Briscoe v. Bank of Commonwealth of Kentucky
36 U.S. 257

Annotate this Case

U.S. Supreme Court

Briscoe v. Bank of Commonwealth of Kentucky, 36 U.S. 11 Pet. 257 257 (1837)

Briscoe v. Bank of Commonwealth of Kentucky

36 U.S. (11 Pet.) 257

ERROR TO THE COURT OF

APPEALS OF KENTUCKY

Syllabus

On 29 November, 1820, the Legislature of Kentucky passed an act establishing a bank by the name of "The Bank of the Commonwealth of Kentucky." The first section of the act declares the bank shall be established "in the name and behalf of the Commonwealth of Kentucky" under the direction of a president and twelve directors to be chosen by the legislature. The second section enacts that the president and directors shall be a corporation, capable of suing and being sued and of purchasing and selling every description of property. The third section declares the bank to be exclusively the property of the commonwealth. The fourth section authorizes the issuing of notes, and the fifth declares the capital to be two millions of dollars, to be paid by all moneys afterwards paid into the Treasury for the vacant lands of the state, and so much of the capital stock as was owned by the state in the Bank of Kentucky, and as the treasurer of the state received those moneys, he was required to pay them into the bank. The bank had authority to receive money on deposit, to make loans on good personal security or on mortgage, and was prohibited increasing its debts beyond its capital. Limitations were imposed on loans, and the accommodations of the bank were apportioned among the different counties of the state. The bank was by a subsequent act authorized to issue three millions of dollars, and the dividends of the bank were to be paid to the treasurer of the state. The notes of the bank were issued in the common form of bank notes in which the bank promised to pay to the bearer on demand the sum stated on the face of the note. The pleadings excluded the court from considering that any part of the capital had been paid by the state, but in the argument of the case it was stated and not denied that all the notes which bad been issued, and payment of which bad been demanded had been redeemed by the bank. By an act of the Legislature of Kentucky it was required that the notes of the bank should be received on all executions by plaintiffs, and if they failed to endorse on such execution that they would be so received, further proceedings on the judgment

were delayed for two years. The Bank of the Commonwealth of Kentucky instituted a suit against the plaintiffs in error on a promissory note for which the

notes of the bank had been given as a loan to the drawers of the note. The defendants in the suit claimed that the note given by them was void, as the same was given for the notes of the bank, which were "bills of credit" issued by the State of Kentucky, against the provisions of the Constitution of the United States which prohibits the issuing of "bills of credit" by the states of the United States and that the act of the Legislature of Kentucky, which established the bank, was unconstitutional and void. By the court:

"The act incorporating the Bank of the Commonwealth of Kentucky was a constitutional exercise of power by the State of Kentucky, and the notes issued by the bank are not bills of credit within the meaning of the Constitution of the United States."

The definition of the terms "bills of credit," as used in the Constitution of the United States, if not impracticable, will be found a work of no small difficulty.

Page 36 U. S. 258

The terms "bills of credit," in their mercantile sense, comprehend a great variety of evidences of debt which circulate in a commercial country. In the early history of banks, it seems their notes were generally denominated "bills of credit," but in modern times they have lost that designation and are now called either bank bills or bank notes. But the inhibitions of the Constitution apply to bills of credit in a limited sense.

Description of the bills of credit which were issued in the early history of the colonies, afterwards the United States of America.

The case of Craig v. State of Missouri, 4 Pet. 410, cited.

The definition of a bill of credit, which includes all classes of bills of credit emitted by the colonies and states, is a paper issued by the sovereign power containing a pledge of its faith and designed to circulate as money.

If the legislature of a state attempts to make the notes of any bank a tender, the act will be unconstitutional, but such attempt could not affect in any degree the constitutionality of the bank. The act which related to the receiving the notes of the Bank of the Commonwealth of Kentucky was not connected with the charter.

The federal government is one of delegated powers; all powers not delegated to it or inhibited to the states are reserved to the states or to the people.

A state cannot emit bills of credit, or in other words it cannot issue that description of paper to answer the purposes of money which was denominated before the adoption of the Constitution "bills of credit." But a state may grant acts of incorporation for the attainment of these objects, which are essential to the interests of society. This power is incident to sovereignty, and there is no limitation on its exercise by the states, in respect to the incorporation of banks, in the federal Constitution.

At the time of the adoption of the Constitution, the "Bank of North America" and "the Massachusetts Bank" and some others were in operation. It cannot therefore be supposed that the notes of these banks were intended to be inhibited by the Constitution, or that they were considered as "bills of credit" within the meaning of that instrument. In many of their most distinguishing characteristics, they were essentially different from bills of credit in any one of the various forms in which they were issued. If then the powers not delegated to the federal government nor denied to the states are retained by the states or the people, and by a fair construction of the terms "bills of credit," as used in the Constitution, they do not include ordinary bank notes, it follows that the powers to incorporate banks to issue these notes may be exercised by a state.

A uniform course of action involving the right to the exercise of an important power by the state government for half a century, and this almost without question, is no unsatisfactory evidence that the power is rightfully exercised.

A state cannot do that which the federal Constitution declares it shall not do. It cannot "coin money." Here is an act inhibited in terms so precise, that they cannot be mistaken. They are susceptible but of one construction. And it is certain that a state cannot incorporate any number of individuals, and authorize them to coin money. Such an act would be as much a violation of the Constitution as if money were coined by an officer of the state under its authority. The act being prohibited cannot be done by a state, directly or indirectly. The same rule applies to bills of credit issued by a state.

To constitute a bill of credit within the Constitution, it must be issued by a state on the faith of the state, and designed to circulate as money. It must be a paper which circulates on the credit of the state, and so received and used in the ordinary

Page 36 U. S. 259

business of life. The individual or committee who issue it must have power to bind the state; they must act as agents, and of course not incur any personal responsibility nor impart as individuals any credit to the paper. These are the leading characteristics of a bill of credit, which a state cannot emit. The notes issued by the Bank of the Commonwealth of Kentucky have not these characteristics.

When a state emits bills of credit, the amount to be issued is fixed by law, as also the fund out of which they are to be paid, if any find be pledged for their redemption, and they are issued on the credit of the state, which in some form appears upon the face of the notes or by the signature of the person who issues them.

No sovereign state is liable to be sued without her consent. Under the Articles of Confederation, a state could be sued only in cases of boundary. It is believed that there is no case where a suit has been brought at any time on a bill of credit against a state, and it is certain that no suit could have been maintained on this ground prior to the Constitution.

The case of Craig v. State of Missouri, 4 Pet. 410, is not authority to sustain the claim that the notes of the Bank of the Commonwealth were bills of credit. The decisions in that case applied to obligations of an entirely different character.

There is no principle decided by this Court in the case of Craig v. State of Missouri which at all conflicts with the views presented by the Court in this case. Indeed the views of the Court are sustained and strengthened by contrasting the present case with that.

The case of Bank of the United States v. Planters' Bank of Georgia, 9 Wheat. 904, cited.

The case of Bank of the Commonwealth v. Wister, 2 Pet. 315, cited.

In the Mercer Circuit Court of the State of Kentucky, the president and directors of the Bank of the Commonwealth of Kentucky, on 15 April 1831, filed a petition of debt stating that they hold a note upon the defendants, George H. Briscoe, Abraham Fulkerson, Mason Vannoy and John Briscoe, in substance, as follows, to-wit:

"2048 Dollars, 37 cents."

"One hundred and twenty days after date, we jointly and severally promise to pay the president and directors of the Bank of the Commonwealth of Kentucky or order 2048 dollars, 37 cents, negotiable and payable at the branch bank at Harrodsburg, for value received. Witness our hands this 1 February 1830."

"G. H. BRISCOE"

"A. FULKERSON"

"MASON VANNOY"

"JOHN BRISCOE"

Page 36 U. S. 260

The defendants appeared and filed the following pleas:

"The defendants, after craving oyer of the note, and the same being read to them, say that the note was executed on no other or further consideration than that of another note which had been previously executed by them to the plaintiffs for a certain sum, negotiable and payable at the branch of the said bank at Harrodsburg, and that the note so previously executed was executed by them on no other or further consideration than that of the renewal of another note of the like tenor, and the defendants aver that previous to the time of executing the note last mentioned, the Legislature of the Commonwealth of Kentucky, in the name and on behalf of the said commonwealth, by an act which passed on 29 November 1820, established a bank the capital stock of which was declared to be $2,000,000, which said capital stock the said bank never received, or any part thereof, as these defendants aver; that by the provisions of said act, the president and directors of the said bank, and their successors in office, were declared and made a corporation and body politic, in law and fact, by the name and style of 'The President and Directors of the Bank of the Commonwealth of Kentucky;' that also by said act the president and directors of the said bank were illegally and contrary to the provisions of the Constitution of the United States empowered and authorized, for and on behalf of the said commonwealth and upon her credit, to make bills of credit, to-wit, bills or notes to an amount not exceeding $2,000,000, signed by the president and countersigned by the principal cashier, promising the payment of money to any person or persons, his, her or their order, or to the bearer, and the said bills or notes were so made illegally, in violation of the said Constitution, to emit, issue and circulate through the community for its ordinary purposes as money; that under the authority of the said act of the legislature, and in violation of the said Constitution of the United States, the said president and directors had, before the date of the note last aforesaid, for and on behalf of the commonwealth and on her credit, made various bills of credit, to-wit, notes of various denominations in amount from one to one hundred dollars, signed by the president of the said bank and countersigned by the principal cashier, promising therein and thereby to pay the person in each note mentioned, or bearer, on demand, the amount therein mentioned in money, and were transferable on delivery, and that for the purpose of circulating said notes through the community for its ordinary purposes

Page 36 U. S. 261

as money, the legislature of the said commonwealth, by an act passed on 25 December in the year 1820, had, amongst other things, provided and declared in substance that upon all executions of fieri facias which should be thereafter issued from any of the courts of the said commonwealth, endorsed that notes on the Bank of Kentucky or its branches, or notes on the bank of the Commonwealth of Kentucky or its branches 'might by the officer holding such execution be received from the defendant in discharge thereof,' such executions, so endorsed, should only be replevied and delayed in their collection for the space of three months; but that all executions of fieri facias which should thereafter be issued from any of the courts of the said commonwealth, without any endorsement for the reception of notes on the Bank of Kentucky or its branches or notes on the Bank of the Commonwealth of Kentucky or its branches, should be replevied and delayed in its collection for the space of two years, or, if not so replevied, that property levied upon under the same should be sold upon a credit of two years."

"The said president and directors, for the like purpose and with the like intent, afterwards, to-wit, on the ___ day of _____ (that being the date of the note executed by the defendants last above mentioned), did, for and on behalf of the said commonwealth, for her benefit, and on her credit, illegally and contrary to the said Constitution of the United States, emit and issue the notes or bills of credit, so made as aforesaid, by the president and directors of said bank, to the amount of $2,048.37 by loaning at interest, and delivering the same to the defendant Briscoe. And the defendants in fact aver that the only consideration for which the note last above mentioned was executed by them was the emission and loan of the said bills of credit, so made and issued as aforesaid to said Briscoe by the plaintiffs, who are the president and directors of the bank aforesaid; wherefore they say that the consideration of the said last above mentioned note, executed by them, was illegal, invalid, and in violation of the Constitution of the United States, and that each of the notes thereafter executed by them as aforesaid, by way of renewal as aforesaid, of the said last above-mentioned note, was also founded upon the illegal, invalid, and insufficient consideration aforesaid, and none other, and this they are ready to verify and prove; wherefore, they pray judgment, &c."

"And the defendants, for further plea in this behalf, say that the plaintiffs their action aforesaid against them ought not to have and

Page 36 U. S. 262

maintain because they say that the only consideration for which the note in the petition mentioned was executed was the renewal of a note which had been previously executed by them to the plaintiffs for the sum of $2,048.37, negotiable and payable at the branch of the Bank of the Commonwealth of Kentucky located at Harrodsburg. And they aver that previous to the date of the note, so renewed as aforesaid, the plaintiffs, under the provisions, and by the authority of the act of the Legislature of the Commonwealth of Kentucky establishing the Bank of the Commonwealth of Kentucky, approved 29 March 1820, and contrary to that provision of the Constitution of the United States which inhibits any state from emitting bills of credit, had, on behalf of the said commonwealth and upon her credit, made various bills of credit, signed by the president of said Bank of the Commonwealth of Kentucky and countersigned by the principal cashier therein, and thereby promising to pay to the person in each of said bills mentioned, or bearer, on demand, the respective amounts in each of said bills expressed, in money, and the said bills so made and signed by the said president and cashier, the plaintiffs, afterwards, to-wit, on the day of the date of the note last aforesaid, for the purpose of circulating the said bills of credit, so as aforesaid made, through the community as money, did, for and on behalf of the said commonwealth and for her benefit and upon her credit, illegally and contrary to the aforesaid provisions in the Constitution of the United States, emit and issue said bills of credit, so made as aforesaid, to the amount of $2,048.37, of the said bills, by loaning and delivering the same to the defendant Briscoe at interest, reserved and secured upon said loan for the benefit of the said commonwealth at the rate of six percentum per annum upon the amount aforesaid, and the defendants in fact aver that the only consideration for which the note last above mentioned was executed by them was the emission and loan of the said bills of credit, so issued as aforesaid, by the plaintiffs to the defendant Briscoe. And so they say the consideration of the said last-mentioned note was illegal, invalid, and in violation of the Constitution of the United States, and that the consideration of the note sued on, executed by these defendants, in renewal of the said last-mentioned note as aforesaid, is likewise illegal, invalid, and contrary to the Constitution of the United States, and this they are ready to verify and prove, wherefore, they pray judgment, &c."

To these pleas, the plaintiffs demurred, and the defendants joined

Page 36 U. S. 263

in the demurrer. The Circuit Court of Mercer County gave judgment for the plaintiffs, and the defendants appealed to the Court of Appeals of Kentucky. In the Court of Appeals the following errors were assigned by the appellants.

1. The court erred in sustaining the demurrer of the defendant in error, to the first plea of the plaintiffs in error.

2. The court erred in sustaining the demurrer to the second plea.

3. The decision of the court upon each demurrer, as well as in rendering final judgment against plaintiffs in error, is erroneous and illegal.

On 5 May 1832, the Court of Appeals affirmed the judgment of the circuit court. That court delivered the following opinion:

"We are called upon in this case, to readjudicate the question of the constitutionality of the Bank of the Commonwealth and its right to maintain an action upon an obligation given in consideration of a loan of its notes. We consider this question as having been settled in the case of Lampton v. Bank, 2 Litt. 300. If it be true, as contended in argument on behalf of the appellants, that the question is presented on the face of the charter, that case has been incidentally recognized and confirmed by a hundred cases that have since passed through this Court. The case of Craig v. Missouri, 4 Pet. 410, has been relied on as ruling this. We do not think that it does; they are distinguishable in at least one important and essential particular."

The appellants prosecuted this writ of error.

Page 36 U. S. 311

MCLEAN, Justice, delivered the opinion of the Court.

This case is brought before this Court by a writ of error from the Court of Appeals of the State of Kentucky under the 25th section of the Judiciary Act of 1789. An action was commenced by the Bank of the Commonwealth of Kentucky, against the plaintiffs in error, in the Mercer Circuit Court of Kentucky on a note for $2,048.37, payable to the president and directors of the bank, and the defendants filed two special pleas, in the first of which oyer was prayed of the note on which suit was brought, and they say that the plaintiff ought not to be have, &c., because the note was given on the renewal of a like note, given to the said bank, and they refer to the act establishing the bank and allege that it never received any part of the capital stock specified in the act; that the bank was authorized to issue bills of credit on the faith of the state, in violation of the Constitution of the United States. That by various statutes, the notes issued were made receivable in discharge of executions, and if not so received, the collection of the money should be delayed, &c., and the defendants aver that the note was given to the bank on a loan of its bills, and that the consideration, being illegal, was void. The second plea presents substantially the same facts. To both the pleas, a general demurrer was filed, and the court sustained the demurrer and gave judgment in favor of the bank. This judgment was removed by appeal to the Court of Appeals, which is the highest court of judicature in the state, where the judgment of the circuit court was affirmed, and being brought before this Court by writ of error, the question is presented whether the notes issued by the bank are bills of credit, emitted by the state in violation of the Constitution of the United States.

This cause is approached under a full sense of its magnitude. Important as have been the great questions brought before this tribunal for investigation and decision, none has exceeded, if it have equaled, the importance of that which arises in this case. The amount of property involved in the principle is very large, but this amount, however great, could not give to the case the deep interest which is connected with its political aspect.

Page 36 U. S. 312

There is no principle on which the sensibilities of communities are so easily excited as that which acts upon the currency; none of which states are so jealous as that which is restrictive of the exercise of sovereign powers. These topics are to some extent involved in the present case. It does not belong to this Court to select the subjects of their deliberations, but they cannot shrink from the performance of any duty imposed by the Constitution and laws.

The definition of the term "bills of credit," as used in the Constitution, is the first requisite in the investigation of this subject, and if this be not impracticable, it will be found a work of no small difficulty. Even in standard works on the exact sciences, the terms used are not always so definite as to express only the idea intended. In works on philosophy, there is generally still less precision of language. But in political compacts more is often left for construction than in most other compositions. This results in a great degree from the elements employed in the formation of such compacts; certain interests are to be conciliated and protected; the force of local prejudices must be met and overcome, and habits and modes of action the most opposite are to be reconciled. This was peculiarly the case in the formation of the Constitution of the United States. And instead of objecting to it on account of the vagueness of some of its terms, its general excellence, both as it regards its principles and language, should excite our admiration.

The term "bills of credit," in its mercantile sense, comprehends a great variety of evidences of debt which circulate in a commercial country. In the early history of banks, it seems their notes were generally denominated bills of credit, but in modern times they have lost that designation, and are now called either "bank bills" or "bank notes." But the inhibition of the Constitution applies to bills of credit in a more limited sense.

It would be difficult to classify the bills of credit which were issued in the early history of this country. They were all designed to circulate as money, being issued under the laws of the respective colonies, but the forms were various in the different colonies and often in the same colony. In some cases they were payable with interest, in others without

Page 36 U. S. 313

interest. Funds arising from certain sources of taxation were pledged for their redemption in some instances; in others, they were issued without such a pledge. They were sometimes made a legal tender, at others, not. In some instances a refusal to receive them operated as a discharge of the debt; in others a postponement of it. They were sometimes payable on demand; at other times at some future period. At all times the bills were receivable for taxes, and in payment of debts due to the public, except perhaps in some instances where they had become so depreciated as to be of little or no value. These bills were frequently issued by committees, and sometimes by an officer of the government or an individual designated for that purpose.

The bills of credit emitted by the states during the Revolution and prior to the adoption of the Constitution were not very dissimilar from those which the colonies had been in the practice of issuing. There were some characteristics which were common to all these bills; they were issued by the colony or state, and on its credit. For in cases where funds were pledged, the bills were to be redeemed at a future period, and gradually, as the means of redemption should accumulate. In some instances, Congress guaranteed the payment of bills emitted by a state. They were perhaps never convertible into gold and silver immediately on their emission, as they were issued to supply the pressing pecuniary wants of the government, their circulating as money was indispensable. The necessity which required their emission precluded the possibility of their immediate redemption.

In the case of Craig v. State of Missouri, 4 Pet. 410, this Court was called upon, for the first time, to determine what constituted a "bill of credit" within the meaning of the Constitution. A majority of the judges in that case, in the language of THE CHIEF JUSTICE, said that

"bills of credit signify a paper medium, intended to circulate between individuals, and between government and individuals for the ordinary purposes of society."

A definition so general as this would certainly embrace every description of paper which circulates as money. Two of the dissenting judges on that occasion gave a more definite, though perhaps a less accurate meaning of the terms "bills of credit." By one of them, it was said

"a bill of credit may therefore be

Page 36 U. S. 314

considered a bill drawn and resting merely on the credit of the drawer, as contradistinguished from a fund constituted or pledged for the payment of the bill."

And in the opinion of the other it is said

"To constitute a 'bill of credit' within the meaning of the Constitution, it must be issued by a state, and its circulation as money enforced by statutory provisions. It must contain a promise of payment by the state generally when no fund has been appropriated to enable the holder to convert it into money. It must be circulated on the credit of the state -- not that it will be paid on presentation, but that the state, at some future period, or a time fixed or resting in its own discretion, will provide for the payment."

These definitions cover a large class of the bills of credit issued and circulated as money, but there are classes which they do not embrace, and it is believed that no definition short of a description of each class would be entirely free from objection, unless it be in the general terms used by the venerable and lamented Chief Justice. The definition, then, which does include all classes of bills of credit emitted by the colonies or states, is a paper issued by the sovereign power containing a pledge of its faith and designed to circulate as money.

Having arrived at this point, the next inquiry in the case is whether the notes of the Bank of the Commonwealth were "bills of credit" within the meaning of the Constitution. The first section of the charter provides that the bank shall be established in the name and behalf of the Commonwealth of Kentucky under the direction of a president and twelve directors, to be chosen by joint ballot of both houses of the general assembly, &c. The second provides that the president and directors of the bank and their successors in office shall be a corporation and body politic, in law and in fact, by the name and style of the president and directors of the bank of the Commonwealth of Kentucky, and shall be capable in law to sue and be sued, to purchase and sell every description of property. In the third section it is declared that the stock of the bank shall be exclusively the property of the Commonwealth of Kentucky, and that no individual shall own any part of it. The fourth section authorizes the president and directors to issue notes, &c., and in the fifth section it is declared that the capital stock

Page 36 U. S. 315

shall be two millions of dollars, to be paid as follows:

"All moneys hereafter paid into the Treasury for the purchase of the vacant land of the commonwealth; all moneys paid into the Treasury for the purchase of land warrants; all moneys received for the sale of vacant lands, west of the Tennessee River, and so much of the capital stock owned by the state in the Bank of Kentucky"

and as the treasurer of the state received these moneys from time to time he was required to pay the same into the bank. The bank was authorized to receive moneys on deposit, to make loans on good personal security or on mortgages, and by the ninth section, the bank was prohibited from increasing its debts beyond double the amount of its capital. Certain limitations were imposed on loans to individuals, and the accommodations of the bank were to be apportioned among the different counties of the state. The president was required to make a report to each session of the legislature. The notes were to be made payable in gold and silver, and were receivable in payment of taxes and other debts due to the state. All mortgages executed to the bank gave to it a priority. By a supplementary act it was provided that the president and directors might issue three millions of dollars. In 1821 an act was passed authorizing the treasurer of the state to receive the dividends of the bank. The notes issued by the bank were in the usual form of bank notes, in which the Bank of the Commonwealth promised to pay to the bearer on demand the sum specified on the face of the note.

There is no evidence of any part of the capital's having been paid into the bank, and as the pleas to which the demurrers were filed aver that no part of the capital was paid, the fact averred is admitted on the record. It is to be regretted that any technical point arising on the pleadings should be relied on in this case, which involves principles and interest of such deep importance. Had the bank pleaded over and stated the amount actually paid into it by the state under the charter, the ground on which it stands would have been strengthened. As the notes of the bank were receivable in payment for land and land warrants, and perhaps constituted no inconsiderable part of the circulation of the state, the natural operation would be for the treasurer to receive the notes of the bank and pay them over to it as

Page 36 U. S. 316

a part of its capital. This would be to the bank equal to a payment in the notes of other banks, as it would lessen the demand against it, leaving to the bank the securities on the original discounts.

The notes of this bank, as also the notes of the Bank of Kentucky, by an act of the legislature, were required to be received in discharge of all executions by plaintiffs, and if they failed to endorse on the executions, that they would be so received, further proceedings on the judgment were delayed two years.

On the part of the plaintiffs in error, it is contended that the provision in the Constitution that "no state shall coin money," "emit bills of credit," or "make anything but gold and silver coin a tender in payment of debts" are three distinct powers which are inhibited to the states, and that if the bills of the Bank of the Commonwealth were substantially made a tender, by an act of the Legislature of Kentucky, it must be fatal to the action of the bank in this case. It is unnecessary to consider on this head whether the above provision of the act of the legislature, making these notes receivable in discharge of executions, is substantially a tender law; as such a question, however it might arise on the execution, cannot reach the obligation given to the bank. If the legislature of a state attempt to make the notes of any bank a tender, the act will be unconstitutional, but such attempt could not affect in any degree the constitutionality of the bank. The act referred to in the present case was not connected with the charter of the bank. So far as this act has a bearing on the bills issued by this bank and may tend to show their proper character, it may be considered.

But the main grounds on which the counsel for the plaintiffs rely is that the Bank of the Commonwealth, in emitting the bills in question, acted as the agent of the state, and that consequently the bills were issued by the state. That as a state is prohibited from issuing bills of credit, it cannot to indirectly what it is prohibited from doing directly. That the Constitution intended to place the regulation of the currency under the control of the federal government, and that the act of Kentucky is not only in violation of the spirit of the Constitution, but repugnant to its letter. These topics have been ably discussed at the bar and in a printed argument on behalf of the plaintiffs.

That by the Constitution the currency, so far as it is composed of

Page 36 U. S. 317

gold and silver, is placed under the exclusive control of Congress, is clear, and it is contended, from the inhibition on the states to emit bills of credit, that the paper medium was intended to be made subject to the same power. If this argument be correct, and the position that a state cannot do indirectly what it is prohibited from doing directly be a sound one, then it must follow as a necessary consequence that all banks incorporated by a state are unconstitutional. And this, in the printed argument, is earnestly maintained, though it is admitted not to be necessary to sustain the ground assumed for the plaintiffs. The counsel of the plaintiffs who have argued the case at the bar do not carry the argument to this extent. This doctrine is startling, as it strikes a fatal blow against the state banks, which have a capital of near $400,000,000 and which supply almost the entire circulating medium of the country. But let us for a moment examine it dispassionately.

The federal government is one of delegated powers. All powers not delegated to it or inhibited to the states are reserved to the states or to the people. A state cannot emit bills of credit, or in other words it cannot issue that description of paper, to answer the purposes of money, which was denominated before the adoption of the Constitution "bills of credit." But a state may grant acts of incorporation for the attainment of those objects which are essential to the interests of society. This power is incident to sovereignty, and there is no limitation in the federal Constitution, on its exercise by the states, in respect to the incorporation of banks. At the time the Constitution was adopted, the Bank of North America, the Massachusetts Bank, and some others, were in operation. It cannot, therefore, be supposed that the notes of these banks were intended to be inhibited by the Constitution, or that they were considered as "bills of credit" within the meaning of that instrument. In fact, in many of their most distinguishing characteristics, they were essentially different from bills of credit in any of the various forms in which they were issued.

If, then, the powers not delegated to the federal government nor denied to the states are retained by the states or the people, and by a fair construction of the terms bills of credit, as used in the Constitution, they do not include ordinary bank notes, does it not follow

Page 36 U. S. 318

that the power to incorporate banks to issue these notes may be exercised by a state? A uniform course of action involving the right to the exercise of an important power by the state governments for half a century -- and this almost without question -- is no unsatisfactory evidence that the power is rightfully exercised. But this inquiry, though embraced in the printed argument, does not belong to the case, and is abandoned at the bar.

A state cannot do that which the federal Constitution declares it shall not do. It cannot coin money. Here is an act inhibited in terms so precise that they cannot be mistaken; they are susceptible of but one construction. And it is certain that a state cannot incorporate any number of individuals and authorize them to coin money; such an act would be as much a violation of the Constitution as if the money were coined by an officer of the state under its authority. The act, being prohibited, cannot be done by a state either directly or indirectly. And the same rule applies as to the emission of bills of credit by a state. The terms used here are less specific than those which relate to coinage. Whilst no one can mistake the latter, there are great differences of opinion as to the construction of the former. If the terms in each case were equally definite and were susceptible of but one construction, there could be no more difficulty in applying the rule in the one case than in the other.

The weight of the argument is admitted that a state cannot, by any device that may be adopted, emit bills of credit. But the question arises what is a "bill of credit" within the meaning of the Constitution? On the answer of this must depend the constitutionality or unconstitutionality of the act in question. A state can act only through its agents, and it would be absurd to say that any act was not done by a state which was done by its authorized agents. To constitute a "bill of credit" within the Constitution, it must be issued by a state on the faith of the state and be designed to circulate as money. It must be a paper which circulates on the credit of the state, and is so received and used in the ordinary business of life. The individual or committee who issue the bill must have the power to bind the state; they must act as agents, and of course do not incur any personal responsibility, nor impart, as individuals, any

Page 36 U. S. 319

credit to the paper. These are the leading characteristics of a bill of credit, which a state cannot emit.

Were the notes of the Bank of the Commonwealth "bills of credit" issued by the state?

The president and directors of the bank were incorporated and vested with all the powers usually given to banking institutions. They were authorized to make loans on personal security and on mortgages of real estate. Provisions were made and regulations common to all banks, but there are other parts of the charter which it is contended show that the president and directors acted merely as agents of the state.

In the preamble of the act it is declared to be

"expedient and beneficial to the state and the citizens thereof to establish a bank on the funds of the state for the purpose of discounting paper and making loans for longer periods than has been customary and for the relief of the distresses of the community."

The president and directors were elected by the legislature. The capital of the bank belonged to the state, and it received the dividends.

These and other parts of the charter, it is argued, show that the bank was a mere instrument of the state to issue bills, and that if by such a device the provision of the Constitution may be evaded, it must become a nullity.

That there is much plausibility and some force in this argument cannot be denied, and it would be vain to assert that on this head the case is clear of difficulty.

The preamble of the act to incorporate the bank shows the object of its establishment. It was intended to "relieve the distresses of the community," and the same reason was assigned, it is truly said, for the numerous emissions of paper money during the Revolution and prior to that period.

To relieve the distresses of the community or the wants of the government has been the common reason assigned for the increase of a paper medium at all times and in all countries. When a measure of relief is determined on, it is never difficult to find plausible reasons for its adoption. And it would seem, in regard to this subject, that the present generation has profited but little from the experience of past ages.

The notes of this bank, in common with the notes of all other banks in the state and indeed throughout the Union, with some

Page 36 U. S. 320

exceptions, greatly depreciated. This arose from various causes then existing, and which, under similar circumstances, must always produce the same result.

The intention of the legislature in establishing the bank, as expressed in the preamble, must be considered in connection with every part of the act, and the question must be answered whether the notes of the bank were "bills of credit" within the inhibition of the Constitution.

Were these notes issued by the state?

Upon their face, they do not purport to be issued by the state, but by the president and directors of the bank. They promise to pay to bearer, on demand, the sums stated.

Were they issued on the faith of the state? The notes contain no pledge of the faith of the state, in any form. They purport to have been issued on the credit of the funds of the bank, and must have been so received in the community.

But these funds, it is said, belonged to the state, and the promise to pay, on the face of the notes, was made by the president and directors, as agents of the state.

They do not assume to act as agents, and there is no law which authorizes them to bind the state. As in perhaps all bank charters they had the power to issue a certain amount of notes, but they determined the time and circumstances which should regulate these issues.

When a state emits bills of credit, the amount to be issued is fixed by law, as also the fund out of which they are to be paid, if any fund be pledged for their redemption, and they are issued on the credit of the state, which in some form appears upon the face of the notes, or by the signature of the persons who issue them.

As to the funds of the Bank of the Commonwealth, they were, in part only, derived from the state. The capital, it is true, was to be paid by the state, but in making loans, the bank was required to take good securities, and these constituted a fund to which the holders of the notes could look for payment, and which could be made legally responsible.

In this respect, the notes of this bank were essentially different from any class of bills of credit which are believed to have been issued.

The notes were not only payable in gold and silver on demand, but there was a fund, and in all probability a sufficient fund, to redeem

Page 36 U. S. 321

them. This fund was in possession of the bank, and under the control of the president and directors. But whether the fund was adequate to the redemption of the notes issued or not is immaterial to the present inquiry. It is enough that the fund existed independent of the state, and was sufficient to give some degree of credit to the paper of the bank.

The question is not whether the Bank of the Commonwealth had a large capital or a small one, or whether its notes were in good credit or bad, but whether they were issued by the state, and on the faith and credit of the state. The notes were received in payment of taxes, and in discharge of all debts to the state, and this aided by the fund arising from notes discounted, with prudent management, under favorable circumstances, might have sustained, and is believed did sustain, to a considerable extent, the credit of the bank. The notes of this bank which are still in circulation are equal in value, it is said, to specie.

But there is another quality which distinguished these notes from bills of credit. Every holder of them could not only look to the funds of the bank for payment, but he had in his power the means of enforcing it.

The bank could be sued, and the records of this Court show that while its paper was depreciated, a suit was prosecuted to judgment against it, by a depositor who obtained from the bank, it is admitted, the full amount of his judgment in specie.

What means of enforcing payment from the state had the holder of a bill of credit? It is said by the counsel for the plaintiffs that he could have sued the state. But was a state liable to be sued?

In the case Chisholm v. Georgia, in 1792, it was decided that a state could be sued before this Court, and this led to the adoption of the amendment of the Constitution, on this subject. But the bills of credit which were emitted prior to the Constitution are those that show the mischief against which the inhibition was intended to operate. And we must look to that period, as of necessity we have done, for the definition and character of a bill of credit.

No sovereign state is liable to be sued, without her consent. Under the Articles of Confederation, a state could be sued only in cases of boundary.

It is believed that there is no case where a suit has been brought at any time on bills of credit against a state, and it is certain that

Page 36 U. S. 322

no suit could have been maintained, on this ground, prior to the Constitution.

In the year 1769, the Colonial Legislature of Maryland passed an "act for emitting bills of credit," in which bills to the amount of $318,000 were authorized to be struck, under the direction of two commissioners, whom the governor should appoint. These persons were to be styled "commissioners for emitting bills of credit," by that name to have succession to sue or be sued in all cases relative to their trust. The commissioners were authorized to make loans on good security, to draw bills of exchange on London, under certain circumstances, and they were authorized to reissue the bills issued by them.

In the year 1712, it is stated in Hewit's History of South Carolina, the Legislature of that colony established a public bank and issued 48,000 pounds in bills of credit, called "bank bills;" the money was to be lent out at interest on landed or personal security.

The bills emitted under these acts are believed to be peculiar, and unlike all other emissions under the colonial governments. But a slight examination of the respective acts will show that the bills authorized by them were emitted on the credit of the colonies, and were essentially different from the notes in question. The holders of these bills could not convert them into specie; they could bring no suit. The Maryland bill was as follows:

"This indented bill of six dollars shall entitle the bearer hereof, to receive bills of exchange, payable in London, or gold and silver, at the rate of four shillings and six pence per dollar for the said bill, according to the directions of an act of the assembly of Maryland."

Dated at Annapolis; signed by R. Conden and J. Clapham.

If the leading properties of the notes of the Bank of the Commonwealth were essentially different from any of the numerous classes of bills of credit issued by the states or colonies, if they were not emitted by the state, nor upon its credit, but on the credit of the funds of the bank, if they were payable in gold and silver on demand, and the holder could sue the bank, and if, to constitute a bill of credit, it must be issued by a state, and on the credit of the state, and the holder could not, by legal means, compel the payment of the bill, how can the character of these two descriptions of paper be considered as identical? They were both circulated as money, but in name, in form, and in substance, they differ.

Page 36 U. S. 323

It is insisted that the principles of this case were settled in the suit of Craig v. Missouri. In that case, the Court decided that the following paper, issued under a legislative act of Missouri, was a "bill of credit" within the meaning of the Constitution:

"This certificate shall be receivable at the Treasury, or any of the loan offices of the State of Missouri, in the discharge of taxes or debts due to the state, in the sum of _____ dollars, with interest for the same, at the rate of two percent per annum from the date."

By the act, certificates in this form of various amounts were issued, and were receivable in discharge of all taxes or debts due to the state and in payment of salaries of state officers. Four of the seven judges considered that these certificates were designed to circulate as money, that they were issued on the credit of the state, and consequently, were repugnant to the Constitution. These certificates were loaned on good security, at different loan offices of the state, and were signed by the auditor and treasurer of state. They were receivable in payment of salt, at the public salt works,

"and the proceeds of the salt springs, the interest accruing to the state, and all estates purchased by officers under the provisions of the act, and all the debts then due or which should become due to the state were pledged and constituted a fund for the redemption of the certificates,"

and the faith of the state was also pledged for the same purpose.

It is only necessary to compare these certificates with the notes issued by the Bank of the Commonwealth to see that no two things which have any property in common could be more unlike. They both circulated as money and were receivable on public account, but in every other particular they were essentially different. If, to constitute a bill of credit, either the form or substance of the Missouri certificate is requisite, it is clear, that the notes of the Bank of the Commonwealth cannot be called bills of credit. To include both papers under one designation would confound that most important distinctions, not only as to their form and substance but also as to their origin and effect.

There is no principle decided by the Court in the case of Craig v. State of Missouri which at all conflicts with the views here presented. Indeed, the views of the Court are sustained and strengthened by contrasting the present case with that one. The State of Kentucky is the exclusive stockholder in the Bank of

Page 36 U. S. 324

the Commonwealth, but does this fact change the character of the corporation? Does it make the bank identical with the state? And are the operations of the bank the operations of the state? Is the bank the mere instrument of the sovereignty to effectuate its designs? And is the state responsible for its acts? The answer to these inquiries will be given in the language of this Court used in former adjudications.

In the case of Bank of the United States v. Planters' Bank, 9 Wheat. 904, the Chief Justice, in giving the opinion of the Court, says

"It is, we think, a sound principle that when a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character and takes that of a private citizen. Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself and takes the character which belongs to its associates and to the business which is to be transacted. Thus, many states of the Union which have an interest in banks are not suable even in their own courts, yet they never exempt the corporation from being sued. The State of Georgia, by giving to the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign character so far as it respects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never exercises its sovereignty. It acts merely as a corporator, and exercises no other power in the management of the affairs of the corporation, than are expressly given by the incorporating act. . . . The government, becoming a corporator, lays down its sovereignty so far as respects the transactions of the corporation, and exercises no power or privilege which is not derived from the charter. The state does not, by becoming a corporator, identify itself with the corporation."

In the case of Bank of the Commonwealth of Kentucky v. Wister, 3 Pet. 318, the question was raised whether a suit could be maintained against the bank on the ground that it was substantially a suit against the state. The agents of the defendants deposited a large sum in the bank, and when the deposit was demanded, the bank offered to pay the amount in its own notes, which were at a discount. The notes were refused, and a suit was commenced on the certificate of deposit.

A judgment being entered against the bank in the Circuit Court of

Page 36 U. S. 325

Kentucky, a writ of error was brought to this Court. In the court below, the defendant pleaded to the jurisdiction on the ground, that the State of Kentucky alone was the proprietor of the stock of the bank, for which reason it was insisted that the suit was virtually against a sovereign state.

MR. JUSTICE JOHNSON, in giving the opinion of the Court, after copying the language used in the case above quoted, said

"If a state did exercise any other power in or over a bank or impart to it its sovereign attributes, it would be hardly possible to distinguish the issue of the paper of such banks from a direct issue of bills of credit, which violation of the Constitution, no doubt, the state here intended to avoid."

Can language be more explicit and more appropriate than this, to the points under consideration?

This Court further said

"The defendants pleaded to the jurisdiction on the ground that the State of Kentucky was sole proprietor of the stock of the bank, for which reason it was insisted, that the suit was virtually against a sovereign state. But the Court is of opinion that the question is no longer open here. The case of United States Bank v. Planters' Bank of Georgia was a much stronger case for the defendants than the present, for there, the State of Georgia was not only a proprietor, but a corporator. Here, the state is not a corporator, since, by the terms of the act, the president and directors alone constitute the body corporate, the metaphysical person liable to suit."

If the bank acted as the agent of the state, under an unconstitutional charter, although the persons engaged might be held liable individually, could they have been held responsible as a corporation?

It is true the only question raised by the plea was whether the bank could be sued, as its stock was owned by the state? But it would be difficult to decide this question without to some extent considering the constitutionality of the charter. And indeed it appears that this point did not escape the attention of the Court, for it said

"If a state imparted any of its sovereign attributes to a bank in which it was a stockholder, it would hardly be possible to distinguish the paper of such a bank from bills of credit,"

and this, the Court said, "the state in that case intended to avoid."

These extracts cover almost every material point raised in this investigation. They show that a state, when it becomes a stockholder in a bank,

Page 36 U. S. 326

imparts none of its attributes of sovereignty to the institution, and that this is equally the case whether it own a whole or a part of the stock of the bank.

It is admitted by the counsel for the plaintiffs that a state may become a stockholder in a bank, but they contend that it cannot become the exclusive owner of the stock. They give no rule by which the interest of a state in such an institution shall be graduated, nor at what point the exact limit shall be fixed. May a state own one-fourth, one-half, or three-fourths of the stock? If the proper limit be exceeded, does the charter become unconstitutional, and is its constitutionality restored if the state recedes within the limit? The Court is as much at a loss to fix the supposed constitutional boundary of this right as the counsel can possibly be.

If the state must stop short of owning the entire stock, the precise point may surely be ascertained. It cannot be supposed that so important a constitutional principle as contended for exists without limitation.

If a state may own a part of the stock of a bank, we know of no principle which prevents it from owning the whole. As a stockholder, in the language of this Court above cited, it can exercise no more power in the affairs of the corporation than is expressly given by the incorporating act. It has no more power than any other stockholder to the same extent.

This Court did not consider that the character of the incorporation was at all affected by the exclusive ownership of the stock by the state. And they say that the case of Planters' Bank presented stronger ground of defense than the suit against the Bank of the Commonwealth. That in the former, the State of Georgia was not only a proprietor but a corporator, and that in the latter the president and directors constituted the corporate body. And yet in the case of Planters' Bank, the Court decided the state could only be considered as an ordinary corporator, both as it regarded its powers and responsibilities.

If these positions be correct, is there not an end to this controversy? If the Bank of the Commonwealth is not the state, nor the agent of the state, if it possess no more power than is given to it in the act of incorporation, and precisely the same as if the stock were owned by private individuals, how can it be contended that the notes of the bank can be called "bills of credit" in contradistinction from the notes of other banks?

Page 36 U. S. 327

If, in becoming an exclusive stockholder in this bank, the state imparts to it none of its attributes of sovereignty, if it holds the stock as any other stockholder would hold it, how can it be said to emit bills of credit? Is it not essential to constitute a bill of credit within the Constitution that it should be emitted by a state? Under its charter, the bank has no power to emit bills which have the impress of the sovereignty or which contain a pledge of its faith. It is a simple corporation, acting within the sphere of its corporate powers, and can no more transcend them than any other banking institution. The state, as a stockholder, bears the same relation to the bank as any other stockholder.

The funds of the bank and its property of every description are held responsible for the payment of its debts, and may be reached by legal or equitable process. In this respect it can claim no exemption under the prerogatives of the state. And if, in the course of its operations, its notes have depreciated, like the notes of other banks, under the pressure of circumstances, still it must stand or fall by its charter. In this, its powers are defined, and its rights and the rights of those who give credit to it are guaranteed. And even an abuse of its powers, through which its credit has been impaired and the community injured, cannot be considered in this case.

We are of the opinion that the act incorporation the Bank of the Commonwealth was a constitutional exercise of power by the State of Kentucky, and consequently that the notes issued by the bank are not bills of credit, within the meaning of the federal Constitution. The judgment of the Court of Appeals is therefore

Affirmed with interest and costs.

MR. JUSTICE THOMPSON, concurring.

I concur in that part of the opinion of the Court which considers the bills issued by the bank as not coming under the denomination of bills of credit, prohibited by the Constitution of the United States to be emitted by the states. The two great infirmities which attended the bills of credit which circulated as money, and come within the mischief intended to be guarded against by the constitutional prohibition, were the want of some real and substantial fund being provided for their payment and redemption and no mode provided for enforcing payment of the same.

It is true that in many and perhaps in most cases where they

Page 36 U. S. 328

were issued, provision was made for the redemption of the bills, so far as the promise of the state, through the medium of taxation, might be said to provide the means for payment, but this was illusory and could in no way be enforced. The bills were always signed by some person, who, upon their face, appeared to act in the character of agent of the state and who could not, of course, be made personally responsible for their payment, and the state was not suable under the old Confederation nor under the present Constitution, even before the amendment in that respect, by citizens of the same state, and those would most likely be the persons who would be the principal holders of the bills issued by the state of which they were citizens. There being therefore no means of enforcing payment of such bills, their credit depended solely upon the faith and voluntary will of the state, and were therefore purely bills of credit. But that is not the situation or character of the bills of the bank in question. There is an ample fund provided for their redemption, and they are issued by a corporation which can be sued and payment enforced in the courts of justice in the ordinary mode of recovering debts.

If I considered these bank notes as "bills of credit" within the sense and meaning of the constitutional prohibition, I could not concur in opinion with the majority of the Court that they were not emitted by the state. The state is the sole owner of the stock of the bank, and all private interest in it is expressly excluded. The state has the sole and exclusive management and direction of all its concerns. The corporation is the mere creature of the state, and entirely subject to its control, and I cannot bring myself to the conclusion that such an important provision in the Constitution may be evaded by mere form.

MR. JUSTICE STORY, Dissenting.

When this cause was formerly argued before this Court, a majority of the judges, who then heard it were decidedly of opinion that the act of Kentucky, establishing this bank was unconstitutional and void as amounting to an authority to emit bills of credit, for and on behalf of the state, within the prohibition of the Constitution of the United States. In principle, it was thought to be decided by the case of Craig v. State of Missouri, 4 Pet. 410. Among that majority was the late Mr. Chief Justice Marshall, a name never to be pronounced without reverence. The cause has been again argued, and precisely upon the same grounds as at the former argument. A

Page 36 U. S. 329

majority of my brethren have now pronounced the act of Kentucky to be constitutional. I dissent from that opinion, and retaining the same opinion which I held at the first argument, in common with the Chief Justice, I shall now proceed to state the reasons on which it is founded. I offer no apology for this apparent exception to the course which I have generally pursued, when I have had the misfortune to differ from my brethren, in maintaining silence, for in truth it is no exception at all, as upon constitutional questions I ever thought it my duty to give a public expression of my opinions when they differed from that of the Court.

The first question naturally arising in the case is what is the true interpretation of the clause of the Constitution that "no state shall emit bills of credit?" In other words, what is a "bill of credit" in the sense of the Constitution? After the decision of the case of Craig v. State of Missouri, I had not supposed that this was a matter which could be brought into contestation -- at least unless the authority of that case was to be overturned and the Court were to be set adrift from its former moorings. The Chief Justice, in delivering the opinion of the Court upon that occasion in answer to the very inquiry said

"To emit bills of credit conveys to the mind the idea of issuing paper, intended to circulate through the community for its ordinary purposes as money, which paper is redeemable at a future day; this is the sense in which it has been always understood."

Again,

"the term has acquired an appropriate meaning, and bills of credit signify a paper medium, intended to circulate between individuals, and between government and individuals, for the ordinary purposes of society."

Again,

"if the prohibition means anything, if the words are not empty sounds, it must comprehend the emission of any paper medium by a state government for the purposes of common circulation."

One should suppose that this language was sufficiently exact and definite to remove all possible doubt upon the point, and it has the more weight because it came from one who was himself an actor in the very times when bills of credit constituted the currency of the whole country, and whose experience justified him in this exposition.

But it seems that this definition is not now deemed satisfactory or to be adhered to, and a new exposition is sought which, in its predicaments, shall not comprehend the bills in question. The arguments of the learned counsel for the bank on the present occasion have, as it appears to me, sought for a definition which shall exclude

Page 36 U. S. 330

any perils to their case; rather than a definition founded in the intention and language of the Constitution. It appears to me, that the true nature and objects of the prohibition, as well as its language, can properly be ascertained only by a reference to history; to the mischiefs existing, and which had existed when the Constitution was formed; and to the meaning then attached to the phrase "bills of credit," by the people of the United States.

If we look into the meaning of the phrase, as it is found in the British laws, or in our own laws, as applicable to the concerns of private individuals or private corporations, we shall find that there is no mystery about the matter; and that when bills of credit are spoken of, the words mean negotiable paper, intended to pass as currency or as money, by delivery or endorsement. In this sense, all bank notes, or, as the more common phrase is, bank bills, are bills of credit. They are the bills of the party issuing them, on his credit, and the credit of his funds, for the purposes of circulation as currency or money. Thus, for example, as we all know, bank notes payable to the bearer (or, when payable to order, endorsed in blank), pass in the ordinary intercourse and business of life, as money; and circulate and are treated as money. They are not, indeed, in a legal and exact sense, money; but, for common purposes, they possess the attributes, and perform the functions of money. Lord MANSFIELD, in Miller v. Rice, 1 Burr. 457, speaking on the subject of bank notes, observed, "that these notes are not like bills of exchange, mere securities, or documents for debts, and are not so esteemed; but are treated as money, in the ordinary course and transactions of credit and of business, by the general consent of mankind; and on payment of them, whenever a receipt is required, the receipts are always given as for money, not as for securities or notes." And, indeed, so much are they treated as money, that they pass by a will which bequeaths the testator's cash, or money, or property.

In confirmation of what has been already stated, it may be remarked, that in the charter of the Bank of England, in 5 & 6 William & Mary, c. 20, § 28, an express provision is made, by which the bill or bills obligatory, and of credit, of the bank, are declared to be assignable and negotiable. Similar expressions are to be found in the many acts of the American states, incorporating banks; as has been abundantly shown in the citations at the bar. [Footnote 1]

Page 36 U. S. 331

The reason is obvious why they are called bills of credit -- they are intended to pass as currency or money, and they are issued on the credit of the bank or of other persons who are bound by them. Not but that there is a capital fund or stock for their redemption, for in general all banks have such a fund, but that the credit is still given to the corporation, and not exclusively to any particular fund. Indeed, in many cases (as in Massachusetts), the private funds and credit of the corporators are by law, to a limited extent, made responsible for the notes of banks.

Such, then, being the true and ordinary meaning applied to bills of credit, issued by banks and other corporations, that they are negotiable paper designed to pass as currency and issued on the credit of the corporation, there is no mystery in the application of the same terms to the transactions of states. The nature of the thing is not changed; the object of the thing is not changed, whether the negotiable paper is issued by a corporation or by a state. Mutato nomine, de te fabula narratur. A bill of credit, then, issued by a state is negotiable paper, designed to pass as currency and to circulate as money. It is distinguishable from the evidence of debt issued by a state for money borrowed or debts otherwise incurred, not merely in form, but in substance. The form of the instrument is wholly immaterial. It is the substance we are to look to; the question is whether it is issued, and is negotiable, and is designed to circulate as currency. If that is its intent, manifested either on the face of the bill or on the face of the act, and it is in reality the paper issue of a state, it is within the prohibition of the Constitution. If no such intent exists, then it is a constitutional exercise of power by the state. This is the test -- the sure and in my judgment the only sincere test -- by which we can ascertain whether the paper be within or without the prohibition of the Constitution. All other tests which have hitherto been applied and all other tests which can be applied will be illusory and mere exercises of human ingenuity to vary the prohibition and evade its force. Surely it will not be pretended that the Constitution intended to prohibit names and not things; to hold up the solemn mockery of warring with shadows, and suffering realities to escape its grasp. To suffer states, on their own credit, to issue floods of paper money, as currency, and if they do not call them bills of credit, if they do not

Page 36 U. S. 332

give them the very form and impress of a promise by the state or in behalf of the state, in the very form so current and so disastrous in former times, then they are not within the prohibition. Let the impressive language of Mr. Chief Justice Marshall on this very point, in the case of Craig v. State of Missouri (a voice now speaking from the dead), let it convey its own admonition, and answer to the argument.

"And can this [said he] make any real difference? Is the proposition to be maintained that the Constitution meant to prohibit names, and not things? That a very important act, big with great and ruinous mischief, which is expressly forbidden by words most appropriate for its description may be performed by the substitution of a name? That the Constitution, in one of its most important provisions, may be openly evaded by giving a new name to an old thing? We cannot think so."

But the argument need not be rested here. The question here is not what is meant by bills of credit in a mere theoretical sense. But I trust that I shall abundantly show that the definition which was given in the case of Craig v. State of Missouri, and the definition which I maintain is the true one, stripped of all mystery, and all extraneous ingredients, is the true one, confirmed by the whole history of the country, and that the true meaning of bill of credit was just as well known and understood from the past and the passing events at the time of the adoption of the Constitution as the terms habeas corpus, trial by jury, process of impeachment, bill of attainder, or any other phrase to be found in the technical vocabulary of the Constitution. And I mean to insist that the history of the colonies, before and during the Revolution and down to the very time of the adoption of the Constitution, constitutes the highest and most authentic evidence to which we can resort to interpret this clause of the instrument, and to disregard it would be to blind ourselves to the practical mischiefs which it was meant to suppress and to forget all the great purposes to which it was to be applied. I trust that I shall be able further to show from this very history that any other definition of bills of credit than that given by the Supreme Court in the case of Craig v. State of Missouri is in opposition to the general tenor of that history, as well as to the manifest intention of the framers of the Constitution.

Before I proceed further, let me quote a single passage from the Federalist, No. 44, in which the writer, in terms of strong denunciation and indignation, exposes the ruinous effects of the paper money

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of the revolution (universally, in those days, called by the name of bills of credit, for there was no attempt to disguise their character), and then adds,

"In addition to these persuasive considerations, it may be observed that the same reasons which show the necessity of denying to the states the power of regulating coin prove with equal force that they ought not to be at liberty to substitute a paper medium instead of coin."

This passage shows the clear sense of the writer that the prohibition was aimed at a paper medium which was intended to circulate as currency, and to that alone.

But it has been said that bills of credit, in the sense of the Constitution, are those only which are made, by the act creating them, a tender in payment of debts. To this argument it might be sufficient to quote the answer of the Chief Justice in delivering the opinion of the Court in the case of Craig v. State of Missouri.

"The Constitution itself [said he] furnishes no countenance to this distinction. The prohibition is general. It extends to all bills of credit, not to bills of credit of a particular description. That tribunal must be bold indeed which, without the aid of other explanatory words, could venture on this construction. It is the less admissible in this case because the same clause of the Constitution contains a substantial prohibition to the enactment of tender laws. The Constitution therefore considers the emission of bills of credit and the enactment of tender laws as distinct operations, independent of each other, which may be separately performed; both are forbidden. To sustain the one because it is not also the other -- to say, that bills of credit may be emitted if they be not a tender of debts -- is in effect to expunge that distinct, independent prohibition and to read the clause as if it had been entirely omitted. We are not at liberty to do this."

But independently of that reasoning, the history of our country proves that it is not of the essence of bills of credit, it is not a part of their definition, that they should be a tender in payment of debts. Many instances, in proof of this, were given in the opinion so often alluded to. Not a single historian upon this subject alludes to any such ingredient as essential or indispensable.

It has been said (and it has never been denied) that the very first issue of bills of credit, by any of the colonies, was by the Province of Massachusetts in 1690. The form of these bills was:

"This indented bill of ten shillings, due from the Massachusetts Colony to the possessor, shall be, in value, equal to money, and shall be accordingly

Page 36 U. S. 334

accepted by the treasurer and receivers subordinate to him in all public payments and for any stock at any time in the Treasury."

Then followed the date and the signatures of the committee authorized to emit them. [Footnote 2] They were not made a tender in payment of debts except of those due to the state. In 1702, 3 Ann. c. 1, another emission of bills of credit for

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