In 1845, the Legislature of Ohio passed a general banking law,
the fifty-ninth section of which required the officers to make
semiannual dividends, and the sixtieth required them to set off six
percent of such dividends for the use of the state, which sum or
amount so set off should be in lieu of all taxes to which the
company, or the stockholders therein, would otherwise be
subject.
This was a contract fixing the amount of taxation, and not a law
prescribing a rule of taxation until changed by the
legislature.
In 1851, an act was passed entitled "An act to tax banks, and
bank and other stocks, the same as property is now taxable by the
laws of this state." The operation of this law being to increase
the tax, the banks were not bound to pay that increase.
A municipal corporation, in which is vested some portion of the
administration of the government, may be changed at the will of the
legislature.
But a bank, where the stock is owned by individuals, is a
private corporation. Its charter is a legislative contract, and
cannot be changed without its assent.
The preceding case upon this subject examined, and the case of
Providence Bank v.
Billing, 4 Pet. 561, explained.
In the record there was the following certificate from the
Supreme Court of Ohio, which explains the nature of the case:
"And thereupon, on motion of the defendant, it is hereby
certified by the court and ordered to be made a part of the record
herein that in the above entitled cause the petitioner claimed to
collect, and prayed the aid of the court to enforce the payment of,
the tax in the petition mentioned under an Act of the General
Assembly of the State of Ohio, passed March 21, 1851, entitled 'An
act to tax banks, and bank and other stocks,
Page 57 U. S. 370
the same as other property is now taxable by the laws of this
state,' a certified copy of which is filed as an exhibit in this
cause, marked 'A.' The said defendant, by way of defense to the
prayer of said petitioner &c., set up an act, entitled 'An act
to incorporate the State Bank of Ohio and other banking companies,'
enacted by the General Assembly of the State of Ohio, February 24,
1845, a certified copy of which is filed as an exhibit in this
cause, marked 'B,' under which act the defendants organized, and
became and was a branch of the State Bank of Ohio, exercising the
franchises of such bank prior to and ever since the year 1847, and
that the defendant claimed that, by virtue of the operation of said
act last mentioned, the State of Ohio had entered into a binding
contract and obligation, whereby the State of Ohio had agreed and
bound herself not to impose any tax upon the defendant, and not to
require the defendant to pay any tax for the year 1851, other or
greater than six percent on its dividends or profits, as provided
by the sixtieth section of the said Act of February 24, 1845. And
it is further certified that there was drawn in question in said
cause the validity of the said statute of the State of Ohio passed
March 21, 1851, hereinbefore mentioned, the said defendant claiming
that it was a violation of the said alleged agreement and contract
between the State of Ohio and the said defendant, and on that
account repugnant to the Constitution of the United States, and
void, but the court here held and decided:"
"1st, that the sixtieth section of said Act of February 24,
1845, to incorporate the State Bank of Ohio, and other banking
companies, contains no pledge or contract on the part of the state
not to alter or change the mode or amount of taxation therein
specified, but the taxing power of the General Assembly of the
State of Ohio over the property of companies formed under that act
is the same as over the property of individuals."
"And 2d, that whether the franchises of such companies may be
revoked, changed, or modified, or not, the Act of March 21, 1851,
upon any construction, does not impair any right secured to them by
the act of 1845, and is a constitutional and valid law. And it is
further certified that the decision of the question as to the
validity of the said statute of 1851 was necessary to the decision
of said cause, and the decision in the premises was in favor of the
validity of said statute. The court does further certify, that this
court is the highest court of law and equity of the State of Ohio
in which a decision of this suit could be held. And it is ordered
that said exhibits A and B be made parts of the complete record in
this cause."
The contents of exhibits A and B are stated in the opinion of
the Court.
Page 57 U. S. 376
MR. JUSTICE McLEAN delivered the opinion of the Court.
The proceeding was instituted to reverse a decree of that court,
entered in behalf of Jacob Knoop, treasurer, against the Piqua
Branch of the State Bank of Ohio, for a tax of twelve hundred and
sixty-six dollars and sixty-three cents, assessed against the said
branch bank for the year 1851.
By the act of 1845, under which this bank was incorporated, any
number of individuals, not less than five, were authorized to form
banking associations to carry on the business of banking in the
State of Ohio at a place designated, the aggregate amount of
capital stock in all the companies not to exceed six millions one
hundred and fifty thousand dollars.
In the fifty-first section it is provided that every banking
company authorized under the act to carry on the business of
banking, whether as a branch of the State Bank of Ohio, or as an
independent banking association,
"shall be held and adjudged to be a body corporate, with
succession, until the 1st of May,
Page 57 U. S. 377
1866; and thereafter until its affairs shall be closed."
It was made subject to the restrictions of the act.
The fifty-ninth section requires
"the directors of each banking company, semiannually, on the
first Mondays of May and November, to declare a dividend of so much
of the net profits of the company as they shall judge expedient,
and on each dividend day the cashier shall make out and verify by
oath, a full, clear, and accurate statement of the condition of the
company as it shall be on that day, after declaring the dividend,
and similar statements shall also be made on the first Mondays of
February and August in each year."
This statement is required to be transmitted to the auditor of
state.
The sixtieth section provides that each banking company under
the act, or accepting thereof, and complying with its provisions,
shall, semiannually, on the days designated for declaring
dividends, set off to the state six percent on the profits,
deducting therefrom the expenses and ascertained losses of the
company for the six months next preceding, which sum or amount so
set off shall be in lieu of all taxes to which the company, or the
stockholders therein, would otherwise be subject. The sum so set
off to be paid to the treasurer on the order of the auditor of
state.
The Piqua Branch Bank was organized in the year 1847, under the
above act, and still continues to carry on the business of banking,
and continued to set off and pay the semiannual amount as required,
and on the first Mondays of May and November, in 1851, there was
set off to the state six percent of the profits, deducting expenses
and ascertained losses for the six months next preceding each of
those days, and the cashier did, within ten days thereafter, inform
the auditor of state of the amount so set off on the 15th of
November, 1851, the same amounting to $862.50, which sum was paid
to the treasurer of state, on the order of the auditor, which
payment the bank claims was in lieu of all taxes to which the
company or its stockholders were subject for the year 1851.
On the 21st of March, 1851, an act was passed entitled "An act
to tax banks and bank and other stocks, the same as property is now
taxable by the laws of the state."
This act provides that the capital stock of every banking
company incorporated by the laws of the state, and having the right
to issue bills or notes for circulation, shall be listed at its
true value in money, with the amount of the surplus and contingent
fund belonging to such bank, and that the amount of such capital
stock, surplus, and contingent fund, should be taxed for the same
purposes and to the same extent that personal property was or might
be required to be taxed in the place
Page 57 U. S. 378
where such bank is located, and that such tax should be
collected and paid over in the same manner that taxes on other
personal property are required by law to be collected and paid
over.
In pursuance of this act there was assessed for the year 1851,
on the capital stock, contingent and surplus fund of the Piqua
Bank, a tax amounting to the sum of twelve hundred and sixty-six
dollars and sixty-three cents. The bank refused to pay this tax on
the ground that it was in violation of its charter. Suit was
brought by the state against the bank for this tax. The defense set
up by the bank was that the tax imposed was in violation of its
charter, which fixed the rate of taxation at six percent on its
dividends, deducting expenses and losses, but the supreme court of
the state sustained the act of 1851, against the provision of the
charter by which, it is insisted, the contract in the charter was
impaired.
We will first consider whether the specific mode of taxation,
provided in the sixtieth section of the charter, is a contract.
The operative words are, that the bank shall,
"semiannually on the days designated in the fifty-ninth section
for declaring dividends, set off to the state six percent on the
profits, deducting therefrom the expenses and ascertained losses of
the company for the six months next preceding, which sum or amount
so set off shall be in lieu of all taxes to which such company, or
the stockholders thereof, on account of stock owned therein, would
otherwise be subject."
This sentence is so explicit that it would seem to be
susceptible of but one construction. There is not one word of
doubtful meaning when taken singly, or as it stands connected with
the sentence in which it is used. Nothing is left to inference. The
time, the amount to be set off, the means of ascertaining it, to
whom it is to be paid, and the object of the payment, are so
clearly stated that no one who reads the provision can fail to
understand it. The payment was to be in lieu of all taxes to which
the company or stockholders would otherwise be subject. This is the
full measure of taxation on the bank. It is in the place of any
other tax which, had it not been for this stipulation, might have
been imposed on the company or stockholders.
This construction, I can say, was given to the act by the
executive authorities of Ohio, by those who were interested in the
bank, and generally by the public, from the time the bank was
organized down to the tax law of 1851.
In the case of
Debolt v. Ohio Insurance and Trust
Company, 1 Ohio 563, new series, the supreme court, in
considering the 60th section now before us, said:
"It must be admitted the section contains no language importing
a surrender
Page 57 U. S. 379
of the right of alter the taxation prescribed, unless it is to
be inferred from the words, 'shall be in lieu of all taxes to which
such company, or the stockholders thereof, on account of stock
owned therein, would otherwise be subject,' and it is frankly
conceded that if these words had occurred in a general law they
would not be open to such a construction. If the place where they
are found is important, we have already seen this law is general in
many of its provisions, and upon a general subject. Why may not
this be classed with these provisions, especially in view of the
fact, that in its nature it properly belongs there? We think it
should be regarded as a law prescribing a rule of taxation, until
changed, and not a contract stipulating against any change: a
legislative command and not a legislative compact with these
institutions."
And the court further said,
"The taxes required by this act are to be in lieu of other taxes
-- that is, to take the place of other taxes. What other taxes? The
answer is such as the banks or the stockholders"
"would otherwise be subject to pay. The taxes to which they
would be otherwise subject were prescribed by existing laws, and
this, in effect, operated as a repeal of them, so far as these
institutions were concerned."
With great respect, it may be suggested there was no general tax
law existing, as supposed by the court, under which the banks
chartered by the act of 1845 could have been taxed, and on which
the above provision could, "in effect, operate to repeal."
The general tax law of the 12th of March, 1831, which raised the
tax to five percent on dividends, and which operated on all the
banks of Ohio, except the "Commercial Bank of Cincinnati," was
repealed by the small note act of 1836, and that could operate only
on banks doing business at the time of its passage.
The Act of the 13th of March, 1838, repealed the act of 1836, so
far "as it restricts or prohibits the issuing and circulation of
small bills." The act of 1836 authorized the treasurer of state to
draw upon the banks for the amount of twenty percent upon their
dividends, as their proportion of the state tax; and provided that
if any bank should relinquish its charter privilege of issuing
bills of less denomination than three and five dollars, the tax
should be reduced to five percent upon its dividends. As the
prohibition of circulating small notes was repealed, the tax
necessarily fell. Neither the twenty nor the five percent could be
exacted. The five percent was a compromise for the twenty; as the
twenty was repealed by the repeal of the prohibition of small
notes, neither the one nor the other could be collected.
But if this were not so, the Bank Act of 1842, which imposed
Page 57 U. S. 380
a tax of one-half percent on the capital stock of the bank,
repealed, by its repugnancy, any part of the act of 1836 which, by
construction or otherwise, could be considered in force. And the
act of 1842 was repealed by the act of 1845. There is a general act
in Ohio declaring that the repeal of an act shall not revive any
act which had been previously repealed. Swan's Stat. 59.
If this statement be correct, as it is believed to be, the
legislature could not have intended, by the special provision in
the sixtieth section, to exempt the bank from tax by the existing
law, as no such law existed, but to exempt from the operation of
tax laws subsequently passed. This is the clear and fair import of
the compact, which we think would not be rendered doubtful if a tax
law had existed at the time the act of 1845 was passed.
The 60th section is not found in a general law, as is intimated
by the supreme court of the state. The act of 1845 is general only
in the sense that all banking associations were permitted to
organize under it, but the act is as special to each bank as if no
other institution were incorporated by it. We suppose this cannot
be controverted by anyone. This view is so clear in itself that no
illustration can make it clearer.
Every valuable privilege given by the charter, and which
conduced to an acceptance of it and an organization under it, is a
contract which cannot be changed by the legislature, where the
power to do so is not reserved in the charter. The rate of
discount, the duration of the charter, the specific tax agreed to
be paid, and other provisions essentially connected with the
franchise, and necessary to the business of the bank, cannot,
without its consent, become a subject for legislative action.
A municipal corporation, in which is vested some portion of the
administration of the government, may be changed at the will of the
legislature. Such is a public corporation, used for public
purposes. But a bank, where the stock is owned by individuals, is a
private corporation. This was not denied or questioned by the
counsel in argument, although it has been controverted in this case
elsewhere. But this Court and the courts of the different states,
not excepting the Supreme Court of Ohio, have so universally held
that banks, where the stock is owned by individuals, are private
corporations, that no legal fact is susceptible of less doubt. Mr.
Justice Story in his learned and able remarks in the
Dartmouth
College Case, says: "A bank created by the government for its
own uses, where the stock is exclusively owned by the government
is, in the strictest sense, a public corporation."
"But a bank whose stock is owned by private persons is a
Page 57 U. S. 381
private corporation, although it is erected by the government,
and its objects and operations partake of a public nature. The same
doctrine, he says, may be affirmed of insurance, canal, bridge, and
turnpike companies. There can be no doubt that these definitions
are sound, and are sustained by the settled principles of law."
It by no means follows that because the action of a corporation
may be beneficial to the public, therefore it is a public
corporation. This may be said of all corporations whose objects are
the administration of charities. But these are not public, though
incorporated by the legislature, unless their funds belong to the
government. Where the property of a corporation is private it gives
the same character to the institution, and to this there is no
exception. Men who are engaged in banking understand the
distinction above stated, and also that privileges granted in
private corporations are not a legislative command, but a
legislative contract, not liable to be changed.
This fact is shown by the following circumstances: "An act to
regulate banking in Ohio," passed the 7th of March, 1842. The 1st
section provided
"That all companies or associations of persons desiring to
engage in and carry on the business of banking within this state,
which may hereafter be incorporated, shall be subject to the rules,
regulations, limitations, conditions, and provisions contained in
this act, and such other acts to regulate banking as are now in
force, or may hereafter be enacted, in this state."
The 20th section of that act provided that a tax of one-half
percent per annum on its capital should be paid, and such other tax
upon its capital or circulation as the General Assembly may
hereafter impose. An amendment to this act was passed the 21st
February, 1843, but the act and the amendment remained a dead
letter upon the statute book. No stock was subscribed under them,
and they were both repealed by the act of 1845, under which nearly
three-fourths of the banks in Ohio were organized. This act
contained the express stipulation that "six percent on the
dividends, after deducting expenses and losses, should be paid in
lieu of all taxes."
This compact was accepted, and on the faith of it fifty banks
were organized, which are still in operation. Up to the year 1851,
I believe, the banks, the profession, and the bench, considered
this as a contract, and binding upon the state and the banks. For
more than thirty-five years, this mode of taxing the dividends of
banks had been sanctioned in the State of Ohio. With few
exceptions, the banks were so taxed, where any tax on them was
imposed. In the case of the
State of Ohio v. Commercial Bank of
Cincinnati, 10 Ohio 535, the Supreme
Page 57 U. S. 382
Court of Ohio say, we take it to be well settled, that the
charter of a private corporation is in the nature of a contract
between the state and the corporation. Had there ever been any
doubts upon this subject, those doubts must have been removed by
the decision of the Supreme Court of the United States in the case
of
Woodward v. Dartmouth College. And the Court
remarked,
"the General Assembly says to such persons as may take the
stock, you may enjoy the privileges of banking, if you will consent
to pay to the State of Ohio, for this privilege, four percent on
your dividends, as they shall from time to time be made. The
charter is accepted, the stock is subscribed, and the corporation
pays, or is willing to pay, the consideration stipulated, to-wit,
the four percent."
And the Court said "here is a contract, specific in its terms,
and easy to be understood."
"A contract between the state and individuals is as obligatory
as any other contract. Until a state is lost to all sense of
justice and propriety, she will scrupulously abide by her contracts
more scrupulously than she will exact their fulfillment by the
opposite contracting party."
This opinion commends itself to the judgment both on account of
its sound constitutional views and its elevated morality. It was
pronounced at December term, 1835. That decision was calculated to
give confidence to those who were desirous to make investments in
banking operations, or otherwise, in the State of Ohio.
Ten years after this opinion, and after an ineffectual attempt
had been made by the act of 1842, and its amendment in 1843, to
organize banks in Ohio without a compact as to taxation, the act of
1845 was passed, containing a compact much more specific than that
which had been sustained by the supreme court of the state. Under
such circumstances, can the intentions of the Legislature of Ohio,
in passing the act of 1845, be doubted, or the inducements of the
stockholders to vest their money under it. Could either have
supposed that the 60th section proposed a temporary taxation? Such
a supposition does great injustice to the legislature of 1845. It
is against the clear language of the section, which must ever
shield them from the imputation of having acted inconsiderately or
in bad faith. They passed the charter of 1845, which they knew
would be accepted, as it removed the objections to the act of
1842.
Can the compact in the 60th section be
"regarded as a law prescribing a rule of taxation until changed,
and not a contract stipulating against any change -- a legislative
command, and not a legislative compact with these
institutions?"
We cannot but treat with great respect the language of the
highest judicial tribunal of a state, and we would say that in our
opinion it does
Page 57 U. S. 383
not import to be a legislative command nor a rule of taxation
until changed, but a contract stipulating against any change, from
the nature of the language used and the circumstances under which
it was adopted. According to our views, no other construction can
be given to the contract than that the tax of six percent on the
dividends is in lieu of all subsequent taxes which might otherwise
be imposed -- in other words, taxes to which the company or the
stockholders would have been liable had the specific tax on the
dividends on the terms stated not been enacted.
In the opinion of the supreme court of the state, it is said,
the 60th section, in effect, repealed the existing law under which
the bank would have been taxed, and that this is the obvious
application of the language used; and they add
"that the General Assembly intended only this, and did not
intend it to operate upon the sovereign power of the state, or to
tie up the hands of their successors, we feel fully assured. To
suppose the contrary would be to impeach them of gross violation of
public duty, if not usurpation of authority."
So far as regards the effect of the 60th section to repeal
existing laws, if no such laws existed, it would follow that no
such effect was produced, and we may presume that this was in the
knowledge of the legislature of 1845; and in saying that the
compact was intended to run with the charter, we only impute to the
legislature a full knowledge of their own powers, and the highest
regard to the public interest. The idea that a state, by exempting
from taxation certain property, parts with a portion of its
sovereignty, is of modern growth; and so is the argument that if a
state may part with this in one instance it may in every other, so
as to divest itself of the sovereign power of taxation. Such an
argument would be as strong and as conclusive against the exercise
of the taxing power. For if the legislature may levy a tax upon
property, they may absorb the entire property of the taxpayer. The
same may be said of every power where there is an exercise of
judgment.
The Legislature of Ohio passes a statute of limitations to all
civil and criminal actions. Is there no danger that in the exercise
of this power it may not be abused? Suppose a year, a month, a
week, or a day should be fixed as the time within which all actions
shall be brought on existing demands, and if not so brought, the
remedy should be barred. This is a supposition more probable under
circumstances of great embarrassment, when the voice of the debtor
is always potent, than that the legislature will inconsiderately
exempt property from taxation.
Under a statute of limitation, as supposed, the remedy of
the
Page 57 U. S. 384
creditor would be cut off, unless the courts should decide that
a limitation to bar the right must be reasonable, but this power
could not be exercised under any constitutional provision. It could
rest only on the great and immutable principles of justice, unless
the time was so short as manifestly to have been intended to impair
or destroy the contract. To carry on a government, a more practical
view of public duties must be taken.
When the State of Ohio was admitted into the Union by the Act of
the 30th of April, 1802, it was admitted under a compact that
"The lands within the state sold by Congress shall remain exempt
from any tax laid by or under the authority of the state, whether
for state, county, township, or any other purpose whatever, for the
term of five years from and after the day of sale."
And yet by the same law the state "was admitted into the Union
upon the same footing with the original states in all respects
whatever."
Now if this new doctrine of sovereignty be correct, Ohio was not
admitted into the Union on the footing of the other sovereign
states. Whatever may be considered of such a compact now, it was
not held to be objectionable at the time it was made.
The assumption that a state, in exempting certain property from
taxation, relinquishes a part of its sovereign power is unfounded.
The taxing power may select its objects of taxation, and this is
generally regulated by the amount necessary to answer the purposes
of the state. Now the exemption of property from taxation is a
question of policy and not of power. A sound currency should be a
desirable object to every government, and this in our country is
secured generally through the instrumentality of a well regulated
system of banking. To establish such institutions as shall meet the
public wants and secure the public confidence, inducements must be
held out to capitalists to invest their funds. They must know the
rate of interest to be charged by the bank, the time the charter
shall run, the liabilities of the company, the rate of taxation,
and other privileges necessary to a successful banking
operation.
These privileges are proffered by the state, accepted by the
stockholders, and in consideration funds are invested in the bank.
Here is a contract by the state and the bank, a contract founded
upon considerations of policy required by the general interests of
the community, a contract protected by the laws of England and
America and by all civilized states where the common or the civil
law is established. In
Fletcher v.
Peck, 6 Cranch 135, Chief Justice Marshall says
"The principle asserted is that one legislature is competent to
repeal any act
Page 57 U. S. 385
which a former legislature was competent to pass, and that one
legislature cannot abridge the powers of a succeeding
legislature."
"The correctness of this principle," he says,
"so far as respects general legislation, can never be
controverted. But if an act be done under a law, a succeeding
legislature cannot undo it. When, then, a law is in its nature a
contract, a repeal of the law cannot divest those rights, and the
act of annulling them, if legitimate, is rendered so by a power
applicable to the case of every individual in the community."
And in another part of the opinion he says,
"Whatever respect might have been felt for the state
sovereignties, it is not to be disguised that the framers of the
Constitution viewed, with some apprehension, the violent acts which
might grow out of the feelings of the moment, and that the people
of the United States, in adopting that instrument, have manifested
a determination to shield themselves and their property from the
effects of those sudden and strong passions to which men are
exposed. The restrictions on the legislative power of the states
are obviously founded on this sentiment, and the Constitution of
the United States contains what may be deemed a bill of rights for
the people of each state."
"No state shall pass any bill of attainder,
ex post
facto law, or law impairing the obligations of contracts. A
bill of attainder may affect the life of an individual, or may
confiscate his property, or may do both."
In this form he says,
"the power of the legislature over the lives and fortunes of
individuals is expressly restrained. What motive, then, for
implying, in words which import a general prohibition to impair the
obligation of contracts, an exception in favor of the right to
impair the obligations of those contracts into which the state may
enter."
The history of England affords melancholy instances where bills
of attainder were prosecuted in Parliament to the destruction of
the lives and fortunes of some of its most eminent subjects. A
knowledge of this caused a prohibition in the Constitution against
such a procedure by the states.
In the case of
State of New Jersey v.
Wilson, 7 Cranch 164, it was held,
"that a legislative act, declaring that certain lands, which
should be purchased for the Indians, should not thereafter be
subject to any tax, constituted a contract which could not be
rescinded by a subsequent legislative act. Such repealing act being
void under that clause of the Constitution of the United States
which prohibits a state from passing any law impairing the
obligation of contracts."
In 1758, the government of New Jersey purchased the Indians'
Page 57 U. S. 386
title to lands in that state, in consideration of which the
government bought a tract of land on which the Indians might
reside, an act having previously been passed that
"the lands to be purchased for them shall not hereafter be
subject to any tax, any law, usage, or custom to the contrary
thereof in any wise notwithstanding."
The Indians continued in possession of the lands purchased until
1801, when they applied for and obtained an act of the legislature,
authorizing a sale of their lands. This act contained no provision
in regard to taxation; under it, the Indian lands were sold.
In October, 1804, the legislature repealed the act of August,
1758, which exempted these lands from taxes; the lands were then
assessed, and the taxes demanded. The Court held the repealing law
was unconstitutional as impairing the obligation of the contract,
although the land was in the hands of the grantee of the Indians.
This case shows that although a state government may make a
contract to exempt property from taxation, yet the sovereignty
cannot annul that contract.
In the case of
Gordon v. Appeal
Tax, 3 How. 133, MR. JUSTICE WAYNE, giving the
opinion of the Court, held
"that the charter of a bank is a franchise, which is not taxable
as such, if a price has been paid for it, which the legislature
accepted. But that the corporate property of the bank, being
separable from the franchise, may be taxed, unless there is a
special agreement to the contrary."
And the Court said the language of the eleventh section of the
act of 1821 is
"And be it enacted, that upon any of the aforesaid banks
accepting and complying with the terms and conditions of this act,
the faith of the state is hereby pledged not to impose any further
tax or burden upon them during the continuance of their charters
under this act."
This, the Court said, is the language of grave deliberation,
pledging the faith of the state for some purpose, some effectual
purpose. Was that purpose the protection of the banks from what
that legislature and succeeding legislatures could not do, if the
banks accepted the act, or from what they might do in the exercise
of the taxing power. The terms and conditions of the act were, that
the banks should construct the road and pay annually a designated
charge upon their capital stocks, as the price of the prolongation
of their franchise of banking. The power of the state to lay any
further tax upon the franchise was exhausted. That is the contract
between the state and the banks. It follows, then, as a matter of
course, when the legislature go out of the contract, proposing to
pledge its faith, if the banks shall accept the act not to impose
any further tax or burden upon them, that it must have meant by
these words an exemption
Page 57 U. S. 387
from some other tax than a further tax upon the franchise of the
banks. The latter was already provided against, and the Court held
that the exemption extended to the respective capital stocks of the
banks as an aggregate and to the stockholders, as persons on
account of their stocks. The judgment of the court of Appeals of
Maryland, which sustained the act imposing an additional tax on the
banks, was reversed.
It will be observed that the above compact was applied to the
stocks of the bank and the interest of the stockholders by
construction.
The Supreme Court of Ohio said in relation to this case that
"The power to tax and the right to limit the power were both
admitted by counsel, and taken for granted in the consideration of
the case, and that a very large consideration had been paid for the
extension of the franchise and the exemption of the stock from
taxation."
In relation to the admissions of the counsel, it may be said
that they were men not likely to admit anything to the prejudice of
their clients, which could be successfully opposed; nor would the
Court, on a constitutional question, rest their judgment on the
admissions of counsel. Whether the consideration paid by the banks
was large or small, we suppose was not a matter for the Court, as
the motives or consideration which induced a sovereign state to
make a contract, cannot be inquired into as affecting the validity
of the act.
In the argument, the case of
Providence
Bank v. Billing, was referred to, 4 Pet. 561. This
reference impresses me with the shortness and uncertainty of human
life. Of all the judges on this bench when that decision was given,
I am the only survivor. From several circumstances the principles
of that case were strongly impressed upon my memory, and I was
surprised when it was cited in support of the doctrines maintained
in the case before us. The principle held in that case was that
where there was no exemption from taxation in the charter, the bank
might be taxed. This was the unanimous opinion of the judges, but
no one of them doubted that the legislature had the power, in the
charter or otherwise, from motives of public policy, to exempt the
bank from taxation, or by compact to impose a specific tax on it.
And this is clear from the language of the Court.
The Chief Justice in that case says:
"That the taxing power is of vital importance, that it is
essential to the existence of government, are truths which it
cannot be necessary to reaffirm. They are acknowledged and asserted
by all. It would seem that the relinquishment of such a power is
never to be presumed. No one can controvert the correctness of
these axioms. "
Page 57 U. S. 388
The relinquishment of such a power is never to be presumed, but
this implies it may be relinquished, or taxable objects may be
exempted, if specially provided for in the charter. And this is
still more clearly expressed, as follows:
"We will not say that a state may not relinquish it; that a
consideration sufficiently valuable to induce a partial release of
it may not exist; but as the whole community is interested in
retaining it undiminished, that community has a right to insist,
that its abandonment ought not to be presumed, in a case in which
the deliberate purpose of a state to abandon it does not
appear."
Such a case was not then before the Court. There was no
provision in the Providence Bank charter which exempted it from
taxation, and in that case the Court could presume no such
intention.
But suppose, in the language of that great man,
"a consideration sufficiently valuable to induce a partial
release of it, and such release had been contained in the charter;
would not that have been held sufficient? And of the sufficiency of
the consideration, whether it was a bonus paid by the bank, or in
supplying a sound currency, the legislature would be the exclusive
judges. This would constitute a contract which a legislature could
not impair."
The above case is a strong authority against the defendants. The
Chief Justice further says
"any privileges which may exempt the corporation from the
burdens common to individuals do not flow necessarily from the
charter, but must be expressed in it, or they do not exist."
But if so expressed, do they not exist?
A case is cited from the
Stourbridge Canal v. Wheely, 2
Barn. & Adol. 793, to show that no implications in favor of
chartered rights are admissible. Lord Tenterden says
"that any ambiguity in the terms of the contract must operate
against the adventurers and in favor of the public, and the
plaintiffs can claim nothing that is not clearly given them by the
act."
In the same opinion, his lordship said:
"Now it is quite certain that the company have no right
expressly to receive any compensation, except the tonnage paid for
goods carried through some of the canals or the locks on the canal,
or the collateral cuts, and it is therefore incumbent upon them to
show that they have a right clearly given by inference from some of
the other clauses."
Neither this, the
Rhode Island Bank Case, nor the
Charles River Bridge Case affords any aid to the doctrines
maintained, with the single exception that a right set up under a
grant must clearly appear, and cannot be presumed, and this has not
been controverted.
Page 57 U. S. 389
That a state has power to make a contract which shall bind it in
future, is so universally held by the courts of the United States
and of the states that a general citation of authorities is
unnecessary on the subject.
Dartmouth College v.
Woodward, 4 Wheat. 518;
Terrett v.
Taylor, 9 Cranch 43;
Town of
Pawlett c. Clark, 9 Cranch 292.
Mr. Justice Blackstone says, 2 Bl.Com. 37,
"that the same franchise that has before been granted to one
cannot be bestowed on another, because it would prejudice the
former grant. In
The King v. Pasmore, 3 Term 246, Lord
Kenyon says that an existing corporation cannot have another
charter obtruded upon it or accept the whole or any part of the new
charter. The reason of this, it is said, is obvious. A charter is a
contract, to the validity of which the consent of both parties is
essential, and therefore it cannot be altered or added to without
consent."
There is no constitutional objection to the exercise of the
power to make a binding contract by a state. It necessarily exists
in its sovereignty, and it has been so held by all the courts in
this country. A denial of this is a denial of state sovereignty. It
takes from the state a power essential to the discharge of its
functions as sovereign. If it do not possess this attribute, it
could not communicate it to others. There is no power possessed by
it more essential than this. Through the instrumentality of
contracts, the machinery of the government is carried on. Money is
borrowed and obligations given for payment. Contracts are made with
individuals, who give bonds to the state. So in the granting of
charters. If there be any force in the argument, it applies to
contracts made with individuals the same as with corporations. But
it is said the state cannot barter away any part of its
sovereignty. No one ever contended that it could.
A state, in granting privileges to a bank, with a view of
affording a sound currency or of advancing any policy connected
with the public interest, exercises its sovereignty, and for a
public purpose, of which it is the exclusive judge. Under such
circumstances, a contract made for a specific tax, as in the case
before us, is binding. This tax continues, although all other banks
should be exempted from taxation. Having the power to make the
contract, and rights becoming vested under it, it can no more be
disregarded nor set aside by a subsequent legislature than a grant
for land. This act, so far from parting with any portion of the
sovereignty, is an exercise of it. Can anyone deny this power to
the legislature? Has it not a right to select the objects of
taxation and determine the amount? To deny either of these is to
take away state sovereignty.
Page 57 U. S. 390
It must be admitted that the state has the sovereign power to do
this, and it would have the sovereign power to impair or annul a
contract so made had not the Constitution of the United States
inhibited the exercise of such a power. The vague and undefined and
indefinable notion that every exemption from taxation or a specific
tax which withdraws certain objects from the general tax law
affects the sovereignty of the state is indefensible.
There has been rarely, if ever, it is believed, a tax law passed
by any state in the Union which did not contain some exemptions
from general taxation. The Act of Ohio of the 25th of March 1851,
in the fifty-eighth section, declared that
"The provisions of that act shall not extend to any joint stock
company which now is or may hereafter be organized whose charter or
act of incorporation shall have guaranteed to such company an
exemption from taxation or has prescribed any other as the
exclusive mode of taxing the same."
Here is a recognition of the principle now repudiated. In the
same act, there are eighteen exemptions from taxation.
The federal government enters into an arrangement with a foreign
state for reciprocal duties on imported merchandise from the one
country to the other. Does this affect the sovereign power of
either state? The sovereign power in each was exercised in making
the compact, and this was done for the mutual advantage of both
countries. Whether this be done by treaty or by law is immaterial.
The compact is made, and it is binding on both countries.
The argument is and must be that a sovereign state may make a
binding contract with one of its citizens and, in the exercise of
its sovereignty, repudiate it.
The Constitution of the Union, when first adopted, made states
subject to the federal judicial power. Could a state, while this
power continued, being sued for a debt contracted in its sovereign
capacity, have repudiated it in the same capacity? In this respect,
the Constitution was very properly changed, as no state should be
subject to the judicial power generally.
Much stress was laid on the argument, and in the decisions of
the supreme court, on the fact that the banks paid no bonus for
their charters, and that no contract can be binding which is not
mutual.
This is a matter which can have no influence in deciding the
legal question. The state did not require a bonus, but other
requisitions are found in the charter, which the legislature deemed
sufficient, and this is not questionable by any other authority.
The obligation is as strong on the state, from
Page 57 U. S. 391
the privileges granted and accepted, as if a bonus had been
paid.
Another assumption is made that the banks are taxed as property
is taxed in the hands of individuals. No deduction, it appears, is
made from banks on account of debts due to depositors or others,
whilst debts due by an individual are deducted from his credits. If
this be so, it places banks on a very different footing from
individuals.
The power of taxation has been compared to that of eminent
domain, and it is said, as regards the question before us, they are
substantially the same. These powers exist in the same sovereignty,
but their exercise involves different principles. Property may be
appropriated for public purposes, but it must be paid for. Taxes
are assessed on property for the support of the government under a
legislative act.
We were not prepared for the position taken by the Supreme Court
of Ohio that
"no control over the right of taxation by the states was
intended to be conferred upon the general government by the section
referred to, or any other, except in relation to duties upon
imports and exports."
This has never been pretended by anyone. The section referred to
gives the federal government no power over taxation by a state.
Such an idea does not belong to the case, and the argument used, we
submit, is not legitimate. We have power only to deal with
contracts under the tenth section of the first article of the
Constitution, whether made by a state or an individual; if such
contract be impaired by an act of the state, such act is void, as
the power is prohibited to the state. This is the extent of our
jurisdiction. As well might it be contended under the above section
that no power was given to the federal government to regulate the
numberless internal concerns of a state which are the subjects of
contracts. With those concerns we have nothing to do, but when
contracts growing out of them are impaired by an act of the state,
under the federal Constitution we inquire whether the act
complained of is in violation of it.
The rule observed by this Court to follow the construction of
the statute of the state by its supreme court is strongly urged.
This is done when we are required to administer the laws of the
state. The established construction of a statute of the state is
received as a part of the statute. But we are called in the case
before us not to carry into effect a law of the state, but to test
the validity of such a law by the Constitution of the Union. We are
exercising an appellate jurisdiction. The decision of the supreme
court of the state is before us for revision, and if their
construction of the contract in question impairs its obligation, we
are required to reverse their judgment. To follow the
Page 57 U. S. 392
construction of a state court in such a case, would be to
surrender one of the most important provisions in the federal
Constitution.
There is no jurisdiction which we are called to exercise of
higher importance, nor one of deeper interest to the people of the
states. It is, in the emphatic language of Chief Justice Marshall,
a bill of rights to the people of the states, incorporated into the
fundamental law of the Union. And whilst we have all the respect
for the learning and ability which the opinions of the judges of
the supreme court of the state command, we are called upon to
exercise our own judgments in the case.
In the discussion of the principles of this case, we have not
felt ourselves at liberty to indulge in general remarks on the
theory of our government. That is a subject which belongs to a
convention for the formation of a Constitution; and, in a limited
view, to the lawmaking power. Theories depend so much on the
qualities of the human mind, and these are so diversified by
education and habit as to constitute an unsafe rule for judicial
action. Our prosperity, individually and nationally, depends upon a
close adherence to the settled rules of law, and especially to the
great fundamental law of the Union.
Having considered this case in its legal aspects, as presented
in the arguments of counsel, and in the views of the supreme court
of the state, and especially as regards the rights of the bank
under the charter, we are brought to the conclusion that in the
acceptance of the charter on its terms and the payment of the
capital stock under an agreement to pay six percent semiannually on
the dividends made, deducting expenses and ascertained losses in
lieu of all taxes, a contract was made binding on the state and on
the bank, and that the tax law of 1851, under which a higher tax
has been assessed on the bank than was stipulated in its charter,
impairs the obligation of the contract, which is prohibited by the
Constitution of the United States, and consequently that the act of
1851, as regards the tax thus imposed, is void.
The judgment of the Supreme Court of Ohio, in giving effect to
that law, is, therefore
Reversed.
MR. JUSTICE CATRON, MR. JUSTICE DANIEL, and MR. JUSTICE
CAMPBELL, dissented.
MR. CHIEF JUSTICE TANEY gave a separate opinion, as follows:
I concur in the judgment in this case. I think that by the
sixtieth section of the act of 1845, the state bound itself by
contract to levy no higher tax than the one therein mentioned upon
the banks or stocks in the banks which organized under that law
during the continuance of their charters. In my judgment,
Page 57 U. S. 393
the words used are too plain to admit of any other
construction.
But I do not assent altogether to the principles or reasoning
contained in the opinion just delivered. The grounds upon which I
hold this contract to be obligatory on the state, will appear in my
opinion in the case of the Ohio Life Insurance and Trust Company,
also decided at the present term.
MR. JUSTICE CATRON.
This is a contest between the State of Ohio and a portion of her
banking institutions, organized under a general banking law, passed
in 1845. She was then a wealthy and prosperous community, and had
numerous banks which employed a large capital, and were taxed by
the general laws five percent on their dividends, being equal to
thirty cents on each hundred dollars' worth of stock, supposing it
to be at par value. But this was merely a state tax, payable into
the state treasury. The old banks were liable to taxes for county
purposes besides, and when located in cities or towns, for
corporation taxes also. These two items usually amounted to much
more than the state tax.
Such was the condition of Ohio when the General Banking Law was
passed in 1845. By this act, any number of persons not less than
five might associate together by articles to carry on banking.
The state was laid off into districts, and the law prescribes
the amount of stock that may be employed in each. Every county was
entitled to one bank, and some to more. Commissioners were
appointed to carry the law into effect. It was the duty of this
Board of Control to judge of the articles of association and other
matters necessary to put the banks into operation. Any company
might elect to become a branch of the state bank or to be a
separate bank, disconnected with any other. Fifty thousand dollars
was the minimum, and five hundred thousand the maximum, that could
be employed in any one proposed institution.
By the fifty-first section, each of the banking companies
authorized to carry on business was declared to be a body corporate
with succession to the first day of May, 1866, with general banking
powers, with the privilege to issue notes of one dollar and
upwards, to one hundred dollars, and each bank was required to
have
"on hand in gold and silver coin, or their equivalent, one-half
at least of which shall be in gold and silver coin in its vault, an
amount equal to thirty percent of its outstanding notes of
circulation,"
and whenever the specie on hand, or its equivalent, shall fall
below twenty percent of the
Page 57 U. S. 394
outstanding notes, then "no more notes shall be circulated." The
equivalent to specie meant deposits that might be drawn against in
the hands of eastern banks or bankers of good credit. In this
provision constituted the great value of the franchise.
The 59th section declares that semiannual dividends shall be
made by each bank of its profits after deducting expenses, and the
60th section provides that six percent per annum of these profits
shall be set off to the state,
"which sum or amount so set off shall be in lieu of all taxes to
which such company, or the stockholders thereof on account of stock
owned therein, would otherwise be subject."
This was equal to thirty-six cents per annum on each hundred
dollars of stock subscribed, supposing it to yield six percent
interest.
By an act of 1851 it was declared that bank stock should be
assessed at its true value and that it should be taxed for state,
county, and city purposes to the same extent that personal property
was required to be taxed at the place where the bank was located.
As this rate was much more than that prescribed by the 60th section
of the act of 1845, the bank before us refused to pay the excess,
and suffered herself to be sued by the tax collector, relying on
the 60th section, above recited, as an irrepealable contract, which
stood protected by the Constitution of the United States.
It is proper to say that the trifling sum in dispute in this
cause is the mere ground of raising the question between the State
of Ohio and some fifty of her banks claiming exemption under the
act of 1845.
The taxable property of these banks is about eighteen millions
of dollars, according to the auditor's report of last year, and
which was used on the argument of this cause by both sides. Of
course the state officers, and other taxpayers, assailed the
corporations claiming the exemption, and various cases were brought
before the Supreme Court of Ohio drawing in question the validity
of the act of 1851 insofar as it increased the taxes of the banks
beyond the amount imposed by the 60th section of the act of 1845.
The state court sustained the act of 1851, from which decision a
writ of error was prosecuted, and the cause brought to this
Court.
The opinions of the state court have been laid before us for our
consideration, and on our assent or dissent to them the case
depends.
The first question made and decided in the Supreme Court of Ohio
was whether the 60th section of the act of 1845 purported to be in
its terms a contract not further to tax the banks organized under
it during the entire term of their existence? The court held that
it imported no such contract, and with this opinion I concur.
Page 57 U. S. 395
The question was examined by the judge, who delivered the
unanimous opinion of the court in the case of
Debolt v. Ohio
Life Insurance & Trust Company, 1 Ohio 564, with a
fairness, ability, and learning calculated to command the respect
of all those who have his opinion to review, and which opinion has,
as I think, construed the 60th section truly. But as my brother
Campbell has rested his opinion on this section without going
beyond it, and as I concur in his views, I will not further examine
that question, but adopt his opinion in regard to it.
The next question decided by the state court is of most grave
importance; I give it in the language of the state court:
"Had the General Assembly power, under the constitution then in
force, permanently to surrender, by contract, within the meaning
and under the protection of the Constitution of the United States,
the right of taxation over any portion of the property of
individuals otherwise subject to it?"
On which proposition the court proceeds to remark:
"Our observations and conclusions upon this question, must be
taken with reference to the unquestionable facts that the act of
1851 was a
bona fide attempt to raise revenue by an equal
and uniform tax upon property, and contained no covert attack upon
the franchises of these institutions. That the surrender did not
relate to property granted by the state, so as to make it a part of
the grant for which a consideration was paid, the state having
granted nothing but the franchise, and the tax being upon nothing
but the money of individuals invested in the stock, and that no
bonus or gross sum was paid in hand for the surrender, so as to
leave it open to controversy that reasonable taxes, to accrue in
future, were paid in advance of their becoming due. What effect a
different state of facts might have we do not stop to inquire.
Indeed, if the attempt has here been made, it is a naked release of
sovereign power without any consideration or attendant circumstance
to give it strength or color, and so far as we are advised is the
first instance where the rights and interests of the public have
been entirely overlooked."
"Under these circumstances we feel no hesitation in saying the
General Assembly was incompetent to such a task. This conclusion is
drawn from a consideration of the limited authority of that body
and the nature of the power claimed to be abridged."
"That political sovereignty, in its true sense, exists only with
the people, and that government is 'founded on their sole
authority' and subject to be altered, reformed, or abolished only
by them is a political axiom upon which all the American
Page 57 U. S. 396
governments have been based and is expressly asserted in the
bill of rights. Such of the sovereign powers with which they were
invested as they deem necessary for protecting their rights and
liberties and securing their independence they have delegated to
governments created by themselves, to be exercised in such manner
and for such purposes as were contemplated in the delegation. That
these powers can neither be enlarged or diminished by these
repositories of delegated authority would seem to result,
inevitably from the fundamental maxim referred to and to be too
plain to need argument or illustration."
"If they could be enlarged, government might become absolute; if
they could be diminished or abridged, it might be stripped of the
attributes indispensable to enable it to accomplish the great
purposes for which it was instituted. And in either event the
Constitution would be made either more or less than it was when it
came from the hands of its authors, being changed and subverted
without their action or consent. In the one event its power for
evil might be indefinitely enlarged, while in the other its
capacity for good might be entirely destroyed, and thus become
either an engine of oppression or an instrument of weakness and
pusillanimity."
"The government created by the Constitution of this state, Ohio,
although not of enumerated, is yet one of limited powers. It is
true, the grant to the General Assembly of 'legislative authority'
is general, but its exercise within that limit is necessarily
restrained by the previous grant of certain powers to the federal
government, and by the express limitations to be found in other
parts of the instrument. Outside of that boundary, it needed no
express limitations, for nothing was granted. Hence this court held
in
Cincinnati, Wilmington &c. R. v. Clinton Co., 1
Ohio St. 77, that any act passed by the General Assembly not
falling fairly within the scope of 'legislative authority,' was as
clearly void as though expressly prohibited. So careful was the
convention to enforce this principle and to prevent the enlargement
of the granted powers by construction or otherwise that they
expressly declared in art. 8, ยง 28, 'To guard against the
transgression of the high powers we have delegated, we declare that
all powers, not hereby delegated, remain with the people.' When,
therefore, the exercise of any power by that body is questioned,
its validity must be determined from the nature of the power,
connected with the manner and purpose of its exercise. What, then,
is the taxing power? And to what extent, and for what purposes has
it been conferred upon the legislature? That it is a power incident
to sovereignty' -- a power of vital importance to the very
existence of every government' -- has been as often declared as it
has been spoken
Page 57 U. S. 397
of. Its importance is not too strongly represented by Alexander
Hamilton, in the 30th number of the Federalist, when he says:"
" Money is with propriety considered as the vital principle of
the body politic as that which sustains its life and motion and
enables it to perform its most important functions. A complete
power, therefore, to procure a regular and adequate supply of
revenue, as far as the resources of the community will permit, may
be regarded as an indispensable ingredient in every constitution.
From a deficiency in this particular one of two evils must ensue --
either the people must be subjected to continual plunder as a
substitute for a more eligible mode of supplying the public wants
or the government must sink into a fatal atrophy, and in a short
course of time perish."
"This power is not to be distinguished, in any particular
material to the present inquiry, from the power of eminent domain.
Both rest upon the same foundation -- both involve the taking of
private property -- and both, to a limited extent, interfere with
the natural right guaranteed by the Constitution, of acquiring and
enjoying it. But as this court has already said in the case
referred to, 'neither can be classed amongst the independent powers
of government, or included in its objects and ends.' No government
was ever created for the purpose of taking, taxing, or otherwise
interfering with the private property of its citizens."
"But charged with the accomplishment of great objects necessary
to the safety and prosperity of the people, these rights attach as
incidents to those objects, and become indispensable means to the
attainment of those ends."
"They can only be called into being to attend the independent
powers, and can never be exercised without an existing
necessity."
"To sustain this power in the general assembly would be to
violate all the great principles to which I have alluded. It would
affirm its right to deal in and barter away the sovereign right of
the state, and thereby, in effect, to change the constitution. When
the general assembly of 1845 convened, it found the state in the
unquestionable possession of the sovereign right of taxation, for
the accomplishment of its lawful objects, extending to 'all the
persons and property belonging to the body politic.'"
When its successor convened in 1846 under the same constitution
and to legislate for the same people, if this defense is available,
it found the state shorn of this power over fifteen or twenty
millions of property, still within its jurisdiction and protected
by its laws. This and each succeeding legislature had the same
power to surrender the right as to any and all other property,
until at length the government, deprived of everything upon which
it could operate to raise the means to attain
Page 57 U. S. 398
its necessary ends by the exercise of its granted powers, would
have worked its own inevitable destruction beyond all power of
remedy either by the legislature or the people. It is no answer to
this to say that confidence must be reposed in the legislative body
that it will not thus abuse the power.
"But, in the language of the Court in
McCulloch v.
Maryland, 4 Wheat. 316, 'is this a case of
confidence?'"
"For every surrender of the right to tax particular property not
only tends to paralyze the government, but involves a direct
invasion of the rights of property of the balance of the community,
since the deficiency thus created must be made up by larger
contributions from them to meet the public demand."
The foregoing are some of the reasonings of the state court on
the consideration here involved. With these views I concur, and
will add some of my own. The first is
"That acts of Parliament derogatory from the power of subsequent
legislatures are not binding. Because, as Blackstone says, the
legislature being in truth the sovereign power, is always equal,
always absolute, and it acknowledges no superior on earth, which
the prior legislature must have been if its ordinances could bind a
subsequent Parliament. And upon the same principle, Cicero, in his
letters to Atticus, treats with proper contempt these restraining
clauses which endeavor to tie up the hands of succeeding
legislatures. When you repeal the law itself, says he, you at the
same time repeal the prohibitory clause which guards against
repeal."
If this is so under the British government, how is it in Ohio?
Her supreme court holds that the state constitution of 1802
expressly prohibited one legislature from restraining its
successors by the indirect means of contracts exempting certain
property, from taxation. The court says power to exempt property
was reserved to the people; they alone could exempt, by an organic
law. That is to say, by an amended constitution. The clause mainly
relied on declares "that all powers not delegated remain with the
people." Now it must be admitted that this clause has a meaning,
and it must also be conceded as I think, that the Supreme Court of
Ohio has the uncontrollable right to declare what that meaning is,
and that this Court has just as little right to question that
construction as the Supreme Court of Ohio has to question our
construction of the Constitution of United States.
In my judgment, the construction of the court of Ohio is proper;
but if I believed otherwise, I should at once acquiesce. Let us
look at the matter fairly and truly as it is, and see what a
different course on part of this Court would lead to -- nay, what
Ohio is bound to do in self-defense and for self-preservation under
the circumstances.
Page 57 U. S. 399
In 1845, a general banking law is sought at the hands of the
legislature where five dollars in paper can be circulated for every
dollar in specie in the bank or on deposit in eastern banks or with
brokers. One dollar notes are authorized; every county in the state
is entitled to a bank, and the large ones to several; the tempting
lure is held out of six percent interest on five hundred dollars
for every hundred dollars paid in as stock, thus obtaining a profit
of twenty-four dollars on each hundred dollars actually paid in.
That such a bill would have advocates enough to pass it through the
legislature all experience attests, and that the slight tax of
thirty-six cents on each hundred dollars' worth of stock,
subscribed and paid, was deemed a privilege when the existing banks
and other property were taxed much higher is plainly manifest. As
was obvious when the law passed, banks sprang up at once -- some
fifty in number having a taxable basis last year of about eighteen
millions. The elder and safer banks were, of course, driven out,
and new organizations sought under the general law by the
stockholders. From having constructed large public works and made
great expenditures, Ohio has become indebted so as to require a
very burdensome tax on every species of property; this was imposed
by the act of 1851, and on demanding from these institutions their
equal share, the state is told that they were protected by a
contract made with the legislature of 1845, to be exempt from
further taxation, and were not bound by the late law, and, of
course, they were sued in their own courts. The supreme court holds
that by the express terms of the state constitution, no such
contract could be made by the legislature of 1845 to tie up the
hands of the legislature of 1851. And then the banks come here and
ask our protection against this decision, which declares the true
meaning of the state constitution. It expressly guarantees to the
people of Ohio the right to assemble, consult, "and instruct their
representatives for their common good," and then "to apply to the
legislature for a redress of grievances." It further declares that
all powers not conferred by that constitution on the legislature
are reserved to the people. Now of what consequence or practical
value will these attempted securities be if one legislature can
restrain all subsequent ones by contracting away the sovereign
power to which instructions could apply?
The question whether the people have reserved this right so as
to hold it in their own hands and thereby be enabled to regulate it
by instructions to a subsequent legislature or by a new
constitution is a question that has been directly raised only once
in any state of the Union, so far as I know. In the case of
Brewster v. Hough, 10 N.H. 139, it
Page 57 U. S. 400
was raised, and Chief Justice Parker, in delivering the opinion
of the court in a case in all respects like the one before us,
says
"That it is as essential that the public faith should be
preserved inviolate as it is that individual grants and contracts
should be maintained and enforced. But there is a material
difference between the right of a legislature to grant lands or
corporate powers or money and a right to grant away the essential
attributes of sovereignty or rights of eminent domain. These do not
seem to furnish the subject matter of a contract."
This Court sustained the principle announced by the Supreme
Court of New Hampshire in the
West River Bridge Case. A
charter for one hundred years incorporating a bridge company had
been granted; the bridge was built and enjoyed by the company. Then
another law was passed authorizing public roads to be laid out and
free bridges to be erected; the commissioners appropriated the West
River Bridge and made it free; the Supreme Court of Vermont
sustained the proceeding on a review of that decision. And this
Court held that the first charter was a contract securing the
franchises and property in the bridge to the company, but that the
first legislature could not cede away the sovereign right of
eminent domain, and that the franchises and property could be taken
for the uses of free roads and bridges on compensation's being
made.
Where the distinction lies involving a principle between that
case and this I cannot perceive, as every taxpayer is compensated
by the security and comfort government affords. The political
necessities for money are constant and more stringent in favor of
the right of taxation; its exercise is required daily to sustain
the government. But in the essential attributes of sovereignty, the
right of eminent domain and the right of taxation are not
distinguishable.
If the
West River Bridge Case be sound constitutional
law, as I think it is, then it must be true that the Supreme Court
of Ohio is right in holding that the legislature of 1845 could not
deprive the legislature of 1851 of its sovereign powers or of any
part of them.
It is insisted that the case of the
State of Ohio v.
Commercial Bank of Cincinnati, 7 Ohio 125, has held otherwise.
This is clearly a mistake. The state in that case raised no
question as to the right of one legislature to cede the sovereign
power to a corporation and tie up the hands of all subsequent
legislatures; no such constitutional question entered into the
decision, nor is any allusion made to it in the opinion of the
court. It merely construed the acts of assembly, and held that a
contract did exist on the ground that by the charter, the bank was
taxed four percent, and therefore the charter must
Page 57 U. S. 401
be enforced, as this rate of taxation adhered to the charter and
excluded a higher imposition.
It would be most unfortunate for any court, and especially for
this one, to hold that a decision affecting a great constitutional
consideration, involving the harmony of the Union, as this case
obviously does, should be concluded by a decision in a case where
the constitutional question was not raised by counsel, and so far
from being considered by the court, was never thought of; such a
doctrine is altogether inadmissible. And in this connection I will
say that there are two cases decided by this Court (and relied on
by the plaintiff in error) in regard to which similar remarks
apply. The first one is that of
New Jersey
v. Wilson, 7 Cranch 164. An exchange of lands took
place in 1758 between the British colony of New Jersey and a small
tribe of Indians residing there. The Indians had the land granted
to them by an act of the colonial legislature, which exempted it
from taxes. They afterwards sold it and removed. In 1804, the state
legislature taxed these lands in the hands of the purchasers; they
were proceeded against for the taxes, and a judgment rendered
declaring the act of 1804 valid. In 1812, the judgment was brought
before this Court, and the case submitted on the part of the
plaintiff in error without argument, no one appearing for New
Jersey. This Court held the British contract with the Indians
binding, and secondly that it ran with the land, which was exempt
from taxation in the hands of the purchasers.
No question was raised in the Supreme Court of New Jersey nor
decided there or in this Court as to the constitutional question of
one legislature's having authority to deprive a succeeding one of
sovereign power. The question was not considered, nor does it seem
to have been thought of in the state court or here.
The next case is
Gordon's
Case, 3 How. 144. What questions were there
presented on the part of the State of Maryland does not appear in
the report of the case, but I have turned to them in the record to
see how they were made in the state courts. They are as
follows:
"1st. That at the time of passing the general assessment law of
1841, there was no contract existing between the state and the
banks, or any of them, or the stockholders therein or any of them,
by which any of the banks or stockholders can claim an exemption
from the taxation imposed upon them by the said act of 1841."
"2d. That the contract between the state and the old banks, if
there be any contract, extends only to an exemption from further
'taxes or burdens' of the corporate privileges of
Page 57 U. S. 402
banking, and does not exempt the property, either real or
personal, of said banks or the individual stockholders
therein."
"3d. That even if the contract should be construed to exempt the
real and personal property of the old banks and the property of the
stockholders therein, yet such exemption does not extend to the new
banks or those chartered since 1830, and moreover that the power of
revocation in certain cases in these charters reserves to the state
the power of passing the general assessment law."
"4th. That the imposition of a tax of 20 cents upon everyone
hundred dollars' worth of property, upon both the old and new
banks, under the said assessment law is neither unequal nor
oppressive nor in violation of the bill of rights."
"5th. That taxation upon property within the state, wherever the
owners may reside, is not against the bill of rights."
On these legal propositions the opinion here given sets out by
declaring that
"The question, however, which this Court is called on the
decide, and to which our decision will be confined, is -- Are the
shareholders in the old and new banks liable to be taxed under the
act of 1841 on account of the stock which they own in the
banks."
The following paragraph is the one relied on as adjudging the
question, that the taxing power may be embodied in a charter and
contracted away as private property, to-wit:
"Such a contract is a limitation on the taxing power of the
legislature making it, and upon succeeding legislatures, to impose
any further tax on the franchise."
"But why, when bought, as it becomes property, may it not be
taxed as land is taxed which has been bought from the state was
repeatedly asked in the course of the argument. The reason is that
everyone buys land, subject in his own apprehension to the great
law of necessity, that we must contribute from it and all of our
property something to maintain the state. But a franchise for
banking, when bought, the price is paid for the use of the
privilege whilst it lasts, and any tax upon it would substantially
be an addition to the price."
As the case came up from the Supreme Court of Maryland, this
Court had power merely to reexamine the questions raised in the
court below and decided there. All that is asserted in the opinion
beyond this is outside of the case of which this Court had
jurisdiction, and is only so far to be respected as it is sustained
by sound reasoning; but its dicta are not binding as authority; and
so the Supreme Court of Maryland held in the case of the
Mayor
of Baltimore v. Baltimore & Ohio Railroad Company, 6 Gill
288.
The State of Maryland merely asked to have her statutes
Page 57 U. S. 403
construed, and if, by their true terms, she had promised to
exempt the stockholders of her banks from taxation, then she
claimed no tax of them. She took no shelter under constitutional
objections, but guardedly avoided doing so.
If an expression of opinion is authority that binds regardless
of the case presented, then we are as well bound the other way by
another quite equal authority. In the case of
East
Hartford v. Hartford Bridge Co., 10 How. 535, Mr.
Justice Woodbury, delivering the opinion of the Court, says the
case of
Goszler v. Corporation of
Georgetown, 6 Wheat. 596,
19 U. S. 598,
"appears to settle the principle that a legislative body cannot
part with its powers by any proceeding so as not to be able to
continue the exercise of them. It can and should exercise them
again and again, as often as the public interests require. . .
."
"Its members are made, by the people, agents or trustees for
them, on this subject, and can possess no authority to sell or
grant their power over the trust to others."
The
Hartford Case was brought here from the Supreme
Court of Connecticut, by writ of error, on the ground that East
Hartford held a ferry right secured by a legislative act that was a
private contract. But this Court held, among other things that, by
a true construction of the state laws, no such contract existed; so
that this case cannot be relied on as binding authority more than
Gordon's Case. If fair reasoning and clearness of
statement are to give any advantage, then the
Hartford
Case has that advantage over
Gordon's Case.
It is next insisted that the state legislatures have in many
instances, and constantly, discriminated among the objects of
taxation, and have taxed and exempted according to their
discretion. This is most true. But the matter under discussion is
aside from the exercise of this undeniable power in the
legislature. The question is whether one legislature can, by
contract, vest the sovereign power of a right to tax, in a
corporation as a franchise, and withhold the same power that
legislature had to tax, from all future ones? Can it pass an
irrepealable law of exemption?
General principles, however, have little application to the real
question before us, which is this: has the Constitution of Ohio
withheld from the legislature the authority to grant, by contract
with individuals, the sovereign power, and are we bound to hold her
Constitution to mean as her supreme court has construed it to mean?
If the decisions in Ohio have settled the question in the
affirmative that the sovereign political power is not the subject
of an irrepealable contract, then few will be so bold as to deny
that it is our duty to conform to the construction they have
settled; and the only objection to
Page 57 U. S. 404
conformity that I suppose could exist with anyone is that the
construction is not settled. How is the fact?
The refusal of some fifty banks to pay their assessed portion of
the revenue for the year 1851, raised the question for the first
time in the State of Ohio; since then, the doctrine has been
maintained in various cases, supported unanimously by all the
judges of the supreme court of that state, in opinions deeply
considered, and manifesting a high degree of ability in the judges,
as the extract from one of them, above set forth, abundantly shows.
If the construction of the state constitution is not settled, it
must be owing to the recent date of the decisions. An opinion
proceeding on this hypothesis will, as I think, involve our
judgment now given in great peril hereafter; for if the courts of
Ohio do not recede, but firmly adhere to their construction until
the decisions, now existing, gain maturity and strength by time,
and the support of other adjudications conforming to them, then it
must of necessity occur that this Court will be eventually
compelled to hold that the construction is settled in Ohio, when it
must be followed to avoid conflict between the judicial powers of
that state and the Union, an evil that prudence forbids.
1. The result of the foregoing opinion is that the sixtieth
section of the general banking law of 1845 is, in its terms, no
contract professing to bind the Legislature of Ohio not to change
the mode and amount of taxation on the banks organized under this
law; and for this conclusion I rely on the reasons stated by my
brother Campbell in his opinion, with which I concur.
2. That according to the constitutions of all the states of this
Union, and even of the British Parliament, the sovereign political
power is not the subject of contract so as to be vested in an
irrepealable charter of incorporation, and taken away from, and
placed beyond the reach of, future legislatures; that the taxing
power is a political power of the highest class, and each
successive legislature having vested in it, unimpaired, all the
political powers previous legislatures had, is authorized to impose
taxes on all property in the state that its constitution does not
exempt.
It is undeniably true that one legislature may by a charter of
incorporation exempt from taxation the property of the corporation
in part, or in whole, and with or without consideration, but this
exemption will only last until the necessities of the state require
its modification or repeal.
3. But if I am mistaken in both these conclusions, then, I am of
opinion that, by the express provisions of the Constitution of Ohio
of 1802, the legislature of that state had withheld
Page 57 U. S. 405
from its powers the authority to tie up the hands of subsequent
legislatures in the exercise of the powers of taxation, and this
opinion rests on judicial authority that this Court is bound to
follow; the Supreme Court of Ohio having held by various solemn and
unanimous decisions, that the political power of taxation was one
of those reserved rights intended to be delegated by the people to
each successive legislature, and to be exercised alike by every
legislature according to the instructions of the people. This being
the true meaning of the nineteenth and twenty-eighth sections of
the bill of rights, forming part of the constitution of 1802; one
section securing the right of instructing representatives, and the
other protecting reserved rights held by the people.
Whether this construction given to the state constitution is the
proper one, is not a subject of inquiry in this Court; it belongs
exclusively to the state courts, and can no more be questioned by
us than state courts and judges can question our construction of
the Constitution of the United States. For these reasons I am of
opinion that the judgment of the Supreme Court of Ohio should be
affirmed.
MR. JUSTICE DANIEL.
In the views so clearly taken by my brother Campbell of the
character of the legislation of Ohio, impeached by the decision of
the Court, I entirely coincide. I will add to the objections he has
so well urged to the jurisdiction of this Court, another, which to
my mind at least is satisfactory; it is this that one of the
parties to this controversy being a corporation created by a state,
this Court can take no cognizance, by the Constitution, of the
acts, or rights, or pretensions of that corporation.
MR. JUSTICE CAMPBELL.
I dissent from the opinion of the court.
The question disclosed by the record, is contained in the
sixtieth section of an act of the General Assembly of Ohio, "to
incorporate the State Bank of Ohio and other banking companies of
that state," adopted February, 1845.
The section provides, that every banking company organized by
the act, or complying with its provisions, shall semiannually, at
designated days, set off to the state, six percent of the net
profits for the six months next preceding,
"which sum or amount so set off shall be in lieu of all taxes to
which such company, or the stockholders thereof, on account of
stock owned therein, would otherwise be subject."
and the cashier was required to report the amount to the auditor
and to pay it to the treasurer,
"but in computing the profits of the company for the
purposes
Page 57 U. S. 406
aforesaid, the interest received on the certificates of the
funded debt held by the company, or deposited with and transferred
to the treasurer of the state, or to the board of control by such
company, shall not be taken into the account."
I have extracted the last clause merely because it forms a part
of the section.
It is not usual for governments to levy taxes upon the
certificates of their funded debt, and Ohio had, in an early
statute, forbidden taxation of hers. This clause was a cumulative
precaution, wholly unnecessary. Swan Stat. 747, ยง 5.
The case lies in the solution of the question whether the clause
directing the banks to set apart semiannually, upon the profits for
the six months preceding, six percent in lieu of all other taxes to
which the company or the stockholders would otherwise be subject on
account of the stock, institutes an unalterable rule of taxation
for the whole time of the corporate existence of these banks? The
General Assembly of Ohio thinks otherwise, and has imposed a tax
upon the stock of the banks, corresponding with the taxes levied
upon other personal property held in the state. The payment of this
tax has been resisted by the banks. The Supreme Court of Ohio, by
its judgment, affirms the validity of the act of the General
Assembly, and has condemned the bank to the payment. This judgment
is the matter of consideration.
The section of the act above cited furnishes a rule of taxation,
and while it remains in force a compliance with it relieves the
banks from all other taxes to which they would otherwise be
subject. Such is the letter of the section.
The question is has the State of Ohio inhibited herself from
adopting any other rule of taxation either for amount or mode of
collection, while these banks continue in existence? It is not
asserted that such a prohibition has been imposed by the express
language of the section. The term for which this rule of taxation
is to continue is not plainly declared. The amounts paid according
to it discharge the taxes for the antecedent six months. Protection
is given in advance of exaction.
The clause in the section that this "sum or amount so set off
shall be in lieu of all taxes to which such company or the
stockholders thereof would otherwise be subject," requires an
addition to ascertain the duration of the rule. It may be completed
in adding, "by the existing laws for the taxation of banks," or
"till otherwise provided by law," or at "the date of such
apportionment or dividend." Or, following the argument of the
banks, in adding, "during the existence of the banks." Whether we
shall select from the one series of expressions, leading to one
result, or the expression leading to another altogether different,
depends upon the rules of interpretation applicable to the
subject.
Page 57 U. S. 407
The first inquiries are of the relations of the parties to the
supposed contract to its subject matter, and the form in which it
has been concluded. The sixtieth section of the act of 1845, was
adopted by the General Assembly of Ohio in the exercise of
legislative powers, as a part its public law. The powers of that
assembly in general, and that of taxation especially, are trust
powers, held by them as magistrates, in deposit, to be returned,
after a short period, to their constituents without abuse or
diminution.
The nature of the legislative authority is inconsistent with an
inflexible stationary system of administration. Its office is one
of vigilance over the varying wants and changing elements of the
association, to the end of ameliorating its condition. Every
General Assembly is organized with the charge of the legislative
powers of the state; each is placed under the same guidance,
experience, and observation; and all are forbidden to impress
finally and irrevocably their ideas or policy upon the political
body. Each, with the aid of an experience, liberal and enlightened,
is bound to maintain the state in the command of all the resources
and faculties necessary to a full and unshackled self-government.
No implication can be favored which convicts a Legislature of a
departure from this law of its being.
The subject matter of this section is the contributive share of
an important element of the productive capital of the state to the
support of its government. The duty of all to make such a
contribution in the form of an equal and apportioned taxation is a
consequence of the social organization. The right to enforce it is
a sovereign right, stronger than any proprietary claim to property.
The amount to be taken, the mode of collection, and the duration of
any particular assessment or form of collection, are questions of
administration submitted to the discretion of the legislative
authority, and variations must frequently occur, according to the
mutable conditions, circumstances, or policy of the state. These
conditions are regulated for the time, in the sixtieth section of
this act. That section comes from the lawmaker, who ordains that
the officers of certain banking corporations at stated periods
shall set apart from their property a designated sum as their share
of the public burden, in lieu of other sums or modes of payment to
which they would be subject; but there is no promise that the same
authority may not, as it clearly had a right to do, apportion a
different rate of contribution. I will not say that a contract may
not be contained in a law, but the practice is not to be
encouraged, and courts discourage the interpretation which
discovers them. A common informer sues for a penalty, or a revenue
officer makes a seizure under a promise that on conviction the
recovery shall be shared, and yet the state
Page 57 U. S. 408
discharges the forfeiture, or prevents the recovery by a repeal
of the law, violating thereby no vested right nor impairing the
obligation of any contract.
9
U. S. 5 Cranch 281;
23 U. S. 10 Wheat.
246;
31 U. S. 6 Pet.
404.
A captor may be deprived of his share of prize money, pensioners
of their promised bounty, at any time before their payment. 2 Russ.
& M. 35.
Salaries may be reduced, offices having a definite tenure,
though filled, may be abolished, faculties may be withdrawn, the
inducements to vest capital impaired and defeated by the varying
legislation of a state, without impairing constitutional
obligation.
49 U. S. 8 How.
163;
51 U. S. 10 How.
395;
44 U. S. 3 How.
534;
33 U. S. 8 Pet. 88;
2 Sanf. 355. The whole society is under the dominion of law, and
acts, which seem independent of its authority, rest upon its
toleration. The multifarious interests of a civilized state must be
continually subject to the legislative control. General
regulations, affecting the public order, or extending to the
administrative arrangements of the state, must overrule individual
hopes and calculations, though they may have originated in its
legislation. It is only when rights have vested under laws that the
citizen can claim a protection to them as property. Rights do not
vest until all the conditions of the law have been fulfilled with
exactitude during its continuance, or a direct engagement has been
made, limiting legislative power over and producing an obligation.
In this case it may be conceded that at the end of every six months
the payment then taken is a discharge for all antecedent
liabilities for taxes. That there could be no retrospective
legislation. But beyond this the concessions of the section do not
extend.
A plain distinction exists between the statutes which create
hopes, expectations, faculties, conditions, and those which form
contracts. These banks might fairly hope that without a charge in
the necessities of the state, their quota of taxes would not be
increased, and that the while payment was punctually made the form
of collection would not be altered. But the General Assembly
represents a sovereign, and as such designated this rule of
taxation upon existing considerations of policy, without annexing
restraints on its will, or abdicating its prerogative, and
consequently was free to modify, alter, or repeal the entire
disposition.
I have thus far considered the sixtieth section of the act as a
distinct act, embodying a state regulation with the view of
ascertaining its precise limitations.
I shall, however, examine the general scheme and object of the
act, of which it forms a part, to ascertain whether a different
signification can be given to it. Before doing so, it is a matter
of consequence to ascertain on what principles the inquiry must be
conducted.
Page 57 U. S. 409
Three cases occurred in this Court, before either of the members
who now compose it belonged to it, in which taxation acts of the
states or its municipal authorities involving questions of great
feeling and interest, were pronounced invalid. In the last of
these, the Court said,
"that in a society like ours, with one supreme government for
national purposes, and numerous state governments for other
purposes, in many respects independent and in the uncontrolled
exercise of many important powers, occasional interferences ought
not to surprise us. The power of taxation is one of the most
essential to a state, and one of the most extensive in its
operation. The attempt to maintain a rule which shall limit its
exercise is undoubtedly among the most delicate and difficult
duties which can devolve on those whose province it is to expound
the supreme law of the land, in its application to
individuals."
The court in each of these cases affirm
"that the sovereignty of the state extends to everything which
exists by its authority, or is introduced by its permission, and
all on subjects of taxation."
27 U. S. 2 Pet.
449;
22 U. S. 9 Wheat.
738;
17 U. S. 4
Wheat. 316.
The limitations imposed by the court in these cases excited a
deep and pervading discontent, and must have directed the court to
a profound consideration of the question in its various relations.
The case of the
Providence Bank v.
Billings, 4 Pet. 514, enabled the court to give a
practical illustration of sincerity with which the principle I have
quoted was declared. A bank, existing by the authority of a state
legislature, claimed an immunity from taxation against the
authority of its creator.
The Court then said
"however absolute the right of an individual to property may be,
it is still in the nature of that right, that it must bear a
portion of the public burdens, and that portion is determined by
the legislature."
The Court declared that the relinquishment of the power of
taxation is never to be assumed.
"The community has a right to insist that its abandonment ought
not to be presumed in a case in which the deliberate purpose of the
state to abandon it does not plainly appear."
These principles were reaffirmed, their sphere enlarged, and
their authority placed upon broad and solid foundations of
constitutional law and general policy, in the opinion of this
Court, in the case of
Charles River
Bridge, 11 Pet. 420. No opinion of the Court more
fully satisfied the legal judgment of the county, and consequently
none has exercised more influence upon its legislation. The Supreme
Court of Pennsylvania, speaking of these cases, says,
"they are binding on the state courts not merely as precedents,
and therefore proving what the law is, but as the deliberate
judgment of that tribunal
Page 57 U. S. 410
with whom the final decision of all such questions rests. The
state courts have almost universally followed them. But no tribunal
of the Union has acceded to the rule they lay down with a more
earnest appreciation of its justice than did this Court."
7 Har. 144; 10 Barr 142.
The Supreme Court of Georgia says,
"the decision, based as it is upon a subject particularly within
the cognizance and jurisdiction of the Supreme Court of the United
States, is entitled to the highest deference."
And the eminent Chief Justice of that court adds, "that the
proposition it establishes commands my entire assent and
approbation." 9 Ga. 517; 10 N.H. 138; 17 Conn. 454; 21 Verm. 590;
21 Ohio, McCook's Rep 564; 9 Ala. 235; 9 Rob. 324; 4 Coms. 419; 6
Gill 288.
The Chief Justice, delivering the opinion of this Court in that
case, quotes with approbation the principle, that the abandonment
of the power of taxation ought not to be presumed in a case in
which the deliberate purpose to do so did not appear, and says,
"The continued existence of a government would be of no great
value, if, by implications and presumptions, it was disarmed of the
powers necessary to accomplish the ends of its creation, and the
functions it was designed to perform transferred to the hands of
privileged corporations. The rule of construction announced by the
court was not confined to the taxing power; nor is it so limited in
the opinion delivered. On the contrary it was distinctly placed on
the ground that the interests of the community were concerned in
preserving, undiminished the power in question; and whenever any
power of the state is said to be surrendered or diminished, whether
it be the taxing power or any other affecting the public interest,
the same principle applies, and the rule of construction must be
the same."
The court only declared those principles for which the commons
of England had struggled for centuries, and which were only
established by magnanimous and heroic efforts. The rules that
public grants convey nothing by implication, are construed strictly
in favor of the sovereign, do not pass anything not described nor
referred to, and when the thing granted is described nothing else
passes; that general words shall never be so construed as to
deprive him of a greater amount of revenue than he intended to
grant, were not the inventions of the craft of Crown lawyers, but
were established in contests with Crown favorites and impressed
upon the administration, executive and judicial as checks for the
people. The invention of crown lawyers was employed about such
phrases, as
ex speciali gratia, certa scientia mero motu,
and
non obstante, to undermine the strength of such rules,
and to enervate the force of wholesome statutes. A writer of the
seventeenth century says
"From the time of William
Page 57 U. S. 411
Rufus, our Kings have thought they might alienate and dispose of
the Crown lands at will and pleasure; and in all ages, not only
charters of liberty, but likewise letters patent for lands and
manors, have actually passed in every reign. Nor would it have been
convenient that the prince's hands should have been absolutely
bound up by any law, or that what had once got into the Crown
should have been forever separated from private possession. For
then by forfeitures and attaintures he must have become lord of the
whole soil in a long course of time. The Constitution, therefore,
seems to have left him free in this matter; but upon this tacit
trust, as he has all his other power, that he shall do nothing
which may tend to the destruction of his subjects. However, though
he be thus trusted, it is only as head of the commonwealth; and the
people of England have in no age been wanting to put in their claim
to that to which they conceived themselves to have a remaining
interest; which claims are the acts of resumption that from time to
time have been made in Parliament, when such gifts and grants were
made as become burdensome and hurtful to the people. Nor can any
government or state divest itself of the means of its own
preservation; and if our kings should have had an unlimited power
of giving away their whole revenue, and if no authority could have
revoked such gifts, every profuse prince, of which we have had many
in this kingdom, would have ruined his successor, and the people
must have been destroyed with new and repeated taxes; for by our
duty we are likewise to support the next prince. So that if no
authority could look into this, a nation must be utterly undone
without any way of redressing itself, which is against the nature
and essence of any free establishment."
Our Constitution therefore seems to have been that the King
always might make grants, and that these grants, if passed
according to the forms prescribed by the law, were valid and
pleadable against not only him but his successors. However it is
likewise manifest that "the legislative power has had an
uncontested right to look into those grants, and to make them void
whenever they were thought exorbitant."
Nor were they careless or indifferent to precautionary measures
for the preservation of the revenues of the state from spoliation
or waste. Official responsibility was established, and the Lords
High Treasurer and Chancellor, through whose offices the grants
were to pass, were severally sworn
"that they would neither know nor suffer the King's hurt, nor
his disheriting, nor that the rights of his crown be distressed by
any means as far forth as ye may let; and if ye may not let it, ye
shall make knowledge thereof clearly and explicitly to the King
with your true advice and counsel. "
Page 57 U. S. 412
The responsibility of these high officers, as the history of
England abundantly shows, was something more than nominal; nor did
the frequent enforcement of that rule of responsibility, nor the
adoption by the judges of the stringent rules I have cited, protect
the revenues of the state from spoliation. "The wickedness of men,"
continues this writer,
"was either too cunning or too powerful for the wisdom of laws
in being. And from time to time great men, ministers, minions,
favorites, have broken down the fences contrived and settled in our
Constitution. They have made a prey of the commonwealth, plumed the
prince, and converted to their own use what was intended for the
service and preservation of the state. That to obviate this
mischief, the legislative authority has interposed with inquiries,
accusations, and impeachments, till at last such dangerous heads
were reached."
Davenant's Dis.
passim.
Nor let it be said that this history contains no lessons nor
instructions suitable to our condition. The discussions before this
Court in the
Indiana Railroad and the
Baltimore
Railroad cases exposed to us the sly and stealthy arts to
which state legislatures are exposed, and the greedy appetites of
adventurers, for monopolies and immunities from the state right of
government. We cannot close our eyes to their insidious efforts to
ignore the fundamental laws and institutions of the states, and to
subject the highest popular interests to their central boards of
control and directors' management.
This is not the time for the relaxation of those time-honored
maxims, under the rule of which free institutions have acquired
their reality, and liberty and property their most stable
guarantees. The Supreme Court of Pennsylvania says with great
force
"that if acts of incorporation are to be so construed as to make
then imply grants of privileges, immunities, and exemptions which
are not expressly given, every company of adventurers may carry
what they wish, without letting the legislature know their designs.
Charters would be framed in doubtful or ambiguous language, on
purpose to deceive those who grant them; and laws, which seem
perfectly harmless on their face, and which plain men would suppose
to mean no more than what they say, might be converted into engines
of infinite mischief. There is no safety to the public interest
except in the rule which declares that the privileges not expressly
granted are withheld."
7 Harris 114.
The principles of interpretation, contained in these cases,
control the decision of this, if applied to this act. Indeed, the
argument of the plaintiff rests upon rules created for, and adapted
to, a class of statutes entirely dissimilar. We were invited to
consider the antecedent legislation of Ohio, in reference to
its
Page 57 U. S. 413
banks, the discouraging effects of that legislation, and then to
deal with this act, as a medicinal and curative measure; as an act
recognizing past error, and correcting for the future the
consequences. It is proper to employ this argument to its just
limit. The legislation of Ohio since 1825 certainly manifests a
distinct purpose of the state to maintain its powers over these
corporations, in the matter of taxation, unimpaired. With a very
few exceptions this appears in all the statutes. It is seen in the
act of 1825, in the charters granted in 1834, in the acts of
1841-1843, the two last being acts embracing the whole subject
matter of banking. It is said this austerity was the source of
great mischief, depreciated the paper currency of the state and
occasioned distress to the people, and that the change apparent in
the act of 1845 was the consequence.
The existence of a consistent and uniform purpose for a long
period is admitted. The abandonment of such a purpose, and one so
in harmony with sound principles of legislation, cannot be
presumed. If the application of these principles in Ohio was
productive of mischief, we should have looked for an explicit and
unequivocal disclaimer. We have seen that the act contains no
renunciation of this important power. And it may be fairly
questioned whether the people of Ohio would have sanctioned such a
measure. I know of no principle which enables me to treat the
sixtieth section of this act as a remedial statute. Even the
dissenting opinions in the
Charles River and
Louisa
Railroad cases, which have formed the repertory from which the
arguments of the plaintiffs have been derived, do not in terms
declare such a rule, and the opinions delivered by the authority of
the court repel such a conclusion. Nor can I consider the decision
in 7 Ohio 125 of consequence in this discussion. That case was
decided upon a form of doctrine which after the judgments of this
Court, before cited, had no title to any place in the legal
judgment of the country. The case was decided in advance of the
most important and authoritative of those decisions. It is not
surprising to hear that the judges who gave the judgment,
afterwards renounced its principle, or that another state court has
disapproved it, 7 Harris 144, or that it has not been followed in
kindred cases, 11 Ohio 12, 393; 19
id. 110; 21
id. McCook, 563, 604 626; and at the first time when it
came up for revision it was overruled.
It remains for me to consider the act of 1845, its purpose and
details, in connection with the sixtieth section of the act, to
ascertain whether it is proper to assume that the state has
relinquished its rights of taxation over the banking capital of the
state.
The act of 1845 was designed to enable any number, not
Page 57 U. S. 414
fewer than five persons, to form associations to carry on the
business of banking.
The legislature determined the whole amount of the capital which
should be employed under the act -- that it should be distributed
over the state, according to a specified measure of apportionment;
that the bills to circulate as currency should have certain marks
of uniformity, and be in a certain proportion to capital and specie
on hand, and that a collateral security should be given for their
redemption. The act contains measures for organization, relating to
subscriptions for stock, the appointment of officers and boards of
management; sections, of a general interest, referring to the
frauds of officers, the insolvency of the corporations, their
misdirection and forfeiture; sections containing explicit and clear
statements of corporate right and privilege, the capacities they
can exercise, the functions they are to perform, and the term of
their existence.
The act initiates a system of banking of which any five of its
citizens may avail, and which provides for the confederacy of these
associations under the general title of the State Bank of Ohio, and
its branches, and their subjection to a board of control, appointed
by them.
More than fifty banks have been formed under this act, and
thirty-nine belong to the confederacy. Some of the banks over whose
charters the state has reserved a plenary control, are by the act
permitted to join it. It is said "that the whole of this act is to
be taken; the purpose of the act and the time of the act. It is a
unit." It will not be contended that the fifty-first section of
this act, by which this multitude of banking companies are adjudged
to be corporations, with succession for twenty years, places every
other relation established by the act, beyond the legislative
domain for the same period of time. For there are in the act
measures designed for organization and arrangement for the
convenience and benefit of the corporators only; there are
concessions creating hopes and expectations out of which rights may
grow by subsequent events; there are sections which convey present
rights, or from which rights may possibly arise in the form of a
contract; there are others which enter into the general system of
administration, affect the public order, and tend to promote and
common security. Some of these provisions may be dispensed with by
those for whose exclusive benefit they were made. Some may be
altered, modified, or repealed, to meet other conditions of the
public interest, and some perhaps may not be alterable except with
the consent of the corporators themselves. To determine the class
to which one enactment or another belongs, we are referred to those
general principles I have already considered. In this act,
Page 57 U. S. 415
of seventy-five sections, which organizes a vast machinery for
private banking, which directs the delicate and complex
arrangements for the supply of a paper currency to the state, and
determines the investment of millions of capital, we find this
sixtieth section. The act is enabling and permissive. It makes it
lawful for persons to combine and to conduct business in a
particular manner. It forms no partnership for the state, compels
no one to embrace or to continue the application of industry and
capital according to its scheme. It grants licenses under certain
conditions and reservations, but is nowhere coercive. Among the
general regulations is the one which directs the banks at the end
of every six months to ascertain their net profits for the six
months next preceding and to set apart six percent for the state in
the place of the other taxes or contributions to which they would
be liable. But the legislature imposes no limit to its power, nor
term to the exercise of its will, nor binds itself to adhere to
this or any other rule of taxation.
The subject affects the public order and general administration.
It is not properly a matter for bargain or barter, but the
enactment is in the exercise of a sovereign power, comprehending
within its scope every individual interest in the state. It is a
power which every department of government knows that the community
is interested in retaining unimpaired, and that every corporator
understood its abandonment ought not to be presumed in a case in
which the deliberate purpose to abandon it does not appear.
I have sought in vain in the sixtieth section of the act, in the
act itself, and in the legislation and jurisprudence of Ohio, for
the expression of such a deliberate purpose.
My opinion is that the Supreme Court of Ohio has faithfully
applied the lessons inculcated by this Court, and that its judgment
should be affirmed.
Order
This cause came on to be heard on the transcript of the record
from the Supreme Court of Ohio, and was argued by counsel. On
consideration whereof, it is now here ordered and adjudged by this
Court that the judgment of the said Supreme Court of Ohio in this
cause be, and the same is hereby reversed with costs, and that this
cause be and the same is hereby remanded to the said Supreme Court
of Ohio for further proceedings to be had therein in conformity to
the opinion of this Court.