Furman v. Nichol

75 U.S. 44 (____) 8 Wall. 44

FURMAN
v.
NICHOL.

Supreme Court of United States.

Messrs. B.R. Curtis, R.L. Caruthers, and G. Hoadley, for the appellants.

Messrs. Maynard and Harrison, contra.

Mr. Justice DAVIS delivered the opinion of the court.

The main question involved in this suit is of more importance than difficulty; but before we proceed to discuss it, it is necessary to consider the point of jurisdiction which is raised by the defendant in error. The circumstances under which this court is authorized to review the decisions of State tribunals has been so often considered and decided, that there is hardly anything left to do, but to apply the already well-settled legal principles which govern this class of cases, to a particular record, in order to decide, whether or not we have jurisdiction to hear and determine the matter in controversy. It would be useless labor to go through with the various adjudications of this court on this subject. It is enough for the purposes of this suit to say, that a cause can be removed from a State court into this court under the 25th section of the Judiciary Act of 1789, whenever some one of the questions embraced in it was relied on by the party who brings the cause here, and when the right he claimed it gave him, was denied to him by the State court. It is urged that the particular provision of the Constitution, which the plaintiffs in error say has been violated in its application to their case, should be contained in the pleadings, but this is in no case necessary. If the record shows, either by express averment, or by clear and necessary intendment, that the constitutional provision did arise, and that the court below could not have reached the conclusion and judgment it did reach, without applying it to the case in hand, then the jurisdiction of this court attaches. And it need not appear that the State court erred in its judgment. It is sufficient to confer jurisdiction that the question was in the case, was decided adversely to the plaintiffs in error, and that the court was induced by it to make the judgment which it did.

Testing the case at bar by these rules, it is apparent that it is properly here, and must be disposed of on its merits.

Furman and Green, conceiving themselves aggrieved by the conduct of the county clerk in refusing their tender of the amount due the State for taxes in the notes and issues of the Bank of Tennessee issued prior to the 6th May, 1861, applied to the local Circuit Court for a mandamus to compel the county clerk to accept payment of the notes in discharge of Furman's obligation, and to issue to them a license as wholesale merchants. The application for the writ proceeded on the theory that the State had, in the passage of the act creating the Bank of Tennessee, in 1838, made a contract with its people to receive these notes in payment of State taxes, and that it was not in the power of a subsequent legislature to impair the binding force of this contract.

The proceeding was an effort on the part of the plaintiffs in error to test the question of the validity of the authority of a public officer of the State, exercising authority under the State, on the ground that such authority was repugnant to that provision of the Federal Constitution which forbids a State to pass any law impairing the obligation of a contract. The purpose of the petition, the issue which it presented and sought to have determined, were as plainly to be seen, as if the words of the particular constitutional provision relied on had been inserted in it, and the obnoxious legislation spread out at length. All courts take notice, without pleading, of the Constitution of the United States, and the public laws of the State where they are exercising their functions.

It is insisted that the petition should have averred that the State had impaired, or by some act attempted to impair, the obligation of a contract, but this does sufficiently appear by necessary intendment, for it is alleged that Furman was the owner of the notes and entitled to have them received for taxes, by virtue of a contract with the State; that he had tendered them to the defendant, who refused to receive them, and that it was not in the power of the legislature to impair the validity of this contract.

The mandamus was asked for to enforce a contract — to act directly on Nichol, the clerk and collector, who was exercising an authority under the State. What is plainer than that this proceeding impeached this authority, in its application to their case, because of legislation construed by this officer as depriving Furman of his right to pay his State taxes in notes of the Bank of Tennessee. If so, then the petitioners, insisting on the protection of the Constitution, drew in question both the validity of State legislation and the authority of the State officer; and unless the record discloses that the Supreme Court of Tennessee denied relief. on other than Federal grounds, it is perfectly manifest that we are compelled to take jurisdiction of this cause.

But to proceed a step further. The cause was heard on the petition and a demurrer, admitting its truth, but denying its sufficiency.

There were three principal defences to the relief asked, specified in the demurrer, as was required by the Tennessee code of practice.

These were, first, that the twelfth section of the act incorporating the Bank of Tennessee, did not constitute a contract. Secondly, that there was no contract, because the said twelfth section was repealed by implication by section 603 of the code of 1858, and there was no averment that the notes were issued before that time. The third and last defence was, that the petition did not show that the plaintiffs became the owners of the notes before the direct repeal of the twelfth section by the legislature, in 1865. What possible difference can it make, in deciding the question of jurisdiction, on which of these three grounds the Supreme Court of Tennessee based their judgment? The right and duty of this court to hear and determine this case does not depend on our ability to prove that the Supreme Court of Tennessee was wrong in its judgment. Whether that judgment was right or wrong, it is reviewable here, if it necessarily drew in question the validity of a State statute, or of an authority exercised under it, on the ground of the repugnancy of the statute to the Constitution of the United States. That it did do this there would seem to be no doubt.

The defence really amounts to this, either that the alleged contract did not exist, or if it did, that there has been no legislation that impairs it.

Whether it be true or false, depends on the construction to be given the laws of the State, which are claimed as proving the making of the contract and its violation.

If so, this court decides for itself, whether the construction which the court below gave to these different statutes was correct or incorrect; and we are required to reverse, under the twenty-fifth section of the Judiciary Act, if we find that, under an error of construction, that court has adjudged that no contract has been impaired. To do otherwise, would be to surrender to the State courts an important trust confided to this court by the Constitution.

Without pursuing the subject any further, it is clear from the record that the Supreme Court of Tennessee, in dismissing the petition for mandamus, necessarily adjudged that there was not at the time such a contract as the plaintiff, Furman, claimed authorized him to make the tender to the clerk, of the notes of the Bank of Tennessee. The jurisdiction of this court is, therefore, complete, and the case must be decided on its merits.

The State of Tennessee, through its legislature, in 1838, thought proper to create a bank "in its name and for its benefit." It was essentially a State institution. The State owned the capital and received the profits; appointed the directors, and pledged its faith and credit for its support. This would seem to have been enough to establish the credit of the institution on a firm basis, and to inspire confidence in the value of its notes, so that they would obtain a free circulation among the people as money. But the legislature, in its anxiety to insure for these notes a still greater confidence of the community, went further, and provided that they should be receivable at the treasury of the State, and by all tax collectors and other public officers, in all payments for taxes and other moneys due the State.

It will be readily seen, that nothing could have been better calculated to accomplish the purpose the legislature had in view than the incorporation of this guaranty into the charter of the bank. It assured the free circulation of their notes, gave them a credit over the issues of other banks, and furnished a security to those who held them against any serious loss, if, in the vicissitudes of trade, the bank itself should become embarrassed; for, annually, they would be enabled to use the notes at their par value in the payment of their taxes.

That this guaranty was, until withdrawn by the State, a contract between the State and every note-holder of the bank, obliging the State to receive the notes for taxes, cannot admit of serious question.

The State was engaged in banking, and like other corporations engaged in the same business, desirous of using all legitimate means to increase the profits of the enterprise. The profits of a bank of issue depend in a great measure on the ability of the bank to keep its currency afloat. The longer the bills are withheld from redemption the greater the remuneration to the corporation. Every additional guaranty thrown around the bills, affecting their security and increasing the uses to which they can be put, affords necessarily additional inducements for the people in whose hands they fall to keep them, and not return them to the counter of the bank for redemption in specie. What so natural as that the intelligent legislators of 1838, knowing all this, should say to every person discounting a note, or taking it in the ordinary transactions of life, "If you will not return this note for redemption, we will take it from you for taxes? It is true you can demand specie for the bills, and so can the State demand specie for taxes, but if you will forego your right the State will do the same, and consent to receive from you, in lieu of specie, for the taxes due her, the notes of the bank." In such a transaction the benefit is mutual between the parties. The bank gets the interest on the notes as long as they are unredeemed, and the holder of the bills has a ready and convenient mode of paying taxes. The State did, therefore, in the charter creating the Bank of Tennessee, on good consideration, contract with the bill-holders to receive from them the paper of the bank for all taxes they owed the State. Until the legislature, in some proper way, notifies the public that the guaranty thus furnished has been withdrawn, such a contract is binding on the State, and within the protection of the Constitution of the United States.

An attempt is made to restrict the operation of this guaranty to the person who, in the course of dealing with the bank, receives the note, and not to extend it further. Such an interpretation would render the guaranty of comparatively little value, and defeat the object which we have attempted to show, the legislature designed to accomplish by it. The guaranty is in no sense a personal one. It attaches to the note — is part of it, as much so as if written on the back of it; goes with the note everywhere, and invites every one who has taxes to pay to take it.

The quality of negotiability is annexed to the notes in words that cannot be misunderstood, and which indicate the purpose of the legislature, that they should be used by every one who is indebted to the State.

It is contended that the promise of the State was withdrawn in 1858, by section 603 of the code of that year — not in express terms, but by necessary implication. Courts do not favor repeals by implication, and never sanction them if the two acts can stand together. The provision of the code, which is deemed inconsistent with the continuance of the promise of the State, directs the kind of funds which collectors shall, after that time, receive for taxes. The legislature thought fit to confer upon the people the privilege of paying their taxes in the issues of other banks that were at par. As these issues were in circulation at the time, it was doubtless thought a wise policy to allow the people to pay their taxes in them, and as long as they were at par the State could not be the loser. This policy was adopted for the convenience of the people. There are in the statute no words of negation, saying that no funds other than those specified in the section shall be received. But we are to construe the different sections of the code together in order to arrive at the meaning of the legislature. In doing this, we find that where acts of incorporation are not expressly repealed, they are, in terms, saved from repeal by section 42 of the code. As there was no attempt in the code to interfere with the charter of the Bank of Tennessee, it follows that it was saved from repeal, and of course, that the guaranty contained in the twelfth section of the act of its incorporation was still continued. That the legislature so understood it receives additional confirmation from the consideration, that this guaranty was expressly withdrawn in 1865. Why withdraw it then if it was withdrawn in 1858?

The effect of the repealing act of 1865 remains to be considered. It is true the State had the right at any time to withdraw its guaranty, but it is equally true that it must be done in such manner as not to impair the obligation of its contract with the note-holders of the bank. That this repealing act operated on all the issues of the bank after its date cannot be doubted, but the question with which we have to deal is, what effect did it have on the notes of the bank issued prior to its passage? It is conceded that these plaintiffs are entitled to the relief they ask, if the defendant was obliged to receive the notes which were tendered. The tender was made in the notes of the bank, issued prior to the 6th day of May, 1861, which were in conformity to its charter, and were payable to bearer. It does not appear when the notes came to the hands of the plaintiffs — whether before or after the repealing act — but it is a fair presumption, in the absence of any averment to the contrary, that it was after the date of that act.

It is insisted, as the bank during the rebellion was under the control of the usurping government, and was used by it for unlawful purposes, that it should have been stated that the notes tendered were the lawful issues of the bank. But it would seem the pleader had this state of things in his mind, and wished to avoid the issue it involved, for he avers that the notes were issued prior to the 6th day of May, 1861, the time when the State endeavored to sever its relations with the Union. The presumption is that the bank, before that time, issued its notes properly; and, in addition, it is stated, as we have seen, that they were issued in conformity with the twelfth section of its charter. It follows from this statement, necessarily, that they were the lawful issues of the bank. If the defendant wished to contest this point he should have answered, and not by his pleading, admitted the truth of the petition and all legal inferences that could be drawn from it.

This case is, therefore, not embarrassed by the changed relation of the State after 1861; and the discussion of the principles which settle this case are not intended by the court to apply to the issues of this bank while under the control of the insurgents, because such a case is not before us, and it will be time enough to decide the important questions which it would present when it arises, if it ever should arise.

It is contended that the repealing act took from those persons who did not at the time hold the paper of the bank, the right to acquire it afterwards, and use it to discharge their debts to the State.

This construction of the contract would limit the obligation to the person, and withdraw it from the paper. If, as we have endeavored to show, the guaranty attached to the paper itself, and could not be withdrawn from it, then it follows that the notes in circulation at the time of the repeal are not affected by it, and carry with them the pledge of the State to be received in payment of taxes by every bona fide holder.

It would seem to be unnecessary to discuss any further the principles which lie at the foundation of this case, as they were settled in Woodruff v. Trapnall, heretofore decided by this court. The mere statement of that case will show its similarity to this. In 1836, the State of Arkansas, in the charter of a bank (owned and controlled by the State), declared that the notes of the institution should be received in payment of all debts due the State. Some years afterwards this provision of the charter was repealed. After its repeal, Trapnall, acting in behalf of the State, sued out an execution upon a judgment which the State had obtained against Woodruff, a defaulting treasurer. Woodruff met the demand of the writ by a tender (which was refused) of the notes of the bank, but whether he got these notes before or after the repealing act was passed, did not appear. On this state of things, Woodruff, to test his right to pay his debt in the paper of the bank, applied for a writ of mandamus against Trapnall, which was denied him by the State court. The case was brought here, as this is, under the twenty-fifth section of the Judiciary Act, and this court held that the undertaking of the State to receive the notes of the bank, constituted a contract between the State and the holders of the notes, which the State was not at liberty to break; and that the tender of notes issued prior to the repealing act was good. It was also held, that it made no difference whether the debtor had the notes in his possession when the repealing act was passed or not.

It will thus be seen that Woodruff v. Trapnall, and this case, in all important features, are alike.

An attempt has been made to distinguish the cases, because in the Tennessee bank trust funds were embarked in the enterprise; but if the State thought proper to use them in this manner, it took care to pledge its faith to supply any deficiency that should arise through the mismanagement of the bank. It is difficult to see how the employment of these funds made the bank any less a State institution, for it was created expressly for the benefit of the State, who had the exclusive management of it, and agreed to support it. But if we concede that the State did wrong in using these funds in banking, can that tend even to justify her in breaking her promise to the note-holders of the bank?

Enough has been said to show, as the result of our views, that section 28 of the charter of the Bank of Tennessee constituted a contract with the holders of the notes of the bank, and that it was not in the constitutional power of the legislature to repeal the section so as to affect the notes which, at the time, were in circulation.

JUDGMENT reversed, and the cause remanded, with directions to enter a judgment

AWARDING THE WRIT OF MANDAMUS.