$178. "Legal Tender."

DEFINITION. —Legal tender is the act of tending, in the performance of a contract, or in satisfaction of a claim, that which the law prescribes or permits, and at such time and place as the law prescribes or permits. ( (Webster's Internat Dict) In the United Kingdom all coin current under proclamation, whether British, foreign, or colonial, is legal tender. British gold coin is legal tender for any amount, unless defaced or deficient in weight; British silver up to forty shillings, and British bronze up to a shilling (Coinage Act, 1870 [33 and 34 Vic. c. 10] s. 4.) Bank of England notes are legal tender in England for all sums above £5, except by the Bank itself and its branches. (Bank of England Act, 1833 [3 and 4 Wm. IV. c. 98, s. 6].) The notes are treated as cash and not as securities for money, and they pass by mere delivery. (Miller r. Race [1758] 1 Burr. 452.) The notes of a county bank are good tender, if not objected to at the time of tender. (Polglass v. Oliver [1831] 2 Crompt. and Jarv. 15.) In Australasia and New Zealand, by an Order in Council of 1896, it is provided that the rules as to the amount for which British coin is legal tender are the same as in the United Kingdom. (Imperial Statutory Rules and Orders, 1896.)

COINAGE AND LEGAL TENDER.-By section 114 the States are forbidden to coin any money or to make anything but gold and silver coin a legal tender in payment of debts. The prohibition is similar to Art. I. sec. 10, subs. 1 of the United States Constitution. Hence it appears that under both Constitutions the creation and regulation of the monetary system is a power conferred on the Federal Parliament. It is a general power; the Parliament is not limited in the choice of metals to which it will give the quality of money. It may choose some other metal than gold and silver, and impress upon it a legal tender quality. But if a State endeavoured to compel a person to accept anything but gold or silver as a legal tender, the person aggrieved could appeal to the Courts of the Commonwealth for relief. (Burgess, Political Sci. II. p. 143.)

LEGAL TENDER IN THE UNITED STATES.-The Congress of the United States is expressly empowered to create and regulate the value of metal money. It has, however, been decided by the Supreme Court that, although the power to legislate concerning legal tender and paper money is not expressly conferred upon Congress, yet it has, by necessary intendment, such a power, and it can make anything a legal tender in payment of debt. (Juilliard v. Greenman, 110 U.S. 421.) The legal tender cases are very instructive, as illustrating the expansive and elastic capacity of a written constitution and the possibilities of its inherent and necessary powers. This subject will be referred to more fully in our note on "Paper Money," infra. At the present stage abstracts of the ruling cases are given.

In the Constitution of the United States there is no express grant of power to Congress to declare what shall be a legal tender, but this power has been uniformly exercised and unquestioned. This universal recognition is tantamount to a direct constitutional declaration, and the power can now be considered settled. (Martin v. Hunter's Lessee, 1 Wheat. 304; Cohens v. Virginia, 6 Wheat. 421; Briscoe v. Bank of Kentucky, 11 Pet. 257; Anderson v Dunn, 6 Wheat. 204. Baker, Annot. Const. p. 46.) A Federal law making United States treasury notes legal tender is, when applied to contracts in existence prior thereto, unconstitutional. (Willard v. Tayloe, 8 Wall. 557; Hepburn v. Griswold, 8 Wall. 603; Broderick v. Magraw, 8 Wall. 639.) The decisions in the above cases are overruled, and the acts of Congress making United States treasury notes legal tender are held to be valid when applied to antecedent, as well as to subsequent contracts. (Legal Tender Cases [1871] 12 Wall. 457; Dooley v. Smith, 13 Wall. 604; Norwich Railroad v. Johnson, 15 Wall. 195; Juilliard v. Greennian, [1884] 110 U.S. 421. Baker, Annot. Const. p. 46.)

IMPERIAL CONTROL. - Australian governors are at present required by their instructions not to assent to any Bill affecting the currency of the colony, unless such bill contains a clause suspending its operation until the signification of the Queen's pleasure thereon, or unless there is urgent necessity requiring it to be brought into immediate operation. In either of these cases he is authorized to assent to the bill, and remit it

to the Queen at the earliest opportunity (p. 399, supra). This paragraph was omitted from the Draft instructions under the Sign Manual and Signet to the Governor-General of Canada, dated 5th October, 1878, and in all probability it will not be found in the instructions to the Governor-General of the Commonwealth.

In 1851 a Canadian Act in relation to coinage was disallowed by the Queen in Council, on the grounds (1) that the Act proposed to confer upon the Governor-General the right of coining—a prerogative reserved by constitutional law to the sovereign; (2) that it purported to alter the current rates of certain foreign coins-a provision which, being enacted without the previous assent of Her Majesty in Council, was an interference with Imperial control over the value of currency money in circulation throughout the realm. By the British North America Act of 1867, the Imperial Parliament has specially empowered the Parliament of Canada to exercise "exclusive legislative authority" in relation to "currency and coinage." The Acts passed in Canada upon the subject of the currency in 1868 and in 1871 expressly conserve the prerogative of the Crown in the matter of coinage, and authorize Her Majesty to fix by proclamation from time to time the rates at which coins in circulation in Canada, or struck off by order of Her Majesty for use in Canada, shall pass current. (Todd's Parl. Gov. in Col. 2nd ed. p. 176.)

"In 1866 a ministerial crisis occurred in Queensland. Owing to serious financial embarrassments in that colony, ministers had tendered to the governor (Sir G. F. Bowen) their advice that, in order to sustain the public credit, there should be an immediate issue of inconvertible paper currency, in the shape of legal tender notes, to an amount not exceeding £200,000. The governor demurred to this proposal, inasmuch as he was expressly forbidden, by the royal instructions-' which are a part of the constitutional law of the colony-to assent to any bill of this nature, unless upon urgent necessity, as aforesaid. He distinctly declared that in no event would he give the royal assent to any such bill. He suggested, however, another mode of meeting the financial difficultyviz., by obtaining legislative sanction to the issue of treasury bills, coupled with the imposition of additional taxation; a course which had proved successful, under similar circumstances, in other colonies, and in the mother country." (Todd's Parl. Gov. in Col. 2nd ed. p. 185.)

51. (xiii) Banking179, other than State banking 180; also State banking extending beyond the limits of the State concerned, the incorporation of banks182, and the issue of paper money 183:

HISTORICAL NOTE.-Sec. 91 of the British North America Act specifies "Banking, incorporation of banks, and the issue of paper money" (sub-s. 20). These words were adopted in the Commonwealth Bill of 1891. In committee, the question of State savings banks was raised, but no amendment was moved. (Conv. Deb., Syd., 1891, pp. 684-5.) At the Adelaide session, 1897, the same words were used. The question of State banks was again mentioned, but no amendment was moved. (Conv. Deb., Adel., pp. 778-9.) At the Sydney session, a suggestion by the Legislative Assembly of New South Wales and the Legislative Council of Tasmania, to insert after "banking" the words "excluding State banking not extending beyond the limits of the State concerned," was agreed to (Conv. Deb., Syd., 1897, pp. 1074-5), and the sub-section was verbally amended.

Banking is the business of a bank or banker. A bank is an institution formed for the deposit, custody, investment, loan, exchange or issue of money, or for facilitating the transmission of money by drafts or bills of exchange; it is an establishment generally incorporated for the purpose of performing one or more of those functions. (Webster's Internat. Dict.) This definition covers every possible phase or combination of banking, viz., the deposit, custody, investment, loan, exchange, issue and transmission of money.

It is wide enough to embrace every person, partnership or corporate body, under whatever name, carrying on business in money. Legislation relating to banking would, therefore, include laws regulating the inception, organization and conduct of such a business; the terms, conditions and securities for good faith under which it could be carried on; the powers, rights and privileges to be exercised and enjoyed by bankers; the obligations and responsibilities of bankers.

This sub-section presents another suitable opportunity for drawing attention to a subject elsewhere referred to (see “Legal Tender," § 178, supra), viz., the vast area of implied powers which may exist within the four corners of a written Constitution such as this. In the Constitution of the United States no power is in express terms given to Congress to incorporate banks. Yet the genius of Alexander Hamilton discerned that such a power might be deduced by inference or implication, from a clause in the Constitution authorizing Congress to make all laws “ necessary and proper for carrying into execution the foregoing powers." (Art. i. sec. viii. sub-s. 18, U.S. Constitution, to which sec. 51-xxxvii. of this Constitution corresponds.) The power to charter a bank to facilitate the financial measures of the Federal Government was (argued Hamilton) subsidiary and incidental to the power to tax and to borrow. "Every power vested in a government is, in its nature, sovereign, and includes by force of the term a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power, and which are not precluded by restrictions and exceptions specified in the Constitution." (Hamilton's Works, Lodge's ed. vol. iii. p. 181.) Accordingly he urged upon Congress the importance of chartering a National Bank of the United States, as an aid and instrument of the Federal Government in its financial operations. The Bill passed Congress in 1791, and thus the first bank of the United States was established. (Von Holst, p. 126.)

The validity of the Act to create a national bank was tested in the Supreme Court of the United States in the great case of McCulloch v. Maryland, 4 Wheat. 316. By a liberal interpretation of the Constitution, the Court, under the presidency of Chief Justice Marshall, held that Congress had the power to incorporate the subscribers of the United States Bank, and that its notes and branches were exempt from State taxation.

"In 1879, ministers submitted a bill to the Imperial Parliament to deal with certain colonial banks which were in operation under royal charters. These charters had been granted before it had become customary to establish joint stock banks under a general law; and the banks were subject to the supervision and control of the Treasury and of other Imperial departments, in respect to divers matters. By this bill it was proposed to do away with this imperial responsibility, and to subject all banks holding royal charters to the laws of the particular colonies wherein they were situated. This would have the further effect of preventing any unfair advantages on such corporations in comparison with other banks established under colonial laws. The bill was dropped in 1879, but reintroduced in 1880, and referred to a select committee, which reported evidence taken thereon; but owing to the then pending dissolution of Parliament it was not pressed in that session. Nevertheless, the general principle of the measure was approved by the house; and the opinion of the Treasury was expressed that, in a self-governing colony, the action of the local legislature would override a royal charter, within the limits of the jurisdiction of that legislature." (Todd's Parl. Gov. in Col. 2nd ed. p. 220.)

$ 180.

"Other than State Banking."

These words exclude from the jurisdiction of the Federal Parliament all laws relating to State banking. In the Sydney Convention (Debates, p. 1075) attention was called by Mr. Glynn to the vagueness of the phrase “State banking." It was said that there are no real “State Banks" in any country in the world. There are great financial organizations such as the Bank of England, the Bank of France, the German Bank, and the Bank of the United States of America, over which the Government exercises certain control which have certain exclusive privileges, including the conduct of government business, but which are not strictly speaking State Banks. A State Bank, properly so -called, is an institution which is solely managed by the Government and the capital of

which has been solely provided by the Government. The nearest known approach to a State Bank, within the above definition, is the Post Office Savings Bank, which is purely a State Institution. Such banks, and similar ones, which might be founded by the States, would under the above words be excepted from Federal control.

EXCEPTIONS TO GRANTS OF POWER.-The words, "other than State banking," are equivalent to "except State banking;" they are words marking an exception to the general grant of power to legislate concerning banking. The Supreme Court of the United States, in construing the Constitution as to grants of powers to the United States, and the restrictions upon the States, has ever held that an exception of any particular case presupposes that those which are not excepted are embraced within the grant of power, and have laid it down as a general rule that, where no exception is made in terms, none will be made by mere implication or construction. (Rhode Island v. Massachusetts, 12 Pet. €57.) It is a rule of construction that the exception from a power marks its extent. (Gibbons v. Ogden, 9 Wheat. 191.) The fact that some powers are specified has been therefore held to import that those not specified were withheld, according to the old maxim, expressio unius exclusio alterius, which Lord Bacon concisely explains by saying, "as exception strengthens the force of a law in cases not excepted, so enumeration weakens it in cases not enumerated."

$181. "State Banking Extending Beyond the Limits of

the State Concerned."

STATE BANKING.-Should a State establish a State Bank which extends its business operations beyond the limits of the State, such extra-state operations would be subject to Federal laws relating to banking.

By virtue of this power the Federal Parliament could establish banks by special Acts, a process known as Private Bills Legislation, or it could pass a general law dealing with the banking business, and authorizing the incorporation and registration of banking companies, subject to compliance with certain formalities and conditions. Compliance with those formalities and conditions would result in the creation of a banking corporation, as effective in its constitution as a corporation formed by a special legislative fiat. When a corporate body is established by a special Act, that Act is called its charter or deed of settlement; when it is established under a law of general application, its memorandum of association, lodged with the proper officer upon its registration, is its charter. The law usually determines the general powers, rights, privileges, liabilities, and responsibilities of corporations: within certain limits, however, many of these legal incidents may be regulated by contract.

An Act of Incorporation is an Act creating an artificial or fictitious person, the peculiarity of which is that it has a legal existence separate and distinct from the individual units of which it is composed. Its members may change, but the corporateentity remains; it has perpetual succession and it never dies, unless its dissolution or winding-up is brought about by operation of law.

In the Merchants' Bank of Canada v. Smith (1884), 8 Ont. App. 15, 8 S.C.R. (Can.) 512, it was held that a receipt given by a warehouseman was a valid receipt within the Dominion Act, 35 Vic. c. 5, s. 46, and that that Act was intra vires the Dominion Parliament under sub-secs. 2 and 15 of sec. 91, relating to the regulation of trade and commerce and banking. In Tennant v. Union Bank of Canada (1894), App. Cas. 31, it was decided that warehouse receipts, taken in security by a bank in the course of the business of banking, are matters coming with the class of subjects described in those sub-sections, and that the provisions of the Dominion Bank Act, Rev. Stat. (Can.), c. 120, secs. 45, 53 and 54, respecting such receipts, are intra vires.

What an Act of incorporation does, "is to create a legal and artificial person with capacity to carry on certain kinds of business, which are defined, within a defined area, but it may nevertheless be subject, in carrying on that business, to the law of the locality wherein it does so. In Re Grand Junction R. Co., 44 Upper Canada Reps. 317, Cameron, J., said: "Creating a corporation can hardly be said to be making a law;" and the same learned judge said, in Clegg v. Grand Trunk R. Co., 10 Ontario Reps. 714: "I wish to be free to consider whether a corporation created by the Dominion Parliament must not, outside of its corporate powers and functions, be regarded as a single entity which is, as far as the exercise of civil rights are concerned, not expressly provided for by the Act of incorporation, subject to the laws respecting such rights within the Province in which it may carry on its authorized business or exercise its corporate powers; and whether in this respect a corporation can have any greater or higher rights than a natural person." But Mr. Lefroy contends that, although the Dominion Parliament can give to a corporation it is creating any powers and functions it likes, outside "provincial objects" within the meaning of sub-sec. 11 of sec. 92 of the British North America Act, it can only regulate its exercise of civil rights in respect to the classes of subjects enumerated in section 91. (Lefroy, Leg. Pow. in Canada, p. 626.)

§ 183. "The Issue of Paper Money."

The Federal Parliament has power to legalize or prohibit the issue of paper money. In this respect it has received a grant of power conspicuously more liberal than that which was intended, by the framers of the American Constitution, to be conceded to Congress. At the time when that Constitution was framed general apprehension was felt throughout the States at the dangerous strength acquired by the movement in favour of paper money. During the War of Independence, the drain on the financial resources of the country was very great, and consequently distress was wide-spread and deepseated. (Fiske, Critical Period of American History, p. 67.) In order to raise supplies the Congress of the Confederation established an inconvertible paper currency. In 1780 the continental paper currency had become so discredited that it utterly collapsed. In 1786, it is said, that as starving men dream of dainty banquets, so a craze for fictitious wealth, in the shape of paper money, ran like an epidemic through the country. (Critical Period of American History, p. 168.) "Several States sought to apply the paper money remedy for public distress; each making the attempt in its own way. In seven States, at least, the rag-money party,' as it was called, dominated the legislatures. North Carolina issued a large amount of paper. It was no sooner placed in circulation by the Government than the value of the paper dollar fell to seventy per cent. of its face value. In South Carolina, paper money was issued, but the planters and merchants refused to take it at its face value. In Georgia, paper money was made a legal tender, and refusal to accept it was declared an offence. In Pennsylvania a guarded attempt was made to issue money in the shape of bills of credit, which, however, were not made legal tender for the payment of private debts, but the value of these bills soon fell 12 per cent. below par. In New York a million dollars were issued in bills of credit, which were made a legal tender, but their value similarly declined. A 'RagMoney Bill' was passed in New Jersey, but the merchants of New York and Philadelphia, who traded with New Jersey, refused to accept the money, and it became worthless. In Rhode Island the paper money agitation reached a white heat. Half a million dollars were issued in scrip to be loaned to the farmers on the security of a mortgage of their land. The merchants refused to take the paper dollars at their face value. An act was passed commanding everyone to take paper money, as equivalent for gold, under a penalty of 5000 dollars, and loss of the right of suffrage. The merchants thereupon shut up their shops. A terrible crisis followed. The unhappy little State was nicknamed ‘Rogues Island.' The rag-money movement was happily defeated in Massachusetts. Shay's rebellion, in January, 1787, brought matters to a climax, and