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
Page 36 U. S. 333
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 �15,000 was authorized in the same form, but
they were not made a tender by the act, and the then duties of
impost and excise were directed to be applied to the discharge of
those bills, as also a tax of �10,000 on polls and estates, real
and personal to be levied and collected, and paid into the
Treasury, in 1705. A subsequent act, passed in 1712, made them a
tender in payment of private debts. In 1716, Act of 3 Geo. I, c. 6,
a further emission of �150,000 in "bills of credit" was expressly
authorized to be made in the like form, to be distributed among the
different counties of the province in a certain proportion stated
in the act, and to be put into the hands of five trustees in each
county to be appointed by the legislature, to be lent out by the
trustees on real security in the county in certain specified sums
for the space of ten years at five percent per annum. The mortgages
were to be made to the trustees, and to be sued for by them, and
the profits were to be applied to the general support of the
government. These bills were not made a tender. Now this act is
most important to show that the fact, that the bills of credit were
to be let out on mortgage was not deemed the slightest degree
material to the essence of such bills. An act for the emission of
bills of credit not materially different in the substance of its
provisions had been passed in 1714, 1 Geo. I., c. 2. Another act
for the emission of �50,000 in bills of credit was passed in 1720,
7 Geo. I, c. 9, containing provisions nearly similar, except that
the trustees were to be appointed by the towns, and the profits
were to be received by the towns, and a tax of �50,000 on polls and
estates was authorized to be raised to redeem the same.
In 1720, the Colony of Rhode Island issued bills of credit
nearly in the form of the Massachusetts bills, and they were made a
tender in payment of all debts excepting special ones, and similar
bills were issued in 1710 and 1711. In 1715, another issue was
authorized, to be lent out by trustees and committees of towns on
mortgage for ten years. There
Page 36 U. S. 335
is no clause in the act declaring them a tender. The same year,
another emission was authorized. In 1709, the Colony of Connecticut
authorized an emission of bills of credit in a similar form,
appropriating a tax for their redemption. There was no clause
making them a tender. Numerous other acts of the like nature were
passed between that period and 1731, some of which made them a
tender and others not. In 1709, the Colony of New York issued bills
of credit in a form substantially the same, and they were made a
tender in the payment of debts, and these bills were to bear
interest. Many other emissions of bills of credit were, from time
to time, authorized to be made in similar forms; they were
generally made a tender, and generally funds were provided for
their due redemption.
In 1722, the Province of Pennsylvania issued bills of credit in
a form not substantially different from those of the New England
states, which were delivered to trustees to be loaned on mortgages
on land or ground rents, and they were made a tender in payment of
all debts. Other emissions for like purposes were authorized by
subsequent laws. In the year 1739, an emission of bills of credit
was authorized by the State of Delaware for similar purposes and in
a similar form, to be loaned on mortgages. They were made a tender
in payment of debts, and a sinking fund was provided.
In 1733, Maryland authorized an emission of bills of credit to
the amount of �90,000, to be issued by and under the management of
three commissioners or trustees, who were incorporated by the name
of "The commissioners or Trustees for emitting Bills of Credit,"
and by that name might sue and be sued, and sell all real and
personal estate granted them in mortgage, &c. These bills of
credit, with certain exceptions, were to be lent out on interest by
the commissioners or trustees, at four percent, upon mortgage or
personal security, and a sinking fund was provided for their
redemption, &c., and they were made a tender in payment of
debts. Another emission was authorized in 1769, and two
commissioners were appointed to emit the bills, to be called
"commissioners for emitting Bills of Credit," and by that name to
have succession, and to sue and be sued. These bills also were to
be lent out by the commissioners on security, and a fund was
provided for their redemption. These bills were not made a tender.
[
Footnote 3]
Page 36 U. S. 336
In Virginia, bills of credit were issued as early as 1755 under
the name of treasury notes which bore interest and were made a
tender in payment of debts. Emissions were subsequently made at
other periods, and especially in 1769, 1771 and 1773. These three
last were not made a tender. In 1778, another emission of them was
authorized, which were made a tender, and a fund was pledged for
their redemption. Many other issues were subsequently made which
were a tender. What demonstrates that these treasury notes were
deemed bills of credit is the fact that by an act passed in 1777,
ch. 34, it was made penal for any person to "issue or offer in
payment any bill of credit or note for any sum of money payable to
the bearer," and that the Act of 1779, ch. 24, makes it a felony
for any person to steal any bill of credit, treasury note, or "loan
office certificate of the United States, or any of them," and that
the Act of 1780, ch. 19, after reciting that the exigencies of the
war requires the emission of paper money, &c., authorizes the
emission of new treasury notes and proceeds to punish with death
any person who shall forge "any bill of credit or treasury note, to
be issued by virtue of this act." In 1748, North Carolina
authorized the emission of bills of credit, which were made a
tender, and a fund was provided for their redemption, and many
subsequent emissions were authorized with similar provisions.
In 1703, South Carolina first issued bills of credit. They were
to bear an interest of twelve percent. Funds were provided for
their redemption. They do not seem originally to have been made a
tender. Many other acts for the emission of bills of credit were
from time to time passed by the colony, some if not all of which
were made a tender. One of these acts, passed in 1712, was of a
peculiar nature, but as I have not been able to procure a copy of
it, I can only refer to it as it is stated by Hewitt, 1 Hewitt's
Hist. of S.Car. 204, who says
"At this time the legislature thought proper to establish a
public bank, and issued �48,000 in bills of credit, called bank
bills, for answering the exigencies of government and for the
convenience of domestic commerce. This money was to be lent out at
interest on landed or personal security, and according to the
tenor
Page 36 U. S. 337
of the act for issuing the same, it was to be sunk gradually by
�4,000 a year, which sum was ordered to be paid annually by the
borrowers into the hands of the commissioners appointed for that
purpose."
In 1760, Georgia authorized an emission of bills of credit to be
lent out at interest, and mortgages were to be taken by the
commissioners. These bills were made a tender. Subsequent acts for
issuing bills of credit were passed, but it is not necessary to
recite them.
Congress, during the revolutionary war, issued more than
$300,000,000 of bills of credit. The first issue was in 1775, and
the confederated colonies were pledged for their redemption. None
of the bills of credit issued by Congress was made a tender,
probably from the doubt whether Congress possessed the power to
make them a tender. The form of those first issued was as
follows:
"This bill entitles the bearer to receive _____ Spanish milled
dollars, or the value thereof, in gold and silver, according to the
resolutions of Congress."
The last emission was made in 1780, under the guarantee of
Congress, and was in the following form:
"The possessor of this bill shall be paid _____ Spanish milled
dollars, by 31 December 1786, with interest in like money at the
rate of five percent per annum, by the State of _____, according to
an act of the Legislature of the State of _____, the ___ day of
_____ 1780."
The endorsement by Congress was,
"The United States insures the payment of the within bill, and
will draw bills of exchange annually, if demanded, according to a
resolve of Congress of 18 March 1780."
These bills were expressly required by Congress to issue on the
funds of the individual states established for that purpose, and
the faith of the United States was pledged for their payment. They
were made receivable in all public payments.
I will close this unavoidably prolix, though, in my judgment,
very important review of the history of bills of credit in the
colonies and during the Revolution with a reference to the Act of
24 Geo. II, c. 53 (1751), for regulating and restraining the issues
of paper money in New England. That act in its prohibitory clause
expressly forbid the issue of "any paper bills, or bills of credit
of any kind or denomination whatsoever" except for certain purposes
and upon certain specified emergencies, and constantly speaks of
"paper bills, or bills of credit" as equivalent expressions, thus
demonstrating that the true meaning of bills of credit was paper
emitted by the state and intended to pass as currency -- or in
other
Page 36 U. S. 338
words, as paper money. It further requires that the acts
authorizing such issues of "paper bills or bills of credit" shall
provide funds for the payment thereof, and makes provisions for
cases where such "paper bills or bills of credit" had been loaned
out on security, and declares that "no paper currency or bills of
credit" issued under the act shall be a legal tender in payment of
any private debts or contracts whatsoever.
This historical review furnishes a complete answer to every
argument which has been used on the present or on former occasions,
which made the nature of bills of credit depend upon any other
quality than the simple one of being for money, and negotiable, and
designed to pass as paper money or paper currency. When it is said
that it is of the essence of "bills of credit" that they should be
a legal tender, we find that many of them never were a tender. Nay,
that the enormous issues by the Revolutionary Congress were
altogether stripped of this quality. When it is said that to
constitute bills of credit their circulation as money must be
enforced by statutable provisions, we find that in many cases, from
the very nature and character of the acts, no such compulsory
circulation was contemplated. They did not in their form generally
contain any express promise on the part of the state to pay them,
whether funds were provided or not, and the same form was used in
both cases. There was, indeed, in my judgment, in every case, an
implied obligation and promise of the state of pay them whether
funds were provided or not. When it is said that it is not a bill
of credit unless credit is given to the state on its own express
promise to pay, and not when the paper is only declared to be
receivable in payment of debts due to the state, that there must be
a promise to pay, and not merely a promise to receive, we find that
the very first issues of bills of credit were of this very
character, and contained no promise, and yet the colonial
legislatures appropriated to them the very name as their true
designation. When it is said that a bill which is payable on demand
is not a bill of credit nor a bill which contains no promise to pay
at a future day, we find that on their face nearly all the colonial
issues were without any limitation of time and were receivable in
payments to the state immediately upon their presentation, though
funds for their redemption were not provided except
in
futuro. The issues by Congress were, with a single exception,
without any limitation of time as to payment, and were to be paid
in gold or silver.
Page 36 U. S. 339
The emission of 1780, already stated, was to be paid at a future
time. But Congress made no express promise to pay any of their
other issues; they simply pledged the colonies for their
redemption, and yet Congress called them bills of credit. When it
is said that bills of credit cannot bear interest, for that
disqualifies them for a paper currency, we find that in point of
fact such bills were issued both by the colonies and by the
Revolutionary Congress, and indeed since by the United States in
the form of treasury notes. When it is said that bills of credit
are such only as are issued upon the mere credit of the state, and
not bottomed upon any real or substantial fund for their
redemption, we find that in most cases the colonial bills of credit
were issued upon such funds, provided by the very terms of the
acts. The Statute of 24 Geo. II, c. 53, also in terms applies the
very phrase not only to bills resting on the mere credit of the
state, but also to bills having suitable funds provided for their
redemption. It goes further and prohibits the colonies, in future,
from issuing such bills without providing suitable funds. In short,
the history of bills of credit in the colonies conclusively
establishes that none of these ingenious suggestions and
distinctions and definitions were or could have been in the minds
of the framers of the Constitution. They acted upon known facts,
and not theories, and meant, by prohibiting the states from
emitting bills of credit, to prohibit an issue, in any form, to
pass as paper currency or paper money, whose basis was the credit,
or funds, or debts, or promises of the states. They looked to the
mischief intended to be guarded against in the future by the light
and experience of the past. They knew that the paper money issued
by the states had constantly depreciated, whether funds for its
redemption were provided or not whether there was a promise to pay
or a promise to receive; whether they were payable with or without
interest; whether they were nominally payable
in praesenti
or in futuro. They knew that whatever paper currency is not
directly and immediately, at the mere will of the holder,
redeemable in gold and silver is and forever must be liable to
constant depreciation.
We know the same facts as well as they. We know, that the
treasury notes of the United States, during the late war,
depreciated fifty percent; that during the period of the suspension
of specie payments by our private banks at the same period, though
with capitals supposed to be ample, their bank bills sunk from
fifteen to twenty-five percent below their nominal value. The bills
of this very Bank of the Commonwealth
Page 36 U. S. 340
of Kentucky, of whose solid and extensive capital we have heard
so much, were admitted at the argument to have sunk fifty percent
from their national value. The framers of the Constitution could
not without irreverence (not to use a stronger phrase) be presumed
to prohibit names and not things; to aim a blow at the artificial
forms in which paper currency might be clothed and leave the
substance of the mischief untouched and unredressed; to leave the
states at liberty to issue a flood of paper money with which to
inundate the community upon their own sole credit, funds, and
responsibility, so always that they did not use certain prescribed
forms of expression. If the states were to possess these attributes
in ample sovereignty, it was worse than useless to place such a
prohibition in the front of the Constitution. It was holding out a
solemn delusion and mockery to the people by keeping the faith of
the Constitution to the ear and breaking it to the sense. My
judgment is that any such interpretation of the Constitution would
be as unsound as it would be mischievous. The interpretation for
which I contend is precisely that which was maintained by this
Court in the case of
Craig v. State of Missouri, where all
these ingenious suggestions, distinctions, and definitions to which
I have alluded were directly overruled. I might indeed have spared
myself some labor in these researches if I had not considered that
case as in some measure assailed in the present decision -- if,
indeed, it is not shaken to its very foundation.
The next question in the case is whether the act of Kentucky
establishing this bank is unconstitutional by authorizing an
emission of bills of credit in the shape of the bank bills or notes
of that bank within the prohibition of the Constitution. The
argument is that the state cannot do that indirectly which it
cannot, consistently with the Constitution, do directly, and that
the bank corporation is here the sole and exclusive instrument of
the state, managing its exclusive funds, for its exclusive benefit,
and under its exclusive management. Even this obvious principle,
that the state cannot be permitted indirectly to do what it is
directly prohibited to do by the Constitution, has been denied on
the present occasion -- upon what grounds of reasoning I profess
myself incapable of comprehending. That a state may rightfully
evade the prohibitions of the Constitution by acting through the
instrumentality of agents in the evasion, instead of acting in its
own direct name, and thus escape from all its constitutional
obligations is a doctrine to which I can never subscribe and which,
for the honor of the country, for the good faith and integrity
Page 36 U. S. 341
of the states, for the cause of sound morals and of political
and civil liberty, I hope may never be established. I find no
warrant for any such doctrine in the case of
Craig v. State of
Missouri, either in the opinion of the Court or in that of the
dissenting judges.
The other part of the argument, from which the conclusion is
drawn that the act is unconstitutional, requires a more extended
consideration. But before proceeding to that, it is proper to
notice the statement at the bar that the point of the
constitutionality of this act has been already decided by this
Court. If so, I bow to its authority. I am not disposed to shake,
even if I could, the solemn decisions of this Court upon any great
principles of law, and
a fortiori not that which respects
the interpretation of the Constitution itself. But I shall require
proof before I yield my assent that the point has been so decided.
The case relied on is
Bank of Commonwealth of
Kentucky v. Wister, 2 Pet. 318. In my judgment,
that case justifies no such conclusion. It was not even made or
suggested in the argument; it was not touched by the judgment of
the Court.
What was that case? Wister brought a suit in the Circuit Court
of the United States in Kentucky against the bank, to recover a sum
deposited in the bank. The bank filed a plea to the jurisdiction of
the court, alleging that the bank was a body corporate established
by an act of the Legislature of Kentucky, and
"that the whole capital stock of the said corporation is
exclusively and solely the property of the state, and that the
state, in her political sovereign capacity as a state, is the sole
and exclusive and only member of the corporation."
The Court decided, that the suit was rightfully brought against
the corporation, and was within the jurisdiction of the circuit
court. Why? Because the Court was of opinion that though the
corporation was created by the state, the state was not even a
member of the corporation.
"The president and directors alone [said MR. JUSTICE JOHNSON in
delivering the opinion of the Court] constitute the body corporate,
the metaphysical person liable to suit. Hence, by the laws of the
state itself, it is excluded from the character of a party, in the
sense of the law, when speaking of a body corporate."
And in confirmation of this view of the matter, a passage was
cited from the opinion in
United States Bank v.
Planters' Bank of Georgia, 9 Wheat. 904. The
learned judge then said, and this is the comment on which so much
reliance has been placed,
"To which it may be added that if a state did exercise any other
power in or over a bank or impart to it its sovereign attributes,
it would be hardly
Page 36 U. S. 342
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."
Now this language imports, at most, only that a case might have
existed which would have been a violation of the Constitution but
which was admitted not to be the case before the Court -- that is,
where the state imparted its sovereign attributes to the
corporation. The Court did not say that the Constitution of the
United States had not been violated by the issue of the bank bills,
for that question was never presented for its consideration, but
only said that the state did not intend to violate the Constitution
and did not intend to communicate its sovereign attributes. Neither
the facts of the case nor the declaration nor the plea to the
jurisdiction in any manner raised or could raise any such question.
The corporation, as such, was capable of suing and being sued by
the laws of Kentucky. However proper, then, the language might have
been as an admonition of the danger to the bank if its ground of
objection to the jurisdiction was maintainable, it did not commit
the Court in the slightest manner to any definite opinion as to the
constitutionality of its issues of bank paper.
Let us now proceed to the consideration of the charter of the
bank, and ascertain whether it is a mere agent of the state, and
what are the powers and authorities which are given to it as to the
issues of bank bills. The act of 1820 declares, in the first
section, that "A bank shall be and thereby is established in the
name and on behalf of the Commonwealth of Kentucky," under the
direction of a president and twelve directors, to be chosen by the
legislature, from time to time, by joint ballot of both houses. The
second section declares the president and directors a corporation
by the corporate name, &c., conferring on the corporation the
usual powers. The third section declares that the whole capital
stock of the bank shall be exclusively the property of the
Commonwealth of Kentucky, and no individual or corporation shall be
permitted to own or pay for any part of the capital of the bank.
The fourth section declares that the president and directors shall
have power to issue notes, not under the denomination of one dollar
nor over one hundred dollars, signed by the president and
countersigned by the cashier. These bills or notes are, by
subsequent sections, authorized to be made payable to order or to
bearer and to be negotiable accordingly, and they are declared to
be receivable at the treasury and by public officers in all
payments of taxes and other debts to the state, and for county
levies, and are to
Page 36 U. S. 343
be payable and redeemable in gold and silver. The capital stock
of the bank is to consist of $2,000,000, to be raised and paid as
follows: all moneys paid into the treasury for the purchase of
vacant lands of the state, and so much of capital stock owned by
the state in the Bank of Kentucky (which it seems had then stopped
payment) as may belong to the state, after the affairs of that bank
were settled up, with the profits thereof not heretofore pledged or
appropriated by law. And the treasurer of the state was required
from time to time, as he received moneys on any of these accounts,
to pay them to the bank. By other sections, the bank was authorized
to discount bills of exchange and notes and to receive deposits and
to loan money on mortgage on real estate, distributing their loans
in certain proportions among the citizens of the different
counties, and the interest arising from all loans and discounts,
after payment of expenses, was to be considered as part of the
annual revenue of the state and subject to the disposition of the
legislature. The notes of the Bank of Kentucky were also receivable
in payment of all debts due to the Commonwealth Bank.
Such are the principal provisions of the charter. It is clear,
therefore, that the bank was a mere artificial body or corporation,
created for the sole benefit of the state, and in which no other
person had or could have any share or interest. The president and
directors were the mere agents of the state, appointed and
removable at its pleasure. The whole capital stock to be provided
consisted of the proceeds of the public lands and other property of
the state, which should be paid over to the bank from time to time
by the treasurer of the state. The public lands themselves and the
other funds were not originally conveyed to or vested in the
corporation, but were left in the free possession of the state
itself. The president and directors had no interest whatsoever in
the institution, but only had the management of it, subject to the
control of the state. They were not personally liable for
nonpayment of any of the bills or notes or debts of the bank, but
only for their personal misconduct in any excess of issues or debts
beyond double the amount of the capital stock. The state was
entitled to all the profits. And though the bills and notes of the
bank were declared payable in gold and silver, it seems that no
human being was made directly responsible for the payment -- not
the president and directors in their private capacity, for they
contracted no personal responsibility, and not the state (as we
have been told at the argument), because the state had not, in
its
Page 36 U. S. 344
own name, promised to pay them -- nay, it is said that these
bills and notes were not even issued on the credit of the
state.
Another thing is quite clear, and that is that as the bank
existed for the sole benefit of the state, and all its officers
were appointed by the state and removable at its pleasure, the
state possessed an unlimited power over the corporation. The whole
funds possessed by it, whether they were capital stock, or debts,
or securities, or real estate, or bank notes, belonged in fact to
the state. The state was the equitable owner, and might at any
time, without any violation of the rights of the corporation, which
was its own exclusive agent, resume and appropriate these funds to
itself, and might at its own pleasure repeal and annihilate the
charter, and by its sovereign legislative act become,
ipso
facto, the legal owner, as it was in fact the equitable owner
of the property and franchise. I know of no principle of law or of
the Constitution which would have been violated by such a course,
for it would have been only conferring upon the equitable owner the
legal title to his own estate and property, and resuming, on the
part of the principal, the funds and the business confided to his
agents.
The bills or notes of the bank were to circulate as currency.
That is so palpable on the face of the charter as not to have been
even questioned at the argument. They were, then, stripped of mere
technical forms, the bills of the state, issued by the agent of the
state, on the exclusive funds of the state, for the benefit and
profit of the state, to circulate as currency within the state, and
without any other responsibility than that of the state. In what
respect then do they differ from bills of credit of the state? I
can perceive none.
In the first place it is said that they were not issued on the
credit of the state, and that the state is not responsible,
directly or indirectly, for their payment. I confess, until I heard
the argument at the bar, I had not supposed that any such
proposition would be maintained or could be maintainable. If these
bills were not issued on the credit of the state, on whose credit
were they issued? It is said, that they were issued on the credit
of the corporation; and what is the corporation? A mere
metaphysical being, the creature and agent of the state, having no
personal existence and incapable
per se of any personal
responsibility. The president and directors constituted that
corporation and were its sole members, and they were not personally
liable. The official legal entity, called the president and
directors, might be sued. But what then? The capital stock was
Page 36 U. S. 345
not vested in them so as to be liable to be taken in execution
in a suit against them. Could a creditor of the corporation seize
or sell the public land, on his execution against them? No one
pretends that. Suppose the state should choose, as it well might,
to assume the whole agency and funds of the corporation to itself;
could the creditor have any redress against the state? It is
admitted, that he could not have any redress, because the state is
not suable.
It is said that the bills are not taken on the credit of the
state because the state has not promised, in terms, to pay them. If
it had so promised, the state not being suable, the holder could
here have no redress against the state. But I insist that in equity
and in justice, the bills must be treated as the bills of the
state, and that if the state were suable, a bill in equity would
lie against the state, as the real debtor; as the real principal.
And I say this upon principles of eternal justice, and upon
principles as old as the foundations of the common law itself. How
can it be truly said that these bills were not taken on the credit
of the state? Were they not to be paid out of the proceeds of the
public lands and other property of the state? Were they not
receivable in payment of debts to the state, for the very reason
that they were the issues of the state, for its own benefit? And
was not credit given to the state upon this very ground? It has
been said at the argument that funds were provided for the payment
of the bills by the provisions of the charter, and therefore no
credit to the state ultra these funds can be inferred. But surely
the case of the old colonial bills of credit answers that position.
They had funds assigned for their redemption; they in many cases
had mortgages upon loans authorized to be made, as they are in the
present charter; and yet the legislature called them bills of
credit. The colonists did not promise to pay them, and yet they
deemed them their bills of credit. Why? Because, in truth and in
fact, and not upon any metaphysical subtleties and fictions, they
were issued upon the general credit of the state, and if the funds
pledged fell short of the payment, the state was bound to redeem
them. The argument on this head assumes the very matter in
controversy. It assumes that the state never, directly or
ultimately, held itself out as responsible for the payment of the
bills, but that the holder trusted, and trusted exclusively, to the
funds provided for him in the charter. Now I deny this inference
altogether. Because a state assigns funds for the payment of its
debts or bills, does it follow that the holder trusts exclusively
to those funds?
When a creditor takes a pledge,
Page 36 U. S. 346
or has a security for payment of his debt, does he thereby
exonerate the debtor from all personal responsibility? If the agent
is authorized to pledge certain funds of his principal for the
payment of the debt, does that exonerate the principal from all
personal liability? No such doctrine has ever yet been established,
to my knowledge, in any code of law, and least of all in the common
law. On the contrary, it is at the common law held incumbent on
those who insist that there has been any exclusive credit given to
a fund, to establish the fact by clear and irresistible proofs.
Suppose, in this very case, the corporation had circulated, as
it had a right to do, its own bank bills to the amount of
$5,000,000, and the funds assigned by the state, and the funds in
the hands of the corporation had been wholly inadequate to redeem
them; would not the state have been bound in reason, in justice and
in equity, to pay the deficiency? Would a court of equity for a
moment tolerate any private person to escape under such
circumstances from his own responsibility for the acts and conduct
of his agent, fully authorized by him? Would it not say
qui
sentit commodum, sentire debet et onus? Would it be consistent
with good faith for a state to proclaim that it was not bound by
the solemn obligations of its own agents, acting officially for its
own exclusive benefit and interest and upon its own funds, to the
payment of debts thus justly and honestly contracted? I put these
questions because it seems to me that they can be answered only one
way, and that is by affirming the positive responsibility of the
state
in foro justitiae. The citizens must be presumed to
trust, in all such cases, to the general credit and good faith of
the state, and not merely to the fund contemplated or provided for
their redemption. So in similar cases, the colonies understood
their own obligations; so the Continental Congress, and so the
United States have constantly understood their own obligations.
Although a fund may have been provided for payment of their bills
of credit; although those bills of credit contained no direct
promise of the state; although they purported, in form, to be the
acts of trustees, or commissioners, or committees acting under the
authority of the state, yet they well understood that the general
credit of the state for the redemption of the bills was necessarily
implied, and that without that silent necessary pledge, the bills
could not and would not have circulated at all, except upon
compulsion, and by irresistible power of the government.
It is obvious that whether a state be suable or not cannot
constitute
Page 36 U. S. 347
a test whether an instrument of currency issued by or on behalf
of a state be a bill of credit or not. It may be a bill of credit
although the state is not suable thereon, as was in fact the case
with all the ante-revolutionary bills of credit, for the colonies
never were suable. On the other hand, the state may expressly allow
itself to be sued on an instrument issued on its behalf, and yet in
may not be a bill of credit. As for example, a state may authorize
suits to be brought for debts due by itself, and if it should
issue, through its officers, a certificate of loan for money
borrowed, if it were not intended to pass as currency, it would not
be a bill of credit.
But it is said that here the state was not only not suable on
these bank bills, but that the corporation itself was expressly
suable, under the charter, and the promise to pay was made by the
corporation, and the promise being made by the corporation, it in
effect excludes any obligation on the part of the state. There is
no magic in words. What was this corporation in fact? A mere legal
entity; a mere agent of the state, existing for the state, with
funds belonging to the state, and dealing wholly upon the credit
which these bills derived from the state. The persons who were
president and directors for the time being, were not (as I have
already said) personally liable for the payment of those bills. The
metaphysical personage only was liable, and the promise, if it is
not to be treated as a mere delusion and phantom, was the promise
of the state itself, through that personage.
Suppose the state had authorized its treasurer, in his official
capacity and without any personal liability, to issue these very
bank bills, saying, "I, A. B., as treasurer, promise to pay,",
&c., and the whole proceeds of these bills were to be for the
benefit of the state, and they were to be paid out of the funds of
the state, in the treasury; could there be a doubt that the state
would, in truth, be the real debtor? That they would be issued on
its credit? That the state would, in conscience, in common honesty,
in justice be responsible for their payment? If this would be true,
in such a case I should be glad to know in what respect that case
substantially differs from the one before the Court. It is
precisely the very case, and in the same predicament, as the bills
of credit issued by Maryland in 1733 and 1769. There, the
commissioners were created a corporation, and were to issue the
bills, and were authorized to sue and be sued, and no one ever
dreamed, and least of all, the state itself, that they were not the
bills of credit of the state. If a state can, by so simple a device
as the creation of a corporation as its own
Page 36 U. S. 348
agent, emit paper currency on its own funds, and thus escape the
solemn prohibitions of the Constitution, the prohibition is a dead
letter. It is worse than a mockery. If we mean to give the
Constitution any rational interpretation on this subject, we must
look behind forms and examine things. We must ascertain for whose
benefit, on whose credit, with whose funds, for what purposes, of
currency or otherwise, the instrument is created and the agency
established. Whether it be the issue of a treasurer of a state or
of a corporation of a state or of any other official personage must
be wholly immaterial. The real question must be in all cases
whether in substance it is the paper currency of the state.
But it has been argued that if this bank be unconstitutional,
all state banks founded on private capital are unconstitutional.
That proposition I utterly deny. It is not a legitimate conclusion
from any just reasoning applicable to the present case. The
Constitution does not prohibit the emission of all bills of credit,
but only the emission of bills of credit by a state, and when I say
by a state, I mean by or in behalf of a state, in whatever form
issued. It does not prohibit private persons or private
partnerships or private corporations (strictly so called) from
issuing bills of credit. No evils, or at least no permanent evils,
have ever flowed from such a source. The history of the country had
furnished no examples of that sort -- of a durable or widely
extended public mischief. And if any should exist, it would be
within the competency of the state legislatures to furnish an
adequate remedy against such issues by private persons. In point of
fact, prohibitions now exist in many states against private banking
and against the issue of private bank paper with the intent that it
shall pass at currency. The mischief was not there; it had never
been felt in that direction. It was the issue of bills of credit as
a currency, authorized by the state on its own funds and for its
own purposes, which constituted the real evil to be provided
against. The history of such a currency constituted the darkest
pages in the American annals, and had been written in the ruin of
thousands who had staked their property upon the public faith,
always freely given and but too often grossly violated. The great
inquiry at the adoption of the Constitution was not whether private
banks, corporate or incorporate, should exist, not whether they
should be permitted to issue a paper currency or not, but whether
the state should issue it on its own account. The anxious inquiry
then was
quis custodiet custodes? The answer is found in
the
Page 36 U. S. 349
Constitution. But it has in my judgment (though I am sure my
brethren think otherwise) become a mere name.
Stat nominis
umbra.
The states may create banks as well as other corporations upon
private capital, and so far as this prohibition is concerned, may
rightfully authorize them to issue bank bills or notes as currency,
subject always to the control of Congress, whose powers extend to
the entire regulation of the currency of the country. When banks
are created upon private capital, they stand upon that capital, and
their credit is limited to the personal or corporate responsibility
of the stockholders, as provided for in the charter. If the
corporate stock, and that only, by the charter is made liable for
the debts of the bank, and that capital stock is paid in, every
holder of its bills must be presumed to trust exclusively to the
fund thus provided, and the general credit of the corporation. And
in such a case a state owning a portion of the funds, and having
paid in its share of the capital stock, is treated like every other
stockholder, and is understood to incur no public responsibility
whatsoever. It descends to the character of a mere corporator, and
does not act in the character of a sovereign. That was the doctrine
of this Court in
United States Bank v.
Planters' Bank of Georgia, 9 Wheat. 904.
"It is [said the Court on that occasion], 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."
In the present case, the legislature expressly prohibited any
partnership, or participation with other persons in this bank. It
set it up exclusively upon the capital of the state as the
exclusive property of the state, and subject to the exclusive
management of the state through its exclusive agents. It acted,
therefore, in its sovereign character and capacity, and could not,
even for an instant, even in intendment of law, divest itself in
the transactions of the bank of that character and capacity.
I have not thought it necessary, in the views which I have taken
of this case, to resort to the state of the pleadings, though they
fortify every portion of the reasoning which I have endeavored to
maintain. One of the averments in the first plea is that the
president and directors of the bank were illegally authorized,
"for and on behalf of the commonwealth, and upon her credit, to
make bills of credit, to emit bills or notes, to an amount not
exceeding _____ millions
Page 36 U. S. 350
of dollars, &c., and when so made, &c.; to emit, issue
and circulate through the community, for its ordinary purposes, as
money."
The plea goes on to allege that the president and directors had,
before the date of the note sued on,
"for and on behalf of the Commonwealth of Kentucky and on her
credit, made various bills of credit,
viz., notes of
various denominations, in amount from one dollar to one hundred
dollars, &c., promising therein and thereby to pay the person
on each note mentioned or bearer, on demand, the amount therein
mentioned in money, and were transferable by delivery."
The demurrer admits the truth of these averments, and upon
technical principles of pleading I do not see how their
conclusiveness in the present question can be avoided. But I do not
rely on the state of the pleadings. I found my judgment upon the
principles presented by the admitted state of the facts that these
bank bills are bills of credit within the true intent and meaning
of the Constitution; that they were issued by and in behalf of the
state upon the credit of the state by its authorized agents, and
that the issue is a violation of the Constitution.
I am conscious that I have occupied a great deal of time in the
discussion of this grave question -- a question in my humble
judgment second to none which was ever presented to this Court in
its intrinsic importance. I have done so because I am of opinion
(as I have already intimated) that upon constitutional questions,
the public have a right to know the opinion of every judge who
dissents from the opinion of the Court, and the reasons of his
dissent. I have another and strong motive -- my profound reverence
and affection for the dead. Mr. Chief Justice Marshall is not here
to speak for himself, and knowing full well the grounds of his
opinion, in which I concurred, that this act is unconstitutional, I
have felt an earnest desire to vindicate his memory from the
imputation of rashness or want of deep reflection. Had he been
living, he would have spoken in the joint names of both of us. I am
sensible that I have not done that justice to his opinion which his
own great mind and exalted talents would have done. But with all
the imperfections of my own efforts, I hope that I have shown that
there were solid grounds on which to rest his exposition of the
Constitution.
His saltem accumulem donis, et fungar inani
munere.
MR. JUSTICE BALDWIN, concurring.
It has so happened that I am the only member of the Court who
composed one of the majority in the case of
Craig v.
Missouri, and now concurs with the majority in this case in
affirming the judgment of the Court of Appeals; in this respect, my
situation is peculiar, as well as in another particular. After an
argument in the former case, two of the judges died; of the
remaining five, three were of opinion, that the paper issued by the
State of Missouri were bills of credit, and two of a contrary
opinion; on the argument in 1830, there were two judges present who
had not before sat in the cause and on whose opinion the result
depended. If they agreed with the minority, the judgment was, of
course, confirmed; if they divided, it was reversed, so that the
one who joined the three made the judgment of the Court. This was
my case; agreeing in opinion with the three who were for reversing,
I concurred in the judgment and general course of the opinion and
reasoning of the Court, though my opinion was formed on grounds
somewhat different. It was my intention to have assigned my reasons
in a separate opinion, but as it was the first term of my sitting
in the Court, the business was new and pressing, and want of time
prevented it; but at my suggestion, a clause was added to the
opinion prepared by THE CHIEF JUSTICE, which would enable me
afterwards to show the reasons of my judgment, should a similar
question occur. In this case too I fully concur in the judgment
rendered, yet not in the course of reasoning or the authority on
which the opinion of the Court is based, so that my position is as
peculiar in this as it was in
Craig v. Missouri, and in
one respect is in marked contrast with that of the other three
judges who sat in that case. The judge who was in the majority
then, and now dissents, was and is of opinion that the paper
emitted in both cases came within the restriction of the
Constitution as bills of credit; two, who then dissented and are
now in the majority, were and are of opinion that the papers in
neither case are bills of credit, so that no imputation of
inconsistency can rest upon them. With me it is different; my
judgment has led me to different results in the two cases, and
therefore it cannot be deemed improper for me to explain the
reasons why, though forming one of the majority in both cases, I
stand in some measure alone. A judge who now dissents may find
reasons therefor in the opinion delivered in
Craig v.
Missouri; those who now concur may rest on their dissenting
opinions in that case, but the same course of reasoning and
deduction which shows the consistency of others may lead to a very
contrary conclusion as to mine. These considerations must be my
apology for the course now taken.
In
Craig v. Missouri, the subjects of controversy were
certificates signed and issued by the auditor and treasurer
pursuant to a law of that state, which were on their face
receivable at the Treasury for taxes and debts due the state,
bearing interest at the rate of two percent per annum. One-tenth
the amount of said certificates were directed to be withdrawn
annually from circulation; they were made a legal tender for all
salaries and fees of office, in payment for salt to the lessee of
the public salt works, at a price to be stipulated by law, and for
all taxes due the state, or to any county or town therein. They
were to be loaned on personal security, by joint and several bonds,
bearing interest; the proceeds of the salt springs, the interest
accruing on the bonds, all estates purchased under the law, all
debts due or to become due to the state, were pledged and
constituted a fund for their redemption, and the faith of the state
was also pledged for the same purpose. It seemed to a majority of
the Court to be impossible to disguise the character of this paper
or to change its nature or effect by substituting the word
"certificate" on its face for the word "bill;" the change was only
in name, the thing was the same. Connected with the law under which
the paper was issued, it was a bill, note or obligation, emitted by
the state with the avowed purpose of circulating as money, for all
the purposes referred to in the law; the funds and faith of the
state were pledged for its payment, with interest from its date,
and it was made a legal tender in payment of certain debts to
individuals, and of taxes to towns and counties. No member of the
Court was more clearly of opinion that these self-called
certificates were bills of credit, to all intents and purposes, and
that that part of the Constitution which declared that no state
should emit them would be a dead letter, if they were not held to
be within it, than I was. On this subject, my opinion went to the
full extent of that which was delivered by THE CHIEF JUSTICE, and
has been fully confirmed by subsequent reflection.
There was between the concurring judges and myself no other
difference of opinion or in the reasons of our respective judgments
than in the definition of a "bill of credit," which is thus given
in the opinion (
29 U. S. 4 Pet.
432):
"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 the terms have been always
understood. 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 purpose of common circulation."
To this broad definition I could not assent; in my opinion, no
paper medium could be deemed a bill of credit emitted by a state
unless it contained on its face, or the law under which it was
emitted gave, a pledge of its faith or credit for its redemption;
nor then unless it was made a legal tender in the payment of some
debts to individuals. Though the opinion is silent as to the pledge
of the faith of the state being a requisite to constitute a bill of
credit, and negatives the necessity of the paper's being made a
legal tender, yet these matters entered into the character of the
paper and were a part of the case before the Court, as appears in
the opinion (4 Pet.
29 U. S.
432-433). The first sentence in the latter page shows
the ground on which my opinion turned; the paper was a tender, and
the faith of the state was pledged. This last clause was added to
the opinion at my request: "It also pledges the faith and funds of
the state for their redemption."
Thus, there was perfect union of opinion between the judges who
composed the majority on the whole case presented for judgment, as
well in the result as the course of reasoning which led to it; the
only variance was as to the requisites of a bill of credit. Three
judges holding that "any paper medium, emitted by a state
government for the purpose of common circulation" filled the
constitutional definition of a bill of credit, while one judge held
that there were two additional requisites -- that the emission
should be on the credit of the state and the paper declared a legal
tender. But as the certificates or bills, taken in connection with
the law directing their emission, contained all the requisites to
constitute bills of credit, on the most limited construction which
could be given to the Constitution, there could be no other
difference of opinion than in the reasons for judgment. Had the
opinion and reasoning been applied to the whole case, to paper not
only emitted by a state for common circulation, but emitted on its
faith and credit expressly pledged, and made a tender, the reasons
would have been in perfect accordance with the views of the
majority and their judgment. But though this was requested by me,
the opinion was confined to only a part of the case on the record,
taking no notice, in the reasoning, of the pledge of the faith of
the state, in direct terms, or giving to it any declared effect in
fixing the character of the paper. If this pledge had not appeared
on the certificate or in the law my opinion would have been for
affirming the judgment of the state court, and as three judges held
that even with this pledge, the certificates were not bills of
credit, it is evident that the judgment of this Court depended on
this part of the law.
With this explanation, the case of
Craig v. Missouri,
so far from being an authority in favor of the proposition that it
is not necessary to constitute a bill of credit that the faith of
the state should be pledged for its payment, it must be taken as
negativing it by the opinion of four judges. On the other hand,
four judges were of opinion that it was not necessary that the
certificates should have been made a legal tender for any purpose,
in order to make them bills of credit. Thus understood, I adhere to
the decision of the Court in that case, as it was judicially before
it on the record, and yet retaining the same opinion now which I
then expressed to the judges, I cannot feel myself precluded from
acting on it in this case, because the opinion of the Court, as
delivered, did not take the same course as mine in leading the
majority to the conclusion they formed. To now abandon the
deliberate result of my best judgment, formed and expressed in that
case, which has been confirmed on the successive arguments in this,
would look more like yielding to a train of reasoning on a part of
a case, than respecting the judgment of the court on the whole
record. It would also place me in a position of inextricable
difficulty to now surrender my judgment to the same reasoning and
illustrations, which failed to convince me seven years since, the
more especially when the intervening investigation which it has
been my duty to make on this subject has led my mind to the
conclusion it first formed.
With these remarks the profession will understand the reason why
I concurred in the judgment of the Court in this and the former
case; in that, the faith of the State of Missouri was pledged for
the payment of the paper which she emitted, and made a legal
tender; in this, Kentucky has not pledged her faith to redeem the
notes of the bank, nor made them a legal tender in payment of a
debt. I also concur with the opinion of the Court in this case that
these notes cannot be deemed to have been emitted by the state, and
have no desire to add any views of my own on this part of the case,
my object being to defend my own peculiar position as to the
definition of a bill of credit, according to the true
interpretation of the first sentence of the tenth section of the
first article of the Constitution. It is in these words:
"No state shall enter into any treaty of alliance or
confederation; grant letters of marque and reprisal; coin money;
emit bills of credit; make anything but gold and silver coin a
tender in payment of debts; pass any bill of attainder, or
ex
post facto law, or law impairing the obligation of contracts,
or grant any title of nobility."
In analyzing this sentence, it is apparent that these
restrictions on the states relate to three distinct subjects.
1. To those on which the Constitution had granted express powers
to the federal government -- to make treaties, grant letters of
marque and reprisal, coin money.
2. To those on which the Constitution made no grant of any power
by either express words, any necessary implication, or any
reasonable interpretation -- to emit bills of credit, make anything
but gold and silver coin a legal tender in payment of debts, or
pass any law impairing the obligation of contracts.
3. To those subjects on which the 9th section of the first
article had imposed the same restriction on the United States and
Congress, as the tenth section did on the separate states -- to
pass any bill of attainder,
ex post facto law, or grant
any title of nobility.
On the last class of cases any comment is useless; there has
never been any difference of opinion as to the meaning of a bill of
attainder or a title of nobility, and though there have been doubts
as to the meaning of an
ex post facto law, they have long
since been settled, so that we can safely assume that as to those
parts of the ninth and tenth sections of the first article, the
meaning of the Constitution is as plain and definite as its
language.
By referring the terms to a standard of admitted authority from
which they have been adopted in the Constitution, they become as
intelligible as if their settled definition had been added by the
convention which framed the instrument. What the standard of
definition shall be depends on the term used; if it is one of
common use, in the ordinary transactions of society, and so
applied, it shall be taken in its common ordinary acceptation by
those who use the term; if it relates to any particular art,
science or occupation, its meaning is its common understood sense,
according to the usage and its acceptation among men so employed.
If it is a term appropriate to the common or statute law or the law
of nations, it must be taken as intended to be applied according to
its established definition as a known legal term. Hence the term
"bill of attainder" means the conviction of a person of a crime by
legislative power; an "
ex post facto law" is one which
makes an act criminal which when committed was no offense; a "title
of nobility" is a term which defines itself. Thus, the terms used
to as the third class of cases, have been considered as defined by
a reference to their understanding in a legal sense.
In passing to the first class of cases, it will be found that
the terms "treaty, alliance, confederation," and "letters of marque
and reprisal," when referred to the law of nations, are perfectly
defined; so is the term "coin money" when referred to the words in
their common acceptation or their legal sense. There is no
ambiguity in the words; taken separately or in connection, as a
term or phrase, they require no other interpretation than is to be
found in the known and universally received standard by which they
are defined, nor can they be taken in any other sense or by any
other reference unless there appears from the context or other
parts of the same instrument an obvious intention to use and apply
them differently from their ordinary or legal acceptation. These
are the established unvarying rules of interpretation which assign
a meaning to language, that requires explanation not contained in
the words themselves; the want of certainty is cured by a reference
to that which is certain, and when any word, term, or phrase has
acquired a definite meaning, its use, without explanatory words, is
always deemed to be so intended. With the universal consent of
every statesman and jurist, the terms used in these two classes of
cases, in the tenth section, with the exception of an
ex post
facto law, have been received and taken according to their
known definition by municipal or national law and common
understanding, and there is now the same common assent to the
meaning of an
ex post facto law as settled by the repeated
adjudications of this Court.
The same rules have also been applied to all other parts of the
Constitution, in which terms of known import are used, as the writ
of habeas corpus, trial by jury, &c. No man ever doubted that
they were used according to their definition by the common law or
that the words "taxes, commerce, money, coin," were used and must
be taken in their ordinary meaning and acceptation. It is indeed a
universal rule, applied to all laws, supreme or subordinate, to all
instruments of writing, all grants or reservations of power,
property, franchise or immunity, and all contracts that the words
and language used shall be interpreted by such reference,
accordingly as the subject matter is made certain by their legal or
commonly received definition or acceptation. There is another rule
of interpretation, equally universal, that the whole instrument
shall be examined to ascertain the meaning of any particular part
or sentence so as to avoid any discrepancy, and the same standard
be applied to all its terms, and every word which can bear upon its
intention, referring each to the appropriate subject to which it
relates, the standard is furnished for the interpretation. Thus,
the word "bill" has a meaning depending on the subject matter to
which it is applied; a "bill of credit" refers to the payment of
money; a "bill of attainder" refers to the conviction of an offense
by a legislature; so of the word "law," an "
ex post facto
law" refers to one which inflicts a punishment; a "law impairing
the obligation of a contract" refers to money or property due or
owned in virtue of a contract.
Taking it, then, as an undoubted proposition that the same rules
of interpretation must be applied to all parts of the tenth
section, taken in connection with the whole Constitution as one
instrument of writing, I shall endeavor to ascertain what is the
meaning of the terms used in reference to the second class of
cases. The first term is "no state shall emit bills of credit."
That by "state" is meant a state of this Union there can be no
doubt. Next comes the word "emit," which, referring to bills of
credit, means an emission of paper; a putting off, putting out,
putting forth, or issuing bills by a state for the payment of money
at some time by some person, and on credit. The time of payment,
the fund out of which it is payable, the faith or credit reposed in
or pledged by those who emit it depends on the law under which the
state made or authorized the emission. Then comes the "term bills
of credit," without any reference of explanatory words; but as it
necessarily relates to the payment of money, the word bill must be
taken as a paper containing some evidence that a certain sum is due
to the person to whom it was emitted or issued or by whom it was
held. It is a word of legal import, as well defined as any in the
English language, according to the subject matter to which it is
applied. "A bill is a common engagement for money given by one man
to another; when with a penalty, it is a penal bill, when without
one, it is a single bill" (Toml.L.D. 230);
"and it is all one with an obligation, saving that it is
commonly called a bill when in English and an obligation when in
Latin. But now by a bill we ordinarily understand a single bond,
without a condition, by an obligation, a bond with a penalty and
condition (Cow.L.I. tit. Bill; 5 Day's Com.Dig. 191, Obl. A); or
according to the definition of Ch. Baron Comyn, 'a single bill is
when a man is bound to another by bill or note, without a penalty.'
(Ibid. 194, C)."
A "bill of credit" is also a well known term of the law; in its
mercantile sense, it means a letter addressed by one merchant to
another, to give credit to the bearer for money or goods, such
letter being in the nature of a bill of exchange, is called a
"bill," and so treated. Beawes, L.M. 483; S.P. 5 Day's Com.Dig.
131, Merchant, F. 3. When the word "bill" refers to paper emitted
by a bank, there will be found a most marked adherence to the
distinction between an obligation and a bill, as appears in the
clause of the original charter of the Bank of England, read by
plaintiffs' counsel,
"That all and every bill or bills obligatory and of credit,
under the seal of the said corporation, made or given to any person
or persons, shall and may, by endorsement thereon, &c., be
assigned,"
&c., 5 W. & M. c. 20, § 29 (3 Ruff. 563). So, in the
26th section of the same act, "the corporation shall not borrow or
give security by bill, bond, covenant or agreement under their
common seal," &c.
Ibid. The word "bill" denotes a
sealed paper, either a bill obligatory, which is an obligation, or
a bill of credit, which is a single bill, or if they are taken as
synonymous, the words of the act are expressly confined to sealed
bills, which require endorsement to make them assignable. Taking
the term "bills obligatory and of credit, under the common seal of
the corporation" to be what they are declared in the charter, they
are, in their legal sense, and in common acceptation, the bills of
the bank, or bank bills, issued under their seal. This leads to
another distinction between the different kinds of paper issued by
the bank, worthy of all observation in the present case; the notes
issued by the bank were not under its common seal; they were
payable to bearer on demand, and passed from hand to hand by
delivery merely, without endorsement. They can therefore in no just
sense, be deemed bills of credit under seal, requiring a special
act of Parliament to make them assignable, and so well was this
known and fully understood that we find throughout the extended
charter to the bank in 8 & 9 Wm. III, bank bills and bank notes
are referred to in the same marked contradistinction which exists
between a sealed bill, assignable only by endorsement, and an
unsealed note, payable to bearer and transferable by delivery
only.
In providing for enlarging the capital of the bank, the
subscribers were authorized to pay one-fifth of their subscription
"in bank bills or bank notes, which have so much money
bona
fide resting due thereupon," &c., 3 Ruff. 657, § 23. The
same words, "in bank bills or bank notes," are three times repeated
in the 25th section, and are carried through the whole act. In the
36th section, the discrimination is too strongly marked to admit of
any possible doubt; in this section it is declared
"That the forging or counterfeiting of any sealed bank bill,
made or given out in the name of the said governor and company for
the payment of any sum of money or of any bank note of any sort
whatever signed for the said governor and company of the Bank of
England, &c., shall be felony."
Ibid., 659. The act of 3 & 4 Ann. c. 9, is also
most explicit in its provisions, which embrace all notes in
writing, signed by any person, "or the servant or agent of any
corporation," payable to order or bearer, and puts them on the
footing of inland bills of exchange, according to the custom of
merchants, but neither in terms or by construction can be applied
to bills under seal, 4 Ruff. 180, or has ever been attempted to be
so applied or constructed. We must therefore take the term "bills
of credit," when applied to the paper issued by a bank, to mean an
instrument under its corporate seal, payable to some person and
assignable by endorsement, and not a note payable to order or
bearer and transferable as an inland bill of exchange according to
the universal acceptation of the term in England.
There is another class of bills of credit in England known by
the name of "Exchequer bills," which are issued by the officers of
the Exchequer when a temporary loan is necessary to meet the
exigencies of government. They were first termed "tallies of loan,"
and orders of repayment, charged on the credit of the Exchequer in
general, and made assignable from one person to another. 5 W. &
M. c. 20, § 39; 3 Ruff. 566. By a subsequent act, the officers of
the Treasury were authorized to cause bills to be made forth, at
the receipt of the Exchequer, in such manner and form as they shall
appoint, &c., and to issue the same to the uses of the war;
they were made receivable for all taxes and money due at the
Exchequer, bore an interest, a premium was given for giving them
circulation, the nation was security for their payment.
See 9 Wm. III., c. 20, § 63-3, 3 Ruff. 667-8; 7 Ann. c. 7,
§ 22, 4 Ruff. 345; 9 Ann. c. 7,
passim, 4 Ruff. 431, and
they were called "bills of credit." 3 Ruff. 679. Such is the nature
of the three classes of bills of credit in England, whether they
are letters or bills of credit of merchants, in the nature of a
bill of exchange, the bills obligatory or of credit or of a bank,
or Exchequer bills; they all partake of the same character, and are
the bills of credit of the person, corporation or government which
emits, makes forth, issues or puts them into circulation. The name
given to the paper, its form, or the mode of giving it currency or
circulation, is immaterial; its substance consists in its being an
engagement to pay money at a future day, and that its payment rests
on the security, faith, credit or responsibility of those who put
it into circulation, pledged on the face of the bills of
individuals and corporations, and the law of the nation which emits
or issues them. Bills of credit were viewed in the United States in
the same way, before the adoption of the Constitution and
immediately afterwards. That the definition of a bill, by the
common law and common acceptation, is the same here as in England
and has ever been so accepted is a proposition which needs only to
be asserted; the same reasoning also attaches to a letter of
credit, in a mercantile sense, and the same distinction which has
been shown to exist there, between bank bills and bank notes, was
in the most explicit manner recognized, during the revolution.
On 31 December 1781, Congress passed an ordinance to incorporate
the subscribers to the Bank of North America, and recommended to
the legislatures of the several states to pass such laws as were
necessary to give the ordinance full operation, agreeable to the
resolutions of Congress on 26 May preceding. 7 Journ.Cong. 197,
199. In the proceedings of that day, we have the plan of the bank
which was then approved; in the 12th article, it is provided, "That
the bank notes, payable on demand," shall by law be made receivable
in every state, for duties and taxes, and by the Treasury of the
United States as specie; Congress also resolved that they should be
received in payment of all.
See 8 & 9 Wm. III, c. 20,
§ 63-6, 3 Ruff. [text missing] to the states to make the
counterfeiting bank notes capital felony. 7 Journ.Cong. 87, 90; 26
May 1781. Pursuant to this recommendation, Pennsylvania passed an
act to prevent and punish the counterfeiting the bank bills and
bank notes of the bank made or to be made or given out. 18 March
1782; Pamph. Laws 11. In 1783, Delaware passed an act to punish the
counterfeiting the bank bills and bank notes of the bank. 2 Laws
Del. 773. But the law of Massachusetts, passed 8 March 1782,
contains the most unequivocal evidence that the distinction between
bank bills and bank notes was well known and understood, for it
copies the 36th section of the Act of 8 & 9 Wm. III, before
referred to,
"that if any person shall counterfeit any sealed bank bill or
obligation made or given out for or in the name of the said P. D.
& Co., for the payment of any sum of money, or any bank note of
nay sort whatever, signed for or in the name of the said P. D.
& Co."
Thomas' Laws Mass. 187. In all these acts, the words "note,
bill, or obligation" are put in the same contradistinction from
each other which the common law assigns to them, and so are the
acts of Congress for chartering the Bank of the United States,
which were patterned from the acts of Parliament chartering the
Bank of England.
By the ninth fundamental article of the charter of 1791, it is
provided, that "The total amount of the debts which the said
corporation shall at any time owe, whether by bond, bill, note or
other contract, shall not exceed, &c." 1 Stat. 194; s. 8th
article of charter of 1816, 3
id. 272. In the 13th
article, the 29th section of the 5 W. & M., c. 20, chartering
the Bank of England, is copied, declaring that "the bills
obligatory and of credit, under the seal of the said corporation,"
&c., shall be assignable by endorsement, &c. And bills or
notes issued by the corporation, signed by the president and
countersigned by the cashier, promising the payment of money, to
any person or his order, or to bearer, though not under the seal of
the corporation, shall be as binding on them as on a private
person, and be negotiable by endorsement if payable to order, or by
delivery only if payable to bearer. 1 Stat. 195;
S.P. 12th
article of charter of 1816, 3
id. 272, thereby adopting
the provisions of the 3 & 4 Ann. c. 9, before referred to, as
to notes.
In the twelfth article of the charter of 1816, there is this
proviso
"That said corporation shall not make any bill obligatory, or of
credit, or other obligation under its seal for the payment of a
less sum than five thousand dollars."
In the 17th section, we find the paper issued by the bank placed
in contradistinction, no less than five times, by the denomination
of bills, notes or obligations, and the same distinction is made
throughout the acts of 1791 and 1816. It is also carried into the
acts of 1798 (omitting the word "obligation"), by which the
counterfeiting of any bill or note, issued by order of the
president, directors, and company of the bank is made a felony. 1
Stat. 573; the act of 1807, 2
id. 423, and the 18th and
19th sections of the act of 1816, 3
id. 275, in each of
which the words "bill" and "note" are used to refer to the two
kinds of paper, the word "bill" being used in its comprehensive
sense, as a known legal term, embracing bills, bonds, obligations
of all kinds, when under the corporate seal, according to their
settled and unvaried acceptation.
In considering the third species of bills of credit which are
issued by the government, I will first refer to their definition by
Parliament as the best evidence of the meaning and acceptation of
the term in England and as it was adopted in the United States. The
authority for issuing tallies, orders or bills, from the Exchequer,
and the manner of doing it, are pointed out in the Acts of 5 W.
& M., c. 20; 8 & 9 Wm. III., c. 20, before referred to, and
8 & 9 Wm. III, c. 28; 3 Ruff. 677-679; also in Gilbert's
Hist.Exch. 137. When money is paid into the Exchequer for debts due
or on a loan to the government, the teller who receives it gives a
bill for the amount, which is an Exchequer bill, or a bill of
credit, a substantial definition of which will be found in the 11th
section of the 8 & 9 Wm. III, c. 28; 3 Ruff. 679.
"Provided also that this act, or anything herein contained,
shall not extend to alter or change any method of receipts or
payments by bills of credit in the Exchequer, allowed or to be
allowed by Parliament,"
referring evidently to two species of such bills which are
issued from the Exchequer, according to the prescribed mode of
accounting for all moneys paid. A bill of credit given to a debtor
who pays his debt is merely the evidence of its payment, but a bill
of credit given to one who lends money on the credit of the
Exchequer, allowed to be pledged by act of Parliament, is a bill
made forth on the credit of the government, who is a debtor to the
holder for the amount, with interest thereon, as directed by the
law.
It is evident that the Constitution did not intend to prevent
the emission by a state of a bill of credit of the first
description, which in effect would be no more than a receipt for a
debt due the state; it clearly refers only to that class of bills
of credit which were emitted by a state for the purposes declared
in the law authorizing them to be emitted and put into circulation.
Taken in this sense the term "bill of credit" will be found to have
been as well defined in the United States before the adoption of
the Constitution as it was in England, or as the term "bill of
credit" in reference to bank bills had been, there and here, from
the time when the first charter of a bank was granted.
By the ninth article of the Confederation, Congress was
authorized "to borrow money or emit bills on the credit of the
United States," but unless nine states consented, could not "coin
money" nor emit bills, nor borrow money on the credit of the United
States. By article twelve,
"All bills of credit emitted, moneys borrowed, and debts
contracted by or under the authority of Congress &c., shall be
deemed a charge against the United States, for payment and
satisfaction whereof the said United States, and the public faith
are hereby solemnly pledged."
1 Stat. 6-7.
If there is certainty in language, it would seem to be in this,
as a definition of a "bill of credit," and was evidently copied in
the tenth section of the first article of the Constitution; the
prohibition against any less than nine in number of states acting
on certain subjects is in the precise words, "nor coin money," "nor
emit bills;" if it is asked what bills, the answer is "bills on the
credit of the United States, bills of credit emitted by the
authority of Congress on a pledge for the public faith." By
substituting "state" for "United States in Congress assembled," the
meaning of the words is identical and cannot be mistaken when they
are transferred into the constitutional prohibition, "no state
shall coin money, emit bills of credit" means bills on the credit
of the state. Plain words must be perverted by something
inconsistent with reason if they mean anything else; if they do not
refer to bills emitted on the credit of the state, we must be
informed on whose credit. It must be that of an individual, a
corporation, or of the United States; those who assert such a
proposition can have no respect for the Constitution or its
framers. Yet they can in no other way evade the obvious meaning of
plain words; the prohibition was intended, and does prohibit a
state from emitting bills on its own credit, and not on any other
credit. The prohibition is confined to a state, to an emission by a
state, of bills of credit, emitted on the faith of a state, which
can be pledged only by the law of a state, and no more exquisite
torture can be inflicted on plain words than in the endeavor to
make them mean more, mean less, or mean anything else than the
credit of a state. When we look to the names affixed to the
Articles of Confederation and the Constitution, when we consider
that the former, after being long discussed in Congress and
approved by that body, was submitted to the state legislatures,
which deliberated nearly four years before its adoption, and that
every word, phrase and sentence was fully discussed and most
anxiously considered, it cannot be considered as a bold or rash
assertion that the framers of both instruments comprehended the
language they used, said what they meant, meant what they said, and
stamped upon their work an impress of intention, which they at
least designed should be intelligible to all capacities.
If the definition of a "bill of credit" as given in both
instruments is not authoritative, I know of none higher to which to
appeal as a more certain standard of political or judicial truth.
In following such leaders in a path which they have plainly marked,
I feel perfectly conscious of avoiding that disrespect for the
solemn muniments of title on which the Union rests, which would be
a cause of severe self-reproach, if, in this tribunal, I should
rest my judgment on any contradictory authority. As, however, it
cannot derogate from the respect due to the framers of those
instruments or the instruments themselves to refer to authority
subordinate only to that of state legislatures who made the
confederation, and the people of the several states who ordained
the Constitution, in affirmance of the definition of bills of
credit, as given by all, I shall refer to the resolutions of the
old Congress, and the acts of the new immediately after the
adoption of the Constitution.
By the third section of the Act of July 1790, making provision
for the debt of the United States, among other evidences of debt
which were to be received as subscription to the proposed loan were
the following:
"Those issued by the commissioners of loans, in the several
states, including certificates given pursuant to the Act of
Congress of 2 January, 1779, for bills of credit of the several
emissions of 20 May, 1777, and 11 April, 1778, and in the bills of
credit issued by the authority of the United States, at the rate of
one hundred dollars in the said bills for one in specie."
1 Stat. 139. The general term "bills of credit," as used in the
act of 1790, is defined in the resolutions of Congress on the days
respectively referred to. 20 May 1770:
"Resolved, that the sum of 5,000,000 of dollars in bills on the
credit of the United States be forthwith emitted under the
direction of the board of Treasury."
3 Journ. 194. 11 April 1778:
"Resolved that 5,000,000 of dollars be emitted in bills of
credit on the faith of the United States. . . . That the thirteen
United States be pledged for the redemption of the bills of credit
now ordered to be emitted."
4 Journ. 149. 2 January 1779: In the preamble and resolutions of
this day, bills of credit are thus referred to. The United States
has "been under the necessity of emitting bills of credit, for the
redemption of which the faith of the United States has been
pledged." "That any of the bills emitted by order of Congress,
&c." "That the bills received on the said quotas," &c.
"That the following bills be taken out of circulation; namely, the
whole emissions of 20th May 1777, and 11th April 1778." 5 Journ.
5-6.
When, therefore, we find that in the Confederation, the acts and
resolutions of Congress, these various terms are used as
synonymous, all referring to the same species of paper, as well
known and defined as the term "coin," "money," or any other term
could be, and the same term, "bills of credit," used in the
Constitution, it is not a little strange that those who framed the
instrument should be supposed to have used it in a different sense,
without adding some words denoting such intention. That, the term
being adopted without explanation, was intended to be taken with
the same meaning which had been so long and universally accepted
would on any other than a constitutional question be deemed
conclusive evidence of their intention cannot be doubted. If the
term could admit of two interpretations, the members of the
convention would adopt that which comported with the meaning given
to the term by themselves, while members of Congress, before as
well as after the adoption of the Constitution, rather than any
other standard of interpretation to be found elsewhere. These
reasons are strengthened by a reference to other parts of the
Constitution, the terms of which are copied from the Articles of
Confederation, as to coin money, regulate the value thereof, borrow
money on the credit of the United States, fix the standard of
weights and measures, and numerous others apparent on
inspection.
As the Constitution was intended to be a supreme fundamental law
and bond of union for ages to come, it was of the last importance
to use those terms in the grant or prohibition of power which had
acquired a precisely defined meaning either in common acceptation
or as terms known to the common, the statute, or the law of
nations, and infused, by universal consent into the most solemn
acts of Congress, and the alliance of the Confederation, which
expressed the sense in which the whole country understood words,
terms, and language. The framers of the Constitution did not speak
in terms known only in local history, laws or usages, nor infuse
into the instrument local definitions, the expressions of
historians, or the phraseology peculiar to the habits,
institutions, or legislation of the several states. Speaking in
language intended to be "uniform throughout the United States," the
terms used were such as had been long defined, well understood in
policy, legislation, and jurisprudence, and capable of being
referred to some authoritative standard meaning; otherwise the
Constitution would be open to such a construction of its terms as
might be found in any history of a colony, a state, or their laws,
however contradictory the mass might be in the aggregate. If we
overlook the language of acts and instruments which express the
sense in which it is understood by all the states, and seek for the
true exposition of the Constitution in those which speak only for
one state, we have the highest assurance, in the course and range
of the argument in this case, that certainty cannot be found in the
almost infinite variety of laws which had been passed by the states
in relation to the emission of paper money. Nor is there more
certainty in referring to the opinions of statesmen and jurists, in
debates in conventions, or legislative bodies, or political
writers, or commentators on the Constitution, among all of whom
there is a most irreconcilable contradiction and discrepancy of
views, on every debatable word and clause in the Constitution, the
result of which has been strongly exemplified in the argument of
the cases at this term depending on its true interpretation.
Whether the remark made in the Senate of the United States by a
profound and eminent jurist in a debate on a most solemn
constitutional question is particularly applicable to the mass of
what has been offered to the Court as authority in this case or
not, yet its general practical truth must be admitted.
"If we were to receive the Constitution as a text, and then to
lay down in its margin the contradictory commentaries which have
been made and which may be made, the whole page would be a polyglot
indeed. It would speak in as many tongues as the builders of Babel,
and in dialects as much confused and mutually as
unintelligible."
Fully convinced that the Constitution is best expounded by
itself, with a reference only to those sources from which its words
and terms have been adopted, I have always found certainty, and
felt safety, in adhering to it as the text of standard authority to
guide my reasoning to a correct judgment. In expounding it by
opinion or on the authority of names, there is in my opinion great
danger of error, for when it is found that from the time of its
proposition to the people to the present, the wisest and best men
in the nation have been and yet are placed foot to foot on all
doubtful and many plain propositions in relation to its
construction, it is as difficult as it would be invidious to select
as a consulting oracle any man or class of statesmen or jurists in
preference to another.
On the question involved in this case of what are bills of
credit, my judgment is conclusively formed on the authority herein
referred to; if it is not conclusive, I have neither found or have
been directed to that which is paramount, or, in my judgment, at
all coordinate or to be compared with it. Resting on this
authority, it was my deliberate opinion that the certificates
issued by a law of Missouri pledging the faith of the state for
their redemption were bills of credit, prohibited by the
Constitution. On the same authority, and as the result of
subsequent researches, it is now my most settled conviction that
the notes of the Commonwealth Bank of Kentucky are not bills of
credit emitted by the State of Kentucky, inasmuch as the state has
pledged neither its faith nor credit for their payment. And the
notes not being payable at a future day nor issued on any credit as
to time either on their face or by the law under which they were
issued, but directed to be paid on demand, in gold or silver, they
were not emitted to obtain a loan to the state or to meet its
expenditures, and cannot be deemed its bills of credit. On a
careful consideration of the mischiefs against the recurrence of
which the Constitution interposed this prohibition, of its
language, the bearing of the three phrases on each other, their
evident spirit, and the meaning deducible therefrom, I cannot
abandon my first impression that one requisite of a bill of credit
is that it be made a tender in payment of debts.
The crying evils which arose from the issue of paper money by
the states cannot be so well described as they are in the language
of the Constitution. The emission of bills of credit by the states,
making them a tender in payment of debts, impaired and violated the
obligation of contracts. The remedy is an appropriate one, reaching
both the cause and effect, by three distinct prohibitions -- no
state shall emit bills of credit, make anything a tender but gold
and silver, nor pass any law impairing the obligation of contracts.
Thus, the remedy covers the whole mischief, and goes beyond it, if
supplied literally to its full extent; the mere emission of bills
of credit was no evil; if no law coerced their circulation or
reception by individuals, they are as harmless as certificates of
stock, emitted on a voluntary loan to the state, which are admitted
not to be the prohibited bills of credit. So long as they were not
made a tender, they could produce no evils not common to all paper,
whether of a state, a corporation or individual, which, by common
consent, passes from hand to hand in the ordinary transactions of
life. To prevent the circulation of such a medium, it was not
necessary to call into action the high power of the Constitution;
the evil would cure itself; when the paper ceased to pass by
consent, it would pay no debt, nor lead to the violation of any
contract. The prohibition could not have been intended to prevent
the people from taking as money what would answer all the purposes
of money in the interchanges of society, nor to deprive them of the
exercise of their free will; on the contrary, it was made to
prevent the coercion of their free will by a tender law, and leave
them free to enforce the obligation of their contracts for the
payment of money and the enjoyment of their property.
In the construction of all laws, we look to the old law, the
mischief and the remedy, and so expound it as to suppress the
mischief and advance the remedy; no just rule of interpretation
requires a court to go further by applying the remedy to a case not
within the mischief unless the words of the law are too imperative
to admit of construction. I know no class of cases to which the
rule is more appropriate than those embraced within those
prohibitions of the Constitution on the exercise of powers reserved
by the states over subjects on which Congress have no delegated
power; there can be no collision between the laws of a state and
the laws of the Union, as there would be, where a state would
legislate on those subjects that had been confided to Congress or
any department of the federal government. Taking the first class of
cases in the tenth section, relating to treaties, letters of marque
and reprisal, and coining money, which are subjects over which the
Constitution grants express powers, as an example, it is evident
that to make the prohibition effectual to the object in granting
the powers, it must be total, so as to exclude the exercise of any
power by a state over the subject matter. From the nature of these
subjects, there can be no concurrent power in the two governments;
hence we find that the first two were, even by the Article Six of
Confederation, expressly prohibited to the states, without the
consent of the United States. The same reasons apply to the third,
because the express power in Congress to coin money, regulate the
value thereof, and of foreign coin, coupled with the prohibition to
a state to coin money, is a decisive expression of the intention
that it shall not exercise the power, as in the case of a treaty,
or a letter of marque and reprisal. The evils to be guarded against
had not existed under the Confederation; the states separately had
not made treaties, granted letters of marque or reprisal, nor
coined money in violation of those articles; the evils were wholly
prospective, but were to be apprehended if any doubt whatever could
be raised on the terms of grant of those powers. Hence the
prohibition.
Touching the third class of cases, bills of attainder,
ex
post facto laws, and titles of nobility, they were not
subjects of any delegated powers to Congress; but as they were
opposed to the whole spirit of the people, and the Constitution, it
annulled all power, state and federal, to do these things, and the
prohibition is, in its nature and object, absolute and illimitable.
But the second class of prohibited cases, emitting bills of credit,
tender laws, and those impairing the obligation of contracts, are
widely different; the evils had existed, did exist, and must recur
if not prevented. Congress could not legislate on these subjects,
much less control the states, on whom the powers of Parliament, in
all their transcendency, as well as the prerogative of the Crown,
devolved by the revolution.
21 U. S. 8
Wheat. 584. Each state has the power of emitting bills of credit,
of passing tender laws,
29 U. S. 4 Pet.
435, and exercised both, by annulling contracts and grants, the
right to do which could not be contested by any authority. 4 Wheat.
17 U. S. 643,
17 U. S. 651.
These were the acts which called aloud for the remedy given by the
prohibitions to prevent their recurrence, which would have been
certain if it had not been made.
This Court has declared the intention of the Constitution of the
subject of contracts.
"It was intended to correct the mischiefs of state laws which
had weakened the confidence between man and man, and embarrassed
all transactions between individuals by dispensing with a faithful
performance of engagements; to guard against a power which had been
extensively abused, and to restrain the legislature in future from
violating the rights of property. It protected contracts respecting
property, under which some person could claim a right to something
beneficial to himself; and since the clause must, in construction,
receive some limitation, it ought to be confined to the mischiefs
it was intended to remedy, not to authorize a vexatious
interference with the internal concerns or civil institutions of a
state, to embarrass its legislation in the regulation of internal
government, or to render immutable those institutions, for these
purposes, which ought to vary with varying circumstances. The term
'contract' must be understood in a more limited sense, so as not to
embrace other contracts than those which respect property, or some
object of value, and confer rights which may be asserted in a court
of justice."
Dartmouth College Case, 4 Wheat.
17 U. S.
428-429.
"The principal was the inviolability of contracts. The plain
declaration that no state shall pass any law impairing the
obligation of contracts includes all laws which infringe the
principle the convention intended to hold sacred, and no further.
It does not extend to the remedy to enforce the obligation of a
contract; the distinction between them exists in the nature of
things, so that without impairing the obligation, the remedy may be
modified as the state may direct."
Sturges v.
Crowninshield, 4 Wheat. 200. It is also a principle
declared by this Court that the prohibition does not extend to the
passage of a state law which does not affect contracts existing
when the law was enacted, which operates only on the obligation of
posterior contracts,
Ogden v.
Saunders, 12 Wheat. 369, and no exposition of the
Constitution is better settled or commands more universal assent
than that the prohibition does not extend to the passage of
retrospective, unjust, oppressive laws or those which divest
rights, antecedently vested, if they do not directly impair the
obligation of a contract,
27 U. S. 2 Pet.
411-413;
28 U. S. 3 Pet.
289;
33 U. S. 8 Pet.
110, and that
"the interest, 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 exclusive
taxation as well as against unwise legislation generally."
29 U. S. 4 Pet.
563.
Let these principles of constitutional law be applied to the
construction of the clause against emitting bills of credit, as
they have been applied to the clause concerning the obligation of
contracts, the conclusion seems to me inevitable that the same
construction which imposes a limitation to the corrective remedy
against the future violation of the sanctity of contracts, which it
was the great object of the prohibition to protect, should be
extended with at least as much liberality to limit the operation of
that clause of the same article which prohibits an evil which by no
possibility could impair the obligation of a contract without a
tender law. The mischiefs of a mere emission of bills of credit are
trivial in their consequences compared with the effect of tender
laws; their combined effect is to violate a contract; surely then,
the restriction on a state ought not to be construed more rigidly
against an act, which cannot of itself produce the mischief
intended to be remedied, than a law which wholly annuls a contract.
If each clause is taken according to an universal rule that laws
should be construed
subjectam materiam, the lesser evil
requires the more gentle corrective; but in assigning to the
emission of bills of credit, without their being made a tender, a
more restrictive meaning than to the direct violation of a
contract, we act on the inverse rule. The protection is lessened in
the same proportion as the danger is increased; the greater the
mischief, the milder and less efficient is the remedy; reason and
established principles alike require that a prohibition should be
limited, so far as can be done, without producing the mischief
intended to be remedied, and expanded, so far as is necessary to
correct it. The construction must be according to the subject
matter of the law, strict or liberal, as the nature of the case
requires, and the object to be effected will be defeated or
accomplished,
ut res magis valeat quam pereat; that which
will effectuate all the objects of the prohibition cannot be too
narrow, that which goes beyond the express word, or necessary
implication, to effect an object not within the mischief, must be
too broad.
On the same rule which confines the prohibition as to contracts,
to state laws passed affecting existing contracts, and excluding
from the protection of the Constitution, all posterior contracts; a
law making bank notes a legal tender in payment of debts contracted
after the passage of the law, would not be within the prohibition.
On the same principle by which an unjust, oppressive, retrospective
law, or one which divests vested rights, is held not to impair the
obligation of a contract
per se, it must be held that a
mere emission of bills of credit is not within the mischiefs
intended to be corrected. There is no more danger in the exercise
of this power, at the discretion of the legislature, than in these
unrestrained powers, to modify the remedy to enforce the obligation
of a contract, which this Court hold not to be affected by the
prohibition. There is, in the nature of things, the same
distinction between bills emitted, which are not made a tender, and
those which are a tender, as between the remedy and the obligation
of a contract; nay, the distinction is more marked. The obligation
of a contract, without an effective remedy to enforce it, would be
"a name," and not "a thing;" the word "obligation" would be an
"empty sound," and the protection of the Constitution a solemn
mockery. Yet if it is held to prohibit the emission only of bills
of credit which were not a tender, it would prevent none but
imaginary evils, and leave real practical ones unredressed. To emit
the notes of an individual or a private corporation, for the
purposes of circulation, would be productive of the same evils as
the bills of credit of a state; the mischief does not depend on who
is the owner of the stock pledged for its payment, or on whose
credit they are received in circulation. Yet it is conceded by
counsel, and agreed by all the judges, that bank notes are not
within the prohibition, though they are as much "paper money,"
"paper medium," as the bills of credit of a state. Why, then,
should the prohibition extend to the mere emission of the latter,
and not to the former species of paper money, when neither are a
tender in payment of debts? What good reasons can be assigned why
the Constitution did not prohibit the emission of both if it
prohibits one, and on what ground does the discrimination rest? It
cannot be that there is less danger, in having the paper medium of
the country based on the funds, faith and credit of the state,
which can by taxation, levy a contribution
ad libitum, on
all the property of all its citizens, for its redemption,
17 U. S. 4
Wheat. 428;
29 U. S. 4 Pet.
563, than when a bank emits it on the mere credit of their
corporate stock. Nor that a state will more readily sport with and
abuse its plighted faith, than a corporation, an individual, or a
banking association.
These questions are not unworthy the consideration of those who
hold that it is not necessary to bring bills of credit within the
prohibition, that they may be made a tender in payment of debts.
That all
"paper intended to circulate through the community, for its
ordinary purposes as money, which paper is redeemable at a future
day, the emission of any paper medium by a state government, for
the purpose of common circulation,"
though not made a tender, and though the faith, funds or credit
of the state are not pledged for its redemption, are bills of
credit. They are also worthy of notice by those who hold that paper
emitted by the officers of a state, under the authority of a law,
which paper is of the precise character above defined, which is
made a tender, and for the redemption of which the funds and faith
of the state are both most solemnly pledged, in the law directing
its emission, are not bills of credit within the prohibition. It
will not suffice that a disclaimer is made of its extension to bank
notes, or a declaration that they are not included within the
mischiefs, without assigning the reasons, or referring to the
authority on which the discrimination is made, on just principles
of construction.
For myself, I rest on the most solemn adjudications of this
Court, as well prior as subsequent to the case of
Craig v.
Missouri, settling the rules and principles on which the most
important prohibition in the tenth article has been construed, and
in applying them to the clause now in question, find abundant
authority for holding it necessary, that bills of credit be made a
tender in payment of debts, to come within the prohibition. Taking
my definition of bills of credit of a government, from acts of
Parliament, of the old and new Congress, the Articles of
Confederation, and the Constitution, I held, in
Craig v.
Missouri, that certificates emitted by a state for
circulation, payable in future, on the faith and funds of the
state, which certificates were made a tender were prohibited as
bills of credit. On the same authority I now hold that the notes in
question are not such bills of credit, because not emitted by the
state, not made a tender in payment of any debts to individuals,
nor the faith or general funds of the state pledged for their
redemption. And further, on the authority of acts of Parliament, of
the old Congress, of state legislatures before the adoption of the
Constitution, and acts of Congress since, and of the common law, I
make the distinction between the bills of credit issued under the
seal of a bank and bank notes payable to bearer, on demand, and
hold that the latter can by no just definition or legal
construction come within the prohibition. I have resorted to these
sources of information, as the fountain of constitutional law, and
have found in them abundant cause of justification of the opinions
which I formed in the former case, and adhere to in this.
The plaintiffs have relied much upon the pleadings in this
record as presenting the question in controversy in an aspect
different from what it would have been, if the averments of the
plea had been denied by a replication, instead of being admitted by
a demurrer. These averments are in the first plea. 1. That the
state, by the law establishing the bank, declared that the capital
stock thereof should be $2,000,000. 2. "But which capital stock the
said bank never received, or any part thereof, as these defendants
aver." From the admission of these averments it is contended that
inasmuch as the capital stock was not made up and paid into the
bank by the state, pursuant to the declaration contained in the
law, the faith and credit of the state was legally, virtually, and
morally pledged to provide this amount of capital as a fund for the
redemption of the notes issued by the bank. And that having
violated this pledge, the state was bound, and, if suable, was
compellable to pay them, whereby the notes of the bank became bills
of credit of the state as effectually as if they had been emitted
on an express pledge of its faith or credit for their
redemption.
The first averment is founded on the law of incorporation, and
is an averment of mere matter of law as to which it is among the
oldest and best settled rules of pleading, that the law will not
suffer an averment of that to be law, which is not law; such
averment or pleading is to no effect or purpose, though admitted by
demurrer. Plowd. 168a; 170b. On an inspection of the law it appears
that this averment refers only to the section which declares what
the amount of the capital shall be, but the plea wholly omits any
reference to the section which specifies the items which shall
compose that capital, as a fund for the redemption of the notes. It
is the proceeds of the lands belonging to the state, its surplus
revenue, the stock of the state in the Bank of Kentucky, and the
securities taken by the bank, on a loan of its notes to
individuals. The mode of redemption was in making these notes
receivable in payment for lands, taxes, debts due the state, the
Bank of Kentucky, and the Bank of the Commonwealth. This was the
only pledge given by the state, and it is not averred in the pleas
that this pledge was in any way violated by any refusal to receive
the notes for any such purposes; on the contrary, it is admitted
that they were always so received; consequently the state has
faithfully kept its faith as entire as it was pledged by the law.
This part of the plea, therefore, is to no purpose or effect so far
as it avers that to be law which is not law.
The notes of the bank constituted no part of its capital; while
they remained on hand, they were worthless to the bank; when loaned
out, they became the evidence of a specie debt, due by the bank on
demand, to the holder; the securities taken for repayment, were
part of the capital for their redemption. But as they were taken
only for the precise amount of the notes loaned, the amount of debt
due by and to the bank was equal, with only this difference, that
the bank paid no interest on their notes, while they received
interest on their loans; the accretion of interest, therefore, was
the only means of increasing the capital by the issue of their
notes. If they were burnt according to the direction of the law
after they had performed their function in their reception as
payment by the state or the bank, it was no loss to the bank which
issued them; or if the notes were returned to the bank, by the
state treasurer or the Bank of Kentucky, they were as useless as
capital as before they were first issued. In reissuing them, their
operation was the same, adding nothing to the capital; indeed, the
proposition is self-evident that a bank note is not a fund for its
own payment; a debt due by a bank is not a part of the capital
stock pledged for the payment of the debt.
It thus appears that by the terms and necessary operation of the
law, though the term capital stock is used in the law, the thing
which was made the capital was the proceeds of lands, taxes, debt
and bank stock, and as the law and Constitution regard things, and
not names, such must be taken to be the spirit, substance and
effect of the law of incorporation. Hence, the second averment is
of a fact wholly immaterial, since it was no part of the law that
the capital should ever be received by the bank in any other manner
than the one pointed out, which was in fact the only manner in
which it could be received -- that is, as a fund for the redemption
of its notes. In virtue of this law, purchasers of land and debtors
of the state or banks had the option of making payment in specie,
the notes of other banks, or of the Commonwealth Bank; they would,
of course, pay in that medium which was the easiest and cheapest to
be obtained, which must have been the notes of the Bank of the
Commonwealth, or they would never have been issued. So that the
inevitable effect of the law, and the emission of these notes on
loan, was to make their receipt in payment, the means of their
redemption, in addition to the securities on which the loan was
made, and precluded any reasonable probability, or even
possibility, that the proceeds of the pledged funds would be paid
into the coffers of the bank, in specie, or the notes or other
banks, unless the notes of the Commonwealth Bank were more
valuable, or more difficult to be obtained than either. That such a
consummation was in the contemplation of the legislature, or can be
assumed by the court, in order to give effect to the plea is a
proposition too extravagant to have been made by counsel; if this
assumption is not made, that the state was bound by the law to make
up the capital stock of the bank, by the actual receipt of the
pledged funds, then there can be no pretense of its reception
having a material averment. Had this second averment been put in
issue, and found for the defendant, the court must have rendered a
judgment for the plaintiff
non obstante veredicto, if he
was otherwise entitled to judgment, on the ground that the issue
was on an immaterial fact.
26 U. S. 1 Pet. 71.
[
Footnote 1]
See the acts extablishing the Bank of New York, 1791,
the Bank of Albany, in New York, the Bank of Pennsylvania, 1793,
the Bank of New Jersey, 1823, the Bank of Baltimore, 1795, the Bank
of Virginia, the State Bank of North Carolina, 1810, the Bank of
Georgia; the Bank of Kentucky, &c.
[
Footnote 2]
See 3 Story's Com. on the Constitution 231, note 2.
[
Footnote 3]
I have been favored with a sight of one of the original bills
issued under the act of Maryland, 1769. It is 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 sterling, per
dollar, for the said bill, according to the direction of an Act of
Assembly of Maryland dated at Annapolis, 4 March, A.D. 1770. R.
Conden, J. C. Clapham."
These gentlemen were doubtless the commissioners appointed under
the act.