The bills of a banking corporation, which has corporate
property, are not bills of credit within the meaning of the
Constitution, although the state which created the bank is the only
stockholder, and pledges its faith for the ultimate redemption of
The facts and pleadings are stated in the opinion of the
Page 54 U. S. 13
MR. JUSTICE McLEAN delivered the opinion of the Court.
An action was brought in the Circuit Court of Mobile County
against the plaintiffs in error by the commissioners and trustees
of the banks of Alabama, under an act of the state, by serving a
notice on them in behalf of the Branch of the Bank of the State of
Alabama at Mobile, as the makers of a promissory note expressly
made payable and negotiable at the said branch bank, dated 2
December, 1843, and in which they promised, twelve months after
date, to pay the said branch bank by the name and description of
Henry B. Halcomb, cashier, or bearer, the sum of four thousand
dollars, with interest thereon from date, for value received, which
said promissory note is regularly due and unpaid, and is the
property of the bank.
The defendants below first pleaded nil debet,
issue was joined.
In their second plea, they aver, that the consideration of the
note sued for consisted of certain bills of credit issued by
Page 54 U. S. 14
State of Alabama, under the name and style of the Branch of the
Bank of the State of Alabama, at Mobile, by which the state, under
that name, promised to pay the bearer of the same on demand. That
these bills of credit were for such sums as showed they were
intended to be circulated as money. And that the object of the
state was to circulate them as money, through the agency of the
bank, for a profit.
The third plea avers that the note, on which suit is brought,
was made and delivered to the plaintiff as a trustee for the state,
and that the bills were received of the bank by the defendants, to
put them into circulation as money for the profit of the state;
that the bank was controlled by the state, and that it was alone
liable for the issues made by the bank in the transaction
The plaintiff below demurred to the defendant's pleas except the
first one, which demurrer was sustained. And on a jury being called
to try the issue they found the amount of the note and interest for
the plaintiff, on which judgment was entered. This judgment was
taken by writ of error before the Supreme Court of Alabama, which
affirmed the judgment. And this writ of error is now prosecuted in
this Court to reverse the judgment of affirmance.
It is argued that this case should be dismissed, as there was no
special assignment of error in the Supreme Court of Alabama, as
required by the law and the practice of that court.
The Supreme Court of Alabama exercised jurisdiction in the case,
and affirmed the judgment of the circuit court. This Court cannot
look behind that judgment and dismiss the cause here on the ground
of a supposed violation of a rule of practice in the state court.
Whether there was an assignment of error or not in that court can
be of no importance, as we look to the judgment only and its
effects. But it may be proper to say there was an assignment of
error in the Supreme Court of Alabama,
"that the court sustained the demurrer to the pleas, and gave
judgment thereon in favor of the plaintiffs, whereas, by the law of
the land it should have been for the defendants."
The judgment on the demurrer in the circuit court was not
formally entered, but the record states,
"and the plaintiffs moved the court for judgment against the
defendants, which was resisted by the defendants, and the plaintiff
demurred to all the defendants' pleas except the first one, which
demurrer was by the court sustained,"
The writ of error brought before the Supreme Court of Alabama
the judgment of the circuit court as well on the demurrer as on the
verdict of the jury, and the affirmance of the judgment extended to
both. The pleas demurred to raised the question whether the bills
of the bank were bills of credit.
Page 54 U. S. 15
Under certain restrictions, the Constitution of Alabama
authorized the general assembly to establish a state bank, with
such number of branches at they should from time to time deem
In 1823, the State Bank was established on the funds of the
state, then in the Treasury, and a loan obtained by an issue of
state bonds. The preamble to the charter states,
"Whereas it is deemed highly important to provide for the safe
and profitable investment of such public funds as may now or
hereafter be in possession of the state and to secure to the
community the benefits, as far as may be, of an extended and
undepreciating currency, be it enacted,"
In 1832, the bank at Mobile was established with a capital stock
of two millions of dollars, procured from the sale of bonds of the
state, created for that purpose.
By the charter, a president and fourteen directors were to be
annually elected by the legislature, who were required to make a
report to each session of the legislature. The corporation was
authorized to issue notes of a denomination not less than one
dollar, to discount notes and deal in bills of exchange, not
exceeding certain amounts. The ordinary powers of a banking
corporation were conferred, with a prohibition against owing debts
exceeding twice the amount of the capital, and the directors were
made personally responsible for any excess of indebtment of the
bank assented to by them. Until one-half of the capital stock was
deposited in specie in its vaults, the corporation was not
authorized to commence operations. The remedy for collecting debts
was reciprocal for and against the bank. And the credit of the
state was pledged for the ultimate redemption of the notes of the
The State of Alabama was the only stockholder of the bank, but
it was placed under the control of directors elected by the
legislature, and one-half of the capital, amounting to the sum of
one million of dollars, was in its vault for the redemption of its
bills. With the means possessed by the bank when it commenced
business, is required only prudent management to sustain its credit
and effectuate the objects for which it was established.
The bills issued by the bank were made payable on presentation
to it, and they were signed by its president and cashier. The bills
issued being convertible into specie by the holder were current,
and in all transactions were received and paid out as equal in
value to specie.
It is impossible to say that bills thus issued come within the
definition of bills of credit. The agency constituted, not only
managed the bank, but were made personally liable under certain
Page 54 U. S. 16
circumstances. The directors, though elected by the legislature,
performed their duties under the charter, and, like all other
directors of banks, derived their powers and incurred their
responsibilities from the law under which they acted.
It is not perceived that their action was not as free as those
of directors who are elected by individual stockholders.
The promise to pay was made by the bank, and its credit gave to
its bills circulation: they were in no respect, therefore, like a
bill of credit. That must issue on the credit of the state. The
principles laid down by this Court in the case of Briscoe v. Bank of the
Commonwealth of Kentucky,
11 Pet. 331, apply to
this case. In that case it is said,
"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 credit to the paper."
Did the pledge of the credit of the state in the charter of the
bank ultimately to redeem the notes of the bank, make them bills of
The charter is a public law, and this Court consider it as
before them the same as it was before the court of Alabama.
Upon the face of the bills, there is no promise to pay by the
state, but an express promise by the bank. In this there is an
important difference between the notes of the bank and bills of
credit. Whatever agency has been employed to issue a bill of
credit, the state promises to pay the bill or to receive it in
payment of public dues. And when a particular fund was designated
out of which the bill should be paid, it depended upon the faith of
the state whether such fund should be so appropriated.
The bank had not only an ample fund for the redemption of its
paper, but a summary mode was provided by which the payment of its
bills could be legally enforced. And the directors were personally
liable if the issues of the bank exceeded twice the amount of its
capital paid in. And besides, the notes and bills of exchange taken
on its discounts enlarged the means of the bank and increased the
security of the bill-holders.
The charter of the bank gave to it all the means of credit with
the public that banks usually have or could desire. That some
reliance may have been placed on the guarantee of the eventual
payment of the notes of the bank by the state may be admitted. But
this was a liability altogether different from
Page 54 U. S. 17
that of a state on a bill of credit. It was remote and
contingent. And it could have been nothing more than a formal
responsibility if the bank had been properly conducted. No one
received a bill of this bank with the expectation of its being paid
by the state.
But it is said the state employed the bank as an agency through
which its bills should be circulated for the profit of the
The state, as a stockholder, received a profit, if any profit
was realized through the operations of the bank. But this is the
condition of individual stockholders in all banks. And as well
might it be said that the individual stockholders of a bank issue
its notes as that the State of Alabama issued the notes of the
Branch Bank at Mobile.
A bank in either case acts under its corporate powers, and the
directors derive their powers and incur their responsibilities
under the law which governs them. The directors of the Mobile bank,
in the discharge of their duties, it would seem, were as
independent as the directors of other banks.
A bill of credit emanates from the sovereignty of the state. It
rests for its currency on the faith of the state pledged by a
public law. The state cannot be sued ordinarily on such bill, nor
its payment exacted against its will. There is no fund or property
which the holder of the bill can reach by judicial process. Such an
instrument is altogether different, in form and in substance, from
the notes issued by the Branch Bank at Mobile. The fact that the
State of Alabama may be sued by one of its citizens does not alter
the case. Such law may be repealed at pleasure, and if judgment
could be obtained, the payment of it could not be enforced.
The state, as a stockholder, held its property, as a corporation
or individual could hold it, in the Mobile bank. The specie in its
vaults, notes taken on discounts, and every description of
property, managed by the directors of the bank, were subject to
judicial process by its creditors. And in such a procedure, the
state in its sovereign capacity could not interfere. Its powers
would be no greater than the powers of individual stockholders of a
bank under similar circumstances.
The affirmance of the judgment of the circuit court which
sustained the demurrer to the pleas by the Supreme Court of Alabama
was right, and its judgment is therefore
MR. JUSTICE GRIER dissented.
Page 54 U. S. 18
This cause came on to be heard on the transcript of the record
from the Supreme Court of the State of Alabama and was argued by
counsel. On consideration whereof, it is now here ordered and
adjudged by this Court that the judgment of the said supreme court
in this cause be and the same is hereby affirmed, with costs and
damages at the rate of six percentum per annum.