Piqua Bank v. Knoup, Treasurer.

conflict with the constitution of the United States can arise, upon which the action of the judicial power of the United States can be invoked. If the sixtieth section of the bank law constituted a contract, or a material provision in a contract, binding the state not to interfere with it by amendment or repeal, there could be no ubt but that the tax law of 1851, repealing it, impaired its obligations. But the whole controversy involved in this case, was one touching the existence of any such contract; and this depended exclusively upon the construction to be given to the state law, and the powers conferred upon the legislature by the state constitution, which, according to the well-settled doctrine of the Supreme Court of the United States, belonged peculiarly and exclusively to the Supreme court of the state. And the Supreme Court of the state having given the judicial construction to this local law, and determined that no such contract actually existed, no question of conflict with the constitution of the United States could arise, unless the Supreme Court of the United States could first invade the province of the state court, and overrule its decision, giving a construction to the state law, and the constitutional powers of the legislature under the state constitution.

It is an undeniable fact that the existence, effect, and validity of contracts depend greatly upon the local laws of the state where made. The legality of the subject-matter of contracts-the essen443] tial legal form and requisites-the *competency of the parties -the manner of the discharge, etc., must all be left within the range of state legislation, subject only to the qualification, that when a valid contract has been made, and actually exists, according to the legal construction and effect of the laws of the state, no law can be passed by the state impairing the obligations by which the parties have bound themselves. Whether the terms and conditions of the contract exist by parol agreement, into which the parties have entered, or by written contract, to which they have subscribed their names, the fact of the existence of the contract must appear in the proof; or, if the contract can arise from the effect or operation given by judicial construction to a statute law, that construction, according to judicial comity between states and nations, and according to the settled adjudications of the Supreme Court of the United States, must be the construction given to the law by the judicial power of the state in which it was enacted.

Now, the Supreme Court of the state, by formal and solemn ad

1

Piqua Bank v. Knoup, Treasurer.

judication, gave a construction, in this respect, to the bank law of 1845, and especially to the sixtieth section of the law, and thus finally settled the question, that no contract, such as that alleged, actually existed; and also, that, under the constitution of the state, the legislature had no authority to make any such contract. See Toledo Bank v. Bond, 1 Ohio St. 623; also, Debolt v. The Ohio Life Insurance and Trust Company, Ib. 564. These are the only adjudications by the Supreme Court of the state ever made, giving a judicial construction in this respect to the bank law of 1845.

The learned judge of the Supreme Court of the United States, who delivered the opinion of the majority of the court in the case before us, in reference to this law, remarks (16 Howard, 381): [444 "Up to the year 1851, I believe, the banks, the profession, and the bench considered this as a contract, and binding upon the state and the banks !"

And it appears that the venerable chief justice of that court, based his opinion in the case, entirely upon the ground, that a uniform construction, by every department of the state government, such as that referred to by Judge McLean, had prevailed in Ohio for many years. And the case of The State v. The Commercial Bank of Cincinnati, 7 Ohio, 125, is referred to in the opinions of both these judges, as the foundation for this conclusion. Now, it so happens, that this decision of the Supreme Court of Ohio, had no reference whatever to the construction of the bank law of 1845, which was enacted many years after this decision was made; and besides, it does not appear, in the report of that case, that the question was even brought to the consideration of the court, whether the constitution of the state contained any grant of power which authorized the legislature, by contract or stipulation, either to limit the legislative control of the state over existing laws, by amendment or repeal, or to abridge the exercise of the legislative power over the right of taxation. In the case of the Toledo Bank v. Bond, above cited, this decision, in 7 Ohio, is fully examined, and the absurd doctrine, that a law granting a charter to a private corporation, is a contract, is fully exposed. In reference to this case of the Commercial Bank of Cincinnati, Mr. Justice Catron, in his very able, dissenting opinion, in the case before us, remarks (16 Howard, 400):

"The state, in that case, raised no question as to the right of oaʊ

Piqua Bank v. Knoup, Treasurer.

legislature to cede the sovereign power to a corporation, and tie up the hands of all subsequent legislatures: no such constitutional question entered into the decision; nor is any allusion made to it 445] in the opinion of the court. It merely construed the acts of the assembly, and held that a contract did exist, on the ground that, by the charter, the bank was taxed four per cent.; and, therefore, the charter must be enforced, as this rate of taxation adhered to the charter, and excluded a higher imposition.

"It would be most unfortunate for any court, and especially for this one, to hold that a decision affecting a great constitutional consideration, involving the harmony of the Union (as this case obviously does), should be concluded by a decision in a case where the constitutional question was not raised by counsel; and so far from being considered by the court, was never thought of. Such a doctrine is altogether inadmissible."

And it may be added that not only was the question of the con-stitutional power of the legislature of Ohio to abridge or surrender, in part, any of its high trusts of power by contract, neither presented nor decided in that case; but the question of the statutory construction of the bank law of 1845, different in its provision, in relation to taxation, from the special charter of the Commercial Bank, was not before the court, and the consideration of it wholly impossible at that time. And even the concession, that the charter of a private corporation is a contract, by no means determines that the 60th section of the bank law of 1845 was a contract, or a stipulation in a contract.

The venerable chief justice of the Supreme Court of the United States gave his reasons for the jurisdiction assumed in this case (16 How. 393), by adopting what he said in the case of the Ohio Life Insurance & Trust Company v. Debolt, where, in relation to this question (16 How. 433), he said:

"It is very true that if there was any controversy about the construction and meaning of the act of 1851, this court would adopt the construction given by the state court. And if that construction did not impair the obligation of a contract as interpreted by this court, there would be no ground for interfering with the judgment. For then the contract, as expounded here, would not be impaired by the state law. But if we were bound to follow not only the interpretation given to the law, but also to the instrument claimed to 446] be a contract, and alleged to be violated, there would be nothing left for the judgment and decision of this court. There would be nothing open which a writ of error or appeal could bring here for consider

Piqua Bank v. Knoup, Treasurer.

ation and judgment; and the duty imposed upon this court under this clause of the constitution would, in effect, be abandoned."

Verily, if there was no contract, there could have been no occasion for this solemn duty imposed on that august tribunal! And most certainly, great stretch of authority would be warranted to prevent the direful consequences of "having nothing left for the judgment and decision of that court" in such a case! But the inquiry must be indulged, how would "the high duty imposed upon that court under this clause of the constitution be abandoned," by following the construction given to this statute of Ohio by the state court? If there was no contract, there could be no conflict with the constitution, and of course no duty in that respect imposed on that court. Is it a part of the "high duty" of that court to create constructive or fictitious contracts with a view to protect corporations in their exclusive privileges? Has this prohibitory clause of the constitution nothing in view but to protect the charters of corporations? Very true it is, that there was no controversy about the construction of the law of 1845. That which the chief justice called, "the instrument claimed to be a contract," is the bank law of 1845! And why should the federal court be more disinclined to adopt the construction, given by the state court to the law of 1845, than that of the law of 1851, both being state laws. The reason is given by the chief justice, in the calamitous event, which he said would follow: "There would be no ground for interference,"" nothing left for the judgment and decision of the federal court,"—" there would be nothing open which a writ of error could bring up for the consideration *and judgment of the federal court!" This would be a most [447 disastrous calamity, and the result would be that the banks would be compelled to bear an equal burden of taxation in Ohio. The doctrine of the federal court amounts to this: that it is the peculiar and exclusive province of the state court to give the judicial interpretation and construction to the constitution and statutes of the state; but that the Supreme Court of the United States is charged with the great conservative duty of preventing the obligations of contracts from being impaired by state laws, and as incident thereto of protecting the charters of corporations from violation by state. legislation. And in the exercise of this great conservative power over the obligations of contracts, that court will assume the power to construe a state law contrary to the construction given to it by

Roxborough v. Messick et al.

the Supreme Court of the state, when necessary to its protecting charge over the privileges and immunities of corporations.

In conclusion, I must be allowed to say, with all proper deference for the opinion of the majority of this court, that I am wholly unable to conceive how this appellate power of the supreme federal court can be admitted in this case, without conceding to the fullest extent, the supremacy of that tribunal in the determination of the extent of its supervisory power over the state courts. A subordinate court can not be allowed to determine the extent of the jurisdiction or power of a superior and appellate court.

I insist that this obedience to the mandate of the federal court is not justified by precedent under the present constitution in this state, at least. This is the first motion ever made in this court for such a proceeding, and for some three years, the determination of it has been delayed by a division of opinion in the court on the 448] question. And if such mandates *were ever entered, or followed by the Supreme Court of this state, under the former constitution, it was when the question of the power of the federal court was not raised.

Under the full conviction, therefore, that the judgment of the Supreme Court of the United States in this case, was coram non judice, and that it is a high duty, which we owe to the sovereignty of the people of Ohio, to disregard it, I must be allowed, with all due respect for the opinion of the majority of this court, to enter my solemn dissent against the entry of the mandate, and the action of this court in conformity thereto.

CHARLES A. ROXBOROUGH v. JOHN W. MESSICK ET AL.

When the note of a third person is transferred, bona fide, before due, as collateral security, and for value, such as in consideration of a loan, or advancement, or a stipulation, express or implied, of further time to pay a pre-existing debt, or in consideration of a change of securities of a preexisting debt, or the like, the holder of such collateral will be protected from infirmities affecting the instrument before it was thus transferred. But when a debt is created, without any stipulation for further security, and the debtor afterward, without any obligation to do so, voluntarily transfers a negotiable instrument, to secure the pre-existing debt, and both parties are