USA > Kentucky > History of Kentucky, Volume II > Part 13
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The political situation had also caused many people to leave the dis- turbed land for other states and for the unoccupied territories, perhaps menaced by Indians, but not so dangerous a place to be as Kentucky. Robert Wickliffe said: "Miserable indeed is the picture of this once proud, once happy Commonwealth-Your capitol in ruins, and here we are legislating and Judge breaking, in an old church, your Mr. Speaker perched in its pulpit, and the Senate pent up in a school house closed up in a cell, treading on each other's toes, like stock in a muddy pound [sic ]." 105
State finances had steadily decreased, until in 1823 a deficit of more than $33.000 existed. The next year saw it beyond the $35,000 mark. In 1822 there had been a surplus of almost $55,000.106 Governor Desha called for retrenchment in the state's expenditures, especially by cutting the salaries of its officials.107
101 Considerations on Some of the Matters to be Voted on * * * at the next Session of the General Assembly of Kentucky. * *
Pamphlet, 34, 35.
* (Louisville, 1824),
102 Niles' Register, Vol. 29, p. 147. To this, Niles adds, "This is what I have always said was the inevitable result of the paper system and relief laws; and the worst of all is, that those descriptions of persons, whom such proceedings cause the removal of, are those which new and thinly settled states can hardly spare-the free productive classes."
103 Niles' Register, Vol. 28, p. 91.
104 Liberty Saved, 7, 8.
105 Lafayette to the People, 58.
106 Niles' Register, Vol. 23, pp. 225, 226, Vol. 27, 198.
107 Message to the Legislature November 7, 1825, in Niles' Register, Vol. 29, pp. 222, 223.
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While Kentucky was running the gamut of hier follies she could not hope to escape criticism from without. The newspapers of the Eastern States leveled many a shaft at her, and the merchants of Philadelphia deliberated on more than criticism. Kentuckians owed them debts, but replevin laws were delaying their payment. Some believed that they were planning to have Congress or the United States courts intervene. At any rate the Philadelphia merchants drew the rejoinder from the relief party that they had profiteered in the War of 1812, while Ken- tuckians were marching against the enemy.108 The editor of the Ken- tucky Gasette was quick to defend his state against outside attacks: "It is now more than four years since the people of Kentucky through their representatives determined to be ruled according to the principles of the government and the natural rights of mau. Imprisonment for debt has been abolished, the fangs of aristocracy have been loosened from the jaws of thousands ready to fall victims to the laws and customs of the darkest ages of the world; sentiments have been advocated which do honour to the state." 109 Governor Desha was also willing to publish to the world that the people still ruled in Kentucky and that he was willing to compare conditions there, "either local, nioral or political, with that of all other nations." 110
Kentuckians were deserving as much of sympathy and pity as of censure and railings. Desperate situations required desperate remedies. A people who had grown up in a wilderness had known more of fighting the enemy than of dealing with complicated financial problems. That they would commit grave blunders might well be expected, that they would profit by then might also well be expected. That they did profit well is abundantly shown in their subsequent history.
108 Kentucky Gazette, Aug. 1, Oct. 17, 1822.
109 Dec. 11, 1823.
110 Message to the Legislature November 7, 1825, in Niles' Register, Vol. 29, p. 219.
Vol. II-6
CHAPTER LI
STATE RIGHTS VERSUS THE UNITED STATES BANK AND COURTS: THE OCCUPYING CLAIMANT LAWS
During the period following the War of 1812, when Kentucky was busily turning her efforts toward solving the multifarious problems that were rapidly presenting themselves and when she was boldly setting out on financial and political courses she had never traveled before or knew little about, she soon found standing in her way the authority of the Federal Government. This interference was expressed through the Fed- eral banks and courts. Just as she had already resented and was des- tined yet to bitterly resent and attack an opposition that grew up within her own borders, so also did she follow up Federal interference with equally persistent hostility. State rights soon came to be a cry as far flung as relief and state banks, and the passions of the people became as fiercely stirred up over this subject as any other. But this was not a hostility that might look toward secession as a remedy, as was thought of in earlier days. The conspiracies and allurements of foreign nations were forever forgotten. Rather now would she assert her own interpre- tation of Federal powers when they affected her, and strongly hint that she might back up her interpretations with force if circumstances should develop to such a point as to demand it. The distempers of this decade in Kentucky history were such as might easily breed an exaggerated notion of the state's powers when they should conflict with the Federal Government. This was, however, a development of the times not peculiar to Kentucky alone. In this same general period, for one reason or another, most states of the Union had periods of violent antipathy toward the Federal Government, generally directed specifically against the judiciary.
The Second United States Bank was responsible for the beginning of the state rights movement here. Immediately after the close of the War of 1812, this bank had been set up for the purpose of bringing some order out of the chaos of national finances. Although it had been strenuously opposed a few years ago by all good democrats in Kentucky, and John Pope had been almost ostracized for supporting it, while Clay's popu- larity was greatly increased for opposing it, now it was generally looked upon as a beneficent institution, sure to spread happiness and prosperity to any region so fortunate as to secure one of its branches, and Clay was praised still more for having supported it in the last instance. A Ken- tuckian assigning himself the patriotic number of "'76" wrote in the Kentucky Gazette: "We cannot but congratulate ourselves and the coun- try at large upon the prospects of the early operations of this institution.
"Whatever difference of opinion formerly existed as to the renewal of the charter of the old United States Bank, there is at present in Ken- tucky almost an undivided sentiment of approbation in favour of the Bank recently chartered by Congress.
"Who will not gladly hail the measure which shall reanimate and give new life to our palsied and rotten paper system?" 1 There was
1 July 15, 1816.
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considerable rivalry among the towns of the state in their efforts to secure branches. Louisville and Lexington were finally chosen as the seats for the two branches awarded Kentucky.
In an amazingly short time after these institutions were set going. the beautiful dreams of Kentuckians having their pockets bulging with crisp United States bank notes and prosperity smiling over the land were rudely upset. The United States banks did not see fit to use bank- ing principles current in Kentucky, and thereby began their unpopularity. They soon began to work against indiscriminate loans and to bring about a contraction of the currency by gathering up and presenting large quan- tities of state bank notes for payment. Their efforts were directed against speculation along all lines. Therefore did they fail to fulfill a single purpose the Kentuckians had in mind. They were not only not spreading prosperity, but by their strict practices were producing the opposite, and within a short while had so operated on the currency of the state that Governor Adair declared not a note of the United States bank was circulating throughout the state. "The depreciated currency of the states," he said, "was regarded as an evil of dangerous tendency -- and the more so as it was one which the states could not speedily eradi- cate. A national bank, with a capital sufficient to furnish a national cur- rency, was proposed and adopted as a prompt and efficient remedy. Has it answered the proposed end? Does it afford a circulating medium for the Union? Whilst it crushed beneath its ponderous weight every feeble corporation and displaces the notes of the specie paying banks within the sphere of its operations, are its notes anywhere to be found except in the great emporiums of trade, or in discharging the silent and impov- erishing operations of exchange?" 2 Hostility was now fast arising against this financial tyranny which had crept into the state like a thief in the night. Governor Desha said it was "an union of local interests operating upon the public councils," that "directly invited or silently tolerated the location of two branches of the United States Bank within our borders." 3
In less than three years after the branches had been set up the people of the state had indebted themselves to them for more than $2,500,000. How this could be paid with no United States bank notes circulating in Kentucky was a problem to one of the Kentucky papers: "This is the trifling sum which the people of Kentucky are called upon to pay in specie; for the notes of these branches have long since vanished. Indeed. we believe that all the U. S. Bank paper, bank of Kentucky paper and specie circulating in the state, would not be sufficient to redeem this debt. The discounts alone which are paid on this sum every month amount to upwards of thirteen thousand dollars."4 The branches, in their pro- cedure to collect their debts, soon came into possession of much land and other property, and thereby "filled the land with tenantry."
Kentuckians thought too much of their rights of self-government and the continued possession of their own wealth to tolerate a foreign bank tyranny. These money monsters should at least be made to pay for their raids on the people's property. In 1818 a tax of $400 annually was put upon the two branches. But it was immediately seen that this was worse than no remedy, for the amount was insignificant-only enough to set up the principle of taxing the bank, without the slightest effect on driving it out of the state or affording the state revenue from its operations. The tax was, therefore, very soon increased to $5,000 per month on each branch. The purpose was clearly shown of driving the banks from the state, for it could not have been believed that they could pay a tax of
2 Message to legislature October 16, 1821 in Niles' Register, Vol. 21, p. 185.
3 In message to legislature, November 7, 1825, in Niles' Register, Vol. 29, p. 219.
4 Quoted in Niles' Register, Vol. 15, p. 385.
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$120,000 a year; but, indeed, if they should submit to the principle and pay the tax, the state could almost afford to tolerate any tyranny the banks could institute in return for so large a sum of money for the state treasury.5 This extraordinary measure not only excited the strong opposition of the branch banks themselves, but roused up numerous other enemies over the state. They saw in it a direct clash between the author- ity of the state and the nation, which might lead to serious results. A person signing himself "Hambden" declared the scheme was nothing more or less than an attempt to array the state against the nation just as much so and just as reprehensibly as the Hartford convention had done in war days.6 John H. Todd wrote Crittenden that a tax on the banks would likely be a very unwise move, and that even if Kentucky had the right to impose such a burden, it would be dangerous. He said: "I believe it inexpedient and somewhat perfidious to impose such a tax, be- cause the Bank was invited here by a resolution of the Senate of the State & called for by the wishes of the people; it deposited a large cap- ital here, the diffusion of which is calculated to enhance the value pros- perity of our country, to facilitate the conveniences of trade, to promote our agricultural interests, to encourage manufactures and above all to give us a current & general medium. Such conduct is calculated to excite collision between the State & Genl. Govt. not friendly to the interests of either." 7
The banks, as was to be expected, refused to pay the tax, thereby incurring severe penalties. The Lexington branch applied to the District Court for an injunction to stop the execution of the law, claiming that it was unconstitutional, as it was designed to drive the banks from the state. The court refused to consider the constitutionality of the Kentucky statute, as the United States Supreme Court was expected soon to hand down a decision covering this point. It did, however, grant a temporary injunction restraining the state from collecting the tax and also requir- ing the bank to give security to the amount of $40,000 not to take its funds out of the state until the question was settled.8 The Supreme Court handed down its epoch-making decision in the case McCulloch versus Maryland, in which it upheld the right of Congress to charter the Bank of the United States and the right of the bank to set up branches in the several states. But no state might tax such branches, for such a right would be incompatible with the right of Congress to set the bank up in the first instance, since the power to tax is the power to destroy. The further principle was set up, however, that, just as the state might not tax an instrumentality of the nation, so the nation might not tax the instruments of a state government. The Kentucky Court of Appeals accepted this decision in the determination of cases involving these points as should have been expected, but in so doing it stirred up much unfavor- able comment.
Many Kentuckians now for the first time began to feel in an exasper- ating manner the restraining power of the Federal Government. The Kentucky Herald railed at the tyranny that had saddled Kentucky and the West with a monster of iniquity, unwelcomed by them, unknown to the Constitution, and unknown to themselves except through its oppres- sive acts. It declared that the bank had taken from the poor and given to the rich, that it had paralyzed manufactories, brought in foreign lux- uries, transported specie across the mountains, and driven the state banks into practices that were ruining the state. It seemed the state had no
5 Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 179.
& Kentucky Gazette, April 30, 1819.
7 Crittenden MSS., Vol. 2, Nos. 189, 190. Letter dated February 4, 1818.
8 McMaster, History of the People of the United States, IV, 504, 505. Also see Niles' Register, Vol. 15, P. 436.
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powers left worth while. Were it not better that she should give up her state government and become a territory again? 9 The governor, in his message to the next Legislature, voiced the strong hatred that had grown up in the state toward the bank. He raised the question whether there was not a limit to the extent the Supreme Court could manacle a state. If one department of the National Government could set at naught the rights of a state, and be upheld in the usurpation by another department, state sovereignty was then no more than a byword and a mockery.
Balked in its attempt to tax the branches out of existence, the Legislature next tried a much less radical course. It resolved "that it is the wish, desire and the interest of the people of this State, that the president and the directors of the United States' bank recall their branches located in this state," and that the state's delegation in Congress be requested to take into consideration the expediency and constitution- ality of repealing, by law or otherwise, the charter of said bank."10 Another method to nullify the powers of the bank as far as possible was soon resorted to. If the state must remain saddled with the bank, then the only course that seemed to remain was to endure it, but pursue it in every way possible short of rousing the interference of the Federal Government. The bank, in making itself a part of the financial and commercial life of the state, dealt in promissory notes and other com- mercial paper which came to it in the satisfaction of debts, as security for loans, or in other ways. This activity was resented by the state, especially as it took business away from the Kentucky banks, which were particularly hard-pressed at this time. A case arose in the courts of the state in the latter part of 1819 involving the activities of the branch at Lexington.
In this case, known as the Bank of the United States v. Norvell, the Lexington branch brought suit against Joshua Norvell in the Fayette County Circuit Court to collect a promissory note of $600 which had come into the possession of the bank through an assignment by Richard M. Johnson. Norvell refused to pay the note, according to common report, not to be permanently rid of the debt, but to set up the prin- ciple that the branches of the United States Bank had no power to pur- chase promissory notes. The court in its decision argued that the powers of the bank set down in its charter did not extend to the case in point. "If this section, with such an ample grant, was to have no restriction, the corporation with such ample means, instead of being the hand-maid, would, or might soon, become the mistress of the sovereignty that created it. The debts payable in property of every embarrassed individual might be procured at a fearful discount. Estates sold under executions might soon be engrossed by the bank at large sacrifices and disposed of at large advances. The evils of such a corporation existing may be more easily conceived than expressed." The limiting clauses in the charter were then cited where it was provided that the bank might not come into possession of land, except that necessary for its immediate purposes which should be mortgaged as security or which should be obtained in the satisfaction of debts previously made, and that the bank might not deal in anything except "bills of exchange, gold or silver bullion, or in the sale of goods really and truly pledged for money lent and not re- deemed in due time, or goods which shall be the proceeds of its lands." The court held that the present promissory note did not come under these headings and that, therefore, it should not be allowed to exceed
9 McMaster, History of the People of the United States, IV, 505. Ohio about the same time as Kentucky, had attempted to drive the branches of the United States Bank out of her limits, by imposing a tax of $50,000 annually on each. Tennessee also attempted to tax the branches within her jurisdiction.
10 Niles' Register, Vol. 15, P. 385.
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its powers twice, viz: in the first place by buying the note, and in the second place by forcing its collection. The court asked the rhetorical questions: "If, therefore, the plaintiff were not allowed to make the purchase of the note in question, yet as they have got it, are they allowed to hold it and coerce its collection, and be permitted to atone for the offense by paying the penalty, if it shall ever be inflicted? Or, in other words, when a positive law has declared that the act shall not be done- is the act good, when the penalty is paid, and can a title acquired con- trary to the express direction of the law be a valid one?" 11 This de- cision was upheld by the Court of Appeals.12 The supporters of the bank were much put out by this decision. Niles said: "The right of the bank to prosecute individuals in the courts of the United States is denied, and we believe has been successfully resisted on constitutional principles - how then is the bank to recover its monies loaned to the people of Kentucky, if the people are not pleased to pay their debts, which, how- ever, every man ought to do?" 13
The bank, being an instrument of the Federal Government, was closely associated by the Kentuckians with its ally and supporter, the Federal judiciary. Both came to be equally reprehensible in the eyes of Kentuckians and equally hated. The United States Circuit Court had early declared certain parts of the replevin laws unconstitutional, and a little later the District Court ordered all of its judgments to be discharged in gold and silver, instead of the Kentucky bank paper provided for by state law, and allowed only three months' replevy. It also established its own rules of court regarding its processes and setting up what should be subject to execution as to persons and property and the circumstances under which they might be levied on and sold. This threatened to rob the people of all their relief measures when the case should be tried in a Federal court. The principle soon reached the Supreme Court in a number of cases, and an interpretation of the processes of the Federal courts handed down which greatly chagrined the Kentuckians. It was held that Congress had the right to legislate concerning the issuing of executions by the Federal courts and that it had so exercised that right. The Process Act of May 8, 1792, adopted as a rule for the Federal courts the final process of the supreme court of each state as existing in September, 1789, subject to such changes as the Federal courts might prescribe. This was an effort to make the Federal courts conform in every state as closely as possible to the state courts. Therefore, any laws of Kentucky concerning the processes of her courts passed after that date did not affect the procedure in Federal courts.14 In another case the Supreme Court reiterated the principle: "An officer of the United States cannot, in the discharge of his duty, be governed and controlled by state laws, any further than such laws have been adopted and sanc- tioned by the legislative authority of the United States. And he does not in such case act under the authority of the state law, but under that of the United States, which adopts such law." 15 The Supreme Court also held in the case of The Bank of the United States v. Halstead that the Kentucky relief law, which prohibited the sale of land under execu- tion for less than three-fourths of the appraised value without the owner's consent, did not apply to the Federal courts.16
According to James Kent, these decisions "have given great dissatis- faction to some of the people of Kentucky and provoked much virulent
11 In Kentucky Gazette, quoted in Niles' Register, Vol. 17, pp. 150, 151. See also ibid., 177.
12 Ibid., 365.
18 Niles' Register, Vol. 17, p. 145.
14 Wayman v. Southard, 10 Wheaton 1.
15 The Bank of the United States v. Halstead, 10 Wheaton, 63, 64.
16 10 Wheaton 51.
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declamation against the court itself. During the late session of Congress, some member intimated that a judicial tyranny was secretly creeping in upon us; and, if we rightly remember the tenor of his discourse, we are to suppose that the venerable Chief Justice Marshall is little other than a Dionysius the Second, who uses the court as a whispering gallery, for discovering subjects upon whom to exercise his tyranny and cruelty. But, notwithstanding all that has been said to the contrary, we verily believe that the citizens feel their persons and rights almost as safe in the hands of the Supreme Court of the United States as in those of some of the states." 17 The people broke out in a great popular meeting in July of 1825, at which they resolved that Congress had no consti- tutional right to delegate to the Supreme Court or to the inferior courts the power to alter the execution laws of the states, that the recent Rules of Court adopted by the Federal courts in Kentucky were unwarranted, and that the Supreme Court ought to be so reorganized as to preserve the rights of the people of the different states to rule themselves.18
Governor Desha, in his message to the Legislature of November, 1825, attacked the Federal courts for adopting new rules on executions, and made bold to charge that the bank and the Federal courts were working together to prostrate the authority of the state. The Federal courts, he said, declared that they "had a right to make execution laws for the regulation of their own proceedings, without asking the sanction of the people's representatives, either in the state or general government, and the Federal judges for the Kentucky district have actually made their code and put it into operation, by which our citizens are imprisoned in direct violation of our own laws, and their property seized and sold in modes not provided in their statute book. The power thus assumed and exercised by the Federal judges is viewed, both in principle and practice, as nothing short of despotism. A power has erected itself in our state which deprives our citizens of their liberty and property by arbitrary rules, to which they have never assented, either in proper person or through their representatives, in their own Legislature or that of the Union." 19
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