# Dodge v. Woolsey/Dissent Campbell

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* Case Syllabus
* Opinion of the Court
* Dissenting Opinion Campbell
United States Supreme Court
59 U.S. 331
Dodge v. Woolsey
Mr. Justice CAMPBELL dissenting.
The following case is made upon the record of this cause:--
The Commercial Bank of Cleveland, Ohio, was organized in 1845, according to the act of the general assembly of February, 1845, for the incorporation of the State Bank of Ohio and other companies, with a capital which was increased in 1848 to $175,000, and placed under the management of five directors.
From its organization until 1851 the taxes of the bank were determined by the 60th section of the act aforesaid, which required the banks semiannually to set off to the State six per cent. of the net profits for the six months next preceding, and the sum so set off the act declared should be 'in lieu of all taxes to which such company or the stockholders thereof on account of stock owned therein would otherwise be subject.' In the year 1851, the general assembly of Ohio altered this rule of taxation, and required that the capital stock, surplus and contingent funds of the banks should be listed for taxation at their money value, and should be assessed for the same purposes and to the same extent that personal property might be in the place of their location.
During the same year the people of Ohio, in the mode prescribed in their fundamental law, adopted a new constitution. One of the articles (art. 12, § 3) requires 'the general assembly to provide by law for taxing the notes and bills discounted or purchased, and all other property, effects, dues of every description (without deduction) of all banks now existing or hereafter created, and of all bankers, so that all property employed in banking shall always bear a burden of taxation equal to that imposed on the property of individuals.' In 1852, the general assembly fulfilled this direction by a law which required the banks to disclose the average amount of all bills, notes discounted or purchased, and the average amount of their moneys, dues and effects, so as to afford a basis for taxation; and by the same act taxes were directed to be laid upon these amounts without deduction.
The directors, stockholders, and officers of this bank have disputed the validity of these changes in the rule of taxation, as violating a right derived by contract, obligatory on the State, and contained in the 60th section of the act first mentioned, and no voluntary obedience has been rendered to them; but, on the contrary, the seccessive measures taken for the collection of these taxes have met with opposition from the corporation, and submission has always been accompanied with a protest on the part of the directors, in which their determination was expressed to rely upon the constitutional and legal rights of the bank.
The taxes for the year 1852 were collected in current bank bills, and the packages were prepared and placed within the reach of the treasurer, who held the duplicate for collection, by the officers of the bank, and immediately after they were assigned by the bank to one Deshler, who replevied the same by a writ from the circuit court of the United States for Ohio, and thus made a case which subsequently came to this court. Deshler v. Dodge, 16 How. 622.
In December, 1853, some five days before the taxes were payable, John M. Woolsey, a stockholder of the bank for thirty shares, at the par value of $100 each, addressed the directors of the bank a letter, requiring them 'to institute the proper legal proceedings to prevent the collection' of the assessment for that year, averring that the bank was not bound to pay them. The board of directors replied, 'that they considered the tax to have been illegally assessed, but in consideration of the many obstacles in the way of resisting said tax in the courts of Ohio they could not take the action they were called upon in the letter to take,' but must leave to Mr. Woolsey to take such a course as he might be advised. It sufficiently appears that the treasurer is able to pay any damages which the bank might sustain, and no evidence exists of any indisposition of the directors to meet all the obligations of their station, except what is found in the letter I have described.
This bill was filed by Woolsey, as a stockholder of the bank, against the treasurer of the county of Cuyahoga, the five directors of the bank, and the corporation itself, alleging his apprehensions that the treasurer would proceed to make the collection of the excess above the tax due under the 60th section, and that it would impair the credit of the bank, invade its franchise, and ultimately compel its dissolution; and that the directors had refused to take measures to prevent its collection, on his requisition, and prays for an injunction on the officer to restrain his further proceedings. The circuit court affirmed the bill so as to restrain the collection of all taxes assessed upon the bank, except such as were laid under the act of 1845.
The first inquiry that arises is, has this court a jurisdiction of the parties to the suit? The case is one of a stockholder of a corporation, bringing the corporation before the courts of United States to redress a corporate wrong in which both are similarly interested. The early decisions of this court on this question would be conclusive against the bill. They require that the plaintiff should be from a State different from all the individual members of the corporation. The chief justice said, that invisible, intangible, and artificial being, that mere legal entity-a corporation aggregate-is certainly not a citizen; and consequently cannot sue or be sued in the courts of the United States, unless the rights of the members in this respect can be exercised in their corporate name. 5 Cranch, 57, 61, 78; 6 Wheat. 450; 14 Pet. 60.
These cases required that the citizenship of all the corporators should appears on the record, so that the court might be sure that the controversy had arisen between citizens of different States, or citizens of a State and foreign states, citizens or subjects. In Marshall v. Baltimore and Ohio Railroad Co. 16 How. 314, the court relaxed its strictness in reference to this averment, and was satisfied by an allegation of the habitat of the corporation, but still intimated that the national character of the corporators was an essential subject of inquiry in a question of jurisdiction. The court says: 'The persons who act under these faculties and use the corporate name, may be justly presumed to be resident in the State which is the necessary habitat of the corporation, and where alone they can be made subject to suit, and should be estopped in equity from averring a different domicile as against those who are compelled to seek them there, and nowhere else.' And again: 'The presumption arising from the habitat of a corporation being conclusive of those who use the corporate name and exercise the faculties of it.'
This case is one of a corporator suing the corporation of which he is a member, and is the first instance of such a case in the court. He cannot aver against the manifest truth, that all the corporators, himself included, are of a different State from himself, to give the court jurisdiction upon the principle of the earlier cases. And if the doctrine of an equitable estoppel can be applied to a subject where facts, and not arbitrary presumptions, were the only objects of consideration; and if, indeed, the character of the corporation, as a matter of law, is to be assumed to be that of the situs of the corporation, then all the corporators, plaintiffs as well as defendants, stand upon this record as citizens of the same State, and this suit cannot be maintained. But if no inquiry into the citizenship of stockholders may be made; if a foreign stockholder, upon the real or affected indifference of a board of directors, or on some imaginary or actual obstacle to relief, arising in the state of opinion in the courts of the State, can draw questions of equitable cognizance into the courts of the United States, in which corporate rights are involved, or evils are threatened or inflicted on corporate property, making the corporation and its managers parties, then a very compendious method of bringing into the courts of the United States all questions in which these artificial beings are concerned has been invented, and the most morbid appetite for jurisdiction among all their various members will be gratified, and upon a class of cases where grave doubts exist whether those who made the constitution ever intended to confer any jurisdiction whatever. Nor can this jurisdiction be supported by affirming that the corporation is not a necessary party to the bill. The subject of the bill is the title of the corporation to an exemption under the act of incorporation, and its object is the protection of corporate franchises and property. The being of the corporation is charged to be an issue involved in the prayer for relief, and the inaction of the directors affords the motive for the suit.
The conduct of the directors was determined in the course of their duty as the governing body of the corporation, under the law of their organization. Their measures and judgments were the acts of the corporation. Whether these were conclusive upon the corporators, or whether they might be impeached at the suit of a single dissenting shareholder; whether the relations between the State and the corporation were to be settled in a suit between them or in this suit, are the matters in issue, and the corporation was an essential party to their adjudication. The principle of the bill is, that in declining to take effective measures of prevention-that is, refusing to apply for an injunction-the directors abdicated their controlling powers, and any stockholder became entitled to intervene for the interests of himself and his associates. The decree in this cause is not a decree for the relief of this corporator, but is a decree for the corporation, and does not differ from a decree proper to a case of the corporation against the treasurer. It is clear, therefore, that the corporation was a necessary party to the bill, and so are the adjudged cases. Bagshaw v. East. Union R. R. Co. 7 Hare, 114; Cunningham v. Pell, 5 Paige, 607; Rumney v. Monce, Finch R. 334, 336; 1 Danl. Ch. Pr. 251; Charles. Ins. & T. Co. v. Sebring, 5 Rich. Eq. R. 342.
The case is one between a corporator and the corporation, and the jurisdiction cannot be affirmed unless the court is prepared to answer the question whether a mere legal entity, an artificial person, invisible, intangible, can be a citizen of the United States in the sense in which that word is used in the constitution; and relying upon the case of Marshall v. The Baltimore and Ohio Railroad Company, with a long list of antecessors, I am forced to conclude that it cannot be
The court has assumed this jurisdiction, and I am therefore called to inquire whether a court of chancery can take cognizance of the bill? The act of incorporation of the bank charges the board of directors with the care of the corporate affairs, subject to an annual responsibility to the stockholders. The principle of a court of chancery is, to decline any interference with the discretion of such directors, or to regulate their conduct or management in respect to the duties committed to them.
The business of that court is to redress grievances illegally inflicted or threatened, not to supply the prudence, knowledge, or forecast requisite to seccessful corporate management. The facts of this case involve, in my opinion, merely a question of discretion in the performance of an official duty. In 1852, the taxes were withdrawn from the treasurer of Cuyahoga county, by an assignee of the bank, and were never passed into the State treasury. The supreme court of Ohio, subsequently to this, pronounced the taxes to be legally assessed upon these banks, and that there was no contract between the State and the banks, and there was no exemption from the tax by any thing apparent in the act of 1845. Some of these judgments were pending in this court upon writs of error then undecided, no judgment having been given contrary to that of the authorities, legislative, executive, and judicial, as well as by the people of Ohio. It was under these conditions that this stockholder, who purchased stock after the controversy had arisen in Ohio, some five days before the taxes were payable, addressed the directors of the Commercial Bank to take preventive measures-that is, I suppose, to file a bill for an injunction instantly-and, upon their suggestion of difficulties, proceeds to take charge of the corporate rights of the bank by this suit, in the circuit court of the United States. The directors were elected annually; they were, collectively, owners of one tenth of the stock of the bank, and no evidence is shown that any other stockholder supposed that 'preventive measures,' under the circumstances, could be sustained. There is no charge of fraud, collusion, neglect of duty, or of indifference by the directors, save this omission to take some undefined 'preventive measures,' which the plaintiff affected to suppose might be proper.
I understand the rule of chancery, in reference to such a case, to be that no suit can be maintained by an individual stockholder for a wrong done, or threatened, to such a corporation, unless it appears that the plaintiff has no means of procuring a suit to be instituted in the name of the corporation; and that the rule is universal, applicable, as well to the cases where the acts which afford the ground for complaint were either such as a majority might sanction, or whether it belonged to the category of those acts by which no stockholder could be bound except by his own consent. This principle has the highest sanction in the decisions of that court. (Foss v. Harbottle, 2 Hare, 461 affirmed 1 Phil. 790; 2 Phil. 740; 7 Hare, 130.) The principle is an obvious consequence from the relations between the officers and members of a chartered corporation, and the corporation itself. These are explained in Smith v. Hurd, 12 Met. 371. The court says: 'There is no legal privity, relation, or immediate connection, between the holders of shares in a bank in their individual capacity, on the one side, and the directors of the bank on the other. The directors are not the bailers, the factors, agents, or trustees of such individual stockholders. The bank is a corporation and body politic having a separate existence, as a distinct person in law, in whom the whole stock and property of the bank are vested, and to whom all agents, debtors, officers, and servants, are responsible for all contracts, express or implied, made in reference to such capital; and for all torts and injuries, diminishing or impairing it.' The corporation, therefore, must vindicate its own wrongs, and assert its own rights, in the modes pointed out by law.
I do not say that a court of chancery will never permit an individual stockholder to come before it to assert a right of the corporation in which he is a shareholder, where there is an obstacle of such a nature that the name of the corporation cannot be employed before legitimate tribunals in their regular modes of proceeding, but the burden is thrown upon the plaintiff to establish the existence of an urgent necessity for such a suit.
The consideration of analogous cases will strengthen this conclusion; cases where courts of chancery are more free to intervene, from the fiduciary relations between the parties and the extent of its general jurisdiction over them. Such are cases of danger to the interests of a creditor of an estate from the collusion of an executor with the debtor of the estate, or the insolvency of the executor; or where an executor wrongfully fails to make a settlement with a surviving partner, and a residuary legatee seeks one entire settlement of the estate against the executor and partner; or where a decedent in his life has fraudulently conveyed assets, and his executor is estopped to impute fraud, and there are creditors; or where the managers of a jointstock company have been guilty of fraud, illegality, waste, and their stockholders desire relief. In all these cases the court of chancery will suffer a party remotely interested to institute the suit which his trustee, or other representative, should have brought, and will grant the relief on that suit which would have been appropriate to the case of him who should have commenced it. Sir John Romilly, in a late case belonging to one of these categories, says:
'To support such a bill as this it is not sufficient to prove that it may be an unpleasant duty to the executors and trustees to take the necessary steps for protecting the property intrusted to them. It is not sufficient to show that it will be for their interests not to take such steps. It is necessary to show that they prefer their own interests to their duty, and that they intend to neglect the performance of the obligation incidental to the office imposed upon them, and which they assumed to perform; or, as said in Travis v. Mylne, that a substantial impediment to the prosecution by the executors of the rights of the parties interested in the estate against the surviving partner exists.' Stainton v. Carron Co. 23 L. & Eq. 315; Travis v. Milne, 9 Hare, 141; Hersey v. Veazie, 11 Shep. 1; Colquitt v. Howard, 11 Geo. 556.
These cases afford no support to this suit. The Cleveland Bank has betrayed no purpose to abandon its corporate duty. The interests and obligations of the directors coincide to support its pretensions. There is no supineness in their past conduct, nor indifference to the existing peril. The evidence, at the most, convicts them only of a present disinclination to commence suits, which were likely to be unproductive, at the request of a single shareholder. The answer shows that the taxes for 1852 had not been recovered by the State, but had been retaken by an assignee of the bank. Nor does the correspondence show that the directors had decided to abandon the contest. The case here does not at all fulfil the conditions on which the interposition of a shareholder is allowable. Elmslie v. McAulay, 3 Bro. C. C. 224, 1 Phil. 790; Law v. Laws, 2 Coll. 41; Walker v. Trott, 4 Ed. Ch. R. 38.
But the evidence does not allow me to conclude that any impediment whatever existed to a suit in the name of the corporation, from any disposition of the directors to resist the claims of the State. Their protest appears at every successive stage of the action of the fiscal officers. This suit is evidently maintained with their consent; there has been no appearance either by the directors or the corporation, but they abide the case of the stockholder. The decree is for the benefit of the corporation. The question then is, can a corporation belonging to a State, and whose officers are citizens, upon some hope or assurance that the opinions of the courts of the United States are more favorable to their pretensions, by any combination, contrivance, or agreement with a non-resident shareholder, devolve upon him the right to seek for the redress of corporate grievances, which are the subjects of equitable cognizance in the courts of the United States, by a suit in his own name. In my opinion, there should be but one answer to the question.
I come now to the merits of the case made by the bill.
In the suit of the Piqua Bank v. Knoop, 16 How. 369, I gave the opinion that the act of February, 1845, did not contain a contract obligatory between the State of Ohio and the banking corporations which might be originated by it, in reference to the rule of taxation to be applied to their capital or business. That the act imposed no limit upon the power of the general assembly of the State, but that the rate of taxation established in that act was alterable at their pleasure. To that opinion I now adhere.
But assuming a contract to be collected from the indeterminate expressions of the 60th section of the act, as interpreted by its general objects and the supposed policy of the State, the question is presented, what consequence did the reconstitution of the political system of the State by the people in 1851, and their direction to the legislature to adopt equality as the rule of assessment of taxes upon corporate property, accomplish to the claims of these corporations?
Certainly no greater question-none involving a more elemental or important principle-has ever been submitted to a judicial tribunal. It involves the operation and efficiency of the fundamental principles on which the American constitutions have been supposed to rest.
The proposition of this confederacy of some fifty banking corporations, having one fortieth of the property of the State, is, that by the law of their organization for the whole term of their corporate being, there exists no power in the government nor people of Ohio to impair the concessions contained in the act of 1845, particularly that determining the amount of their contribution to the public revenue. This proposition does not depend for its truth upon the limitation of time imposed upon the corporate existence of the banks. It would not affect the proposition if the charters were for a century, or in perpetuity. Nor does the proposition derive strength from the fact that the statute applies only to banking corporations, or corporations confined to a single form of commercial dealing. The proposition would have had the same degree of accuracy if the act had been universal, applicable to all private corporations, whether for manufactures, trade, intercourse, mining, morals, or religion. It is said by a competent authority, that in the State of Massachusetts there are near twenty-five hundred trading corporations, and that more than seven tenths of the real and personal property of that State is held by corporations. The proportion between the property of corporations and individuals is greater there than in other States, but the property held by corporations in other States is large enough to awaken the most earnest attention. A concession of the kind contained in this act, by a careless or a corrupt legislature, for a term or in perpetuity, would impair in many States their resources to an alarming extent.
Writers upon the condition of the Turkish empire say, that three fourths of the landed property of the empire is held in mortmain, as vakuf by mosques or charitable institutions, for their own use, or in trust for their owners. This property ceases to contribute to the public revenues, except in a specific form of certain objectionable taxes on produce, and is inalienable. If held in trust, it is exempt from forced sales and confiscations, and, on the death of the owner without children, passes to the mosque or other charitable trustee. In that empire, the ecclesiastical and judicial is the dominant interest, for the Ulemas are both priests and lawyers, just as the corporate moneyed interest is dominant in Ohio, and in either country that interest claims exemption from the usual burdens and ordinary legislation of the State. The judgment of this court would establish the permanent existence of such an incubus upon the resources and growth of that country, if that interest should have taken their privileges in the form of a contract, and had such a constitution as ours. Yet the first step for the regeneration of Turkey, according to the wisest statesmanship, is to abolish the vakuf.
Bentham, treating upon constitutional provisions in favor of contracts, says: 'If all contracts were to be observed, all misdeeds would be to be committed, for there is no misdeed the committal of which may not be made the subject of a contract; and to establish in favor of themselves, or of any other person or persons, an absolute despotism, a set of legislators would have no more to do than to enter into any engagement-say with a foreign despot, say with a member of their own community-for this purpose.' And were this to happen, should it be that a State of this Union had become the victim of vicious legislation, its property alienated, its powers of taxation renounced in favor of chartered associations, and the resources of the body politic cut off, what remedy has the people against the misgovernment? Under the doctrines of this court none is to be found in the government, and none exists in the inherent powers of the people, if the wrong has taken the form of a contract. The most deliberate and solemn acts of the people would not serve to redress the injustice, and the overreaching speculator upon the facility or corruption of their legislature would be protected by the powers of this court in the profits of his bargain. Where would the people find a remedy? Let the case before us form an illustration. Congress cannot limit the term nor abolish the privileges of these corporations; they are corporations of Ohio, and beyond her limits they have no legal existence; they live in the contemplation of her laws and dwell in the place of their creation. (13 Pet. 512; 16 How. 314.) Nor can congress enlarge the subjects for state taxation, nor interfere in the support of the state government. They could not empower the State to collect taxes from these corporations. Were the resources of the State oppressed with the burden of a Turkish vakuf, congress could not afford relief.
The faculties of the judicial department are even more fatal to the State than the impotence of congress. The courts cannot look to the corruption, the blindness, nor mischievous effects of state legislation, to determine its binding operation. (Fletcher v. Peck, 6 Cr. 87.) The court, therefore, becomes the patron of such legislation, by furnishing motives of incalculable power to the corporations to stimulate it, and affording stability and security to the successful effort. Where, then, is the remedy for the people? They have none in their state government nor in themselves, and the federal government is enlisted by their adversary. It may be that an amendment of the constitution of the United States, by the proposal of two thirds of congress and the ratification of the legislatures of three fourths of the States, might enable the people of Ohio to assess taxes for the support of their government, upon terms of equality among her citizens.
The first observation to be made upon this is, that these extraordinary pretensions of corporations are not unfamiliar to an inquirer into their nature and history. The steady aim of the most thoroughly organized and powerful of the corporate establishments of Europe has ever been to place themselves under the protection of an external authority, superior to the government and people where they dwell-an authority sufficiently powerful to shield them from responsibility and to secure their privileges from question. I do not refer to the claim of kings to passive obedience under a divine title. Ecclesiastical corporations, acknowledging the supremacy of the Pope, afford a case parallel to that before us. I find their principles compendiously declared in an allocution of a minister of Rome to the court of Sardinia, in reference to taxes on church property there. I find that 'religious corporations, forming a portion of the ecclesiastical family at large, are by their very nature, under the guardianship and authority of the church; and, consequently, no measure or laws can be adopted with respect to them, except by the spiritual power, or through its agency, especially in what touches their existence or their conduct in the institutions to which they respectively belong; nor can any other rule be recognized, even in matters that concern their property. It is, in truth, beyond dispute that the property possessed by ecclesiastical or religious foundations belongs to the general category of property of the church, and constitutes a true and proper portion of its patrimony. In consequence whereof, as the property of the church is inviolable, so are the possessions of such foundations.' Nor was the doctrine of the inviolableness of contracts foreign to these controversies. The sagacious and far-sighted members of the ecclesiastical interests fortified themselves with concordats, and these concordats were affirmed to be 'contracts,' and, like these, 'entail obligations;' and 'if the bond of a bargain is to be respected in private life,' so they declared 'it is sacred and inviolable in the life of States.' A slight change of expression will demonstrate that the principle of corporate policy, the dictate of corporate ambition, which has predominated in the contests in Europe, leading to desolating wars, is the same which this court is required to sanction in favor of corporations in the United States. The allocution of the Ohio banks to this court may be thus stated: 'That the charters of incorporation granted by the state governments are in their essence and nature 'contracts,' which 'entail obligations;' that, consequently, they are finally under the guardianship and protection of the judiciary establishment of the United States; that no acts of the state legislature which conferred them, in whatever touches their existence, methods of proceeding, or corporate privilege, are binding on them; that, as the state legislatures are agents of the people, whatever they have done in these respects is obligatory upon them, and irrevocable by them, in any form of their action, or in the exercise of any of their sovereign authority; and as the judiciary establishment of the Union is charged with the duty of holding the States and people to their limited orbits, and to afford redress for violated contracts, and to prevent serious resulting damage; and as these corporations cannot sue in the courts of the United States, it is the duty of the court to suffer the corporate wrongs to be redressed in the suit and at the solicitation of any of their stockholders who can appear there-for the state of opinion in the state courts will not allow the hope of redress from them.'
The allowance of this plea interposes this court between these corporations and the government and people of Ohio, to which they owe their existence, and by whose laws they derive all their faculties. It will establish on the soil of every State a caste made up of combinations of men for the most part under the most favorable conditions in society, who will habitually look beyond the institutions and the authorities of the State to the central government for the strength and support necessary to maintain them in the enjoyment of their special privileges and exemptions. The consequence will be a new element of alienation and discord between the different classes of society, and the introduction of a fresh cause of disturbance in our distracted political and social system. In the end, the doctrine of this decision may lead to a violent overturn of the whole system of corporate combinations.
Having thus examined the proportions of the doctrine contained in the judgment of the court, I oppose to it a deliberate and earnest dissent.
And, first, as to the claim made for the court to be the final arbiter of these questions of political power, I can imagine no pretension more likely to be fatal to the constitution of the court itself. If this court is to have an office so transcendent as to decide finally the powers of the people over persons and things within the State, a much closer connection and a much more direct responsibility of its members to the people is a necessary condition for the safety of the popular rights. Justice Woodbury, in Luther v. Borden, 7 How. 52, has exposed this danger with great discrimination and force. He said: 'Another evil, alarming and little foreseen, involved in regarding these as questions for the final arbitrament of judges, would be, that in such an event all political privileges and rights would in a dispute among the people depend on our decision finally. We would possess the power to decide against them, as well as for them; and, under a prejudiced or arbitrary judiciary, the public liberties or popular privileges might thus be much perverted, if not entirely prostrated. And if the people, in the distribution of powers under the constitution, should ever think of making judges supreme arbiters in political controversies, when not selected by nor amenable to them, nor at liberty to follow the various considerations that belong to political questions in their judgments, they will dethrone themselves, and lose one of their invaluable birthrights-building up in this way slowly, but surely, a new sovereign power in this republic in most respects irresponsible, unchangeable for life, and one, in theory at least, more dangerous than the worst elective monarchy in the worst of times.'
The inquiry recurs, have the people of Ohio deposited with this tribunal the authority to overrule their own judgment upon the extent of their own powers over institutions created by their own government and commorant within the State? The fundamental principle of American constitutions, it seems to me, is, that to the people of the several States belongs the resolution of all questions, whether of regulation, compact, or punitive justice, arising out of the action of their municipal government upon their citizens, or depending upon their constitutions and laws, and are judges of the validity of all acts done by their municipal authorities in the exercise of their sovereign rights, in either case without responsibility or control from any department of the federal government. This I understand to be the import of the municipal sovereignty of the people within the State.
In 1802, the inhabitants of Ohio were released from their pupilage to the federal authority, placed in full possession of their rights to self-government, and were invited to adapt their institutions to the federal system, of which the State, when formed, was authorized to become a member.
The people of Ohio, by their state constitution, reserved to themselves 'complete power' to 'alter, reform, and abolish their government;' 'to petition for redress of grievances;' and to 'recur, as often as might be necessary, to the first principles of government.' It was by a constitution adopted according to established forms, and expressive of the sovereign will of the body politic, that the rule of taxation complained of in this suit was prescribed.
The inquiry arises, to what did the authority of the people extend? It was their right to ameliorate every vicious institution, and to do whatever an enlightened statesmanship might prescribe for the advancement of their own happiness; and for this end, persons and things in the State was submitted to their authority. A material distinction has always been acknowledged to exist as to the degrees of the authority that a people could legitimately exert over persons and corporations. Individuals are not the creatures of the State, but constitute it. They come into society with rights, which cannot be invaded without injustice. But corporations derive their existence from the society, are the offspring of transitory conditions of the State; and, with faculties for good in such conditions, combine durable dispositions for evil. They display a love of power, a preference for corporate interests to moral or political principles or public duties, and an antagonism to individual freedom, which have marked them as objects of jealousy in every epoch of their history. Therefore, the power has been exercised, in all civilized States, to limit their privileges, or to suppress their existence, under the exigencies either of public policy or political necessity.
Sir James McIntosh says: 'Property is indeed, in some sense, created by act of the public will, but it is by one of those fundamental acts which constitute society. Theory proves it to be essential to the social state. Experience proves that it has, in some degree, existed in every age and nation of the world. But those public acts, which form and endow corporations, are subsequent and subordinate. They are only ordinary expedients of legislation. The property of individuals is established on a general principle, which seems coeval with civil society itself. But bodies are instruments fabricated by the legislature for a specific purpose, which ought to be preserved while they are beneficial, amended when they are impaired, and rejected when they become useless or injurious.' Vind. Gal. 48, note.
Who, in the United States, is to determine when the public interests demand the suppression of bodies whose existence or modes or action are contrary to the well-being of the state?
If the powers of the people of a State are inadequate to this object, then their grave and solemn declarations of their rights and their authority over their governments, and of the ends for which their governments and the institutions of their governments were framed, and the responsibility of rulers and magistrates to themselves, are nothing but 'great swelling words of vanity.'
But not only is the jurisdiction of Ohio 'complete' over the public institutions of her government, but the subject-matter upon which their will was expressed in their constitution was independently of their control over the corporations, one over which their jurisdiction was plenary. They declared in what manner property held within the State by these artificial bodies should contribute to the public support, in the form of regular and apportioned taxation. When the constitution of the United States was before the people of the States for their ratification, they were told, that, with the exception of duties on exports and imports, the States retained 'an independent and uncontrollable authority' to 'raise their own revenue in the most absolute and unqualified sense;' and that any attempt, on the part of the federal government, to abridge them in the exercise of it, would be 'a violent assumption of power unwarranted by any clause of the constitution.' (Fed. 163, by Hamilton.) And the opinions of this court are filled with disclaimers on the same subject. 4 Wheat. 429.
The true principle, therefore, would seem to be, that if there was any conflict in the tax laws of the State, and a supposed contract of its legislative or executive agents with one of its citizens, it would be for the State to harmonize the two upon principles of general equity; but in no condition of facts for the judiciary department to interfere with state affairs by writs of replevin or injunction. The acknowledgment of such a power would be to establish the alarming doctrine that the empire of Ohio, and the remaining States of the Union, over their revenues, is not to be found in their people, but in the numerical majority of the judges of the court.
In the opinion I gave in the case of the Piqua Bank, I exhibited evidence that the care of the public domain, whether consisting of crown lands or of taxes on property, belonged to the sovereign power of the State, and that improvident alienations by the crown were, from time to time, set aside by the parliament of Great Britain under the dictates of a public policy. Twelve acts of parliament are cited by Sir William Davenant of this character, and having this object. Davenant, Grants and Res. 244.
A similar condition existed in France. The kings were bound, by their coronation oath, 'to maintain and preserve the public domain with all their power,' and it was an inviolable maxim, that it could not be alienated, except in specified cases determined in the fundamental laws of the monarchy. This legal result was declared by the national assembly in 1790, to the effect that the public domain, with all its accretions, belonged to the nation; that this property is the most perfect that can be imagined, since their exists no superior power that can restain or modify it; that the power to alienate-the essential attribute of property-exists in the nation; that every appropriation of the public domain is essentially revocable, if made without the consent of the nation; that it preserves over the property alienated the same right and authority as if it had remained under its control; and that this principle was one which no lapse of time nor legal formality could evade. All grants, therefore, of the public rights, and especially those partaking of the nature of taxes, or subsidies, such as fines, confiscations, and stamps, were revoked, because the subject was not alienable. 8 Merlin Rep., tit. Dom. Pub.; 1 Proud., Dom. Pub. 62.
If the power to review the illegal or improvident acts of a monarch, by which 'the domain and patrimony of the crown (one of the principal sinews of the State, as they are termed in the ordinances) was dilapidated or impoverished, in the nearly absolute monarchies of Europe, was reserved to the nation, it would seem to follow that in the American States, where so little has been conceded to the government, and whose 'complete power' to amend or abrogate is so distinctly reserved that no inference nor implication can arise, that the same has been relinquished or abdicated. My conclusion is, that the constitution of Ohio, whether it is to be regarded as the expression of the sovereign will of the people, that the extraordinary exemptions granted to these corporations, by which they contribute unequally to the public support, is contrary to the genius of their institutions; or whether they are inconsistent with a just apportionment of the public burdens; or whether, as a declaration of the exigency of the State, requiring an additional contribution from them to its revenue; or a judgment of condemnation of the former government for an abuse of the powers it enjoyed; that it is above and beyond the supervision or control of the judiciary department of this government.
Nor does the opinion, that this department can exert such an empire over the people of Ohio, derive support, in my opinion, from the clause in the constitution on the subject of the obligation of contracts, nor the decision of this court upon that clause of the constitution.
That the people of the States should have released their powers over the artificial bodies which originate under the legislation of their representatives, or over the improvident charges or concessions imposed by them upon its revenues, or over the acts of their own functionaries, is not to be assumed. Such a surrender was not essential to any policy of the Union, nor required by any confederate obligation. Such an abandonment could have served no other interest than that of the corporations, or individuals who might profit by the legislative acts themselves. Combinations of classes in society, united by the bond of a corporate spirit, for the accumulation of power, influence, or wealth, by the control of intercourse or trade, or the spiritual or moral concerns of society, unquestionably desire limitations upon the sovereignty of the people, and the existence of an authority upon which they can repose in security and confidence. But the framers of the constitution were imbued with no desire to call into existence such combinations, nor dread of the sovereignty of the people. They denied to congress the power to create, (3 Mad. Deb. 1576,) and the most salutary jealousy was expressed in reference to them. The people of the States, during the existence of the confederation, suffered from the violation of private property by their governments. In reconstituting their political system, they abstained from delegating to the United States the powers to emit bills of credit; to make any thing but gold and silver a tender in the payment of debts; to pass any bill of attainder or ex post facto law, or law to impair the obligation of contracts, except so far as necessary to a uniform law of bankruptcy; while they protected property from unreasonable searches and seizures, and the title from detriment, except in the due course of legal proceeding.
The state governments were prohibited from any corresponding legislation, either by their federal or state constitutions.
The power to interfere with private contracts is one of the most delicate and difficult, in its exercise, of any belonging to the social system, and one which there is constant temptation to abuse. That its exercise is sometimes necessary is proved by the history of every civilized State. Its judicious exercise constitutes the titles of Solon and Sully to fame, and has been vindicated by the most enlightened statesmen. But the people reserved to themsevles to determine the exigencies which should call it into existence. The prohibition is a limitation upon the ordinary government, and not upon the popular sovereignty. In Fletcher v. Peck, 6 Cr. 87, the chief justice doubted whether the repeal of a grant, issued under a legislative act by the executive of a State, was within the competence of the legislative authority; and notices the distinction between acts of legislation and sovereignty, and treats the clause of the constitution under consideration as an inhibition on legislation. In Dartmouth College v. Woodward, 4 Wheat. 518, 553, Mr. Webster presents the distinction with prominence in his argument. He says: 'It is not too much to assert that the legislature of New Hampshire would not have been competent to pass the acts in question, and make them binding on the plaintiffs, without their assent, even if there had been in the constitution of the United States, or of New Hampshire, no special restriction on their power, because these acts are not the exercise of a power properly legislative. * * * The British Parliament could not have annulled or revoked this grant as an ordinary act of legislation. If it had done it at all, it could only have been in virtue of that sovereign power called omnipotent, which does not belong to any legislature of the United States. The legislature of New Hampshire has the same power over the charter which belonged to the king who granted it, and no more. By the law of England, the power to grant corporations is a part of the royal prerogative. By the revolution, this power may be considered as having devolved on the legislature of the State, and it has been accordingly exercised by the legislature. But the king cannot abolish a corporation, or new-model it, or alter its powers, without its assent.' * * *
Chief Justice Marshall, in describing the jurisdiction of the court over such contracts, says, it belongs to it 'the duty of protecting from legislative violation those contracts which the constitution of the country has placed beyond legislative control.' And, in defining the object and extent of the prohibition, he says: 'Before the formation of the constitution, a course of legislation had prevailed in many, if not in all the States, which weakened the confidence of man in man, and embarrassed all transactions between individuals by dispensing with a faithful performance of engagements. To correct this mischief by restraining the power which produced it, the state legislatures were forbidden to pass any law impairing the obligation of contracts; that is, of contracts respecting property under which some individual could claim a right to something beneficial to himself.' These selections from opinions delivered in this court which have carried the prerogative jurisdiction of the court to its farthest limit, and portions of which are not easily reconciled with a long series of cases subsequently decided, (Satterlee v. Matthewson, 2 Pet. 380; Charles River Bridge, 11 Pet. 420; West River Bridge v. Dix, 6 How. 507; 8 How. 569, 10 How. 511,) show with clearness that this court has not, till now, impugned the sovereignty of the people of a State over these artificial bodies called into existence by their own legislatures.
I have thus given the reasons for the opinion that the constitution of Ohio and the acts of her government, done by its special authority and direction, are valid dispositions. It is no part of my jurisdiction to inquire whether these public acts of the people and the State were just or equitable. Those questions belong entirely to themselves.
It may be that the people may abuse the powers with which they are invested, and, even in correcting the abuses of their government, may not in every case act with wisdom and circumspection.
But, for my part, when I consider the justice, moderation, the restraints upon arbitary power, the stability of social order, the security of personal rights, and general harmony which existed in the country before the sovereignty of governments was asserted, and when the sovereignty of the people was a living and operative principle, and governments were administered subject to the limitations and with reference to the specific ends for which they were organized, and their members recognized their responsibility and dependence, I feel no anxiety nor apprehension in leaving to the people of Ohio a 'complete power' over their government, and all the institutions and establishments in has called into existence. My conclusion is, that the decree of the circuit court of Ohio erroneous, and that the judgment of this court should be to reverse that decree and to dismiss the bill of the plaintiff.
'I concur entirely in the preceding opinion of my brother Campbell.
'I also dissent, and concur with the conclusions of the opinion just read.'
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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