US SUPREME COURT DECISIONS

On 27 June, 1821, the Legislature of the State of Missouri passed an act entitled "An act for the establishment of loan offices," by the third section of which the officers of the treasury of the state, under the direction of the governor, were required to issue certificates to the amount of $200,000, of denominations not exceeding ten dollars nor less than fifty cents, in the following form:

"This certificate shall be receivable at the treasury of any of the loan offices in the State of Missouri in discharge of taxes or debts due to the state for the sum of ___ dollars, with interest for the same at the rate of two percentum per annum from this date."

These certificates were to be receivable at the treasury, and by tax gatherers and other public officers in payment of taxes or moneys due or to become due to the state or to any town or county therein and by all officers civil and military in the state in discharge of salaries and fees of office, and in payment for salt made at the salt springs owned by the state and to be afterwards leased by the authority of the legislature. The twenty-third section of the act pledges certain property of the state for the redemption of these certificates, and the law authorizes the governor to negotiate a loan of silver or gold for the same purpose. A provision is made in the law for the gradual withdrawal of the certificates from circulation, and all the certificates have since been redeemed. The commissioners of the loan offices were authorized to make loans of the certificates to citizens of the state, assigning to each district a proportion of the amount of the certificates, to be secured by mortgage or personal security, the loans to bear interest not exceeding six percent per annum and the loans on personal property to be for less than $200. Held that the certificates issued under the authority of the law of Missouri, were "bills of credit," and that their emission was prohibited by the Constitution of the United States which declares that no state shall "emit bills of credit"

A promissory note given for certificates issued at the loan office of Chariton in Missouri, payable to the State of Missouri, under the act of the legislature "establishing loan offices" is void.

The action was assumpsit on a promissory note, and the record stated

"That neither party having required a jury, the cause was submitted to the court, and the court having seen and heard the evidence, the court found that the defendants did assume as the plaintiff had declared; that the consideration for the note and the assumpsit, was for loan office certificates, loaned by the State of Missouri at her loan office in Chariton, which certificates were issued under 'An act for establishing loan offices,', &c., held that it could not be doubted that the declaration is on a note given in pursuance of the act of Missouri, and that under the plea of nonassumpsit, the defendants were at liberty to question the validity of the consideration which was the foundation of the contract and the constitutionality of the law in which it originated. The record, thus exhibiting the case, gives jurisdiction to this Court over the case on

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a writ of error prosecuted by the defendants to this Court from the Supreme Court of Missouri under the provisions of the twenty-fifth section of the Judiciary Act of 1789."

Everything which disaffirms the contract, everything which shows it to be void, may be given in evidence on the general issue in an action of assumpsit.

In its enlarged and perhaps literal sense, the term "bill of credit" may comprehend any instrument by which a state engages to pay money at a future day, thus including a certificate given for money borrowed. But the language of the Constitution itself and the mischief to be prevented equally limit the interpretation of the terms. The word "emit" is never employed in describing those contracts by which a state binds itself to pay money at a future day for services actually received, or for money borrowed for present use. Nor are instruments executed for such purposes in common language denominated "bills of credit." "To emit bills of credit" conveys to the mind the idea of issuing paper intended to circulate through the community for its ordinary purposes as money, which paper is redeemable at a future day. This is the sense in which the terms have always been understood.

The Constitution considers the emission of bills of credit and the enactment of tender laws as distinct operations independent of each other, which may be separately performed. Both are forbidden. To sustain the one because it is not also the other -- to say that bills of credit may be emitted if they be not made a tender in payment of debts -- is in effect to expunge that distinct independent prohibition and to read the clause as if it had been entirely omitted.

It has been long settled that a promise made in consideration of an act which is forbidden by the law is void. It will not be questioned that an act forbidden by the Constitution of the United States, which is the supreme law, is against law.

In 1823, an action of trespass on the case was instituted in the Circuit Court for the County of Chariton in the State of Missouri by the State of Missouri against Hiram Craig and others. The declaration sets forth the cause of action in the following terms:

"For that whereas heretofore, on 1 August in the year of our Lord 1822, at the County of Chariton aforesaid, the said Craig, John Moore, and Ephraim Moore made their certain promissory note in writing bearing date the day and year aforesaid, and now to the court here shown, and thereby and then and there, for value received, jointly and severally promised to pay to the State of Missouri, on 1 November, 1822, at the loan office in Chariton, the sum of $199.99

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and the two percentum per annum, the interest accruing on the certificates borrowed, from 1 October, 1821, nevertheless the said Hiram Craig, John Moore, and Ephraim Moore did not on 1 November or at any time before or since, pay to the State of Missouri, at the loan office in Chariton, the said sum of $199.99 or the two percentum per annum, the interest accruing on the certificates borrowed, from 1 October, 1821, but the same to pay,"

&c.

To this declaration the defendants pleaded the general issue, and neither party requiring a trial by jury, the case was submitted to the court on the evidence and the arguments of counsel. The record contained the following entry of the proceedings of the court:

"And afterwards, at a court began and held at Chariton, on Monday 1 November, 1824, and on the second day of said court, in open court, the parties came into court by their attorneys, and neither party requiring a jury, the cause is submitted to the court; therefore, all and singular the matter and things and evidences being seen and heard by the court, it is found by them, that the said defendants did assume upon themselves, in manner and form as the plaintiffs, by their counsel, allege and the court also finds that the consideration for which the writing declared upon, and the assumpsit was made, was for the loan of loan office certificates, loaned by the state at her loan office at Chariton, which certificates were issued, and the loan made in the manner pointed out by an Act of the Legislature of the said State of Missouri, approved 27 June, 1821, entitled, 'an act for the establishment of loan offices, and the acts amendatory and supplementary thereto.' And the court does further find that the plaintiff hath sustained damages by reason of the nonperformance of the assumptions and undertakings of them, the said defendants, to the sum of $237.79. Therefore it is considered,"

&c.

The defendants in the Circuit Court of the County of Chariton appealed, in 1825, to the Supreme Court of the State of chanrobles.com-red

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Missouri, the highest tribunal in that state, where the judgment of the circuit court was affirmed.

The defendants prosecuted this writ of error, under the twenty-fifth section of the Judiciary Act of 1789.

The act of the Legislature of Missouri, under which the certificates were issued which formed the consideration of the note declared upon, was passed on 27 June, 1821. It is entitled "An act for the establishment of loan offices, &c." The provisions of the third, thirteenth, fifteenth, sixteenth, twenty-third and twenty-fourth sections of the act, are all that have a connection with the questions in the case which were before the court.

"Sec. 3. Be it further enacted that the auditor of public accounts and treasurer, under the direction of the governor, shall, and they are hereby required to issue certificates signed by the said auditor and treasurer to the amount of $200,000, of denominations not exceeding ten dollars, nor less than fifty cents (to bear such devices as they may deem the most safe) in the following form, to-wit: this certificate shall be receivable at the Treasury or any of the loan offices of the State of Missouri, in the discharge of taxes or debts due to the state, for the sum of $ _____, with interest for the same, at the rate of two percentum per annum from this date, the ___ day of _____ 182_."

"Sec. 13. Be it further enacted that the certificates of the said loan office shall be receivable at the treasury of the state, and by all tax gatherers and other public officers, in payment of taxes or other moneys now due, or to become due to the state or any county or town therein, and the said certificates shall also be received by all officers civil and military in the state, in discharge of salaries and fees of office."

"Sec. 15. Be it further enacted that the commissioners of the said loan offices shall have power to make loans of the said certificates to citizens of this state, residing within their respective districts only, and in each district a proportion shall be loaned to the citizens of each county therein, according to the number thereof, secured by mortgage or personal security, provided that the sum loaned on mortgage shall

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never exceed one-half the real unencumbered value of the estate so mortgaged; provided also that no loans shall ever be made for a longer period than one year, nor at a greater interest than at the rate of six percent per annum, which interest shall be always payable in advance, nor shall a loan in any case be renewed, unless the interest on such reloan be also paid in advance; provided also that the commissioners aforesaid shall never make a call for the payment of any installment at a greater rate than ten percentum for every six months, and that whenever any installment to a greater amount than at the rate of ten percentum per annum be required, at least sixty days previous notice shall be given to the person or persons thus required to pay, and provided also that all and every person failing to make payment shall be deprived in future of credit in such office, and be liable to suit immediately, for the whole amount by him or them due."

"Sec. 16. Be it further enacted that the said commissioners of each of the said offices are further authorized to make loans on personal securities, by them deemed good and sufficient, for sums less than $200; which securities shall be jointly and severally bound for the payment of the amount so loaned, with interest thereon, under the regulations contained in the preceding section of this act."

"Sec. 23. Be it further enacted that the general assembly shall, as soon as may be, cause the salt springs and lands attached thereto given by Congress to this state, to be leased out, and it shall always be the fundamental condition in such leases that the lessee or lessees shall receive the certificates hereby required to be issued, in payment for salt, at a price not exceeding that which may be prescribed by law, and all the proceeds of the said salt springs, the interest accruing to the state, and all estates purchased by officers of the several offices, under the provisions of this act, and all the debts now due, or hereafter to be due to this state, are hereby pledged, and constituted a fund for the redemption of the certificates hereby required to be issued, and the faith of the state is hereby also pledged for the same purpose."

"Sec. 24. Be it further enacted that it shall be the duty of the auditor and treasurer to withdraw, annually, from circulation

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one tenth part of the certificates which are hereby required to be issued,"

&c. chanrobles.com-red

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