In 1836, the Legislature of Arkansas chartered a bank the whole
of the capital of which belonged to the state and the president and
directors of which were appointed by the general assembly.
The twenty-eighth section provided "that the bills and notes of
said institution shall be received in all payments of debts due to
the State of Arkansas."
In January, 1845, this twenty-eighth section was repealed.
The notes of the bank which were in circulation at the time of
this repeal were not affected by it.
The undertaking of the state to receive the notes of the bank
constituted a contract between the state and the holders of these
notes, which the state was not at liberty to break, although notes
issued by the bank after the repeal were not within the contract,
and might be refused by the state.
Therefore a tender, made in 1847, of notes issued by the bank
prior to the repealing law of 1845 was good to satisfy a judgment
obtained against the debtor by the state, and it makes no
difference whether or not the debtor had the notes in his
possession at the time when the repealing act was passed.
On 2 November, 1836, the State of Arkansas passed an act to
incorporate the Bank of the State of Arkansas. The capital was one
million of dollars, which was raised by a sale of the bonds of the
state, or by loans founded upon those bonds. The president and
directors were appointed by a joint vote of the general assembly.
All dividends upon the capital stock were declared to belong to the
state, subject to the control and disposal of the legislature.
The twenty-eighth section was as follows,
viz.: "That
the bills and notes of said institution shall be received in all
payments of debts due to the State of Arkansas." The other
Page 51 U. S. 191
sections of the act were in the usual form of conferring general
banking powers.
In 1836, William E. Woodruff was elected by the General Assembly
of Arkansas Treasurer of the state, and on 27 October, 1836,
executed a bond to James S. Conway, governor of the state, in the
penal sum of three hundred thousand dollars conditioned for the
faithful performance of his duties as treasurer. There were seven
sureties, whose names it is not necessary to mention. The time for
which Woodruff was to serve was two years, "and until his successor
shall be elected and qualified." His term of office was thus from
27 October, 1836, to 25 December, 1838.
On 23 March, 1840, the State of Arkansas brought a suit upon
this official bond against the principal and sureties in the
Pulaski Circuit Court. The breach alleged was that Woodruff had not
paid over to his successor the sum of $2,395.18. It is not
necessary to trace the history of this suit; suffice it to say that
it eventuated in a judgment against Woodruff for $3,359.22 and
costs.
On 10 January, 1845, the legislature passed an act relating to
the revenue of the state, the nineteenth section of which provided
that, "from and after 4 March, 1845, nothing shall be received in
payment of taxes or revenue due the state but par funds."
In the progress of the suit, Frederick W. Trapnall had become
regularly substituted in place of the Attorney General to conduct
the suit.
In 1847, Trapnall ordered an execution upon the judgment which
the state had obtained against Woodruff, who, on 24 February, 1847,
tendered and offered to pay to Trapnall the sum of $3,755 in the
notes issued by the Bank of the State of Arkansas, which Trapnall
refused to receive.
On 25 February, 1847, Woodruff filed a petition in the supreme
court of the state praying for an alternative writ of mandamus
commanding Trapnall to "receive and accept, in payment of the
judgment, the notes of the bank, or to show cause why he shall
refuse to do so." The writ was issued accordingly.
To this writ the following answer was filed:
"The answer of Frederick W. Trapnall, attorney for the state
pro tem., to an alternative mandamus hereto annexed,
issued by the supreme court on the petition of William E.
Woodruff."
"This respondent admits the judgment and tender as set out in
the said petition, but alleges that he was not authorized to
Page 51 U. S. 192
receive the said Arkansas state Bank notes, because the
twenty-eighth section of the bank charter, under which alone the
said Woodruff could claim a right so to satisfy the said judgment,
was repealed by an Act of the Legislature of the State of Arkansas
approved January 10, 1845, and entitled, 'An act making
appropriations for the years 1845, 1846, and part of the year 1844,
and for balances due from the state, and for other purposes,' and
by the nineteenth section of the said act."
"And this respondent submits to the court, if the repeal of the
said section does not deprive him of all authority to receive the
said bank notes from the said Woodruff in satisfaction of the said
judgment in favor of the State of Arkansas against him and others.
Respectfully,"
"FREDERICK W. TRAPNALL"
To this answer Woodruff demurred, and there was a joinder in
demurrer.
Before the argument, the following agreement was filed by the
counsel of the respective parties.
"Be it remembered that the following matters are agreed upon by
the counsel for the petitioner and respondent in this cause, to the
end that the same may be filed and become a part of the record
herein."
"1st. The record and proceedings in the case of William E.
Woodruff, and the said persons named in said petition as his
securities, against the State of Arkansas, upon the first and
second writs of error remaining in this Court, and which are
referred to in said petition, shall form a part thereof by such
reference as fully as though the same were incorporated therein at
full length."
"2d. That said respondent, as attorney of record for said state
in the suit aforesaid, is the proper officer by law to receive and
acknowledge satisfaction of said judgment."
"3d. That the notes of the Bank of the State of Arkansas,
referred to in said petition and response and tendered in this
case, were issued by said bank, pursuant to the charter thereof,
prior to the year 1840."
"4th. That after the creation of said bank, down to the year
1845, the notes of said bank were received and paid out by said
state in discharge of all public dues to and from said state."
"5th. That said bank continues to exist, with all its corporate
functions, and that in the consideration of this case, all the acts
of the general assembly of said state affecting said bank shall be
deemed to be public laws, as they have been heretofore decided by
this Court to be, and whereof this Court will judicially
Page 51 U. S. 193
take notice; but to the end thereof, and for greater certainty,
the Act of said general assembly entitled 'An act to incorporate
the Bank of the State of Arkansas,' approved November 2, 1836, is
here inserted at full length, and made part of the record in this
cause, and which act of incorporation is in the words
following."
Then followed the charter of the bank
in extenso.
One of the grounds of the demurrer was the following:
"1st. That the nineteenth section of said act, entitled 'An act
making appropriations for the years 1845, 1846, and part of the
year 1844, and for balances due from the state, and for other
purposes,' approved January 10, 1845, is a law impairing the
obligation of contracts, and is repugnant to the Constitution of
this state and of the United States, and therefore void."
On 28 July, 1847, the Supreme Court of Arkansas overruled the
demurrer, and on 30 July, Woodruff sued out a writ of error to
bring the case up to this Court.
Page 51 U. S. 203
MR. JUSTICE McLEAN delivered the opinion of the Court.
An action was brought by the State of Arkansas in the Pulaski
Circuit Court against the plaintiff in error and his sureties,
Chester Ashley and others, upon his official bond as late treasurer
of state for the recovery of a certain sum of money alleged to have
been received by him, as treasurer, between 27 October, 1836, and
26 December, 1838. And a judgment was recovered against him and his
securities, on 13 June, 1845, for $3,359.22
Page 51 U. S. 204
and costs. An execution having been issued on the judgment, on
24 February, 1847, the plaintiff tendered to the defendant in
error, who prosecuted the suit as Attorney General, the full amount
of the judgment, interest, and costs, in the notes of the Bank of
the State of Arkansas, which were refused.
The above facts being stated in a petition to the Supreme Court
of Arkansas on 25 February, 1847, an alternative mandamus was
issued to Trapnall, the defendant in error, to receive the bank
notes in satisfaction of the judgment or show cause why he shall
refuse to do so.
On the return of the mandamus, the defendant admitted the
judgment and tender of the notes, but alleged that he was not
authorized to receive them in satisfaction of the judgment because
the twenty-eighth section of the bank charter, under which alone
the plaintiff could claim a right so to satisfy the judgment, was
repealed by an Act of the legislature approved January 10,
1845.
It was agreed by the parties that the record of the judgment
should be made a part of the proceeding; that the defendant was the
proper officer by law to receive satisfaction of the judgment; that
the notes tendered were issued by the bank prior to the year 1840,
and that down to the year 1845, the notes of the bank were received
and paid out by the state in discharge of all public dues; that the
bank continues to exist with all its corporate functions.
The court was of opinion that the return of the defendant showed
a sufficient cause for a refusal to obey the mandate of the writ,
and gave judgment accordingly.
The twenty-eighth section of the bank charter, which was
repealed by the act of 1845, provided "that the bills and notes of
said institution shall be received in all payments of debts due to
the State of Arkansas." And the question raised for consideration
and decision is whether the repeal of this section brings the case
within the Constitution of the United States, which prohibits a
state from impairing the obligations of a contract.
The bank charter was passed on 2 November, 1836,
"with a capital of one million of dollars, to be raised by a
sale of the bonds of the state, loans, or negotiations, together
with such other funds as may now or hereafter belong to, or be
placed under the control and direction of, the state,"
the principal bank to be located at the City of Little Rock and
its concerns to be conducted by a president and twelve directors,
to be appointed by a joint vote of the general assembly. Branches
were required to be established, the presidents and directors
whereof to be elected in the same manner.
Page 51 U. S. 205
The president and directors were to have a common seal, were
authorized to deal in bullion, gold, silver &c., purchase real
property, erect buildings &c., issue notes, make loans at eight
percent on endorsed paper, or on mortgages, within the state; a
general board was constituted, which was to make report of the
condition of the bank annually to the legislature and perform other
duties, and any debtor to the bank, "as maker or endorser of any
note, bill, or bond, expressly made negotiable and payable at the
bank, who delays payment," should have a judgment entered against
him on a notice of thirty days.
Some doubt has been suggested whether the notes of this bank
were not bills of credit within the prohibition of the
Constitution. We think they cannot be so held consistently with the
view taken by this Court in the case of
Briscoe v. Bank of the
Commonwealth of Kentucky, 11 Pet. 311. It was there
said that
"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 bills of this bank are not made payable by the state. A
capital is provided for their redemption, and the general
management of the bank, under the charter, is committed to the
president and directors, as in ordinary banking associations. They
may in a summary manner obtain judgments against their debtors. And
although the directors are not expressly made liable to be sued,
yet it is not doubted they may be held legally responsible for an
abuse of the trust confided to them.
The entire stock of the bank is owned by the state. It furnished
the capital and receives the profits. And in addition to the credit
given to the notes of the bank by the capital provided, the state
declares in the charter they shall be received in all payments of
debts due to it. Is this a contract? A contract is defined to be an
agreement between competent persons to do or not to do a certain
thing. The undertaking on the part of the state is to receive the
notes of the bank in payment from its debtors. This comes within
the definition of a contract. It is a contract founded upon a good
and valuable consideration -- a consideration beneficial to the
state, as its profits are increased by sustaining the credit, and
consequently extending the circulation, of the paper of the
bank.
With whom was this contract made? We answer, with the holders of
the paper of the bank. The notes are made payable to bearer;
consequently every
bona fide holder has a right, under the
twenty-eighth section, to pay to the state any debt he may owe it,
in the paper of the bank. It is a continuing
Page 51 U. S. 206
guarantee by the state that the notes shall be so received. Such
a contract would be binding on an individual, and it is not less so
on a state.
That the state had the right to repeal the above section may be
admitted. And the emissions of the bank subsequently are without
the guarantee. But the notes in circulation at the time of the
repeal are not affected by it. The holder may still claim the
right, by the force of the contract, to discharge any debt he may
own to the state in the notes thus issued.
It is argued that there could have been violated or impaired no
contract with the plaintiff in error, as it does not appear he had
the notes tendered by him in his possession at the time the
twenty-eighth section was repealed.
It is admitted that he had the notes in his possession at the
time he made the tender, and that they were issued by the bank
before the repeal of the section, and nothing more than this could
be required.
The guarantee of the state that the notes of the bank should be
received in discharge of public dues embraced all the bills issued
by it; the repeal of the guarantee was intended, no doubt, to
exclude all the notes of the bank then in circulation. Until the
repeal of the twenty-eighth section, the state continued to receive
and pay out these notes. Up to that time, no one doubted the
obligation of the state to receive them. The law was absolute and
imperative on the officers of the state. The holder of the paper
claimed the benefit of this obligation, and it is supposed his
right could never have been questioned. The notes were payable to
bearer, and the bearer was the only person who had a right to
demand payment of the bank, or to pay them into the state Treasury
in discharge of a debt. The guarantee included all the notes of the
bank in circulation as clearly as if on the face of every note the
words had been engraved "This note shall be received by the state
in payment of debts." And that the legislature could not withdraw
this obligation from the notes in circulation at the time the
guarantee was repealed is a position which can require no argument.
Anyone had a right to receive them and to test the
constitutionality of the repeal.
Suppose a state legislature should pass a law authorizing the
drawers of promissory notes payable to bearer to discharge the same
by the payment of produce. Would such a law affect the rights of
the bearer? The contract would stand, and the law would be declared
void. A standing guarantee by a mercantile house to receive in
payment of its debts all notes drawn by a certain other house is
valid on the ground that the notes were taken on the credit of such
guarantee. It may
Page 51 U. S. 207
be terminated by a notice, but when so terminated, are not all
the notes good against the guarantors, which were executed and
circulated prior to the notice? Who could commend the justice of
guarantors, who should endeavor to avoid responsibility, on so
clear a principle?
Louisville Manuf. Co. v. Welch, post,
51 U. S. 461.
A state can no more impair, by legislation, the obligation of
its own contracts than it can impair the obligation of the
contracts of individuals. We naturally look to the action of a
sovereign state to be characterized by a more scrupulous regard to
justice and a higher morality than belong to the ordinary
transactions of individuals. The obligation of the State of
Arkansas to receive the notes of the bank in payment of its debts
is much stronger than in the above case of individual
guarantee.
The bank belonged to the state, and it realized the profits of
its operations. It was conducted by the agents of the state under
the supervision of the legislature. By the guarantee, the notes of
the bank for the payment of debts to the state were equal to gold
and silver. This, to some extent, sustained their credit and gave
them currency. Loans were made by the bank on satisfactory
security. The debts of the bank, or a large proportion of them, may
fairly be presumed to have been collected. But the means of the
bank, thus under the control of the state, became exhausted.
Whether this was the result of withdrawing the capital from the
bank by the state does not appear upon the record. We only know the
fact that its funds have disappeared, leaving, it is said, a large
amount of its paper, issued before the repeal of the guarantee,
worthless in the hands of the citizens of the state.
The obligation of the state to receive these notes is denied on
the ground that the twenty-eighth section was a general provision,
liable to be repealed at any time by the legislature. And it is
compared to a general provision to receive, for public dues, the
paper of banks generally, unconnected with the state. There is no
analogy in the two cases. One is a question of public policy,
influenced by considerations of general convenience, which everyone
knows may be changed at the discretion of the legislature. But the
other arises out of a contract incorporated into the charter,
imposing an obligation on the state to receive, in payment of all
debts due to it, the paper of a bank owned by the state and whose
notes are circulated for its benefit. The power of the legislature
to repeal the section, the stock of the bank being owned by the
state, is not controverted, but that act cannot affect the notes in
circulation at the time of the repeal.
It is objected, that this view trenches upon the sovereignty of
the state, in the exercise of its taxing power and in the
regulation
Page 51 U. S. 208
of its currency. We are not aware that a state has power over
the currency farther than the right to establish banks, to regulate
or prohibit the circulation, within the state, of foreign notes,
and to determine in what the public dues shall be paid.
It is a principle controverted by no one that on general
questions of policy, one legislature cannot bind those which shall
succeed it, but it is equally true and undoubted that a legislature
may make a contract which shall bind those that shall come after
it.
The notes of the bank in circulation at the repeal of the
twenty-eighth section, if made receivable by the state in discharge
of public dues, may so far resuscitate them as that in the course
of time they will find their way into the treasury of the state,
where in justice and by contract they belong. It is presumed there
will be no complaint, as there will be no ground for any, by the
citizens of the state if these notes, now dead and worthless,
should be so far revived as to reach their appropriate destination.
And if, as a consequence, some increase of taxation should be
required by the state, it will be nothing more than is common to
all other states that perform their contracts. It would be a most
unwise policy for a state to improve its currency through a
violation its contracts. In such a course, the loss of the state
would be incomparably greater than its gain. Any argument in
commendation of such an action by a state cannot be otherwise
considered than as exceedingly infelicitous and unjust.
If these notes be receivable in payment of public dues by the
state, having been in circulation at the time of the repeal of the
above section, as we think they clearly are, no doubt can exist as
to the sufficiency of the tender. The law of tender which avoids
future interest and costs has no application in this case. The
right to make payment to the state in this paper arises out of a
continuing contract, which is limited in time by the circulation of
the notes to be received. They may be offered in payment of debts
due to the state, in its own right, before or after judgment, and
without regard to the cause of indebtment.
Whatever may be the demerits of the plaintiff in error, they do
not affect the nature and extent of the obligation of the state.
And that obligation cannot be withdrawn from this paper. Into
whosesoever hands it shall come, it carries with it the pledge of
the state to receive it in payment of its debts. In this case, the
payment is made by the securities of Woodruff, and exacted by the
state, to whose organization and management of the bank may be
attributed its insolvency. In procuring the notes of the bank,
these securities had a right to
Page 51 U. S. 209
rely, and no doubt did rely, upon the guarantee of the state to
receive them in payment of debts.
In sustaining the application for a mandamus, the supreme court
of the state exercised jurisdiction in the case. To that court
exclusively belongs the question of its own jurisdiction. For the
reasons stated, the judgment of the supreme court is
Reversed, and the cause is remanded for further proceedings
to that court, as it may have jurisdiction, in conformity to the
opinion of this Court.
MR. JUSTICE CATRON, MR. JUSTICE DANIEL, MR. JUSTICE NELSON, and
MR. JUSTICE GRIER dissented.
MR. JUSTICE GRIER.
With all respect for my brethren, I feel constrained to express
my entire dissent from the opinion of the majority of the Court
which has just been delivered.
There is no portion of the power and jurisdiction committed to
this Court which demands so much caution in its exercise as that of
declaring the legislation of a state to be null and void because it
comes in conflict with the Constitution of the United States. And
more especially should this be the case where one of the states of
this Union is really, though not nominally, the true party
defendant and is charged not merely with legislation injuriously
impairing contracts between her citizens, but with a direct and
dishonest repudiation of her own solemn obligations. Such is the
charge on which the state and people of Arkansas have been publicly
arraigned before this Court. But it is one I am unwilling to
endorse or believe without other evidence than the record before us
contains. When a state is charged with a repudiation of her
contracts, the party making it is bound to show beyond dispute that
the state has made a contract; when, where, how, and with whom; and
not leave it to surmise, strained inferences, or fanciful
construction, as to the nature of the obligation, or the parties to
it.
Assuming the State of Arkansas to be, for the purposes of this
case, a private corporation, or an individual, and bound by the
same principles of law and equity which affect other persons in
their intercourse with the world, let us examine whether William E.
Woodruff, the plaintiff below and in error, has shown a contract
which entitled him to the remedy sought, in the Supreme Court of
Arkansas, and which we are now called on to afford him. The record
shows that his bond was given to the State of Arkansas on 27
October, 1836, before the act was passed which incorporated the
Bank of the State of Arkansas. His contract, as it appears on the
face of his bond, is
Page 51 U. S. 210
to pay $300,000, "lawful money of the United States," subject to
a condition which is forfeited. He was treasurer of the state, and
between the date of his bond and on 21 December, 1838, he received
large sums of money, and among others, the sum of $286,757.49, in
drafts from the Secretary of the Treasury of the United States. Of
these moneys a balance remained in his hands, which he refused to
pay over, and a suit was brought on his bond in 1840; and on 23
January, 1847, final judgment was recovered for the sum of $3,359
and costs, and an execution having issued for the same, Woodruff,
for the first time, in February, 1847, tendered to the attorney of
the state not lawful money of the United States, which he had
contracted to pay, and for which judgment was given against him,
but notes of the state Bank of Arkansas, then and now insolvent,
and the notes almost worthless. Woodruff then petitioned the
supreme court for a mandamus to compel the attorney of the state to
receive these worthless notes in place of the money he had
contracted to pay, and which he was condemned by the judgment of
the court to pay, and because of the refusal of the Supreme Court
of Arkansas to issue a peremptory mandamus, he has appealed to this
Court to compel them, on the ground that the law of the state which
forbade its officers to receive payment of taxes and debts in
anything but specie or par funds impaired the obligation of
contracts. The twenty-eighth section of the act of 1836,
incorporating the bank, directed that the bills and notes of the
bank should "be received in all payments of debts due to the State
of Arkansas." But another statute, passed in 1845, enacted, that
"from and after 4 March, 1845, nothing shall be received in payment
of taxes or revenue due the state but par funds or treasury
warrants of the state."
Now for seven years and upwards after the default of the
plaintiff in paying over money which he had received, he was
permitted to pay in notes of this bank, but in all this time he
made no tender of payment in such notes. When sued on his bond, he
makes no tender of notes, pleads no setoff, but, after judgment of
the court that he shall pay money, he claims a right to satisfy the
execution by handing over that which is not money. If this claim be
not just, it has at least the merit of novelty, as it is certainly
without precedent either in the courts of England or America.
Let us assume for argument's sake that every enactment of the
Legislature of Arkansas is in the nature of a contract or promise
with some person, and cannot be repealed, and that the state had
guaranteed or endorsed every note issued by the bank, or, what will
make the case stronger for the plaintiff, that his bond was made
payable in the notes of the State Bank
Page 51 U. S. 211
of Arkansas. Is he entitled to the extraordinary process now
demanded, or had he a right to allege such contract on the part of
the state at this stage of the proceedings? If he had not, and the
court below were right in refusing to issue the mandamus, whether
the act of 1845 was void or valid, he has no right to call upon
this Court to reverse their judgment, because they may have given a
wrong reason for it, and unnecessarily passed their opinion on the
validity of an act which did not affect the plaintiff's case, or
deprive him of any right.
If a creditor gives public notice to his debtors that he will
accept, in payment of his debts, wheat, tobacco, or Arkansas notes,
and his debtor for a course of seven years refuses or neglects to
accept of the offer and tender payment in such articles, and is
afterwards sued upon his bond or note, and even after suit brought
makes no such tender, or pleads his readiness to pay in such
articles, and judgment is obtained against him on his bond for
money due; can he afterwards ask a court to allow him to tender
payment in anything else than money, or have a rule on the
plaintiff's attorney or a mandamus to compel him to accept notes of
a broken bank, or other specific articles, in payment of an
execution issued on the judgment? Again, if the obligation sued
upon is payable in specific articles, and no tender of them is made
before suit brought, or plea that the defendant is ready and
willing to pay according to contract, and the court give judgment
against the debtor for a certain sum of money as damages for his
breach of his contract, can he afterwards compel the sheriff or the
plaintiff's attorney to accept specific articles in satisfaction of
a judgment and execution for money? And again, if a defendant hold
notes drawn or endorsed or guaranteed by the plaintiff, he may
plead them as a setoff, and obtain judgment in his favor. But if he
enter no such plea, or demand no such setoff, and judgment is
entered against him for the money due, can he purchase the
plaintiff's notes after judgment, and ask the court to compel the
plaintiff's attorney to accept them in payment? It does not appear,
nor have the learned counsel asserted, that such is the peculiar
law of Arkansas, and it certainly is not the law anywhere else.
When suit is brought on a contract, it becomes merged in the
judgment; if the defendant claims a right to pay it in anything
else than money, he must plead it and set it up on the trial, for
the court, on an action for money, can give judgment only for the
payment of money. If, after trial, verdict, and judgment the
plaintiff on motion could raise a new question as to setoff,
tender, or a right to satisfy his debt in some other way than by
payment of money, the judgment of a court, instead of being the end
of controversy, would be but the beginning of litigation.
Page 51 U. S. 212
Of this the present case is a most flagrant instance. The
plaintiffs in error were sued on their bond in 1840, on an
obligation to pay "lawful money of the United States." They
contested the claim in court for seven years, never alleged by plea
or otherwise any contract on the part of the state by which they
were entitled to pay in anything but money, never tendered notes of
the Bank of Arkansas, never alleged that the state was liable as
guarantor of the notes of the bank, and bound to accept them as a
setoff or in payment, but after final judgment affirmed in a court
of error, and execution issued, they commence a new litigation,
which has now lasted for four years more.
If a citizen of Arkansas had sued the defendants on their bond,
and thus had claimed the right to tender payment of it in anything
else than money, owing to some promise or contract of the plaintiff
to accept the paper of a particular bank in payment of his bond, no
lawyer can pretend that the defendants were not bound to make their
defense on the trial, or that, after judgment to pay money, any
court has the power to compel the plaintiff to accept anything
else. That a sovereign state has not the same rights in a court of
justice that are granted to her humblest citizens is a doctrine
that I have not heard advanced and do not feel bound to disprove.
And yet if the Supreme Court of Arkansas had issued the peremptory
mandamus asked by plaintiff, they would have assumed a power over
the sovereign state which the law would not allow them to exercise
over any of her citizens. The Constitution of the United States
forbids any state "to make anything but gold and silver a tender in
payment of debts;" yet it is claimed that this Court has the power
to compel a state to accept payment of a judgment for $3,000 lawful
money of the United States in worthless paper of a broken bank, or
in other words, in a collateral proceeding to set aside and reverse
the judgment of the court condemning the defendants to pay money,
and let them into a defense on some alleged contract of the
defendant to guarantee the notes of a certain bank, or to accept
payment in something else than money, and thus try the defense
after judgment. If courts of justice have such a power, it would
seem that this is the first instance in which they have been called
upon to exercise it, as the books of reports can furnish no
precedent of such a proceeding.
Thus far, I have considered this case on the assumption that the
State of Arkansas, by her direction to her officers to receive
payment of debts due to her in the notes of the bank, has become
the guarantor and endorser of such notes, and has thereby divested
itself of all power to lay and collect taxes payable in any other
medium or currency than notes
Page 51 U. S. 213
of the bank, and irrevocably made them a sufficient tender to
her for all debts due, and shown, as I think, that the court below
were justifiable in refusing to the plaintiff the writ prayed for
in his petition. Let us now inquire whether there is any such
contract between the parties in this case which has been impaired
by the legislation of the state. For it is well settled that the
plaintiffs have no right to invoke the aid of this Court to
exercise the high power entrusted to it of deciding on the validity
of state legislation, unless some rights vested in them by contract
with the state or some other person has been impaired or destroyed
thereby.
I admit that if the defendant, as treasurer of the state, had
received debts or taxes due the state in the notes of the bank
before the repeal of this law directing him to receive them, it
would be a gross violation of its contract to refuse to receive
from him such currency or specific articles as he had received in
pursuance of law. But that is not the case before us. On the
contrary, the bond given by the plaintiff was antecedent to the
incorporation of the bank; their contract with the state was to pay
"lawful money of the United States," and the subsequent act cannot
be said to be incorporated in it, or make a part of their contract.
The treasurer received for the use of the state money, not notes of
the bank, as the record shows. They do not pretend that after the
passage of the act, or even after its repeal up to the time that
judgment was obtained against them, they ever held a dollar of
these bank notes, or ever tendered a payment of their debt in them.
Where, then, is the contract with these plaintiffs, or how has it
been impaired? If other persons have received these notes on the
faith of their guarantee by the state, and their value has been
diminished or destroyed by the refusal of the state to receive them
in payment of their dues, what right have the plaintiffs to
complain, or to come to this Court for aid? Who is attempting to
commit a fraud, or deny the obligation of their contracts, the
State of Arkansas or the plaintiffs themselves? For seven years
after this balance was due from the treasurer, from 1838 till 1845,
he was permitted to pay it in notes of the bank; but he refused to
accept the offer. The bank becomes insolvent, the offer to receive
payment in its worthless paper is withdrawn. And two years
afterwards, and after the plaintiffs are condemned to pay their
debt according to their covenant, in lawful money of the United
States, after an execution has issued to compel a compliance with
the judgment of the court, they ask this Court to annul their
contract and the judgment of the Supreme Court of Arkansas, that
they may pay their debt in depreciated paper bought up for the
purpose. It seems to me
Page 51 U. S. 214
that if the charge of fraudulent disregard of their contract be
imputable to either of the parties in the argument, so far as it
affects the contract between them, it is not the state which is
justly liable to it, but the plaintiffs. The repeal of the
twenty-eighth section of the act incorporating the bank, if it
impaired the obligation of a contract with any person, certainly
did not add to or change the obligation given by the plaintiffs, or
impair it in any respect. If it was a contract at all, it was with
the corporation. So far as it affected the plaintiffs, it was a
gratuitous offer and direction or permission to the treasurer to
receive, accept, and pay over debts due the state in a specific
article not money, nor a legal tender as such. There is no
complaint that the state ever refused to receive from the treasurer
taxes or debts received by him in this currency, under this
permission or direction of the act. For the seven years that he was
permitted to pay his own debt in that medium, he refused to accept
of the offer. If a wealthy creditor, for the purpose of sustaining
the credit of a particular bank, publishes to the world that if his
debtors will pay him in notes of that bank, he will accept them,
and after the bank fails gives notice that he will no longer
receive them, can a debtor who for seven years has refused to
accept this offer and pay his debts in the manner proposed allege
that this is a contract binding on the creditor forever? Can he
allege that this offer to receive payment in a specific article,
unaccepted by him, has changed the nature of his bond, and that a
demand of payment according to the letter of his obligation impairs
any contract between them? Such a doctrine as regards the contracts
of individuals has never been advanced in a court of justice. And
why a different rule should be applied to contracts when a
sovereign state is one of the parties has certainly not been
explained.
It needs no argument to demonstrate that a contract must have at
least two parties, and that all laws made by a sovereign state are
not necessarily contracts, and therefore irrevocable. The act of
the Legislature of Arkansas under consideration is entitled, "An
act to incorporate the Bank of the State of Arkansas." It creates a
corporation and confers certain powers and privileges upon it. So
far as it does this, as has been decided by this Court, the act may
be considered in the nature of a contract, and that these powers
and privileges cannot be annulled or withdrawn without the consent
of the artificial power thus created, or the individuals for whose
benefit the franchise was granted. It is true also that when a law
is in the nature of a contract or grant, and absolute rights have
vested under that contract, a repeal of the law cannot divest
Page 51 U. S. 215
those rights. But the plaintiffs in this case are not
corporators, or stockholders in the bank; they hold no franchise,
powers, or privileges, under the act of incorporation; they are no
parties to the contracts, nor have they any vested rights under it
which have been impaired by the repeal of the twenty-eighth
section. If the corporation, or those who claim the franchises and
powers granted to it, do not complain of an infringement of their
contract, no other person can. As to them, it is a mere speculative
question, which this Court is not bound to decide.
So far as it affected the plaintiffs, the twenty-eighth section
was but a gratuitous offer to accept notes in place of gold and
silver, if they would pay their debt, a mere license at the
pleasure of the state if not accepted by them. To call it a grant
or vested right under a contract seems to me a perversion and abuse
of terms. But admitting that the directions given in this act to
her public officers to deposit the funds of the state in this bank,
and receive its paper in payment of its debts, constituted a part
of the contract with the corporation, and could not be repealed,
did it bind the state after the corporation ceased to perform the
functions and duties imposed upon it? If a state creates a banking
corporation with a certain capital, and requires it to pay its
notes in specie on demand, and agrees to make it a depositary, and
use and receive its notes as cash, is the state bound by its
contract to do so when the corporation fails or refuses to fulfill
the duties and purposes of its creation? If such be the case, it is
certainly a one-sided contract; there is no mutuality in it.
Does it make any difference in the case also whether the stock
of the corporation is furnished by the state or individuals? In
neither case are the stockholders individually liable for the
mismanagement or defaults of the corporation unless previously made
so by the act of incorporation. The State of Arkansas furnished one
million of dollars as the stock upon which this banking corporation
was to issue notes and discount paper. She has nowhere agreed to
guarantee the solvency of the bank or be liable for its issues. If
individuals had furnished the stock, they would not be personally
liable for its debts. If the stockholders had all made deposits of
their money in the bank, and received interest on long deposits,
and received its notes as gold and silver, it would not have
amounted to a contract with the public, or note holders, or anybody
else, that they should continue to deposit their money or receive
its notes in payment of debts after the bank became insolvent and
its notes worthless. The most refined legal
astutia has
thus far been unable to discover in such conduct of individuals an
implied promise to receive broken bank notes in payment of debts,
or a liability to the
Page 51 U. S. 216
note holders, because their conduct had given credit to the
bank. But it seems there is a more stringent rule of morality with
regard to sovereign states and their contracts. In their case,
under some fiction of the law, without regard to the fact or their
actual undertaking, there has been discovered an implied contract
running with the paper, like a covenant running with land, which
renders them liable for all the issues of the bank, into
whosesoever hands it may come, and forever disables them to lay or
collect a tax or pay a debt till they have lifted and paid every
note of the broken bank in which they were stockholders, although
they never directly pledged the faith of the state or agreed to be
liable for a single dollar issued by the bank. If individuals had
furnished the one million of dollars capital under an act of
incorporation which did not make the stockholders personally
liable, every person who received the notes would do it on the
credit of the capital paid in. Why it should not be the same case
when a state furnished the capital I am unable to perceive. Nor can
I comprehend how a direction by a state to its officers to make
deposits in a bank and receive its notes in payment of debts
amounts
per se to a contract running with the notes which
binds the state to receive them forever, whether the corporation be
solvent or insolvent, dead or alive. But the liability of the state
for these issues is argued and attempted to be proved by another
legal fiction -- to-wit that the state is the bank and the bank is
the state. And why? Because she created the corporation? No, for
that would make her liable for the paper of every corporation
created by the legislature.
It is, then, because she is owner of the stock, receives the
profits, makes the bank her depositary, and gives credit to its
notes by ordering them to be received in payment of her debts. And
it is from this doctrine of identity that this contract of
guarantee, running with the paper, has been inferred, or rather
imputed to the state. If the same identity exists when individuals
stand in the same relation to a corporation, and the same contract
of guarantee be imputed to them -- and I can see no reason why it
should not -- it is strange that no traces of the doctrine can be
found in our books of reports.
But there are certain inferences which necessarily follow as
corollaries from this decision in this case, and certain doctrines
for which it may be quoted as a precedent although not directly
asserted, that confirm me in refusing my assent to it.
1st. That if the same rules of law for the interpretation of
contracts, and the rights of the parties to them, affect all
persons, whether natural or artificial, the individual and the
sovereign state, it may fairly be inferred hereafter that when a
bond or
Page 51 U. S. 217
note payable in specific articles is sued upon, the defendant is
not bound either to tender them or plead a tender, but, after
judgment for a sum of money, he may make payment to the sheriff of
the execution in specific articles, and not in money.
2d. That after a court has solemnly adjudged that the defendant
shall pay to the plaintiff a certain sum of money, they can compel
him to receive in lieu of it worthless rags.
3d. That a defendant who has been condemned by the judgment of a
court to pay to the plaintiff a sum of money may buy up notes drawn
or endorsed by the plaintiff and by mandamus or rule of court
compel the plaintiff's attorney to accept them in payment.
4th. If these consequences are not legitimately to be inferred
from this judgment, then it necessarily follows that this Court
exercise a controlling power over sovereign states and judgments
obtained by them which it cannot exercise over the humblest
individual or petty corporation.
5th. That this Court has the power to compel any state of this
Union, which repudiates its debts to pay them because such refusal
or repudiation impairs the obligation of her contracts.
6th. That so long as any portion of the three millions of
dollars of notes issued by this bank before 1845 remains unpaid,
the State of Arkansas cannot collect a dollar of taxes from her
citizens in lawful money.
7th. That the courts have a right to compel a state to pay bank
notes guaranteed by them, before and in preference of all other
debts.
8th. That the collectors of taxes, so long as any of this issue
of bank notes can be found, may buy them up at the rate of one
dollar for ten or a hundred, and have the assistance of the court
to compel the state to receive them at part even where the
collector has received gold and silver.
9th. That when a state, a corporation, or an individual
publishes to the world their willingness to accept payment of their
debts in the issues of a bank, it amounts to a contract, by
implication, with the public, and each individual composing it, to
guarantee the notes issued by said bank, and that this contract
runs with and is attached to said notes in the hands of the bearer,
provided the notes were issued before such offer is withdrawn.
As I cannot assent to anyone of these propositions, and as I
believe they are legitimate deductions from the decision of the
Court, I beg leave to express my dissent from it.
Page 51 U. S. 218
MR. JUSTICE CATRON.
I concur in the dissenting opinion just delivered by my brother
GRIER.
MR. JUSTICE DANIEL.
I dissent from the decision of the Court in this case, and
entirely concur in the arguments and conclusions expressed in the
opinion delivered by my brother GRIER.
Order
This cause came on to be heard on the transcript of the record
from the Supreme Court of the State of Arkansas and was argued by
counsel. On consideration whereof it is now here ordered and
adjudged by this Court that the judgment of the said supreme court
in this cause be and the same is hereby reversed with costs, and
that this cause be and the same is hereby remanded to the said
supreme court for further proceedings to be had therein in
conformity to the opinion of this Court.