MR. JUSTICE FIELD delivered the opinion of the court.
The plaintiff in error, who is the petitioner in the court below, is a citizen and resident of the city of Richmond, State of Virginia; and on the 5th of April, 1878, was indebted to the State for taxes to the amount of twenty-six dollars and fifty-three cents. On that day he tendered to the treasurer of Richmond — who is by law charged with the duty of collecting the taxes of the State in that city — certain interest coupons, which were overdue, amounting to twenty-four dollars, cut from bonds of the State, issued under the provisions of an act of the General Assembly, passed March 30, 1871, commonly known as the Funding Act, and two dollars and fifty-three cents in lawful money of the United States, in payment of the taxes; but the treasurer refused to receive the coupons in discharge of the taxes without first deducting therefrom the taxes upon the bonds to which they were originally attached. The petitioner holding the coupons was not at the time the owner of such bonds. Upon this refusal he applied to the Supreme Court of Appeals of Virginia for a writ of mandamus to the treasurer to compel him to receive the coupons, with the money mentioned, in full discharge of the petitioner's taxes, without any deduction from the coupons for the taxes upon the bonds.
The court issued a rule or an alternative writ upon the treasurer, to which he answered, that the General Assembly of the State had, for many years, exercised the right to tax all bonds, choses in action, and other evidences of debt, including bonds of the State; that the taxes assessed upon the latter bonds were according to their market value, the amount being fixed at fifty cents on the one hundred dollars of such value; that the law required the taxes to be collected when the interest on the bonds was paid, and made it a high penal offence for any officer to receive coupons in payment of taxes without deducting
The application was fully argued before the Supreme Court of Appeals by counsel for the petitioner, and by the attorney-general of the State for the treasurer. The judges of the court were equally divided in opinion upon it, and, as is usual in such cases, the application was denied, and judgment to that effect, with costs, was entered. To review this judgment the case is brought here on writ of error.
The principal question for determination, as thus seen, is the validity of the statute of the State requiring the tax levied upon its bonds to be deducted from the coupons for interest, originally attached to them, when the coupons are presented for payment, so far as it applies to coupons separated from the bonds and held by different owners.
To fully understand this question, it will be necessary to make a brief reference to the legislation of the State upon her indebtedness. But before doing this there is a question of jurisdiction to be considered. The judgment of the Supreme Court of Appeals being entered upon an equal division of opinion among its judges, it is argued that there is no such final adjudication of the State court as can be reviewed by this court.
The Revised Statutes, which express the statute law of the United States in force Dec. 1, 1873, provide, in sect. 709, — embodying substantially the provisions of the twenty-fifth section of the Judiciary Act of 1789, — that a final judgment or decree, in any suit, of the highest court of a State in which a decision could be had, may be re-examined by the Supreme Court of
Nor does it matter that the judgment was rendered in an original proceeding in the Supreme Court of Appeals of Virginia, and not in a case pending before that court on appeal. It is enough for our jurisdiction that the judgment is by the highest tribunal of the State in which a decision could be had in the suit. When such a judgment is brought before us for review, involving in its rendition a decision upon a Federal question, we do not look beyond the action of that court. It is enough that we have its final judgment in the case, whether it be one of original jurisdiction or heard by it in the exercise of its own appellate power over the inferior courts of the State.
We proceed, therefore, to consider the legislation of the State upon her indebtedness. A brief sketch of it will perhaps enable us better than in any other way to exhibit the question for our determination, and indicate the solution it should receive.
It appears from the statutes to which we are referred — and we know the fact as a matter of public history — that prior to the late civil war Virginia had become largely indebted for moneys borrowed to construct public works in the State. The moneys were obtained upon her bonds, which were issued to an amount exceeding $30,000,000. Being the obligations of a State of large wealth, which never allowed its fidelity to its promises to be questioned anywhere, the bonds found a ready sale in the markets of the country. Until the civil war, the interest on them was regularly and promptly paid. Afterwards the payments ceased, and until 1871, with the exception of a few small sums remitted in coin during the war to London for foreign bondholders, or paid in Virginia in Confederate money, and a small amount paid in 1866 and 1867, no part of the interest
In conformity with the doctrine thus stated by Halleck, both States — Virginia and West Virginia — have recognized in their Constitutions their respective liability for an equitable proportion of the old debt of the State, and have provided that measures should be taken for its settlement. The Constitution of Virginia of 1870 declared that the General Assembly should "provide by law for adjusting with the State of West Virginia the proportion of the public debt of Virginia proper to be borne by the States of Virginia and West Virginia," and should "provide that such sums as shall be received from West Virginia shall be applied to the payment of the public debt of the State." Art. 10, sect. 19.
The Constitution of West Virginia, which went into effect
But notwithstanding these constitutional requirements and various efforts made to adjust the liabilities of West Virginia, nothing was accomplished up to March 30, 1871, and it is stated by counsel that nothing has been accomplished since. As might have been expected, the position of Virginia was not a pleasant one, being charged with the whole indebtedness which accrued before the formation out of her territory of a new State, and entitled to, without being able to obtain, a contribution from the new State of a part of it, corresponding proportionately to her extent and population. She, therefore, undertook to effect a separate adjustment with her creditors, and for that purpose, on the 30th of March, 1871, passed an act known as the "Funding Act" of the State. It is entitled "An Act to provide for the funding and payment of the public debt." Its preamble recited that in the ordinance authorizing the organization of the State of West Virginia it was provided that she should take upon herself a just proportion of the public debt of the Commonwealth of Virginia, prior to Jan. 1, 1861, and that this provision had not been fulfilled, although repeated and earnest efforts in that behalf had been made by Virginia; and then declared that, "to enable the State of West Virginia to settle her proportion of said debt with the holders thereof," and to prevent any complications or difficulties which might be interposed to any other manner of settlement, and "for the purpose of promptly restoring the credit of Virginia, by providing for the certain and prompt payment of the interest on her proportion of said debt, as the same shall become due," the legislature enacted that the owners of the bonds, stocks, or interest certificates of the State (with a few exceptions) might fund two-thirds of the same and two-thirds of the interest due or to become due thereon up to July 1, 1871, in six per cent coupon or registered bonds of the State,
Under this act a large number of the creditors of the State, holding bonds amounting, including interest thereon, to about thirty millions of dollars, surrendered them and took new bonds with interest coupons annexed for two-thirds of their amount and certificates for the balance. A contract was thus consummated between the State and the holders of the new bonds, and the holders of the coupons, from the obligation of which she could not, without their consent, release herself by any subsequent legislation. She thus bound herself, not only to pay the bonds when they became due, but to receive the interest coupons from the bearer at and after their maturity, to their full amount, for any taxes or dues by him to the State. This receivability of the coupons for such taxes and dues was written on their face, and accompanied them into whatever hands they passed. It constituted their chief value, and was the main consideration offered to the holders of the old bonds to surrender them and accept new bonds for two-thirds of their amount.
In Woodruff v. Trapnall, reported in 10th Howard, a provision in an act of Arkansas, similar to this one, that the bills and notes of the Bank of the State of Arkansas, the capital of which belonged to the State should "be received in all payments of debts due to the State of Arkansas," was held to be a contract with the holders of such notes which was binding on
Yet notwithstanding the language of the act of March 30, 1871, providing that the interest coupons of the new bonds should "be receivable at and after maturity for all taxes, debts, dues, and demands due the State," and this was so expressed upon their face, the legislature of Virginia, less than one year afterwards (on the 7th of March, 1872), passed an act declaring that thereafter it should "not be lawful for the officers charged with the collection of taxes or other demands of the State" then due or which should thereafter become due "to receive in payment thereof anything else than gold or silver coin, United States Treasury notes, or notes of the national banks of the United States." This act, as seen on its face, is in direct conflict with the pledge of the State of the previous
These decisions of the Federal and 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, received for all taxes due the State to their full amount. On the 25th of that month, the legislature passed an act providing that from the interest payable out of the treasury on bonds of the State, whether funded or unfunded, there should be retained a tax equal in amount to fifty cents on the one 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 collection of taxes, to deduct from the matured coupons which might be tendered to him in payment of taxes, or other dues to the State, such tax as was then or might thereafter be imposed on the bonds. The act, in terms, applied to all bonds of the State, whether held by her own citizens or non-residents and citizens of other States or countries. In 1874, the legislature modified this provision so that the tax on the bonds should not be retained from the interest paid on them, when they were the property of non-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. It is the validity of this provision requiring the tax levied on the bonds to be deducted from the coupons held by other parties, when tendered in payment of their taxes or other dues to the State, which is presented for our determination.
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 v. Charleston (96 U.S. 432) there are many pertinent and just observations on this subject which it is not material to repeat, for the question is not necessarily involved in the disposition of the case before us. Whatever may be the wise rule — looking at the necessity in a commercial country for its prosperity that its public credit should never be impaired — as to the taxability of the public securities, it is settled that any tax levied upon them cannot be withheld from the interest payable thereon. Such was the decision of this court in Murray v. Charleston. There the city had issued certificates of stock, whereby it promised to pay to the owners thereof certain sums of money, with six per cent interest, payable quarterly. Subsequently it imposed a tax of two per cent on the value of all property within its limits for the purpose of meeting the expenses of its government; and, treating its 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 due thereon. To recover the amount thus retained, which was one-third of the interest stipulated, suit was brought. The city defended its 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 of the city, its obligation to its creditors was impaired, and, however great its power of taxation, it must be exercised, being a political agency of the State, in subordination to the inhibition of
In Clark v. Iowa City we had occasion to speak of bonds of municipal bodies and private corporations 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 a century. Coupons for different instalments of interest are usually attached to such bonds in the expectation that they will be paid as they mature, however distant the period fixed for 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 bonds are cancelled or paid before maturity, nor their negotiable character, nor their ability to support separate actions... . They then possess the essential attributes of commercial paper, as has been held by this court in repeated instances. 20 Wall. 583, 589.
Here, also, the coupons held by the petitioner 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 a stranger 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.
We are clear that this act of Virginia of 1876 (sect. 117), requiring the tax on her bonds, issued under the Funding Act of March 30, 1871, to be deducted from the coupons originally attached to them when tendered in payment of taxes or other dues to the State, cannot be applied to coupons separated from the bonds, and held by different owners, without impairing the contract with such bondholders contained in the Funding Act, and the contract with the bearer of the coupons. It follows that the petitioner was entitled to a writ of mandamus to compel the treasurer of the city of Richmond to receive the coupons, tendered to him in payment of taxes due the State, for their full amount.
The judgment of the Supreme Court of Appeals denying the writ must, therefore, be reversed, and the case remanded for further proceedings in accordance with this opinion; and it is
I dissent from the judgment of the court. In addition to the general proposition which I have always maintained, that no legislature of a State has authority to bargain away the State's right of taxation, I am of opinion that in issuing the bonds and coupons which are the subject of this controversy the legislature of Virginia, neither in terms nor by any just inference, made any contract that the bonds and coupons should not be subject to the same taxes as other property taxed by the State.