Providence Bank v. Billings, 29 U.S. 514 (1830)
U.S. Supreme CourtProvidence Bank v. Billings, 29 U.S. 4 Pet. 514 514 (1830)
Providence Bank v. Billings
29 U.S. (4 Pet.) 514
In 1791, the Legislature of Rhode Island granted a charter of incorporation to certain individuals who had associated for the purpose of banking. They were incorporated by the name of the president, directors, and company of the Providence Bank, with the ordinary, powers of such associations. In 1822, the legislature passed an act imposing a tax on every bank in the state except the bank of the United States. The Providence Bank refused the payment of the tax, alleging that the act which imposed it was repugnant to the Constitution of the United States as it impaired the obligation of the contract created by the charter of in corporation. Held that the act of the Legislature of Rhode Island imposing a tax which under the law was assessed on the Providence Bank does not impair the obligation of the contract created by the charter granted to the bank.
It has been settled that a contract entered into between a state and an individual is as fully protected by the prohibitions contained in the tenth section, first article of the Constitution, as a contract between two individuals, and it is not denied that a charter incorporating a bank is a contract.
The power of taxing moneyed corporations has been frequently exercised, and has never before, so far as is known, been resisted. Its novelty, however, furnishes no conclusive argument against it.
That the taxing power is of vital importance, that it is essential to the existence of government, are truths which it cannot be necessary to reaffirm. They are acknowledged and asserted by all. It would seem that the relinquishment of such a power is never to be assumed. We will not say that a state may not relinquish it; that a consideration sufficiently valuable to induce a partial release of it may not exist; but as the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought not to be presumed in a case in which the deliberate purpose of the state to abandon it does not appear.
The great object of an incorporation is to bestow the character and properties of individuality on a collected and changing body of men. Any privileges which may exempt it from the burdens common to individuals do not flow necessarily from the charter, but must be expressed in it or they do not exist.
The power of legislation, and consequently of taxation, operates on all the persons and property belonging to the body politic. This is an original principle which has its foundation in society itself. It is granted by all for the benefit of all. It resides in government as a part of itself, and need not be reserved where property of any description or the right to use it in any manner is granted to individuals or corporate bodies.
However absolute the right of an individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portion must be determined by the legislature. This vital power may be abused, but the Constitution of the United States was not intended to furnish the correction of every abuse
of power which may be committed to the state governments. The intrinsic wisdom and justice of the representative body and its relations with its constituents furnish the only security where there is no express contract against unjust and excessive taxation, as well as against unwise legislation generally.
This was a writ of error to the Supreme Judicial Court of the State of Rhode Island, and the question which was presented for the consideration of the court was the constitutionality of an act passed by the Legislature of the State of Rhode Island in January, 1822, entitled "An act imposing a duty upon licensed persons and others, and bodies corporate within this state," alleged to be a violation of the contract contained in the charter of the bank. Under the provisions of this act and in conformity with them, a tax was imposed on the Providence Bank, and the bank having refused payment thereof, a seizure was made for the amount of the tax in the banking house by Alpheus Billings, the Sheriff of the County of Providence, and by Mr. Pittman, the General Treasurer of the State of Rhode Island. The bank instituted an action of trespass for this taking against the sheriff and the treasurer in the Court of Common Pleas of the County of Providence, to which action the defendants pleaded in their defense the act imposing the tax and the amendments thereto, and that in pursuance of the provisions of the same a warrant was issued and the proceedings which were the subject of the action were done.
To this plea the bank filed a general and a special demurrer. Among the causes of demurrer, the repugnancy of the acts of the general assembly imposing the tax to the Constitution of the United States inasmuch as they violate the contract set forth in the declaration, the act incorporating the bank, and inasmuch as they authorize private property to be taken for public purpose without providing any compensation are distinctly stated.
A judgment against them was submitted to by the bank in the court of common pleas, and they appealed to the Supreme Judicial Court, where the judgment of the inferior court was confirmed by submission on the part of the bank,
and it prosecuted this writ of error under the twenty-fifth section of the Judiciary Act of 1789.
The Providence Bank was chartered by the Legislature of Rhode Island in October, 1791. The preamble of the act states,
"Whereas the president and directors of a bank established at Providence on 3 October last have petitioned this general assembly for an act to incorporate the stockholders in said bank, and whereas well regulated banks have proved very beneficial in several of the United States as well as in Europe, therefore be it enacted by the general assembly, and by the authority thereof it is hereby enacted that the stockholders in said bank, their successors and assigns, shall be, and are hereby created, and made a corporation and body politic by the name and style of the president, directors and company of the Providence Bank, and by that name shall be, and are hereby made able and capable in law to have, purchase, receive, possess, enjoy, and retain to them and their successors, rents, tenements, hereditaments, goods, chattels and effects of what kind or nature soever, and the same to sell, grant, devise, alien or dispose of, to sue and be sued, plead and be impleaded, answer and be answered, defend and be defended, in courts of record or any other place whatsoever, and also to make, have, and use a common seal, and the same to break, alter, and renew at their pleasure, and also to ordain, establish, and put in execution such bylaws, ordinances, and regulations as shall seem necessary and convenient for the government of the said corporation, not being contrary to law or the constitution of said bank, and generally to do and execute all and singular acts, matters, and things which to them it shall or may appertain to do."
"And whereas, the stockholders, on the said 3d day of October, formed and adopted a constitution for said bank, in the words following, viz.,"
" Taught by the experience of Europe and America that well regulated banks are highly useful to society by promoting punctuality in the performance of contracts, increasing the medium of trade, facilitating the payment of taxes,
preventing the exportation of specie, furnishing for it a safe deposit, and by discounts rendering easy and expeditious the anticipations of funds on lawful interest, advancing at the same time the interest of the proprietors, we, the subscribers, desirous of promoting such an institution, do hereby engage to take the number of shares set against our names respectively, in a bank to be established in Providence, in the State of Rhode Island, on the following plan, &c."
The plan of the association is set forth in the act, and is made a part of the charter. It provides for the opening of subscriptions for the stock of the bank, to consist of six hundred and twenty-five shares, of $400 each, making a capital of $250,000, and for the organization of the bank. The act gives to the corporation the usual powers necessary to carry into effect the objects of its formation, and makes provisions for the transaction of the business of the company. Amendments to this act were afterwards passed by the legislature.