Providence Bank v. Billings

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4 Pet. (29 U.S.) 514 (1830), argued 11 Feb. 1830, decided 22 Mar. 1830 by vote of 7 to 0; Marshall for the Court. Influenced by the currents of Jacksonian democracy and states’ rights sentiment, the Supreme Court in Providence Bank limited the amount of protection accorded corporation charters under the Contracts Clause. In 1791, the Rhode Island legislature granted a charter to Providence Bank to conduct a banking business. In 1822, the lawmakers sought to tax the capital stock of every bank in the state. Providence Bank argued that its charter impliedly conferred an exemption from state taxation and that the tax law thus impaired the obligation of contract.

Rejecting this contention, Chief Justice John Marshall stressed that taxing authority “is essential to the existence of government” (p. 560) and could not be relinquished by implication. Only an express grant of immunity from taxation would bind the state. Marshall added that the Constitution “was not intended to furnish the corrective for every abuse of power which may be committed by the state governments” (p. 563). The ruling in Providence Bank established the principle that corporate privilege must be expressly set forth in the charter in order to receive constitutional protection. The Court later built upon this doctrine in Charles River Bridge v. Warren Bridge (1837) to emphasize that corporate grants must be strictly construed.

James W. Ely, Jr.

Subjects: Law.

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