The Valley Virginian. [volume] (Staunton, Va.) 1865-1895, 1881-02-10

r
priation Of portion of the revenue, derive
from taxation, to the payment Of exstr
! debts; and such Legislation could not ]
4 deemed great stretch of power when tt
] organic law Of the State not only contemplat,
the pqnctual annual payment of the interest
her entire debt, but imperatively required, O
the creation of debt, that sinking fun
! should be at once established, to be apple
solely to its extinction. The organic law thu
not merely authorized but, required the Legi.
lature which created the debt to bindal fntllt
Legislatures by the establishment ofa fund t
| be applied solely to the extinction of the deb
And rs to the objection that such legslatio
| might and probably would result in crippln
| the power and resources of the State in tim
OF war Or other great calamity, the court sal
| that legislation cannot well be adapted in ad
vance to extraordinary and exceptional cases
that such cases will occur at all times with al
nations, and must be provided for bv the wis
dom and prudence of the government for til
time being. AT such tlme however," sal,
the court, in words full of wisdom, "the hon
ored name and high credit secured to a Stat
by unbroken faith, even in adversely, will
apart from all other considerations, be wortl
more to her in dollars-inealenlably more
than the comparatively insignificant amour
OF the interest on portion OF the puslic deb
thus expressed a great truth, which all ius
men appreciate, that there is no wealth OF
power equal to that which ultimately comes
TO Il State when in all her engagements she
keeps her faith unbroken.
These decisions of the Federal ana State
courts dispose substantially of the question
presented in the case at bar The act OF March.
1872, being held to be invalid, the coupons
were subsequently and until March, 1873, re-
ceived for all taxes due the State to their full
amount. On the 25tll of that month the Legis-
lature passed an act providing that from the
interest payable out of the treasury on bonds
of the State, whether funded or unfnnded,
there should be retained tax equal in amount
to fifty cents Oh the hundred dollars of their
market value on the first day in April of each
year, and made it the duty of every officer of
the Commonwealth charged with the collec-
ton of taxes, to deduct from the matured
coupons which might be rendered to him in
payment OF taxes, or other dues to the State
such tax as was then ormight thereafter he im-'
posed ON the bonds. The act in terms
applied to all bonds of the State, whether
held by her own citizens or non-resi.
dents ana citizens ofother States or countries
In 1874 the Legislature modified this provision
so that the tax on the bonds should not be re-
tanned from the interest paid on them when
they were the property ofnon-residents of the
Commonwealth. But this exemption was
omitted in the act OF 1876 providing for the
assessment of taxes in the State, in which, the
provision of the act of 1873 was inserted. 1t
is the validity of this provision, requiring the
tax LEVIED on the bonds to be deducted from
the coupons held by other parties when ten
dered In payment of their taxes or other dues
to the State, which is presented for our de-
The power of the State to impose tax up
on her own obligations is a subject upon which
there has been a difference of opinion among
jurists and statesmen. On the one hand, it
has been contended that such tax is in CON
filct with and contrary to the obligation AS
sumed; that the obligation to pay certain
sum is inconsis tent with a right, at the same
time, to retain a portion of it in the shape of
a tax, and that to impose such a tax is. there
fore, to violate the promise of The Govern
Hamilton on the Public Credit in
in his works, Sd VOL. PIP 514 to 51S).
On the other hand, it is urged that the bonds
OF every State are property in the hands of its
creditors, and, as such, that they should bear a
due proportion of the public burdens. In the
case of Murray uS. Charleston (96 U. s., 445)
there are many pertinent and just observa-
tons on this subject which it is not material TO
repeat, for the question is not necessarily in
v0lved in the disposition of the case before us
Whatever may be the wise rule-looking at
the necessity IN a commercial country tor its
that lis public credit should never
be impaired-as TO the taxability of the public
ii is settled that any tax levied upon
them cannot be withheld from the interest
payable thereon. Such was the decision Of
his court in Murray as Charleston. There the
3ity had issued certificates of stock, whereby
it promised to pay to the owners thereof Ger
ain sums of money, with 6per cent. interest.
payable quarterly. Subsequently it imposeda
tax of per cent. on the value of all property
W thin its limits for the purpose of meeting
lhe expenses of its government; and, treating
It's stock as part of such property, directed
that the tax assessed upon it should be retained
by the treasurer OF the city from the interest
lue thereon. TO recover the amount thus re-
ained, which was one-thrd of the interest
stipulated, suit was brought. The city de-
Tended lis action on the ground that the tax
On the stock was not higher than the tax on
all other property of its citizens, and that all
property in the city was subject to taxation
but the court answered that, by the legislation
nf the city, its obligation TO its creditors was
impaired, and, however great its power of tax
alton, it must he exercised, being political
agency of the State, in subordInation to the
of the Federal Constitution against
legislation impairing the obligation of con
tracts. Until the interest was paid, no act of
the State or of its political subdivisions, eXer-
csing legislative power by its authority, could
work an eXoneratiOn from what was prom
Used to the creditor. This decision would be
decisive here, but the present case is still
stronger for the creditor The funding act
made the bonds issued under it, payable to
order or bearer, and made the coupons payable
to bearer. They were 50 far distinct and
contracts that they could be
from each other and transferred to
different hands.
In Clark rs Iowa City we had occasion to
speak of bonds of municipal bodies and private
having similar coupons, and the
language there used is applicable here. We
said that most of such bonds ARE issued in
order to raise funds for works of large extent
and cost, and their payment is, therefore, made
at distant periods, not unfrequently beyond a
quarter OF q century. Coupons for different
instruments of interest are usually attached 10
such bonds in the expectation that they will
be paid as they mature. however distant the
period fixed tor the payment of the principal
These coupons, when severed from the bonds
are negotiable and pass by delivery. They
then cease to be incidents of the bonds, and
become in fact Independent claims; they do
not lose their validity if for any cause the
DOHue dlc ClH'tliCI VI paul boioiS iildtul II y =,
nor their negotiable character, nor their ability
to support separate actions. They then
possess the essential attriou of commercial
paper, as has been held by this court in re-
peated instances "-(20 Wall, 500.
Here, also, the coupons held by the petition
er were distinct contracts imposing separate
obligations upon the State. He was not the
owner of the bonds to which they had been
originally attached. In his hands they were
as free and discharged from all liability on
those bonds as though they had never been
connected with them. And surely it is not
necessary to argue that an act which requires
the holder of one contract to pay the taxes
levied upon another contract held by stran-
ger cannot be sustained. Such an act IS not a
legitimate exercise of the taxing power; it
undertakes to impose upon one the burden
which should fall if at ALL upon another.
The funding act stipulated thai the coupons
should be receivable for all taxes and dues to
the State-that is, tor taxes and dues owing
by the holders of the coupons, and for their
full amount; and upon this pledge the holders
of the bonds of the State surrendered them and
took new bonds for two thirds of their amount
The act of 1876 declares that the coupons shall
not be thus received for taxes and dues owing
BY the holders of them for their full amount but
only for such portion as may remain after a
tax subsequently levied upon the bonGs to
which they were originally attached is de
Quoted, though the bonds be held by Other
parties If this act does not impair the con
tract with the bondholder-who was author
ized tn transfer to others the cOupOns with