US SUPREME COURT DECISIONS

After the late rebellion in the Southern states had broken out into war and the government had blockaded all the Southern ports so as to prevent the shipment of the staples of the South, including especially cotton, from them, the rebel Legislature of Mississippi passed (December 19, 1861) an act authorizing the issue of $5,000,000 in what were called cotton notes; negotiable notes in a form suitable for currency, to be issued by the state in sums of $l, $2, $3, $5, $10, $20, and $100. Owners of cotton were to, in effect, hold it pledged to the government, which thereupon gave them an advance on it in these notes, it being agreed on both sides that after the removal of the blockade, and on a proclamation made to that effect, the cotton should be delivered by the owners at some seaport or city to be named, and sold, the proceeds of sale to be paid into the treasury of the state, and if sufficient, to be applied to redeeming the notes, and if insufficient, the owner of the cotton was to make the deficit good to the state.

The notes were made, by the act, receivable in payment of all taxes due or to become due to the state, or to any county, or school fund, or municipal corporation, except a military tax then laid and confessedly in aid of the rebellion; and when received for taxes might he again paid out by the state treasurer upon any warrant of the auditor drawn upon the general treasury.

Held that notwithstanding the exception as to the "military tax," the notes were to be regarded as issued in aid of the rebellion and were therefore void. And that on the rebellion's being suppressed, the notes -- notwithstanding the provision in the original act about their receivability for taxes -- were not receivable in payment of taxes which the reorganized state government directed to be paid in currency of the United States.

This case involved the question of the validity of certain notes, commonly known as "cotton money," issued and put chanrobles.com-red

Page 89 U. S. 480

in circulation by the State of Mississippi as currency during the late rebellion, and also the obligation of the state to receive the same in payment of taxes after the rebellion, and after the reorganization of the state government.

The case was thus:

Mississippi, through a convention convened by the action of the legislature, passed, on the 9th of January, 1861, an ordinance of secession, by which it was ordained "that all the laws and ordinances by which the state became a member of the federal Union were repealed, and that all obligations on the part of the said state, or the people thereof, were withdrawn, and that the state now resumed all the rights, functions, and powers which by any of the said laws and ordinances were conveyed to the government of the said United States, and was absolved from all the obligations, restraints, and duties incurred to the said Union, and should be henceforth a free, sovereign, and independent state."

And in March of the same year, persons from different rebel states having met at Montgomery, Alabama, and made what they called a constitution for the permanent federal government of the Confederate states of America, an additional ordinance was passed by the convention in Mississippi, ordaining that said constitution was adopted and ratified by the State of Mississippi, acting in its sovereign and its independent character; and that the state acceded to and became a member of the Confederacy provided for by the same.

Immediately after this the Constitution of the state was so amended as to abrogate all provisions adapting it to the Constitution of the United States, and so changing it as to conform it to the connection between the state and the Southern Confederacy.

This was followed by measures taxing all the resources of the states in various forms to provide the means to sustain the Confederacy in its separation from the United States.

In the spring of 1861, the insurrection having broken out into war throughout the Southern states, military and naval chanrobles.com-red

Page 89 U. S. 481

measures became necessary to suppress it, and the government of the United States instituted a blockade of all the Southern ports, so that no staple of the states in rebellion could find a market.

On the 19th December, 1861, under such circumstances and in the condition of affairs just described, the insurrectionary government of the state passed an act entitled "An act authorizing the issue of treasury notes as advances upon cotton."

The act provided for the issue of $5,000,000, in notes of the denomination of $1, $2, $3, $5, $10, $20, and $100, to be paid out of the state treasury as advances to the people of the state on the crop of cotton grown in the state in the year 1861, at the rate of 5 cents per pound. The notes were to be in the following form:

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On the petition of parties owning cotton and having it in their actual possession or control, and on their executing a bond with approved securities in double the amount of the advance conditioned for the delivery of the cotton &c., the auditor was required to advance these notes to the amount and at the rate per pound above stated. The owner of the cotton was to keep it safely until after the removal of the then existing blockade of the Confederate ports, when, on the proclamation of the governor demanding it, the cotton was to be delivered at some city or seaport in the Confederate states within ninety days, and sold either for gold and silver or for these cotton notes, and the funds so received chanrobles.com-red

Page 89 U. S. 482

for the cotton were pledged for the redemption of the notes, and were not to be appropriated to any other purpose whatever; and such of the cotton notes as might be received in payment for the cotton were to be cancelled and destroyed. If the proceeds of the sale were not sufficient to discharge the advance in gold or silver, or in treasury notes, then the owner was to pay the amount requisite to make up the deficit. All funds received by the governor, whether in payment of the advances or for the proceeds of sales of the cotton, or for deficits, or recovered in suits on the bonds, were to be deposited with the state treasurer and placed in the state treasury. And the treasury notes issued under the act were to be receivable in payment of all taxes due or to become due to the state, or to any county or school fund, or municipal corporation, except a military tax previously levied under "An ordinance (of January 26, 1861) to raise means for the defense of the state," and when so received for taxes might be "again paid out upon any warrant of the auditor drawn upon the general treasury," until redeemed and cancelled as above stated. The cotton, until sold, was to be at the risk of the owner receiving the advance; but when sold, the proceeds were to be subject to the order of the governor.

The Legislature of Mississippi, which passed the law of 1861, had been elected prior to the so-called secession of the state.

In the year 1865 -- the rebellion being now suppressed and the supremacy of the government reestablished -- the legislature of Mississippi passed a law laying a tax of $2 per bale on cotton, and enacting that the collectors of taxes should collect it "in the currency of the United States."

A certain Taylor having fifty bales, the tax on which was of course $100, the collector of the taxes, one Thomas, demanded of him payment in currency of the United States. Taylor tendered to him the amount in $100 of the cotton notes, and refused to pay in currency of the United States. Hereupon the collector was about to distrain, when Taylor filed a bill -- the present bill -- to enjoin him, and to make chanrobles.com-red

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him receive the $100 "cotton note" in payment of the tax; he, Taylor, contending that the agreement of the state made in the act authorizing their issue, to receive the cotton bills in payment of taxes, was a "contract" which the state had no power by its subsequent act of 1865 to impair.

The supreme court of the state, where the case finally came, adjudged the notes to be void. It said, in substance,

"We regard the act, in its operation and effects, to have been in aid of the late rebellion; a part of the financial system of the state, at a time of great pecuniary want, to supply not only a circulating medium for the people in the transactions of their ordinary business, but also to furnish the means by which an empty treasury of the state might be replenished."

"One section of the act provides that the notes shall be receivable in payment of all taxes now due or that may hereafter become due to the state, or to any county, or school fund, or municipal corporation, except the military tax; and that the said notes, when so received for taxes, may again be paid out by the treasurer upon any warrant of the auditor, drawn upon the general treasury. It will be thus seen that the notes were intended to supply an important part of the revenue by which the state government was to be sustained and enabled more effectually to aid the Confederate government in the prosecution of a sanguinary war, waged expressly for the purpose of subverting the government of the United States. The notes are therefore illegal and void."

Taylor now brought the case here on error. chanrobles.com-red

Page 89 U. S. 486