This case lies within narrow limits. The question to be decided arises under the Constitution of the United States. The ground of the discussion has been well trodden by our predecessors. Little is left for us but to apply the work of other minds. The facts are agreed by the parties, and may be briefly stated.
The Union and Planters' Bank of Memphis was duly organized under a charter granted by the Legislature of Tennessee, by two acts, bearing date respectively on the 20th of March, 1858, and the 12th of February, 1869. Since its organization, it has been doing a regular banking business. Its capital stock subscribed and paid in amounts to $675,000, divided into six thousand seven hundred and fifty shares of $100 each. Farrington, the plaintiff in error, was, throughout the year 1872, the owner of one hundred and fifty shares, of the value of $15,000.
The tenth section of the charter of the bank declares 'that the said company shall pay to the State an annual tax of one-half of one per cent on each share of the capital stock subscribed, which shall be in lieu of all other taxes.'
The State of Tennessee and the county of Shelby claiming the right, under the revenue laws of the State, to tax the stock of the plaintiff in error, assessed and taxed it for the year 1872. It was assessed at its par value. The tax imposed by the State was forty cents on the $100, making the State tax $60. The county tax was $1.20 on the $100, making the county tax $180.
The plaintiff in error denies the right of the State and county to impose these taxes. He claims that the tenth section of the charter was a contract between the State and the bank; that any other tax than that therein specified is expressly forbidden; and that the revenue laws imposing the taxes in question impair the obligation of the contract. The Supreme Court of the State adjudged the taxes to be valid. The case was thereupon removed to this court by the plaintiff in error for review.
A compact lies at the foundation of all national life. Contracts mark the progress of communities in civilization and prosperity. They guard, as far as is possible, against the fluctuations of human affairs. They seek to give stability to the present and certainty to the futur . They gauge the confidence of man in the truthfulness and integrity of his fellowman. They are the springs of business, trade, and commerce. Without them, society could not go on. Spotless faith in their fulfilment honors alike communities and individuals. Where this is wanting in the body politic, the process of descent has begun, and a lower plane will be speedily reached. To the extent to which the defect exists among individuals, there is decay and degeneracy. As are the integral parts, so is the aggregated mass. Under a monarchy or an aristocracy, order may be upheld and rights enforced by the strong arm of power. But a republican government can have no foundation other than the virtue of its citizens. When that is largely impaired, all is in peril. It is needless to lift the veil and contemplate the future of such a people. Trist v. Child, 21 Wall. 441; 1 Montesquieu's Spirit of Laws, 25. History but repeats itself. The trite old aphorism, that 'honesty is the best policy,' is true alike of individuals and communities. It is vital to the highest welfare.
The Constitution of the United States wisely protects this interest, public and private, from invasion by State laws. It declares that 'no State shall. . . pass any . . . law impairing the obligation of contracts.' Art. 1, sect. 10. This limitation no member of the Union can overpass. It is one of the most important functions of this tribunal to apply and enforce it upon all proper occasions.
This controversy has been conducted in a spirit of moderation and fairness eminently creditable to both parties. The State is obviously seeking only what she deems to be right. The judges of her own highest court, whence the case came here, were divided in opinion.
Contracts are executed or executory. A contract is executed where every thing that was to be done is done, and nothing remains to be done. A grant actually made is within this category. Such a contract requires no consideration to support it. A gift consummated is as valid in law as any thing else. Dartmouth College v. Woodward, 4 Wheat. 518. An executory contract is one where it is stipulated by the agreement of minds, upon a sufficient consideration, that something is to be done or not to be done by one or both the parties. Only a slight consideration is necessary. Pillans v. Van Mierop, 3 Burr. 1663; Forth v. Stanton, 1 Saund. 210, note 2, and the cases there cited.