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The objection, however, which was most pressed upon the court, and relied upon by the counsel for the plaintiff in error, was, that the effect of this act was to devest rights which were vested by law in Satterlee. There is certainly no part of the constitution of the United States which applies to a state law of this description; nor are we aware of any decision of this, or of any circuit court, which has condemned such a law upon this ground, provided its effect be not to impair the obligation of a contract; and it has been shown, that the act in question has no such effect upon either of the contracts which have been before mentioned.
In the case of Fletcher vs. Peck, it was stated by the chief justice, that it might well be doubted, whether the nature of society and of government do not prescribe some limits to the legislative power; and he asks, “if any be prescribed, where are they to be found, if the property of an individual, fairly and honestly acquired, may be seized without compensation ?" It is no where intimated in that opinion, that a state statute, which devests a vested right, is regugnant to the constitution of the United States; and
the case in, which that opinion was pronounced, was removed into this court by writ of error, not from the supreme court of a state, but from a circuit court.
This was a writ of error to the Constitutional Court of South Carolina.
On the 20th of February, 1823, an ordinance was passed by the City Council of Charleston, providing "that the following species of property, owned and possessed within the limits of the city of Charleston, shall be subject to taxation in the manner, and at the rate, and conformably to the provisions hereinafter specified; that is to say, all personal estate, consisting of bonds, notes, insurance stock, six and seven per cent. stock of the United States, or other obligations upon which interest has been or will be received during the year, over and above the interest which has been paid, (funded
The strong expressions of the court upon this point, in the cases of Vanhorne's lessee vs. Dorance, and The Society for the Propagation of the Gospel vs. Wheeler, were founded expressly on the constitution of the respective states in which those cases were tried.
We do not inean in any respect to impugn the correctness of the senti ments expressed in those cases, or to question the correctness of a circuit court, sitting to administer the laws of a state, in giving to the constitution of that state a paramount authority over a legislative act passed in violation of it. We intend to decide no more than that the statute objected to in this case is not repugnant to the constitution of the United States, and that unless it be so, this court has no authority, under the 25th section of the judiciary act, to re-examine and to reverse the judg ment of the supreme court of Pennsylvania in the present case.
That judgment, therefore, must be affirmed with costs.
Plowden Weston & al. vs. the City Council of Charleston.
stock of this state, and stock of the incorporated banks of this state and the United States bank excepted,) twenty-five cents upon every hundred dollars."
A prohibition was granted, upon the suggestion of the plaintiffs, by the Court of Common Pleas for the Charleston district, restraining the City Council from levying this tax on the six and seven per cent. United States stock, on the ground that the ordinance, so far as it imposed a tax on United States stock, was unconstitutional.
This prohibition was reversed by the Constitutional Court of the state, by a majority of the judges (four being in
favour of the constitutionality of the ordinance, and three against it. From this decision, the relators appealed to the Supreme Court of the United States.
Mr. Hayne for the plaintiffs. Mr. Crugar and Mr. Legare for the defendants.
Chief Justice Marshall delivered the opinion of the court.
This case was argued on its merits at a preceding term; but a doubt having arisen with the court respecting its jurisdiction in cases of prohibition, that doubt was suggested to the bar, and a re-argument was requested. It has been re-argued at this term.
The power of this court to revise the judgments of a state tribunal, depends on the 25th section of the judicial act. That section enacts, a final judgment or decree in any suit in the highest court of law or equity of a state in which a decision in the suit could be had," "where is drawn in question the validity of a statute or of an authority exercised under any state, on the ground of their being repugnant to the constitution, treaties, or laws of the United States, and the decision is in favour of such their validity," 'may be re-examined and reversed or affirmed in the Supreme Court of the United States."
In this case, the city ordinance of Charleston is the exercise of an 66 authority under the state of South Carolina," "the validity of which has been drawn in question on the ground of its being repugnant to the constitution," and "the decision is in favour of its validity." The question, therefore, which was decided by the constitutional court, is the very question on which the revising power of this tribunal is to be exercised, and the only inquiry is, whether it has been decided in a case described in the section which authorizes the writ of error that has been awarded. Is a writ of prohibition a suit?
The term is certainly a very comprehensive one, and is understood to apply to any proceeding in a court of justice, by which an individual pur
sues that remedy in a court of justice, which the law affords him, The modes of proceeding may be various, but if a right is litigated between parties in a court of justice, the proceeding by which the decision of the court is sought, is a suit. The question between the parties, is precisely the same as it would have been in a writ of replevin, or in an action of trespass. The constitutionality of the ordinance is contested; the party aggrieved by it applies to a court; and at his suggestion, a writ of prohibition, the appropriate remedy, is issued. The opposite party appeals; and, in the highest court, the judgment is reversed, and judgment given for the defendant. This judgment was, we think, rendered in a suit.
We think also that it was a final judgment, in the sense in which that term is used in the 25th section of the judicial act. If it were applicable to those judgments and decrees only in which the right was finally decided, and could never again be litigated between the parties, the provisions of the section would be confined within much narrower limits than the words import, or than congress could have intended. Judgments in actions of ejectment, and decrees in chancery dismissing a bill without prejudice, however deeply they might affect rights protected by the constitution, laws, or treaties of the United States, would not be subject to the revision of this court. A prohibition might issue, restraining a collector from collecting duties, and this court would not revise and correct the judgment. The word "final" must be understood, in the section under consideration, as applying to all judgments and decrees which determine the particular cause.
We think, then, that the writ of error has brought the cause properly before this court.
This brings us to the main question. Is the stock issued for loans made to the government of the United States liable to be taxed by states and corporations?
Congress has power "to borrow
But it is unnecessary to pursue this principle through its diversified application to all the contracts, and to the various operations of government. No one can be selected which is of more vital interest to the community than this of borrowing money on the credit of the United States. No power has been conferred by the American people on their government, the free and unburthened exercise of which more deeply affects every member of our republic. In war, when the honour, the safety, the independence of the nation are to be defended, when all its resources are to be strained to the utmost, credit must be brought in aid of taxation, and the abundant revenue of peace and prosperity must be anticipated to supply the exigences, the urgent demands of the moment. The people, for objects the most important which can occur in the progress of nations, have empowered their government to make these anticipations, "to borrow money on the credit of the United States." Can any thing be more dangerous, or more injurious, than the admission of a principle which authorizes every state and every corporation in the Union which possesses the right of taxation, to burthen the exercise of this power at their discretion?
If the right to impose the tax exists,
it is a right which, in its nature, acknowledges no limits. It may be carried to any extent within the jurisdiction of the state or corporation which imposes it, which the will of each state and corporation may prescribe. A power which is given by the whole American people for their common good, which is to be exercised at the most critical periods for the most important purposes, on the free exercise of which the interests certainly, per haps the liberty of the whole may depend; may be burthened, impeded, if not arrested, by any of the organized parts of the confederacy.
In a society formed like ours, with one supreme government for national purposes, and numerous state governments for other purposes; in many respects independent, and in the uncontrolled exercise of many important powers, occasional interferences ought not to surprise us. The power of
taxation is one of the most essential to a state, and one of the most extensive in its operation. The attempt to maintain a rule which shall limit its exercise, is undoubtedly among the most delicate and difficult duties which can devolve on those whose province it is to expound the supreme law of the land,in its application to the cases of individuals. This duty has more than once devolved on this court. In the performance of it, we have considered it as a necessary consequence, from supremacy of the government of the whole, that its action, in the exercise of its legitimate powers, should be free and unembarrassed by any conflicting powers in the possession of its parts; that the powers of a state cannot rightfully be so exer cised as to impede and obstruct the free course of those measures which the government of the states united may rightfully adopt.
This subject was brought before the court in the case of M'Cullough vs the state of Maryland, when it was thoroughly argued and deliberately considered. The question decided in that case bears a near resemblance to that which is involved in this. It was
discussed at the bar in all its relations, and examined by the court with its utmost attention. We will not repeat the reasoning which conducted us to the conclusion thus formed; but that conclusion was, that "all subjects over which the sovereign power of a state extends, are objects of taxation; but those over which it does not extend, are upon the soundest principles exempt from taxation." "The sovereignty of a state extends to every thing which exists by its own authority, or is introduced by its permission;" but not "to those means which are employed by congress to carry into execution powers conferred on that body by the people of the United States." "The attempt to use" the power of taxation "on the means employed by the government of the Union, in pursuance of the constitution, is itself an abuse, because it is the usurpation of a power which the people of a single state cannot give."
The court said in that case, that "the states have no power by taxation or otherwise, to retard, impede, burthen, or in any manner control the operation of the constitutional laws enacted by congress, to carry into execution the powers vested in the general government."
We retain the opinions which were then expressed. A contract made by the government in the exercise of its power, to borrow money on the credit of the United States, is undoubtedly independent of the will of any state in which the individual who lends may reside, and is undoubtedly an operation essential to the important objects for which the government was created. It ought, therefore, on the principles settled in the case of M'Cullough vs. The State of Maryland, to be exempt from state taxation, and consequently from being taxed by corporations deriving their power from states
It is admitted that the power of the government to borrow money cannot -be directly opposed, and that any law directly obstructing its operation would be void; but, a distinction is taken between direct opposition and those
measures which may consequently affect it; that is, that a law, prohibiting loans to the United States, would be void; but a tax on them,to any amount, is allowable.
It is, we think, impossible not to perceive the intimate connexion which exists between these two modes of acting on the subject.
It is not the want of original power in an independent sovereign state, to prohibit loans to a foreign government, which restrains the legislature from direct opposition to those made by the United States. The restraint is imposed by our constitution. The American people have conferred the power of borrowing money on their government, and by making that government supreme, have shielded its action in the exercise of this power, from the action of the local governments. The grant of the power is incompatible with a restraining or controlling power, and the declaration of supremacy is a declaration that no such restraining or controlling power shall be exercised.
The right to tax the contract to any extent, when made, must operate upon the power to borrow before it is exercised, and have a sensible influence on the contract. The extent of this influence depends on the will of a distinct government. To any extent, however inconsiderable, it is a burthen on the operations of government. It may be carried to an extent which shall arrest them entirely.
It is admitted by the counsel for the defendants, that the power to tax stock must affect the terms on which loans will be made; but this objection, it is said, has no more weight, when urged against the application of an acknowledged power to government stock, than if urged against its application to lands sold by the United States.
The distinction is, we think, apparent. When lands are sold, no connexion remains between the purchaser and the government. The lands purchased become a part of the mass of property in the country, with no implied exemption from common bur
thens. All lands are derived from the general or particular government, and all lands are subject to taxation. Lands sold are in the condition of money borrowed and re-paid. Its liability to taxation, in any form it may then assume, is not questioned. The connexion between the borrower and the lender is dissolved. It is no burthen on loans, it is no impediment to the power of borrowing, that the money, when repaid, loses its exemption from taxation. But a tax upon debts due from the government, stands, we think, on very different principles from a tax on lands which the government has sold.
"The Federalist" has been quoted in the argument. and an eloquent and well merited eulogy has been bestowed on the great statesman who is supposed to be the author of the number from which the quotation was made. This high authority was also relied upon in the case of M'Cullough vs. The State of Maryland, and was considered by the court. Without repeating what was then said, we refer to it as exhibiting our view of the sentiments expressed on this subject by the authors of that work.
It has been supposed that a tax on stock comes within the exceptions stated in the case of M,Cullough vs. The State of Maryland. We do not think so. The bank of the United States is an instrument essential to the fiscal operations of the govern
This action was commenced in the Circuit Court for the Maryland district, on a bill of exchange, drawn by the defendants at Baltimore, in favour of Rosewell L. Colt, or order, of Baltimore, and endorsed to the plaintiff, a citizen of New-York.
ment, and the power which might be exercised to its destruction was denied. But property acquired by that corporation in a state was supposed to be placed in the same condition with property acquired by an individual.
The tax on government stock is thought by this court to be a tax on the contract, a tax on the power to borrow money on the credit of the United States, and consequently to be repugnant to the constitution.
We are, therefore, of opinion that the judgment of the constitutional court of the state of South Carolina, reversing the order made by the court of common pleas, awarding a prohibition to the city council of Charleston, to restrain them from levying a tax imposed on six and seven per cent. stock of the United States, under an ordinance to raise supplies to the use of the city of Charleston for the year 1823, is erroneous in this; that the said constitutional court adjudged that the said ordinance was not repugnant to the constitution of the U. States; whereas, this court is of opinion that such repugnancy does exist. We are, therefore, of opinion, that the said judgment ought to be reversed and annulled, and the cause remanded to the constitutional count for the state of South Carolina, that farther proceedings may be had therein according to law.
William S. Buckner vs. Finley & Van Lear.
Judgment was confessed for the amount of the bill, subject to the opinion of the court on this objection, that the bill was an inland and not a foreign bill of exchange, and consequently
Justices Johnson and Thompson dissenting.