§ 604. We may also examine the effect of insolvent laws upon contracts entered into subsequent to their passage. This question was presented in the great case of Ogden v. Saunders. Perhaps no case was ever argued before the Supreme Court with more care, and decided with more consideration. I have already spoken of this judgment somewhat at large, and need not repeat the arguments and separate conclusions of the judges. It was held by a majority of the court that a state insolvent law, providing for a discharge of a debtor from his debts, does not impair the obligation of contracts entered into subsequent to its passage, and while it continues in force. I am not able to see any doubt as to the correctness of this decision upon principle, and it seems remarkable that two such able jurists as Marshall and Story should have dissented. At all events the rule was thus settled, and has since been universally followed.2 § 605. Although not necessarily connected with the subjectmatter of this work, it is proper to state the practical rules which have been established in reference to the effect of an insolvent discharge. Such discharge operates upon two persons or classes of persons, the debtor and his creditors; upon the debtor favorably, by relieving him from his liabilities; upon the creditors unfavorably, by destroying their claims. Now the question arises, Does the discharge of a debtor by the laws of a state in which he is domiciled, operate upon the claims of all American creditors, no matter in what state they may reside? This question is partly constitutional, and is partly referable to that department of jurisprudence which modern writers term the private international law. The fundamental principle established by the Supreme Court is, that the state domicil or inhabitancy of the creditor is the fact which determines the validity of a state insolvent discharge as against him; or, in other words, that these discharges have no extra-territorial effect as against the creditor. There may be three cases. 1 12 Wheat. 213. 2 Blanchard v. Russell, 13 Mass. 1; Hemstead v. Reed, 6 Conn. 480; Betts v. Bagley, 12 Pick. 572. §606. First. The creditor and the debtor may be inhabitants of the same state. Here, of course, the insolvent discharge granted in that state, destroys the creditor's claim. Being a member of the state, he is bound by its laws, and the obligation of the contract he entered into was created by those laws. This rule is so well settled, that I simply refer, in its support, to a few cases collected in the foot-note.1 § 607. Secondly. The creditor may be an inhabitant of a different state from the one in which the debtor obtains his discharge, and the contract may not, by its express terms, have been made payable in the latter commonwealth. The creditor is not bound, against his consent, by such a discharge. His claim still subsists, and may be enforced, notwithstanding the insolvency. These were the facts in Ogden v. Saunders. Ogden, then an inhabitant of New York, had accepted certain bills of exchange held by Saunders, a resident of Kentucky. Ogden was subsequently discharged in New York under the insolvent law of that state. Having afterwards removed to Louisiana, he was there sued upon these bills, and set up his discharge as a defence to the action. This defence the Supreme Court finally overruled.2 The same court reaffirmed the rule in Boyle v. Zacharie,3 and Cook v. Moffatt.* State courts have acquiesced in this doctrine.5 § 608. Thirdly. The courts of Massachusetts and of one or two other states, however, have endeavored to engraft an exception upon the last mentioned rule, as follows: If the contract, by its express terms, was to be performed in the state where the debtor resided, and where he obtained his discharge, the creditor, though an inhabitant of another state, is bound by that discharge. This statement of the rule would make the efficacy of the discharge to depend upon the locus of the contract, and not upon the domicil of the creditor. The Supreme 1 1 Ogden v. Saunders, 12 Wheat. 358; Norton v. Cook, 9 Conn. 514; Walsh v. Farrand, 13 Mass. 19; Pugh v. Bussell, 2 Blackf. 366. 86 Pet. 348, 635. 2 12 Wheat. 358, 369. 4 5 How. 295. Norton v. Cook, 9 Conn. 314; Bradford v. Farrand, 13 Mass. 18; Pugh v. Bussell, 2 Blackf. 366. Court of Massachusetts insisted upon this view in the old case of Blanchard v. Russell 1 (1816), and later, in that of Scribner v. Fisher 2 (1854). But the Court of Appeals of New York had considered the exact question, and had arrived at an opposite conclusion in Donelly v. Corbett (1852). Finally, the case of Baldwin v. Hale (1863), was carried to the Supreme Court of the United States, and the exception which the Massachusetts tribunals had endeavored to establish, was overruled; the place of performance was held immaterial; the domicil of the creditor, under all circumstances, was declared to be the determining fact. After this decision, the Massachusetts court gracefully receded from its position, and in Kelly v. Drury 5 (1864), adopted the views of the national judiciary. The Supreme Court again affirmed their rule in Gilman v. Lockwood (1867).o 2. Laws which Apply Directly to the Remedy. § 609. What laws, if any, which apply directly to the remedy, fall within the inhibition of the Constitution, has given rise to much judicial controversy and conflict of decision. State courts of undoubted ability have asserted and maintained the proposition, that the remedy is completely under the control of the local law. Others of no less authority have admitted that the remedy may be interfered with to such an extent as to impair the obligation of contracts, but have virtually refused to apply this doctrine to cases where any remedy has been left, although its efficacy may have been materially diminished, or a resort to it may have been arbitrarily postponed. On the other hand, the Supreme Court of the United States has, in a series of important cases, established and applied the rule, that materially abridging or postponing the existing remedy, or imposing new conditions upon it which substantially interfere with its pursuit, have the effect to impair the obligation of contracts. But it must be admitted that the state courts have shown themselves very unwilling to 1 13 Mass. 1. 4 1 Wall. 223. 2 2 Gray, 43. 8 3 Seld. 500. 64 Wall. 409. accept these conclusions of the national tribunal, and the reasoning upon which they were founded, and to apply them in their integrity to subsequent cases as they have arisen. I believe, however, that the obscurity which has been thrown around this subject, and the direct contradiction of judicial decision which has been so frequent, have resulted in great measure from the employment of the word "remedy" in uncertain and even in double senses; that in this, as in so many other forensic disputes, the parties have not given to the same terms the same meaning; and that by a proper analysis it is possible to arrive at a general principle which may reconcile all conflict, and be a guide in the decision of all cases. § 610. It was shown in a former paragraph that a remedial right is included in the very notion of the obligation of a contract; that without such a right there would be nothing imperative in the rule of law requiring parties to do what they have agreed to do. Any state statute which impairs this remedial right in the case of an existing contract, as truly and as effectually impairs the obligation as though its operation had been directed against the very terms in which the parties had expressed their compact. This would seem to be self-evident. But lawyers, judges, and text-writers have not always distinguished between this intrinsic remedial, or sanctioning right, which is additional to the primary right flowing from the very terms of the contract, and which equally with it forms a part of the obligation, and the mere modes, the mere judicial procedure by means of which this secondary right is enforced. The word "remedy" has been applied to both, to the essential remedial right which is the final object of all judicial procedure, and to the procedure itself; a denial that the latter forms any part of the obligation has been tacitly or expressly extended to the former; and the whole remedy has thus been placed under the control of state legislatures. That this result is plainly erroneous may be established, I think, by the following analysis: § 611. The term remedy used in our legal nomenclature includes, as Austin clearly shows, two entirely distinct classes of objects; (1) the secondary, sanctioning, or remedial right by which the observance of a contract is made something more than voluntary; (2) the procedure by and through which this secondary, sanctioning right is made efficient. The first of these objects is included within the obligation; the second is not. To express the same proposition in other language, a party may demand that substantially the same remedial right appropriate to his contract when it was entered into, shall be accorded to him when it is broken; he cannot demand that the forms of judicial procedure which prevailed at the former time shall also be in existence at the latter. If we can ascertain, therefore, in any general way, what is necessarily embraced within the secondary, sanctioning, or remedial right which inheres in the injured party upon the breach of a contract, we shall also have ascertained what laws, by impairing that remedial right, will impair the obligation of the contract itself. § 612. Under our system of jurisprudence two forms of remedial right may result to the injured party upon the breach of a contract; the one form applying to a small number only of agreements, the other being appropriate to all. The first is the right to have done exactly what the defaulting party promised to do, the remedial right to a specific performance. The other is compensatory, or the right to be paid such an amount of pecuniary damages as shall be a compensation for the injury caused by the failure of the defaulting party to do exactly what he promised to do. Both of these species of remedial rights must be pursued by the aid of the courts. In both, the exist ence of the contract and of the breach must be established. These facts having been sufficiently ascertained, a decree or judicial order must be rendered, in the first case, that the defaulting party do exactly what he undertook to do, and in the second case, that the defaulting party pay the sum of money fixed as a compensation for his delict. But the remedial right cannot stop here, else it would be a mere empty show. The judicial order addressed to the defaulting party must be enforced; in the first case, by compelling him to do the act or acts commanded to be done; in the second case, by seizing and selling so much of his property as may be necessary to pay |