Jefferson Branch Bank v. Skelly, 66 U.S. 436 (1861)
U.S. Supreme CourtJefferson Branch Bank v. Skelly, 66 U.S. 1 Black 436 436 (1861)
Jefferson Branch Bank v. Skelly
66 U.S. (1 Black) 436
1. It is the general rule that the construction given by state courts to state laws and constitutions are binding and conclusive upon the federal courts, but the rule does not extend to cases in which this Court is called on to interpret the contracts of states, though they have been made in the form of laws or by functionaries of the state in pursuance of state laws.
2. Fidelity to the Constitution of the United States makes it necessary, that in such a matter, this Court should not follow the construction of a state court with whose opinion it cannot concur, and it makes no difference in the obligation whether the contract is in the shape of a law or of a covenant by the state's agents.
3. The charter of a bank is a franchise, which is not taxable as such if a price has been paid for it which the legislature has accepted with a declaration that it is to be in lieu of all other taxation.
4. The rule of construction is strict against the corporators and in favor of the public, and neither the right of taxation nor any other power of sovereignty will be held to have been surrendered, unless such surrender has been expressed in terms too plain to be mistaken.
5. But the state may make a contract not to exercise the taxing power, or to exercise it only within certain limits with respect to a particular subject, and such a contract once made cannot be rescinded by a subsequent legislative act.
6. The 60th section of the charter of the State Bank of Ohio, which requires that six percent of the dividends shall be set off for the use of the state, which sum the state consents to accept in lieu of all taxes to which the banks or their stockholders might otherwise be subject, is a contract, and a subsequent law increasing the taxes is a violation of the contract.
7. A provision of the state constitution adopted after the charter of the state Bank that a higher tax might be imposed on all banks than that stipulated for in the charter of the state Bank cannot be applied to the state Bank and its branches without a violation of the contract.
The Jefferson branch of the State Bank of Ohio brought trespass in the Common
Pleas of Jefferson County against Alexander Skelly, and charged in their declaration that the defendant took and carried away from the banking house of the plaintiff at Steubenville a certain quantity of gold coin of the value of seven thousand dollars and converted it to his own use. The defendant pleaded specially, in justification, that he was treasurer of Jefferson County, and as such required and authorized by law to collect the taxes assessed in the County of Jefferson; that taxes to the amount of $5,568 88.9/10 had been assessed upon and were then due from the plaintiff, which it was the duty and right of the defendant to distrain for, and that the supposed trespass consisted in making such lawful distraint. The plaintiff replied that it was a banking corporation organized under an act of the state legislature, entitled "An act to incorporate the State Bank of Ohio and other banking corporations;" that, agreeably to the 60th section of said act, the plaintiff had always agreeably to the 60th section of said act, the plaintiff had always regularly and punctually paid to the properly authorized officers six percent of its profits; that the 60th section of the charter was a contract between the state and the plaintiff to assess or demand no other or greater taxes from the plaintiff than six percent on its profits; and that the taxes for which the defendant alleged that he had made the supposed distraint were assessed and demanded in pursuance of a law which was a violation of the said contract, and therefore void. The defendant rejoined, taking issue on the replication.
The question of law thus raised was whether the state had a right to impose on the bank any taxes other than those which were stipulated for in the 60th section of the charter, the plaintiff asserting, and the defendant denying, that the section referred to was a contract which made any other or greater taxes illegal and unconstitutional. The verdict and judgment in the common pleas were in favor of the plaintiff for $6,292 80, with costs. The defendant appealed to the circuit court, where a verdict and judgment for the plaintiff were again rendered, but the judgment was arrested, and judgment finally given for the defendant. Thence the cause was taken, on the plaintiff's petition, to the supreme court of the state. The judges of the supreme court were of opinion that the said 60th section of
the act of the General Assembly of Ohio of the 24th of February, 1845, entitled "An act to incorporate the State Bank of Ohio and other banking companies," under the provisions of which the said Jefferson branch was organized, is not a contract within the meaning, and entitled to the protection, of that clause of the Constitution of the United States which provides that "no state shall pass any law impairing the obligation of contracts," and that consequently the subsequent laws under which the increased taxes were assessed and levied were valid. The judgment of the circuit court was therefore affirmed, and thereupon the plaintiff took this writ of error from the Supreme Court of the United States.