In Ogden v. Saunders was laid down the important principle that a certificate of discharge under a state law cannot be pleaded in bar of an action brought by a citizen of another State in the courts of the United States, or of any other State than that where the discharge was obtained. The creditor of another State is, however, concluded by the discharge in bankruptcy if, by appearance or otherwise, he has made himself a party to the original insolvency proceedings.
6 186 U. S. 181; 22 Sup. Ct. Rep. 857; 46 L. ed. 1113.
7 The court say: "As the States, in surrendering the power, did so only if Congress chose to exercise it, but in the absence of congressional legislation retained it, the limitation was imposed on the States that they should pass no 'law impairing the obligation of contracts.'"
8 Chief Justice Marshall and Justices Story and Duvall dissenting.
9 Edwards v. Kearzey, 96 U. S. 595; 24 L. ed. 793.
10 See, for example, Denny v. Bennett, 128 U. S. 489; 9 Sup. Ct. Rep. 134; 32 L. ed. 491.
It is thus seen that the power of the States in the matter of bankruptcy does not extend to an absolute release of the debtor from the obligation of his contracts. "The authority to deal with the property of the debtor within the State, so far as it does not impair the obligation of contracts, is conceded; but the power to release him, which is one of the usual elements of all bankrupt laws, does not belong to the legislature where the creditor is not within the control of the court." 11
The United States is, of course, not under this territorial limitation in the exercise of its bankruptcy powers, and furthermore, it is not limited with reference to the impairment of the obligation of contracts. National bankrupt laws may, therefore, be made applicable to contracts already entered into at the time of their passage.12