In Craig v. Missouri,4 decided in 1830, the Supreme Court was for the first time called upon to determine squarely what constitutes a "bill of credit" within the meaning of the constitutional prohibition. In this case was questioned the power of the State to issue certain interest bearing certificates, not declared legal tender, but receivable at the treasury of any of the loan offices of the State in discharge of taxes or payment of debts due to the State. Certain property of the State was pledged to their redemption, and the governor was authorized to negotiate a loan of silver or gold for the same purpose. These certificates, it was provided, might be loaned to citizens of the States upon real estate or personal security. These certificates, the Supreme Court held, Justices Thompson, M'Lean and Johnson dissenting, to be bills of credit, and as such illegally emitted. In his opinion Marshall says: "In its enlarged, and perhaps its literal sense, the term 'bill of credit' may comprehend any instrument by which a State engages to pay money at a future day; thus including a certificate given for money borrowed. But the language of the Constitution itself, and the mischief to be prevented, which we know from the history of our country, equally limit the interpretation of the terms. The word 'emit' is never employed in describing those contracts by which a State binds itself to pay money at a future day for services actually received, or for money borrowed for present use; nor are instruments executed for such purposes, in common language, denominated 'bills of credit.' To 'emit bills of credit' conveys to the mind the idea of issuing paper intended to circulate through the community for its ordinary purposes, as money, which paper is redeemable at a future day."
4 4 Pet. 410; 7 L. ed. 903.
Having adverted to the characteristics of the certificates in question, their denominations - from ten dollars to fifty cents - their receivability for taxes, etc., as indicating conclusively that they were fitted and intended for circulation as currency, the court next overrules the contention that they were not to be deemed bills of credit in the constitutional sense because not made legal tender. "The Constitution itself," it is declared, "furnishes no countenance to this distinction. The prohibition is general. It extends to all bills of credit, not to bills of a particular description."
In the case of Briscoe v. Bank of Kentucky5 was questioned the power of a State to charter a bank, of which the State was the sole stockholder, with the power of issuing notes payable to bearer on demand designed to circulate as money. The case was first argued just before the death of Chief Justice Marshall, and the issue of these notes by the bank was held to be, in effect, the issuance of bills of credit by the State itself. A rehearing being granted, however, and the case coming on for argument before the court presided over by Taney, the previous decision was reversed, and the notes held to be constitutionally issued. Justice M'Lean delivered the opinion of the court, saying: "To constitute a bill of credit within the Constitution, it must be issued by a State, on the faith of the State, and be designed to circulate as money. It must be a paper which circulates on the credit of the State, and is so received and used in the ordinary business of life. The individuals or committee who issue the bill must have the power to bind the State: they must act as agents, and of course do not incur any personal responsibility, nor impart, as individuals, any credit to the paper. These are the leading characteristics of a bill of credit, which a State cannot emit"
5 11 Pet. 257; 9 L. ed. 709.
Continuing, the court deny that the notes of the bank were issued by the State, or that they contained a pledge of the credit of the State. The fact that the State was the exclusive stockholder of the bank is held immaterial. Quoting from Bank of United States v. Planters' Bank6 the principle is declared that "the United States does not, by becoming a corporation, identify itself with the corporation." Upon the contrary, by becoming a partner in or the owner of stock of a trading company "it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to the company its privileges and prerogatives, it descends to a level with those with whom it associates itself." 7
In Darrington v. Bank of Alabama8 the doctrine of the Briscoe case was reaffirmed. In this case the State was not only the sole stockholder of the bank but had pledged its faith for the ultimate redemption of its notes. This, however, it was held, did not operate to transform the notes into state-emitted bills of credit for the reason that the bank had corporate property of its own which was primarily liable and sufficient for the payment of the notes. It was admitted that some reliance might have been placed upon the State's guaranty, but this liability, the court declared, was ' altogether different from that of a State on a bill of credit. It was remote and contingent, and it could have been nothing more than a formal responsibility if the bank had been properly conducted. No one received a bill of this bank with the expectation of its being paid by the State."
In the Virginia coupon case of Poindexter v. Greenhow9 the court held that interest coupons cut from bonds issued by the State and made receivable by the State in payment of taxes due it, were not bills of credit. Though promises to pay money, and the credit of the State pledged therefor, and receivable by the State for taxes, the coupons were not issued or emitted as a circulating medium or paper currency.
6 9 Wh. 904; 6 L. ed. 244.
7 A strong dissenting opinion was filed by Justice Story.
8 13 How. 12; 14 L. ed. 30.
9 114 U. S. 270; 5 Sup. Ct. Rep. 903; 29 L. ed. 185.
In Houston, etc., Ry. Co. v. Texas10 a warrant drawn by state authorities in payment of an appropriation made by the legislature for a debt due by the State and payable upon presentation if there should be funds in the treasury, was held not to be a bill of credit within the meaning of the constitutional prohibition.