Front Page Titles (by Subject) CHAP. II.: WHAT BANK CHARTERS ARE UNCONSTITUTIONAL. - The Shorter Works and Pamphlets of Lysander Spooner vol. I (1834-1861)
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CHAP. II.: WHAT BANK CHARTERS ARE UNCONSTITUTIONAL. - Lysander Spooner, The Shorter Works and Pamphlets of Lysander Spooner vol. I (1834-1861) 
The Shorter Works and Pamphlets of Lysander Spooner vol. I (1834-1861) (Indianapolis: Liberty Fund, 2010).
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WHAT BANK CHARTERS ARE UNCONSTITUTIONAL.
If the principles of the foregoing chapter are correct, then all bank-charters, and other acts of incorporation, which would relieve the stockholders from the full liability incurred by the terms of their contracts, are unconstitutional, as impairing the obligation of contracts. Such are most of the bank charters, and other acts of incorporation, in this country.
But it will, perhaps, be said that such charters are themselves contracts—and that their obligation, therefore, cannot be impaired.
For the sake of the argument it may be admitted that a charter is a contract—but it does not follow that it is one having an “obligation.” To decide whether any contract have an obligation, we must determine whether the contract be, in itself, just or unjust, moral or immoral.
Some charters are merely an authority to the corporators to use a corporate name in their dealings and contracts, and in suing and being sued—the corporators still remaining liable, as partners, to the extent of their means, for the debts of the company. To the constitutionality of such charters, there is probably no ground of objection.
But the other kind of charters profess to guaranty to individuals the immunities, (to a certain extent,) of a joint, incorporeal, intangible being. They declare that these individuals shall, in certain contingencies, be deemed to be such a being. And the object is to protect them severally in the non-performance of their joint contracts. Now it is obviously impossible for legislation to create such a being, or entity, as it here professes to do. For, after all, who are “The President, Directors and Company” of a bank, but real bona fide men, who, in making contracts, consult their own interests like other men—who are as competent as other men to make contracts, and who, so far as the obligations of justice are concerned, are as much responsible for their acts, as if they had never passed through such an operation as that of being fictitiously transformed into an unreal being. Now, it is to be observed, as has been already suggested, that the whole object and effect (if any) of this legislative legerdemain, is to give to these individuals an immunity against all personal liability for the contracts they may make. The question now is, whether this “contract,” or pledge, on the part of the state, that these individuals shall be regarded, in law, as an imaginary, incorporeal being, or rather as so many imaginary, incorporeal beings, and that they shall be held irresponsible, as men, for the contracts they may enter into, is an obligatory contract?
Perhaps this question cannot be better answered, than by asking another. Suppose, then, a legislature, for the purpose of enabling them to perpetrate their crimes with impunity, should assume to incorporate a gang of burglars, and to guaranty to them all the immunities, such as intangibility, irresponsibility &c, that would pertain to a joint incorporeal being. Would such a charter be an “obligatory contract?” Clearly not. But would it not be as obligatory as one that should pledge to men the privilege of contracting debts, without the liability of being held to pay them?
A bank charter, then, of the kind now under discussion, so far as it is in the nature of a “contract,” is a mere agreement, on the part of the state, to screen men against their just liability for their debts. In their character of “contracts,” then, these charters are void—void for the same reason that all immoral contracts are void, viz, that] justice does not require their fulfilment.
Suppose a legislature should say to a single individual, who was worth fifty thousand dollars, “Sir, If you will invest ten thousand dollars of your money in mercantile, manufacturing, or agricultural business, you shall be allowed to issue unconditional promises to pay to the amount of three times the sum you invest, and if your enterprize prove successful, you shall have all the profits—but if it prove unsuccessful, you shall lose only the ten thousand dollars which you intended to risk, and we will then protect you in refusing to pay your creditors the other twenty thousand, which you shall have promised them—and you may then retire to indulge your dignity on the forty thousand dollars that will still remain to you.” Is there a man in the whole country, that would not declare such a contract to be a nefarious and swindling agreement, destitute of “obligation?” Void for immorality? Yet such are most of our bank charters. All the difference is, that in a bank charter, the agreement is with twenty, or an hundred men, instead of one.
Bank charters, of this kind, then, are void in their character of “contracts.” They are also void in their character of laws. They are unconstitutional as impairing the obligations of the contracts made by the company. They declare that the absolute promises, that may be entered into by the individuals, composing the company, to pay money, shall not, in law, be held to be absolute promises, but only promises to pay in a certain contingency—that is, in the contingency that they can be fulfilled without requiring more money than the individuals were willing to risk when they made the contract. The charters, then, impair the obligation of contracts, by making those promises contingent, which in their terms are absolute.
If a state law can declare that certain obligatory promises to pay money, shall be void in the contingency of their payment requiring more money than the promissors intended to put at risk, (a contingency not mentioned in the contracts the themselves,) it may equally declare that contracts shall be void in any other contingency whatever—in the contingency, for instance, of a hail-storm, or a thunder-shower.
But it will, of course, be said that the promises of a banking company are made, by the company, in their joint, incorporeal, intangible capacity. The answer to this argument is, that this idea of a joint, incorporeal being, made up of several real persons, is nothing but a fiction. It has no reality in it. It is a fiction adopted merely to get rid of the consequences of facts. An act of legislation cannot transform twenty living, real persons, into one joint, incorporeal being. After all the legislative juggling that can be devised, “the company” will still be nothing more, less or other, than the individuals composing the company. The idea of an incorporeal being, capable of carrying on banking operations, is ridiculous. The theory of one incorporeal being is not, and cannot be, consistently sustained throughout the various doings of the company. For instance, when the agents of the company, the President and Cashier, enter into contracts on behalf of the company, to pay money, they act under the dictation of the stockholders, voting severally and individually, as so many distinct and real persons, though a committee of their number, called directors. The making of the contract, then, is the act of real persons—and necessarily must be, for no others can make contracts. But no sooner does their liability for their contracts come in question, than these real persons claim that they have been resolved, by law, into an imaginary, intangible, and purely legal being. So also when the profits of their contracts are to be received and enjoyed, these same stockholders, who authorised the contracts to be made in their name, appear in their real, bona fide, corporeal nature, to receive those profits, and put them in their pockets. But in that moment when the fulfilment of their contracts comes to be demanded, presto! they have all vanished into an incorporeality. There is nothing left of them, but a “legal idea!”
Now does not a law, which allows men to make contracts in their proper persons, and would then screen them from all personal liability on those contracts, by giving them the liberty to shroud themselves, at pleasure, in a fictitious, incorporeal, intangible nature—does not such a law “impair the obligation of their contracts?” Or is this fictitious nature a sufficient plea in bar of the promises they have personally made?
Suppose the Constitution of the United States had declared that “no State should pass any law impairing a man’s right to be protected against burglars.” And suppose a state should then incorporate a company of burglars, by a charter that should guaranty to them full liberty to commit burglary, in concert, in their own proper persons, and then authorize them severally to plead a joint, incorporeal, fictitious, intangible nature, in bar of an indictment by the grand jury. Would not such a charter be void, as being a law prohibited by the constitution? Or would it really be a good plea for these burglars to say, “we committed our crimes, it is true, in our own proper persons; but it was, nevertheless, in our joint, incorporeal, irresponsible capacity, and of course we cannot be held liable to such corporal responsibility and punishment, as are justly incurred by those vulgar burglars, who are not thus privileged in the commission of their offences?” The case is a fair parallel to that of a bank charter.
If such bank charters are valid, their effect is to give to individuals the advantage of two legal natures—one favorable for making contracts, the other favorable for avoiding the responsibility of them, when made. Another effect is, to convert an unconditional promise, of individuals, to pay money, into a mere promise to pay, provided they should not choose to refuse to pay—or provided they should not choose to transform themselves into a joint, fictitious, incorporeal, and non-debt paying, being.
Perhaps it will be said that these bank charters are public acts, and that the public must be presumed to have known of them, and to have trusted the company only to the extent of their chartered liability. The answer is, that the public must also be presumed to have known that any state law, which assumes to screen men from the responsibility incurred by the terms of their contracts, is unconstitutional—and that they must therefore be presumed to have trusted the company on the strength of their promise, without any regard to any unconstitutional law, that would convert an unconditional promise into a contingent one. No man can legally be presumed to have trusted another with reference to a void law, not named in the contract.
If companies or individuals wish to limit their liability on their promises, the limitation must be expressed in the contracts themselves—and not in a law, which, if it lessen the liability expressed in the contract, impairs the obligation of the contract.
Perhaps it will be said that the terms of a bank promise—which are that “the President, Directors and Company of a Bank, promise to pay,” &c—necessarily imply that the promise is a conditional one, limited by the amount of funds already deposited in the joint treasury. But such is not a true or natural construction of the contract. An act of incorporation does not, necessarily, attempt to limit the personal liability of the members of the company. It may, and often does, only grant them the privilege of making contracts, and being known in law, under a corporate name and style, to save them the inconvenience of repeating the several names of the whole company—they being all the while liable, as partners, to the extent of their private property. The promise, therefore, of a “Company,” to pay money, if unconditional in its terms, carriés with it no necessary implication of any limited responsibility on the part of the individuals composing the company. They all join in an absolute promise; and the presumption of law must be, that both they and the public knew that the liability, incurred by such a promise, was unconditional also.
If these views be correct, the owners of bank stock, and the members of all other incorporations, are liable, in their private property, as partners, on the promises of their respective companies—and even a transfer of their stock does not relieve them from any liabilities incurred while they were stockholders—and the rich stockholders of every insolvent corporation may be sued, and made to pay.
If the foregoing principles are correct, I suggest whether they are not a sufficient objection to the constitutionality of a bank of the United States—or at least to that feature of its charter, which would limit the liability of the stockholders for the debts they may contract among the people, in their capacity of bankers. Congress has no direct authority to pass any law impairing or limiting the obligation of men’s contracts, or screening their property from the operation of state laws, unless it be a “uniform law on the subject of bankruptcies throughout the United States.” A bank charter does not come within the definition of such a law, and therefore it is unconstitutional, unless some other authority for it can be shown.
In the case of M’Culloch and Maryland, (4 Wheaton), the supreme court of the United States affirmed the constitutionality of a bank—but the grounds on which they affirmed it, by no means support the conclusion. The grounds, on which the question was decided, were, that Congress had authority to “pass all laws that were necessary and proper for carrying into execution” the substantive powers of the government—and that, therefore, if a corporation were a convenient and proper agent to be employed in collecting and disbursing the revenues of the government, Congress had a right to create such an agent by an act of incorporation. This doctrine all looks reasonable enough, and it is probably correct law that congress may incorporate a company, and authorize them to do, in their corporate capacity, any thing which they are to do for the government. And congress may undoubtedly limit, at discretion, the liability which the stockholders shall incur to the government. And the company may probably, in their corporate capacity, buy and sell bills of exchange, so far as it may be convenient to do so, in making the necessary transmissions of the public funds from one point of the country to another—because bills of exchange are the most usual safe, cheap and expeditious mode of transmitting money.
But all this is a wholly different thing from a charter authorizing the company, not only to perform these services for the government, but also to carry on the trade of bankers, in all its branches, and contract debts at pleasure among the people, without being liable to have payment of their debts enforced, either according to the natural obligation of contracts, or the laws of the states in which they live. The principles of the decision itself do not justify the grant of any such authority to the company. Those principles go only to the extent of authorizing the company to use their corporate rights in doing the business of the government alone—for the court say, that if an agent be needed to perform certain services for the government, the government may create an agent for that purpose. The court admit also, that the necessity of such agent for carrying into execution the powers of the government, is the only foundation of the right to create the agent. This principle evidently excludes the idea of creating the corporation for any other purpose—and of course it excludes the right of giving it any other corporate powers than that of performing the services required by the government. Now in order that the company may collect, keep and disburse the revenues, (which are the only services the government requires, or which the decision of the court contemplates that the bank will perform), it plainly is not at all necessary that they should also have the privilege of contracting debts among the people, as bankers, in their corporate capacity, or under a limited liability, or with an exemption from the operation of those state laws, to which all other citizens are liable. If congress may, by a charter, thus protect the private property of a company of bankers, from liability for their banking debts, according to the laws of the States, merely because, in addition to their banking business, they perform for the government the service of collecting and disbursing its revenues, then, by the same rule, congress may by law forbid the state governments to touch the private property of any collector of the customs, or of any clerk in the custom house, for the purpose of satisfying his debts. And the result of this doctrine would be, that every person, who should perform the slighest service of any kind for the government, might be authorized by congress to contract private debts at pleasure among the people, and then claim the protection of Congress, not merely for his person, but also for his property, against the state laws which would enforce the obligation of his contracts. Every postmaster, for instance, and every mail-contractor might have this privilege granted to them, as part consideration for their services—for Congress have the same right to grant this privilege to postmasters and mail-carriers, in consideration of the particular services they perform for the government, as they have to grant it to a company of bankers, as a consideration for their collecting and disbursing the general revenues of the government. There is no difference, in principle, between an act incorporating a company of mail-carriers, with banking powers, and an immunity against their debts, and one incorporating, with like powers and immunities, those who collect and disburse the revenue.
Suppose that Congress, in consideration of the engagement of a certain number of men to carry the mail between such and such points, should assume to incorporate them for that purpose—and, under cover of that pretence, should licence them also to carry on the additional business of common carriers of passengers and merchandize, and, in that capacity, to extend their business throughout the several states at pleasure, and contract debts among the people, with an immunity against both the natural obligation of their contracts, and the laws of the States for the collection of debts—is there a man who would not say that such a charter was unconstitutional? No. Nor is there a man who can point out the difference, in principle, between such a charter, and the charters of the banks of the United States.