Planters' Bank of Mississippi v. Sharp/Separate McLean

Mr. Justice McLEAN.

So far as the seventh section of the act in question has been construed, by the Supreme Court of Mississippi, to invalidate the note between the bank and the payee, it is unconstitutional. The fair import of the provision takes away only the negotiability of the instrument. But the courts of Mississippi have decided, where a note has been assigned in violation of the statute, that no suit can be sustained on the note, either in the name of the assignee or of the payee. This impairs the obligation of the contract, which the Constitution inhibits.

The argument, that, where the bank attempts to transfer a note by a void indorsement, it must be reindorsed to enable the bank to sue in its own name as payee, is unsustainable. A void indorsement is no indorsement, and it can have no effect on the validity of the note. The section declares, that 'it shall not be lawful for any bank in this State to transfer, by indorsement or otherwise, any note, bill receivable, or other evidence of debt; and if it shall appear in evidence, upon the trial of any action upon such note, bill receivable, or other evidence of debt, that the same was transferred, the same shall abate upon the plea of the defendant.'

The object of the statute was to secure the right of the debtors of a bank to pay their debts in its own paper. This they could not do, if the notes, before they were payable, had been assigned by the bank. No fair construction of the seventh section can authorize a forfeiture of the note, by reason of the illegal indorsement. It is, therefore, unnecessary to consider whether such a provision would be constitutional.

The bank had the power, under its charter, to assign promissory notes. If this were not so, the law to prohibit the assignment would have been unnecessary. There being no express power in the charter of the bank to indorse notes, it must be considered as exercising the power under the general law making notes negotiable; and in this respect it must stand on the same ground as an individual. And this presents the question, whether the repeal of the law making notes negotiable by banks can affect notes executed before the repeal. A majority of the judges hold that a provision so construed is void, as it impairs the obligation of the contract. I dissent from this conclusion.

An individual holds a note, which, under the statute, is negotiable; but the statute is repealed. Does this take away the negotiability of the note? I think it does. There can be no doubt of this, unless such a construction shall impair the obligation of the contract. Now, what obligation is violated by this contruction? It is said, that the maker of the note promised to pay to the assignee of the payee. This is admitted. But until the noto be assigned, there can be no assignee. The indorsement is a new contract between the indorser and the indorsee; and when this contract is made, it can no more be impaired than the contract between the maker and the pavee of the note.

A promise to pay to A. B. or his assignee is no contract with the assignee, until the new contract of assignment be made. The promise is to pay to the indorsee, if the payee of the note shall indorse it. But the payee is under no obligation to indorse the note. And if there be no obligation, how can it be impaired? A contract binds a party either to do or not to do a certain thing. The maker of the note, on a certain contingency, binds himself to pay the indorsee, and that contingency depends upon the will of the payee; but until that will is exercised, there is no obligation by the maker. The payee has power to bind the maker of the note to pay its contents to some other person; but until that power is exercised, there is no contract which can be impaired.

Suppose a power of attorney was given to A by B, to enable him to bind B, by a written instrument, to do a certain thing which may legally be done, but, before the instrument is executed, the thing is made unlawful; does this impair the obligation of the contract? The instrument contemplated has no existence; B cannot complain that he has not been bound to do the act, and on what ground can A complain? Is his contract impaired? He has no contract. He had the power to make a contract, which he failed to exercise. And this is the principle involved in the case now under consideration. The payee had a discretionary power to bind the maker of the note, but he did not exercise it until the assignment of the note was made illegal. Is a mere power of attorney to make a contract within the Constitution? It is essential, to constitute a contract, that there shall be two parties bound by it. Now the payee is not bound to assign the note, though the maker has authorized him to assign it. This, then, is a mere power to make a contract, which may or may not, at the discretion of the payee, be exercised. It is a mere unexecuted power to make a contract, and is, in my judgment, not within the Constitution.

If the charter of the bank had contained a special provision, authorizing it to assign promissory notes, no subsequent act of the legislature could repeal or modify such provision, against the consent of the bank.