An action was instituted in the Circuit Court of the United
States for the District of Alabama by the Bank of Augusta, Georgia,
against the defendant, a citizen of Alabama, on bills of exchange
drawn at Mobile, Alabama, on New York, which had been protested for
nonpayment and returned to Mobile. The bill was made and endorsed
for the purpose of being discounted by the agent of the bank, who
had funds in his hands belonging to the plaintiffs for the purpose
of purchasing bills of exchange, which funds were derived from
bills and notes discounted by the bank in Georgia. The bills were
discounted by the agent of the bank in Mobile for the benefit of
the bank, with their funds, to remit the said funds to the bank.
The defendant defended the suit on the facts that the bank of
Augusta is a corporation incorporated by an act of the Legislature
of Georgia, and have power such as is usually conferred on banking
institutions, such as to purchase bills of exchange, &c. The
circuit court held that the plaintiffs could not recover on the
bills of exchange, and that the purchase of the bills by the agent
of the plaintiffs were prohibited by the laws of Alabama, and gave
judgment for the defendant. In the case of
Bank of the United
States of Pennsylvania v. Primrose, the plaintiffs, a
corporation by virtue of a law of the State of Pennsylvania,
authorized by its charter to sue and be sued in the name of the
corporation, and to deal in bills of exchange, and composed of
citizens of Pennsylvania and of states of the United States other
than the State of Alabama, the agent of the bank resident in
Mobile, and in possession of funds belonging to the bank and
entrusted with them for the sole purpose of purchasing bills of
exchange, purchased a bill of exchange, and paid for the same in
notes of the branch of the Bank of Alabama at Mobile. The bill was
protested for nonpayment, and a suit was instituted in the circuit
court against the payee, the endorser of the bill. The question for
the opinion of the circuit court was whether the purchase of the
bill of exchange by the Bank of the United States was a valid
contract, under the laws of Alabama. The circuit court decided that
the contract was void and gave judgment for the defendant. The case
of
New Orleans & Carrollton Railroad Company v. Earle
was similar to that of
Bank of Augusta v. Earle. The
Supreme Court reversed the judgment of the circuit court in the
three cases and held the contracts for the purchase of the bills
valid and that the plaintiffs acquired a legal title to the bills
by the purchase.
In the case of
Bank of the United States v. Deveaux,
the Supreme Court decided that in a question of jurisdiction, it
might look to the character of the persons composing a corporation,
and if it appeared that they were citizens of another state and the
fact was set forth by proper averments, the corporation might sue
in its corporate name in the courts of the United States. But in
that case the Court confined its decision in express terms to a
question of jurisdiction, to a right to sue, and evidently went
even so far with some hesitation. The propriety of that decision is
fully assented to, and it has ever since been recognized as
authority in this Court. But the principle has never been extended
any farther than it was carried in that case, and has never been
supposed to extend to contracts made by a corporation, especially
in another sovereignty.
The nature and character of a corporation created by statute,
and the extent of the powers which it may lawfully exercise, have
upon several occasions been under consideration in this Court. The
cases of
Head and Amory v.
Providence Insurance Company, 2 Cranch 167, and
Dartmouth College v.
Woodward, 4 Wheat. 636, cited.
Whenever a corporation makes a contract, it is the contract of
the legal entity, of the artificial being created by the charter,
and not the contract of the individual members. The only rights it
can claim are the rights which are given to it in that character,
and not the rights which belong to its members as citizens of a
state.
Page 38 U. S. 520
It may be safely assumed that a corporation can make no
contracts and do no acts, either within or without the state which
creates it, except such as are authorized by its charter, and those
acts must also be done by such officers or agents and in such
manner as the charter authorizes. And if the law creating a
corporation does not, by the true construction of the words used in
the charter, give it the right to exercise its powers beyond the
limits of the state, all contracts made by it in other states would
be void.
It is very true that a corporation can have no legal existence
out of the boundaries of the sovereignty by which it is created. It
exists only in contemplation of law and by force of the law, and
where that law ceases to operate and is no longer obligatory, the
corporation can have no existence. It must dwell in the place of
its creation, and cannot migrate to another sovereignty. But
although it must live and have its being in that state only, yet it
does not by any means follow that its existence there will not be
recognized in other places, and its residence in one state creates
no insuperable objection to its power of contracting in another. It
is indeed a mere artificial being, invisible and intangible, yet it
is a person for certain purposes in contemplation of law, and has
been recognized as such by the decisions of this Court. It is
sufficient that its existence as an artificial person in the state
of its creation is acknowledged and recognized by the law of the
nation where the dealing takes place, and that it is permitted by
the laws of that place to exercise there the powers with which it
is endowed.
Courts of justice have always expounded and executed contracts
made in a foreign country according to the laws of the place in
which they were made, provided that law was not repugnant to the
laws or policy of their own country. The comity thus extended to
other nations is no impeachment of sovereignty. It is the voluntary
act of the nation by which it is offered, and is inadmissible when
contrary to its policy, or prejudicial to its interests. But it
contributes so largely to promote justice between individuals and
to produce a friendly intercourse between the sovereignties to
which they belong that courts of justice have continually acted
upon it as a part of the voluntary law of nations.
The court can perceive no sufficient reason for excluding from
the protection of the law the contracts of foreign corporations
when they are not contrary to the known policy of the state or
injurious to its interests. It is nothing more than the admission
of the existence of an artificial person created by the law of
another state and clothed with the power of making certain
contracts. It is but the usual comity of recognizing the law of
another state.
The states of the Union are sovereign states, and the history of
the past and the events which are daily occurring furnish the
strongest evidence that they have adopted towards each other the
laws of comity in their fullest extent.
In the legislation of Congress, where the states and the people
of the several states are all represented, we shall find proof of
the general understanding in the United States that by the law of
comity among the states, the corporations chartered by one were
permitted to make contracts in the others.
It is well settled that by the law of comity among nations, a
corporation created by one sovereignty is permitted to make
contracts in another and to sue in its courts, and that the same
law of comity prevails among the several sovereignties of this
Union. The public and well known and long continued usages of
trade, the general acquiescence of the states, the particular
legislation of some of them, as well as the legislation of
Congress, all concur in proving the truth of this proposition.
Franchises are special privileges conferred by government upon
individuals, and which do not belong to the citizens of the country
generally of common right. It is essential to the character of a
franchise that it should be a grant from the sovereign authority,
and in this country no franchise can be held which is not derived
from a law of the state.
The comity of suit brings with it the comity of contract, and
where the one is expressly adopted by the courts, the other must
also be presumed, according to the usages of nations, unless the
contrary can be shown.
The State of Alabama has not merely acquiesced by silence, but
her judicial tribunals have declared the adoption of the law of
international comity in the case of a suit.
The State of Alabama never intended by its Constitution to
interfere with the right of selling or purchasing bills of
exchange.
When the policy of a state is manifest, the courts of the United
States would be bound to notice it as a part of its code of laws
and to declare all contracts in the state repugnant to it to be
illegal and void.
Page 38 U. S. 521
These cases were brought from the Circuit Court of the Southern
District of Alabama by the plaintiffs in each case by writs of
error. The cases of the
Bank of Augusta v. Earle and of
the
Bank of the United States v. Primrose were argued by
counsel. The case of
New Orleans & Carrollton Railroad
Company was submitted by Mr. Ogden on the argument in the
other causes.
In the case of
Bank of Augusta v. Earle, the facts were
the following:
The Bank of Augusta, incorporated by the Legislature of the
State of Georgia, instituted in the Circuit Court for the Southern
District of Alabama in March, 1837, an action against Joseph B.
Earle, a citizen of the State of Alabama, on a bill of exchange,
dated at Mobile, November 3, 1836, drawn at sixty days sight by
Fuller, Gardner & Co. on C. B. Burland & Co. of New York in
favor of Joseph B. Earle and by him endorsed, for six thousand
dollars. The bill was accepted by the drawees, but was afterwards
protested for nonpayment and was returned with protest to the
plaintiffs.
The following facts were agreed upon by the counsel for the
plaintiffs and the defendant, and were submitted to the circuit
court:
"The defendant defends this action upon the following facts that
are admitted by the plaintiffs; that plaintiffs are a corporation,
incorporated by an act of the Legislature of the State of Georgia,
and have power usually conferred upon banking institutions, such as
to purchase bills of exchange, &c. That the bill sued on was
made and endorsed for the purpose of being discounted by Thomas
McGran, the agent of said bank, who had funds of the plaintiffs in
his hands for the purpose of purchasing bills, which funds were
derived from bills and notes, discounted in Georgia by said
plaintiffs and payable in Mobile, and the said McGran, agent as
aforesaid, did so discount and purchase the said bill sued on, in
the City of Mobile, state aforesaid, for the benefit of said bank,
and with their funds; and to remit said funds to the said
plaintiffs."
"If the court shall say that the facts constitute a defense to
this action, judgment will be given for the defendant, otherwise
for plaintiffs, for the amount of the bill, damages, interest and
costs, either party to have the right of appeal or writ of error to
the Supreme Court, upon the statement of facts, and the judgment
thereon."
The circuit court gave judgment for the defendant.
The Bank of the United States, incorporated by the Legislature
of the State of Pennsylvania, as the holders of a bill of exchange
protested for nonpayment, for five thousand three hundred and fifty
dollars, drawn by Charles Gascoine, at Mobile, on 14 January, 1837,
at four months, on J. and C. Gascoine, of New York, in favor of W.
D. Primrose, and by him endorsed, instituted in October, 1837, an
action against the endorser of the bill, in the Circuit Court
for
Page 38 U. S. 522
the Southern District of Alabama. The agreed facts of the case,
which were submitted to the circuit court, were as follow:
"The plaintiffs are a body corporate, existing under and by
virtue of a law of the State of Pennsylvania, authorized by its
charter to sue and be sued by the name of the President, Directors,
and Company of the Bank of the United States, and to deal in bills
of exchange, and is composed of citizens of Pennsylvania and of
states of the United States other than the State of Alabama. The
defendant is a citizen of the State of Alabama. George Poe, Jr.,
was the agent of the plaintiffs, resident in Mobile and in the
possession of funds belonging to the plaintiffs, entrusted to him
for the sold purpose of purchasing bills of exchange. The said
George Poe, Jr., as such agent, on 14 January, A.D. 1837, purchased
at Mobile the bill declared upon and paid for the same in notes of
the branch of the Bank of the State of Alabama at Mobile. The
defendant is the payee of the bill, and endorsed it to plaintiffs,
the present holders. The bill was presented at maturity to the
acceptors, and duly protested for nonpayment, and due and legal
notice given to the defendant."
"The question for the opinion of the court on the foregoing
statement of facts is whether the purchase of the said bill of
exchange by the plaintiffs, as aforesaid, was a valid contract
under the laws of Alabama. If the court be of opinion that the said
contract was valid and that the said plaintiffs, as holders of the
said bill, acquired the legal title thereto by the said purchase,
then judgment to be rendered for the plaintiffs for the sum of
5,350 dollars, with interest at eight percent since 30 May, 1837,
and ten percent damages on it. But if the court be of opinion that
the said purchase was prohibited by the laws of Alabama, and the
contract was therefore invalid and void, judgment to be rendered
for the defendant."
The circuit court gave judgment for the defendant.
The action of
New Orleans & Carrollton Railroad
Company, incorporated by an act of the Legislature of
Louisiana, was upon a bill of exchange drawn by Fuller, Gardner
& Co., of Mobile, in favor of Joseph B. Earle upon Fuller &
Yost of New Orleans for five thousand two hundred and ten dollars,
protested for nonpayment. The action was against the endorser of
the bill, which had been purchased at Mobile by an agent of the
plaintiffs, who had funds in his hands belonging to the plaintiffs
for the purpose of purchasing bills exchange as a means of
remittance to New Orleans.
Page 38 U. S. 584
MR. CHIEF JUSTICE TANEY delivered the opinion of the Court.
These three cases involve the same principles, and have been
Page 38 U. S. 585
brought before us by writs of error directed to the Circuit
Court and Southern District of Alabama. The two first have been
fully argued by counsel, and the last submitted to the Court upon
the arguments offered in the other two. There are some shades of
difference in the facts as stated in the different records, but
none that can affect the decision. We proceed therefore to express
our opinion on the first case argued, which was
Bank of Augusta
v. Earle. The judgment in this case must decide the
others.
The questions presented to the Court arise upon a case stated in
the circuit court in the following words:
"The defendant defends this action upon the following facts that
are admitted by the plaintiffs:"
"That plaintiffs are a corporation, incorporated by an act of
the Legislature of the State of Georgia, and have power usually
conferred upon banking institutions, such as to purchase bills of
exchange, &c. That the bill sued on was made and endorsed for
the purpose of being discounted by Thomas McGran, the agent of said
bank, who had funds of the plaintiffs in his hands for the purpose
of purchasing bills, which funds were derived from bills and notes
discounted in Georgia by said plaintiffs and payable in Mobile, and
the said McGran, agent as aforesaid, did so discount and purchase
the said bill sued on in the City of Mobile, state aforesaid, for
the benefit of said bank and with their funds, and to remit said
funds to the said plaintiffs."
"If the court shall say that the facts constitute a defense to
this action, judgment will be given for the defendant, otherwise
for plaintiffs, for the amount of the bill, damages, interest, and
cost, either party to have the right of appeal or writ of error to
the Supreme Court upon this statement of facts, and the judgment
thereon."
Upon this statement of facts the court gave judgment for the
defendant, being of opinion that a bank incorporated by the laws of
Georgia, with a power among other things to purchase bills of
exchange, could not lawfully exercise that power in the State of
Alabama, and that the contract for this bill was therefore void and
did not bind the parties to the payment of the money.
It will at once be seen that the questions brought here for
decision are of a very grave character, and they have received from
the Court an attentive examination. A multitude of corporations for
various purposes have been chartered by the several states; a large
portion of certain branches of business has been transacted by
incorporated companies or through their agency, and contracts to a
very great amount have undoubtedly been made by different
corporations out of the jurisdiction of the particular state by
which they were created. In deciding the case before us, we in
effect determine whether these numerous contracts are valid or not.
And if, as has been argued at the bar, a corporation, from its
nature and character, if incapable of making such contracts, or if
they are inconsistent with the rights and sovereignty of the states
in which they are made, they cannot be enforced in the courts of
justice.
Page 38 U. S. 586
Much of the argument has turned on the nature and extent of the
powers which belong to the artificial being called a corporation
and the rules of law by which they are to be measured. On the part
of the plaintiff in error it has been contended that a corporation
composed of citizens of other states are entitled to the benefit of
that provision in the Constitution of the United States which
declares that "The citizens of each state shall be entitled to all
privileges and immunities of citizens in the several states;" that
the court should look behind the act of incorporation and see who
are the members of it, and if in this case it should appear that
the corporation of the Bank of Augusta consists altogether of
citizens of the State of Georgia, that such citizens are entitled
to the privileges and immunities of citizens in the State of
Alabama, and as the citizens of Alabama may unquestionably purchase
bills of exchange in that state, it is insisted that the members of
this corporation are entitled to the same privilege, and cannot be
deprived of it even by express provisions in the Constitution or
laws of the state. The case of
Bank of the United States v.
Deveaux, 5 Cranch 61, is relied on to support this
position.
It is true that in the case referred to, this Court decided that
in a question of jurisdiction they might look to the character of
the persons composing a corporation, and if it appeared that they
were citizens of another state and the fact was set forth by proper
averments, the corporation might sue in its corporate name in the
courts of the United States. But in this case the Court confined
its decision in express terms to a question of jurisdiction; to a
right to sue; and evidently went even so far with some hesitation.
We fully assent to the propriety of that decision, and it has ever
since been recognized as authority in this Court. But the principle
has never been extended any farther than it was carried in that
case, and has never been supposed to extent to contracts made by a
corporation, especially in another sovereignty. If it were held to
embrace contracts, and that the members of a corporation were to be
regarded as individuals carrying on business in their corporate
name, and therefore entitled to the privileges of citizens in
matters of contract, it is very clear that they must at the same
time take upon themselves the liabilities of citizens and be bound
by their contracts in like manner. The result of this would be to
make a corporation a mere partnership in business, in which each
stockholder would be liable to the whole extent of his property for
the debts of the corporation, and he might be sued for them in any
state in which he might happen to be found. The clause of the
Constitution referred to certainly never intended to give to the
citizens of each state the privileges of citizens in the several
states and at the same time to exempt them from the liabilities
which the exercise of such privileges would bring upon individuals
who were citizens of the state. This would be to give the citizens
of other states far higher and greater privileges than are enjoyed
by the citizens of the state itself. Besides, it would deprive
every state of all control over the extent
Page 38 U. S. 587
of corporate franchises proper to be granted in the state, and
corporations would be chartered in one to carry on their operations
in another. It is impossible upon any sound principle to give such
a construction to the article in question. Whenever a corporation
makes a contract, it is the contract of the legal entity -- of the
artificial being created by the charter -- and not the contract of
the individual members. The only rights it can claim are the rights
which are given to it in that character, and not the rights which
belong to its members as citizens of a state, and we now proceed to
inquire what rights the plaintiffs in error, a corporation created
by Georgia, could lawfully exercise in another state, and whether
the purchase of the bill of exchange on which this suit is brought
was a valid contract and obligatory on the parties.
The nature and character of a corporation created by a statute,
and the extent of the powers which it may lawfully exercise, have
upon several occasions been under consideration in this Court.
In the case of
Head and Amory v. Providence
Insurance Company, 2 Cranch 127, Chief Justice
Marshall, in delivering the opinion of the Court, said
"Without ascribing to this body, which in its corporate capacity
is the mere creature of the act to which it owes its existence, all
the qualities and disabilities annexed by the common law to ancient
institutions of this sort, it may correctly be said to be precisely
what the incorporating act has made it; to derive all its powers
from that act, and to be capable of exerting its faculties only in
the manner which that act authorizes."
"To this source of its being, then, we must recur to ascertain
its powers and to determine whether it can complete a contract by
such communications as are in this record."
In the case of
Dartmouth College v.
Woodward, 4 Wheat. 636, the same principle was
again decided by the Court. "A corporation," said the Court,
"is an artificial being, invisible, intangible, and existing
only in contemplation of law. Being a mere creature of the law, it
possesses only those properties which the charter of its creation
confers upon it either expressly, or as incidental to its very
existence."
And in the case of
Bank of the United States v.
Dandridge, 12 Wheat. 64, where the questions in
relation to the powers of corporations and their mode of action
were very carefully considered, the Court said
"But whatever may be the implied powers of aggregate
corporations by the common law and the modes by which those powers
are to be carried into operation, corporations created by statute
must depend both for their powers and the mode of exercising them
upon the true construction of the statute itself."
It cannot be necessary to add to these authorities. And it may
be safely assumed that a corporation can make no contracts and do
no acts either within or without the state which creates it except
such as are authorized by its charter, and those acts must also be
done by such officers or agents and in such manner as the charter
authorizes. And if the law creating a corporation does not, by
Page 38 U. S. 588
the true construction of the words used in the charter, give it
the right to exercise its powers beyond the limits of the state,
all contracts made by it in other states would be void.
The charter of the Bank of Augusta authorizes it, in general
terms, to deal in bills of exchange, and consequently gives it the
power to purchase foreign bills as well as inland -- in other
words, to purchase bills payable in another state. The power thus
given clothed the corporation with the right to make contracts out
of the state insofar as Georgia could confer it. For whenever it
purchased a foreign bill and forwarded it to an agent to present
for acceptance, if it was honored by the drawee, the contract of
acceptance was necessarily made in another state, and the general
power to purchase bills without any restriction as to place, by its
fair and natural import, authorized the bank to make such purchases
wherever it was found most convenient and profitable to the
institution, and also to employ suitable agents for that purpose.
The purchase of the bill in question was therefore the exercise of
one of the powers which the bank possessed under its charter, and
was sanctioned by the law of Georgia creating the corporation so
far as that state could authorize a corporation to exercise its
powers beyond the limits of its own jurisdiction.
But it has been urged in the argument that notwithstanding the
powers thus conferred by the terms of the charter, a corporation,
from the very nature of its being, can have no authority to
contract out of the limits of the state, that the laws of a state
can have no extraterritorial operation, and that as a corporation
is the mere creature of a law of the state, it can have no
existence beyond the limits in which that law operates, and that it
must necessarily be incapable of making a contract in another
place.
It is very true that a corporation can have no legal existence
out of the boundaries of the sovereignty by which it is created. It
exists only in contemplation of law and by force of the law, and
where that law ceases to operate and is no longer obligatory, the
corporation can have no existence. It must dwell in the place of
its creation, and cannot migrate to another sovereignty. But
although it must live and have its being in that state only, yet it
does not by any means follow that its existence there will not be
recognized in other places, and its residence in one state creates
no insuperable objection to its power of contracting in another. It
is indeed a mere artificial being, invisible and intangible; yet it
is a person for certain purposes in contemplation of law, and has
been recognized as such by the decisions of this Court. It was so
held in the case of
United States v.
Amedy, 11 Wheat. 412, and in
Beaston v. Farmer's Bank
of Delaware, 12 Pet. 135. Now natural persons,
through the intervention of agents, are continually making
contracts in countries in which they do not reside and where they
are not personally present when the contract is made, and nobody
has ever doubted the validity of these agreements. And what greater
objection can there be to the capacity of an artificial person
Page 38 U. S. 589
by its agents to make a contract within the scope of its limited
powers in a sovereignty in which it does not reside, provided such
contracts are permitted to be made by them by the laws of the
place?
The corporation must no doubt show that the law of its creation
gave it authority to make such contracts through such agents. Yet
as in the case of a natural person, it is not necessary that it
should actually exist in the sovereignty in which the contract is
made. It is sufficient that its existence as an artificial person
in the state of its creation is acknowledged and recognized by the
law of the nation where the dealing takes place and that it is
permitted by the laws of that place to exercise there the powers
with which it is endowed.
Every power, however, of the description of which we are
speaking which a corporation exercises in another state depends for
its validity upon the laws of the sovereignty in which it is
exercised, and a corporation can make no valid contract without
their sanction, express or implied. And this brings us to the
question which has been so elaborately discussed -- whether, by the
comity of nations and between these states, the corporations of one
state are permitted to make contracts in another. It is needless to
enumerate here the instances in which, by the general practice of
civilized countries, the laws of the one will, by the comity of
nations, be recognized and executed in another where the right of
individuals are concerned. The cases of contracts made in a foreign
country are familiar examples, and courts of justice have always
expounded and executed them according to the laws of the place in
which they were made, provided that law was not repugnant to the
laws or policy of their own country. The comity thus extended to
other nations is no impeachment of sovereignty. It is the voluntary
act of the nation by which it is offered, and is inadmissible when
contrary to its policy or prejudicial to its interests. But it
contributes so largely to promote justice between individuals and
to produce a friendly intercourse between the sovereignties to
which they belong that courts of justice have continually acted
upon it, as a part of the voluntary law of nations. It is truly
said in Story's Conflict of Laws 37 that
"In the silence of any positive rule affirming or denying or
restraining the operation of foreign laws, courts of justice
presume the tacit adoption of them by their own government unless
they are repugnant to its policy or prejudicial to its interests.
It is not the comity of the courts, but the comity of the nation
which is administered, and ascertained in the same way, and guided
by the same reasoning by which all other principles of municipal
law are ascertained and guided."
Adopting as we do the principle here stated, we proceed to
inquire whether, by the comity of nations, foreign corporations are
permitted to make contracts within their jurisdiction, and we can
perceive no sufficient reason for excluding them when they are not
contrary to the known policy of the state or injurious to its
interests.
Page 38 U. S. 590
It is nothing more than the admission of the existence of an
artificial person created by the law of another state and clothed
with the power of making certain contracts. It is but the usual
comity of recognizing the law of another state. In England, from
which we have received our general principles of jurisprudence, no
doubt appears to have been entertained of the right of a foreign
corporation to sue in its courts since the case of
Henriquez v.
Dutch West India Company, decided in 1729, 2 L.Raymond 1532.
And it is a matter of history which this Court is bound to notice
that corporations created in this country have been in the open
practice for many years past of making contracts in England of
various kinds and to very large amounts, and we have never seen a
doubt suggested there of the validity of these contracts by any
court or any jurist. It is impossible to imagine that any court in
the United States would refuse to execute a contract by which an
American corporation had borrowed money in England, yet if the
contracts of corporations made out of the state by which they were
created are void, even contracts of that description could not be
enforced.
It has, however, been supposed that the rules of comity between
foreign nations do not apply to the states of this Union, that they
extend to one another no other rights than those which are given by
the Constitution of the United States, and that the courts of the
general government are not at liberty to presume, in the absence of
all legislation on the subject, that a state has adopted the comity
of nations towards the other states as a part of its jurisprudence
or that it acknowledges any rights but those which are secured by
the Constitution of the United States. The Court thinks otherwise.
The intimate union of these states as members of the same great
political family, the deep and vital interests which bind them so
closely together, should lead us, in the absence of proof to the
contrary, to presume a greater degree of comity and friendship and
kindness towards one another than we should be authorized to
presume between foreign nations. And when (as without doubt must
occasionally happen) the interest or policy of any state requires
it to restrict the rule, it has but to declare its will, and the
legal presumption is at once at an end. But until this is done,
upon what grounds could this Court refuse to administer the law of
international comity between these states? They are sovereign
states, and the history of the past and the events which are daily
occurring furnish the strongest evidence that they have adopted
towards each other the laws of comity in their fullest extent.
Money is frequently borrowed in one state by a corporation created
in another. The numerous banks established by different states are
in the constant habit of contracting and dealing with one another.
Agencies for corporations engaged in the business of insurance and
of banking have been established in other states and suffered to
make contracts without any objection on the part of the state
authorities. These usages of commerce and trade have been so
general and public and have been practiced for so long a period of
time and so generally acquiesced
Page 38 U. S. 591
in by the states that the Court cannot overlook them when a
question like the one before us is under consideration. The silence
of the state authorities while these events are passing before them
shows their assent to the ordinary laws of comity which permit a
corporation to make contracts in another state. But we are not left
to infer it merely from the general usages of trade and the silent
acquiescence of the states. It appears from the cases cited in the
argument, which it is unnecessary to recapitulate in this opinion,
that it has been decided in many of the state courts -- we believe
in all of them where the question has arisen -- that a corporation
of one state may sue in the courts of another. If it may sue, why
may it not make a contract? The right to sue is one of the powers
which it derives from its charter. If the courts of another country
take notice of its existence as a corporation so far as to allow it
to maintain a suit and permit it to exercise that power, why should
not its existence be recognized for other purposes, and the
corporation permitted to exercise another power which is given to
it by the same law and the same sovereignty, where the last
mentioned power does not come in conflict with the interest or
policy of the state? There is certainly nothing in the nature and
character of a corporation which could justly lead to such a
distinction and which should extent to it the comity of suit and
refuse to it the comity of contract. If it is allowed to sue, it
would of course be permitted to compromise, if it thought proper,
with its debtor; to give him time; to accept something else in
satisfaction; to give him a release; and to employ an attorney for
itself to conduct its suit. These are all matters of contract, and
yet are so intimately connected with the right to sue that the
latter could not be effectually exercised if the former were
denied.
We turn in the next place to the legislation of the states.
So far as any of them have acted on this subject, it is evident
that they have regarded the comity of contract, as well as the
comity of suit, to be a part of the law of the state unless
restricted by statute. Thus, a law was passed by the State of
Pennsylvania, March 10, 1810, which prohibited foreigners and
foreign corporations from making contracts of insurance against
fire and other losses mentioned in the law. In New York also a law
was passed March 18, 1814, which prohibited foreigners and foreign
corporations from making in that state insurances against fire, and
by another law passed April 21, 1818, corporations chartered by
other states are prohibited from keeping any office of deposit for
the purpose of discounting promissory notes or carrying on any kind
of business which incorporated banks are authorized by law to carry
on. The prohibition of certain specified contracts by corporations
in these laws is by necessary implication an admission that other
contracts may be made by foreign corporations in Pennsylvania and
New York, and that no legislative permission is necessary to give
them validity. And the language of these prohibitory acts most
Page 38 U. S. 592
clearly indicates that the contracts forbidden by them might
lawfully have been made before these laws were passed.
Maryland has gone still farther in recognizing this right. By a
law passed in 1834, that state has prescribed the manner in which
corporations not chartered by the state, "which shall transact or
shall have transacted business" in the state, may be sued in its
courts upon contracts made in the state. The law assumes in the
clearest manner that such contracts were valid, and provides a
remedy by which to enforce them.
In the legislation of Congress also, where the states and the
people of the several states are all represented, we shall find
proof of the general understanding in the United States that by the
law of comity among the states, the corporations chartered by one
were permitted to make contracts in the others. By the Act of
Congress of June 23, 1836, 4 Story's Laws 2445, regulating the
deposits of public money, the Secretary of the Treasury was
authorized to make arrangements with some bank or banks to
establish an agency in the states and territories where there was
no bank or none that could be employed as a public depository to
receive and disburse the public money which might be directed to be
there deposited. Now if the proposition be true that a corporation
created by one state cannot make a valid contract in another, the
contracts made through this agency in behalf of the bank, out of
the state where the bank itself was chartered, would all be void
both as respected the contracts with the government and the
individuals who dealt with it. How could such an agency, upon the
principles now contended for, have performed any of the duties for
which it was established?
But it cannot be necessary to pursue the argument further. We
think it is well settled that by the law of comity among nations, a
corporation created by one sovereignty is permitted to make
contracts in another and to sue in its courts, and that the same
law of comity prevails among the several sovereignties of this
Union. The public and well known and long continued usages of
trade, the general acquiescence of the states, the particular
legislation of some of them, as well as the legislation of Congress
all concur in proving the truth of this proposition.
But we have already said that this comity is presumed from the
silent acquiescence of the state. Whenever a state sufficiently
indicates that contracts which derive their validity from its
comity are repugnant to its policy or are considered as injurious
to its interests, the presumption in favor of its adoption can no
longer be made. And it remains to inquire whether there is anything
in the Constitution or laws of Alabama from which this Court would
be justified in concluding that the purchase of the bill in
question was contrary to its policy.
The Constitution of Alabama contains the following provisions in
relation to banks:
"One state bank may be established with such number of
Page 38 U. S. 593
branches as the general assembly may from time to time deem
expedient, provided that no branch bank shall be established nor
bank charter renewed under the authority of this state without the
concurrence of two-thirds of both houses of the general assembly,
and provided also that not more than one bank or branch bank shall
be established nor bank charter renewed but in conformity to the
following rules:"
"1. At least two-fifths of the capital stock shall be reserved
for the state."
"2. A proportion of power, in the direction of the bank, shall
be reserved to the state, equal at least to its proportion of stock
therein."
"3. The state and individual stockholders shall be liable
respectively for the debts of the bank, in proportion to their
stock holden therein."
"4. The remedy for collecting debts shall be reciprocal, for and
against the bank."
"5. No bank shall commence operations until half of the capital
stock subscribed for be actually paid in gold and silver, which
amount shall in no case be less than one hundred thousand
dollars."
Now from these provisions in the Constitution it is evidently
the policy of Alabama to restrict the power of the legislature in
relation to bank charters and to secure to the state a large
portion of the profits of banking in order to provide a public
revenue, and also to make safe the debts which should be contracted
by the banks. The meaning, too, in which that state used the word
"bank" in her Constitution is sufficiently plain from its
subsequent legislation. All of the banks chartered by it are
authorized to receive deposits of money, to discount notes, to
purchase bills of exchange, and to issue their own notes payable on
demand to bearer. These are the usual powers conferred on the
banking corporations in the different states of the Union, and when
we are dealing with the business of banking in Alabama, we must
undoubtedly attach to it the meaning in which it is used in the
constitution and laws of the state. Upon so much of the policy of
Alabama, therefore, in relation to banks as is disclosed by its
constitution, and upon the meaning which that state attaches to the
word bank, we can have no reasonable doubt. But before this Court
can undertake to say that the discount of the bill in question was
illegal, many other inquiries must be made and many other
difficulties must be solved. Was it the policy of Alabama to
exclude all competition with its own banks by the corporations of
other states? Did the state intend by these provisions in its
Constitution and these charters to its banks to inhibit the
circulation of the notes of other banks, the discount of notes, the
loan of money, and the purchase of bills of exchange? Or did it
design to go still further and forbid the banking corporations of
other states from making a contract of any kind within its
territory? Did it mean to prohibit its own banks from keeping
mutual accounts with the banks of other states and from entering
into any contract with
Page 38 U. S. 594
them, express or implied? Or did she mean to give to her banks
the power of contracting within the limits of the state with
foreign corporations, and deny it to individual citizens? She may
believe it to be the interest of her citizens to permit the
competition of other banks in the circulation of notes in the
purchase and sale of bills of exchange and in the loan of money. Or
she may think it to be her interest to prevent the circulation of
the notes of other banks and to prohibit them from sending money
there to be employed in the purchase of exchange or making
contracts of any other description.
The state has not made known its policy upon any of these
points. And how can this Court, with no other lights before it,
undertake to mark out by a definite and distinct line the policy
which Alabama has adopted in relation to this complex and intricate
question of political economy? It is true that the state is the
principal stockholder in her own banks. She has created seven, and
in five of them the state owns the whole stock, and in the others
two-fifths. This proves that the state is deeply interested in the
successful operation of her banks, and it may be her policy to shut
out all interference with them. In another view of the subject,
however, she may believe it to be her policy to extend the utmost
liberality to the banks of other states in the expectation that it
would produce a corresponding comity in other states towards the
banks in which she is so much interested. In this respect it is a
question chiefly of revenue and of fiscal policy. How can this
Court, with no other aid than the general principles asserted in
her constitution, and her investments in the stocks of her own
banks, undertake to carry out the policy of the state upon such a
subject in all of its details and decide how far it extends and
what qualifications and limitations are imposed upon it? These
questions must be determined by the state itself, and not by the
courts of the United States. Every sovereignty would without doubt
choose to designate its own line of policy, and would never consent
to leave it as a problem to be worked out by the courts of the
United States from a few general principles which might very
naturally be misunderstood or misapplied by the court. It would
hardly be respectful to a state for this Court to forestall its
decision and to say, in advance of her legislation, what her
interest or policy demands. Such a course would savor more of
legislation than of judicial interpretation.
If we proceed from the Constitution and bank charters to other
acts of legislation by the state, we find nothing that should lead
us to a contrary conclusion. By an act of assembly of the state
passed January 12, 1827, it was declared unlawful for any person,
body corporate, company, or association to issue any note for
circulation as a bank note without the authority of law, and a fine
was imposed upon anyone offending against this statute. Now this
act protected the privileges of her own banks in relation to bank
notes only, and contains no prohibition against the purchase of
bills of exchange or against any other business by foreign banks
which
Page 38 U. S. 595
might interfere with her own banking corporations. And if we
were to form our opinion of the policy of Alabama from the
provisions of this law, we should be bound to say that the
legislature deemed it to be the interest and policy of the state
not to protect its own banks from competition in the purchase of
exchange or in anything but the issuing of notes for circulation.
But this law was repealed by a subsequent law, passed in 1833,
repealing all acts of assembly not comprised in a digest then
prepared and adopted by the legislature. The law of 1827 above
mentioned was not contained in this digest, and was consequently
repealed. It has been said at the bar in the argument that it was
omitted from the digest by mistake, and was not intended to be
repealed. But this Court cannot act judicially upon such an
assumption. We must take their laws and policy to be such as we
find them in their statutes. And the only inference that we can
draw from these two laws is that after having prohibited under a
penalty any competition with their banks by the issue of notes for
circulation, they changed their policy and determined to leave the
whole business of banking open to the rivalry of others. The other
laws of the state therefore, in addition to the constitution and
charters, certainly would not authorize this Court to say that the
purchase of bills by the corporations of another state was a
violation of its policy.
The decisions of its judicial tribunals lead to the same result.
It is true that in the case of
State v. Stebbins, 1
Stewart 312, the court said that since the adoption of their
constitution, banking in that state was to be regarded as a
franchise. And this case has been much relied on by the defendant
in error.
Now we are satisfied from a careful examination of the case that
the word "franchise" was not used and could not have been used by
the court in the broad sense imputed to it in the argument. For if
banking includes the purchase of bills of exchange and all banking
is to be regarded as the exercise of a franchise, the decision of
the court would amount to this -- that no individual citizen of
Alabama could purchase such a bill. For franchises are special
privileges conferred by government upon individuals and which do
not belong to the citizens of the country generally, of common
right. It is essential to the character of a franchise that it
should be a grant from the sovereign authority, and in this country
no franchise can be held which is not derived from a law of the
state.
But it cannot be supposed that the Constitution of Alabama
intended to prohibit its merchants and traders from purchasing or
selling bills of exchange and to make it a monopoly in the hands of
their banks. And it is evident that the court of Alabama, in the
case of
State v. Stebbins, did not mean to assert such a
principle. In the passage relied on they are speaking of a paper
circulating currency, and asserting the right of the state to
regulate and to limit it.
The institutions of Alabama, like those of the other states, are
founded upon the great principles of the common law, and it is
Page 38 U. S. 596
very clear that at common law the right of banking in all of its
ramifications belonged to individual citizens, and might be
exercised by them at their pleasure. And the correctness of this
principle is not questioned in the case of
State v.
Stebbins. Undoubtedly the sovereign authority may regulate and
restrain this right, but the Constitution of Alabama purports to be
nothing more than a restriction upon the power of the legislature
in relation to banking corporations, and does not appear to have
been intended as a restriction upon the rights of individuals. That
part of the subject appears to have been left, as is usually done,
for the action of the legislature, to be modified according to
circumstances, and the prosecution against Stebbins was not founded
on the provisions contained in the constitution, but was under the
law of 1827 above mentioned, prohibiting the issuing of bank notes.
We are fully satisfied that the state never intended by its
constitution to interfere with the right of purchasing or selling
bills of exchange, and that the opinion of the court does not refer
to transactions of that description when it speaks of banking as a
franchise.
The question then recurs does the policy of Alabama deny to the
corporations of other states the ordinary comity between nations,
or does it permit such a corporation to make those contracts which
from their nature and subject matter, are consistent with its
policy, and are allowed to individuals? In making such contracts, a
corporation no doubt exercises its corporate franchise. But it must
do this whenever it acts as a corporation, for its existence is a
franchise. Now it has been held in the court of Alabama itself, in
2 Stewart 147, that the corporation of another state may sue in its
courts, and the decision is put directly on the ground of national
comity. The state therefore has not merely acquiesced by silence,
but her judicial tribunals have declared the adoption of the law of
international comity in the case of a suit. We have already shown
that the comity of suit brings with it the comity of contract, and
where the one is expressly adopted by its courts, the other must
also be presumed according to the usages of nations unless the
contrary can be shown.
The cases cited from 7 Wend. 276 and from 2 Rand. 465 cannot
influence the decision in the case before us. The decisions of
these two state courts were founded upon the legislation of their
respective states, which was sufficiently explicit to enable their
judicial tribunals to pronounce judgment on their line of policy.
But because two states have adopted a particular policy in relation
to the banking corporations of other states, we cannot infer that
the same rule prevails in all of the other states.
Each state must decide for itself. And it will be remembered
that it is not the State of Alabama which appears here to complain
of an infraction of its policy. Neither the state nor any of its
constituted authorities has interfered in this controversy. The
objection is taken by persons who were parties to those contracts
and
Page 38 U. S. 597
who participated in the transactions which are now alleged to
have been in violation of the laws of the state.
It is but justice to all the parties concerned to suppose that
these contracts were made in good faith and that no suspicion was
entertained by either of them that these engagements could not be
enforced. Money was paid on them by one party and received by the
other. And when we see men dealing with one another openly in this
manner, and making contracts to a large amount, we can hardly doubt
as to what was the generally received opinion in Alabama at that
time in relation to the right of the plaintiffs to make such
contracts. Everything now urged as proof of her policy was equally
public and well known when these bills were negotiated. And when a
court is called on to declare contracts thus made to be void upon
the ground that they conflict with the policy of the state, the
line of that policy should be very clear and distinct to justify
the court in sustaining the defense. Nothing can be more vague and
indefinite than that now insisted on as the policy of Alabama. It
rests altogether on speculative reasoning as to her supposed
interests, and is not supported by any positive legislation. There
is no law of the state which attempts to define the rights of
foreign corporations.
We, however, do not mean to say that there are not many subjects
upon which the policy of the several states is abundantly evident
from the nature of their institutions and the general scope of
their legislation, and which do not need the aid of a positive and
special law to guide the decisions of the courts. When the policy
of a state is thus manifest, the courts of the United States would
be bound to notice it as a part of its code of laws and to declare
all contracts in the state repugnant to it to be illegal and void.
Nor do we mean to say whether there may not be some rights under
the Constitution of the United States which a corporation might
claim under peculiar circumstances in a state other than that in
which it was chartered. The reasoning as well as the judgment of
the Court is applied to the matter before us, and we think the
contracts in question were valid, and that the defense relied on by
the defendants cannot be sustained.
The judgment of the circuit court in these cases must therefore
be
Reversed with costs.
MR. JUSTICE BALDWIN delivered an opinion assenting to the
judgment of the court on principles which were stated at large in
the opinion. This opinion was not delivered to the reporter.
MR. JUSTICE McKINLEY delivered an opinion dissenting from the
judgment of the Court.
I dissent from so much of the opinion of the majority of the
Court as decides that the law of nations furnishes a rule by which
validity can be given to the contracts in these cases and from so
much as
Page 38 U. S. 598
decides that the contracts which were the subjects of the suits
were not against the policy of the laws of Alabama.
This is the first time since the adoption of the Constitution of
the United States that any federal court has, directly or
indirectly, imputed national power to any of the states of the
Union, and it is the first time that validity has been given to
such contracts, which, it is acknowledged, would otherwise have
been void by the application of a principle of the necessary law of
nations. This principle has been adopted and administered by the
Court as part of the municipal law of the State of Alabama,
although no such principle has been adopted or admitted by that
state. And whether the law of nations still prevails among the
states notwithstanding the Constitution of the United States, or
the right and authority to administer it in these cases are derived
from that instrument, are questions not distinctly decided by the
majority of the Court. But whether attempted to be derived from one
source or the other, I deny the existence of it anywhere for any
such purpose.
Because the municipal laws of nations cannot operate beyond
their respective territorial limits, and because one nation has no
right to legislate for another, certain rules founded in the law of
nature and the immutable principles of justice have, for the
promotion of harmony and commercial intercourse, been adopted by
the consent of civilized nations. But no necessity exists for such
a law among the several states. In their character of states they
are governed by written constitutions and municipal laws. It has
been admitted by the counsel and decided by the majority of the
Court that without the authority of the statutes of the states
chartering these banks, they would have no power whatever to
purchase a bill of exchange, even in the state where they are
established. If it requires the exertion of the legislative power
of Pennsylvania, for instance, to enable the United States Bank to
purchase a bill of exchange in that state, why should it not
require the same legislative authority to enable it to do the same
act in Alabama? It has been contended in argument that the power
granted to the bank to purchase a bill of exchange at Philadelphia,
in Pennsylvania, payable at Mobile, in Alabama, would be nugatory
unless the power existed also to make contracts at both ends of the
line of exchange. The authority to deal in exchange may very well
be exercised by having command of one end of the line of exchange
only. To buy and sell the same bill at the bank is dealing in
exchange, and may be exercised with profit to the bank, but not
perhaps as conveniently as if it could make contracts in Alabama as
well as at the bank.
But if it has obtained authority to command but one end of the
line of exchange, it certainly has no right to complain that it
cannot control the other when that other is within the jurisdiction
of another state whose authority or consent it has not even asked
for. The bill of exchange which is the subject of controversy
between the Bank of Augusta and Earle and that which is the subject
of controversy between the United States Bank and Primrose
Page 38 U. S. 599
were both drawn at Mobile and made payable at New York. Neither
of the banks had authority from any state to make a contract at
either end of the line of exchange here established. Here, then,
they claim and have exercised all the rights and privileges of
natural persons, independent of their charters, and claim the
right, by the comity of nations, to make original contracts
everywhere because they have a right, by their charters, to make
like contracts in the states where they were created, and have "a
local habitation and a name."
It is difficult to conceive of the exercise of national comity
by a state having no national power. Whatever national power the
old thirteen states possessed previous to the adoption of the
Constitution of the United States they conferred by that instrument
upon the federal government. And to remove all doubt upon the
question whether the power thus conferred was exclusive or
concurrent, the states are by the tenth section of the First
Article of the Constitution expressly prohibited from entering into
any treaty, alliance, or confederation, and without the consent of
Congress from entering into any agreement or compact with another
state or with a foreign power. By these provisions, the states
have, by their own voluntary act and for wise purposes, deprived
themselves of all national power and of all the means of
international communication, and cannot even enter into an
agreement or compact with a sister state for any purpose whatever
without the consent of Congress. The comity of nations is defined
by Judge Story in his Conflict of Laws to be the obligations of the
laws of one nation in the territories of another, derived
altogether from the voluntary consent of the latter. And in the
absence of any positive rule affirming or denying or restraining
the operation of foreign laws, courts of justice presume the tacit
adoption of them by their own government unless they are repugnant
to its policy or prejudicial to its interests. Conflict of Laws
37.
Now I ask again what is the necessity for such a rule of law as
this? Have not the states full power to adopt or reject what laws
of their sister states they please? And why should the courts
interfere in this case when the states have full power to legislate
for themselves and to adopt or reject such laws of their sister
states as they think proper? If Alabama had adopted these laws, no
difficulty could have arisen in deciding between these parties.
This Court would not then have been under the necessity of
resorting to a doubtful presumption for a rule to guide its
decision. But when the Court has determined that they have the
power to presume that Alabama has adopted the laws of the states
chartering these banks, other difficult questions arise. How much
of the charter of each bank has been adopted? This is a question of
legislative discretion which, if submitted to the legislature of
the state, would be decided upon reasons of policy and public
convenience. And the question of power to pass such a law under the
Constitution of Alabama would have to be considered and decided.
These are
Page 38 U. S. 600
very inconvenient questions for a judicial tribunal to
determine. As the majority of the Court has not expressly stated
whether Alabama has adopted the whole charters of the banks or what
parts they have adopted, there is now no certainty what the law of
Alabama is on the subject of these charters.
But these are not all the difficulties that arise in the
exercise of this power by the judiciary. Many questions very
naturally present themselves in the investigation of this subject,
and the first is to what government does this power belong?
Secondly, has it been conferred upon the United States, or has it
been reserved to the states by the Tenth Amendment of the
Constitution? If it be determined that the power belongs to the
United States, in what provision of the Constitution is it to be
found? And how is it to be exercised? By the judiciary, or by
Congress? The counsel for the banks contended that the power of
Congress to regulate commerce among the several states deprives
Alabama of the power to pass any law restraining the sale and
purchase of a bill of exchange, and by consequence the whole power
belongs to Congress. The Court, by the opinion of the majority,
does not recognize this doctrine in terms. But if the power which
the Court exercised is not derived from that provision of the
Constitution, in my opinion it does not exist.
If ever Congress shall exercise this power to the broad extent
contended for, the power of the states over commerce and contracts
relating to commerce will be reduced to very narrow limits. The
creation of banks, the making and endorsing of bills of exchange
and promissory notes, and the damages on bills of exchange all
relate more or less to the commerce among the several states.
Whether the exercise of these powers amounts to regulating the
commerce among the several states is not a question for my
determination on this occasion. The majority of the Court has
decided that the comity of nations gives validity to these
contracts.
And what are the reasons upon which this doctrine is now
established? Why, the counsel for the banks say we are obliged to
concede that these banks had no authority to make these contracts
in the State of Alabama in virtue of the laws of the states
creating them or by the laws of Alabama. Therefore, unless this
Court will extend to them the benefit of the comity of nations,
they must lose all the money now in controversy, they will be
deprived hereafter of the benefit of a very profitable branch of
their business as bankers, and great public inconvenience will
result to the commerce of the country. And besides all this, there
are many corporations in the north which were created for the
purpose of carrying on various branches of manufactures, and
particularly that of cotton. Those engaged in the manufacture of
cotton will be unable to send their agents to the south to sell
their manufactured articles and to purchase cotton to carry on
their business, and may lose debts already created. This is the
whole amount of the argument upon which the benefit of this
doctrine is claimed. Because banks cannot make money in places and
by means not authorized by their charters,
Page 38 U. S. 601
because they may lose by contracts made in unauthorized places,
because the commerce of the country may be subjected to temporary
inconvenience, and because corporations in the north, created for
manufacturing purposes only, cannot, by the authority of their
charters, engage in commerce also, this doctrine, which has not
heretofore found a place in our civil code, is to be established.
Notwithstanding it is conceded that the states hold ample
legislative power over the same subject, it is deemed necessary on
this occasion, to settle this doctrine by the supreme tribunal. The
majority of the Court having in its opinion conceded that Alabama
might make laws to prohibit foreign banks to make contracts,
thereby admitted by implication that she could make laws to permit
such contracts, I think it would have been proper to have left the
power there, to be exercised or not as Alabama in her sovereign
discretion, might judge best for her interest or her comity. The
majority of the Court thought and decided otherwise. And here
arises the radical and essential difference between them and
me.
They maintain a power in the federal government, and in the
judicial department of it, to do that which in my judgment belongs
exclusively to the state governments, and to be exercised by the
legislative and not the judicial departments thereof. A difference
so radical and important growing out of the fundamental law of the
land has imposed on me the unpleasant necessity of maintaining,
single-handed, my opinion against the opinion of all the other
members of the Court. However unequal the conflict, duty impels me
to maintain it firmly, and although I stand alone here, I have the
good fortune to be sustained to the whole extent of my opinion by
the very able opinion of the Court of Appeals of Virginia in the
case of
Marietta Bank v. Pendell, 2 Ran. 465. If Congress
has the power to pass laws on this subject, it is an exclusive
power, and the states would then have no power to prohibit
contracts of any kind within their jurisdictions. If the government
of the United States has power to restrain the states under the
power to regulate commerce, whether it be exerted by the
legislative or the judicial department of the government is not
material; it being the paramount law, it paralyzes all state power
on the same subject. And this brings me to the consideration of the
second ground on which I dissent.
It was contended by the counsel for the banks that all the
restraints imposed by the Constitution of Alabama in relation to
banking were designed to operate upon the legislature of the state,
and not upon the citizens of that or any other state. To comprehend
the whole scope and intention of that instrument, it will be
necessary to ascertain from the language used what was within the
contemplation and design of the convention. The provision in the
Constitution on the subject of banking is this:
"One state bank may be established, with such number of branches
as the general assembly may from time to time deem expedient,
provided that no branch bank shall be established nor bank charter
renewed under
Page 38 U. S. 602
the authority of this state without the concurrence of
two-thirds of both houses of the general assembly, and provided
also that not more than one bank nor branch bank shall be
established nor bank charter renewed at anyone session of the
general assembly, nor shall any bank or branch bank be established
or bank charter renewed but in conformity with the following rules:
"
"1. At least two-fifths of the capital stock shall be reserved
for the state."
"2. A proportion of power in the direction of the bank shall be
reserved to the state equal at least to its proportion of stock
therein."
"3. The state and the individual stockholders shall be liable,
respectively, for the debts of the bank in proportion to their
stock holden therein."
"4. The remedy for collecting debts shall be reciprocal for and
against the bank."
"5. No bank shall commence operations until half of the capital
stock subscribed for shall be actually paid in gold or silver,
which amount shall in no case be less than one hundred thousand
dollars."
There are a few other unimportant rules laid down, but they are
not material to the present inquiry. The inquiry naturally suggests
itself to the mind why did Alabama introduce into her constitution
these very unusual and specific rules? If they had not been deemed
of great importance, they would not have been found there. Can
anyone say, therefore, that this regularly organized system, to
which all banks within the State of Alabama were to conform, did
not establish for the state, her legislature, or other authorities
a clear and unequivocal policy on the subject of banking? It has
been conceded in the argument and by the opinion of the majority of
the Court that these constitutional provisions do restrict and
limit the power of the legislature of the state. Then the
legislature cannot establish a bank in Alabama, but in conformity
with the rules here laid down. They have established seven banks,
five of them belonging exclusively to the state, and two-fifths of
the stock of the other two, with a proportionate power in the
direction, reserved to the state. Each of these banks is authorized
to deal in exchange.
It is proper to stop here and inquire whether the subject of
exchange is proper to enter into the policy of the legislation of a
state, and whether it is a part of the customary and legitimate
business of banking. All the authorities on the subject show that
in modern times it is a part of the business of banking.
See Postlethwaite's Commercial Dictionary, title Bank;
Tomlin's Law Dictionary, title Bank; Rees' Cyclopaedia, title Bank;
Vatt. 105. This last author quoted, after showing that it is the
duty of the sovereign of a nation to furnish for his subjects a
sufficiency of money for the purposes of commerce, to preserve it
from adulteration, and to punish those who counterfeit it, proceeds
to say,
"There is another custom more modern and of no less use to
commerce than the establishment of money -- namely, exchange, or
the business of the bankers, by means of whom a merchant remits
immense sums from
Page 38 U. S. 603
one end of the world to the other with very little expense, and
if he pleases, without danger. For the same reasons that sovereigns
are obliged to protect commerce, they are obliged to protect this
custom by good laws in which every merchant foreigner or citizen
may find security."
From these authorities it appears that exchange is a part of
modern banking, or at least to intimately connected with it that
all modern banks have authority to deal in it. And it also appears
that it is as much the duty of a state to provide for exchange as
for money or a circulating medium for its subjects or citizens.
When the State of Alabama reserved to herself, by her
fundamental law, at least two-fifths of the capital and control of
all banks to be created in the state, and by her laws has actually
appropriated to herself the whole of the capital, management, and
profits of five out of seven banks and two-fifths of the other two,
had she not the same right to appropriate the banking right to deal
in exchange to herself to the same extent? While performing her
duty under the Constitution by providing a circulating medium for
the citizens, she was not unmindful of her duty in relation to
exchange, and that is also provided for. Has she not provided
increased security and safety to the merchant by making herself
liable for the payment of every bill of exchange sold by the five
banks belonging to her and for two-fifths of all sold by the other
two? And has she not also provided by law that all the profits
derived from thus dealing in bills of exchange shall go into the
public treasury for the common benefit of the people of the state?
And has she not, by the profits arising from her banking, including
the profits on exchange, been enabled to pay the whole expenses of
the government, and thereby to abolish all direct or other
taxation?
See Aikin's Digest 651.
It was not the intention of the legislature, by conferring the
power upon these banks to purchase and sell bills of exchange, to
deprive the citizens of the state or any other natural person of
the right to do the same thing. But it was the intention to exclude
all accumulated bank capital which did not belong to the state, in
whole or in part, according to the Constitution, from dealing in
exchange, and such is the inevitable and legal effect of those
laws. Let us test this principle. It is admitted by the majority of
the Court in its opinion that these constitutional provisions were
intended as a restraint upon the legislature of the state. If so
intended, the legislature can pass no law contrary to the spirit
and intention of the Constitution or contrary to the spirit and
intention of the charters of the banks created in pursuance of its
provisions. Now were the laws chartering the banks which are
parties to this suit contrary to the spirit and intention of the
Constitution and laws of Alabama? That is the precise question.
It must be borne in mind that these were banks, and nothing but
banks, that made the contracts in Alabama, and in that character
and that only have they been considered in the opinion of the
majority of the Court. Were those banks chartered by the
Legislature of Alabama, two-thirds of both houses concurring? Was
at least two-fifths of the capital stock and of the management of
these
Page 38 U. S. 604
banks reserved to the state? Did the profits arising from the
purchase of these bills of exchange go into the Treasury of
Alabama? All these questions must be answered in the negative. Then
these are not constitutional banks in Alabama, and cannot contract
there? The majority of the Court has decided these causes upon the
presumption that Alabama had adopted the laws of Georgia,
Louisiana, and Pennsylvania chartering these banks. And this
presumption rests for its support upon the fact that there is
nothing in the laws or the policy of the laws of Alabama to resist
this presumption. I suppose it will not be contended that the power
of this Court to presume that Alabama had adopted these laws is
greater than the power of Alabama to adopt the laws for herself.
Suppose these banks had made a direct application to the
Legislature of Alabama to pass a law to authorize them to deal in
bills of exchange in that state, could the legislature have passed
such a law without violating the constitution of the state?
An incorporated bank in Alabama is not only the mere creature of
the law creating it, as banks are in other states, but it is the
creature of a peculiar fundamental law, and if its charter is not
in conformity to the provisions of the fundamental law, it is void.
It must be recollected that the banks, which are the plaintiffs in
these suits, when they present themselves to the legislature,
asking permission to use their corporate privileges there, are not
demanding a right, but asking a favor, which the legislature may
grant or refuse as it pleases. If it should refuse, it would
violate no duty, incur no responsibility. If, however, the Court
exercise the power, it is upon the positive obligation of Alabama
that the presumption must arise, or the right does not exist. A
positive rule of law cannot arise out of an imperfect obligation by
presumption or implication. But to put it on the foot of bare
repugnance of the law presumed to be adopted to the laws of the
country adopting, if there be any repugnance, the Court ought not
to presume the adoption. Story's Conflict of Laws 37. The charter
of every bank not created in conformity with the Constitution of
Alabama must at least be repugnant to it. The presumption is that
the charters of all these banks were repugnant, there being no
reason or inducement to make them conform in the states where they
were created. The power of the Court to adopt the laws creating
these banks as they actually existed, and the power of the
Legislature of Alabama to adopt them in a modified form or to grant
the banks a mere permission to do a specified act, present very
different questions, and involve very different powers. If,
therefore, the legislature could not adopt the charters in the
least objectionable form nor authorize the banks to deal in
exchange without violating the Constitution of Alabama, how can it
be said that the contracts in controversy are not against the
policy of the laws of Alabama? And by what authority does the
majority of this Court presume that Alabama has adopted those laws?
The general rule is that slight evidence and circumstances shall
defeat a mere legal presumption of law. This case will be a signal
exception to that rule.
Page 38 U. S. 605
In the case of
Pennington v. Townsend, 7 Wend. 278, the
Protection and Lombard Bank, chartered by New Jersey, by agents
undertook to do banking business in New York, and there discounted
the check which was the subject of the suit in violation of the
restraining acts of 1813 and 1818, the first of which enacts that
no person unauthorized by law shall become a member of any
association for the purpose of issuing notes or transacting any
other business which incorporated banks may or do transact. The act
of 1818 enacts that it shall not be lawful for any person,
association, or body corporate to keep any office of deposit for
discounting, or for carrying on any kind of banking business, and
affixes a penalty of $1,000, to be recovered, &c. Under these
laws, the contract between the parties was held to be void, and the
court says
"The protection against the evil intended to be remedied,
to-wit, preventing banking without the authority of the legislature
of the state, is universal in its application within the state, and
without exception unless qualified by the same power which enacted
it or by some other paramount law. Such is not the law
incorporating this bank."
Is there anything in these laws which more positively prohibits
banking in New York without the authority of the legislature of
that state than there is in the Constitution of Alabama,
prohibiting all banking except in the manner prescribed by the
constitution? Can it be believed that she intended to protect
herself against the encroachments of her own legislature only, and
to leave herself exposed to the encroachments of all her sister
states? Does the language employed in these provisions of the
constitution justify any such construction? It is general,
comprehensive, and not only restrictive but expressly prohibitory.
Whatever is forbidden by the Constitution of Alabama can be done by
no one within her jurisdiction, and it was sufficient for her to
know that no bank could do any valid banking act there without
violating her Constitution. It was contended by the counsel for the
banks that no law could be regarded as declaring the policy of the
state unless it was penal and inflicted some punishment for its
violation. This doctrine is as novel as it is unfounded in
principle. I know of no such exclusive rule by which to reach the
mind and intention of the legislature. If the language used shows
clearly that particular acts were intended to be prohibited, and
the act is afterwards done, it is against the policy of the law and
void. Suppose the Legislature of Alabama were to establish a bank,
disregarding all the conditions and restrictions imposed by the
Constitution; would it not violate that instrument, and therefore
the act be void? And can Georgia, Louisiana, or Pennsylvania, by
their respective legislatures, do in Alabama what her own
legislature cannot do? The relations which these states hold
towards each other in their individual capacity of states under the
Constitution of the United States is that of perfect independence.
In the case of
Buckner v. Finley, 2 Pet. 590, Chief
Justice Marshall said
"For all national purposes embraced by the federal Constitution,
the states and the citizens thereof are one
Page 38 U. S. 606
united under the same sovereign authority and governed by the
same laws. In all other respects, the states are necessarily
foreign to and independent of each other."
It is in this foreign and independent relation that these four
states stand before this Court in these cases. The condition of
Alabama, taken with a view to this relation, cannot be worse than
that of an independent nation in like circumstances. What that
would be we will see from authority.
"Nations being free and independent of each other in the same
manner as men are naturally free and independent, the second
general law of their society is that each nation ought to be left
in the peaceable enjoyment of that liberty it has derived from
nature. The natural society of nations cannot subsist if the rights
which each has received from nature are not respected. None would
willingly renounce its liberty; it would rather break off all
commerce with those that should attempt to violate it. From this
liberty and independence it follows that every nation is to judge
of what its conscience demands, of what it can or cannot do, of
what is proper or improper to be done, and consequently to examine
and determine whether it can perform any office for another without
being wanting in what it owes to itself. In all cases, then, where
a nation has the liberty of judging what its duty requires, another
cannot oblige it to act in such or such a manner. For the
attempting this would be doing an injury to the liberty of nations.
A right to offer constraint to a free person can only be invested
in us in such cases where that person is bound to perform some
particular thing for us or from a particular reason that does not
depend on his judgment -- or, in a word, where we have a complete
authority over him."
Vatt. 53- 54.
Now apply these just and reasonable principles to Alabama in her
relation of a foreign and independent state, reposing upon the
rights reserved to her by the Tenth Amendment of the Constitution
of the United States, and then show the power that can compel her
to pass penal laws to guard and protect those perfect, ascertained,
constitutional rights from the illegal invasion of a bank created
by any other state. If this power exists at all, it can be shown,
and the authority by which it acts. But not even a reasonable
pretense for any such power or authority has been shown. The
conclusion must therefore be that Alabama, as an independent
foreign state, owing no duty, nor being under any obligation to
either of the states by whose corporations she was invaded, was the
sole and exclusive judge of what was proper or improper to be done,
and consequently had a right to examine and determine whether she
could grant a favor to either of those states without injury to
herself, unless indeed there be a controlling power in this Court
derived from some provision of the Constitution of the United
States. As none such has been set up or relied upon in the opinion
of the majority of the Court, for the present I have a right to
conclude that none such exists. And without considering any of the
minor points discussed in the argument or noticed in the opinion, I
dismiss the subject.