THIS case was brought up, by writ of error, from the Supreme Court of the state of Arkansas.
On the 2d of November, 1836, the state of Arkansas passed an act to incorporate the Bank of the State of Arkansas. The capital was one million of dollars, which was raised by a sale of the bonds of the state, or by loans founded upon those bonds. The president and directors were appointed by a joint vote of the General Assembly. All dividends upon the capital stock were declared to belong to the state, subject to the control and disposal of the legislature.
The twenty-eighth section was as follows, viz.:–'That the bills and notes of said institution shall be received in all payments of debts due to the state of Arkansas.' The other sections of the act were in the usual form of conferring general banking powers.
In 1836, William E. Woodruff was elected by the General Assembly of Arkansas Treasurer of the state, and on the 27th of October, 1836, executed a bond to James S. Conway, Governor of the state, in the penal sum of three hundred thousand dollars, conditioned for the faithful performance of his duties as treasurer. There were seven sureties, whose names it is not necessary to mention. The time for which Woodruff was to serve was two years, 'and until his successor shall be elected and qualified.' His term of office was thus from the 27th of October, 1836, to the 25th of December, 1838.
On the 23d of March, 1840, the state of Arkansas brought a suit upon this official bond against the principal and sureties in the Pulaski Circuit Court. The breach alleged was, that Woodruff had not paid over to his successor the sum of $2395.18. It is not necessary to trace the history of this suit; suffice it to say, that it eventuated in a judgment against Woodruff for $3359.22 and costs.
On the 10th of January, 1845, the legislature passed an act relating to the revenue of the state, the nineteenth section of which provided 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.'
In the progress of the suit, Frederick W. Trapnall had become regularly substituted in place of the Attorney-General, to conduct the suit.
In 1847, Trapnall ordered an execution upon the judgment which the state had obtained against Woodruff, who, on the 24th of February, 1847, tendered and offered to pay to Trapnall the sum of $3755 in the notes issued by the Bank of the State of Arkansas, which Trapnall refused to receive.
On the 25th of February, 1847, Woodruff filed a petition in the Supreme Court of the state, praying for an alternative writ of mandamus, commanding Trapnall to 'receive and accept, in payment of the judgment, the notes of the bank, or to show cause why he shall refuse to do so.' The writ was issued accordingly.
To this writ the following answer was filed:––
'The answer of Frederick W. Trapnall, attorney for the state pro tem., to an alternative mandamus hereto annexed, issued by the Supreme Court on the petition of William E. Woodruff.
'This respondent admits the judgment and tender as set out in the said petition, but alleges that he was not authorized to receive the said Arkansas State Bank notes; because the twenty-eighth section of the bank charter, under which alone the said Woodruff could claim a right so to satisfy the said judgment, was repealed by an act of the legislature of the state of Arkansas, approved January 10, 1845, and entitled, 'An Act making appropriations for the years 1845, 1846, and part of the year 1844, and for balances due from the state, and for other purposes,' and by the nineteenth section of the said act.
'And this respondent submits to the court, if the repeal of the said section does not deprive him of all authority to receive the said bank-notes from the said Woodruff in satisfaction of the said judgment in favor of the state of Arkansas against him and others. Respectfully,
To this answer Woodruff demurred, and there was a joinder in demurrer.
Before the argument, the following agreement was filed by the counsel of the respective parties.
'Be it remembered, that the following matters are agreed upon by the counsel for the petitioner and respondent in this cause, to the end that the same may be filed and become a part of the record herein.
'1st. The record and proceedings in the case of William E. Woodruff, and the said persons named in said petition as his securities, against the state of Arkansas, upon the first and second writs of error remaining in this court, and which are referred to in said petition, shall form a part thereof by such reference, as fully as though the same were incorporated therein at full length.
'2d. That said respondent, as attorney of record for said state in the suit aforesaid, is the proper officer by law to receive and acknowledge satisfaction of said judgment.
'3d. That the notes of the Bank of the State of Arkansas, referred to in said petition and response, and tendered in this case, were issued by said bank, pursuant to the charter thereof, prior to the year 1840.
'4th. That after the creation of said bank, down to the year 1845, the notes of said bank were received and paid out by said state in discharge of all public dues to and from said state.
'5th. That said bank continues to exist, with all its corporate functions, and that in the consideration of this case all the acts of the General Assembly of said state, affecting said bank, shall be deemed to be public laws, as they have been heretofore decided by this court to be, and whereof this court will judicially take notice; but to the end thereof, and for greater certainty, the act of said General Assembly, entitled 'An Act to incorporate the Bank of the State of Arkansas,' approved November 2d, 1836, is here inserted at full length, and made part of the record in this cause, and which act of incorporation is in the words following.' (Then followed the charter of the bank in extenso.)
One of the grounds of the demurrer was the following:––
'1st. That the nineteenth section of said act, entitled 'An Act making appropriations for the years 1845, 1846, and part of the year 1844, and for balances due from the state, and for other purposes,' approved January 10th, 1845, is a law impairing the obligation of contracts, and is repugnant to the Constitution of this state and of the United States, and therefore void.'
On the 28th of July, 1847, the Supreme Court of Arkansas overruled the demurrer, and on the 30th of July Woodruff sued out a writ of error to bring the case up to this court.
It was argued by Mr. Lawrence and Mr. Reverdy Johnson, for the plaintiff in error, and by Mr. Sebastian, for the defendant in error.
The following extract from the brief filed by Mr. Lawrence shows the ground upon which he placed his argument. Of the argument of Mr. Johnson, the reporter has no notes.
The question presented is an important one. It is whether, under the Constitution of the United States, a state can violate her solemn pledges, break her plighted word, and annul her sacred and deliberate contracts and promises. One would think it not a difficult question; and surely we should have supposed the mere statement of it enough, without a word of argument, had not the highest tribunal of a state decided in favor of this monstrous power, and announced principles which, as it seems to us, are at variance with sound, well-settled, and universally admitted principles of constitutional and national morals.
We say the question is an important one. It is, whether states and sovereignties are governed by the rules of ordinary honesty; whether the provision in the Constitution, that the obligation of contracts shall by no law be impaired, is mere brutum fulmen. For there is no doubt that private honesty cannot long survive when public dishonesty is legalized; that private promises and obligations will not long be held sacred, when the judiciary, the guardian of the public morals, admits and argues that the state may, at pleasure, violate her pledges and promises; that public and private morals are intimately connected; and that a despotic government, that kept her faith and held her pledge and promise sacred and inviolable, would be far preferable to a republic whose promises were but ropes of sand, her public faith a mockery, and her plighted honor the mere oath of a dicer.
The Supreme Court of Arkansas denies that the twenty-eighth section of the charter so incorporated itself into the contract as to become a part of it, and holds such a position fallacious. One would think, on the contrary, it was self-evident. That court says that the position is a fallacy, because 'the act by which the State Bank was created was nothing more than a grant of power for certain purposes therein specified, which was exclusively under the control of the legislature, and consequently subject to be repealed at any time, whenever, in the wisdom of that body, it should seem expedient for the good of the country.' That, so far as it means that the legislature could repeal the charter, and end the existence of the bank, we admit. But the court proceeds to say that, on such repeal, the notes of the bank would become valueless, and the debt evidenced by them extinguished. And they further assert, that the provision allowing the debtors of the state to pay in notes of the bank was a mere gratuity; a privilege, on condition they should pay before the repeal of the law.
This is the whole argument, or rather series of assertions, used by the court. It assumes that a repeal of the act would repeal, and could constitutionally repeal, the promise and pledge contained in the twenty-eighth section; that, indeed, it is no pledge, but a privilege gratuitously conferred, on condition the law was not repealed. Now, is this true? At first blush, it would seem extraordinary that any such conclusion could ever have been arrived at. If an individual was about to issue his notes to serve as currency, would it be a gratuity if he promised to receive them in payment of debts due him? It might just as well be said that his promise to pay them was a gratuity. One would be just as much a gratuity as the other.
Suppose A wishes to induce me to loan money to B, and take for it his note, and, in order to do so, tells me that, if I will loan the money on B's giving me his note for the amount, he (A) will, at any time, receive it in payment of any debt I, or any holder of it, may owe him. Suppose he puts this in writing, and seals it. Is this promise a gratuity? On the contrary, it is a valid promise, for a good and valuable consideration. If it is not, in every case where a man becomes security for another, it is a gratuity. If we need an apology for quoting authorities to sustain a self-evident proposition, lying on the very surface of the law, it must be found in the fact that so trite and common and fundamental a principle is actually denied by the Supreme Court of a State.
That such a promise is not a gratuity, but a valid contract, for good consideration, was established before cases were reported. It is repeated in a multitude of cases, and denied nowhere. Bailey v. Croft, 4 Taunt., 611; Suffield v. Bruce, 2 Stark., 175; Brown v. Garbrey, Gouldsb., 94; Kirkby v. Coles, Cro. Eliz., 137; Stadt v. Dill, 9 East, 348; Leonard v. Vredenburgh, 8 Johns. (N. Y.), 29; Hunt v. Adams, 5 Mass., 362; Howe v. Ward, 4 Greenl. (Me.), 195; Minet's Case, 14 Ves., 189; Violett v. Patton, 5 Cranch, 142, 152.
The twenty-eighth section of the charter of this bank is not a law, in any sense of the word. Municipal law is a rule of civil conduct prescribed by the supreme power of a state. (1 Kent Com., 446.) Statute law is the express written will of the legislature, rendered authentic by certain prescribed forms and solemnities. (Id.) The word law, in its most general and comprehensive sense, signifies a rule of action (1 Bl. Com., 38); a rule of action prescribed by some supreme being. (Id.) Municipal law is a rule of civil conduct, prescribed by the supreme power in a state (1 Bl. Com., 46), commanding what is right, and prohibiting what is wrong. (Id., 53.) The operation of a law must be from the supreme power or state, upon the individuals or corporations, or some of them, composing it. It must be an exercise of the power of government. If I order a child to learn a task, that is a law; but if I, at the same time, promise him a reward for doing it, this is no law, but a promise. It is no exercise of the paternal power. An act of the ...