1. The words "memorandum, check," in that part of the schedule
of instruments required by the statute of June 30, 1864, 13 Stat.
at Large p. 298, § 158, to be stamped, which in the printed statute
books are printed with a comma between them, should read,
"memorandum-check," with a hyphen instead of a comma.
2. In settling whether an instrument should be stamped or not,
regard is to be had to its form, rather than to its operation.
Though it may be a device to avoid the revenue acts, and though its
operation may have the effect of avoiding them, yet if the device
be carried out by means of legal forms, it is subject to no legal
censure.
The Act of June 30, 1864, "to provide internal revenue to
support the government," &c., [
Footnote 1] requires certain instruments, specified in a
schedule which it contains, to be stamped. The schedule is as
follows:
BANK-CHECK, draft, or order for the payment
of any sum of money whatever, drawn upon
any bank, banker, or trust company, or for
any sum exceeding $10 drawn upon any other
person or persons, companies or corporations,
at sight or on demand . . . . . . . . . . . . . . 2 cents
Bill of exchange (inland), draft, or order
for the payment of any sum of money not
exceeding $100, otherwise than at sight
or on demand,
or any promissory note
(except bank notes issued for circulation,
and checks made and intended to be forthwith
presented, and which shall be presented to
a bank or banker for payment), or
any memo-
randum, check, receipt, or
other written
or
printed evidence of an amount of money to
be paid on demand, or at a time designated,
for a sum not exceeding $100. . . . . . . . . . . 5 "
And for every additional $100, or fractional
part thereof in excess of $100 . . . . . . . . . . 5 "
This statute being in force, the United States filed, in 1871, a
criminal information in the court below against E. B. Isham, for
issuing without a stamp and with intent to evade
Page 84 U. S. 497
the provisions of the above-quoted act, a paper in the form of a
draft drawn upon one C. J. Canda. The paper, which was attached to
and made part of each count of the information, was in this
form:
image:a
It appeared from the testimony offered by the government that
the Iron Cliffs Company was a corporation of Michigan, situated at
Negaunee, in the state just named, and engaged in mining iron ore
and in manufacturing pig iron. It had an office at Negaunee where
its business was carried on and a head office in New York, where
its board of directors met and its funds were kept. Isham was
superintendent of the works at Negaunee and resided there. Canda
was treasurer of the company, and resided in New York. The company
had been in the practice of issuing paper like the instrument above
set forth in payment for labor or other debts due at the mine since
January, 1868, nearly all payments of balances due for labor having
been made since that time and up to 1871, when the information was
filed, in it. The amount issued annually since that time had been
about $100,000. The blanks were sent to Isham from New York, and
signed by him as drawn. The denominations issued were of $1, $2,
$3, $5 and $10. When the Iron Cliffs Company began to issue this
paper, there were hardly any facilities for getting currency into
the country except taking it through one hundred and twenty miles
of staging, and through a wilderness chiefly, and when it was
issued, it to some extent went into circulation and answered the
purpose of a local currency. It was taken at a store, in which the
company was interested, in payment for
Page 84 U. S. 498
goods and by all the banks and banking houses in that region,
and sometimes paid out by them on checks. But when in the course of
business it came into the hands of a bank or banker or a merchant,
it was generally retained until a considerable amount of it was on
hand -- say from $1,000 to $2,000 -- and then either sent to New
York by express for redemption or Isham took it up and gave to the
holder a draft on New York for the amount. When Isham took this
paper in this way, by giving the holder a large draft for it, he
frequently reissued it, or paid it out again in the course of the
company's business at the mine; but when it was finally paid in New
York, it was cancelled and destroyed.
On this and similar evidence, the following questions arose,
concerning which the defendant requested the court to instruct the
jury in his favor, and for a verdict of acquittal:
"1st. Whether the instrument was on its face subject to be
stamped?"
"2d. Whether the evidence tending to prove that Isham was
superintendent of the Iron Cliffs Company, and drew the instrument
in that capacity, or that Canda was the treasurer of the said
company, and the instrument was drawn upon him in that capacity, or
that the said paper was drawn in the course of the company's
business, was relevant and admissible?"
"3d. Whether, if the paper in question was made and issued with
the design that it should be used as a local circulating medium,
and was actually used by the holders as such, it thereby became
subject to be stamped, and whether the evidence given by the
prosecution, tending to prove these facts, was relevant and
admissible?"
"4th. Whether, assuming every fact which the evidence in support
of the prosecution tended to prove, the defendant was guilty of the
offense charged?"
"5th. Whether the information in this case sufficiently charged
any offense under the laws of the United States?"
And the following further question, upon which the district
attorney requested the court to charge in favor of the
prosecution:
Page 84 U. S. 499
"6th. Whether if the instrument set forth in the information and
adduced in evidence was issued with the design and intent to secure
time for the payment of the debt it represented, it was therefore
subject to stamp duty?"
Which questions (the judges being divided in opinion upon them)
were now certified to this Court for its opinion.
Page 84 U. S. 501
MR. JUSTICE HUNT delivered the opinion of the Court.
We are of the opinion that the position taken by the counsel of
the defendant is correct -- that the paper issued required no
stamp, and that the prosecution must fail.
The schedule of instruments required by the statute of 1864 to
be stamped, designates the various instruments and writings to be
taxed by the well known names and descriptions of the paper, and
specifies the amounts of duty in substance as follows:
1st. Every bank-check, 2 cents.
2d. Every draft or order for the payment of any sum of money
at sight or on demand (except where the draft or order is
so drawn on a person, company, or corporation other than a bank,
banker, or trust company, and for a sum not exceeding $10), 2
cents.
3d. Every bill of exchange, draft, or order for the payment of
any sum of money
otherwise than
at sight or on
demand, for every $100, 5 cents.
4th. Every promissory note, for each $100, 5 cents.
5th. Every memorandum, check, receipt, or other written or
printed evidence of an amount of money to be paid on demand or at a
time designated, for a sum not exceeding $100, 5 cents.
6th. If the draft or order is drawn on a person not a banker, or
a bank or a trust company, and does not exceed $10, then no stamp
is required.
Page 84 U. S. 502
There is probably an error in the punctuation of the statute in
regard to the item which reads, "memorandum, check, receipt, or
other written or printed evidence of an amount of money to be
paid." It should read "memorandum-check (with a hyphen between the
words), receipt, or other written or printed evidence." A "check"
was specifically provided for already in the schedule, and it is
not to be assumed that Congress would, in the same schedule, make
two provisions, differing from each other, for the same subject. A
memorandum-check, however, is an instrument well known in the
commercial law, which, it might be claimed, did not come under the
general term of a check, and which therefore had not been
specifically provided for. A memorandum-check is in the ordinary
form of a bank-check, with the word "memorandum" written across its
face, and is not intended for immediate presentation, but simply as
evidence of an indebtedness by the drawer to the holder.
Mr. Parsons, in his work on Notes and Bills, [
Footnote 2] says:
"It has been said that the word 'memorandum,' or 'mem.,' written
on the check would not affect the right of the holder. We think
this might have been doubted, because there is a well known custom
in all our commercial cities of drawing and using checks in this
form merely as due-bills, or as what they are, and are called
'memorandum-checks.'"
In
Dykers v. Leather Manufacturers' Bank, [
Footnote 3] it was said:
"The weight of the testimony is that this memorandum amounts to
nothing more than an indication of an understanding that the check
is not to be presented immediately for payment, so as to destroy
the drawer's credit with the bank, where he has not provided funds
to meet the draft."
It is stated further in Parsons, [
Footnote 4] that the holder may present the same for
payment if the name of the bank is not cancelled on the check.
In
Franklin Bank v. Freeman, [
Footnote 5] the court speaks of memorandum-checks
Page 84 U. S. 503
as well known in Boston, and says that the rules of business
with regard to them are well understood.
In
Glover v. Graeser, [
Footnote 6] it is said that memorandum-checks, being
regular bank-checks with the word "memorandum" written on their
face, are constantly used in settlement of accounts between
merchants, as admissions of amounts of money due.
This reading makes the statute harmonious and sensible,
providing for bank-checks, drafts, inland bills, promissory notes,
memorandum-checks, receipts, and assigning to each its proper
position.
It is said that in many instances, the statute refers to the
same subject more than once, under different names and with
different rates of duty, and that embarrassment in the construction
of the statute may arise from this cause. Thus a check, whether
drawn upon a bank or an individual, is in the nature and form of an
inland bill of exchange, having a drawer, a drawee, and usually a
payee. The statute describes checks, drafts, and promissory notes,
and subsequently speaks of a memorandum-check; also of a receipt or
other written or printed evidence of an amount of money to be paid.
These general terms plainly include the specifications already
made. A bank-check, a memorandum-check, a draft, or a bill of
exchange each furnishes written or printed evidence of an amount of
money to be paid. So does a promissory note. A note is, indeed, the
regular and usual evidence in dealings between men that money is to
be paid, whether in cities or in the country and whether the
transactions be limited or extensive, and yet bank-checks and
drafts, or orders at sight or on demand, require different stamps
from memorandum-checks, bills of exchange, and promissory
notes.
A few simple rules will dispose of the most of the difficulties
that may arise:
1st. Instruments described in technical language, or in
Page 84 U. S. 504
terms especially descriptive of their own character, are classed
under that head, and are not to be included in the general words of
the statute.
2d. The words of the statute are to be taken in the sense in
which they will be understood by that public in which they are to
take effect. Science and skill are not required in their
interpretation except where scientific or technical terms are
used.
3d. The liability of an instrument to a stamp duty, as well as
the amount of such duty, is determined by the form and face of the
instrument, and cannot be affected by proof of facts outside of the
instrument itself.
4th. If there is a doubt as to the liability of an instrument to
taxation, the construction is in favor of the exemption because, in
the language of Pollock, C.B., in
Girr v. Scudds,
[
Footnote 7] "a tax cannot be
imposed without clear and express words for that purpose."
These principles are based in good sense, and are sustained by
the authorities.
In
Williams v. Jarrett, [
Footnote 8] where the question was, whether a bill was
liable to the stamp duty imposed upon bills "exceeding two months
after date," it was held, that the date meant the time expressed on
the face of the bill, and that it did not depend upon the fact that
the bill actually had more than two months to run. Denman, C.J.,
said:
"If a bill bears no date, we must ascertain by evidence the day
when it issued, but where there is a date, that must be considered
as the time to which the schedule refers."
In
Whistler v. Forster, [
Footnote 9] the same language was used by Erle, C.J., and
by Willes, J. The latter said:
"Drafts payable to order, not being affected by either of those
enactments, fall within the law as to bills of exchange, which have
been repeatedly held not to be void by postdating, though that
Page 84 U. S. 505
should have the effect of making the instrument require a less
stamp than if it had been dated correctly and payable at the same
time."
In
Bull v. O'Sullivan, [
Footnote 10] decided in 1871, the cases of
Whistler
v. Forster and
Williams v. Jarrett are approved, and
the rule is thus announced:
"There is nothing in the statutes to invalidate a postdated
check on a banker payable to order on demand, and in determining
what is the requisite stamp to make such an instrument admissible
in evidence, the instrument alone is to be looked at. Such a check
is available in the hands of a person who took it with knowledge
that it was postdated, and is admissible in evidence with only a
penny stamp."
Hannan, J., further said:
"We are of opinion that the stamp acts above referred to, so far
as they relate to bills of exchange and orders for the payment of
money, deal with those documents only as they appear on their face,
without reference to any collateral agreement or condition by which
their apparent operation may be affected."
It is not necessary, in this view of the case, to decide whether
an order drawn by one officer of a corporation upon another officer
of the same corporation is in law a promissory note, nor whether it
may simply be treated as such in pleading; nor is it necessary to
decide whether the fact that the order is drawn upon Mr. Canda
individually, and not as treasurer of the corporation, will affect
the result. Whatever may be the law on this subject, it will not
affect the case before us. The instrument we are considering is, in
form, a draft or check upon an individual. It is not in form a
promissory note. It must therefore pay the stamp duty of a draft or
order, and not that of a promissory note. It is not permissible to
the courts, nor is it required of individuals who use the
instrument in their business, to inquire beyond the face of the
paper. Whatever upon its face it purports to be, that it is for the
purpose of ascertaining the stamp duty. The paper here, as we have
said, has the distinctive
Page 84 U. S. 506
form of a draft or check upon an individual. It falls under that
specific description, and is to be taxed according to that
description, not varied by proof, and not ranked under any general
terms contained in the statute.
It is said that the transaction proved upon the trial in this
case is a device to avoid the payment of a stamp duty, and that its
operation is that of a fraud upon the revenue. This may by true,
and if not true in fact in this case, it may well be true in other
instances. To this objection there are two answers:
1st. That if the device is carried out by the means of legal
forms, it is subject to no legal censure. To illustrate. The Stamp
Act of 1862 imposed a duty of two cents upon a bank-check, when
drawn for an amount not less than twenty dollars. A careful
individual, having the amount of twenty dollars to pay, pays the
same by handing to his creditor two checks of ten dollars each. He
thus draws checks in payment of his debt to the amount of twenty
dollars, and yet pays no stamp duty. This practice and this system
he pursues habitually and persistently. While his operations
deprive the government of the duties it might reasonably expect to
receive, it is not perceived that the practice is open to the
charge of fraud. He resorts to devices to avoid the payment of
duties, but they are not illegal. He has the legal right to split
up his evidences of payment and thus to avoid the tax. The device
we are considering is of the same nature.
Another answer may be given to the objection more comprehensive
in its character. It is this: that the adoption of a rule that the
form of the instrument can be disregarded, and its real character
be investigated for the purpose of determining the stamp duty,
would produce difficulties and inconveniences vastly more injurious
than that complained of. Such a rule would destroy the circulating
capacity of bills, or drafts, or orders. The present act imposes
the same stamp duty upon inland bills of exchange and promissory
notes, but this is an accidental circumstance only. Suppose that
the draft is made subject to a tax of five cents on the
Page 84 U. S. 507
hundred dollars, and the note to a tax of ten cents on the
hundred dollars. The defendant contends that a draft or bill drawn
by one officer of a company upon another officer of the same
company is, in legal effect, a promissory note. Upon the
supposition thus made, its real character would require a tax of
twice the amount of that indicated upon its face, and if the stamp
be too small, the instrument is absolutely void from its inception.
[
Footnote 11] In the
language of the statute, it shall be "deemed invalid and of no
effect."
Is every man to whom a paper in the form of a bill of exchange
is presented bound to inquire whether there are not outside
circumstances that may affect its nature? Having ascertained this,
is he bound to delay all proceedings until he can take legal advice
upon its nature and character? This he must do upon the theory
contended for, and he must be certain also that his advice is
correct; otherwise he will lose the money he advances upon the
bill. The same rule, it is contended, will apply where the drawee
does not appear upon the face of the bill to be an officer of the
company. Such is the case before us, where Mr. Canda, the drawee,
does not appear upon the bill itself to be connected with the
company, and yet the prosecution contends that it may be proved
that he is its treasurer, and that thereupon the instrument ceases
to be a draft or order for the payment of money and becomes a
promissory note.
That the rule contended for is impracticable in a commercial
country is too obvious to require farther illustration. We are
satisfied that the principles heretofore laid down must govern the
case before us.
These views require that an answer in the negative should be
given to each of the questions certified to this Court. They are
accordingly so answered, and the record must be returned to the
court below with directions to
Dismiss the information.
[
Footnote 1]
13 Stat. at Large § 158, p. 298, amended by the Act of July 13,
1866; 14
id. 144.
[
Footnote 2]
Vol. 2, p. 66.
[
Footnote 3]
11 Paige 615.
[
Footnote 4]
Supra.
[
Footnote 5]
16 Pickering 535.
[
Footnote 6]
10 Richardson's Equity 446.
[
Footnote 7]
11 Exchequer 191;
see also Conroy v. Warren, 3
Johnson's Cases 259, to the same effect.
[
Footnote 8]
5 Barnewall & Adolphus 32.
[
Footnote 9]
14 Common Bench (New Series) 257.
[
Footnote 10]
Law Reports 6 Q.B. 209.
[
Footnote 11]
Stat., § 158.
