The Providence Bank, Plaintiffs In Error v. Alpheus Billings and Thomas Pittman

• Decision Date: 01 January 1830
• Parties: THE PROVIDENCE BANK, PLAINTIFFS IN ERROR v. ALPHEUS BILLINGS AND THOMAS G. PITTMAN
• Court: U.S. Supreme Court

29 U.S. 514

4 Pet. 514

7 L.Ed. 939

THE PROVIDENCE BANK, PLAINTIFFS IN ERROR v. ALPHEUS BILLINGS AND THOMAS G. PITTMAN.

January Term, 1830

THIS was a writ of error to the supreme judicial court of the state of Rhode Island; and the question which was presented for the consideration of the court, was the constitutionality of an act passed by the legislature of the state of Rhode Island, in January 1822, entitled 'an act imposing a duty upon licensed persons and others, and bodies corporate within this state;' alleged to be a violation of the contract contained in the charter of the bank. Under the provisions of this act, and in conformity with them, a tax was imposed on the Providence Bank; and the bank having refused payment thereof, a seizure was made for the amount of the tax in the banking house, by Alpheus Billings, the sheriff of the county of Providence, and by Mr Pittman, the general treasurer of the state of Rhode Island. The bank instituted an action of trespass for this taking against the sheriff and the treasurer, in the court of common pleas of the county of Providence; to which action the defendants pleaded in their defence the act imposing the tax, and the amendments thereto; and that in pursuance of the provisions of the same a warrant was issued, and the proceedings which were the subject of the action were done.

To this plea the bank filed a general and a special demurrer. Among the causes of demurrer, the repugnancy of the acts of the general assembly imposing the tax to the constitution of the United States, inasmuch as they violate the contract set forth in the declaration, the act incorporating the bank, and, inasmuch as they authorise private property to be taken for public purpose, without providing any compensation; are distinctly stated.

A judgment against them was submitted to by the bank in the court of common pleas; and they appealed to the supreme judicial court, where the judgment of the inferior court was confirmed by submission on the part of the bank and they prosecuted this writ of error, under the twenty-fifth section of the judiciary act of 1789.

The Providence Bank was chartered by the legislature of Rhode Island in October 1791. The preamble of the act states,

'Whereas, the president and directors of a bank established at Providence, on the 3d of October last, have petitioned this general assembly for an act to incorporate the stockholders in said bank, and whereas, well regulated banks have proved very beneficial in several of the United States, as well as in Europe; therefore be it enacted by the general assembly, and by the authority thereof it is hereby enacted; that the stockholders in said bank, their successors and assigns, shall be, and are hereby created, and made a corporation and body politic, by the name and style of the president, directors and company of the Providence Bank, and by that name shall be, and are hereby made able and capable in law, to have, purchase, receive, possess, enjoy, and retain to them and their successors, rents, tenements, hereditaments, goods, chattels and effects of what kind or nature soever, and the same to sell, grant, devise, alien or dispose of, to sue and be sued, plead and be impleaded, answer and be answered, defend and be defended, in courts of record, or any other place whatsoever; and also to make, have and use a common seal, and the same to break, alter and renew at their pleasure, and also to ordain, establish and put in execution such by-laws, ordinances and regulations, as shall seem necessary and convenient for the government of the said corporation, not being contrary to law, or the constitution of said bank, and generally to do and execute all and singular acts, matters and things, which to them it shall or may appertain to do.

'And whereas, the stockholders, on the said 3d day of October, formed and adopted a constitution for said bank, in the words following, viz.

'Taught by the experience of Europe and America, that well regulated banks are highly useful to society, by promoting punctuality in the performance of contracts, increasing the medium of trade, facilitating the payment of taxes preventing the exportation of specie, furnishing for it a safe deposit, and by discounts rendering easy and expeditious the anticipations of funds on lawful interest, advancing at the same time the interest of the proprietors; we, the subscribers, desirous of promoting such an institution, do hereby engage to take the number of shares set against our names respectively, in a bank to be established in Providence, in the state of Rhode Island, on the following plan, &c.

The plan of the association is set forth in the act, and is made a part of the charter. It provides for the opening of subscriptions for the stock of the bank, to consist of six hundred and twenty-five shares, of four hundred dollars each, making a capital of two hundred and fifty thousand dollars; and for the organization of the bank. The act gives to the corporation the usual powers necessary to carry into effect the objects of its formation, and makes provisions for the transaction of the business of the company. Amendments to this act were afterwards passed by the legislature.

The case was argued by Mr Whipple, for the plaintiffs in error; and by Mr Hazzard and Mr Jones, for the defendants.

Mr Whipple, for the plaintiff in error, said; as this case involves constitutional principles of great delicacy and importance, it may not be useless to advert to the principles established by this court.

At no period in the political or civil history of England or of this country, has it been admitted that the legislature possessed unlimited or absolute power. Under the British government, the rights of private property were respected, long antecedent to emigration to this country; although violence to the political rights of the subjects of the crown are frequently recorded in history. The immunities of private property, and the inviolability of vested rights, have been asserted by political and legal writers, and established by judicial decisions, for three centuries past.

The assertion of a limit to legislative authority was constant during the colonial existence of this country; and the principle was afterwards inserted in the bills of rights, and in the constitutions of states. At a very early period after the establishment of the government of the United States, it became necessary to give to these received opinions the sanction of judicial authority; and this was done by this court in 1798, in the case of Calden vs. Ball, 3 Dall. Rep. 186. 1 Condensed Rep. 172. The principles of that case, so far as they declare the obligation of a contract to be superior to the power of the legislature, were re-asserted in Fletcher vs. Peck, 6 Cranch's Rep. 88. Again these principles were maintained in the cases of the State of New Jersey vs. Wilson, 7 Cranch, 104. Terrett vs. Taylor, 9 Cranch, 43. The Town of Pawlet vs. Clarke et al. 9 Cranch, 202. Sturges vs. Crowninshield, 4 Wheat. 122. M'Culloch vs. Maryland, 4 Wheat. 316. The Dartmouth College vs. Woodward, 4 Wheat. 518. Weston vs. The City Council of Charleston, 2 Peters, 450.

The cases which have the strongest bearing, and which are thought to decide the present case, are Fletcher vs. Peck, M'Culloch's case, the Dartmouth College case, and the case of the City Council of Charleston. Fletcher vs. Peck establishes the principle that a state cannot invalidate its own grant; that in making a grant, it acts as a party, and is bound as a party. 'Every grant (say the court) is, in its own nature, an extinguishment of the right of the grantor; and implies an obligation not to re-assert that right.'

The Dartmouth College case puts an end to all discussion of the question, whether a charter is a contract, and whether the public benefit derived from them is not a sufficient consideration? The language of the court is so full and clear upon those points, that it is believed that no doubt will be entertained upon them.

Mr Whipple then went into a particular examination of the case. He said the bank was incorporated in 1791, with the usual powers of a corporation. The motives of the legislature in granting the charter, which was the legal consideration of the grant, are declared in these terms.

'Taught by the experience of Europe and America, that well regulated banks are highly useful to society, by promoting punctuality in the performance of contracts, increasing the medium of trade, facilitating the payment of taxes preventing the exportation of specie, furnishing for it a safe deposit, and by discounts rendering easy and expeditious the anticipations of funds on lawful interest, advancing at the same time the interest of the proprietors,' &c.

The first and seventh sections of the charter evidently contemplate the ownership of property by the bank in its corporate capacity. The real estate and the profits of the capital stock, previous to a dividend, may be considered as belonging to the bank. But the capital stock itself is as much the property of a stranger as of the bank. There cannot well be two entire owners to the same property. The stockholders have the property, and the corporation the management of it. The corporation is not even the trustee: for it has not the legal estate, and no power to sell. It has merely the naked possession, with the perpetual legal right of using the funds for the benefit of the legal and equitable owners.

The stock was subscribed for at a very early period, and the bank went into successful operation. The capital was subsequently increased to five hundred thousand dollars. For many years past, the shares have sold from fifteen to twenty-five per cent. advance, owing, in part, to the belief that the charter was perpetual, and that the legislature had no power over it. No power to repeal or to modify, by subsequent law, was reserved; and none was believed to exist, until ...