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Briscoe v. Bank of Commonwealth of Kentucky
 | |
| Briscoe v. Bank of Commonwealth of Kentucky | |
| Reference: 36 U.S. 257 | |
| Term: 1837 | |
| Important Dates | |
| Argued: Jan 29-Feb 1, 1837 Decided: February 11, 1837 | |
| Outcome | |
| Kentucky Court of Appeals upheld | |
| Majority | |
| Philip Pendelton Barbour • Roger Brooke Taney • John McLean • James Moore Wayne | |
| Concurring | |
| Henry Baldwin • Smith Thompson | |
| Dissenting | |
| Joseph Story | |
Briscoe v. Bank of Commonwealth of Kentucky is a case decided on February 11, 1837, by the United States Supreme Court holding that the state of Kentucky could issue banknotes without violating the U.S. Constitution's clause that forbids states from issuing bills of credit.
Why it matters: The Supreme Court's decision in Briscoe departed from court precedent and allowed states to establish their own banks to compete with the national bank. To read more about the impact of Briscoe v. Bank of Commonwealth of Kentucky click here.
Background
The state of Kentucky, on November 29, 1820, established the Bank of the Commonwealth of Kentucky and authorized it to circulate state banknotes. The bank's officials were selected by the Kentucky legislature and its stock was owned entirely by the state. All state funds were deposited into the bank and the state loaned banknotes which could be used to pay state taxes.[1][2]
John Briscoe asked for a loan from the bank and received payment in banknotes. He later defaulted and the bank sued him to collect the debt. Briscoe argued that the banknotes were bills of credit and prohibited by Article I, Section 10, clause 1 of the Constitution which reads:
| “ | No state shall coin money, emit bills of credit, or make any thing but gold and silver coin a tender in payment of debts. | ” |
Briscoe argued that because the bank violated the United States Constitution he did not have to pay his debt. He argued that the banknotes were the same as bills of credit because they were pieces of paper that only had value because of the state's full faith and credit.[4]
Henry Clay represented the Bank of the Commonwealth of Kentucky and argued that the decision in Craig v. Missouri, in which the US Supreme Court ruled 4-3 that loan certificates issued by the state of Missouri were unconstitutional bills of credit, did not apply to this case. Clay argued that the bank was not part of the state but instead a separate corporation.[4]
The Kentucky Supreme Court ruled that the bank was constitutional and the case was originally argued before the U.S. Supreme Court in 1835. The court did not reach a decision because of the vacancy created by Justice Gabriel Duvall's resignation. Later that year, Justice John Marshall died and the court did not issue a decision. The case was later taken up by the U.S. Supreme Court in 1837. The only justice remaining from the court in 1835 was justice Joseph Story who dissented in Briscoe.[5]
Oral argument
Oral argument was held from January 29, 1837 through February 1, 1837. The case was decided on February 11, 1837.[6]
Decision
The Supreme Court decided 6-1 that the state bank notes issued by the Bank of the Commonwealth of Kentucky did not violate the Constitution.
Justice John McLean wrote the majority opinion and was joined by Justice Philip Pendelton Barbour, Chief Justice Roger Brooke Taney, and Justice James Moore Wayne.
Justices Smith Thompson and Henry Baldwin wrote concurring opinions.
Justice Joseph Story wrote a dissenting opinion.
Opinions
Majority opinion
Justice John McLean wrote the 6-1 majority opinion for the US Supreme Court. The first issue that Justice McLean addressed was the definition of "bills of credit." After considering the definition of bills of credit by the different justices in Craig v. Missouri, Justice McLean argued that the loans from the Bank of the Commonwealth of Kentucky were not state bank notes because they were not issued by a state, but by a corporation separate from the state. He wrote, "The definition, then, which does include all classes of bills of credit emitted by the colonies or states, is a paper issued by the sovereign power containing a pledge of its faith and designed to circulate as money."[2]
Next, Justice McLean considered whether the notes of the Bank of the Commonwealth of Kentucky were bills of credit within the meaning of the U.S. Constitution. McLean wrote that "the main grounds on which the counsel for the plaintiffs rely is that the Bank of the Commonwealth, in emitting the bills in question, acted as the agent of the state, and that consequently the bills were issued by the state." McLean argued that although a state may not issue and circulate its own currency, it may establish or incorporate a bank "for the attainment of those objects which are essential to the interests of society." He argued that a number of other states established banks at the time of the adoption of the U.S. Constitution, and they were not outlawed upon the ratification of the U.S. Constitution. Justice McLean argued that the banknotes at the time of the founding were not considered bills of credit.[2]
Finally, Justice McLean considered whether the banknotes in question were circulated by the state. He argued that the banknotes were not issued by the state, but by the president and directors of the bank. Additionally, he argued that the banknotes in question contained no pledge of faith of the state in any form and that the funds in the bank were only partially supplied by the state.[2]
McLean's majority opinion held that although the banknotes in question could be construed to be bills of credit, the banknotes were not issued by the state and were not valued on the basis of the full faith and credit of the state. Furthermore, the majority ruled that the incorporation of the Bank of the Commonwealth of Kentucky was a constitutional exercise of power by the state of Kentucky. Because the banknotes in question were not circulated directly by the state, Justice McLean ruled that they were constitutional.[2]
Concurring opinions
Baldwin's concurrence
Justice Baldwin wrote a lengthy concurring opinion and explained why he concurred with the US Supreme Court's opinion in Craig v. Missouri and Briscoe. He argued that the state of Missouri was pledged for the payment of the paper bills in Craig v. Missouri, but that was not the case in Briscoe:
| “ | I also concur with the opinion of the Court in this case that these notes cannot be deemed to have been emitted by the state, and have no desire to add any views of my own on this part of the case, my object being to defend my own peculiar position as to the definition of a bill of credit, according to the true interpretation of the first sentence of the tenth section of the first article of the Constitution. | ” |
Thompson's concurrence
Justice Thompson argued that the banknotes in question were not bills of credit under the definition of the U.S. Constitution, but, unlike the majority, he argued that the Bank of the Commonwealth of Kentucky was a creature of the state:
| “ | If I considered these bank notes as "bills of credit" within the sense and meaning of the constitutional prohibition, I could not concur in opinion with the majority of the Court that they were not emitted by the state. The state is the sole owner of the stock of the bank, and all private interest in it is expressly excluded. The state has the sole and exclusive management and direction of all its concerns. The corporation is the mere creature of the state, and entirely subject to its control, and I cannot bring myself to the conclusion that such an important provision in the Constitution may be evaded by mere form. | ” |
Dissenting opinion
Justice Joseph Story wrote a dissenting opinion and argued that the bank was part of the state government and that the state banknotes were unconstitutional forms of state currency. He argued that the bank was part of the state because it was "the sole and exclusive instrument of the State, managing its exclusive funds, for its exclusive benefit and under its exclusive management." Because he believed the bank was the exclusive instrument of the state, he argued that the Bank of the Commonwealth of Kentucky, when issuing bills of credit, violated the U.S. Constitution's prohibition against states issuing bills of credit.[2]
Impact
| Federalism |
|---|
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| •Key terms • Court cases •Major arguments • State responses to federal mandates • Federalism by the numbers • Index of articles about federalism |
The U.S. Supreme Court's opinion in Briscoe v. Bank of Commonwealth of Kentucky established that state banks could issue banknotes and loans without violating the U.S. Constitution as long as the bank was not controlled by the state government.[2]
The opinion in Briscoe showed that The Taney Court differed from The Marshall Court with regard to the issues of federalism and banking. The Marshall Court case McCulloch v. Maryland, for example, had previously ruled that Congress has the constitutional authority to establish a bank and that states cannot interfere with the federal bank.[2]
The holding of Briscoe no longer has any effect because the National Banking Acts, passed in 1863 and 1864, established a system of national banks and created the United States National Banking System. These acts established a federal banking system and served as the predecessor to the Federal Reserve Act of 1913. The U.S. Federal Reserve System created federal reserve banks to regulate a uniform currency for the United States and precluded the ability for states to establish banks and competing currencies.
See also
External links
- Full text of case syllabus and opinions (Justia)
- Supreme Court of the United States
- Search Google News for this topic
Footnotes
- ↑ Landmark Decisions of the United States Supreme Court, Paul Finkleman & Melvin I. Urofsky, Pages 45-48, accessed November 8, 2022
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 JUSTIA, Briscoe v. Bank of Commonwealth of Kentucky, accessed November 8, 2022
- ↑ 3.0 3.1 3.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ 4.0 4.1 Constituting America, Briscoe v. Bank of Kentucky, accessed November 8, 2022
- ↑ Archive, Monetary Decisions of the Supreme Court, accessed February 17, 2023
- ↑ Oyez, Briscoe v. Bank of Commonwealth of Kentucky, accessed November 9, 2022
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