Opinion ID: 1794502
Heading Depth: 1
Heading Rank: 4

Heading: The Constitution of 1870

Text: The political background is relevant and significant. [16]
The legislature convened in Nashville on October 4, 1869. It acted with dispatch. It adopted a resolution [17] on November 15, 1869, submitting the question of calling a convention to a vote of the people in a special election to be held on December 18, 1869. The election was conducted, delegates selected, and thereafter the convention met on January 10, 1870, in the Davidson County Courthouse in Nashville. [18] We presume the courthouse was selected as the convention site in view of the fact that the legislature was in simultaneous session during the entire course of the convention. The basic and underlying purpose of the convention was the restoration of the citizenship of thousands of Tennesseans disqualified under Parson Brownlow's franchise acts. [19] Notwithstanding the emotionally charged political atmosphere, this convention was marked by restraint. In fact, it has been said that the true policy was to do as little as possible. [20] Delegate A.O.P. Nicholson, later Chief Justice of this Court, sounded the key-note: Let us be careful; let us do no more than is absolutely necessary. In ten years from now all this must be done again. [21] There seems to be a unanimity among historians that this convention of seventy-five Tennesseans was, probably, the most intellectual body of men ever assembled in Tennessee for any purpose. [22] Major General John C. Brown, of Giles County, who served as governor from 1871 to 1875, was elected as chairman. His older brother, former Governor Neill S. Brown, was an influential member of the convention. David M. Key, who succeeded Andrew Johnson in the United States Senate, served as Postmaster-General under President Hayes, and became a United States District Judge in 1800, was another outstanding member of the convention. Other distinguished members included future Governor James D. Porter, Joseph B. Heiskell, a former member of the Confederate Congress and afterwards Attorney General of Tennessee (See Volumes 48-59, Tennessee Reports); and Chancellor Henry R. Gibson, famed author of Gibson's, Suits in Chancery. The most distinguished delegate was probably A.O.P. Nicholson. He served in the Senate of the United States and as the first Chief Justice under the Constitution of 1870. Such was the leadership of the 1870 Convention. While the primary purpose of that convention was political and few changes of major importance were made in the Constitution of 1834, a significant change was made in the constitutional provision relating to interest. The conventional interest law of 1859-1860 had been repealed, but conventional interest continued as a critical issue. On November 4, 1869, after the introduction of a bill to establish a conventional rate of interest, Representative R.B. Cheatham addressed the House of Representatives. His remarks are reported verbatim in the November 5, 1869 issue, of the Nashville Union and American, page 1, and constitute a most forceful argument in favor of the law. We quote a portion: ... Money is worth in the market whatever it will bring. Laws saying it shall only be worth six per cent. do not fix its price; and no licensing or penal regulations can govern the price, or restrain the sale at whatever price it may bring... . It is evident that our laws prohibiting money to be loaned, and contracts to be made at any higher rate of interest than six per cent. has been for years, and is still, not only preventing foreign capital from coming into Tennessee, but has driven out, and is continually driving millions of our capital into other States with more liberal laws, and forcing it into investments which are non producing. Money to-day in our own midst, and in every State surrounding us, is worth from 8 to 12 per cent. per annum, and is so recognized by all classes. The farmer, the trader, the manufacturer cannot get it at 6 per cent., the price fixed by law. They have ceased to expect it. They do not ask it. Being unable to borrow it from private individuals or from estates of any kind on any kind of security, on account of the usury laws as they exist, they are forced to go into the bank on paper inconveniently short, or to go to shavers who are compelled, on account of these same laws, to exact exorbitant rates. This argument, like the Joint Committee report of 1859, has a familiar ring and one that continues to be sounded today. Representative Sadler of Robertson County addressed the House of Representatives in opposition to the bill. His remarks are reported on page 1, Nashville Union and American, November 27, 1869. In obvious reference to Caruthers v. Andrews, supra, Mr. Sadler said: I am aware of a decision of the Supreme Court on the old ten per cent. law that has been acknowledged by an eminent lawyer in this house to be at least a doubtful decision, and there is no good lawyer but will acknowledge, when we have a strong bench, this decision may be reversed. On December 4, 1869, the Nashville Union and American published an editorial endorsing the conventional interest law. After reviewing the report of the Joint Committee of the 1859-1860 legislature, the editorial reads: What was true of this State ten years ago, is equally so to-day. Money is worth more than six per cent, not only in Tennessee but in every State of the Union. .. . Again, on February 6, 1870, the Nashville Union and American editorially urged passage of the conventional interest law. The editorial recognizes the argument that a conventional interest law is unconstitutional and counters it by extensive quotation from Caruthers v. Andrews, supra. Thus, it appears that conventional interest was extensively debated prior to and during the time the Constitutional Convention and the legislature were deliberating.
We have examined the Journal of the Constitutional Convention of 1870 in an effort to determine the intent of the convention. The matter of interest rates was the subject of many motions. On February 21, the Journal reflects that the Convention adopted Article 11, Sec. 6 as amended, giving the Legislature power to pass a conventional rate of interest not to exceed ten per centum per annum. [23] This operated to complete the formulation of the present provision. On Wednesday morning, February 23, 1870, the Convention proceeded in a body and presented the enrolled copy of the Constitution to the Governor. [24] In its final form Article 11, Section 7, read as follows: The Legislature shall fix the rate of interest, and the rate so established shall be equal and uniform throughout the State; but the Legislature may provide for a conventional rate of interest, not to exceed ten per cent. per annum. [25] In summary, it appears from the proceedings of the Convention that the delegates, in order: a. rejected an amendment giving the legislature the power to fix a conventional rate of interest; b. rejected an amendment authorizing a rate of ten per cent for loaned money; c. rejected an amendment fixing a legal rate of interest at 6 per cent with the legislature fixing a conventional rate; d. rejected a committee report containing a proposed section under which the rate was fixed at 6 per cent but made lawful any rate agreed upon by the parties, inserted in a written contract, not to exceed 10 per cent; e. adopted Article 11, section 6, Constitution of 1834 (the first clause of Article 11, section 7, Constitution of 1870); f. adopted an amendment: but the Legislature may provide for a conventional rate of interest; g. adopted an amendment providing that the Legislature shall have no power to enact any law allowing a higher rate of interest than ten per cent. per annum; and h. adopted an amendment giving the legislature power to pass a conventional rate of interest not to exceed ten per cent. These proceedings, in orderly progression, combined to produce the final version of Article 11, section 7 of the Constitution.
We think that the language used, in the context of the statutory and decisional law, public debates, and public documents, leading up to its adoption compels these conclusions: a. The legislature must fix a rate of interest. b. The rate so fixed must be equal and uniform throughout the state. c. The legislature may provide for a conventional rate of interest. d. A conventional rate of interest must not exceed ten per cent. All legislative enactments must yield to this, our basic charter, and must be tested against these plain provisions. Statutory enactments relating to usury are of only passing relevance. The Constitution contains no provision against usury except that which is implicit in the second clause of Article 11, section 7. We set to rest, at this point, the suggestion so often heard that our Constitution fixes a ten per cent limitation on interest. This is a misconception. The legislature, under the first clause of Article 11, section 7, may fix any legal rate of interest it deems proper. It is not required to fix a conventional rate. We point out that no part of Article 11, section 7, is self-executing. If, however, the legislature elects to fix a conventional rate of interest it is limited to ten per cent. Our Constitution contains the conventional interest clause and the phrase conventional interest had a particularized legal significance in 1870 and that meaning has not changed. See supra, Sec. III e. Again, the distinction between conventional and legal rates of interest is crucial. We recognize the insistence that the insertion of a fixed limitation in a constitution or other basic charter, and thus constitutionalizing with fixed rigidity, matters better left to statutory flexibility, violates recognized principles. Indeed, this has been said to be the chief criticism of the 1870 Constitution by most scholars. [26] This contention harmonizes with Justice Cardozo's statement in The Nature of the Judicial Process, 83 (1921), that a constitution states or ought to state not rules for the passing hour but principles for an expanding future. Thus, under this view it is the duty of a constitutional convention to achieve a balance between the demands of stability and the need for change. Be this as it may, the second clause of Article 11, section 7 is in our Constitution. Its meaning is plain; our duty is clear. We shall enforce it.