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[Briscoe et al. v. The Commonwealth Bank of Kentucky.]

lution; 6 Wh. 651; 8 Wh. 584. Each state had the power of emitting bills of credit, of passing tender laws, 4 Pet. 435, and exercised both, by annulling contracts and grants, the right to do which could not be contested by any authority; 4 Wh. 643, 651. These were the acts which called aloud for the remedy given by the prohibitions, to prevent their recurrence, which would have been certain if it had not been made.

This Court has declared the intention of the constitution on the subject of contracts. “It was intended to correct the mischiefs of state laws, which had weakened the confidence between man and man, and embarrassed all transactions between individuals, by dispensing with a faithful performance of engagements; to guard against a power which had been extensively abused, and to restrain the legislature in future from violating the rights of property. It protected contracts respecting property, under which some person could claim a right to something beneficial to himself; and since the clause must, in construction, receive some limitation, it ought to be confined to the mischiefs it was intended to remedy. Not to authorize a vexatious interference with the internal concerns or civil institutions of a state; to embarrass its legislation in the regulation of internal government, or to render immutable those institutions for these purposes, which ought to vary with varying circumstances. The term contract must be understood in a more limited sense, so as not to embrace other contracts than those which respect property, or some object of value, and confer rights which may be asserted in a court of justice;” 4 Wh. 428,429; Dart. College case. “The principle was the inviolability of contracts. The plain declaration that no state shall pass any law impairing the obligation of contracts, includes all laws which infringe the principle the convention intended to hold sacred, and no further. It does not extend to the remedy to enforce the obligation of a contract; the distinction between them exists in the nature of things, so that without impairing the obligation, the remedy may be modified as the state may direct;” 4 Wh. 200; Sturgess v. Crowninshield. It is also a principle declared by this Court, that the prohibition does not extend to the passage of a state law, which does not affect contracts existing when the law was enacted, and which operates only on the obligation of posterior contracts; 12 Wh. 369; Ogden v. Saunders; and no exposition of the constitution is better settled, or commands more universal assent, than that the prohibition does not extend to the passage of retrospective, unjust, oppressive laws, or those which divest rights, antecedently vested, if they do not directly impair the obligation of a contract; 2 Pet. 411, 13; 3 Pet. 289; 8 Pet. 110; and that “The interest, wisdom, and justice of the representative body, and its relations with its constituents, furnish the only security where there is no express contract, against unjust and exclusive taxation, as well as against unwise legislation generally;” 4 Pet. 563.

Let these principles of constitutional law be applied to the con

[Briscoe et al. v. The Commonwealth Bank of Kentucky.]

struction of the clause against emitting bills of credit, as they have been applied to the clause concerning the obligation of contracts, the conclusion seems to me inevitable. That the same construction, which imposes a limitation to the corrective remedy against the future violation of the sanctity of contracts, which it was the great object of the prohibition to protect, should be extended with at least as much liberality, to limit the operation of that clause of the same article, which prohibits an evil which by no possibility could impair the obligation of a contract, without a tender law. The mischiefs of a mere emission of bills of credit, are trivial in their consequences, compared with the effect of tender laws; their combined effect is to violate a contract: surely then the restriction on a state, ought not to be construed more rigidly against an act, which cannot of itself produce the mischief intended to be remedied, than a law which wholly annuls a contract. If each clause is taken according to an universal rule, that laws should be construed subjectam materiam, the lesser evil requires the more gentle corrective; but in assigning to the emission of bills of credit, without their being made a tender, a more restrictive meaning than to the direct violation of a contract, we act on the inverse rule. The protection is lessened in the same proportion as the danger is increased; the greater the mischief the milder and less inefficient is the remedy: reason and established principles alike require, that a prohibition should be limited, as far as can be done, without producing the mischief intended to be remedied, and expanded so far as is necessary to correct it. The construction must be according to the subject matter of the law, strict or liberal as the nature of the case requires, and the object to be effected will be defeated or accomplished, ut res magis valeat quam pereat; that which will effectuate all the objects of the prohibition cannot be too narrow, that which goes beyond the express word, or necessary implication, to effect an object not within the mischief, must be too broad.

On the same rule which confines the prohibition as to contracts, to state laws passed affecting existing contracts, and excluding from the protection of the constitution, all posterior contracts; a law making bank notes a legal tender in payment of debts contracted after the passage of the law, would not be within the prohibition. On the same principle by which an unjust, oppressive, retrospective law, or one which divests vested rights, is held not to impair the obligation of a contract per se, it must be held that a mere emission of bills of credit is not within the mischiefs intended to be corrected. There is no more danger in the exercise of this power, at the discretion of the legislature, than in these unrestrained powers, to modify the remedy to enforce the obligation of a contract, which this Court hold not to be affected by the prohibition. There is in the nature of things, the same distinction between bills emitted which are not made a tender, and those which are a tender, as between the remedy and the obligation of a contract; nay the distinction is more marked.

[Briscoe et al. v. The Commonwealth Bank of Kentucky.]

The obligation of a contract, without an effective remedy to enforce it, would be “a name,” and not “a thing;” the word obligation would be an “empty sound,” and the protection of the constitution a solemn mockery. Yet if it is held to prohibit the emission only, of bills of credit which were not a tender, it would prevent none but imaginary evils, and leave real practical ones unredressed. To emit the notes of an individual or a private corporation, for the purposes of circulation, would be productive of the same evils as the bills of credit of a state; the mischief does not depend on who is the owner of the stock pledged for its payment, or on whose credit they are received in circulation. Yet it is conceded by counsel and agreed by all the judges, that bank notes are not within the prohibition, though they are as much “paper money,” “paper medium,” as the bills of credit of a state. Why then should the prohibition extend to the mere emission of the latter, and not to the former species of paper money, when neither are a tender in payment of debts? What good reason can be assigned, why the constitution did not prohibit the emission of both, if it prohibits one, and on what ground does the discrimination rest? It cannot be that there is less danger, in having the paper medium of the country based on the funds, faith, and credit of the state, which can by taxation, levy a contribution ad libitum, on all the property of all its citizens, for its redemption, 4 Wh. 428; 4 Pet. 563, than when a bank emits it on the mere credit of their corporate stock. Nor that a state will more readily sport with and abuse its plighted faith, than a corporation, an individual, or a banking association.

These questions are not unworthy the consideration of those who hold that it is not necessary to bring bills of credit within the prohibition, that they be made a tender in payment of debts. That all “paper intended to circulate through the community for its ordinary purposes as money, which paper is redeemable at a future day, the emission of any paper medium by a state government, for the purpose of common circulation,” though not made a tender, and though the faith, funds, or credit of the state are not pledged for its redemption, are bills of credit. They are also worthy of notice by those who hold that paper emitted by the officers of a state, under the authority of a law, which paper is of the precise character above defined, which is made a tender, and for the redemption of which the funds and faith of the state are both most solemnly pledged in the law directing its emission, are not bills of credit within the prohibition. It will not suffice, that a disclaimer is made of its extension to bank notes, or a declaration that they are not included within the mischiefs, without assigning the reasons, or referring to the authority on which the discrimination is made on just principles of construction. For myself, I rest on the most solemn adjudications of this Court, as well prior as subsequent to the case of Craig v. Missouri, settling the rules and principles on which the most important prohibition in the tenth article has been construed; and in applying them to the

[Briscoe et al. v. The Commonwealth Bank of Kentucky.]

clause now in question, find abundant authority for holding it necessary, that bills of credit be made a tender in payment of debts, to come within the prohibition. Taking my definition of bills of credit of a government, from acts of parliament, of the old and new congress, the articles of confederation, and the constitution, I held in Craig v. Missouri, that certificates emitted by a state, for circulation, payable in future on the faith and funds of the state, which certificates were made a tender, were prohibited as bills of credit. On the same authority I now hold, that the notes in question are not such bills of credit, because not emitted by the state, not made a tender in payment of any debts to individuals, nor the faith or general funds of the state pledged for their redemption. And further; On the authority of acts of parliament, of the old congress, of state legislatures before the adoption of the constitution, and acts of congress since, and of the common law, I make the distinction between the bills of credit, issued under the seal of a bank, and bank notes payable to bearer on demand, and hold that the latter can by no just definition, or legal construction, come within the prohibition. I have resorted to these sources of information, as the fountain of constitutional law and have found in them abundant cause of justification of the opinions which I formed in the former case, and adhere to in this.

The plaintiffs have relied much upon the pleadings in this record, as presenting the question in controversy in an aspect different from what it would have been, if the averments of the plea had been denied by a replication, instead of being admitted by a demurrer.

These averments are in the first plea. 1. That the state, by the law establishing the bank, declared that the capital stock thereof should be 2,000,000 dollars. 2. “But which capital stock the said bank never received, or any part thereof, as these defendants aver.” From the admission of these averments, it is contended, that inasmuch as the capital stock was not made up and paid into the bank by the state, pursuant to the declaration contained in the law, the faith and credit of the state was legally, virtually, and morally pledged to provide this amount of capital, as a fund for the redemption of the notes issued by the bank. And that having violated this pledge, the state was bound, and, if suable, was compellable to pay them; whereby the notes of the bank became bills of credit of the state, as effectually as if they had been emitted on an express pledge of its faith or credit for their redemption.

The first averment is founded on the law of incorporation, and is an averment of mere matter of law as to which it is among the oldest and best settled rules of pleading, that the law will not suffer an averment of that to be law, which is not law; such averment or pleading is to no effect or purpose, though admitted by demurrer; Pl. 168, a, 170, b. On an inspection of the law, it appears that this averment refers only to the section which declares what the amount of the capital shall be; but the plea wholly omits any reference to the section which specifies the items which shall compose that capi

[Briscoe et al. v. The Commonwealth Bank of Kentucky.]

tal as a fund for the redemption of the notes. It is the proceeds of the lands belonging to the state, its surplus revenue, the stock of the state in the bank of Kentucky, and the securities taken by the bank, on a loan of its notes to individuals. The mode of redemption was in making these notes receivable in payment for lands, taxes, debts due the state, the Bank of Kentucky, and the Bank of the Commonwealth. This was the only pledge given by the state, and it is not averred in the pleas that this pledge was in any way violated, by any refusal to receive the notes for any such purposes; on the contrary, it is admitted that they were always so received; consequently, the state has faithfully kept its faith, as entire as it was pledged by the law. This part of the plea, therefore, is to no purpose or effect, so far as it avers that to be law which is not law.

The notes of the bank constituted no part of its capital; while they remained on hand, they were worthless to the bank; when loaned out, they became the evidence of a specie debt, due by the bank on demand, to the holder; the securities taken for repayment, were part of the capital for their redemption. But as they were taken only for the precise amount of the notes loaned, the amount of debt due by and to the bank was equal, with only this difference, that the bank paid no interest on their notes, while they received interest on their loans; the accretion of interest, therefore, was the only means of increasing the capital, by the issue of their notes. If they were burnt, according to the direction of the law, after they had performed their function, in their reception as payment by the state, or the bank, it was no loss to the bank which issued them; or if the notes were returned to the bank by the state treasurer, or the bank of Kentucky, they were as useless, as capital, as before they were first issued. In reissuing them, their operation was the same, adding nothing to the capital; indeed, the proposition is self-evident, that a bank note is not a fund for its own payment; a debt due by a bank, is not a part of the capital stock, pledged for the payment of the debt.

It thus appears, that by the terms and necessary operation of the law, though the term capital stock is used in the law, the thin which was made the capital was the proceeds of lands, taxes, debt, and bank stock; and as the law and constitution regard things, and not names, such must be taken to be the spirit, substance, and effect of the law of incorporation. Hence, the second averment is of a fact wholly immaterial, since it was no part of the law that the capital should ever be received by the bank in any other manner than the one pointed out, which was in fact the only manner in which it could be received; that is, as a fund for the redemption of its notes. In virtue of this law, purchasers of land, and debtors of the state, or banks, had the option of making payment in specie, the notes of other banks, or of the Commonwealth Bank; they would, of course, pay in that medium which was the easiest, and cheapest to be obtained, which must have been the notes of the Bank of the Com

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