XUV. 113. It should also be nored that there was some agreement on what the clause did not da. Kedid aoc diminish the equicy power of sate jurists, wha could abrogate privace conezacts if shey were “unjust” The literarire on the zapid shife in private law From this justpsice agtion w a modern one thar stresses the sanctity of & contcact unless fraud 1s proven cecurzed independently at the consucwionsl mandate of Acicle |, Section ro, which oaly rescticeed the lawmaking authority of the legislature. On'the development of modera concract law see Morten.) Hora, The Transformation of American Law, 1782-1860 (Cambridge, Mass, 4977) hap. 6.On the reservation of sate equi power see Hariton, deri‘THE CONTRACT CLAUSE 537 Tape L STATE LAWS IMPAIRING THE OBLIGATION OF CONTRACTS, By YEAR IN FORCE, (789-18) RL Com NY NJ Pa Md Va NO SO Ga 38 BOB BoB Ss BOB sBoBOB BoB S$ 8 B SBOB 6B UB UB UB US UB OB SB oB 6B 6B UB UR OS OBO 5B B B & BB S BIB BB BB BOS B B BB OB BS 8 BOB OB AOS B BOB OB BOOS B BoB OB BOS B BOB OB BOS B Bo BOB s BOS B BoB OB SB Ss B BoB OB 8 BOS B BoB OB SBS B BoB OB 8 BOOS B BB OB 8 BS B B BOB SBS B BoB OB SBS B B BOB S BOS § BS en) S 6 $ 8S BS nn) BS B BoB OB BOS B BOB OB BB S Ss BS BOB OB Bp S$ S BS BoB OB SsBoB S$ SB S$ BoB OB SBOB OS Insallmecs, B = Bankeopiey The vatwees ae ced in te notes ueacked @ ssi of ther in che texto it Coleman, Debtor nd Cred, and Feller, "Mareary Legislation." Harsard Li Re, XLVI (3933), 1061-2085 ‘The implications of these different understandings of the scope of the contract clause are important. If, at its broadest, ail state interferences in contacts public and private were precluded (including: interferences crested by existing legislation), che role of the steces in the new consticu- tional order wouid be substantially diminished. Furthermore, ifthe states conld nar act, chen the federal power to pass bankrupecy starutes was exclusive, and che role of the federal governmenc in the operation of the econamy would be quite broad. If, on the other hand, the clause restricted only particular types of scate legislative interference in private contracts henceforth, chen the power of the states in regulating the economic life of the nation remained significant ‘The resolution of these ambiguities, and thes of the shape of federal-538 WILLIAM AND MARY QUARTERLY stare relations, came ooly gradually as state legislatures and state and federal courts moved t0 establish cheic notions of constitucional pabey im the new republic. The legislazures necessarily (00k the lead in defining areas of permissible state action. Berween 1788 and 1815 they impie- mented their standard of constitucional right and political authority by continuing existing legislation respecting contracts and by supplementing it with addicional stay and bankeupcey measures. Historians have long been aware of some aspects of state interference in contcacts followiag ratification af the Constitution. Peter J. Coleman, for ‘example, analyzed all seare bankeuptcy legislation from the Founding of the colonies to the close of che ninereenth century in Debtors and Credirars ix ‘America: Insolvency, Imprisonment for Debt, and Bankruptcy, 1607-1950. Other historians have also noved specific statutes as did Louis acts in Economic Policy and Demsratic Thought; Pernsyleania, 1776-1860. Legal scholars, 100, have identified state laws interfering with contracts follow ing ratification *® Table [, which incorporates all of chs research as well a5, my own in che published stace statutes, illustrates the extent to which stay, installmenc, and barkruptey legislation remained a part of state public policy duting che early sational period, Tn some states such policies represented a continuation of debeor-rehief measures adopted in the 1780s. la 1787, for exampie, che South Carolina legislature appcoved an installment law. Je did so over che objections of Federalise David Ramsay, who maintained chat the measute Was “uncon stiutional” because the “power of all legislative bodies was limited by the erernal laws of justice and reason." The act allowed repayment of ‘existing debts over a three-year period. Eighteen monchs later, the legislature revised che law to allow debtors co pay over five years and co permit any payments made under the 1787 act to he credited under the fnew law. Proponents of the revised installmene act, including Chatles Pinckney and Pierce Buder, both of whom had been delegates to the Fedecal Convention, were not persuaded by the argument of Jacab Read, another convention delegate, that the new Constitution, having been fatified by nine states, was already binding. The bill, 5 finally appraved, allowed payment of debs, some of which were already thirty years old, lover five years beginning in March 1789, adace chat fortuitously coincided with the commeacement of the new federal government.+2 ‘After 1800, Penasylvania, #5 part of a “radical program of judicial reform," allowed petty debtors to stay executions of debts under one hhundzed dollars for three to nine monchs. Alchough the act as vetoed by “Coleman, Debtors and Creditors (Madison, Wis. 1974). * Haarcz, Econeotc Policy and Democratic Thought (Cambridge, Mass.. 1948) AL EL Fellet, “Maracory Legislation A Comparative Seudy,” Herverd Law Review, XVI (2933), 1061-1085, “Report of House Rebates, Macrachasets Gazete (Boston), Mar. 27, 1787 eCooper and McCord, eds,, Statute, V, 88-93, City Gaz, (Charleston), Oct 24, 37,28, 1788. “Ringed E. Elis, The Jafenonian Cri: Courts and Pelities sw the Young Republic (New York, 1971) 160HE CONTRACT CLAUSE 539 Gov. Thomas McKean and then repsssed over his vero, and chough it was the subject of considerable public debate, no one objected co its stay provision, Furthermore, this policy was broadened in :804 and 1806 «0 protect any debtor for a period of chree to ewelve months if the debtor was, a frecholder or could provide adequate security for the amount of the debt, interest, and court costs. *4 Finally, in 1814, the stare authorized 2 seven-year stay of execution if a majority of a debcor's credivors agreed."® The North Carolia legislacure enacted measuces in 1809 and again in 1812 chat mandated a three-month stay of execution, provided the debtor secured the endarsemenc of two frecholders as securities © The Geoeaia legislacure required sicnilar securicy in measures of 1808 end 1809, as well as aonesthied paymene it order co obtain a stay.” The Virginia legislacure did the same in 1808 and 1814 when it provided for “stay bonds, co be taken on judgements, decrees, deeds of trust and conditioned for the payment of the debe ac the expiration or repeal of the act"#® This legislation supplemented 2 poliey thar allowed debtors co defer the collection of debts for three £0 twelve months by use of 2 replevy bond. Under that system, which operated in Virginia from 1748 to 1817, a debtor who obtained the signature of a solvent individual as guarantor of the deb could secure a stay of execution ** Nor ali scares adopted general relief measures. For example, Vermose and Rhode Island after 1789 received petitions from debrors seeking relief. In Vermont most of those petitioners were granted a stay of execution of ep to cen years, while a smailer number secured a baakrupecy act. 5 The Rhode Island legislature granced hankrupecy relief co a largee share of petitioners than did Vermont, buc in some cases allowed a stay of execution for periods of a few months to several years. In 1792, creditors challenged che latter procedure in federal eircuie court. Aicxander Cham pion and Thomas Dickason argued that suck s sray impaired the obligation Of the contract of debt owed co them by Silas Casey. Justices John Jay and Henry Marchane agreed. In one of the earliest exercises of judicial review “Aa Act forthe Recovery of Debts and Demands not exceeding one Hundred Dollars <..," Laws of she Cavemonsveaish of Pennisleanta Philadelphia, 1804, 1806), Vi, 383-200, VIil, 558-369. See che discussion of ehe ace in Fis, Jefjerenian Cris, 16e- 16.4, 187-168. “Joka Purdon, comp., ‘The Digest of the Laut of Pennsylvania, 700-1830 (Philadelphia, 1831), 388389. Laws of North Carolina Raleigh, N C., 1809, 1812), chaps. ¢, & "Ae Act co Alleviace the Condition of Debtors..." Act of the General Assembly of the State of Gerrgie Milledgeville, Ga, 829}, 16-28; "An Ace to Alleviate che Condition of Debrars "ibid. (2812), 29-34 Ae Acc Conceraing the Sale of Property Under Executions ..." Acts Pacred at @ Geral Assembly... (Richmond, Va., 1808), 64-15; “An Ace Concerning Executions." shed. 1815), 68-75, S"An act co reduce into one act the several acts concerning executions, and for the reliet of insolvent debxars,” The Reried Code of the Laws of Virginia. (Bichmond, Va, 1819), 524-547 ‘Coleman, Debirs and Crediars, 69-71540 WILLIAM AND MARY QUARTERLY of state law, they held that Rhode Island's act granting a stay of execution 10 Casey violated the cancract clause and wes cherefare void. The principal record of the case, a notice in the Providence Gazette, reported that the legisiacure, thea ia session, agreed ro cease granting such stays in the fucure. The legislature contiaued co grant bankruprcy relief ro roughly half the debtors who petitioned for it and a say of execucion co all petisioners pending legislative action on their sequest.5* The contract ciause places restrictions upon ¢he states only. The Constitution in Articie I, Section 8, gives Congress authority co establish a woiform system of batkruptcy legislation. Congeess did nat, however, exercise that authority und 1800, and the seatute it then passed was repealed in 1803. In the absence of federal legislation, stares continued «0 actin chis area as they bad during the Confederation. South Carolina, for example, continued measures frse adopted in 1759, by which an insolvent coutid obcain a discharge if his creditors accepted a share of his property in sectiemenc for his debs. He chen received a one-year stay of suits from any creditors uawilling 60 accepe # parcial seclemene. This statute, with minor revisions, remained the basis for South Carolina's bankruptcy policy throughour the ninereenth cencury.59 Pennsyivania, too, built on its colonial experience by amending several times in the (7808 a scatuce first passed in 1750. The statue expired, however, ia 1793, and oot wat 812 did che stave reenter che field, Then icapproved a shorciived law that extended bankraprey relief to residents of the city and county of Philadelphia and made the system voluncary. The law proved 50 unpopulac chat i¢ was cepealed within a year. In 1824 a federal district court declased ir an uacansticutional impairment of the obligation of contracts. North Carolina's experience paralicled Pennsylvania's. The legislacuce expanded colonial practice in 1777 and 1778 by allowing debtors to obtain discharge from their obligations by caking an oath of povercy. These laws expired in 1793.59 New York in 1788 and New Jersey in 1791 also adopted generai bankeupecy legislation, alchough New Jersey's law lapsed ia 1795. New York's stazute allowed 2 debror to be discharged of all obligations wich che consent of three-fourths of his creditors by value. The law, amended several cmes, survived until 1813, when it was replaced by one that allowed a discharge with the consent of ewo-thitds of the cteditors by June 23, 1992, Coleman, Debtors and Credivon, 95, Charles Warren, Bankruptcy tn United State Hisory (Cambridge, 0935), "Cooper aad McCord, eds, Statutes, IV, 86-94. The discussion of stare bankruptey legislation chat follows is based in large measure on Coleman, Debtors dud Cradators. Foe his discussion of Souch Carolina legislation see chap. 13, Sea act forthe zelief of insolvent debrors, sa ciey and couaey of Philadelphia, passed Marca 13, 1812" (Philadelphia, 1812); Galden w. Prince, to Federal Cases pazeya7 (0flca] “sColemas, Debtors and Craditors, chap. 16,THE CONTRACT CLAUSE sau value. This stetuce was nullified in 1819 by the United Stares Supreme Court decision in Sturgts v. Grewnsashield as an unconscicutianal impair- ment of the obligation of contracts.>* ‘Other states preferred different policies, Maryland, after a one-year experiment with a general bankcupscy seacuce ia 1747, abandoned i in favor of granting bankrup.cy by speciai petition. Between 1789 aad 1805, 1,496 debtors had their obligations discharged before the state again adopted a general bankruptcy statute. That 1805 statute continued in operation w 1854.57 Rhode Island and Connecticue also preferred a policy of discharging debtors only by special petition. Unlike Maryland, howevee, whece the burden of bearing large numbers of petitions compelled ehe legislature €0 transfer this function co the couccs, the legislatures of chese cWo states contioued ¢o hear such requests (o 1828 aad 1818 respectively. In those years the legislatures repeaied ail forms of bankruptcy legisiation.5* Jn summary, then, the “thou shale nots” of the Constitution did not prevent the states from continuing established policies regarding bank- ruprcy and debtor relief. The question is: how could men embrace « cocument that potentially at icast probubited such policies and scill pursue them? ‘A partial explanation is chac the Consticucion was not perceived to be controlling uatit the inauguration of the new governmecr. Therefore, 50 the proponents of debcor relief in che staces arzued, legislation approved uring the Confederation era avoided che consticutional prahibiticn, ‘This was the view of the majority in the 1788 South Carolina legislatuce. Chief Justice John Louis Taylor of the North Caroiina Supreme Court heid ic toa. in Georgia “Tullius” and former governor Telfair agreed that che state legislacure could act oa mavcers affecting contracts only until che commencement of the new govecament, although Telfair also believed ‘that any such legislation haa to he executed before that date in order to escape the constitutional prohibition. John Brown Curting of Massachu- seus, a commercial agear in Charleston, agreed with Telfair ia this: be advised Joha Rutledge ia the spring of 1789 char he doubted chat the South Carolina instailmene ace of 1788 could continue in operation once the new government was set in motion.*" Fox New Jersey see sbid , 146. The New York squuces ace summarized in ‘William P. Vaa Ness and Joha Woodworth, eds., Law ofthe Suate af New Fork 2 ols, (Albany, N.Y, 1813), L, 4630. Shurgis w. Crowninsbield is printed in 4 Wheston 123-208 (efits), *Coleraaa, Debtors and Conlin, chap, 12 58See the tables ibid, 81, 96. Cty Gas, (Chavieston), Oct 24, 27, £788, See also the discussion ofthis ia the Jan 1788 sescion of the legislature in Dehaser which Arce in che House of Representatives ..(Chatleston, §C., 1831), 4-05, 17. fener v. Crittenden, 4 Notch Ceroling Reports 69 (1814). Hissery of Ratification, If, 100, 304-307, *Curting co Rutledge, Feb. 21, 178, in Merrill Jensen and Robert A. Becker,342 WILLIAM AND MARY QUARTERLY Opinions varied on chis point. Opponents of debtor-relief legislation in South Carolina argued that such stacutary relief was precluded by che state's actof ratification, Francis Corbin, aetorney general of Virginia, held thar ee Constitution was the supreme law of the land as early as August 3788, when the required number of states had ratified i¢ % Nor until 1821 did the Uniced States Supreme Court resolve the question: in Quang v. Speed ic held chac stacuces adopced before the inauguration of the new government were constitutional, even if such laws continued to be enforced after March 1789. What detecmined constitutionality, the Court hheld, was the date of enacmen:.%3 Most legislatures enacted debror-celief legislation only after the federal government was inaugurated, They did so over the vociferous objections of men who insisted chat seay laws, installment laws, commodity paymene laws, and the like violaced the constitutional ban of Article I, Section 19. In 1809, for example, a number of North Carolina legislators led by William Gaston, 2 prominence Federalise and lacer state judge, opposed cheie scare’s “bill for che celief of debtors.” Thac measure propased 2 one-year stay if the debtor paid one-half the principal, the entice interest due, and covet casts, and provided security for the remainder of the obligation. Gascon argued thac the Constitution of che United States was “so very clear and explici, chat it must staad obvious to ali, an insuperable bar co the passage of che bill. "6 ‘The judges of che North Carolina Supreme Caurt also proved critical af debcor-celief lenislation. In Jones v. Crittenden, decided in January 1814, Chief Justice Taylor held for the court chat the state's «812 act “co suspend ‘executions fora limited time" impaiced che obligation of canteacts and was therefore unconsticutianal. The court declared thac the framers intended, co prohibie stay laws, that che policy inkerent in such legislation was unwise, and that the prohibition was absolute, In Viginia “Asconius” voiced the same view when chat scate’s legisla- ture considered a stay law in 1814, He insisted chac such measures were “uoconstieucional, iniquitous, and impolitic” as well as “a violation of the principles of natueal justice." In Georgia the edivot of the Augusta Herald repeatedly accacked that state's 1828 debear-relief measuce, and the seate’s r824 act was similarly condemned in other newspapers as immoral, unnecessary, and unconstitudional 6? eds, The Documentary History of the Fine Fedevad Plein, 1788-1950 (Madison, Wiel 1996 Ly at Thug. 5, 1788, Execusive Papers, Virginie Stare Library, Richmond 685 Wheaton 420-424 (1821). avSeate Legislative Debate ia the House of Coramons af Nartk Carolina, oa the Bill for the Relief of Debrors,” Siar (Raleigh), Dec. 22, 1808. "84 North Carolina Reports 55-68 (1814) © Verginsa Gaaesie (Winchester, Mar. 11, 1809 © May 26, June 2, 1808. See also “Lucius,” Calembian Museum & Savannah‘THE CONTRACT CLAUSE 343 In light of these arguoients, on what grounds could state laws afecting ‘contracts be found no? 0 wolute che federal Coastiution? Fiest, i should be noted that not all oppoaeats of such laws held chat che seaces could noc pass them, lastead, they argued chat some parricelar measure was imprac weal ar unwise. For example, the editor of the Augusta Herald, who assailed the Georgia act of 1868, observed thar the measure, if approved, ‘would stop nearly all civil business of the cours for approxumately seven months, “which is certainly extending rehef beyond what the circum staaces of the case requiced "6? A year and a half later, commenting upon ‘anew bill chen pending, the same editor argued that “the iess legislative bodies take upon ehemselves co sacerfece with the private contracts of tadividuals,ehe heccer."® Federalist Shaler Hillyer, an Augusta merchant, likewise coademaed the Georgia legislature for approving the 1808 statute, which he found “oppeessive aad immoral” bue aor unconscitu- tional 79 Cleasly, the implication is chat on some occasions legislaive interferences could be justified as constieurional ‘One such accasion, in the minds of some state legislators, sesulted fram renewal of warfare in Eucope after tfco, Legislators in the North Carolina House of Commons argued thac Jeffeeson’s embargo necessitated an “indulgence” for cheir “suffering coastieuents." Furthermore, when con froaced with the contension that a proposed stay law was unconscieutional, spokesmen for the majatity maintsined it was nor. W. R, King insisted hac 4 suspeasion act passed the previous session, and by implication the one proposed, “was consurecional,” for were it n0t, the judges “would bave refused t0 carry it into etfece"?* The bill, which provided for a ninety-day suspension, was approved by a cen-vote margia. In 1814 a Caroline County, Virginia, farmer offered the same justifica- tion for debcor-selief legislaion—ehat it was constitutional because it was necessary. He called upon the Virginia legislaure co close that state's courts because of diseuprions brought by che Wa: of 1812, To allow the courts £0 stay open axa ume when “specie isso scarce,” he warned, would mean that the “few holders of i in each county” would “have the upper band over debrors, quite unfairly.” This view was widely held. Thus, while several state and federal courts struck down state laws as usconsticutional impairments ¢f the obiigation of coneract, other judges viewed ehese marcers differeneiy. For example, in ‘April 1808, Paul Grimball, a Georgia plancer, petitioned che superice couct for an injunction co hale a forced sale co satisfy a jucgment agains. Advertiser, Aug. 2, 1808; "Wilkes," Maritor (Washiagron, Ga}, Oct. 5, 1813; and the "Grand Jury of Richmond County," Colaba Museum, May 26, 1814 May 26, 1808. @Now. 24, 1809, Hillyer to Olives Whyte, June 19, (B08, Hillyer Papers, Universiy of Georgia, Athens ""Debsee in the House of Commons,” Star (Raleigh), Dec. 22, 1808. % Vargunta Patriat (Richmond), Oct. 22, 1814sat WILLIAM AND MARY QUARTERLY him. The basis for Geimball’s petition was che unfairness of the proceed- ing, which “would prove evinous to the complaintant, inasmuch as nearly double the property would be sacrificed now, ata forced sale, which ic would have requiced oniy four months ago, to pay these judgements.” Grieuball’s accorney argued that the court should intervene 6a the ground of “public utilicy,” since ie wonld be profoundly unfair for Griraball a be compelled to sacrifice a substantial share of his property at forced sale st 4 time when prices were accificialy depressed because of the federal erabargo.”* Opposing counsel did noc deny the legitimacy of Grimball’s complaine bue contended that an injunction should nor be issued because “no levy and sale was yer ordered.” They also argued chat if Judge Thomas Charon die grane Grinball relief, Grimball should then be requiced to ive security “before the relief peayed for could be obtained." After a careful review of the court's equity power, Judge Charlton declaced “chat cases of chis description involve hardship and oppression; hat they are against equity and conscience; that they are pramotive of injucy co the public: that hey enable monied men to accumulate usurious ‘wealth; and that they rend to convert a just and salutary measure of the government [the embargo], into an engine of political disaffection, acough the medium of distressed and persecuced debtors." He then issued an injunction ¢o stay the forced sale while requiring Grimball co deposit with the sheriff “sufficient property, the valuation of which co be ascertained by the price at marker thrce months preceding the embargo act," as security for che debt in question.” Chariton acted in his capacity a5 4 superior court judge with equity powers. His analysis nonetheless sheds light an the motives of legislators who argued the state could act in extraordinary situations (0 ensure justice for hard-pressed debtors. Ducing the spring of 1808 che Georgia legisiature did precisely char when they approved “An act 10 alleviate the condition of debtors and afford chem temporary relief.” The act provided a stay of any judgment from che date of passage of the bill, May 23, 1808, co December 25, 1808, provided che defeadane entered “good and sufficient freehald security for the ultimate payment of the debe, cost and interest, and upon paying lone third part of the judgemenc and one hird parc of the costs." To November of the same year che constieutionalicy of that measure was chaileaged on the ground ehae ic impaired the obligation of a contract. In 2 comprehensive evaluation of the contract clause Chariton forcefully acticulaced the constitutional underseanding of the proponents of debtor telicflegislacion. In his ruling he acknawledged that Article, Section 70, denied the srates the authority to pass laws thar impaired the obligation of "Bx Parte Paul Grimball, Cases in che Supetioe Courts ia the State of Georgia 153 (1808). Ye lbid, "bed, 158 bad. 17 Aas of the General Assembly of Genrpia (1809), 16-08,‘THE CONTRACT CLAUSE 345 contcacts, Buc, he asked, “What is meant by the term ‘impairing the obligation of coneracts?” "His answer: “any measure ... that gives them a diminished value, takes from them. any of the essential properties of contracts, of which divests chem of that prioriev of lien, obligation or recovery... must impair the obligation of the contcact.” The Georgia acc was constitutional, he insisted, because ic did sone of chose things. Charlton ackaowledged that the law extended the period “at which ‘conttacts were heretofore enforced” and suspended the means of recav- ‘ery. Bue the obligation “remained entire, and a bond or covenant is as valuabie, and on che score of the obligation, is as operative aow, as before the passing of the act.’ In effect, Charleon distinguished between the obligation of the contract, which was protected, and che means of enforcing ic (remedies available «0 the creditor for failuce to fulfil che obligetion), which could be aitered. “This dissincsion between che obligation of a contract and ies remedies had existed at the time of the adoption of the Consticution, may have been tacitly recogaized in the revision of the contract clause oa the foor of the Federal Convention, and underlay much of the state action described above. In the spring of 1787, for example, members of the Maryland Senace, a conservative and soon a become an overwhelmingly Federalise body, acgued against 2 stace emission of paper money proposed by the state House of Delegates. The senators warned thar such a measure was unvvise in chat it “violaced the Sese principles of justice and legislation, by infeinging che contraces of individuals." Supporters of the Senate in che ensuing public debate wenc farcher in their actack, explaining that the House of Delegates bill “changes she nacure of past contracts, and suggests a mode (of relief] ruinous to credicors, repugnant ro justice and good faith, disreputable to government, and facal co aur commercial interests.” These were harsh words, indeed, albeit standard ones among the critics af such debtor-relief measuces. What is rernarkable, however, is not the language of the Senace’s supporters bur cheie proposed alteractive, They called for "law obliging debtor and creditor 10 encer into 4 reasonable composition, proposed by either party, placing the one on a certaincy of receiving bi duc at stipulated periods, and securing the other against suits before the expiration of the ferm.”#° Some Marylanders opposed as a breach of the ‘obligation of concracts a sate issue of paper money that they believed ‘would depreciate and would chen be used co pay legitimate debes at full face value. Buc the same men believed thar it wes noc 2 breach of contract to use state authority co compel debtors and creditors 10 agree «2 a %B, Grimabell v. F. Rats, Cases in che Supesiog Courts 18a-18c (:888) "The Reply of the Senate,” in Meivin Yazasis, ed., Representative Government end the Reoslution: The Maryland Canstitustonal Cris of 178? (Baluscare, £975), 56. %0A Proposal from Ange Arundel Councy,” Maryland Gazete (Annapolis), Feb. 8, 1787, id, 54.546 WILLIAM AND MARY QUARTERLY moratorium during which 2 debtor could not be accested or his property arached, a5 long as there was a guarantee that the creditor eventually would be compensated, ‘Joseph Jones, 2 Virgioia Federalist, ceporced a similar view in chat seace that alteracions in the remedy intended so protect the debtor and guarantee payowent ac 4 lacer date were 10: impairments of contact. Ia December 1787, he informed Madison, then ar the Confederation Con- gress meeting in New York, chac the Virginia House of Delegates had adopted a court bill that set 4 minimum os the value ac which goods could be sold at auction in execution of a judgment. If goods did aoe seli ar three-fourchs of theit value, the execution could be postponed for ewelve months, provided the debrcr posted bond or otherwise provided adequate security. Such a minimum appraisal aw, Jones commented, was held co be ‘0 “direct interference with privace coneracts.”#* This distinction becween che obligation of a contract and che remedies available co a creditor ifthe debtor failed to felfll the obligation may have underlain the cevisions in the contract clause made on the flaar of che Federal Convention, The report of the committee on style denied the states che power of “altering or impairing the obligation of contracts.” The elimination of the words “altering or” may have signified a tacie recogni- tion by the delegates chat some changes not diminishing the obligation could he legitimare.*? Nor all agreed. In the legislative debate over the 1828 debtor-relief bill in Noreh Carolina, opponents argued vociferousiy against che idea that “by pessing this bill we should not impair the conerace itself, but deprive one of the parties of the opportunity of eaforcing i” Such “a quibble,” William Gascon insisted, “would satisfy a0 man's understanding” and was amiere “miserable subserfuge.”§% The observer for che Raleigh Star who covered the debate reported principally the comments of the bill's ‘opponents, buc the implication is clear. The proponents of the bill assumed that whac Gaston saw as 4 “miserable subcerfuge” was ia face a Jegitimate distinction. Thar distinction gained formal recognition in 829 when Chief Justice ‘Marshall stared his opinion in Sturgis v. Crewninshield chat “the distinction berween the obligation of a conteace and the remedy gives by the legislature to enforce that obligation has been taken ar che bar, and exists in the nature of things. Withour impairing the obligation of the coneract, the remedy may cercaialy be modified.”*4 Marshall nonetheiess declared ‘uncoastiutional the law ia question, 2 New York state bankruprey act. He did so, fese, because ic affected contracts entered into before che passage of the law, and, second, because he personally opposed all baakeupecy “Dec. £8, 178, ia Rudand et af, eds, Madizon Papers, X, 329-430. = The “mystery” of che concrace clause is discussed in MeDonaké, Novus Ordo Seclyram, 272275, although he does no: suggest che hypockesis advanced tere Star (Raleigh), Dec. 22, 1808. #4 Wheaton 122-208 (1819)‘THE CONTRACT CLAUSE: 347 legislation. Other members of the Court did aot share Marshalls view, and in Osden v. Saunders, in 1827, he was overraied as co bankcupicy laws affecting contacts entered int after passage of a stare bankruptcy act.2° The majoriey in that case argued that if a state passes « bankruptcy act, chat inw becomes an implicic pact of the contract, affecting the remedies available to the creditor if che debtor fails ro perform the obligation. The distinction between the obligation and remedies justified, in Marskall’s pinion in Sturges v. Crownsnsbield, the abolition of imprisonment for debt. Building on thar apiaion, Justice Bushrod Wasingcon held for che majority in Oder v, Saunders that a discharge could include aot oniy the body of ¢ debeor bu his Feture earniags as well, Suck a discharge, he held, did not impair the obligation of « conccact ® The Court's conclusion in Ogden v. Saunders had been reached by some judges earlier, For example, Justice Brockhalsc Liviaaston, a New York Federaiist, upheld state baakcupccy legislation in Adame v. Storey, a case decided in 1817. He maintained thac at che time of the writing of che Constirusion the states had a right ca pass insolvency and bankreptcy laws, and that neither Article I, Section 10, nor Article L, Section 8, restricted hac right, Actile I, Livingstoa held, was intended ta prevent certain types of state policies arising feom che calamities of war—legal vender paper money, installmenc laws, and commodicy payntenc laws. In coneeast, insoivency and bankruptcy laws arose «8 an “encouragement to trade," were universal amang the states, and served a legitimate function that distinguished chem from the types of action prohibited by Arccle Section 10.8? For Livingston, in cantrast co the United States Supreme Court, those means that “encoucaged trade” were constitutional Livingston did noe sanction or proseribe stay laws in his decision in Adams v, Storey. Neither did the Supreme Coure in 1819 or 182). But state legislatures and judges had previously, and would in fueure, justify such laws on che same grounds that had been used to justify state bankcuptcy legislation. *8 Such legislation did not impaie the obligation of cantract for ic merely altered the remedy, which was compatibie with the intentions of the framecs, Furthermore, such legislation was necessacy and just. Ieprorected individuals from the deleterious effects of governmental policies, even as it encouraged the legitimate efforts of farmers and mecchaas, So, what can we say about the effects of the prohibitions of Avticie I, Section ro, an state economic policy during the early national period? Clearly, the broad potential envisioned Dy some Federalists and Andifederalists was act realized. Neither Congress nor the fedecal courts © ra Wheaton 213-369 (1827) ibid. 21 Pedeeal Cases 154-152 [2807]. In addition ta the material cited above see Mucray N. Rothbard, The Panic of 1819: Reactions end Policer (New York, 1962), ehap. 2548 WILLIAM AND MARY QUARTERLY moved co peohibie stace bankruptcy legislation, except in a limited fashion, aad thea only after 1815, The porential for che absolute sanctity of contracts, free from state interference through any form of debcor-celief legislation, which Antifederaliss had predicted, and some Federslists may have prefeered, was not achieved Even so, the states did cesort 0 fewer interferences in contraces, and ia more limited ways, afeer 1789 than they had during the Confederation period. No state adopted a commodicy payment law after 1789, an the ‘aly installment law operating during the eaely national period was passed before the establishment of the aew government. Furthermore, some legislacures rejected calls for stay and other forms of debtorrclict legislation, in pare because of Article I, Section to. Still, the impact of the ban was smaller than che language of the Constitution would seem co suggest, for stay and bankruptcy legislation continued to be adopted foliowing rstification of che Constiution. More broadly, the early history of the contract clause conéems Madison's argument in The Federalist that che Constitution was neither “wholly national nor wholly federal” Because of the ambiguity of Arcicle 1, Section 10, Federalists and Antifederalists came to widely differing, conclusions aboue che prospective impact of the contract clause. Same incerpeered the clause co mean that most or all stare debtor relief legislation would be proscribed. Others, Federalist and Ancifedecalist alike, anticipated a far naccower effect. This host of conflicting incerpre- cations, the previous experience of che colonies and siates with such policies, and the reactive sature of the federal judiciary, which could respond to stace initiatives only when deciding cases alieging a stare violation of the Constitucon, created 2 vacuum that states filled by continuing, and iaitiating aew stay, installment, and bankruptcy programs. “These state initiatives profoundly affected che ulcimace stape of feder alism. Tous, while the federal courts after 815 moved to deny the constitvrionality of stay and inscaliment laws, they accepred such debtor relief legislarion if it had been adopred before the inauguration of the new goverament. The experience of the states ducing the first quarter century under the new government also sigaaled co future stare legislatures that stay and other forms of debeos-relief laws could be adopted as short-term responses 10 immediace economic crises with litle likelihood of federal review. Finally, the federal courts affirmed the conscitucionality of state baokrupecy legislation chat affected only furure concracts, The Consticu- tion, 48 a result of state legislative initiatives chat built on the ambiguicy of the documene and of the diversity of the framers’ intentions, proved incapable of establishing exclusive federal control over state ecanor policy after 1789.