1. A cause can be removed from a state court into this Court
under the twenty-fifth section of the Judiciary Act of 1789
whenever some one of the questions embraced in it was relied on by
the party who brings the cause here, and when the right which he
asserted that it gave him was denied to him by the state court,
provided the record show either by express averment or by clear and
necessary intendment that the constitutional provision did arise,
and that the court below could not have reached the conclusion and
judgment it did reach, without applying it to the case in hand.
2. It need not appear that the state court erred in its
judgment. It is sufficient to confer jurisdiction that the question
was in the case, was decided adversely to the plaintiff in error,
and that the court was induced by it to make the judgment which it
did.
3. The provision in section 12 of the charter of 1838 of the
Bank of Tennessee,
"that the bills or notes of said corporation, originally made
payable, or which shall have become payable on demand, in gold or
silver coin, shall be receivable at the treasury of the state, and
by all tax collectors and other public officers, in all payments
for taxes or other moneys due to the state,"
made a contract on the part o� the state with all persons, that
the state would receive for all payments for taxes or other moneys
due to it, all bills of the bank lawfully issued, while the section
remained in force. The guaranty was not a personal one, but
attached to the note if so issued -- as much as if written on the
back of it. It went with the note everywhere, as long as it lasted,
and although after the note was issued, Section 12 were
repealed.
4. Section 603 of the Tennessee code of 1858, which enacted that
besides federal money, controllers' warrants, and wildcat
certificates, the collector should receive "such bank notes as are
current and passing at par," did not amount to a repeal of the
above quoted 12th section; the words of the code having no words of
negation, the two enactments being capable of standing together,
and implied repeals not being to be favored.
5. This decision does not apply to issues of the bank while
under the control of the insurgents.
Page 75 U. S. 45
In 1838 the Legislature of Tennessee chartered a bank, enacting
as follows:
"A bank shall be, and is hereby established in the
name and
for the benefit of the state, to be known under the name and
style of 'The Bank of Tennessee,' and the faith and credit of the
state are hereby
pledged for the support of said
bank."
The capital of the bank, which was five million dollars,
consisted chiefly of the school fund of the state and of surplus
revenue of the federal government. The deficiency was to be made up
by funds raised on the faith of the state. The dividends which the
bank should make were to be applied to common schools and
academies, and the bank itself was to be managed in aid of internal
improvements. Any losses arising to the trust funds used to make
the capital were to be made good by the state. The governor was to
nominate to the general assembly, for confirmation or rejection,
twelve directors, to serve for two years, as officers to manage its
affairs.
The twelfth section of the charter contained this important
provision:
"That the bills or notes of said corporation originally made
payable, or which shall have become payable on demand in gold or
silver coin, shall be receivable at the treasury of this state, and
by all tax collectors and other public officers, in all payments
for taxes, and other moneys due to the state."
The bank went into operation with branches in different parts of
the state, and was employed largely in various ways as the fiscal
agent of the government.
In May, 1858, the legislature of the state passed an act to
revise the statutes of the state, and so established its "code." In
this code were certain enactments, thus:
"
Section 603. The collector shall receive, in discharge
of public
Page 75 U. S. 46
taxes and other dues to the state, besides the constitutional
and lawful currency of the United States,"
"1st.
Such bank notes as are current at par in this
state."
"2d. Warrants issued by the comptroller."
"3d. Certificates from the county court for killing a
wildcat."
"
Sec. 41. All public and general acts passed prior to
the present session of the General Assembly, and all public and
special acts,
the subject whereof are revised in this
code, are hereby
repealed."
"
Sec. 42. Local, special, and private acts,
and
acts of incorporation heretofore passed, are
not
repealed, unless it be
herein so expressed."
From the character of its organization, the newly incorporated
bank was capable of being placed much under the control of the
governor and legislature of the state, and at the outbreak of the
late rebellion in Tennessee,
May 6th, 1861, it passed into
the control of the rebel agents, who then managed to possess
themselves of the state government. They issued its notes to an
indefinite amount, advanced immense sums to the rebel state
authorities, and when the federal army were approaching with
superior power, left the bank, carrying with them its coin, and all
its assets, except real estate and some uncollected debts. The bank
was thus ruined, and its bills became largely depreciated.
In February, 1865, the rebel powers being now driven away, the
people of the state reorganized the state government, and declared,
in their amended constitution, that "all notes of the Bank of
Tennessee, or any of its branches, issued on or after the 6th day
of May, 1861," were null and void; and an act of the legislature in
the following June, repealed by express terms, the already quoted
twelfth section of the chartering statute of 1838, which made the
notes of the bank receivable in payment of taxes. Finally came an
Act of February 16, 1866, by which the directors were directed to
take in payment of debts due to it its notes,
"which were issued prior to the 6th day of May, 1861, and
studiously to refuse and exclude all issues
or reissues
after that date; also all issues signed by G. C. Torbett; also, all
reissues made after the 6th day of May, 1861, as utterly void.
"
Page 75 U. S. 47
In this state of things, with these statutes, relative to the
subject of the sort of money in which taxes &c., might or might
not be paid upon the statute book -- and with other statutes of the
state in force, which made the privilege of merchandising taxable,
and enacted that anyone who wished to engage in that calling must
obtain a license from the clerk of the county court where he
proposed to carry on the business, and give bond that he would pay
a certain percentage on the invoice cost of all goods brought into
his mercantile establishment for sale during the year -- one
Francis Furman, of Nashville, who had obtained, in August, 1865,
from the county clerk, a license as a wholesale merchant for the
ensuing year, and now purposed forming a partnership before the
expiration of his license (a purpose which made it necessary for
him to discharge his obligation to the state for the business of
the store up to that time), appeared, on the 3d of August, 1866,
before the clerk of his county, with Green, his proposed partner,
and tendered to the clerk the amount due the state for taxes, in
the notes and issues of the Bank of Tennessee,
issued prior to
the 6th of May, 1861, and tendered also the bond as required
by law, and demanded that a license be issued to them as wholesale
merchants. But the clerk declined to comply with this request,
because these notes were depreciated, and informed the parties that
he would not issue the license, unless the taxes were paid in par
funds.
Thereupon Furman & Green applied to one of the circuit
courts of the state for a mandamus to compel the clerk to receive
their bank notes.
Their petition, after setting forth the charter of the bank, and
particularly the provisions of the
twelfth section, the
ownership of the notes, and that they were issued in conformity
with the section just named,
and issued "prior to the 6th day
of May, 1861," alleged the tender to the defendant, his
official character, and his refusal to receive them, "because the
same were not at par," and issue the license; adding that the
"said charter was a
contract made with the people of
the state, and
every person into whose possession the
Page 75 U. S. 48
said notes and issues of the said bank might come, that
the same should be received by all collectors of taxes, and in
payment of all dues to the State of Tennessee, and it is not in the
power of the legislature of the said State of Tennessee, to impair
or annul the validity or binding force of said contract."
The petition referred to the Act of February, 1866, by which the
directors were directed to take in payment of debts due to it notes
issued prior to May 6, 1861, and to exclude reissues made after
that day, and it made the act part of it, so far as the act might
be in conflict with their rights.
But the petition did not
state at what time the notes had come into the bands of the
petitioners.
The county clerk demurred:
1. Because the petition did not show a contract between the
State of Tennessee and
petitioners, or either of them,
that the notes in question should be received in payment of state
taxes, and
2. Because it failed to show ownership of the notes
before the passage of the Tennessee code, 1858, with its
section 603,
or before the repealing act of 1865.
The local circuit court thought the demurrer bad and awarded the
mandamus, but the supreme court of the state on appeal considered
it good, and reversed that decree; the judgment having been in
these words, and without any assignment of reasons.
"The court being of opinion that there is error in the judgment
of the court below, in overruling the demurrer in this cause, doth
order and adjudge that the said judgment be reversed, and the
demurrer sustained, and the petition dismissed."
The case was now brought here on appeal, under the 25th section
of the Judiciary Act, which gives this Court jurisdiction to review
decrees in the highest court of the state,
"where is drawn in question the validity of the statute of, or
an authority exercised under any state, on the ground of its being
repugnant to the constitution, treaties, or laws of the United
States, and the decision is in favor of such their validity. "
Page 75 U. S. 49
Two questions were here argued:
1. Whether under the 25th section just quoted, jurisdiction
existed in this Court?
2. Whether the act of incorporation amounted to a contract with
these petitioners, their petition not showing that they had
themselves received the notes prior to either the statute of 1858,
making the code having section 603; or the act of 1866, repealing
the 12th section of the original charter.
Page 75 U. S. 55
MR. JUSTICE DAVIS delivered the opinion of the Court.
The main question involved in this suit is of more importance
than difficulty, but before we proceed to discuss it, it is
necessary to consider the point of jurisdiction which is raised by
the defendant in error. The circumstances under which this Court is
authorized to review the decisions
Page 75 U. S. 56
of state tribunals has been so often considered and decided,
that there is hardly anything left to do, but to apply the already
well settled legal principles which govern this class of cases, to
a particular record, in order to decide, whether or not we have
jurisdiction to hear and determine the matter in controversy. It
would be useless labor to go through with the various adjudications
of this Court on this subject. It is enough for the purposes of
this suit to say that a cause can be removed from a state court
into this Court under the 25th section of the Judiciary Act of 1789
whenever some one of the questions embraced in it was relied on by
the party who brings the cause here, and when the right he claimed
it gave him was denied to him by the state court. It is urged that
the particular provision of the Constitution which the plaintiffs
in error say has been violated in its application to their case
should be contained in the pleadings, but this is in no case
necessary. If the record shows either by express averment or by
clear and necessary intendment that the constitutional provision
did arise, and that the court below could not have reached the
conclusion and judgment it did reach, without applying it to the
case in hand, then the jurisdiction of this Court attaches. And it
need not appear that the state court erred in its judgment. It is
sufficient to confer jurisdiction that the question was in the
case, was decided adversely to the plaintiffs in error, and that
the court was induced by it to make the judgment which it did.
Testing the case at bar by these rules, it is apparent that it
is properly here, and must be disposed of on its merits.
Furman and Green, conceiving themselves aggrieved by the conduct
of the county clerk in refusing their tender of the amount due the
state for taxes in the notes and issues of the Bank of Tennessee
issued prior to the 6th May, 1861, applied to the local circuit
court for a mandamus to compel the county clerk to accept payment
of the notes in discharge of Furman's obligation, and to issue to
them a license as wholesale merchants. The application for the writ
proceeded on the theory that the state had, in the passage of the
act creating the Bank of Tennessee, in 1838, made a
Page 75 U. S. 57
contract with its people to receive these notes in payment of
state taxes, and that it was not in the power of a subsequent
legislature to impair the binding force of this contract.
The proceeding was an effort on the part of the plaintiffs in
error to test the question of the validity of the authority of a
public officer of the state, exercising authority under the state,
on the ground that such authority was repugnant to that provision
of the federal Constitution which forbids a state to pass any law
impairing the obligation of a contract. The purpose of the
petition, the issue which it presented and sought to have
determined, were as plainly to be seen, as if the words of the
particular constitutional provision relied on had been inserted in
it, and the obnoxious legislation spread out at length. All courts
take notice, without pleading, of the Constitution of the United
States, and the public laws of the state where they are exercising
their functions.
It is insisted that the petition should have averred that the
state had impaired, or by some act attempted to impair, the
obligation of a contract, but this does sufficiently appear by
necessary intendment, for it is alleged that Furman was the owner
of the notes and entitled to have them received for taxes, by
virtue of a contract with the state; that he had tendered them to
the defendant, who refused to receive them, and that it was not in
the power of the legislature to impair the validity of this
contract.
The mandamus was asked for to enforce a contract -- to act
directly on Nichol, the clerk and collector, who was exercising an
authority under the state. What is plainer than that this
proceeding impeached this authority, in its application to their
case, because of legislation construed by this officer as depriving
Furman of his right to pay his state taxes in notes of the Bank of
Tennessee. If so, then the petitioners, insisting on the protection
of the Constitution, drew in question both the validity of state
legislation and the authority of the state officer, and unless the
record discloses that the Supreme Court of Tennessee denied
relief
Page 75 U. S. 58
on other than federal grounds, it is perfectly manifest that we
are compelled to take jurisdiction of this cause.
But to proceed a step further. The cause was heard on the
petition and a demurrer admitting its truth, but denying its
sufficiency.
There were three principal defenses to the relief asked,
specified in the demurrer, as was required by the Tennessee code of
practice.
These were first that the twelfth section of the act
incorporating the Bank of Tennessee did not constitute a contract.
Secondly, that there was no contract, because the said twelfth
section was repealed by implication by section 603 of the code of
1858, and there was no averment that the notes were issued before
that time. The third and last defense was that the petition did not
show that the plaintiffs became the owners of the notes before the
direct repeal of the twelfth section by the legislature in 1865.
What possible difference can it make in deciding the question of
jurisdiction on which of these three grounds the Supreme Court of
Tennessee based their judgment? The right and duty of this Court to
hear and determine this case does not depend on our ability to
prove that the Supreme Court of Tennessee was wrong in its
judgment. Whether that judgment was right or wrong, it is
reviewable here if it necessarily drew in question the validity of
a state statute or of an authority exercised under it on the ground
of the repugnancy of the statute to the Constitution of the United
States. That it did do this there would seem to be no doubt.
The defense really amounts to this -- either that the alleged
contract did not exist, or if it did that there has been no
legislation that impairs it.
Whether it be true or false depends on the construction to be
given the laws of the state, which are claimed as proving the
making of the contract and its violation.
If so, this Court decides for itself whether the construction
which the court below gave to these different statutes was correct
or incorrect, and we are required to reverse under the twenty-fifth
section of the Judiciary Act if we find that,
Page 75 U. S. 59
under an error of construction, that court has adjudged that no
contract has been impaired. To do otherwise, would be to surrender
to the state courts an important trust confided to this Court by
the Constitution.
Without pursuing the subject any further, it is clear from the
record that the Supreme Court of Tennessee, in dismissing the
petition for mandamus, necessarily adjudged that there was not at
the time such a contract as the plaintiff, Furman, claimed
authorized him to make the tender to the clerk of the notes of the
Bank of Tennessee. The jurisdiction of this Court is therefore
complete, and the case must be decided on its merits.
The State of Tennessee, through its legislature, in 1838,
thought proper to create a bank "in its name and for its benefit."
It was essentially a state institution. The state owned the capital
and received the profits; appointed the directors, and pledged its
faith and credit for its support. This would seem to have been
enough to establish the credit of the institution on a firm basis
and to inspire confidence in the value of its notes, so that they
would obtain a free circulation among the people as money. But the
legislature, in its anxiety to insure for these notes a still
greater confidence of the community, went further and provided that
they should be receivable at the treasury of the state, and by all
tax collectors and other public officers, in all payments for taxes
and other moneys due the state.
It will be readily seen that nothing could have been better
calculated to accomplish the purpose the legislature had in view
than the incorporation of this guaranty into the charter of the
bank. It assured the free circulation of their notes, gave them a
credit over the issues of other banks, and furnished a security to
those who held them against any serious loss if, in the
vicissitudes of trade, the bank itself should become embarrassed,
for annually they would be enabled to use the notes at their par
value in the payment of their taxes.
That this guaranty was, until withdrawn by the state, a
Page 75 U. S. 60
contract between the state and every note holder of the bank,
obliging the state to receive the notes for taxes, cannot admit of
serious question.
The state was engaged in banking, and like other corporations
engaged in the same business, desirous of using all legitimate
means to increase the profits of the enterprise. The profits of a
bank of issue depend in a great measure on the ability of the bank
to keep its currency afloat. The longer the bills are withheld from
redemption, the greater the remuneration to the corporation. Every
additional guaranty thrown around the bills, affecting their
security and increasing the uses to which they can be put, affords
necessarily additional inducements for the people in whose hands
they fall to keep them and not return them to the counter of the
bank for redemption in specie. What so natural as that the
intelligent legislators of 1838, knowing all this, should say to
every person discounting a note or taking it in the ordinary
transactions of life,
"If you will not return this note for redemption, we will take
it from you for taxes. It is true you can demand specie for the
bills, and so can the state demand specie for taxes, but if you
will forego your right, the state will do the same and consent to
receive from you, in lieu of specie, for the taxes due her, the
notes of the bank."
In such a transaction, the benefit is mutual between the
parties. The bank gets the interest on the notes as long as they
are unredeemed, and the holder of the bills has a ready and
convenient mode of paying taxes. The state did, therefore, in the
charter creating the Bank of Tennessee, on good consideration,
contract with the bill holders to receive from them the paper of
the bank for all taxes they owed the state. Until the legislature
in some proper way, notifies the public that the guaranty thus
furnished has been withdrawn, such a contract is binding on the
state and within the protection of the Constitution of the United
States.
An attempt is made to restrict the operation of this guaranty to
the person who, in the course of dealing with the bank, receives
the note, and not to extend it further.
Page 75 U. S. 61
Such an interpretation would render the guaranty of
comparatively little value and defeat the object which, we have
attempted to show, the legislature designed to accomplish by it.
The guaranty is in no sense a personal one. It attaches to the note
-- is part of it, as much so as if written on the back of it; goes
with the note everywhere, and invites everyone who has taxes to pay
to take it.
The quality of negotiability is annexed to the notes in words
that cannot be misunderstood and which indicate the purpose of the
legislature that they should be used by everyone who is indebted to
the state.
It is contended that the promise of the state was withdrawn in
1858 by section 603 of the code of that year -- not in express
terms, but by necessary implication. Courts do not favor repeals by
implication, and never sanction them if the two acts can stand
together. The provision of the code which is deemed inconsistent
with the continuance of the promise of the state directs the kind
of funds which collectors shall, after that time, receive for
taxes. The legislature thought fit to confer upon the people the
privilege of paying their taxes in the issues of other banks that
were at par. As these issues were in circulation at the time, it
was doubtless thought a wise policy to allow the people to pay
their taxes in them, and as long as they were at par, the state
could not be the loser. This policy was adopted for the convenience
of the people. There are in the statute no words of negation saying
that no funds other than those specified in the section shall be
received. But we are to construe the different sections of the code
together in order to arrive at the meaning of the legislature. In
doing this, we find that where acts of incorporation are not
expressly repealed, they are in terms saved from repeal by section
42 of the code. As there was no attempt in the code to interfere
with the charter of the Bank of Tennessee, it follows that it was
saved from repeal, and of course that the guaranty contained in the
twelfth section of the act of its incorporation was still
continued. That the legislature so understood it receives
additional confirmation from the consideration that
Page 75 U. S. 62
this guaranty was expressly withdrawn in 1865. Why withdraw it
then if it was withdrawn in 1858?
The effect of the repealing act of 1865 remains to be
considered. It is true the state had the right at any time to
withdraw its guaranty, but it is equally true that it must be done
in such manner as not to impair the obligation of its contract with
the note holders of the bank. That this repealing act operated on
all the issues of the bank after its date cannot be doubted, but
the question with which we have to deal is what effect did it have
on the notes of the bank issued prior to its passage? It is
conceded that these plaintiffs are entitled to the relief they ask
if the defendant was obliged to receive the notes which were
tendered. The tender was made in the notes of the bank, issued
prior to the 6th day of May, 1861, which were in conformity to its
charter, and were payable to bearer. It does not appear when the
notes came to the hands of the plaintiffs -- whether before or
after the repealing act -- but it is a fair presumption, in the
absence of any averment to the contrary, that it was after the date
of that act.
It is insisted, as the bank during the rebellion was under the
control of the usurping government and was used by it for unlawful
purposes, that it should have been stated that the notes tendered
were the lawful issues of the bank. But it would seem the pleader
had this state of things in his mind, and wished to avoid the issue
it involved, for he avers that the notes were issued prior to the
6th day of May, 1861, the time when the state endeavored to sever
its relations with the Union. The presumption is that the bank,
before that time, issued its notes properly, and in addition it is
stated, as we have seen, that they were issued in conformity with
the twelfth section of its charter. It follows from this statement
necessarily that they were the lawful issues of the bank. If the
defendant wished to contest this point, he should have answered,
and not by his pleading admitted the truth of the petition and all
legal inferences that could be drawn from it.
This case is therefore not embarrassed by the changed
Page 75 U. S. 63
relation of the state after 1861, and the discussion of the
principles which settle this case are not intended by the Court to
apply to the issues of this bank while under the control of the
insurgents, because such a case is not before us, and it will be
time enough to decide the important questions which it would
present when it arises, if it ever should arise.
It is contended that the repealing act took from those persons
who did not at the time hold the paper of the bank, the right to
acquire it afterwards, and use it to discharge their debts to the
state.
This construction of the contract would limit the obligation to
the person, and withdraw it from the paper. If, as we have
endeavored to show, the guaranty attached to the paper itself, and
could not be withdrawn from it, then it follows that the notes in
circulation at the time of the repeal are not affected by it, and
carry with them the pledge of the state to be received in payment
of taxes by every
bona fide holder.
It would seem to be unnecessary to discuss any further the
principles which lie at the foundation of this case, as they were
settled in
Woodruff v. Trapnall, heretofore decided by
this Court. The mere statement of that case will show its
similarity to this. In 1836, the State of Arkansas, in the charter
of a bank (owned and controlled by the state), declared that the
notes of the institution should be received in payment of all debts
due the state. Some years afterwards, this provision of the charter
was repealed. After its repeal, Trapnall, acting in behalf of the
state, sued out an execution upon a judgment which the state had
obtained against Woodruff, a defaulting treasurer. Woodruff met the
demand of the writ by a tender (which was refused) of the notes of
the bank, but whether he got these notes before or after the
repealing act was passed, did not appear. On this state of things,
Woodruff, to test his right to pay his debt in the paper of the
bank, applied for a writ of mandamus against Trapnall, which was
denied him by the state court. The case was brought here, as this
is, under the twenty-fifth section of the Judiciary Act, and this
Court held that the
Page 75 U. S. 64
undertaking of the state to receive the notes of the bank,
constituted a contract between the state and the holders of the
notes which the state was not at liberty to break, and that the
tender of notes issued prior to the repealing act was good. It was
also held that it made no difference whether the debtor had the
notes in his possession when the repealing act was passed or
not.
It will thus be seen that
Woodruff v. Trapnall and this
case in all important features are alike.
An attempt has been made to distinguish the cases because in the
Tennessee bank, trust funds were embarked in the enterprise, but if
the state thought proper to use them in this manner, it took care
to pledge its faith to supply any deficiency that should arise
through the mismanagement of the bank. It is difficult to see how
the employment of these funds made the bank any less a state
institution, for it was created expressly for the benefit of the
state, who had the exclusive management of it and agreed to support
it. But if we concede that the state did wrong in using these funds
in banking, can that
tend even to justify her in breaking
her promise to the note holders of the bank?
Enough has been said to show, as the result of our views, that
section 28 of the charter of the Bank of Tennessee constituted a
contract with the holders of the notes of the bank and that it was
not in the constitutional power of the legislature to repeal the
section so as to affect the notes which, at the time, were in
circulation.
Judgment reversed and the cause remanded with directions to
enter a judgment awarding the writ of mandamus.
