Antoni v. Greenhow/Dissent Field

by Stephen Johnson Field

United States Supreme Court

107 U.S. 769

Antoni  v.  Greenhow

FIELD, J., dissenting.

I am not able to agree with the majority of the court in the judgment in this case, nor in the reasoning on which it is founded. The legislation of Virginia, which is sustained, appears to me to be in flagrant violation of the contract with her creditors under the act of March 30, 1871, commonly known as the funding act; and the doctrines advanced by the court, though not so intended, do, in fact, license any disregard of her obligations which the ill-advised policy of her legislators may suggest.

The plaintiff in error, the petitioner in the court below, is a citizen of Virginia and a resident of the city of Richmond. He owns property there, and on the twentieth of March, 1882, was indebted to the state for taxes to the amount of $3.15. At that time he was also the lawful holder of an overdue interest coupon for $3, which had been cut from a bond of the state, issued under the provisions of the funding act. This coupon is in the following words:

'The commonwealth of Virginia will pay the bearer three dollars, interest due first of January, 1882, on bond 6,498.

'GEORGE RYE,

'Treasurer of the Commonwealth of Virginia.

'Coupon No. 21.'

And on its face it thus declares: 'Receivable at and after maturity for all taxes, debts, and demands due the state.'

The receivability of such coupons for state taxes, debts, and demands was, as will hereafter be shown, the principal consideration for the surrender of former bonds of the state and the acceptance of a less number in their place.

The petitioner, in payment of his taxes, tendered the coupon he held and 15 cents in money to the treasurer of Richmond, who was charged by law with the duty of collecting taxes due to the state in that city, but he refused to receive them. Application was then made to the supreme court of appeals to compel their receipt. The treasurer set up in his answer that he was ready to receive the coupon in payment of the taxes as soon as it was ascertained to be genuine and legally receivable. This answer was founded upon the provisions of the act of January 14, 1882, entitled 'An act to punish frauds upon the commonwealth and the holders of her securities in the collection and disbursement of revenues.' Upon the validity of its provisions the judges of the court of appeals equally divided, and the application failed. The preamble of the act recites that bonds purporting to be those of the commonwealth, issued under the act of March 30, 1871, are in existence without authority of law; that other bonds are in existence, which are spurious, stolen, or forged, bearing coupons in the similitude of those which are genuine, and receivable for taxes, debts, and demands of the state; that coupons from such spurious, stolen, and forged bonds are received in payment of such taxes, debts, and demands; that coupons from genuine bonds, after having been thus received, are frequently reissued and received more than once in such payment; and that such frauds on the rights of the holders of the bonds impair the contract made by the commonwealth with them, and, therefore, for the alleged purpose of protecting the rights of the bondholders, and of enforcing the contract between them and the state, the act declares that whenever any tax-payer or his agent shall tender to a collector any papers or instruments in print purporting to be coupons detached from bonds of the commonwealth, issued under the act of 1871, to fund the public debt, the collector shall receive the same, and give the party tendering a receipt, stating that he has received them for the purpose of identification and verification; that he shall, at the same time, require such tax-payer to pay his taxes in coin, legal-tender notes, or national-bank bills, and if payment be refused, the taxes shall be collected as other delinquent taxes; that the collector shall mark each coupon thus received with the initials of the tax-payer, and deliver them sealed up to the judge of the county court of the county, or hustings court of the city, in which the taxes are payable. It then provides that the tax-payer shall be at liberty to file his petition in said county court against the commonwealth; that a summons to answer the same shall be served on the commonwealth's attorney, who is to appear and defend the same; that in his petition the tax-payer must allege that he has tendered the coupons in payment of his taxes, and pray that a jury be impaneled 'to try whether they are genuine legal coupons, which are legally receivable for taxes, debts, and demands.' Upon this petition an issue is to be made on behalf of the commonwealth, which is to be tried by a jury, and either party is to have a right to exceptions on the trial, and to an appeal to the circuit court, and ultimately to the court of appeals. If it be finally decided in favor of the petitioner that the coupons are 'genuine legal coupons, receivable for taxes, and so forth,' then the judgment of the court is to be certified to the treasurer of the commonwealth, who, upon receipt thereof, shall receive the coupons for taxes and refund to the tax-payer the amount before paid by him out of the first money in the treasury, in preference to other claims.

The act also provides that whenever any tax-payer applies to a court for a mandamus to compel a collector of taxes to receive coupons for them, it shall be the duty of the collector to return that he is ready to receive, in payment of the taxes, the coupons as soon as they have been legally ascertained to be genuine, and by law actually receivable; and that, upon such return being made, the court shall require the petitioner to pay his taxes to the collector of the city or county, or to the treasurer of the commonwealth; and upon filing the receipt for the same, that the court shall direct the petitioner to file his coupons in court, which shall then forward the same to the county court of the county, or hustings court of the city, where the taxes are payable, and direct that court to frame an issue between the petitioner and the commonwealth as to whether the coupons thus tendered are genuine and legally receivable for taxes. On the trial either party is to be entitled to exceptions, and to an appeal to the circuit court and to the supreme court of appeals. If the decision be finally in favor of the petitioner, he is to be entitled to a mandamus that the coupon be received for taxes; but inasmuch as those taxes have already been paid, they are to be refunded by the treasurer of the commonwealth out of the first money in the treasury in preference to all other claims. A subsequent act, passed on the seventh of April, 1882, amending a section of the Code of Virginia of 1873, prohibits the supreme court of appeals from issuing the writ of mandamus or any other summary process to compel the collecting officers of the state to receive anything in payment of taxes other than gold or silver, treasury notes of the United States, or bills of the national banks.

The question for decision here is as to the constitutionality of the act of January 14, 1882, which destroys the receivability of the coupon for taxes, allows a suit for the recovery of its amount only after they have been paid, and authorizes a recovery only when the jury have found that it is genuine and legally receivable for them, and of the act of April 7, 1882, which withdraws from the supreme court of appeals the power to compel the receivability of the coupon for taxes. In other words, do these acts impair the obligation of the contract upon which the coupons were originally issued?

A brief reference to the history of the funding act of 1871 will serve to place this subject in a clear light. Prior to the late war Virginia constructed various public works, and to enable her to do so she borrowed large sums of money, for which she issued her bonds, exceeding in amount $30,000,000. The interest on them was regularly paid up to the breaking out of the war. Afterwards its payment ceased, and until 1871, with the exception of some small sums remitted to London for foreign bondholders, or paid in Virginia in confederate money, and a small amount in 1866 and 1867, no part of the interest or principal was ever paid. In 1871 the principal of her debt, with its unpaid and overdue interest, amounted to over $45,000,000.

During the war the people of a portion of her territory separated from her, and formed a new state, by the name of West Virginia, which was admitted by congress into the Union. Nearly one-third of the territory of Virginia and one-third of her people were thus with-drawn from her original limits and jurisdiction. Her then indebtedness was justly chargeable against her and the new state in some ratable proportion. The money raised by her bonds had been expended in improvements throughout the entire territory. All portions of it had participated in the benefits conferred by the expenditure of the moneys. It was but just, therefore, that the new state should assume and pay an equitable proportion of the debt. It is a well-settled doctrine of public law that upon a division of a state into two or more states, her debts shall be ratably apportioned among them. See authorities upon this subject in Hartman v. Greenhow, 102 U.S. 677. In conformity with this doctrine West Virginia, in her first constitution, adopted in 1863, recognized her liability in this respect and declared that 'an equitable proportion of the public debt of the commonwealth of Virginia prior to the first day of January in the year 1861 shall be assumed by this state, and the legislature shall ascertain the same as soon as may be practicable, and provide for the liquidation thereof by a sinking fund sufficienr to pay the accruing interest, and redeem the principal within 34 years.' Constitution of 1863, art. 8, § 8. She, however, did nothing up to 1871, to give effect to this unequivocal and solemn recognition of her liability, or to her positive injunction that the legislature should, as soon as practicable, ascertain the same and provide for its liquidation; and she has done nothing since.

The commonwealth of Virginia, nevertheless, undertook in that year to effect a settlement with her creditors, taking as a basis that inasmuch as one-third of her former territory and population was embraced in the new state, the latter should assume one-third of the debt and the commonwealth should settle for the remainder. Accordingly, her legislature, on the thirtieth of March, 1871, passed the funding act. It is entitled 'An act to provide for the funding and payment of the public debt.' Its preamble recites that in the ordinance authorizing the creation of the state of West Virginia, it was provided that she should take upon herself a just proportion of the public debt of the commonwealth of Virginia, prior to the first day of January, 1861, and that this provision has not been fulfilled, although repeated and earnest efforts in that behalf have been made by Virginia, and that the people of the commonwealth are anxious for the prompt liquidation of her proportion of the debt, estimated at two-thirds of the same; and then declares that to enable the state of West Virginia to settle her proportion of said debt with the holders thereof, and to prevent any complications or difficulties which may be interposed to any other manner of settlement, and for the purpose of promptly restoring the credit of Virginia, by providing for the prompt and certain payment of the interest upon the just proportion of her debt as the same should become due, the legislature enacts that the owners of the bonds, stocks, or interest certificates of the state, with some exceptions, may fund two-thirds of the amount of the same, together with two-thirds of the interest due, or to become due thereon, up to July 1, 1871, in 6 per cent. coupon or registered bonds of the state, having 34 years to run, but redeemable at the pleasure of the state after 10 years, the bonds to be made payable to order or bearer, and the coupons to bearer. The act declares that the coupons shall be payable semi-annually, and 'be receivable at and after maturity for all taxes, dues, and demands due the state,' which shall be so expressed on their face, and that the bonds shall bear on their face a declaration to the effect that their redemption is secured by a sinking fund, provided for by the law under which they were issued. For the remaining one-third of the amount of the bonds thus funded the act provides that certificates shall be issued to the creditors, setting forth the amount, with the interest thereon, and that their payment shall be provided for in accordance with such settlement as may subsequently be made between the two states, and that Virginia will hold the bonds surrendered, so far as they are not funded, in trust for the holder or his assignees.

This act induced a large number of creditors to surrender their bonds, and take new bonds, with interest coupons annexed, for two-thirds of their amount, and certificates for the balance. The number of bonds surrendered amounted to about thirty millions of dollars, for which new bonds to the amount of twenty millions were issued. A contract was thus executed between the state and the holders of the new coupons which the state could not afterwards impair. As this court, with only one dissenting member, said in Hartman v. Greenhow, with respect to this contract:

'She thus bound herself not only to pay the bonds when they became due but to receive the interest coupons from the bearer at and after their maturity, to their full amount, for any taxes or dues by him to the state. This receivability of the coupons for such taxes and dues was written on their face, and accompanied them into whatever hands they passed. It constituted their chief value, and was the main consideration offered to the holders of the old bonds to surrender them and accept new bonds for two-thirds of their amount.' 102 U.S. 679.

The supreme court of appeals of Virginia had previously spoken, with respect to this contract, with equal clearness. Notwithstanding the language of the act of March 30, 1871, declaring that the interest coupons of the new bonds shall be 'receivable at and after maturity for all taxes, debts, dues, and demands due the state,' and this is expressed upon their face, the legislature of Virginia, within less than a year afterwards, on March 7, 1872, passed an act declaring that it shall not be lawful for any officers charged with the collection of taxes or other demands of the state then due, or to become due, 'to receive in payment thereof anything else than gold or silver coin, United States treasury notes, or notes of the national banks.' As this act was in direct conflict with that of March 30, 1871, its validity was assailed, and came before the court of appeals in Antoni v. Wright, at the November term, 1872. 22 Grat. 833. In an opinion of great ability and learning, the character and effect of the funding act were elaborately considered; and it was held that its provisions constituted a contract founded upon valuable considerations and binding upon the state. By the decision of the state court in that case, and of this court in Hartman v. Greenhow, the receivability of the coupons for taxes and demands of the state was held to be an essential part of the contract on which the bonds were received, and to constitute the chief value of the coupon and the principal inducement offered for the surrender of the old bonds, and the acceptance of two-thirds of their amount. When the legislature subsequently attempted to annul this receivability, and required coin or currency to be received for taxes, the court of appeals held that such interference with the receivability of the coupons impaired the obligation of the contract, and was void. When again the legislature attempted to impair that receivability by requiring the tax on the bond to which it originally belonged to be first deducted from the amount of the coupon before it could be received for other taxes, this court held that the legislation impaired the obligation of the contract. But now, strange to say, a law is sustained as not impairing the obligation of the contract, although it prohibits the receivability of the coupons for state taxes, dues, and demands, and requires the holder to pay them in soin, treasury notes, or bills of the national banks, and, in return, gives him the privilege only, upon surrendering it, to test its genuineness and its receivability for taxes by instituting a suit in which a jury is to be summoned, and any decision obtained may be taken to the circuit court and to the court of appeals. If final judgment shall be obtained that the coupon is genuine, and be legally receivable for taxes, the court is required to certify it to the treasurer of the commonwealth, who shall then receive the coupon for taxes,-that is to say, long after they are paid,-and refund its amount out of the first money in the treasury in preference to other claims. If there be no money in the treasury not otherwise appropriated, he may have to wait an indefinite period until the treasury is replenished. Not only does this act entail prolonged delay and expense in every case, but, in a majority of cases, the expense would exceed the amount of the coupon. Where only a few hundred dollars in bonds are held, the amount of the coupons would not justify the expenditure. Coupons for small amounts are thus rendered practically of no value. Their receivability for taxes, dues, and demands of the state is effectually destroyed.

Under the act of January 14, 1882, there is no equivalent given to the creditor for the receivability of the coupon for taxes. The right to enforce on demand payment of a particular claim essentially differs, both in availability and value, from a right to reduce the claim to judgment after protracted litigation, and particularly when, even after judgment, a further delay is necessary to wait until there are funds in the treasury of the state to pay it.

It would excite surprise in any commercial community if a bank, whose bills purport on their face to be payable on demand, should declare that inasmuch as there were some forged notes upon it in circulation, therefore it would pay only such as the holder should judicially establish to be genuine. It has been decided that any unnecessary delay by a bank in examining its bills to determine their genuineness is equivalent to a refusal to redeem them. A bank resorting to such a flimsy pretext to evade payment would at once be pronounced insolvent, and be put into the hands of a receiver.

No weight is to be given to the recitals in the preamble of the act of January 14, 1882, as to outstanding forged bonds and coupons. In the first place, the state, by reciting that various frauds have been committed with respect to some of her securities, cannot legislate to impair the obligation of her contracts. In the second place, we are justified in considering that these recitals are without foundation in fact. According to the established doctrine of this country, the most which can be attributed to a recital of facts in the preamble of an act is that it was represented to the legislature that they existed. It is not the province of the legislature to find facts which shall affect the rights of others; that is the province of the judiciary. Says Cooley: 'A recital of facts in the preamble of a statute may, perhaps, be evidence when it relates to matters of a public nature, as that riots or disorders exist in a certain part of the country; but when the facts concern the rights of individuals, the legislature cannot adjudicate upon them.' Const. Lim. 96.

'The legislature, in all its inquiring forms by committees, makes no issue, and in their discretion may or may not coerce the attendance of witnesses, or the production of records, and are frequently not bound by those rules of evidence applicable to an issue properly formed, the trial of which is an exercise of judicial power. Once adopt the principle that such facts are conclusive, or even prima facie evidence against private rights, and many individual controversies may be prejudged, and drawn from the functions of the judiciary into the vortex of legislative usurpation. The appropriate functions of the legislature are to make laws to operate on future incidents, and not a decision of or forestalling rights accrued or vested under previous laws.' Elmendorf v. Carmichael, 3 Litt. 480.

In the case from which this citation is made two acts were under consideration. The recital in the preamble of one was that a certain person was a naturalized citizen; the recital in the preamble of the other was of a letter of attorney and a conveyance by a third party; and the court said: 'Such a preamble is evidence that the facts were so represented to the legislature, and not that they are really true.' Although the language cited was used with reference to the preamble of a private statute, Sedgwick, in his Treatise on the Interpretation and Construction of Statutory and Constitutional Law, after quoting it, says: 'This reasoning applies with as much force to public as to private statutes; and the supreme court of New York has well said that the legislature has no jurisdiction to determine facts touching the rights of individuals.'

The weight usually accorded to a recital of matters of fact in the preamble of an act, that the facts were so represented to the legislature, cannot be allowed here; for the journals of the legislature of Virginia show that it had information when the act was passed that the very opposite of the recitals was true-that there were no forged or counterfeit bonds or coupons in existence, as therein stated. The journals may be referred to in order to show what was brought to the attention of the legislature, and those journals show that in 1880 the house of delegates of Virginia appointed a committee to examine the office of the second auditor, who is the custodian of all papers relating to the debt of the state, to ascertain whether there were any forged or counterfeit bonds or coupons among them; and the committee reported that they were unable to find a single forged or counterfeit bond or coupon; and of the millions of dollars in coupons which had been paid into the treasury since 1871, all were accounted for except coupons to the amount of $28,197. As it was the duty of the officer on receiving the coupons to cancel them, it must be presumed that these were properly canceled by him at the time.

Again, in answer to a resolution of the house of delegates, dated January 9, 1882, the second auditor reported that no counterfeit or forged obligations, bonds, coupons, or certificates of the state had in any way come to his knowledge. And in answer to a resolution of the senate of the sixteenth of January, 1882, the same auditor replied that he had no knowledge of any spurious or forged bonds or coupons issued or purporting to be issued under the funding act of March 30, 1871; and in an examination had into the matter, a clerk in the second auditor's office testified that he was familiar with the coupons issued under the act of March 30, 1871, and had handled about seven millions of them, and had never seen or heard of a counterfeit coupon. Another witness connected with the treasurer's office stated that he was familiar with the conduct and management of both the second auditor's office and of the treasurer's office, and that he had never heard of a duplicate or forged coupon.

In the third place, assuming that the $28,197 in coupons which could not be found in the auditor's office or accounted for had not been canceled, but had been mislaid, lost, or stolen, the holders of other coupons ought not to be deprived of their use because the officers of the auditor's department had been neglectful of their duties. Assuming, also, against the fact that there were forged and spurious coupons of the state, their existence did not warrant a rejection of such as are genuine. Although no officer questions their genuineness when tendered, the holder of them must make up an issue with the state to try the fact before a jury. The act was evidently designed to accomplish much more than the protection of the holders of genuine coupons. As justly said by one of the judges of the court of appeals:

'While its professed object in its title is to prevent frauds upon the commonwealth and the holders of its securities, it greatly depreciates the value of those securities, and thereby impairs the obligation of contracts, under the vain pretext that it is necessary to protect the commonwealth against frauds. It not only destroys or renders almost valueless the coupon, but also the coupon bonds, amounting to millions of dollars, issued by the state by authority of the act of March 30, 1871, and whose value depends upon the prompt payment of interest, of which assurance was given by the state to the holders of those bonds by the stipulation in the contract that the coupons at and after maturity should be receivable for all taxes, debts, etc., due the state. This statute prohibits revenue officers to receive any coupons, though unquestionably genuine, when tendered for and in discharge of taxes, etc., due the state, and requires the bearer of the coupon so tendered to pay his taxes in coin or other currency, which I think is plainly a repudiation or annulment of the state's contract.'

The clause of the constitution which declares that no state shall pass any law impairing the obligation of contracts, prohibits legislation thus affecting contracts between the state and individuals equally as it does contracts between individuals. Indeed, the greater number of cases, in which the protection of the constitutional provision has been invoked against subsequent legislative impairment of contracts, has been of those in which the state was one of the contracting parties. Where a state enters the markets of the world and becomes a borrower, she lays aside her sovereignty and takes upon herself the position of an ordinary civil corporation, or of an individual, and is bound accordingly. Davis v. Gray, 16 Wall. 232; Murray v. Charleston, 96 U.S. 445; Hall v. Wisconsin, 103 U.S. 11.

What, then, was the obligation of the contract entered into between Virginia and her creditors under the funding act of 1871, so far as the interest coupons are concerned? The contract is that she will pay the amount of the coupon, and that it shall, at and after maturity, be receivable for taxes, dues, and demands of the state. And by its receivability is meant that it is to be taken by officers whom the state may authorize to receive money for its dues whenever tendered for them. By the obligation of a contract is meant the means which the law affords for its execution; the means by which it could, at the time it was made, be enforced. As said by the court in McCracken v. Hayward:

'The obligation of a contract consists in its binding force on the party who makes it. This depends on the laws in existence when it is made; these are necessarily referred to in all contracts and form a part of them as the measure of the obligation to perform them by the one party and the right acquired by the other.' 2 How. 612.

To the same purport and still more emphatic is the language of the court in Walker v. Whitehead, 16 Wall. 317:

'The laws which exist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it. This embraces alike those which affect its validity, construction, discharge, and enforcement. Nothing is more material to the obligation of a contract than the means of its enforcement. The ideas of validity and remedy are inseparable, and both are parts of the obligation which is guarantied by the constitution against impairment.'

In other words, to quote the language of Professor Pomeroy in his work on Constitutional Law,-

'A party may demand that substantially the same remedial right appropriate to his contract when it was entered into shall be accorded to him when it is broken.' 'Under our system of jurisprudence,' says the same writer, 'two forms of remedial right may result to the injured party upon the breach of a contract; the one form applying to a small number only of agreements, the other being appropriate to all. The first is the right to have done exactly what the defaulting party promised to do,-the remedial right to a specific performance. The other is compensatory, or the right to be paid such an amount of pecuniary damages as shall be a compensation for the injury caused by the failure of the defaulting party to do exactly what he promised to do. Both of these species of remedial rights must be pursued by the aid of the courts. In both, the existence of the contract and of the breach must be established. These facts having been sufficiently ascertained, a decree or judicial order must be rendered, in the first case, that the defaulting party do exactly what he undertook to do, and in the second case, that the defaulting party pay the sum of money fixed as a compensation for his delict.' Sections 611, 612.

The receivability of the coupon, under the funding act of 1871, for taxes, dues, and demands, gave to it, as already said, its principal value. At that time there was provided, in the system of procedure of this state, a remedy for the specific execution of the contract, by which this receivability could be enforced. The legislation of January 14, and April 7, 1882, deprives the holder of the coupon of this remedy, and in lieu of it gives him the barren privilege, after paying the taxes, of suing in a local court to test before a jury the genuineness of the coupon and its legal receivability for them, and, in case he establishes these facts, of having a judgment to that effect certified to the treasurer of the commonwealth, and the amount paid refunded out of money in the treasury, if there be any. To recover this judgment he must pay the cost of the proceeding, including the fees of witnesses and jurors, and of the clerk, sheriff, and other officers of the court. This is a most palpable and flagrant impairment of the obligation of the contract. No legislation more destructive of all value to the contract is conceivable, unless it should absolutely and in terms repudiate the coupon as a contract at all. It is practical repudiation.

In Bronson v. Kinzie, this court, speaking by Chief Justice TANEY, said:

'It is difficult, perhaps, to draw a line that would be applicable in all cases between legitimate alterations of the remedy and provisions which, in the form of remedy, impair the right. But it is manifest that the obligation of a contract, and the rights of a party under it, may in effect be destroyed by denying a remedy altogether, or may be seriously impaired by burdening the proceedings with new conditions and restrictions, so as to make the remedy hardly worth pursuing. And no one, we presume, would say that there is any substantial difference between a retrospective law, declaring a particular contract or class of contracts to be abrogated and void, and one which took away all remedy to enforce them, or incumbered it with conditions that rendered it useless or impracticable to pursue it.' 1 How. 317.

In Planters' Bank v. Sharp this court said:

'One of the tests that a contract has been impaired, is that its value has by legislation been diminished. It is not, by the constitution, to be impaired at all. This is not a question of degree or manner or cause, but of encroaching in any respect on its obligation, dispensing with any part of its force.' 6 How. 327.

In Murray v. Charleston the court cited with approval the language of a previous decision to the effect that a law which alters the terms of a contract by imposing new conditions, or dispensing with those expressed, impairs its obligation; and added, speaking by Mr. Justice STRONG, who recently occupied a seat on this bench, that 'it is one of the highest duties of this court to take care the prohibition (against the impairment of contracts) shall neither be evaded nor frittered away. Complete effect must be given to it in all its spirit.' 96 U.S. 448.

In Edwards v. Kearney this court said, speaking by Mr. Justice SWAYNE, so lately one of our number:

'The remedy subsisting in a state when and where a contract is made and is to be performed is a part of its obligation, and any subsequent law of the state which so affects that remedy as substantially to impair and lessen the value of the contract, is forbidden by the constitution, and is therefore void.' 96 U.S. 607.