[Briscoe v. The Bank of the Commonwealth of Kentucky.]

the law, for the redemption of the obligations of the bank. The amount of paper allowed to be issued was not equal to that permitted to other banks, in proportion to the security given for such issues. The objection to a want of capital of this bank is, therefore, without foundation; for an equål capital, or property equal in amount as a security for the operations of the institution, has not, in any instance, been exceeded.

It is said the paper of the bank fell below par. This is not in the record; and if that fact should be allowed to have an influence, other matters should be introduced. The value of the notes was diminished by the conduct of the borrowers of the bank; who had used them at par for their private purposes, and who had used them for their full value. No measures, which could bring the notes into discredit, were attributable to the bank; and the amount of the paper issued was constantly in progressive diminution, by its being destroyed when paid in for taxes and for lands. The laws of the state directed that the notes of the bank should be received for the public lands, in the same manner, and as of the same value as the notes of other banks, paying gold and silver. The receivers of the proceeds of the sales of the public lands south of the Tennessee, was directed to take the notes of the bank for lands; Pamphlet Laws of Kentucky of 1824, sec. 8. Under the operation of these provisions, there was received for taxes, and for lands, by the bank, and by the old State Bank of Kentucky, the notes of the Bank of the Commonwealth, to the amount of nearly six hundred thousand dollars, which were cancelled and burned.

In this manner, almost the whole of the issues of the bank have been returned to it; and it is believed that before the suit now before the Court was brought, all the paper, with the exception of about forty thousand dollars, had been returned to the bank. Paper of the bank, to the amount of about forty thousand dollars cannot be found; and is supposed to be irretrievably lost. Thus all the notes, with the exception of those lost, have been redeemed.

By numerous successive acts, the legislature of Kentucky directed that the notes of the bank, as they were redeemed, should be burned, and this was done; cited Session Laws of Kentucky, of 1825, 1826, 1827, 1830, 1832. After all the notes were thus satisfied, or redeemed by other banks established under charters from the state; the public lands, which had been pledged for them, were distributed for school and road purposes.

[Briscoe v. The Bank of the Commonwealth of Kentucky.]

The objections to the charter on the ground of there having been no capital provided for the bank, does not therefore exist; and the question which is alone presented for the consideration of the Court, is, whether the bank was constitutional, as the state of Kentucky was the only corporator. It differs from many other banks in this only; the state alone is the corporator, or stockholder. In many other banking institutions, states are joint stockholders, and corpo

rators.

In the charter of the Bank of the Commonwealth, there is no pledge of the faith of the state for the notes issued by the institution. The capital only was liable; and the bark was suable, and could sue. The bank was sued; and in the case of Wister v. The Bank of the Commonwealth, 4 Peters, this Court held, that as against the corporation, the suit was well brought.

If it is unconstitutional for a state to be a corporator, how can she be a corporator for a part of the capital of the bank? If the state cannot alone be a corporator to issue paper, she cannot be in part such; and the constitution of the United States is violated, as well by the issue of notes for one dollar, as for one thousand; by the issue of notes, of which a state is one among many of the corporators bound to pay them, as well as if she had alone become bound for their payment.

What is the difference between the state being a corporator, or taking a bonus for establishing a bank; and authorizing the corporation so erected, to issue notes. The sale of a charter by a state, for a bonus, is the sale of the privilege to issue notes; which, if the state had not, she could not grant; she gives the bank thus established power to issue notes for her benefit; a benefit she has secured in advance, by the payment of the bonus to her.

It is submitted, that if the notes of the Bank of the Commonwealth are "bills of credit," and the issue of them was prohibited by the constitution of the United States, the notes of all state banks are equally prohibited. Before this question is approached, it is desirable to place it before the Court, on its true grounds.

The provisions of the constitution are:-"No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make any thing but gold or silver coin a tender; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts; or grant any title of nobility;" art. I. sec. 10.

[Briscoe v. The Bank of the Commonwealth of Kentucky.]

The powers granted to the government of the United States, of coining money, are exclusive; so are the powers to establish post offices, and post roads; and in addition to the grant of these powers, there are the express inhibitions to the states, which forbid their coining money, making tender laws, and issuing bills of credit.

It is claimed that making them a tender, is a portion of the character of a bill of credit, as the same was intended by the constitution. Each prohibition is separate. If the states could make any thing a tender but gold and silver coins, all would be confusion. What was meant by "a bill of credit," is not stated in the constitution, and is thus left undefined: we must look for the meaning of the terms elsewhere. We must look to the uses of the terms in past times and on this search we find great difficulties, from their different application to different obligations for the payment of money, and the peculiar characteristics of those obligations when issued by states or political communities. We look to colonial legislation, and to the practices of states; and we are unable to ascertain from these, the true sources of information, with accuracy, what those who framed the constitution intended. Sometimes the bills issued under state or colonial authority were made a tender, and sometines they were not. This is said by Mr. Chief Justice Marshall, in the case of Craig v. The State of Missouri. In the first issue of bills of credit by Massachusetts, they were not made a tender in payment of debts: afterwards, this character was expressly given to them. In South Carolina, they were made a tender; 2 Ramsay's Hist. of South Carolina, 164.

But there was a universal feature in all the bills of credit, issued before the formation and adoption of the constitution of the United States. The faith of the state, or of the government which issued them, was always pledged for their redemption. This was ever the fact.

Another feature and characteristic of these bills of credit was, that the state always issued them in its sovereign capacity, and no capital was pledged for their redemption. They were never issued by or in the name of a corporation. The bills of the Commonwealth's Bank were issued by a corporation, subjected to suits, and capable of suing.

This is the first time this Court has been called upon to fix the precise meaning of the words of the consitution under consideration; and they are now, by their decision, to save or take from the states a

[Briscoe v. The Bank of the Commonwealth of Kentucky.]

little of their remaining sovereignty; and at the same time preserve and faithfully guard the constitutional rights of the Union. The Court, in exercising their powers, will do so as sound judges, and lawyers; and as sound statesmen and politicians. The plaintiffs in error ask, to impose restraints on the states, which will deprive them of powers essential to their prosperity, and to the business of their

citizens.

In order to arrive at a true construction of the constitutional provision, it is proper to look at the mischiefs proposed to be remedied by its introduction into the instrument. These were the excessive issues of paper, and authorizing them to be made a tender. The great evil was making the bills a tender; without this, it was a voluntary act to accept and to refuse them; and no injury, but such as was freely consented to, could ensue. This should be the test of a bill of 'credit, as intended by the constitution. A state can borrow money; and give a note, or bond, or a certificate, transferable for the sum borrowed. The amount of the notes or bonds given for a loan made to the state, may be determined by her and the lenders; and they may circulate as the holders think proper. The form may be precisely the same as that of any other bank note, or bond, or evidence of debt; and she may pledge her faith and her property for the payment of such engagements. If notes or bonds given by a state are not made a tender, they will not be said to be bills of credit.

Another part of the case is deserving of the consideration of the Court. The notes given to the bank by her debtors, and by the law authorizing them to be taken, are made payable absolutely. Suppose the bank to be unconstitutional, yet the notes given by individuals, and held by the bank, must be paid. They were given for value, by those who gave them; and they used, for the purpose of purchasing lands, the notes received by them from the bank. This was a valuable consideration for the contract, and imposes an obligation to pay the notes independently of any other matter. Whatever is a benefit to one, or an injury to another, is a consideration.

This Court has no jurisdiction of the case under the 25th section of the judiciary act. The question of the consideration given by the bank for the notes, and the question of the constitutionality of the law, were both before the court of appeals. That court could have given the judgment, which was given, without deciding the constitutional question. The construction of the constitution of the United States was not necessarily involved in the judgment given in this

cause.

[Briscoe v. The Bank of the Commonwealth of Kentucky.]

This is an essential feature in every case brought here under the judiciary act of 1789.

Mr. Clay, also of counsel for the defendants in error, said, he was gratified by the learning and research of the counsel for the plaintiffs. He had gone into an investigation of commercial, historical and statutary authorities, which were highly interesting; but were not considered, by him, essential to the decision of the case before this Court.

He had, when the bank was established, concurred with many others, who were, with him, citizens of the state of Kentucky, in the opinion that it was impolitic and inexpedient; and its inexpediency is now generally admitted. But among those who promoted the establishment of the institution, none went further than some of those who now come before this Court to ask to be relieved from the obligations they entered into with it; and for which they received, and used the notes of the bank. Those notes have all been redeemed; they fully answered the purpose of those who borrowed them. They were of value to them; they solicited them from the bank, and voluntarily received them. It is doubted if the cause of morals would be most promoted, by allowing a release from their contracts, of those who are before the Court; or by sustaining the bank, even if it is unconstitutional.

The old Bank of Kentucky had a capital of one million of dollars; and one half of which was reserved by the state, which the state afterwards paid for. Besides this property of the state, lands were pledged, and taxes were payable in the notes of the Bank of the Commonwealth. Loans on mortgage of real estate were authorized; and these mortgages became a substitute for real property, and could be made liable for the debts of the bank. The bank had also extraordinary powers for the collection of debts.due to it. Thus, full provision was made for the preservation of the solvency of the institution.

The depreciation of the paper of the bank was gradual, and afterwards became very great. But it is proper to state, that the credit of the paper afterwards rose, and became equal to par; and in credit, as good as that of the notes of any other monied institution. So it continues. The depression of the value of the notes of the Bank of the Commonwealth, was similar to that of all other banks which suspended specie payments. It was not greater than the notes of other banks, in similar circumstances.

Two questions are presented in this case.