Craig v. Missouri/Dissent Johnson

Mr Justice JOHNSON.

This is a case of a new impression, and intrinsic difficulty; and brings up questions of the most vital importance to the interests of this union.

The declaration is in the ordinary form; and the part of the record of the state court, which raises the questions before us, is expressed in these words: 'at a court, &c. came the parties, &c. and neither party requiring a jury, the cause is submitted to the court; therefore, all and singular, the matters and things, and evidences, being seen and heard by the court, it is found by them that the said defendants did assume upon themselves in the manner and form as the plaintiffs by their counsel allege; and the court also find that the consideration for which the writing declared upon, and the assumpsit was made, was for the loan of loan office certificates, loaned by the state at her loan office at Chariton; which certificates were issued and the loan made in the manner pointed out by an act of the legislature of Missouri; approved, & c. And the court do further find that the plaintiff hath sustained damages by reason of the non-performance of the assumptions and undertakings aforesaid, of them the said defendants, to the sum, &c.; and therefore it is considered that the plaintiff recover,' &c.

In order to understand the case, it may be proper to premise, that the territory now occupied by the state of Missouri having been subject to the Spanish government, was at the time of its cession governed by the civil law as modified by the Spanish government; that it so continued, subject to certain modifications introduced by act of congress, until it became a state; when the people incorporated into their institutions as much of the civil law as they thought proper: and hence, their courts of justice now partake of a mixed character, perhaps combining all the advantages of the civil and common law forms. By one of the provisions of this law the trial by jury is forced upon no one; is yet open to all; and when not demanded, the court acts the double part of jury and judge.

It is obvious, therefore, that the matter certified from the record of the state court before recited, is in nature of a special verdict, and the judgment of the court is upon that verdict: and in this light it shall be examined.

The purport of the finding is that the vote declared upon was given 'for a loan of loan office certificates, loaned by the state under certain state acts, the caption of which is given.'

Some doubts were thrown out in the argument, whether we could take notice of the state laws thus found, without being set out at length: but in this there can be no question; whatever laws that court would take notice of, we must of necessity receive and consider, as if fully set out.

By the acts of the state designated by the court in their finding, the officers of the treasury department of the state were authorised to create certificates of small denominations, from ten dollars down to fifty cents, bearing interest at two per centum per annum, and to loan these certificates to individuals; taking in lieu thereof promissory notes, payable not exceeding one year from the date, with not more than six per cent interest, and redeemable by instalments not exceeding ten per cent every six months, giving mortgages of landed property for security.

These certificates were in this form: 'this certificate shall be receivable at the treasury, or any of the loan offices of the state of Missouri, in the discharge of taxes or debts due the state, for the sum of $_____, with interest for the same, at the rate of two per centum per annum from this date, the _______ day of _____ 182;' which form is set out in, and prescribed by the act designated in the finding of the court.

This writ of error is sued out under the twenty-fifth section of the judiciary act; upon the supposition that the state act is in violation of that provision in the constitution which prohibits the states from emitting bills of credit; and that the note declared on is void, as having been taken for an illegal consideration, or without consideration.

As a preliminary question, it has been argued, that the case is not within the provisions of the twenty-fifth section; because it does not appear from any thing on the record, that this ground of defence was specially set up in the courts of the state. But this we consider no longer an open question; it has repeatedly been decided by this court, that if a special verdict or the instruction of a court involve such facts as that the judgment must necessarily affirm the validity of the state law, or invalidity of a right set up under the laws or constitution of the United States; the case is sufficiently brought within the provisions of the twenty-fifth section.

The judgment of the court in this case affirms the validity of the contract on which the suit is instituted. And this could not have been affirmed, unless on the assumption that the act in which it had its origin was constitutional.

In the argument of counsel the objections to this contract were presented in the form of objections to the consideration. But this was unnecessary to his argument; since even a valuable consideration will not make good a contract in itself illegal. These notes originate directly under the law of Missouri; they are taken in pursuance of its provisions; have their origin in it; and rest for their validity upon it: and if that law be void, must fall with it. Whether, therefore, the bills for which they were given be void or valid, if the law be void, the notes would be so.

There are some difficulties on the subject of consideration, for which I would reserve myself until they become unavoidable. But it is not one of those difficulties that, as a guide for the state, the power of the states over the law of contracts will legalize a contract made, under whatever law, or for whatever consideration. That argument makes the act to justify itself; and is a direct recurrence to that exercise of sovereign power which it was the leading principle of the constitution that each should renounce, so far as it was incompatible with the provisions of the constitution; the objects of which were the security of individual right, and the perpetuation of the union.

The instrument is a dead letter, unless its effect be to invalidate every act done by the states in violation of the constitution of the United States. And as the universal modus operandi by free states must be through their legislature, it follows, that the laws under which any act is done, importing a violation of the constitution, must be a dead letter. The language of the constitution is, 'no state shall emit bills of credit;' and this, if it means any thing, must mean that no state shall pass a law which has for its object an emission of bills of credit.

It follows, that when the officers of a state undertake to act upon such a law, they act without authority; and that the contracts entered into, direct or incidental to such their illegal proceedings, are mere nullities.

This leads us to the main question: 'Was this an emission of bills of credit in the sense of the constitution?' And here the difficulty which presents itself is to determine whether it was a loan or an emission of paper money; or, perhaps, whether it was not an emission of paper money, under the disguise of a loan. There cannot be a doubt that this latter view of the subject must always be examined; for that which it is not permitted to do directly, cannot be legalized by any change of names or forms. Acts done 'in fraudem legis,' are acts in violation of law.

The great difficulty, as it is here, must ever be to determine, in each case, whether it be a loan, or an emission of bills of credit. That the states have an unlimited power to effect the one, and are divested of power to do the other, are propositions equally unquestionable; but where to draw the discriminating line is the great difficulty. I fear it is an insuperable difficulty.

The terms, 'bills of credit,' are in themselves vague and general, and, at the present day, almost dismissed from our language. It is then only by resorting to the nomenclature of the day of the constitution, that we can hope to get at the idea which the framers of the constitution attached to it. The quotation from Hutchinson's History of Massachusetts, therefore, was a proper one for this purpose; inasmuch as the sense in which a word is used, by a distinguished historian, and a man in public life in our own country, not long before the revolution, furnishes a satisfactory criterion for a definition. It is there used as synonymous with paper money; and we will find it distinctly used in the same sense by the first congress which met under the present constitution.

The whole history and legislation of the time prove that, by bills of credit, the framers of the constitution meant paper money, with reference to that which had been used in the states from the commencement of the century, down to the time when it ceased to pass, before reduced to its innate worthlessness.

It was contended, in argument, for the defendant in error, that it was essential to the description of bills of credit in the sense of the constitution, that they should be made a lawful tender. But his own quotations negative that idea; and the constitution does the same, in the general prohibition in the states to make any thing but gold or silver a legal tender. If, however, it were otherwise, it would hardly avail him here, since these certificates were, as to their officers' salaries, declared a legal tender.

The great end and object of this restriction on the power of the states, will furnish the best definition of the terms under condisderation. The whole was intended to exclude every thing from use, as a circulating medium, except gold and silver; and to give to the United States the exclusive control over the coining and valuing of the metallic medium. That the real dollar may represent property, and not the shadow of it.

Now, if a state were to pass a law declaring that this representative of money shall be issued by its officers, this would be a palpable and tangible case; and we could not hesitate to declare such a law, and every contract entered into on the issue of such paper, purporting a promise to return the sum borrowed, to be a mere nullity. But suppose a state enacts a law authorising her officers to borrow a hundred thousand dollars, and to give in lieu thereof certificates of one hundred dollars each, expressing an acknowledgment ledgement of the debt; it is presumed there could be no objection to this. Then suppose that the next year she authorises these certificates to be broken up into ten, five, and even one dollar bills. Where can be the objection to this? And if, at the institution of the loan, the individual had given for the script his note at twelve months, instead of paying the cash; it would be but doing in another form what was here done in Missouri; and what is often done, in principle, where the loan is not required to be paid immediately in cash.

Pursuing the scrutiny farther, and with a view to bringing it as close home to the present case as possible: a state having exhausted its treasury, proposes to anticipate its taxes for one, two or three years; its citizens, or others, being willing to aid it, give their notes payable at sixty days, and receive the script of the state at a premium, for the advance of their credit, which enables the state, by discounting these notes, to realise the cash. There could be no objection to this negotiation; and their script being by contract to be receivable in taxes, nothing would be more natural than to break it up into small parcels in order to adapt it to the payment of taxes. And if in this state it should be thrown into circulation, by passing into the hands of those who would want it to meet their taxes, I see nothing in this that could amount to a violation of the constitution. Thus far the transaction partakes of the distinctive features of a loan; and yet it cannot be denied that its adaptation to the payment of taxes does give it one characteristic of a circulating medium. And another point of similitude, if not of identity, is the provision for forcing the receipt of it upon those to whom the state had incurred the obligation to pay money.

The result is, that these certificates are of a truly amphibious character; but what then should be the course of this court? My conclusion is, that, as it is a doubtful case, for that reason we are bound to pronounce it innocent. It does indeed approach as near to a violation of the constitution as it can well go, without violating its prohibition; but it is in the exercise of an unquestionable right, although in rather a questionable form; and I am bound to believe that it was done in good faith, until the contrary shall more clearly appear.

Believing it then a candid exercise of the power of borrowing, I feel myself at liberty to go further, and briefly to suggest two points, on which these bills vary from the distinctive features of the paper money of the revolution.

1. On the face of them they bear an interest, and for that reason vary in value every moment of their existence: this disqualifies them for the uses and purposes of a circulating medium; which the universal consent of mankind declares should be of an uniform and unchanging value, otherwise it must be the subject of exchange, and not the medium.

2. All the paper medium of the revolution consisted of promises to pay. This is a promise to receive, and to receive in payment of debts and taxes due the state. This is not an immaterial distinction; for the objection to a mere paper medium is, that its value depends upon mere national faith. But this certainly has a better dependence; the public debtor who purchases it may tender it in payment; and upon a suit brought to recover against him, the constitution contains another provision to which he may have recourse. As far as the feeble powers of this court extend, he would be secured (if he could ever need security) from a violation of his contracts. This approximates them to bills on a fund; and a fund not to be withdrawn by a law of the state.

Upon the whole, I am of opinion that the judgment of the state court should be affirmed.