to form any

Adams on the points presented, except that relating to the southern provinces, our government being unwilling to contract an engagement not

relations with them. The answer to this point was communicated to the king; and, if it should be received by him as satisfactory, the treaty would probably be ratified. The ratification took place on the 24th of October, 1820; and the treaty was proclaimed by the president on the 22d of February, 1821, precisely two years from its date.

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CHAPTER XXII.

INVESTIGATION OF THE AFFAIRS OF THE UNITED STATES BANK.-OPINION

OF THE SUPREME COURT ON ITS CONSTITUTIONALITY.-DECISION OF THE CIRCUIT COURT. — JUDICIAL DECISION ON BANKRUPT LAWS-QUESTION

OF INTERNAL IMPROVEMENTS.

The public mind had become much excited by the refusal of the bank of the United States to receive the notes of its branches, except in payment of debts due to the United States, and by sundry acts of alleged mismanagement on the part of the directors highly injurious to the public interest. The dissatisfaction with the bank had become so general as to induce congress to institute an investigation of its affairs and management.

The inquiry was moved by John C. Spencer, of New York, on the 25th of November, 1818, who, as chairman of the committee of investigation, on the 16th of January, 1819, made a very elaborate report, reviewing minutely the transactions of the bank, and expressing the opinion that it had in several instances violated its charter. The committee also reported a bill for the better regulation of the election of the directors. No other remedial measures were recommended, as, by the provisions of the charter, the secretary of the treasury had full power to apply them, which it was presumed would be done, should the directors persist in a course of conduct which should require it.

Subsequently, February 1, the same gentleman presented a resolution requiring the corporation, on or before the 1st of July, to declare their consent to certain propositions providing more stringent regulations in the management of its affairs; and in case of non-compliance, the secretary of the treasury was required to cause all the public deposits to be withdrawn from the bank and its branches on that day, and the attorneygeneral was required to sue out a writ of scire facias, in conformity with

its charter, calling upon the corporation to show cause why its charter should not be declared forfeited.

A proposition was made by Mr. Johnson, of Virginia, to repeal the charter; which was opposed by Mr. Spencer. The immediate destruction of the bank, he said, would ruin thousands who had become its debtors, and inflict a wound upon the public credit, and tarnish the national faith abroad. The resolutions on the subject were referred to the committee of the whole on the bank report, all of which were subsequently with. drawn, or disagreed to, and the bill reported by Mr. Spencer, with amend. ments designed to render its provisions more effectual, was passed. It was believed the bank had been too much managed in a spirit of speculation. Reformation, however, and not destruction, appears to have been the desire even of those most unfriendly to the institution.

There was about this time a general depreciation of state bank paper; and many of the state banks were compelled to suspend specie payments. The greatest pressure prevailed in the south-western states.

In March, 1819, was decided in the supreme court, the case of M'Cul. loh against the state of Maryland, involving the question of the power of a state to impose a tax on a branch of the bank of the United States. The plaintiff was president of the branch bank in Maryland, which had been taxed under a law taxing the banks of that state. This cause, in the opinion of the court, presented two questions: (1.) Has congress power to incorporate a bank? (2.) Can a state, without a violation of the constitution, tax a branch bank?

The first of these questions was decided in the affirmative. The arguments upon which the decision was founded, are substantially those by which the constitutionality of the banks of 1791 and 1816 were main. tained in congress. [See bank of the United States.]

In construing the constitution, the counsel for the state of Maryland considered it, not as having emanated from the people, but as the act of sovereign and independent states. And the powers of the general gov. ernment were delegated by the states, and must be exercised in subordi. nation to the states, who alone were supreme. The convention which framed the constitution, the court said, was indeed elected by the state legislatures. But it was a mere proposal without obligation, until it had been submitted, not to the state governments, but to a convention of delegates in each state chosen by the people, for their assent and ratification. Hence the adoption of the constitution was properly considered the act of the people themselves. The confederation, which was a meru league, was formed by the state sovereignties. The "more perfect union" under the constitution was the act of " the people of the United States."

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The government is one of enumerated powers, and possesses those only which are granted to it. But, though limited in its powers, it is supreme within its sphere of action. Among its enumerated powers is not that of establishing a bank, or creating a corporation. But there is no phrase in the instrument which excludes incidental or implied powers. The confederation authorized the exercise of such powers only as were expressly granted. But the word "expressly" was omitted in the constitution. It was not even inserted in the 10th article of amendment, which was framed to quiet the jealousies which had been excited against tbat instrument.

The great powers having been given to lay and collect taxes, to borrow money, to regulate commerce, to declare and conduct a war, and to raise and support armies, it must be for the interest of the nation to facilitate the execution of these powers. And it was not to be presumed, the court said, that the express grant of these powers was intended to clog and embarrass their execution by withholding the most appropriate means. As the constitution does not profess to prescribe the means of executing its powers, the government is left to a choice of means. Hence, a corporation, if it is essential to a beneficial exercise of granted rowers, may be created for this purpose.

Congress has “power to make all laws which are necessary and proper for carrying into execution the foregoing powers," &c. It was contended that this did not authorize, in all cases, the choice of means, but the passing of such laws only as were absolutely indispensable, and without which the powers granted could not be executed. It was maintained, on the contrary, by the court, that the word “necessary" did not always import an absolute physical necessity; that in common use it meant no more than that one thing is convenient, or useful, or essential to another; that it had not a fixed character peculiar to itself; but that, like many other words, it admitted of all degrees of comparison. A thing might be necessary, very necessary, or absolutely or indispensably necessary. The constitution prohibits a state from laying“ imposts, or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws." The word "absolutely" being here inserted, it was evident the framers intended to give a different meaning to the word “ necessary" in this place from that given to it when granting power "to make all laws necessary and proper for carrying into execution" the powers of the general government.

Against the right of a state to tax the bank, it was argued, that, if congress could create, it could of course continue a bank. But the power of taxing it by the states might be so exercised as to destroy it. Taxation had been claimed, on the part of the state, as an absolute power,

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and, like other sovereign powers, was trusted to the discretion of those who used it. But the sovereignty of the state, in the article of taxation itself, is subordinate to, and may be controlled by the constitution of the United States.

It was contended on the part of the state of Maryland, not that the states may resist a law of congress, but that they may exercise their acknowledged powers upon it; and that the constitution leaves them this right in the confidence that they will not abuse it.

The court admitted that the power of taxation was essential to the very existence of government, and might be exercised on objects to which it was applicable, to the utmost extent to which the government might choose to carry it. And the fact that, in imposing a tax, the legislature

. acts upon itself, as well as upon its constituents, and the influence of the latter over their representatives, were deemed a sufficient security against the abuse of this unlimited power of taxation given by the people of a state to their government. But the sovereignty of a state extends only to what exists by its own authority, but not to the means employed by congress to carry into execution powers conferred on that body by the people of the United States. These powers are not given by the people of a single state, but by the people of all the states, to a government whose laws, made in pursuance of the constitution, are declared to be supreme. The people of a state, therefore, can not confer a sovereignty which will extend over them. Besides, if the states might tax one instrument employed by the government in executing its powers, they might tax any and every other. They might tax the mails, the mint, patent rights, papers of the customhouse, judicial process, and all other means employed by the government, to an excess which would defeat all the ends of government.

In view of these and other reasons, the court unanimously declared the law of Maryland imposing a tax on the bank of the United States, unconstitutional and void. This opinion, however, did not deprive the states of any resources which they originally possessed. The real property of the bank, and the interest held in the bank by citizens of Maryland, were liable to taxation.

Another case of taxation occurred in the state of Ohio; and a suit was brought before the United States circnit court by the bank against the officers of the state for the recovery of the money. A law had been enacted in that state, by which it was provided, that, if the branches at Cincinnati and Chillicothe did not cease their operations by the first of September, 1819, a tax of $100,000 should be levied on the bank. On the 15th of September, a bill in chancery, issued from the United States circuit court, was served on the auditor of the state, who was directed to answer to the bill of complaint, praying for an injunction against his

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proceeding under the law of the state to tax the bank of the United States. On the same day, the auditor proceeded to charge the bank with the sum of $100,000; one-half on each of the branches above mentioned, and directed the tax to be collected. The collector, with two assistants, entered the branch at Chillicothe, and demanded payment, which was refused; whereupon they entered the vaults, and took out specie and paper to the amount of $100,000, and conveyed the money to the state treasury.

A protracted litigation ensued. A communication on the subject was made by the state auditor to the legislature, and resolutions, reported by a joint committee, were adopted by large majorities, (1.) Approving the doctrines of the Virginia and Kentucky resolutions of 1798 and 1799. (2.) Protesting against the doctrines of the federal circuit court sitting in that state as being in direct violation of the 11th amendment of the constitution of the United States. (3.) Asserting, and resolving to maintain, the right of the states to tax the business and property of any private corporation of trade incorporated by congress, and transacting its business within any state. (4.) Declaring the bank of the United States to be a private corporation of trade. (5.) Protesting against the doctrine, that the political rights and powers of the separate states, may be settled in the supreme court of the United States, so as to conclude and bind them, in cases contrived between individuals, and in which none of them is a party direct.

A decision was at length made, September, 1821, in the circuit court of the United States, decreeing the restoration of the $100,000 which had been seized, with interest on the specie part of it, (the specie being nearly $20,000,) and granting a perpetual injunction against the collection of any tax in future under the act of Ohio.

Another important decision of the supreme court about this time, was on the question of the constitutionality of state bankrupt and insolvent laws. The case was that of Sturges against Crowninshield; the defendant pleading a discharge under « an act for the benefit of insolvent debtors and their creditors,” passed by the legislature of New York in 1811.

On the several questions which arose in this case, the opinions of the ceurt were, (1.) That, in the absence of any uniform laws of congress on the subject of bankruptcies, authorized by the constitution, the states may pass a bankrupt law, provided that it does not violate that provision of the constitution which declares, that "no state shall pass any law impairing the obligation of contracts.” (2.) That the law of New York, which not only liberates the person of the debtor, but discharges him from all liability for any debt previously contracted, on his surrendering his property, is clearly a law impairing the obligation of contracts.