The Banks v. Mayor of New York City
THESE were three cases in error to the Court of Appeals of New York, in which the people of that State, at the relation of different banks there, were plaintiffs in error, and the mayor and controller of the city of New York were defendants. Each presented, under somewhat different forms, the same question, namely: 'Are the obligations of the United States, known as certificates of indebtedness, liable to be taxed by State legislation?'
The certificates referred to were issued under authority of Congress, empowering the Secretary of the Treasury to issue them to any public creditor who might be disirous of receiving them. They were payable in one year or earlier, at the option of the government, and bore six per cent. interest. In the present cases, they had been issued to creditors for supplies necessary to carrying on the war for the suppression of the late rebellion.
The three cases were argued and considered together. The more immediate case in each was thus: In 1863 and in 1864, the proper officers of the State, acting under the laws of New York, assessed certain taxes upon the capital stock of the several banking associations in that State. Some of these banking associations resisted the collection of the tax on the ground that, though nominally imposed upon their respective capitals, it was, in fact, imposed upon the bonds and obligations of the United States, in which a large proportion of these capitals was invested, and which, under the Constitution and laws of the United States, were exempt from State taxation.
This question was brought before the Court of Appeals, which sustained the assessments, and disallowed the claim of the banking associations.
From this decision an appeal was taken to this court, upon the hearing of which, at the December Term, 1864, it was adiudged that the taxes imposed upon the capitals of the as sociations were a tax upon the national bonds and obligations in which they were invested, and, therefore, so far, contrary to the Constitution of the United States. 
A mandate in conformity with this decision was sent to the Court of Appeals of New York, which court thereupon reversed its judgment, and entered a judgment agreeably to the mandate.
Afterwards, on the 30th of April, 1866, the legislature of New York provided by law for refunding to the banking associations, and other corporations in like condition, the taxes of 1863 and 1864, collected upon that part of their capitals invested in securities of the United States exempt by law from taxation. The board of supervisors of the county of New York was charged with the duty of auditing and allowing, with the approval of the mayor of the city and the corporation counsel, the amount collected from each corporation for taxes on the exempt portion of its capital, together with costs, damages, and interest. Upon such auditing and allowance, the sums awarded were to be paid to the corporations severally entitled, by the issue to each of New York County seven per cent. bonds of equal amounts. These bonds were to be signed by the controller of the city of New York, countersigned by the mayor, and sealed with the seal of the board of supervisors, and attested by the clerk of the board.
Under this act the board of supervisors audited, and allowed to the several institutions represented in the three cases under consideration, their several claims for taxes collected upon the national securities held by them, including in this allowance the taxes paid on certificates of indebtedness, which the corporations asserted to be securities of the United States exempt from taxation. But the controller, mayor, and clerk refused to sign, countersign, seal, and attest the requisite amount of bonds for payment, insisting that certificates of indebtedness were not exempt from taxation. A writ of mandamus was thereupon sued out of the Supreme Court of New York, for the purpose of compelling these officers to perform their alleged duties in this respect. An answer was filed, and the court by its judgment sustained the refusal. An appeal was taken to the Court of Appeals of New York, by which the judgment of the Supreme Court was affirmed. Writs of error, under the 25th section of the Judiciary Act, brought these judgments here for revision; the section  which gives such writ, where is drawn in question the validity of a statute of, or authority exercised under any State, on the ground of their being repugnant to the Constitution or laws of the United States, and the decision is in favor of such validity; or where is drawn in question the construction of any clause of the Constitution or statute of the United States, and the decision is against the title, right, privilege, or exemption specially set up, &c.;-a paragraph, this last, re-enacted by act of February 5th, 1867,  with additional words, as 'where any title, right, privilege, or immunity is claimed under the Constitution, or any statute of or authority exercised under the United States, and the decision is against the title, right, privilege, or immunity specially set up, &c.'
Messrs. O'Connor and O'Gorman in support of the judgment below:
1. The judgment below is not subject to review here. The banks having voluntarily paid the tax, had no right to recover it, even in a regular action at law or suit in equity. There was no color of a claim enforceable by mandamus, except such as might have arisen under the State act of April 30th, 1866. The reimbursement contemplated by that act was a favor to a certain class of claimants upon its liberality. By the voluntary payment, the banks waived any exemption that might have existed. When they appeared in the State court they had no title, right, or privilege, save such as may have been conferred by the State act. The construction, import, and effect of the Constitution and laws of the United State in respect to taxation by States, were only incidentally brought under consideration in the State court; not immediately 'drawn in question,' within the meaning of the Judiciary Act.
2. The exemption set up on the other side, can rest only upon the power of Congress 'to borrow money on the credit of the United States.' The organs whereby the Federal government carries on its operations are, we admit, exempt. But a certificate or statement of a past indebtedness-a mere chose-property in the hands of a citizen-is not a necessary instrumentality of the government. There is no particular virtue in the certificate. It affords ready proof of the debt, but does not alter its character.
Is, then, issuing a certificate acknowledging a pre-existing debt, arising from the purchase of supplies or procuring of service, 'borrowing money?' According to ordinary understanding it certainly is not. The term in use at the time, which would have come nearest to a description of these certificates, is 'bills of credit.' With these the Convention was familiar, and prohibited their issue by the States. It did not confer upon Congress power to issue them. The modes of raising means to support the government are pointed out by the Constitution. First, taxes, &c. Secondly, borrowing money. Buying on credit is not sanctioned, and was not necessary to be sanctioned. The other means were adequate so long as there was money at home or credit abroad. If the relators cannot stand upon an implication from the principles of the Constitution they must fail.
Messrs. Peckham and Burrill, with whom was Rodman, contra, submitting that the jurisdiction of this court was sufficiently plain, and reiterating, enlarging, and enforcing the arguments made in recent previous cases denying the right of States to tax Federal securities held by banks,  contended that the credit of the United States, independently of the form in which it is used, was the matter meant to be protected, and that whatever securities or contracts were issued upon that credit were exempt from State taxation.
The certificates were given to creditors having debts due; such as the creditors were entitled to have paid. Suppose them to be paid, and the creditors then immediately to lend the money to the United States on these certificates of indebtedness; that would confessedly be a loan, and not taxable. Now the certificates are issued simply to avoid this roundabout operation, and to creditors desirous of receiving them. They extend the time of payment and bear interest. Without them the debt would be payable immediately and without interest. It is thus, in substance, a new contract and a loan.
The government does not want money itself, but commodities and the services of men. It borrows only because it is easier to use the medium of exchange in its transactions than it is directly to secure commodities, services, &c., in kind. In essence, a borrowing of money and a purchase of commodities on credit are the same thing. Now, cases decide that the government's contract for the loan of money, or for the services of men, is exempt. Can any reason be shown why a contract for the purchase of commodities with an issue of a certificate of debt for them, should not be in the same position? The object in each case is the same, and the obstacles to the completion of the transaction desired by the government would be as detrimental to the public interest in one case as in the other.
In all registered loans of the government, the certificates of stock are in the form of certificates of indebtedness; that is to say, they import that the United States are indebted to the persons therein named in a sum therein expressed, which is to be paid at a specified time and place, with a specified rate of interest.
Some, indeed, are called by one name and some by another; but the different securities are so styled for convenience only, and not because of any difference in the essence of the obligation. They are all 'securities' of the United States; or, as Mr. Justice Bouvier defines that term,  'instruments which render certain the performance of a contract.'
The CHIEF JUSTICE delivered the opinion of the court in all the cases.
^1 Bank Tax Case, 2 Wallace, 200.
^2 1 Stat. at Large, 85.
^3 14 Id. 384.
^4 Bank of Commerce v. New York City, 2 Black, 620; Bank Tax Case, 2 Wallace, 200; Van Allen v. The Assessors, 3 Id. 573.
^5 Law Dictionary, title 'Security.'