Woodruff v. Trapnall/Dissent Grier

Mr. Justice GRIER.

With all respect for my brethren, I feel constrained to express my entire dissent from the opinion of the majority of the court, which has just been delivered.

There is no portion of the power and jurisdiction committed to this court which demands so much caution in its exercise, as that of declaring the legislation of a State to be null and void, because it comes in conflict with the Constitution of the United States. And more especially should this be the case where one of the States of this Union is really (though not nominally) the true party defendant, and is charged, not merely with legislation injuriously impairing contracts between her citizens, but with a direct and dishonest repudiation of her own solemn obligations. Such is the charge on which the State and people of Arkansas have been publicly arraigned before this court. But it is one I am unwilling to indorse or believe, without other evidence than the record before us contains. When a State is charged with a repudiation of her contracts, the party making it is bound to show, beyond dispute, that the State has made a contract; when, where, how, and with whom; and not leave it to surmise, strained inferences, or fanciful construction, as to the nature of the obligation, or the parties to it.

Assuming the State of Arkansas to be, for the purposes of this case, a private corporation, or an individual, and bound by the same principles of law and equity which affect other persons in their intercourse with the world, let us examine whether William E. Woodruff, the plaintiff below and in error, has shown a contract which entitled him to the remedy sought, in the Supreme Court of Arkansas, and which we are now called on to afford him. The record shows that his bond was given to the State of Arkansas on the 27th of October, 1836, before the act was passed which incorporated the Bank of the State of Arkansas. His contract, as it appears on the face of his bond, is [p210] to pay $300,000, "lawful money of the United States," subject to a condition which is forfeited. He was treasurer of the State, and between the date of his bond and the 21st of December, 1838, he received large sums of money, and among others, the sum of $286,757.49, in drafts from the Secretary of the Treasury of the United States. Of these moneys a balance remained in his hands, which he refused to pay over, and a suit was brought on his bond in 1840; and on the 23d of January, 1847, final judgment was recovered for the sum of $3,359 and costs; and an execution having issued for the same, Woodruff, for the first time, in February, 1847, tendered to the attorney of the State, not lawful money of the United States, which he had contracted to pay, and for which judgment was given against him, but notes of the State Bank of Arkansas, then and now insolvent, and the notes almost worthless. Woodruff then petitioned the Supreme Court for a mandamus to compel the attorney of the State to receive these worthless notes, in place of the money he had contracted to pay, and which he was condemned by the judgment of the court to pay; and because of the refusal of the Supreme Court of Arkansas to issue a peremptory mandamus, he has appealed to this court to compel them, on the ground that the law of the State which forbade its officers to receive payment of taxes and debts in any thing but specie or par funds, impaired the obligation of contracts. The twenty-eighth section of the act of 1836, incorporating the bank, directed that the bills and notes of the bank should "be received in all payments of debts due to the State of Arkansas." But another statute, passed in 1845, enacted, that "from and after the 4th of March, 1845, nothing shall be received in payment of taxes or revenue due the State, but par funds or treasury warrants of the State."

Now, for seven years and upwards after the default of the plaintiff in paying over money which he had received, he was permitted to pay in notes of this bank, but in all this time he made no tender of payment in such notes. When sued on his bond, he makes no tender of notes, pleads no set-off, but, after judgment of the court that he shall pay money, he claims a right to satisfy the execution by handing over that which is not money. If this claim be not just, it has at least the merit of novelty, as it is certainly without precedent, either in the courts of England or America.

Let us assume, for argument's sake, that every enactment of the legislature of Arkansas is in the nature of a contract or promise with some person, and cannot be repealed, and that the State had guaranteed or indorsed every note issued by the bank, or, what will make the case stronger for the plaintiff, that his bond was made payable in the notes of the State Bank [p211] of Arkansas. Is he entitled to the extraordinary process now demanded, or had he a right to allege such contract on the part of the State at this stage of the proceedings? If he had not, and the court below were right in refusing to issue the mandamus, whether the act of 1845 was void or valid, he has no right to call upon this court to reverse their judgment, because they may have given a wrong reason for it, and unnecessarily passed their opinion on the validity of an act which did not affect the plaintiff's case, or deprive him of any right.

If a creditor gives public notice to his debtors that he will accept, in payment of his debts, wheat, tobacco, or Arkansas notes, and his debtor for a course of seven years refuses or neglects to accept of the offer, and tender payment in such articles, and is afterwards sued upon his bond or note; and even after suit brought makes no such tender, or pleads his readiness to pay in such articles, and judgment is obtained against him on his bond for money due; can he afterwards ask a court to allow him to tender payment in any thing else than money, or have a rule on the plaintiff's attorney or a mandamus, to compel him to accept notes of a broken bank, or other specific articles, in payment of an execution issued on the judgment? Again, if the obligation sued upon is payable in specific articles, and no tender of them is made before suit brought, or plea that the defendant is ready and willing to pay according to contract, and the court give judgment against the debtor for a certain sum of money, as damages for his breach of his contract, can he afterwards compel the sheriff or the plaintiff's attorney to accept specific articles in satisfaction of a judgment and execution for money? And again, if a defendant hold notes drawn or indorsed or guaranteed by the plaintiff, he may plead them as a set-off, and obtain judgment in his favor. But if he enter no such plea, or demand no such set-off, and judgment is entered against him for the money due, can he purchase the plaintiff's notes after judgment, and ask the court to compel the plaintiff's attorney to accept them in payment? It does not appear, nor have the learned counsel asserted, that such is the peculiar law of Arkansas, and it certainly is not the law anywhere else.

When suit is brought on a contract, it becomes merged in the judgment; if the defendant claims a right to pay it in any thing else than money, he must plead it and set it up on the trial; for the court, on an action for money, can give judgment only for the payment of money. If, after trial, verdict, and judgment, the plaintiff on motion could raise a new question as to set-off, tender, or a right to satisfy his debt in some other way than by payment of money, the judgment of a court, instead of being the end of controversy, would be but the beginning of litigation. [p212] Of this, the present case is a most flagrant instance. The plaintiffs in error were sued on their bond in 1840, on an obligation to pay "lawful money of the United States." They contested the claim in court for seven years, never alleged by plea or otherwise any contract on the part of the State by which they were entitled to pay in anything but money, never tendered notes of the Bank of Arkansas, never alleged that the State was liable as guarantor of the notes of the bank, and bound to accept them as a set-off or in payment, but after final judgment affirmed in a court of error, and execution issued, they commence a new litigation, which has now lasted for four years more.

If a citizen of Arkansas had sued the defendants on their bond, and thus had claimed the right to tender payment of it in anything else than money, owing to some promise or contract of the plaintiff to accept the paper of a particular bank in payment of his bond, no lawyer can pretend that the defendants were not bound to make their defence on the trial, or that, after judgment to pay money, any court has the power to compel the plaintiff to accept anything else. That a sovereign State has not the same rights in a court of justice that are granted to her humblest citizens, is a doctrine that I have not heard advanced, and do not feel bound to disprove. And yet, if the Supreme Court of Arkansas had issued the peremptory mandamus asked by plaintiff, they would have assumed a power over the sovereign State which the law would not allow them to exercise over any of her citizens. The Constitution of the United States forbids any State "to make anything but gold and silver a tender in payment of debts;" yet it is claimed that this court has the power to compel a State to accept payment of a judgment for $3,000 lawful money of the United States, in worthless paper of a broken bank; or, in other words, in a collateral proceeding to set aside and reverse the judgment of the court condemning the defendants to pay money, and let them into a defence on some alleged contract of the defendant to guaranty the notes of a certain bank, or to accept payment in something else than money; and thus try the defence after judgment. If courts of justice have such a power, it would seem that this is the first instance in which they have been called upon to exercise it, as the books of reports can furnish no precedent of such a proceeding.

Thus far I have considered this case on the assumption, that the State of Arkansas, by her direction to her officers to receive payment of debts due to her in the notes of the bank, have become the guarantors and indorsers of such notes, and have thereby divested themselves of all power to lay and collect taxes payable in any other medium or currency than notes [p213] of the bank, and irrevocably made them a sufficient tender to her for all debts due, and shown, as I think, that the court below were justifiable in refusing to the plaintiff the writ prayed for in his petition. Let us now inquire whether there is any such contract between the parties in this case, which has been impaired by the legislation of the State. For it is well settled, that the plaintiffs have no right to invoke the aid of this court, to exercise the high power intrusted to them, of deciding on the validity of State legislation, unless some rights vested in them by contract with the State, or some other person, have been impaired or destroyed thereby. I admit that if the defendant, as treasurer of the State, had received debts or taxes due the State in the notes of the bank before the repeal of this law directing him to receive them, it would be a gross violation of their contract to refuse to receive from him such currency or specific articles as he had received in pursuance of law. But that is not the case before us. On the contrary, the bond given by the plaintiff was antecedent to the incorporation of the bank; their contract with the State was to pay "lawful money of the United States," and the subsequent act cannot be said to be incorporated in it, or make a part of their contract. The treasurer received for the use of the State money, not notes of the bank, as the record shows. They do not pretend that after the passage of the act, or even after its repeal up to the time that judgment was obtained against them, they ever held a dollar of these bank-notes, or ever tendered a payment of their debt in them. Where, then, is the contract with these plaintiffs, or how has it been impaired? If other persons have received these notes on the faith of their guaranty by the State, and their value has been diminished or destroyed by the refusal of the State to receive them in payment of their dues, what right have the plaintiffs to complain, or to come to this court for aid? Who is attempting to commit a fraud, or deny the obligation of their contracts, the State of Arkansas, or the plaintiffs themselves? For seven years after this balance was due from the treasurer (from 1838 till 1845), he was permitted to pay it in notes of the bank; but he refused to accept the offer. The bank becomes insolvent, the offer to receive payment in its worthless paper is withdrawn. And two years afterwards, and after the plaintiffs are condemned to pay their debt according to their covenant, in lawful money of the United States, after an execution has issued to compel a compliance with the judgment of the court, they ask this court to annul their contract and the judgment of the Supreme Court of Arkansas, that they may pay their debt in depreciated paper bought up for the purpose. It seems to me, [p214] that if the charge of fraudulent disregard of their contract be imputable to either of the parties in the argument, so far as it affects the contract between them, it is not the State which is justly liable to it, but the plaintiffs. The repeal of the twenty-eighth section of the act incorporating the bank, if it impaired the obligation of a contract with any person, certainly did not add to or change the obligation given by the plaintiffs, or impair it in any respect. If it was a contract at all, it was with the corporation. So far as it affected the plaintiffs, it was a gratuitous offer and direction or permission to the treasurer to receive, accept, and pay over debts due the State in a specific article not money, nor a legal tender as such. There is no complaint that the State ever refused to receive from the treasurer taxes or debts received by him in this currency, under this permission or direction of the act. For the seven years that he was permitted to pay his own debt in that medium, he refused to accept of the offer. If a wealthy creditor, for the purpose of sustaining the credit of a particular bank, publishes to the world that, if his debtors will pay him in notes of that bank, he will accept them, and after the bank fails gives notice that he will no longer receive them, can a debtor who for seven years has refused to accept this offer, and pay his debts in the manner proposed, allege that this is a contract binding on the creditor forever? Can he allege that this offer to receive payment in a specific article, unaccepted by him, has changed the nature of his bond, and that a demand of payment according to the letter of his obligation impairs any contract between them? Such a doctrine as regards the contracts of individuals has never been advanced in a court of justice. And why a different rule should be applied to contracts when a sovereign State is one of the parties, has certainly not been explained.

It needs no argument to demonstrate that a contract must have at least two parties, and that all laws made by a sovereign State are not necessarily contracts, and therefore irrevocable. The act of the legislature of Arkansas under consideration is entitled, "An Act to incorporate the Bank of the State of Arkansas." It creates a corporation and confers certain powers and privileges upon it. So far as it does this, as has been decided by this court, the act may be considered in the nature of a contract, and that these powers and privileges cannot be annulled or withdrawn, without the consent of the artificial power thus created, or the individuals for whose benefit the franchise was granted. It is true, also, that when a law is in the nature of a contract or grant, and absolute rights have vested under that contract, a repeal of the law cannot divest [p215] those rights. But the plaintiffs in this case are not corporators, or stockholders in the bank; they hold no franchise, powers, or privileges, under the act of incorporation; they are no parties to the contracts, nor have they any vested rights under it, which have been impaired by the repeal of the twenty-eighth section. If the corporation, or those who claim the franchises and powers granted to it, do not complain of an infringement of their contract, no other person can. As to them, it is a mere speculative question, which this court is not bound to decide. So far as it affected the plaintiffs, the twenty-eighth section was but a gratuitous offer to accept notes in place of gold and silver, if they would pay their debt, a mere license at the pleasure of the State if not accepted by them. To call it a grant, or vested right under a contract, seems to me a perversion and abuse of terms. But admitting that the directions given in this act to her public officers to deposit the funds of the State in this bank, and receive its paper in payment of its debts, constituted a part of the contract with the corporation, and could not be repealed, did it bind the State after the corporation ceased to perform the functions and duties imposed upon it? If a State creates a banking corporation with a certain capital, and requires it to pay its notes in specie on demand, and agrees to make it a depositary, and use and receive its notes as cash, is the State bound by its contract to do so, when the corporation fails or refuses to fulfil the duties and purposes of its creation? If such be the case, it is certainly a one-sided contract; there is no mutuality in it. Does it make any difference in the case, also, whether the stock of the corporation is furnished by the State or individuals? In neither case are the stockholders individually liable for the mismanagement or defaults of the corporation, unless previously made so by the act of incorporation. The State of Arkansas furnished one million of dollars as the stock upon which this banking corporation was to issue notes and discount paper. She has nowhere agreed to guaranty the solvency of the bank, or be liable for its issues. If individuals had furnished the stock, they would not be personally liable for its debts. If the stockholders had all made deposits of their money in the bank, and received interest on long deposits, and received its notes as gold and silver, it would not have amounted to a contract with the public, or note-holders, or any body else, that they should continue to deposit their money or receive its notes in payment of debts after the bank became insolvent and its notes worthless. The most refined legal astutia has thus far been unable to discover in such conduct of individuals an implied promise to receive broken bank notes in payment of debts, or a liability [p216] to the note-holders, because their conduct had given credit to the bank. But it seems there is a more stringent rule of morality with regard to sovereign States and their contracts. In their case, under some fiction of the law, without regard to the fact or their actual undertaking, there has been discovered an implied contract running with the paper, like a covenant running with land, which renders them liable for all the issues of the bank, into whosesoever hands it may come, and forever disables them to lay or collect a tax, or pay a debt, till they have lifted and paid every note of the broken bank in which they were stockholders, although they never directly pledged the faith of the State, or agreed to be liable for a single dollar issued by the bank. If individuals had furnished the one million of dollars capital under an act of incorporation which did not make the stockholders personally liable, every person who received the notes would do it on the credit of the capital paid in. Why it should not be the same case when a State furnished the capital, I am unable to perceive. Nor can I comprehend how a direction by a State to its officers to make deposits in a bank, and receive its notes in payment of debts, amounts per se to a contract running with the notes, which binds the State to receive them forever, whether the corporation be solvent or insolvent, dead or alive. But the liability of the State for these issues is argued and attempted to be proved by another legal fiction; to wit, that the State is the bank, and the bank is the State. And why? Because she created the corporation? No; for that would make her liable for the paper of every corporation created by the legislature.

It is, then, because she is owner of the stock, receives the profits, makes the bank her depositary, and gives credit to its notes by ordering them to be received in payment of her debts. And it is from this doctrine of identity, that this contract of guaranty, running with the paper, has been inferred, or rather imputed to the State. If the same identity exists when individuals stand in the same relation to a corporation, and the same contract of guaranty be imputed to them (and I can see no reason why it should not), it is strange that no traces of the doctrine can be found in our books of reports.

But there are certain inferences which necessarily follow as corollaries from this decision in this case, and certain doctrines for which it may be quoted as a precedent (although not directly asserted), that confirm me in refusing my assent to it.

1st. That if the same rules of law for the interpretation of contracts, and the rights of the parties to them, affect all persons, whether natural or artificial, the individual and the sovereign State, it may fairly be inferred hereafter, that, when a bond [p217] or note, payable in specific articles, is sued upon, the defendant is not bound either to tender them, or plead a tender, but, after judgment for a sum of money, he may make payment to the sheriff of the execution in specific articles, and not in money.

2d. That, after a court has solemnly adjudged that the defendant shall pay to the plaintiff a certain sum of money, they can compel him to receive in lieu of it worthless rags.

3d. That a defendant, who has been condemned by the judgment of a court to pay to the plaintiff a sum of money, may buy up notes drawn or indorsed by the plaintiff, and by mandamus or rule of court compel the plaintiff's attorney to accept them in payment.

4th. If these consequences are not legitimately to be inferred from this judgment, then it necessarily follows, that this court exercise a controlling power over sovereign States, and judgments obtained by them, which they cannot exercise over the humblest individual or petty corporation.

5th. That this court has the power to compel any State of this Union, who repudiates her debts, to pay them, because such refusal or repudiation impairs the obligation of her contracts.

6th. That so long as any portion of the three millions of dollars of notes issued by this bank before 1845 remains unpaid, the State of Arkansas cannot collect a dollar of taxes from her citizens in lawful money.

7th. That the courts have a right to compel a State to pay bank notes guarantied by them, before and in preference of all other debts.

8th. That the collectors of taxes, so long as any of this issue of bank-notes can be found, may buy them up at the rate of one dollar for ten or a hundred, and have the assistance of the court to compel the State to receive them at par, even where the collector has received gold and silver.

9th. That when a State, a corporation, or an individual publish to the world their willingness to accept payment of their debts in the issues of a bank, it amounts to a contract, by implication, with the public, and each individual composing it, to guaranty the notes issued by said bank, and that this contract runs with, and is attached to, said notes, in the hands of the bearer, provided the notes were issued before such offer is withdrawn.

As I cannot assent to any one of these propositions, and as I believe they are legitimate deductions from the decision of the court, I beg leave to express my dissent from it.

[p218] Mr. Justice CATRON.

I concur in the dissenting opinion just delivered by my brother Grier.

Mr. Justice DANIEL.

I dissent from the decision of the court in this case, and entirely concur in the arguments and conclusions expressed in the opinion delivered by my brother Grier.