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Supreme Court of the United States • 1796

Ware v. Hylton

3 U.S. 199 | 1 L. Ed. 568 | 3 Dall. 199 | 1796 U.S. LEXIS 400

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Takeaway

In short, Ware v. Hylton established that a United States treaty is supreme over conflicting state law: the 1783 Treaty of Peace required Virginia courts to disregard a state-law discharge that blocked a British creditor's recovery of a prewar debt.

Background

Before the Revolution, Virginia debtors executed a bond to British creditors for £2,976 sterling. During the war, Virginia enacted a 1777 sequestration statute that allowed a Virginia citizen owing money to a British subject to pay the debt into the state loan office. The debtor could obtain a state receipt that purported to discharge the debt to that extent. In 1780, the defendants paid part of their debt into the loan office under that statute.

When the British creditors later sued on the bond in the federal Circuit Court for Virginia, the defendants invoked the Virginia statute and their loan-office payment as a bar. The creditors replied that Article IV of the 1783 Treaty of Peace guaranteed creditors on either side recovery of the full value, in sterling money, of all bona fide debts previously contracted, free of lawful impediments. The circuit court sustained the defendants' position. The Supreme Court reversed and held that the treaty prevented the state statute and payment from barring the British creditors' recovery.

Issues

Issue #1

Whether Article IV of the Treaty of Peace protected a British creditor whose American debtor had paid the debt into Virginia's loan office under the 1777 sequestration statute.

Holding

Yes. Article IV required that the British creditor be allowed to recover from the original debtor notwithstanding the Virginia statute and the loan-office payment.

Reasoning

The treaty's language was broad and direct: creditors on either side were to encounter “no lawful impediment” to recovering the full sterling value of all bona fide debts previously contracted. The debt at issue was contracted before the treaty, and the Virginia statute and payment made under it were precisely the sort of legal obstacle that prevented recovery.

Justice Chase treated both the Virginia statute and the payment under it as lawful impediments within Article IV. A statute that discharged the debtor after payment to the state, and the receipt evidencing that discharge, would defeat the creditor's action unless the treaty displaced them.

The Court read the treaty as restoring the creditor and debtor to the legal position they would have occupied absent the war and Virginia's intervention. Reading Article IV to exclude debts paid into state treasuries or loan offices would leave a major class of British creditors without a remedy, even though the treaty used universal terms such as “creditors,” “no lawful impediment,” and “all bona fide debts.”

The treaty's promise of recovery in sterling money also showed that the parties meant to prevent American states from satisfying British debts through depreciated paper money, property tenders, or state-created substitutes for payment. The creditor was entitled to recover the debt's full value from the original debtor, although fairness required the state that received the first payment to indemnify that debtor.

Issue #2

Whether a treaty made by the United States could supersede a contrary Virginia law and rights asserted under that law.

Holding

Yes. The Treaty of Peace was superior to the Virginia statute, and Article VI of the Constitution required state and federal judges to give the treaty effect over conflicting state law.

Reasoning

Justice Chase concluded that Congress, under the Articles of Confederation, possessed the power to make peace and necessarily to determine the terms on which peace would be made. That power included the authority to settle claims involving property and debts affected by the war, even when the settlement altered rights created under state law.

The Constitution confirmed and made judicially enforceable that supremacy. Article VI declares treaties made under the authority of the United States to be the supreme law of the land and binds state judges despite contrary state constitutions or statutes. The Court understood this provision to apply to the preexisting 1783 treaty as well as to future treaties.

A contrary rule would allow one state legislature to defeat a national treaty negotiated for the entire country. Because the treaty promised that British creditors would face no lawful impediment, state courts had to disregard a state-law defense that would produce the forbidden impediment.

Issue #3

Whether Virginia initially possessed authority, under the law of nations, to confiscate or sequester debts owed to British subjects during the Revolutionary War.

Holding

The Court did not rest its judgment on a single, definitive resolution of that question because the treaty was dispositive.

Reasoning

Justice Chase reasoned that Virginia became a sovereign and independent state upon independence and retained internal sovereignty, including authority over enemy property within its territory. In his view, the strict law of war permitted the confiscation of enemy debts, and Virginia had not delegated that particular domestic power exclusively to Congress before enacting the 1777 statute.

Other Justices did not adopt that analysis as a necessary basis for judgment. Justice Paterson declined to decide whether Virginia had authority to confiscate British debts, while Justice Wilson concluded that the modern law of nations treated confiscation of private debts as impermissible. The controlling point was that, even assuming the Virginia enactment had legal effect during the war, the later treaty removed its effect as a defense to the creditor's claim.

Concurrences

Justice Paterson

Reasoning

Justice Paterson agreed that the judgment for the debtors had to be reversed, but he did not decide whether Virginia had authority to confiscate debts due to British subjects. He read the Virginia statute as falling short of an outright confiscation because its preamble disapproved confiscating debts and the payments into the loan office were voluntary. Still, he accepted that the statute purported to discharge a debtor who complied with it.

For Paterson, the decisive point was the treaty's comprehensive language. Article IV covered every creditor and every bona fide pre-treaty debt, and “no lawful impediment” encompassed state sequestration statutes and payments made under them. The treaty therefore repealed the statute's obstructive effect and nullified the payment as a defense against the original creditor.

Paterson also emphasized the commercial and moral case against confiscating private debts. Such confiscation undermined confidence in cross-border commerce and violated the good faith on which private contracts depend. The treaty should consequently receive a liberal construction favoring restoration of prewar contractual obligations.

Justice Wilson

Reasoning

Justice Wilson agreed that the treaty independently required reversal, but he took a more skeptical view of Virginia's wartime authority. Once the United States declared independence, he reasoned, they were bound by the modern law of nations, under which confiscating private debts had become disreputable and inconsistent with public faith among civilized commercial states.

He also maintained that Congress, not an individual state, possessed the national war power that could support confiscation of enemy property. In all events, he concluded, Article IV unmistakably reached debts contracted before the treaty and removed every state-law obstacle to recovery by the British creditor.

Justice Cushing

Reasoning

Justice Cushing found it unnecessary to question Virginia's authority to enact its wartime law. Even if the statute initially created a valid discharge for a debtor who paid the loan office, the later treaty had sufficient force to remove that discharge as an impediment to the creditor's action.

He read Article IV as speaking of original creditors, original debtors, and debts previously contracted. By guaranteeing recovery in sterling money without lawful impediment, the treaty necessarily nullified state measures aimed at defeating those debts. Virginia, having received the money, should compensate the debtor required to pay again, but that equitable obligation did not alter the creditor's treaty right against the original debtor.

Dissents

Justice Iredell

Reasoning

Justice Iredell agreed that an individual debtor could not defeat the treaty merely by alleging that Great Britain had breached it or committed later hostilities. Under the law of nations, a treaty breach makes a treaty voidable at the election of the sovereign power, not at the election of a private litigant. No competent national authority had declared the Treaty of Peace void.

He nevertheless would have affirmed the circuit court on the loan-office-payment defense. In his view, Virginia's statute, whether or not perfectly consistent with the law of nations, was binding within Virginia so long as it did not violate the state constitution or the Articles of Confederation. The state had at least validly sequestered the debt and, after receiving payment under its law, had completely discharged the debtor.

Iredell read Article IV more narrowly. He believed its promise that creditors would face no lawful impediment removed existing or future legislative barriers to enforcing debts that remained owing, but did not plainly destroy private rights already acquired through a lawful state discharge. Because the original debtor had paid and been released before the treaty, Iredell concluded that the creditor could not recover the same sum again from that debtor, even if the creditor might have a claim to the money held by Virginia.

He also distinguished the treaty's moral force before the Constitution from its legal status after Article VI. The Constitution made treaties supreme law, but Iredell did not read it or Article IV to retrospectively undo completed payments and vested defenses without unmistakably clear treaty language.