Lead Opinion
delivered the opinion of the court.
It must often happen, under such a government as that of the United States, that constitutional'questions will be brought to this court for" decision, demanding extended investigation and its most careful judgment.
This is one of that kind; but fortunately it involves no new principles, nor any assertion of judicial action which has not been repeatedly declared to be within the constitutional and legislative jurisdiction of the courts of, the United States, and by way of -appeal or by writ of error, as the case ¿nay be, within that of the supreme court.
It is a suit in chancery, which was "brought by John M. Woolsey, in the circuit court of the United States for the district of Ohio, seeking to enjoin the collection of a tax assessed by the. State of Ohio on the Commercial Branch Bank óf Cleveland, á branch of the State Bank of Ohio. He makes George C. Dodge, • the tax collector, the directors’ of the bank, and the bank itself, defendants.
■Woolsey avers that he is a citizen of the State of Connecticut, that he is the owner of thirty shares in the Branch Bank of Cleveland, that Dodge and the other defendants are all - citizens of. the State of Ohio, and that' the Commercial Bank of Cleveland, is a corporation, and Ivas made such, as a branch of the State Bank of Ohio, by an act of the general assembly of that State, passed the 24th of February, 1845, entitled “ An act to ■ incorporate the State Bank of Ohio and other banking companies.” He alleges that the Commercial Bank' has in all things complied with the requirements ¡of its charter, and that, by the
It is averred that the Bank of Cleveland had at all times complied with the requirements of the act. That, in the year 1853, it set off to the State six per cerit. on the two semi-annual dividends which had been made in that -year, on the first day of May and the first day of November, which amounted in the ággregate to the sum of $3,206jf0. That the same had been notified to the auditor, and that the bank had always been ready to pay the same when demanded. The complainant then avers, that three years before bringing his suit, having full confidence that the State of Ohio would observe good faith towards the bank, in respect, to its franchises and .privileges conferred upon it by the act of incorporation, arid that it would adhere with fidelity to the rule of taxation provided for in the charter,, he had purchased thirty shares of the capital stock of the bank, and that he was then- the owner of the same. He further states, after he had made such purchases, that bn the 17th of June, 1851,-a draft of a new cohstitution had -been submitted to the electors of the State for .their acceptance-or rejection, which, if accepted by a majority of the electors who should vote, was to take effect as the constitution of the State, on the 1st of September, 1851. It is admitted that it was accepted, that it became and now is the constitution of the State of Ohio. It is provided in sections two and three of the 12th article' of that constitution, that laws shall be passed, taxing by an uniform rule, all moneys, credits, investments in bonds, stock, joint-stock, companies, or otherwise; and that the general assembly shall provide by law for taxing the notes and bills discounted or pur¡ chased, money loaned, and .all other property, effects,- or due? whatever, without deduction, of all-bariks now existing, or hereafter ^created, and of all b.arikers, so that :all property employed in banking shall always bear a burden of taxation equal to that imposed on the property of individuals.. And in. the 4th section of the 13th article of the constitution of 1851, it is further de
It appears also by the bill, that the general assembly of the State of Ohio passed an act on ’the 13th of April, 1852, for the assessment and taxation of all property in the State; and for levying taxes on the same according to its true valué in money, in which it is declared to be the duty of the president and cashier of every bank, or banking company, “ that shall have been, or may hereafter be, incorporated by the laws of the State, •and having the right to issue bills for circulation as money, to make. and return, under oath, to the auditor of the county in which such banks may be, in the month of- May, annually, a written statement containing, first, the average amount of notes and bills discounted or purchased, which amount shall include all the loans or discounts, whether originally made, or renewed during the year, or at anytime previous; whether made on bills of exchange, notes, bonds, mortgages, or other evidence of indebtedness, at their actual cost value in money; whether due previous to, during, or after the period aforesaid, and on which said banking company has, at any time, recovered or received, or is entitled to receive, any profit of other consideration whatever, either in the shape of interest, discount, exchange, or otherwise ; and secondly, the average amount of all other moneys, effects, or dues of every description, belonging to such bank, ór banking company, loaned, invested, or otherwise used or employed, with a view to profit, or -upon which such bank, or banking.company receives, or is entitled to receive, interest.
The act then makes it the duty of the auditors, in the counties in which a bank or banking companies may be, to receive ffom them returns of notes and bills discounted, and all other moneys and effects or dues, as provided for in the 19th section of the áct, to enter the same for taxation upon the grand duplicate of the property of the. county, and upon the city duplicate for city taxes, in cases where the city tax is not returned upon the grand duplicate, but is collected by city officers;- which amounts so returned and entered shall be taxed for the same purposes and to the same extent that personal property is, or may be taxed, •in the place where such bank or banking company is situated. ,It is then averred that the president and cashier of the Commercial Bank of Cleveland, fearing.the penalty imposed by the act for a refusal or neglect to make a return according to the act, did, in the month of May, in the year 1852, make a return; protesting against the right of the State to assess a tax Upon the bank, other than that which was provided for, in the charter of its incorporation of the 24th February, 1845. But it appears
It is against the collection of. this tax that John M. Woolsey, as a stockholder in the bank, has brought this suit, claiming an exemption from it as a stockholder, upon the ground that the act of the general assembly of the State of Ohio, and the tax assessed under it upon the bank, are in violation-of the 10th section of the 1st article of the constitution of the United States, which declares that no State shall pass any law impairing the obligation, of contracts. And he seeks the aid of the circuit court to enjoin Dodge, the defendant, from collecting the same from,the bank, as collector of taxes, as he had threatened to do by distress, and as he had done for the assessed tax for the year .1852.
■- The complainant gives a further aspect to his suit which it is also -proper to notice. It is, if the'taxes are permitted to be assessed and collected from the bank, under the act of the 13th of April, 1852, it will virtually destroy and annul the contract between the State and the bank, in respect to the tax which the State imposed upon it by the charter of its incorporation, in lieu of all other taxes upon the bank or the stockholders thereof, on account of stock owned therein; that his stock will be thereby lessened in value, his dividends diminished; and' that the tax is so onerous upon the bank, that it will compel a suspension and. final cessation of its business. He- finally declares that as a stockholder, on his' own behalf, he had requested the directors of the bank to take measures, by suit or otherwise, to assert the franchises -of the bank against the collection of what he believes to be an unconstitutional tax, and that they had refused to do so.- .
To this bill the defendant, G-eorge C. Dodget filed a» answer. The other defendants did1 pqt answer. He admits the material allegations of the bill, except the allegation-that the tax law of April 13,1852, is unconstitutional; says that the act is in conformity with the constitution of Ohio,'which .took effect September 1,1851, and- that it is' in harmony with the constitution of -the United States. He denies that any application- was piaffe by Woolsey to the directors óf the bank, to take measures, by suit- or otherwise, to prevent the collection 'of the tax, and
Upon the foregoing pleadings and admission, the circuit court rendered a final decree for the complainant, perpetually enjoining the treasurer against the collection of the tax, under the act of the 13th February, 1852, and subjecting the defendant, Dodge, to the payment of the costs of the suit. From that decision the defendant, Dodge, has appealed to this court.
His counsel have relied upon the following points, to sustain the appeal':—
1. The complainant does not show himself to be entitled to relief in a court of chancery, because the charter of the' bank .provides, that its affairs shall be managed by a board of directors, and that they are not-amenable to the stockholders for an' error of judgment merely.. And that in order to make them so, it .should have been averred that they were in collusion with the tax collector in their refusal to take legal steps to test the validity of the tax.
2. It was urged that this suit had been improperly brought in the circuit court of the United States for the district of Ohio, because it is. a contrivañce to create a jurisdiction!, where none
3d. It was said, if the foregoing points were not available to defeat the action, that it might be contended that the defendant was in the discharge of his official duty when interrupted by the mandate of "the circuit court, and that the tax had been properly assessed by a law of the State, in conformity with its constitution, of the 1st September, 1851.
We will consider the points in their order. The first comprehends two propositions, namely; that courts of equity have no jurisdiction over corporations, as such, at the suit of a stockholder for violations of charters, and none for the errors of judgment of those who manage their business ordinarily.-
There has been a conflict' of judicial authority in both. Still, it has been found necessary, for prevention of injuries for which common-law courts were inadequate; to entertain in equity such a jurisdiction in the progressive development of the powers and effects of private corporations upon all the business and interests of society. __ . '
It is now no longer doubted, either in England or the United States, that courts of equity, in both, have a jurisdiction over corporations, at the instance of one or more of their members; to apply preventive remedies by injunction, to restrain those who administer them from doing acts which would amount to a violation of charters, or to prevent any misapplication of their capitals or profits, which might result in lessening, the dividends of stockholders, or the value of their shares, as either may . be protected by the franchises of a corporation, if the acts intended to be done create what is in the law denominated a breach of trust. And the jurisdiction extends to inquire into,' and to .enjoin, as the case may require that to be done, any proceedings by individuals, in whatever character they may profess to act, if the subject of complaint is an imputed violation of a corporate franchise, or the denial of a right growing out of it, for which there is not an adequate remedy at law. 2 Russ. & Mylne Ch. R., Cunliffe v. Manchester and Bolton Canal Company, 480, n.; Ware v. Grand Junction Water Company, 2 Russ. & Mylne, 470; Bagshaw v. Eastern Counties Railway Company, 7 Hare Ch. R. 114; Angell & Ames, 4th ed. 424, and the other cases there cited.
It was ruled in the case of Cunliffe v. The Manchester and Bolton Canal Company, 2 Russ. & Mylne Ch. R. 481, that where the legal remedy against a corporation is inadequate, a
But. further, it is not only illegal for a corporation to apply its capital to object’s not contemplated.by its charter, but also to apply its profits. • And therefore a shareholder may maintain a .bill in equity against the directors and-compel 'the company to refund .-any of the profits thus improperly applied. It is an im
We do not mean to say that the jurisdiction in equity over corporations at the suit of a shareholder has not been' contested. The cases cited in this argument show it to have been otherwise ; but when the case of Hodges v. The New England Screw Company et al. was cited against it — (we may say the best argued and judicially considered case which' we know upon the point, both upon the original hearing and rehearing of that cause,) — the counsel could not have been aware of the fact that, upon the rehearing of it, the learned court, which had decided that courts of equity have no jurisdiction over corporations as such at the suit of a stockholder for violations of charter, reviewed and recalled that conclusion. The language of the’ court is: “We have thought it our duty to review in this general form this new and unsettled jurisdiction, and to say, in view of the novelty and importance of the subject, and the additional light which has been thrown upon it since the trial, we consider the jurisdiction of this court over corporations for breaches of charter, at the suit of- shareholders, and how far it shall be extended, and subject tp what limits, is still an open question in this court. 1 Rhode Island Reports, 312 — rehearing .of the case September term, 1853.”
The result of the cases is well stated in Angell & Ames, paragraphs 391, 393. “ In cases where the legal remedy against a corporation is inadequate, a court of equity wifi interfere, is well settled, and there are cases in which a bill in equity will lie against a corporation by one of its members.” “ Though the re-suit of the authorities clearly is, that in a corporation, when acting within the scope -of and in obedience to the provisions of its constitution, the will of the majority, duly expressed at ,a legally constituted meeting, must govern; yet beyond the limits of the act of incorporation, the will of the majority cannot make an act valid; and the'powers of a-court of equity may be put in motion at the instance of a single shareholder, if he can show that the corporation are employing their statutory powers for the accomplishment of purposes not within the scope of their institution. Yet it is to be observed, that there' is an important
We have then the rulé and its limitation. It is contended that this case is within the limitation; or that the directors of the Commercial Bank of Cleveland, in their action in respect to the tax assessed upon it, under the act of April 18,1852, and in their refusal to take proper measures for testing its validity, have committed an “ error of judgment merely.”
It is obvious, from the rule, that the circumstances of each case must determine the jurisdiction of a court of equity to give the relief sought. That the pleadings must be relied upon- to collect what they are, to ascertain in what character, and to what end a shareholder invokes the interposition of a court of equity, on account of the mismanagement of a board of directors. Whether such acts are out of or beyond the limits.of the act of incorporation, either of commission contrary, thereto, or of negligence in not doing what it may be their chartered duty to do.
•. This brings .us to the inquiry, as to what the directors have done in this cáse, and what they refused to do upon the application of their co-corporator, John M. Woolsey. . After a full statement of his case, comprehending all of his rights and theirs also, alleging in his bill that his object was to test the validity of a tax upon the ground that it was unconstitutional, because it impaired the obligation' of a contract made by the State of Ohio
. Thinking, as we do, that the action of the board of directors was not “ an error of judgment .merely ” but a breach of duty, it is our opinion that they were properly made parties to the bill, and that the jurisdiction of a court of equity reaches such a case to give such a remedy as its circumstances may require. This conclusion makes it unnecessary for us to notice further the point made by the counsel that the suit should have been brought in the name of the corporation, in support of which they cited the case of the Bank of the United States v. Osborn. The obvious difference between this case and that is, that the Bank of the United States brought a bill in the circuit court of the United States for the district of Ohio, to resist a tax assessed under an act of that State, and executed by its auditor, and' here the
But it was said in the argument, that this suit had been improperly brought in the circuit court of the United States, be.cause it was a contrivance by Woolsey, or between him and the directors of the bank, to give that court jurisdiction, on account .of their;residence and citizenship being in different States. That the subject-matter of the suit was within the exclusive jurisdiction of the state courts, and that, if the jurisdiction in the -courts of the United States was sustained, it would make inoperative.to a great extent the 7th amendment of the constitution of 'the United States and the 16th section of the Judiciary Net of 1789, this last being a declaratory act, settling the law, as to cases of equity jurisdiction, in the nature of a proviso, Iimitatiori, or" exception to its exercise. And further, that it would máke the judiciary 'of the United States paramount to that of the individual States, and the legislative and executive departments of the federal government paramount to the same departments of the individual States.
’ • We first remark as to the imputation of contrivance, that it is the assertion of a fact which does 'not appear in the case, one which the defendants should have proved if they meant to rely upon it to'abate or defeat the complainant’s suit, and that, not having done so, as théy might have attempted to do, we cannot presume its existence. Mr. Woolsey’s right, as a citizen of ..the State of Connecticut, to sue citizens- of the State of Ohio in-, the courts of the United States, for that State, cannot be questioned. The papers in the case also show, that the directors and himself .occupy antagonist grounds in respect, to the controversy which their refusal to sue -foiced him to take in defence of his rights as a' shareholder in. the bank. - Nor can the counsel for the defendant assume the existence, of such a fact in the argument of .their case in this court, in the absence of any attempt on their' part to prove it in the circuit court.
'. We remark, as to the subject-matter of the suit being w-ithin the exclusive jurisdiction of the state, courts, that the .courts of
It Was also said by both of the counsel for the defendant, and argued with some zeal, that if the court sustained the jurisdiction in-this case, it would be difficult to determine whether any thing, and how much of state sovereignty may hereafter exist. We shall give, to this "observation our particular consideration, regretting that it should be necessary, but not doubting that-such a jurisdiction exists at. the "suit of a shareholder, and that' the appellate jurisdiction of this court may be exercised in the matter, not only without taking'away any of the rights of the States, but, by doing so, giving additional securities for their preservation, to the great benefit of the people of the United. States. If it,does.not exist ^nd was not exercised, we should indeed have a' very imperfect national government, .altogether unworthy of the wisdom and foresight of those who framed-'it; incompetent, too, to secure for the future those advantages hitherto sécured by it to the people of the United State's, and which were in their contemplation, when, by their conventions in the several States, the constitution was ratified..
Impelled then by a sense of- duty to the constitution, and thé administration of so much lof it as has been assigned to the judiciary, we proceed With the discussion.
' The departments of the gdvernment are legislative, executive, and judicial. They are coordinate in degree to the extent of the powers delegated to each of them. Each, in the exercise of its powers, is independent of the other, but all, rightfully done by either; is binding upon the others.- The constitution is supreme over all of them, because the people who ratified it have made" it so--; consequently, any thing which may be done unauthorized by it is unlawful. But it is not only over the departments of
Now, whether such a supremacy of the constitution, with its limitations in' the" particulars just méntioned, and with the further restrietitin laid by the people upon -themselves, and for themselves, as to the modes of amendment, be right or wrong politically, no one can deny that the constitution is supreme, as has been stated, and that the statement is in exact conformity with it.
Further, the' constitution is not only supreme in the sense we have said it was, for the people in the ratification of it have chosen to add that “ this constitution and the la'ws of the. United States which shall be made in pursuance thereof; and all treaties made; or which shall be' made, under the authority of the United States, shall be the supreme law of the -land, and the judges in every State shall be bound thereby, any thing in the constitution or laws of any State to the contrary notwithstanding.” ; And, in that connection, to make' its supremacy more complete, impressive, and practical, that there should fie no escape from its operation, and that its binding force upon the States qnd the members of congress should be unmistakable, it ■is declared.that “the senators and representatives, before mentioned, and. the .members of the state legislatures, and all executive and judicial officers, both of the United States and of
Having stated, not by way of argument or inference, but in the words of' the constitution, the particulars in. which it is declared to be supreme, we proceed to show that it contains an interpreter, or has given directions for determining what is its meaning and operation, what “laws are made in pursuance thereof,” and to fix the meaning of treaties which had been made, or which shall be made, under the authority of the United States, when either the constitution, the laws of congress, or a treaty, are brought judicially in question, in which a- State, or a citizen of the United States, or a foreigner, shall claim rights before the courts of the United States, or in the courts of the States, either under the constitution or the laws of the United ■ States, or from a treaty.
All legislative powers in the constitution are vested in a congress of the United States, which shall consist of a senate and house of representatives. Then stating of whom the house shall be composed, how they shall be chosen by the people of the several States, the qualification of electors, the age of representatives, the time of their citizenship, and their inhabitancy iri the State in which they shall be’ chosen ; how representatives and direct taxes shall be apportioned, how the senate shall be composed, with sundry other provisions relating to the house and the senate, the powers of congress are enumerated affirmatively. The 9th section then declares what the congress shall not have power to do, and it is followed by the 10th, consisting of three paragraphs, all of them prohibitions upon the States from doing the particulars expressed in them.
Our first suggestion now is, as all the legislative powers are concessions of sovereignty from the people of the States, and the prohibitions upon them in the 10th section are likewise so, both raise an obligation upon the States not to legislate upon either; each, however, conferring rights, according to what may be the constitutional legislation of congress upon the first; and the second giving rights of equal force, without legisl: fcion in respect to such of them as execute themselves, on account of their being 'prohibitions of what the States shall not do. For .instance, no .legislation by congress is wanted to make more binding upon the States what they have bound themselves in absolute terms not to do. As where it is said “ 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 and silver coin a tender in payment of debts, pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.”
But ours is not such a government. The States, or rather the people' forming it, though sovereign as to the powers not delegated
Their union, by the constitution, was made by each of them conceding portions of their equal sovereignties for all of them, . and it acts upon the States conjunctively and separately, and in the same manner upon their citizens, aggregately in some things, and in others individually, in many of their relations of business, and also upon their , civil conduct, so far as their obedience to the laws of congress is concerned.
In such a union,' the States are bound by all of those prin-?' ciples of justice which bind individuals to their contracts. They are bound by their mutual acquiescence in the powers of the constitution, that neither of them should be the judge, or should-' be allowed to be the final'judge of the powers of the constitution, or of the interpretation of the-laws of congress. This is not so, because their sovereignty is impaired; but the exercise of it is diminished in quantity, because they have, in certain respects, put restraints upon that exercise, in virtue of .voluntary engagements. (Vattel, Ch. 1, section 10.)
We will now give two illustrations — one from the constitution, and the other from one of the cases decided in this court, upon a tax act of the State of Ohio — to show that the framers of the. constitution, and the conventions which ratified it, were fully aware of the necessity for and meant to make a department of it, to which was to be confided th.e final decision judicially of the powers of that. instrument, the conformity of laws with it, which either congress or the legislatures of the States may enact, and to review the judgments of the state courts, in which a right; is decided against, which has been claimed.in virtue of the constitution or the laws of congress. - .-
The third clause of the 2d section of the 1st article of the constitution is, “ that -representatives and direct taxes .shall be ap- -. portioned among the several States, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians' not taxed, three fifths of all other persons.” We will suppose that congress shall again impose a direct tax, and that a citizen liable to assessment should dispute its application to a kind of his property;* allegihg-it nottó be a direct tax, in the sense of that provision? of the constitution ; and that he should apply to a state, court for relief from an execution which had been levied upon his property for its collection, máking the United States collector of the tax/a party to his suit; and that the court should enjoin him'from further proceedings to collect the tax. It is plain, if such a judgment was final,
The .illustration given, and its results, have been drawn from the constitution of the United States, also from what might be. the action of the state legislatures and state courts, which could not be prevented unless the supreme court of the United States had the power to review the action of the state courts upon a matter exclusively of national interest, made so by the legislation of -congress.
Hitherto, no such case as we have supposed has happened, but a reference to the case of Hylton v. The United States,
Other illustrations of the propriety and necessity for a judicial, tribunal of the United States to settle such questions finally, might be made from other clauses of the constitution. We-will, however, cite but one of them in addition to such as have been already mentioned. It is the power of congress to regulate commerce, and we refer to the case of Brown v. The State of Maryland, as an instance of the attempt of that State to lay a ta;x upon imports, which this court pronounced to be unconstitutional.
We will now give other illustrations, in which the rights of property are involved, to show the cautious wisdom of that provision of the constitution which secures to the citizens of the different States a right to sue in the courts of the United States, and to claim either in them, or in the courts of the States, the protection either of the constitution or of the laws of congress.
The legislature of Ohio passed an act in 1803, incorporating the' proprietors of the half-million of acres of land south of Lake Erie called the “Sufferers’ Land.” This act required.the appointment of directors, who were authorized to extinguish the Indian .title, to súrvey the land into townships, or otherwise make partition among the owners; and,-among other things provided, “that, to defray all necessary expenses of the company in purchasing and extinguishing the Indian claim of title to the land, surveying, locating, and making partition, and all other necessary expenses of said company, power is hereby vested in the said directors, ánd their successors in office, to levy a tax or taxes on said land, and enforce the collection thereof.” It was also provided that the directors should have power and authority to do whatever it shall appear to them to be necessary and proper to be done for the well-ordering and interest of the proprietors, not contrary to the laws of the State. Subsequently, the legislature of Ohio imposed a tax upon these lands as a part of the revenue to be raised for the State.- The directors assessed a tax upon
The foundation of the right of citizens of different States to sue each other in the courts of the United States, is not an unworthy-jealousy of the impartiality of the state tribunals. It has a higher aim and purpose. It is to make the people think and' feel, though residing in different States of the Union, that their relations to each other were protected by the strictest justice, administered in courts independent of all local control or connection with the subject-matter of the controversy between the parties to a suit.
Men unite in civil society, expecting to enjoy peaceably what belongs to them, and that they may regain it by the law when wrongfully withheld. That can only be accomplished by good laws, with suitable provisions for the establishment of courts of justice, and for the enforcement of their decisions. The right to establish them flows from the same source which deférmines the extent of the legislative and executive powers of government. Experience has shown that the object.cannot be attained without a supreme tribunal, as one of the departments of the government, with defined powers in its organic structure, and the mode for exercising them to be provided legislatively. This has been done in the constitution of the United States. Its framers were well aware of their responsibilities to secure justice to the people;
Without the supreme court, as it has been constitutionally and legislatively constituted, neither the cpnstitution nor the laws of congress passed in pursuance of it, nor treaties, -would be in practice or in fact the supreme law of the land, and the injunction that the judges in every State should be bound thereby, any thing in the constitution or laws of any State to the contrary, notwithstanding, would be useléss, if the judges of state courts, in any one. of the States, could finally determine what was the meaning and operation of the constitution and laws of congress, or the extent of the obligation of treaties.
But let it be remembered, that the appellate jurisdiction of the supreme court, as it is, is one of perfect equality between the States and the United States. It acts upon the constitution and laws of both, in the same way, to the same extent, for the same purposes, and with • the same final result. Neither the dignity nor the .independence of either are lessened by its organization or action.
The same electors choose the members of the house of representatives who choose the members of the most popular branch of the state legislatures. The senators of the United States are chosen by the legislatures of the States. The senate and house of representatives of the United States exercise their legislative powers independently of each other, their concurrence being necessary to pass laws. The States are represented' in the one, the people in the other and in both. But as it >vas thought that
We do not know a case more appropriate to show the necessity for such a jurisdiction than that before us.
A citizen of the United States, residing in Connecticut, having a large pecuniary interest in a bank in Ohio, with a board of directors opposed, in fact, to the Only course which could be taken to test the constitutional validity of a law of that State bearing upon the franchises of their corporation, is told by the directors, that though they fully concur with him in believing the tax law of Ohio unconstitutional and in no way binding upon the bank, they will not institute legal proceedings to prevent the collection of the tax, “in consideration of the many 'obstacles in the way of resisting the tax in the state courts.” Without partaking, ourselves, in their uncertainty of relief in the courts of Ohio, it must be admitted their declaration was calculated to diminish this suitor’s confidence in such a result, and to induce him to resort to the only other tribunal which there was to take cognizance of his cause. Besides, it was not his interest alone which would be affected by the result. Hundreds, citizens of the State of Ohio and citizens of other States, are concerned in the question. Millions of money in that State, and millions upon millions of banking capital in the other States, are to be affected by its judicial decision; all depending upon the assertion, in opposition to the claim of the complainant, that a new constitution of a State supersedes every legislative enactment touching its own internal policy, and bearing upon the-interest of persons, which may have been the subject of legislation under a preceding constitution. In the words of the counsel for the defendant, that all such legislation must give way" when found to contravene the will of the sovereign péople, subsequently expressed in a new state constitution. The assertion may be met and confuted, without further argument, by what
And here we will cite another passage from the writings of that great statesman, and venerated man by every citizen of the United States who knows how much his political wisdom contributed to the establishment of our American popular institutions. He says, in the 22d number of The Federalist: “A circumstance which shows the defects of the confederation remains to be mentioned — the want of a judiciary power.' Laws are a dead letter without courts to expound and define their true meaning and operation. The treaties of the United-States, to have any force at all, must be considered as a part of the law of the land. Their true import, as regards individuals, must, like all other laws, be ascertained by judicial'determinations. To produce uniformity in these determinations, they ought to be submitted to a supreme tribunal; and this tribunal ought to be instituted under the same authorities which form the treaties themselves. These ingredients are both indispensable. If there is in each State a court of final jurisdiction, there may be as many different final determinations on the same point as there are courts. There are endless diversities in the opinions of men. We often see not only different courts, but the judges of the same court, differing from each other; To avoid the confusion which would unavoidably result from the' contradictory decisions of a number of independent judicatures, all nations have found it necessary to establish one tribunal paramount to the rest, possessing a general superintendence, and authorized to settle and declare in the last résort a uniform rule of civil justice. This is the more necessary where the frame of the government is so compounded that the laws of the whole are in danger of being contravened by the laws of the parts. In this case, if the particular tribunals are invested with a right of ultimate decision, besides the contradictions to be expected from difference of opinion, there will be much to fear from the bias of local views and prejudices, and from the' interference of local institutions. As often as such an interference should'happen, there would be reason to apprehend that the provisions of the particular laws might be preferred to those of the general laws,
Hitherto we have shown from the constitution itself that the framers of it meant to provide a jurisdiction for its final interpre- , tation, and for the laws passed by Congress, to give them an equal operation in all of the States.
But there are considerations out of the constitution which contribute to show it, which we will briefly mention. Without such a judicial tribunal there are no means provided by which the conflicting legislation of the States with the constitution and the laws of congress may be terminated, so as to give to either a national operation in each of the States. In such an event no means have been provided for an amicable accommodation ; none for- a compromise; none for mediation; none for arbitration; none for a congress of the States as a mode of conciliation. The consequence of which would be a permanent diversity of the operation of the constitution in the States, as well in matters exclusively of public concern as in those which secure individual rights. Fortunately it is not so. A supreme tribunal has been provided, which has hitherto, by. its decisions, settled all differences which have arisen between the authorities of the States and those of the United States. The legislation under which its appellate power is exercised has been of sixty-seven years’ duration, without any countenanced attempt to repeal it. It is rather late to question it; and in continuing to exercise it, this court complies with the decisions of its predecessors, believing, after the fullest examination, that its appellate jurisdiction is given in conformity with the constitution.
The last position taken by the counsel for the defendant, now the appellant here, is, that George C. Dodge was in the discharge of his official duty as treasurer of Cuyahoga county, in the State of Ohio, when interrupted by the mandate of the circuit court; that the tax in his hands for collection against the bank was regularly assessed under a valid law of the State, passed April 18,1852, in conformity with the requisitions of tile constitution, adopted June 17,1851,. which took effect 1st September, 1851.
It was admitted, in the argument of it, that the only difference between this case and that of the Piqua Branch of the State of Ohio v. Jacob Knoop,
Both acts, in effect, are the same in their operation upon the charter of the bank, as that was passed by the general assembly
The fact raises the question whether the tax now claimed has not been assessed in violation of the 10th section of the 1st article of the constitution, which declares that no State shall pass any law impairing the obligation of contracts.
The law of 1845 was' an agreement with the bank, quasi ex contractu — and also an agreement separately with the shareholders, quasi ex contractu — that neither the bank as such, nor ’ the shareholders as such, should be liable to any other tax larger than that which was to be levied under the 60th section of the act of 1845.
That 60th section is, “ that each banking company under the act, on accepting thereof and complying with its provisions, shall semiannually, on the days designated for declaring dividends, set off to the State six per cent, on the profits, deducting therefrom the expenses and ascertained losses of the company, for the six months next preceding, which sum or amount so set off shall be in lieu of all taxes to which the company, or the stockholders therein, would otherwise be subject. The sum so set off to be paid to the treasurer, on the order of the auditor of the State.” The act under which the tax of 1853 has been assessed is: “ That the president and cashier of evjery bank and banking company that shall have been, or may hereafter be, incorporated by the laws of this State, and having the right to issue bills of circulation as money, shall make and return, under oath, to the auditor of the county.in which such bank or banking company may be situated, in the month of May annually, a written statement containing, first, the average amount of notes and bills discounted or purchased, which amount shall include all the loans or discounts, whether originally made or renewed during the year aforesaid, or at any previous time, whether made on bills of exchange, notes, bonds, or mortgages, or any other evidence of indebtedness, at their actual cost value in money, whether due previous to, during, or after the period aforesaid, and on which such banking company has at any time reserved or received, or is entitled to receive, any profit or other consideration whatever; and, secondly, the average amount • of all other moneys, effects, or dues of every description belonging to the bank or banking company, loaned, invested, or otherwise used with a view to profit, or upon which the bank, &c., receives, or is entitled to receive, interest.”
This case is coincident with that of the Piqua Branch of the State Bank of Ohio v. Knoop,
(No. 1.)
Statement of the Commercial Branch Bank, Cleveland, made to the Auditor of Cuyahoga county, May 25, 1853.
1st. The average amount of notes and bills discounted and purchased by the Commercial Branch Bank of Cleveland, including all loans or discounts whether made or renewed during the year, from May 1st, 1852, to May 1st, 1853, inclusive, is................................... $582,735
2d. The average amount of all other moneys, effects, or dues of every description belonging to said Commercial Branch Bank, loaned, invested or otherwise used or employed with a view to profit, or upon which said bank received, or was entitled to receive, interest during the above period, was.......................................... 88,714
Total.............................. $671,449
W. A. OTIS, President.
F. P. Handy, Cashier.
State of Ohio, Cuyahoga county, ss.
Cleveland, May 25, 1853.
Personally appeared William A. Otis, President, and Freeman P. Handy, Cashier of the Commercial Branch Bank of Cleveland, and made oath that the aforesaid statement is true and correct, according to their best knowledge and belief.
Before me, witness my hand. JOHN T. NEWTON, Notary Public.
The.following resolutions have been adopted by the directors of this bank:—
Resolved, That in the opipion of the directors of the Commercial Branch Bank of Cleveland, that the act for the assessment and taxation of all property in this State, and for levying taxes thereon according to its true value in money, passed April 13, 1852, so far as it imposes a tax on this bank or banking company, or the listing or valuing of its property different from that required by its charter, without the consent of the corporators, is unconstitutional and void, and is also repugnant to the constitution of the State of Ohio — which declares that all laws shall be passed taxing by uniform rule all investments in stock or otherwise, and that property employed in banking shall bear a burden of taxation equal to that imposed on the property of individuals; and, again — that the property of corporations now existing or hereafter created, shall be forever subject to taxation the same as the property of individuals, and therefore creates no legal liability against this bank, and that this bank will not, as at present advised, pay such additional tax unless compelled by law, and hereby enters its protest against its imposition and collection.
Resolved, That the cashier attach a copy of these resolutions, signed by the president and cashier of this bank, to the return of this bank, made under said law. Also file a Copy so attested with the treasurer of thiis county, and transmit a like copy to the
W. A. Otis, President.
Commercial Branch Bank, Cleveland, May 25; 1853.
Auditor’s Office, Cuyahoga County,
Cleveland, February 22, 1856.
I hereby certify, that the foregoing is a true copy of the statement of the Commercial Branch Bank, made to the Auditor of Cuyahoga county, May 25, 1853.
WILLIAM PULLER, County Auditor.
(No; 2.)
Auditor’s Office, Cuyahoga County,
Cleveland, February, 22, 1856.
I hereby certify, that th.ere was entered upon the tax duplicate of this county, for the year 1853, for taxation, in the name of the Commercial Branch Bank of Cleveland, the sum of six hundred seventy-one thousand four hundred and forty-nine dollars, in accordance with the statement of said bank, made to the auditor of said county, May 25, 1853.
And that the amount of taxes assessed thereon in said year, for State, county, city, and road purposes, is fourteen thousand seven hundred and seventy-one dollars eighty-seven cents and seven mills, ($14;771 87 7,) as follows.
WILLIAM PULLER, County Auditor.
Owners’ Names. Personal prop.’y. Value — dolls. Total taxes on duplicate. State, county, and city taxes. Road Tax.
Dolls. Cts. Ms. Dolls. Cts. Ms. Dolls. Cts. Ms.
Commercial Branch Bank........... 671,449 14,771 87 7 14,234 71 8 637 15 9
Notes
So it has been repeatedly decided, that a private corporation may be sued at law by one of its own members. The text upon this subject is so well expressed, with authorities to support it, that we will extract the paragraph 390 from Angelí & Ames pntire: ■ A private corporation may be sued, by one of its own members. This point came directly before the court, in the State of South Carolina in an action of assumpsit against the Catawba Company. The plea in abatement was, that the plaintiff himself was a member of that company, and therefore could maintain no action against it in his individual capacity. The court, after hearing argument, overruled the plea as containing principles, subversive of justice; and they moreover said, that the point had been settled by two former cases, wherein certain officers were allowed to maintain actions for their salaries due by the company. 'In this respect, the cases of incorporated companies are'entirely dissimilar from those of ordinary copartnerships, or unincorporated joint-stock companies. In .the former, the individual members of the company are entirely distinct from the artificial body endowed with corporate powers. A member, of a corporation who is a creditor, has the same right as any other creditor to secure the payment of his dema-.ds, by attachment or by levy upon the .property of the corporation, although he may be personally liable by statute to satisfy other judgments against the corporation. An action was maintained against a corporation on a bond securing a certain sum to the plaintiff, a member of the corporation, the member being deemed by the court a stranger. Pierce & Partridge, 3 Met. Mass. 44; so of notes and bonds, accounts and rights to dividends. Hill v. Manchester and Salford Waterworks, 5 Adol. & Ellis, 866; Dunston v. Imperial Glass Company, 3 B. & Adol. 125; Geer v. School District, 6 Vermont, 187; Methodist Episcopal Society, 18 Ib. 405; Rogers v. Danby Universalist Society, 19 Ib. 187.
Dissenting Opinion
dissenting.
The following ease is made upon the record of this cause:—
. The Commercial Bank of Cleveland, Ohio, was organized in 1845, according to the act of the general assembly of February, 1845, for the incorporation of the State Bank of Ohio and other' companies, with a capital which was increased in 1848' to $175,000, and placed under the management of five directors.
From its organization until 1851 the taxes of the bank were determined by the 60th section of the act aforesaid, which required the banks semiannually to set off to the State six per cent, of the net profits for the six months next preceding, and
During the same year the people of Ohio, in the mode prescribed in their fundamental law, adopted a new constitution. One of the articles (art. 12, § 3) requires “the general assembly to provide by law for taxing the notes and bills discounted or purchased, and all other property, effects, dues of every description (without deduction) of all banks now existing or hereafter created, and of all bankers, so that all property employed in banking shall always bear a burden of taxation equal to that imposed on the property of individuals.” In 1852, the general assembly fulfilled this direction by a law which required the banks to disclose the average amount of all bills, notes discounted or' purchased, and the average amount of their moneys, dues and effects, so as to afford a basis for taxation; and by the same act taxes were directed to be laid upon these amounts without deduction.
The directors, stockholders, and officers of this bank have disputed the validity of these changes in the rule of taxation, as violating a right derived by contract, obligatory on the State, and contained in the 60th section of the act first mentioned, and no voluntary obedience has been rendered to them; but, on the contrary, the successive measures taken for the collection of these taxes have met with opposition from the corporation, and submission has always been accompanied with a protest on the part of the directors, in which their determination was’ expressed to rely upon the constitutional and legal rights of the bank.
The taxes for the year 1852 were collected in current bank bills, and the packages were prepared and placed within the reach of the treasurer, who held the duplicate for collection, by the officers of the bank, and immediately after they were assigned by the bank to one Deshler, who replevied the same by a writ from the circuit court of the United States for Ohio, and thus made a case which subsequently came to this court. Deshler v. Dodge,
In December, 1^53, some five days before the taxes were payable, John M. Woolsey, a stockholder of the bank for thirty shares, at the par value^ of J§100 each, addressed the directors of, the bank a letter, requiring them “ to institute the proper legal prp-.
This bill was filed by Woolsey, as a stockholder of the bank, against the treasurer of the county of Cuyahoga, the five directors of the bank, and the corporation itself, alleging his apprehensions that the treasurer would proceed' to make the collection of the excess above the tax due under the 60th section, and that it would impair the credit of the bank, invade its franchise, and ultimately compel its dissolution ; and that the. directors had refused to take measures to prevent its collection, on his requisition, and prays for an injunction on the officer to restrain his further proceedings. The circuit court affirmed the bill so as to restrain the collection of all taxes assessed upon the bank, except such as were laid under the act of 1845. '
The first inquiry that arises is, has this court a jurisdiction of the parties to the suit ? The case is one of a stockholder of a corporation, bringing the corporation before the courts of United States to redress a corporate wrong in which both are similarly interested. The early decisions of this court on this question would be conclusive against the bill. They require that the plaintiff should be from a State different from all the individual members of the corporation. The chief justice said, that invisible, intangible, and artificial being, that mere legal entity ■ — a corporation aggregate — is certainly not a citizen; and consequently cannot sue or be sued in the courts of the United States, unless the rights of the members in this respect can be exercised in their corporate name.
These cases required that the citizenship of all the corporators should appear on the record, so that the court might be sure that the controversy had arisen between citizens of different States, or citizens of a State and foreign states, citizens or subjects. In Marshall v. Baltimore and Ohio Railroad Co.
This case is one of a corporator suing the corporation of which he is a member, and is the first instance of such a case in the court. He cannot aver against the manifest truth, that all the corporators, himself included, are of a different State from himself, to give the court jurisdiction upon the principle of the earlier cases. And if the doctrine of an equitable estoppel can be applied to a subject where facts, and not arbitrary presumptions, were the only objects of consideration ; and if, indeed, the character of the corporator, as a matter of law, is to be assumed to be that of the situs of the corporation, then all the' corporators, plaintiffs as well as defendants, stand upon this record as citizens of the same State, and this suit cannot be maintained. But if no inquiry into the citizenship of stockholders may be made; if á "foreign stockholder, upon the real or affected indifference of a board of directors, or on some imaginary or actual obstacle to relief, arising in the state of opinion in the courts of the State, can draw questions of equitable cognizance into the courts of the United States, in which corporate rights are involved, or evils are threatened or inflicted on corporate property, making the corporation and its managers parties, then a very compendious method of bringing iiito the courts of the United States all questions in which these artificial beings are concerned has been invented, and the. most morbid appetite for jurisdiction among all their various members will be gratified, and upon a class of cases where grave doubts exist whether those who made the constitution ever intended to confer any jurisdiction whatever. Nor can this jurisdiction be supported by affirming that the corporation is not a necessary party to the bill. The subject of the bill is the title of the corporation to an exemption under the act of incorporation, and its object is the protection of corporate franchises and property. The being of the corporation is. charged to be an issue involved in the prayer for relief, and the inaction of the directors affords the motive for the suit.
The conduct of-the directors-was determined in the .course of their duty as the governing body of. the corporation, under the law of their organization.- Their measures and were
The case is one between'a corporator and the corporation, and the jurisdiction cannot be affirmed unless the court is prepared to answer the question whether a mere legal entity, an,artificial person, invisible, intangible, can be a,citizen of the United States in the sense in which that word is used in the constitution; and relying upon the case of Marshall v. The Baltimore and Ohio Railroad Company; with a long list of antecessors, I am forced to conclude that it cannot be.
.The court has assumed this jurisdiction, and l am therefore called to inquire whether' a court of chancery can take cognizance of the bill ? * The act of incorporation of the bank charges the board of directors with the care of the corporate affairs, subject to an annual responsibility to the stockholders. ■ The principle of a court of chancery is, to decline any interference with the discretion of such directors, or to regulate their conduct or management in respect to the duties committed to them.
The business of that court is to redress grievances illegally inflicted or threatened, not to supply the prudence, knowledge, or forecast requisite to successful corporate management. The facts of this case involve, in my opinion, merely a question of discretion in the performance of an official duty. In 1852, the taxes were withdrawn from the treasurer of Cuyahoga county, by an assignee of the bank, and were never passed into the State treasury. The supreme court of Ohio, subsequently to this,, pronounced the taxes to be legally assessed upon these banks, and that there was no contract between the State, and the banks, and there was no exemption from the tax by any thing apparent'
I understand the rule of chancery, in reference to such a casé, to be that no suit can be maintained by an individual stockholder for a wrong done, or threatened, to such a .corporation, unless it appears that the plaintiff has no means of procuring a suit to be instituted in the name of the corporation ; and that the rule is universal, applicable, as well to the cases where the acts which afford the ground for complaint were either such as a majority might • sanction, or whether it belonged to the category of those acts by which no stockholder could be bound except by his own consent. This principle has the highest sanction in the decisions of that court. (Foss v. Harbottle, 2 Hare, 461 — affirmed
The consideration of analogous cases will strengthen this conclusion ; cases where courts of chancery are more free to intervene, from the fiduciary'relations between the parties and the extent of its general jurisdiction over them. Such are cases of .danger to the interests of a creditor of an estate from the collusion of an executor with the debtor of the estate, or the insolvency of the executor; or where an executor wrongfully fails to make a settlement with a surviving partner, and a residuary legatee. seeks one entire settlement of the estate against the executor and partner; or where a decedent in his life has fraudulently conveyed assets, and his executor is estopped to impute fraud, and there are creditors; or where the managers of a joint-stock company have been guilty of fraud, illegality, waste, and their stockholders desire relief. • In all these cases the court of chancery will suffer a party remotely interested to institute the suit which his trustee, or other representative, should have brought, and will grant the relief on that suit which would have been appropriate to the case of him who should have commenced it. Sir John Romilly, in a late case belonging to one of these categories, says:
“ To support such a bill as this it is not sufficient to prove that it may be an unpleasant duty to the executors and trustees to take the necessary steps for protecting the property intrusted to them. It is not sufficient to show that it will be for their interests not to take such steps. It is necessary to show that they prefer their own interests to their duty, and that they intend to neglect the performance of the obligation incidental to the office imposed upon them, and which they assumed to perform; or, as said in Travis v. Mylne, that a substantial impediment to the prosecution by the executors of the rights of the parties interested in the estate against the surviving partner exists.”' Stainton v. Carron Co. 23 L. & Eq. 315; Travis v. Milne, 9 Hare, 141; Hersey v. Yeazie, 11 Shep. 1; Colquitt v. Howard, 11 Geo. 556.
These cases afford no support to this suit. The Cleveland Bank has betrayed no purpose to abandon its corporate duty. The interests and obligations of the directors coincide to support its pretensions. There ■ is no supineness' in their past conduct, nor indifference to the existing peril. The evidence, at the most, convicts them only of a present disinclination to commence suits,
But the evidence does not allow me to conclude that any impediment whatever existed to a suit in the name of the corporation, from any disposition of the directors to resist the claims of the State. Their protest appears at every successive stage of the action of the fiscal officers. This suit is evidently maintained with their consent; there has been no appearance either by the directors or the corporation, but they'abide the case of the stockholder. The decree is for the benefit of the corporation. The question then is, can a corporation belonging to a State, and whose officers are citizens, upon some hope or assurance that the opinions of the courts of the United States are •more- favorable to their pretensions, by any combination, contrivance, or agreement with a non-resident shareholder, devolve, upon him the right to seek for the redress of corporate grievances, which are the subjects of equitable cognizance in the courts of the United States, by a suit-in his own name. In my opinion, there should be but one answer to the question.
I come now to the merits of the case made by the bill.
In the suit of the Piqua Bank v. Knoop,
But assuming a contract to be collected from the indeterminate expressions of the 60th section of the act, as interpreted by ,its general objects and the supposed policy of the State, the question is presented, what consequence did the reconstitution of the political system of the State by the people in 1851, and their direction to the legislature to adopt equality as the rule of assessment of taxes’ upon corporate property, accomplish to the claims of these corporations ?
Certainly no greater question — none involving a more elemental or important principle — has ever been submitted to a judicial
The proposition of this confederacy of some fifty banking cor-' porations, having one fortieth of the property of the State,.is, that by the law of their organization for the whole term pf their corporate being, there exists no power in the government nor people of Ohio to impair the concessions contained in the act of 1845, particularly that determining the amount of their contribution to the public revenue. This proposition does not depend for its truth upon the limitation of time imposed upon the corporate existence of the banks. It would not affect the proposition if the charters were for a century,-or in perpetuity. Nor' does the proposition derive strength from the fact that the statute applies only to banking corporations, or corporations confined to a. single form of commercial dealing. The proposition would have had the same degree of accuracy if the act had been universal, applicable to all private corporations, whether for manufactures,-trade, intercourse, mining, morals, or religion. It is said by a competent authority, that in the State of Massachusetts there are near twenty-five hundred trading corporations, and that more than seven tenths of the real and personal property of that State is held by corporations. The proportion between the property of corporations and individuals is greater there than in other States, but the property held by corporations iryother States isTarge enough to awaken the most earnest attention. A concession of the kind contained in this act, by a careless or a corrupt legislature, for a term or in perpetuity, would impair in many States their resources'to an alarming extent!
■Writers upon the condition of the Turkish empire say, that three fourths of the landed property of the empire is held in mortmain^ as vakuf by mosques or charitable' institutions, for their own use, or. in trust for their owners. This property ceases to contribute to the public revenues, except in a specific form of certain objectionable taxes on produce, and is inalienable. If held in trust, it is exempt from forced sales and confiscations, and, on the death of the owner without children, passes to the mosque or other charitable trustee. In that empire, the ecclesiastical and judicial is the dominant interest, for the Ulemas are both priests and lawyers, just as the corporate moneyed interest is dominant in Ohio, and in either country that interest claims exemption -from the usual burdens and ordinary legislation of the State. The judgment of this court wquld establish the permanent existence of - such an incubus upon the resources and growth- of that country, if that interest should have taken their privileges in .the form of a contract, and had such a constitution as ours. Yet the
Bentham, treating upon constitutional provisions in favor of contracts, says: “ If all contracts were to be observed, all misdeeds would be to be committed, for there is no misdeed the committal of which may not be .made the subject of a contract; and to establish in favor of themselves, or of any other person, or persons, an' absolute despotism, a set of legislators would have no more to .do. than to enter into any engagement — say with a foreign despot, say with a member of their own community — for this purpose.” ' And were this to happen, should it be that a State of this Union had become the victim of vicious legislation* its property alienated, its powers of taxation* renounced in favor of chartered associations, and the resources of the body politic cut off, what remedy has the people against the misgovernment ?. Under the doctrines of this court none is to be found in the government, and none exists in the inherent powers of the people, if the wrong has taken the form of a contract. The most deliberate and' solemn acts of the people would not serve to redress the injustice, and the overreaching speculator upon the facility or corruption of their legislature would be protected by the powers of this court in the profits of his bargain. Where would the people find a remedy? Let the case before us form an illustration. Congress cannot limit the term nor abolish the privileges of these corporations; they are corporations of Ohio, ánd beyond her limits they have no legal existence; they live in the contemplation of her laws and dwell in the place of their creation. (
The faculties of the judicial department are even more fatal to the State than the impotence of congress. The courts cannot look to the corruption, the blindness, nor mischievous effects of state legislation, to determine its binding operation. (Fletcher v. Peck, 6 Cr. 87.) The court, therefore, becomes the patron of such legislation, by furnishing motives of incalculable’ power to. the corporations to stimulate it, and affording stability and security to the successful effort. Where, then, is the remedy for the people ? They have none in their state government nor in themselves, and the federal government is enlisted, by their adversary. . It may be ■ that an amendment of the constitution of the United States’, by the proposal of two thirds of congress and the ratification of the legislatures of three fourths of the States,
The first observation to be made upon this is, that these extraordinary pretensions of corporations are not unfamiliar to an inquirer into their ■ nature and history. The steady aim of the most thoroughly organized and powerful of the corporate establishments of Europe has ever been to place themselves under the protection of an external authority, superior to the government and people where they dwell — an authority sufficiently powerful to shield them from responsibility and to secure their privileges from question. I do not refer to the claim of kings to passive obedience under a divine title. Ecclesiastical corporations, acknowledging the supremacy of the Pope, afford a case parallel to that before us. I find their principles compendiously declared in an allocution of a minister, of Rome to the court of Sardinia, in reference to taxes on church property there. I find that “ religious corporations, forming a portion of the ecclesiastical family at large, are by their very nature, unaer the guardianship and authority of the church; and, consequently, no measure or laws can be adopted with respect to them, except by the spiritual power, or through its agency, especially in what touches their existence or their conduct in the institutions to which they respectively belong; nor can any other rule be recognized, even in matters that concern their property. It is, in truth, beyond dispute that the property possessed by ecclesiastical or religious foundations belongs to the general category of property of the church, and constitutes a true and proper portion of its patrimony.' In consequence whereof, as the .property of the church is inviolable, so are the possessions of such foundátions.” Nor was the doctrine of the inviolableness of contracts foreign to these controversies. The sagacious and far-sighted members of the ecclesiastical interests fortified themselves with concordats, and these concordats were affirmed to be “ contracts,” and, like these, “ entail obligations; ” and “ if the bond of a bargain is to be respected in private life,” so they declared “ it is sacred and inviolable in the life of States.” A slight1 -change of expression will demonstrate that the principle of corporate policy, the dictate of corporate ambition, which has predominated in the contests in Europe, leading to desolating wars, is the same which this court is required to sanction in favor of corporations in the United States. The allocution of the Ohio banks to this court may be thus stated: “ That the charters of incorporation granted by the state governments are in their essence and nature i contracts,’ which ‘ entail obligations; ’ that, consequently, they are finally under the guardianship and protection of the judiciary establishment of the United States; that no acts of the state
The allowance of this plea interposes this court between these corporations and the government and people of. Ohio, to' which they owe their existence, und by whose laws they derive all their faculties. It will establish on the soil of every' State a caste made up of combinations of men for the most part under the most favorable conditions in society, Who will habitually look beyond the institutions and the authorities of the State to the central government for the strength and support necessary to maintain them in the enjoyment of their special privileges and exemptions. The consequence will be a new element of aliena* tibn and discord.betyreen the different classes of society, and the' introduction of. a fresh cause of disturbance in our distracted political and social system. In the end, the doctrine of this decision may. lead to a violent overturn of the whole system of corporate combinations.
Having thus examined the proportions of the doctrine contained in the judgment of the court, I oppose to it a deliberate and earnest dissent.
And, first, as to' the claim made for the, court to be the final arbiter of these questions of political power, I can imagine no pretension more likely to be fatal to the constitution of the court itself. If this court is to have an office so transcendent as to decide finally the powers of the people, over persons and things within the State, a much closer • connection and a much more direct responsibility of its member^' to the people is a necessary condition for the safety of the popular rights. Justice Woodbury, in Luther v. Borden,
The inquiry recurs, have the people of Ohio deposited with this tribunal the'authórity to overrule their own judgment upon the extent of their own powers over institutions created by their owb government' and eommorant within the State ? . The' fundamental principle óf American constitutions, it seems to me, is, that to the people of the several States belongs the resolution of all questions, whether of regulation, compact,' or punitivevjustice, arising out of the action of their municipal government upon their citizens, or' depending.upon their constitutions and laws, and are judges of the validity of áll acts done by their municipal authorities in the 'exercise óf their sovereign rights, in either case without responsibility or control from any department of the federal government. This I understand to bé the import of the municipal sovereignty of the people ¡within the State.
, In 1802, the inhabitants of .Ohio were released from their jjjupiiage to the federal authority, placed in full possession of their rights to self-government, and were invited to adapt their institutions • to the . federal system, of which-the State, when formed, was authorized to become a member.
The people of Ohio,-by their state constitution, reserved to themselves “ complete power ” to “ alter, reform,'and abolish their government;” “to petition for redress of grievances;” and to “recur, as often as might be necessary, tó the first principles of gove’rnment.” It was by a constitution adopted according to established, forms, and expressive of the sovereign will-of the bódy politic, that the'rule of taxation complained of in this suit was. prescribed. ■
. ' The inquiry arises, to what did the authority of the people extend ? It was their- right to ameliorate every vicious -institution, and. to do whatever an. enlightened statesmanship might
Sir James McIntosh says: “ Property is indeed, in some sense, created by act óf the public will, but it is by one of those fundamental acts which constitute society. Theory proves it to be essential to the social state. Experience proves that it has; in some degree, existed in every age and nation of the world. But those public acts, which form and endow corporations, are subsequent and subordinate. They are only ordinary expedients of legislation. The property of individuals is established on . a general principle, which seems coeval with civil society itself. But' bodies aré instruments fabricated by the legislature for a specific .purpose, which ought to .be preserved while they are beneficial,' amended when they are impaired, and rejected when they become useless or injurious.” Vind. Gal. 48, note.
Who, in the. United States, is to determine when the public interests demand the suppression of bodies whose existence or modes of action are contrary to the well-being of the state 1
' If the powers of the people of a State are inadequate to this object, then their grave and solemn declarations of their rights and their authority over their governments, and of the ends for which their governments and the institutions of their governments were framed, and the responsibility of rulers and magistrates to themselves, are nothing but “ great swelling words of vanity.”
But not only is the, jurisdiction of Ohio “ complete ” over the public institutions of her government, but the • subject-matter upon which their will was expressed in their constitution was independently of their control over the corporations, one over which their jurisdiction was plenary. They declared in what
' The true'principle; therefore, would Seem to be, that'if there was any conflict in the tax, laws of the State, and a supposed contract of its legislative or executive agents with one of its citizens, it would be for the State to harmonize the two upon, principles' of general equity; but in no condition of facts for the judiciary department to interfere with state affairs by writs of. replevin or injunction. The acknowledgment of. such a power' would be to establish the alarming doctrine that the' empire of Ohio, and the remaining States of the Union, over then revenues,' is -not to be' found in their people, but in the numerical majority of the judges of this court.
In the opinion I gave in the case of the Piqua Bank, I éx-' hibited evidence that the care of the public domain, whether consisting of crown lands or of taxes on property, belonged to the sovereign power of the State, and .that improvident aliena-' tions by the. crown were, from time to time, set aside by the parliament of Great Britain' under the dictates.of a public policy. Twelve- acts of parliament are cited by Sir William Davenant of this character, and having this object. Davenant, Grants and Res. 244.'
>_ A similar condition existed in France. The kings were bound, by their coronation ‘oath, “ to maintain and preserve the public domain with all, their power,!’ and it was an inviolable maxim,that it could not be alienated, except--in specified cases determined in the fundamental laws of the monarchy. This legal result was declared by the national assembly in 1790, to the effect-that the public domain, with, all its accretions, - belonged to the' nation; that this property is the most perfect that can be imagined, since.'their exists no superior power that can restrain or modify-it; that the power to alienate — the essential attribute of property — exists in the nation; that.-every appropriation of. the public domain is essentially revocable, if made without.the consent*of the nation; that it preserves over the property..alien
If the power to review the illegal or improvident acts of a monarch, by which “ the domain and patrimony of the crown (one of the .principal sinews of the State, as they are termed in the ordinances) was dilapidated or impoverished, in the nearly absolute monarchies of Europe, was reserved to the nation, it would seem- to follow that in the American States, where so little has been conceded to the government, and whose “ complete power” to amend or abrogate is so distinctly reserved that no inference nor implication can arise, that the same has been relinquished or abdicated. My conclusion is, that the constitution- of Ohio, whether it is to be regarded as the expression of the sovereign will of the people, that the extraordinary exemptions granted to these corporations, by which they contribute unequally to the public support, is contrary to the genius of their institutions ; or whether they are inconsistent with a just apportionment of the public burdens; or whether, as a declaration of the exigency of the State, requiring an additional contribution from them to its revenue; or a judgment of condemnation of the former government for an abuse of the powers it enjoyed; that it is above and beyond the supervision or control of the judiciary department of this government.
Nor does the opinion, that this department can exert such an empire over the people of Ohio, derive support, in my opinion, from the clause in the constitution on the subject of the obligation of contracts, nor the decisions of this court upon that clause of the constitution.'
That the people of the States should have released their powers over the artificial bodies which originate under the legislation of their representatives, or over the improvident charges or concessions imposed by them upon its revenues, or over the acts of their own functionaries, is not to be assumed. Such a surrender was not essential to any policy of the Union, nor required by any confederate obligation.. Such an abandonment could have served no other interest than1 that of the corporations, or individuals who might profit by the legislative acts themselves. Combinations of classes in society, united by the bond of a corporate spirit,'for the accumulation of power, influence, or wealth, by the control of intercourse or trade, or the spiritual or moral concerns of society, unquestionably desire limitations upon the sovereignty
The state governments were prohibited from any corresponding legislation, either by their federal or state constitutions.
■' The power to interfere with .private'contracts is one of the most delicate and difficult, in its exercise, of any belonging to the social system, and one which there is constant temptatioh to abuse. That its exercise is .sometimes necessary is proved by the history of every civilized State. Its judicious exercise constitutes the titles' of Solon and.Sully to fame, and has been vindicated by the most enlightened statesmen. But the people reserved to. themselves to determine the exigencies which should call it into existence.. ■ The prohibition is a limitation upon the ordinary government, and not upon the popular sovereignty. In Fletcher v. Peck, 6 Cr. 87, the chief justice doubted Whether the repeal of a grant, issued under a legislative act by the executive of a State, was within the competence of the legislative authority; and notices the distinction between acts of legislation and sov-. ereignty, and treats the clause of the constitution under consideration as an inhibition on legislation. *' In Dartmouth College v. Woodward,
Chief Justice Marshall, in describing the jurisdiction of the court over such contracts, says, it belongs to it “ the duty of protecting from legislative violation thosé contracts which the' constitution of the country has placed beyond legislative control.” And, in defining the object and extent of the prohibition, he says: “ Before the formation of the constitution, a course of legislation had prevailed in many, if not in all the States, which weakened the confidence of man in man, and embarrassed all transactions between individuals by dispensing with a faithful performance of engagements. To correct this mischief by restraining the power which produced it,. the state legislatures were forbidden to pass any law impairing the obligation of contracts ; that is, of contracts respecting property under which some individual could claim a right to something beneficial to himself.” These selections from opinions delivered in this court which have carried the prerogative jurisdiction of the court to its farthest limit, and portions of which are not easily reconciled, with a long series of cases.subsequently decided, (Satterlee v. Matthewson, 2 Pet. 380; Charles River Bridge,
I have thus given the reasons for the opinion that th.e constitution of Ohio and thé acts of her government, done by its special authority and direction, are valid dispositions. It is no part of my jurisdiction to inquire whether these public acts of the people and the State were just or equitable. Those questions belong entirely to. themselves. ■
It may be that the people may abuse the powers with which ‘they ¡are invested, and, even in correcting the abuses of their government, may not, in every case act with wisdom and circumspection.
. But, for my part, when I consider the justice, moderation, the restraints upon arbitrary power, the stability of social order, the security of personal rights, and general harmony which existed in the country before the sovereignty of governments was as
Concurrence Opinion
“ I concur ■ entirely in the preceding opinion of my brother Campbell. ■
Dissenting Opinion
“ I also dissent, and cóncur with the conclusions of the opinion just’reacb”.