Bank of Augusta v. Earle

Mr. Justice M'Kinley

delivered an opinion, dissenting from the judgment of the Court.

I dissent from so much of the opinion of the majority of the Court as decides that the law of nations furnishes a rule by which validity can.be given to the contracts in these cases; and from 'so much as *598 decides that the contracts, which were the subjects of the suits, were not against the policy of the laws of. Alabama.

•This is the first time since the adoption of the Constitution of the United States, that any federal Court has, directly or indirectly, imputed national power to any of the states of the Union; and it is the first time that validity has been given to such contracts, which, it is acknowledged, would otherwise have been void, by the application .of a principle of the necessary law of nations. This principle has been adopted and administered by the Court as part of the-.municipal law of the state of Alabama, although no such principle has been adopted or admitted by that state. And whether the law of nations still prevail? among the states, notwithstanding the Constitution of the. United States; or the right and authority to administer it in these cases are derived from that instrument; are questions not distinctly decided by the majority of the Court. But whether attempted to be derived from one source or the other, I deny the existence of it anywhere, for any such purpose.

Because .the municipal laws of nations cannot operate beyond -their respective territorial limits4 and because one nado 1 has no right to legislate for another; certain rules founded in the law of nature and'the immutable principles of justice have, for the promotion of harmony and commercial intercourse, been adopted by the consent of civilized nations. But no necessity exists for such a law among the several states. In their character of states they are governed by written constitutions and municipal laws. It has been admitted by the counsel, and decided by the majority of the Court, that without, the authority of the statutes of the states chartering these banks, they,would have no power whatever to purchase a bill of exchange, even in the state where .they are established. If it requires the exertion of the legislative power of Pennsylvania, for instance, to enable the United States Banlcto purchase a bill of exchange in that state; why should it not require the same legislative authority to enable it to do the same act in Alabama ? It has been contended jn argument, that the power granted to the bank to purchase a bill of exchange at Philadelphia, in Pennsylvania, payable at.Mobile, in Alabama, would be nugatory, unless the power existed also to make contracts at both ends of the line of exchange. ■ The authority to' deal in exchange may very well be exercised by having command of one end of the line of exchange only. To buy and sell the same bill at the bank is dealing in exchange, and. may be exercised with profit to the bank; but not perhaps- as conveniently as if it could make contracts in Alabama as well as at the bank. “

But if it has obtained authority to command but one end of the line of exchange, it certainly has no right to complain that it cannot control the other; when that other is within the jurisdiction of another state, whose authority or consent it has -not even asked for. The bill of exchange which is the subject of controversy between the Bank of Augusta and Earle, and that which is the subject of controversy between the. United States Bank and Primrose, *599 were both drawn at Mobile, and made payable at New York. Neither of the banks had authority from any state, to make a contract at either end of the line of exchange here, established. Here, then, they claim, and have exercised, all the rights and privileges. of natural persons, independent of their charters; and claim the right, by the comity of nations, to make original contracts everywhere, because they have a right, by their, charters, to make like contracts in the states where they were created, and have “ a local habitation and a name.’? ■

It is difficult to conceive of the exercise of national comity, by a state having no national power. Whatever national power the old thirteen state's possessed previous to the adoption of the Constitution of the United States, they ^conferred, by that instrument, upon the federal government. And to remove all doubt upon’the question* whether the power thus conferred was exclusive' or concurrent, the states are, by the tenth section of the first article of the. Constitution, expressly prohibited from entering into any- treaty, alliance, or confederation ; ■ and, without the consent of. Congress, from entering into any ágreement.or compact with another state, or with.a foreign power. By these provisions, the' states have, by their own voluntary act, and for wise purposes, deprived themselves of all national power, and of all the means of international' communication ; and cannot even enter into an agreement or compact with a sister state, for any purposte- whatever, without' the consent of Congress. ■ The comity of nations is defined by Judge Story, in his Conflict of Laws, to be the obligations of the laws of one- nation in the territories of another, derived, altogether from the voluntary consent of the latter. And in the absence of any positive rule, affirming, or denying, or restraining the operation of foreign laws, Courts of justice.présume the tacit adoption of them by their own government, unless they are repugnant to its policy or prejudicial to its mterests. Conflict Of Laws, 37. '

Now, I ask again, what is the necessity for such a rule of law as this ? Have not the states full power to adopt or reject what laws of their sister states they please ? And why. should the Courts interfere in this caste, when the states have full power to legislate for themselves, and to adopt or reject such laws of their sister states as they think proper ? If Alabama had adopted these laws, no difficulty could have arisen- in deciding between these parties. This Court would not then have been under the necessity of resorting to a doubtful presumption for a rule to guide-its decision. But when the Court have determined that they have the power to presume that Alabama has adopted the laws of the states chartering these banks, other difficult questions arise. How much of the charter of .each bank has been adopted ? * This is á question of legislative discretion, which, if submitted to the legislature of the state, would be decided upon reasons of policy, and public convenience. ■ And the question of power, to pass such a law under the Constitution of Alabama, would have to be considered and decided. These are *600 very inconvenient questions for a judicial tribunal to determine. As the majority of'the Court have ndt expressly stated whether Alabama has adopted the whole‘charters of the banks, or what parts they have adopted, there is now no certainty what the law of Alabama is on the subject of these charters. *

But these are not all the difficulties that arise in the exercise of this power by the judiciary. Many questions very naturally present themselves in the investigation of this subject, and the first is, To what government does, this power belong ? • Secondly, Has it been conferred upon the United States ? or has it been reserved to the states' by the tenth amendment of the Constitution ? If it be determined that the power belongs .to the United States, in what provision of the Constitution is it to be found ? And how is it to be exercised ? By the judiciary, or by Congress? The counsel foy the banks contended, that the power of Congress to regulate commerce among the several states, deprives Alabama of the power to pass any law restraining the sale and purchase of a. bill of exchange; and, by consequence, the whole power belongs to Congress. The Court, by the opinion of the majority, does not recognise this doctrine, in terms. But if .the power which the Court exercised, is not derived from that provisión of the- Constitution, in my opinion it does not exist.

.If .ever Congress shall exercise this power to the broad extent contended for, the power of the states over commerce, and contracts relating to commerce; .will be reduced to very narrow' limits. The creation of. banks, the making and endorsing of bills of exchange and promissory notes,'and the damages on bills of exchange, all relate, more or less, to the commerce among the several states. Whether the exercise of thesi) powers amounts to regulating the commerce among the several states, is not a question for niy determination on this occasion. The majority of the Court have decided that the comity of Rations gives validity to these contracts.

. And what are the reasons upon which this doctrine is now established? Why, the counsel for the banks say: We are obliged to concede that these banks had no authority to make these contracts in the- state of Alabama, in virtue of the laws of. .the states creating them, or by the laws of Alabama. • Therefore, unless, this Court will extend to them the benefit of the comity of nations; they must lose all the money now in controversy,-¡they will be deprived hereafter of the benefit of a very profitable branch of their business as bankers,, and great public inconvenience will result to the commerce of the country. And besides all this, there are maiiy corporations in the north, which were created for the purpose of carrying on various branches of manufactures, and particularly that of cotton Those engaged in the manufacture of. cotton will be unable to send their agents to the south to sell their manufactured articles, and to purchase cotton to carry on their business: and may lose debts already created. - This is the whole amount of the argument, upon which the benefit of this doctrine is claimed. Because banks carinot make money in places-, and by means not authorized by their 'charters ; *601 because' they may lose by contracts made in unauthorized places; because the commerce of the country may be subjected to temporary inconvenience; and because corporations in the north, creatéd for manufácturihg purposes only, cannot, by.the authority of their charters, engage" iii commerce also; this' doctrine, which has not heretofore found a place in our civil code, is to be established'. Notwithstanding, it is conceded' that the states hold ample" legislative power over the same subject, it is deemed necessary, on this occasion, to settle this, doctrine by the supreme tribunal.'' The majority of the Court having, in the'ir opinion, conceded that Alabama might make laws to prohibit foreign banks to. make contracts, thereby admitted, by implication, that she. could make laws to permit such contracts.' I think it would have been proper to have left thé power there, to be exercised or-not, as Alabama, in her sovereign discretion, might judge best for her interest or her comity. The majority of the Court thought and decided otherwise. And here arises the radical and essential difference between them and me.

They maintain a power in the federal government, and in-tibe judicial department of it, to do that which in my judgment belongs, . exclusively, to the state governments; and to be exercised by the legislative and not the judicial departments thereof. A difference so radical and -important, growing out of the fundamental law of 'the land, has imposed om me the unpleasant necessity of maintaining, single handed, my opinion, against the opinion of all the other members of the Court. However unequal, the conflict, duty impels me to maintain it firmly; and, although I stand' alone here,-I have the good fortune to be sustained, to the whole extent of my opinion,, by the very able opinion of the Court of Appeals of Virginia, in the case of the Marietta Bank vs. Pendell and others, 2 Ran. Rep. 465. If Congress have the power to pass laws on. this subject, it is an exclusive powerj and the states would-then have nc power to prohibit contracts of any kind within'their jurisdictions. If the gpvernment pf the United States 'have -power to restrain the states, under the power to regulate commerce, whether it be exerted by the' legislative, or the judicial department of the government is not material; it being the paramount law, it paralyses all, state power on the same subject. And this brings me to the consideration of the second ground on which I dissent.

It was. contended by the counsel for the banks, that all the restraints imposed by the constitution of Alabama, in relation to banking, were designed to operate upon the legislature of. the state, and not upon the citizens of that or any .other state. To comprehend' the whole scope and intention of that instrument, it' will be necessary to ascertain from the language used, what was within the contemplation and design of the convention. The provision in the constitution on the subject of banking is this: “.One state bank may, be. established, with such number of branches as the General Assembly may, from time to time, deem expedient; provided, thaf riO branch bank shall .be established, nor bank charter rehewed, finder *602 the authority of. this state, without the concurrence of two-thirds of both house's of the General Assembly; and provided, also, that not moré than one bank nor branch bank, shall be established, nor bank charter renewed, at any one session of the General Assembly, nor shall any bank or branch" bank be established, or bank charter renewed, but in conformity with the following rales :

1. At least two-fiths of the capital stock shall be reserved for the. state.

2. A- proportion of power in the direction of the bank shall, be reserved to the state, equal at least to its proportion of stock therein.'

•3. The'state, and the individual stockholders, shall be liable, respectively, for the debts of the- bank, in proportion to their stock holden therein.

4. The remedy for collecting debts -shall be reciprocal for and against the bank.

- 5. No bank shall commence operations- until half of the capital stock subscribed for shall be actually paid- in gold or silver, which amount shall in no case be less than one hundred thousand dollars.”

There are a few other unimportant rules laid down, but they are not material to the present inquiry'.' The inquiry naturally suggests itself to the.mind, Why did Alabama introduce into her constitution these very unusual and specific rules ? If they had not been deemed of great importance, they would. not have been found there. Can any one say, therefore, that this regularly organized system, to which . all banks within the state of Alabama were to conform, did not establish'for the state, her legislature, or .other authorities a clear and unequivocal policy on the subject of banking ? It has been conceded in the argument, and by the opinion of the majority of the Court, that these constitjitional provisions dp restrict and limit the power of the'legislature of the state. Then the legislature cannot establish a bank in Alabama, but in conformity with the rules 'here laid down. They have established seven banks; five of them belonging exclusively to the state, and two-fifths of the stock of the o'ther two, with a proportionate power in the direction, reserved to the state. Each of. these banks is authorized to deal in- exchange.

It is proper to stop here, and inquire whether the subject of exchange is proper to enter into the policy of the legislation of a state; and whether it is a part of the customary and legitimate business of- .banking. All the authorities on the subject show that in modern times it is a part of the business of banking. See Postlethwaite’s Commercial Dictionary, title Bank; Tomlin’s Law Dictionary, title Bank; Rees’ Cyclopædia, title Bank; Vatt. 105. This last author quoted, after showing that it is the duty of the sovereign of a nation to furnish for his subjects a sufficiency of money for the purposes of commerce, to preserve it from adulteration, and to punish those who counterfeit it, proceeds to say] “There is another cus: tom more modern, and of no less “use to commerce, than the establishment of money, namely, exchange, or the business, of the bankers; by means of whom a merchant remits immense sums from *603 one end of the world to the other with very little expense, and, if he pleases, without danger. For the same reasons that, sovereigns are obliged to protect commerce, they are obliged to protect this custom by good laws, in which every merchant1 foreigner, or citizen may find security.” From these authorities it appears that exchange is a part of modern banking, or at least so intimately connected with it that all modern banks have authority to deal in it.. And it also appears that it is as much the duty of a state to provide for exchange, as for money or, a circulating medium, for its subjects or citizens.

When the state of Alabama reserved to herself, by her fundamental law, at least two-fifths of the capital and control of all banks to be created in the state, and, by her laws, has actually appropriated to herself the whole of the capital, management, and profits of five out of seven banks, and two-fifths of the other two; had she not the same right to appropriate the banking right, to deal in exchange, to herself, to the same extent ? While performing her duty, under' the constitution, by providing a circulating medium for the citizens, she was not unmindful of her'duty in relation to exchange, and that is .also provided for. Has she not provided increased security and safety to the merchant by making herself- liable for the payment of every bill of exchange sold by the five banks belonging to her, and for two-fifths of all sold by the other two ? ' And has she not also provided by law, that all the profits derived from thus dealing in bills of exchange shall go into the public.treasury, for the common benefit of the people of the state ? And has she not, by the profits arising from her banking, including the profits on exchange, been enabled to pay the whole expenses of the government, and thereby to abolish all direct or other taxation? See Aikin’s Digest, 651.

It was not the intention of the legislature,by conferring the power upon these banks to purchase and sell bills of exchange, to deprive the citizens of the state, or any other natural person, of the right to do the same thing. But it was the intention to exclude all accu-. nmlated bank capital which did not belong to the state, in whole or in part, according to the constitution, from dealing in exchange j and such is the inevitable and legal effect of those laws. Let us test this principle. It is admitted by the majority of the Court, in their opinion, that these constitutional provisions were intended as a restraint upon the legislature of the state; If so intended, the legislature can pass no law contrary to the spirit and intention of the constitution; or contrary to the spirit- and intention of the charters of the banks, created in pursuance of its provisions. Now were the laws chartering the banks which are parties to this suit, contrary to the spirit, and intention of the constitution and ■ laws of Alabama ? That is the precise question.

It must he borne in mind that these were banks, and nothing but banks that made the contracts in Alabama; and in that character, and that only, , have they been considered in the opinion of the majority of the Court. Were those banks chartered by the legis-' lature of Alabama, two-thirds of both houses concurring ? Was, at least, twó-fifths of the capital stock, and of the management of these *604 banks reserved to the state ? Did the profits arising from the'purchase of these bills of exchánge go into'. the treasury of Alabama ? All these questions must be answered in the negative. Then these are not constitutional banks in Alabama, and cannot contract there ? The majority of the Cohrt have'decided these causes, upon the presumption that Alabama had adopted the laws of Georgia, Louisiana,. and Pennsylvania chartering these banks. And this presumption rests for its support upon the fact that there is nothing in .the laws or the policy of the laws of Alabama to resist this presumption. I 'suppose it will hot be contended that the power of this Court, to •presume that Alabama had adopted these laws, is greater than the power of Alabama to adopt the laws for herself. Suppose these banks,had made a direct application to the legislature of Alabama to pass a law to authorize them to deal in bills of exchange in that state, could the legislature have passed such a law without violating the constitution of the state ?

An incorporated bank in Alabama is not only the mere creature pf the law creating it, as banks are in other states; but it is the . creature of a peculiar fundamental law; and if its charter is not in conformity to the provisions of the fundamental’law,'it. is void. It-, must be recollected that the banks, which qre the plaintiffs in these suits, when they present themselves to the legislature, asking permission to use their corporate privileges. there, are not demanding a right, but asking a favour, which the .legislature may grant or refuse as it pleases. If it should refuse, it would violate no duty, incur no responsibility. If, however, the Court exercise the power, it ~ is upon the positive obligation of Alabama, that.'the presumption must arise, or the right does not exist. A positive rule of law cannot arise out of an imperfect obligation,.by presumption or' implication. But to put it on the foot of bare repugnance of the law, presumed ,to be adopted, to the laws of the country adopting, if there -be any repugnance the Court ought not .to presume the adoption. .Story’s Conflict of Laws, 37. The charter of every bank hot created in conformity with the constitution of Alabama, must, at least, be repugnant to it. The presumption is, that-the. charters of all these banks were repugnant, there being no. reason or inducement to make them conform in.the states where they were created. The power of the Court to adopt the laws creating these banks, as they actually existen, and the power of the legislature of Alabama to adopt them in a modified form, or to grant the banks a mere permis-. ■siOn to do a specified act, present very different questions, and involve very different powers. • If, therefore, the legislature could'not adopt' thq charters in the least-objectionable form, nor authorize the banks to deal'in exchange, without violating the constitution of Alabama:, - how can it be said that the contracts in controversy are not against the policy of' the laws .of Alabama ? And by what authority does the majority of this Court presume that Alabama has adopted those laws ? The general rule is, that slight evidence and circumstances shall defeat a mere legal presumption of law.- This case will be .a sigual exception to that rule.

*605 In the case of Pennington vs. Townsend, 7 Wend. Rep. 278 , the Protection and Lombard Bank, chartered by New Jersey, by agents, undertook to do banking business in New York, and there discounted the, check which was the subject of the suit, in ^violation of the restraining acts of 1813 and 1818; the first of which enacts that no person unauthorized by law shall become a member of any association for the purpose of issuing notes or transacting any other business which incorporated banks may or' do transact. The act of 1818 enacts that it shall not be lawful for any person, association, or body corporate to keep any office of deposit for discounting, or. for carrying on any kind of banking business, and affixes a penalty of $1000, to be recovered, &c. Under these laws the contract between the. parties was held to be void ; and the Court says, “ The protection against the evil intended to be remedied, to wit, preventing banking without the authority of the legislature of the state, is universal in its application within the state, and without exception; unless qualified by the sátae power which enacted it, or by some other paramount law. Such is not the law incorporating this bank.”

Is there any thing in these laws which more positively prohibits banking in New York, without the authority of the legislature of. that state, than there, is in the constitution of Alabama, prohibiting all banking except in the manner prescribed by the constitution ? Can it be believed that she intended to protect herself against the encroachments of her own legislature only, and to leave herself exposed to the encroachments of all her sister states ? Does the language employed in these provisions of the constitution justify any such construction?' It is general, comprehensive, and'not only restrictive, but expressly prohibitory. Whatever is forbidden by the. • constitution of Alabama, can be done by no one within her jurisdiction and it was sufficient for her to know that no bank could do any valid banking act there without violating her constitution. It was contended, by the counsel for the banks, that no law could be regarded as declaring the policy of the state, unless it was penal; and inflicted some punishment • for its violation. This doctrine is as novel as it is unfounded in principle. I know of no such- exclusive rule by which to reach the mind and intention of the legislature. If the language used shows clearly that particular acts were intended to be prohibited, and the .act is afterwards done, it is against the policy of the law and void. , Suppose the legislature of Alabama were to establish "a bank, disregarding all the conditions and restrictions' imposed by the constitution: would it not violate that instrument, and therefore the act be void ? And can Georgia, Louisiana, or Pennsylvania, by their respective legislatures, do in Alabama what her.own legislature cannot do? The relations which these states hold towards each other, in their individual capacity of states, under' the Constitution of the United States, is that of perfect independence. In the casé of Buckner vs. Finley and Van Lear, 2 Peters’ Rep. 590, Chief Justice Marshall said, “For all national purposes embraced by the federal Constitution, the states and the citizens ^hereof are q&q *606 united under the- same sovereign authority, and governed by the same laws. In all other respects the states are-necessarily foreign to, and independent of each other.” ' It is in this foreign and independent relation that these four states stand before this Court in these cases. The condition .of Alabama, taken with a view to this relation,' cannot be worse than that of an independent nation, in like circumstances. What that would be we will see from authority.

“ Nations being- free and independent of each other in the same manner as men are naturally free and independent, the second general law of their society is-that each nation ought to be left in -the peaceable enjoyment of that liberty it has derived from nature. The natural society’of nations cannot subsist, if the rights which •each has received from- nature are not respected. None would willingly, renounce its liberty: it would father break off all commerce with those that should attempt to violate it. From .this liberty and-independence it follows that every nation is to judge of -what it's conscience demands, of what it can orcannot do, of what is.proper or improper to be done; .and consequently to examine and determine whether it can perform any office for another without being wanting in what it owes to itself. In all cases, then, where a nation has the liberty of judging what its duty requires, another cannot oblige it to' act in such or such a manner. For the attempting this would "be doing an injury to- the liberty of nations. A right jo offer constraint to a free- person can only be invested in us in such cases .where.that person is bound to-perform some-particular • thing for us,' or from a particular reason that does not depend -on his judgment; or, in.a word, where we have a complete authority over him.” Vatt. 53, 54.

Now apply these Just and reasonable principles to Alabama,- in her relation of a foreign and independent state, reposing upon the rights reserved to- her by the tenth amehdrnent'pf the Constitution of the United States-; and then show the power that can compel her to pass penal laws to guard and protect those perfect, ascertained, constitutional rights from the illegal invasion of a bank created by any other state. If this power exists at all, it can be shown, and' the' authority by which it acts. But not even a reasonable pretence for any such power or authórity has been shown. The conclusion, must therefore be, that Alabama, as an independent foreign state; owing no duty, nor being' under, any obligation to either of the states", by whose corporations she was invaded; was the sole and exclusive judge of what was proper. or improper to be done; and consequently had a right- to examine and determine whether she 'pould'gxañt a favour to - eí-thér of those states without injury to her- • self; unless indeed there be a controlling power in this Court, derived from some provision of the Constitution of the- United States. As none such has been set up, or relied upon in the opinion -of the majo'rity-'of the Court; for the present Í have a right to conclude that none such exists? And without considering any of the minor points discussed in. the argument, or noticed in the opinion, I'dismiss the-subject.