pense, loss or injury" upon the policy holder, and it is this further expense, loss or injury that or injury that measures the amount to be allowed, which is not to exceed twenty-five per cent of the liability on the policy.

It cannot be said that this effort to give indemnity for the injuries which would be sustained through perverse methods and through an abuse of the privileges accorded to honest litigants imposed a burden upon the enforcement of the contract. Neither the contract, nor the existing law which entered into it, contemplated contests promoted in bad faith or justified the infliction of loss by such means. The State was entitled at all times to take proper measures to prevent the perversion of its legal machinery, and there was no denial or burdening in any proper sense, of the existing remedies applicable to the contract by the demand that they be availed of bona fide. . . The statute, judged by its provisions as they have been construed and applied, cannot be regarded as an impairment of the obligation of the contract.

Judgment affirmed.

NOTE.-The Supreme Court has pointed out in many cases that the contract clause of the Constitution is a protection against impairIment only through the legislative action of the State. Within the meaning of this provision a law of a State may be not only an enactment of its legislature, but a constitution, White v. Hart (1872), 13 Wallace, 346; Bier v. McGehee (1893), 148 U. S. 137, or the ordinance of a municipal corporation enacted in the exercise of its delegated authority, Ross v. Oregon (1913), 227 U. S. 150, or the order of a board of county commissioners, Northern Ohio Traction Co. v. Ohio (1918), 245 U. S. 574, or an order of a State Railroad Commission, Grand Trunk Western Ry. v. Railroad Commission of Indiana (1911), 221 U. S. 400. All of these were enactments to which the State gave the force of law. On the same principle an act of the Congress of the Southern Confederacy to which the State of Virginia gave the force of law was treated as a statute of Virginia within the prohibition of the contract clause, Williams v. Bruffy (1877), 96 U. S. 176. When a State gives effect to later legislation on the ground that the earlier legislation did not create a contract, it is for the Federal Supreme Court to determine whether or not a contract existed, Russell v. Sebastian (1914), 233 U. S. 195; Louisiana Railway & Navigation Co. v. New Orleans (1914), 235 U. S. 164. While a change in judicial decision does not in itself impair the obligation of a contract made in reliance on the first decision, Cross Lake Club v. Louisiana (1912), 224 U. S. 632, nevertheless if a judicial decision gives effect to a subsequent State statute, either avowedly or in substance, the Supreme Court may review it, Bacon v. Texas (1896), 163 U. S. 207; Houston & Texas Central Ry. v. Texas (1900), 177 U. S. 66; Columbia Ry., Gas & Electric Co. v. South Carolina (1923), 261 U. S. 236.

The breach or repudiation of a contract should be distinguished from the impairment of its obligation. A mere breach of contract leaves its obligation intact, Hays v. Port of Seattle (1920), 251 U. S. 233. The obligation of a contract is that right which either party according to its terms is entitled to enforce against the other. "The obligation of a contract includes everything within its obligatory scope," Edwards v. Kearzey (1878), 96 U. S. 595, 600. Obviously a law which alters the terms of a contract either by imposing new terms or by dispensing with those expressed in it impairs its obligation, State Tax on Foreignheld Bonds (1872), 15 Wallace, 300, 320. Hence a contract entered into with a corporation at a time when its shareholders were liable to the amount of their shares for the debts of the corporation is impaired by a subsequent statute which releases them from that liability, Hawthorne v. Calef (1865), 2 Wallace, 10; and since a life insurance policy payable to the executors, administrators or assigns of the insured is his property and subject to the claims of his creditors, a statute which exempts such a policy or its proceeds from antecedent debts is invalid, Bank of Minden v. Clement (1921), 256 U. S. 126. So a statute which after sale for foreclosure materially extends the time for the redemption of the property involved adversely affects the contract rights of the purchaser, Barnitz v. Beverly (1896), 163 U. S. 118, and a creditor's right to satisfy his claim by execution levied on the property of his debtor is protected by the contract clause, McCracken v. Hayward (1844), 2 Howard, 608. But the giving of an additional remedy merely strengthens a contract and does not impair its obligation, Bernheimer v. Converse (1907), 206 U. S. 516; National Surety Co. y. Architectural Decorating Co. (1912), 226 U. S. 276. Likewise if a contract is unenforceable because of some formal defect, such as the incapacity of a nominal party or the omission of some purely formal requirement, later legislation may provide a remedy whereby the intent of the parties may be made effective, Ewell v. Daggs (1883), 108 U. S. 143; Gross v. United States Mortgage Co. (1883), 108 U. S. 477; Henley v. Myers (1910), 215 U. S. 373. A statute which increases the burdens of either party to a contract impairs its obligation. Hence the contract of a street railway company to carry passengers for a five-cent fare within town limits is impaired by a statute which extends the town limits and makes the contract applicable throughout, Georgia Railway & Power Co. v. Decatur (1923), 262 U. S. 432. The remedy by which a contract may be enforced is an essential part of it, and the power of the States to alter the procedure for the enforcement of contracts is limited by the contract clause. One of the most important discussions of this subject is found in Bronson v. Kinzie (1843), 1 Howard, 311, in which Chief Justice Taney said:

Undoubtedly, a State may regulate at pleasure the modes of proceeding in its courts in relation to past contracts as well as future. It may, for example, shorten the period of time within which claims shall be barred by the Statute of Limitations. It may, if it thinks proper, direct that the necessary implements of agriculture, or the tools of the mechanic, or articles of necessity in household furniture, shall, like wearing apparel, not be liable to execution on judg

ments. Regulations of this description have always been considered, in every civilized community, as properly belonging to the remedy, to be exercised or not by every soVereignty, according to its own views of policy and humanity. It must reside in every State to enable it to secure its citizens from unjust and harassing litigation, and to protect them in those pursuits which are necessary to the existence and well-being of every community. And, although a new remedy may be deemed less convenient than the old one, and may in some degree render the recovery of debts more tardy and difficult, yet it will not follow that the law is unconstitutional. Whatever belongs merely to the remedy may be altered according to the will of the State, provided the alteration does not impair the obligation of the contract. But if that effect is produced, it is immaterial whether it is done by acting on the remedy or directly on the contract Itself. In either case it is prohibited by the Constitution.

It is difficult, perhaps, to draw a line that would be applicable in all cases between legitimate alterations of the remedy and provisions which, in the form of remedy, impair the right. But it is manifest that the obligation of the contract, and the rights of a party under it, may, in effect, be destroyed by denying a remedy altogether; or may be seriously impaired by burdening the proceedings with new conditions and restrictions, so as to make the remedy hardly worth pursuing. And no one, we presume, would say that there is any substantial difference between a retrospective law declaring a particular contract or class of contracts to be abrogated and void, and one which took away all remedy to enforce them, or encumbered it with conditions that rendered it useless or impracticable to pursue it.

A State statute which increases the exemption to a debtor, as applied to existing indebtedness, impairs a substantial part of the obligation of the contract, Gunn v. Barry (1873), 15 Wallace, 610. A State having authorized a city to issue bonds and to levy taxes for their payment may not so limit the city's taxing power as to make it impossible for it to fulfil its contracts. "The power given becomes a trust which the donor cannot annul, and which the donee is bound to execute; and neither the State nor the corporation can any more impair the obligation of the contract in this way than in any other," Von Hoffman v. Quincy (1867), 4 Wallace, 535. Statutes of limitation affecting existing rights are not invalid if a reasonable time is given for commencing an action before the bar takes effect. "In all such cases, the question is one of reasonableness," Terry v. Anderson (1877), 95 U. S. 628; Wheeler v. Jackson (1890), 137 U. S. 245; Atchafalaya Land Co. v. Williams Cypress Co. (1922), 258 U. S. 190. It is well settled that "the legislature may modify or change existing remedies, or prescribe new modes of procedure, without impairing the obligation of contracts, provided a substantial or efficacious remedy remains or is given, by means of which a party can enforce his rights under the contract," Oshkosh Waterworks Co. v. Oshkosh (1903), 187 U. S. 437. Contracts are made subject to the fundamental

powers of government such as the power of taxation, the right of eminent domain and the police power, but in the exercise of those powers the limitations of the Constitution must be taken into account. An ordinance of the city of Charleston directing the city treasurer to deduct a tax of two per cent on the coupons of all city bonds before payment is invalid as applied to bonds owned by nonresidents. "A change of the expressed stipulations of a contract, or the relief of a debtor from strict and literal compliance with its requirements, can no more be effected by an exertion of the taxing power than it can be by the exertion of any other power of the State legislature," Murray v. Charleston (1878), 96 U. S. 432. But a State in the exercise of its police power may so regulate water rates as to impair existing contracts of the water company with consumers, Knoxville Water Co. v. Knoxville (1903), 189 U. S. 434. The New York Housing Acts of 1920 which enabled tenants to retain possession of leased premises contrary to their covenants to surrender did not violate the contract clause of the Federal Constitution since they were an exercise of the State's police power, Marcus Brown Holding Co. v. Feldman (1921), 256 U. S. 170. "Parties, by entering into contracts, may not estop the legislature from enacting laws intended for the public good," Manigault. v. Springs (1905), 199 U. S. 473. Said Mr. Justice Holmes, "One whose rights, such as they are, are subject to State restriction, cannot remove them from the power of the State by making a contract about them. The contract will carry with it the infirmity of the subject-matter," Hudson County Water Co. v. McCarter (1908), 209 U. S. 349. But if the State exerts its power over the rates of a public utility company merely for the purpose of relieving the company from an improvident contract it contravenes the contract clause of the Constitution, Arkansas Natural Gas Co. v. Arkansas Railroad Commission (1923), 261 U. S. 379. Every corporation by the very nature of its existence is subject to dissolution either by the voluntary surrender of its corporate franchise or by the action of the State which created it. Such dissolution does not impair its contractual obligations. They survive although there may be no means of enforcing them, Mumma v. The Potomac Co. (1834), 8 Peters, 281. The adoption by the legislature of certain methods of carrying out a public policy does not constitute a contract with persons acting in reliance thereon that such methods will not be changed, Beers v. Arkansas (1858), 20 Howard, 527. Hence when the State of Ohio, which had allowed employers to make direct to their employees the compensation provided for in its Workmen's Compensation Act and to insure against their liability thereunder, deprived employers who had insured of that privilege and required payment to be made direct to the State and thereby made worthless outstanding contracts of insurance, it did not violate the contract clause, Thornton v. Duffy (1920), 254 U. S. 361. The abolition of imprisonment for debt is not such a change in the remedy as impairs the obligation of the contract, Penniman's Case (1881), 103 U. S. 714.

As to the relation of the bankruptcy laws of the States to the contract clause, see Ogden v. Saunders (1827), 12 Wheaton, 213; Cook v. Moffatt, et al. (1847), 5 Howard, 295, and Baldwin v. Hale (1863), 1 Wallace, 223.

CHAPTER VI.

INTERNATIONAL RELATIONS.

SECTION 1. THE TREATY-MAKING POWER.

HAUENSTEIN v. LYNHAM.

SUPREME COURT OF THE UNITED STATES. 1880.
100 United States, 483.

Error to the Supreme Court of Appeals of the State of Virginia.

MR. JUSTICE SWAYNE delivered the opinion of the court.

Solomon Hauenstein died in the city of Richmond in the year 1861 or 1862, intestate, unmarried, and without children. The precise date of his death is not material. At that time, he owned and held considerable real estate in the city of Richmond. An inquisition of escheat was prosecuted by the escheator for that district. A verdict and judgment were rendered in his favor. When he was about to sell the property, the plaintiffs in error, pursuant to a law of the State, filed their petition, setting forth that they were the heirs-at-law of the deceased, and praying that the proceeds of the sale of the property should be paid over to them. Testimony was taken to prove their heirship as alleged, but the court was of opinion that, conceding that fact to be established, they could have no valid claim, and dismissed the petition. They removed the case to the Court of Appeals. That court, entertaining the same views as the court below, affirmed the judgment. They thereupon sued out this writ of

error.

The plaintiffs in error are all citizens of Switzerland. The deceased was also a citizen of that country, and removed thence to Virginia, where he lived and acquired the property to which this controversy relates, and where he died. The validity of his title is not questioned. There is no proof that he denationalized himself or ceased to be a citizen and subject of Switzerland.