IN

A charter granted by a State Legislature authorizing a lottery for a special time, in consideration of certain payments into the State treasury, is not a contract protected by the provision of the Federal Constitution forbidding State legislation impairing the obligation of a contract. error to the Supreme Court of the State of Mississippi. Sufficient facts appear in the opinion. WAITE, C. J. It is now too late to contend that any contract which a State actually enters into when granting a charter to a private corporation is not within the protection of the clause in the Constitution of the United States that prohibits States from passing laws impairing the obligation of contracts. Art. I, § 10. The doctrines of the Dartmouth College case, 4 Wheat. 518, announced by this court more than sixty years ago, have become so imbedded in the jurisprudence of the United States as to make them to all intents and purposes a part of the Constitution itself. In this connection, however, it is to be kept in mind that it is not the charter which is protected, but only any contract the charter may contain. If there is no contract there is nothing in the grant on which the Constitution can act. Consequently the first inquiry in this class of cases always is, whether a contract has in fact been entered into, and if so, what its obligations are.

In the present case the question is whether the State of Mississippi, in its sovereign capacity, did by the charter now under consideration bind itself irrevocably by a contract to permit "the Mississippi Agricultural, Educational and Manufacturing Aid Society," for twenty-five years, "to receive subscriptions and sell and dispose of certificates of subscription hich shall entitle the holders thereof to" "any lands, books, paintings, statues, antiques, scientific instruments or apparatus, or any other property or thing that may be ornamental, valuable or useful," "awarded to them" "by the casting of lots, or by lot, chance, or otherwise." There can be no dispute but that under this form of words the Legislature of the State chartered a lottery company, having all the powers incident to such a corporation for twenty-five years, and that in consideration thereof the company paid into the State treasury five thousand dollars for the use of a university, and agreed to pay, and until the commencement of this suit did pay, an annual tax of one thousand dollars and "one-half of one per cent on the amount of receipts derived from the sale of certificates or tickets." If the Legislature that granted this charter had the power to bind the people of the State and all succeeding legislatures to allow the corporation to continue its corporate business during the whole term of its authorized existence, there is no doubt about the sufficiency of the language employed to effect that object, although there was an evident purpose to conceal the vice of the transaction by the phrases that

were used. Whether the alleged contract exists, therefore, or not, depends on the authority of the Legislature to bind the State and the people of the State in that way.

All agree that the Legislature cannot bargain away the police power of a State. "Irrevocable grants of property and franchises may be made if they do not impair the supreme authority to make laws for the right government of the State: but no Legislature can curtail the power of its successors to make such laws as they may deem proper in matters of police." Met. Bd. of Excise v. Barrie, 34 N. Y. 668; Boyd v. Alabama, 94 U. S. 650. Many attempts have been made in this court and elsewhere to define the police power, but never with entire success. It is always easier to determine whether a particular case comes within the general scope of the power than to give an abstract definition of the power itself which will be in all respects accurate. No one denies, however, that it extends to all matters affecting the public health or the public morals. Patterson v. Kentucky, 97 U. S. 504; Beer Co. v. Massachusetts, supra. Neither can it be denied that lotteries are proper subjects for the exercise of this power. We are aware that formerly, when the sources of public revenue were fewer than now, they were used in some or all of the States, and even in the District of Columbia, to raise money for the erection of public buildings, making public improvements, and not unfrequently for educational and religious purposes, but this court said, more than thirty years ago, speaking through Mr. Justice Grier, in Phalen v. Virginia, 8 How. 168, that "experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the wide-spread pestilence of lotteries. The former are confined to a few persons and places, but the latter infests the whole community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor, and it plunders the ignorant and simple." Happily, under the influence of restrictive legislation, the evils are not so apparent now, but we very much fear that with the same opportunities of indulgence the same results would be manifested.

If lotteries are to be tolerated at all, it is no doubt better that they should be regulated by law, so that the people may be protected as far as possible against the inherent vices of the system; but that they aro demoralizing in their effects, no matter how carefully regulated, cannot admit of a doubt. When the government is untrammelled by any claim of vested rights or chartered privileges, no one has ever supposed that lotteries could not lawfully be suppressed, and those who managed them punished severely as violators of the rules of social morality. From 1822 to 1867, without any constitutional requirement, they were prohibited by law in Mississippi, and those who conducted them punished as a kind of gamblers. During the provisional government of that State, in 1867, at the close of the late civil war, the present act of incorporation, with more of like character, was passed. next year, 1868, the people, in adopting a new Constitution with a view to the resumption of their political rights as one of the United States, provided that "the Legislature shall never authorize any lottery, nor shall the sale of lottery tickets be allowed, nor shall any lottery heretofore authorized be permitted to be drawn, or tickets therein to be sold." Art. XII, § 15. There is now scarcely a State in the Union where lotteries are tolerated, and Congress has enacted a special statute, the object of which is to close the mails against them. R. S., § 3894; 19 Stat. 90, § 2.

The

The question is, therefore, directly presented whether, in view of these facts, the Legislature of a State can, by the charter of a lottery company, defeat the will of the people, authoritatively expressed, in relation to the further continuance of such business in their midst.

We think it cannot. No Legislature can bargain away the public health or the public morals. The people themselves cannot do it, much less their servants. The supervision of both these subjects of governmental power is continuing in its nature, and they are to be dealt with as the special exigencies of the moment may require. Government is organized with a view to their preservation, and cannot divest itself of the power to provide for them. For this purpose the largest legislative discretion is allowed, and the discretion cannot be parted with any more than the power itself. Beer Co. v. Massachusetts, supra.

In the Dartmouth College case it was argued that the contract clause of the Constitution, if given the effect contended for in respect to corporate franchises, "would be an unprofitable and vexatious interference with the internal concerns of a State, would unnecessarily and unwisely embarrass its legislation, and render immutable those civil institutions, which are established for the purpose of internal government, and which, to subserve those purposes, ought to vary with varying circumstances" (p. 628); but Chief Justice Marshall, when he announced the opinion of the court, was careful to say (p. 629) “that the framers of the Constitution did not intend to restrain States in the regulation of their civil institutions, adopted for internal government, and that the instrument they have given us is not to be so construed." The present case, we think, comes within this limitation. We have held, not, however, without strong opposition at times, that this clause protected a corporation in its charter exemptions from taxation. While taxation is in general necessary for the support of government, it is not part of the government itself. Government was not organized for the purposes of taxation, but taxation may be necessary for the purposes of government. As such, taxation becomes an incident to the exercise of the legitimate functions of government, but nothing more. No government dependent on taxation for support can bargain away its whole power of taxation, for that would be substantially abdication. All that has been determined thus far is that for a consideration it may, in the exercise of a reasonable discretion, and for the public good, surrender a part of its powers in this particular.

But the power of governing is a trust committed by the people to the government, no part of which can be granted away. The people, in their sovereign capacity, have established their agencies for the preservation of the public health and the public morals and the protection of public and private rights. These several agencies can govern according to their discretion, if within the scope of their general authority, while in power, but they cannot give away nor sell the discretion of those that are to come after them, in respect to matters the government of which, from the very nature of things, must "vary with varying circumstances." They may create corporations and give them, so to speak, a limited citizenship, but as citizens, limited in their privileges, or otherwise, these creatures of the government creation are subject to such rules and regulations as may from time to time be ordained and established for the preservation of health and morality.

The contracts which the Constitution protects are those that relate to property rights, not governmental. It is not always easy to tell on which side of the line which separates governmental from property rights a particular case is to be put, but in respect to lotteries there can be no difficulty. They are not, in the legal acceptation of the term, mala in se, but as we have just seen, may properly be made mala prohibita. They are a species of gambling, and wrong in their influences. They disturb the checks and balances of a well-ordered community. Society built on such a foundation would almost of necessity bring forth a population of specu

lators and gamblers, living on the expectation of what "by the casting of lots, or by lot, chauce or otherwise," might be "awarded" to them from the accumulations of others. Certainly the right to stop them is governmental, and to be exercised at all times by those in power at their discretion. Any one, therefore, who accepts a lottery charter does so with the implied understanding that the people, in their sovereign capacity and through their properly constituted agencies, may take it back at any time the public good shall require, and this whether it be paid for or not. All one can get by such a charter is a suspension of certain governmental rights in his favor, subject to withdrawal at will. He has in legal effect nothing more than a license to continue on the terms named for the specified time, unless sooner abrogated by the sovereign power of the State. It is a permit, good as against existing laws, but subject to future legislative and constitutional control or withdrawal.

On the whole, we find no error in the record, and the judgment is consequently affirmed.

PARTNERSHIP IN NAME OF Single MEMBER.

ENGLISH COURT OF APPEAL, MARCH, 11, 1880.

YORKSHIRE BANKING COMPANY V. BEATSON AND MYCOCK (42 L. T. Rep., N. S. 455).

Where a bill of exchange is drawn, accepted, or indorsed by an individual for his privato purpose, his name being the same as that of a firm of which he is a member, the holder cannot recover against the firm. But where the name of the individual and of the firm is the same, and the individual carries on no business apart from the firm, the presumption, in the absence of evidence to the contrary, is that a bill bearing such a name is the bill of the firm. There is no difference in this respect between a dormant and an ostensible partner.

M. and B. owned a business, which was carried on in B.'s name, M. being a dormant partner. B., without the authority, and in fraud of M., signed accommodation bills in his own name, one of which was addressed to him at the placo of business of the firm. The proceeds were paid into the same banking account with B.'s own money and that of the firm; but the effect of these transactions (which were not entered in the partnership books) was to diminish the capital of tho firm. Held, in an action by a bona fide holder without notice, that these facts rebutted the presumption that the bills were the bills of the firm, and that a finding by the jury to that effect ought to be set aside as against evidence.

A

PPEAL by the plaintiffs from the judgment of Denman and Lopes, JJ. (reported 40 L. T. Rep. [N. S.] 654; 4 C. P. Div. 204), directing the verdict and judgment, which had been given for the plaintiffs against the defendant Mycock, to be set aside, and judgment to be entered for the defendant Mycock.

The facts of the case, the findings of the jury, and the points raised in argument before the Court of Appeal, are fully stated in the judgment.

The appeal was argued by Bompas, Q. C., and Forbes (H. Tindal Atkinson with them), for the plaintiffs, and by Waddy, Q. C., and Gainsford Bruce, for the defendant Mycock.

In addition to the authorities noticed in the judgment, the following were referred to: Winship v. United States Bank, 5 Peters, 561; Ex parte Bushell, 3 M. D. & De G. 615; Sutton v. Gregory, 2 Peake, 150; Baird's case, 23 L. T. Rep. (N. S.) 424; L. Rep., 5 Ch. 725, 733; Ex parte Buckley, 14 M. & W. 469; Smith v. Craven, 1 C. & J. 500; Hall v. West, cited in Lindley on Partnership (4th ed.), p. 343; Lloyd v. Ashby, 2 C. & P. 138; 2 B. & Ad. 23; Mercantile Bank v. Cox, 38 Me. 500; National Bank of Chemung v. Ingraham, 58 Barb. 290; Ex parte Law, 3 Deacon, 541.

THESIGER, L. J., read the judgment of the court. This is an action brought upon two bills of exchange of which the plaintiffs are the holders. The first is a bill for 2761. 15s., dated 6th March, 1878, drawn by R. K. Kelly & Co. upon and accepted by Messrs. J. & R. Wilson, payable to the order of the drawers four mouths after date, and bearing the indorsements "R. K. Kelly & Co.," "Wm. Beatson," and "Josiah Carr & Sons." The second is a bill for 4841. 13s., dated 13th March, 1878, drawn by Josiah Carr & Son, addressed "Mr. Wm. Beatson, chemical works, Rotherham," and accepted in the name "William Beatson," payable to the order of the drawers four months after date, and indorsed by them; both bills were discounted by the plaintiffs upon the 14th March, 1878. The defendants to the action are Wm. Beatson and John Henry Mycock. The signature "Wm. Beatson upon each of the bills was the signature of the defendant William Beatson. He has allowed judgment to go by default, and the action is defended by Mycock alone, who disputes his liability upon either of the bills. The circumstances of the case are as follows: Beatson for many years prior to Dec. 1877, carried on business as a chemical manufacturer at certain works at Rotherham. At the end of the year 1873, and the beginning of the year 1874, the plaintiffs made inquiries as to Beatson's commercial position of Josiah Carr, who was bringing them paper for discount with Beatson's name upon it; and the result of the inquiries being satisfactory, they discounted such paper. Beatson and Carr had some trade transactions together, but apart from these trade transactions, there was a series of accommodation transactions carried out by accommodation bills between Beatson and the other parties to the bills now sued upon, including Carr himself, and these accommodation bills were from time to time renewed. Down to the end of the year 1877 Beatson had no partner; but upon the 11th Dec. in that year, a deed of partnership was entered into between him and the defendant Mycock. By its terms the partnership was to last for a period of five years, with power of continuance. The value of the good will of the business, the works and premises where the same was carried on, and the machinery, plant, and effects belonging to it, was estimated at 25,000l., and Mycock was to purchase a onefifth share of the business by the payment of the sum of 5,000l. The business was to be carried on under the style of "William Beatson." The works and premises were to remain vested in Beatson, who was to stand possessed of them for the purposes of the partnership, and the business was to be managed by Beatson, his partner not being required to attend to the business any further than he should think fit. By the 11th clause of the deed it was provided that "neither of the partners, without the written consent of the other first obtained, should, on the credit of the firm, make any payment, advance, or other application of the moneys or effects of the said partnership, or in any manner engage or use the same, or the name or credit of the partnership firm, except on account of and for the benefit of the partnership, and in the usual manner of carrying on the business;" and by the 12th clause it was provided "that neither of the partners should lend or deliver upon credit any of the moneys or effects belonging to the partnership to any person whom the other partner should previously have forbidden to be trusted, nor without the previous consent in writing of the other partner would become bail, surety or security with or for any person whomsoever, nor make, give, draw, accept or indorse any bond, bill, promissory note, or other instrument, or enter into any obligation or engagement, or make any default whereby the estate and effects of the partnership might be made liable for the payment or satisfaction of any sum of money for which the partnership should not have received a full and sufficient consideration." The

object with which Mycock entered into this partnership was that of ultimately putting his son, who was then under age, into it, and as a matter of fact, Mycock never interfered in any way with the management of the business, or occupied any other position in connection with it than that of a dormant partner. Beatson concealed from him any information relating to his accommodation transactions, and for his fraud upon him in this and other matters connected with the inception of the partnership was ultimately prosecuted and convicted. The plaintiffs never knew of the partnership until after July, 1878, at which date Beatson was a bankrupt. For some time prior to the formation of the partnership Beatson had kept an account at the Sheffield and Rotherham Bank, headed "William Beatson," and after the formation of the partnership that account was continued without any change in its heading, and into this account Beatson paid all moneys, whether moneys belonging to the partnership or his own private moneys; and upon It he drew, whether for the purposes of the business or his own private purposes. Beatson himself was called as a witness for the plaintiffs, and in addition to proving the facts already mentioned, gave evidence to the effect that he kept two cash-books, of which one was, as he stated, a private book, kept by him as manager at the place of business, the other a partnership cashbook; that in the former he did not enter cash received on account of the partnership, but that in the latter all business payments were entered. With reference to his bill accommodation transactions generally, he stated that none of these were brought into the ledger, either before the partnership or after; that the cash transactions relating to these accommodation bills were entered in the private cash-book, to which Mycock had no access, and were never put into the partnership cash-book, to which Mycock himself might have had access. With reference to his particular transactions with Josiah Carr, he stated that all trade transactions between them were over before the partnership, and that as regards the particular bills sued on, they were bills drawn for his and Carr's accommodation, not for Mycock's, although he added that they were in a degree for the business, as one way of finding capital, and that without the bill transactions there was not capital enough to work the business. He admitted that Mycock found the 5,000l. which he was to pay for his share in the business; that he never told Mycock that money was wanted; that he thought he was not making Mycock liable for any of the accommodation bills, whether renewals or otherwise, and that he considered them private transactions, and did not enter them in the partnership book. He further said that he considered the bank-book private, and that Mycock had left him to keep the banking account as he thought proper; that the proceeds of accommodation bills were paid into the banking account, and that out of such proceeds the price of goods supplied to the business and wages were sometimes paid. As regards the proceeds of the bills sued on, it appeared that a portion of them found their way into the banking account; but that upon the same day as this occurred Beatson drew out more than he paid in. On the part of Mycock an accountant was called who, upon an examination of Beatson's books, proved that apart from the accommodation bill transactions, the business had during the period between the beginning of January and the end of May, 1878, a cash balance to its credit; that the net result of the accommodation transactions was to reduce the balance; and that Beatson had drawn out for his own purposes, independent of the business, about 4,000l. Upon these facts taken from the notes of Lindley, J., before whom with a jury the case was tried, that learned judge stated to the jury, as appears from the shorthand writer's notes, that the questions for them were: First, Iwas the name Wm. Beatson

66

Wood & Payne, and also carrying on, under the same firm name, and at their counting-house, the business of buying and selling cotton. The defendant Steele was a dormant partner with them in this latter business. It was held that he was liable upon an indorsement in the firm name of a bill which had been paid to Wood & Payne, for cotton sold by the firm, but which had been delivered by them to provide for an acceptance in the firm name for sugar supplied to the grocery business. It is difficult to see how the case could have been otherwise decided, for the bill sued upon was admittedly a bill in which Steele was interested as indorser and holder with his partner, and consequently the indorsement over of that bill, although improper under the circumstances, was still manifestly an indorsement in fact by the partnership of which Steele was a member. The evidence showed what the facts were, and the judgment of Lord Ellenborough assumed that the indorsement was in the name of the partnership of which Steele was a member, and upon that assumption decided, that in the absence of all fraud on the part of the indorsee, such indorsement would bind all the partners. Emly v. Lye, 15 East, 6, which is commented on in the judgment of the court below as an authority in favor of the defendant upon the point under consideration, has really no bearing upon it. There, in an action upon several bills of exchange, and for money had and received, it was attempted to make the defendant liable, either upon the bills or in respect of the money received upon the discount of the bills, which was applied to partnership purposes, where the signature upon the bills was not in the firm name, which was George Lye & Son, but in the name of E. L. Lye, which was the individual name of the partner signing. The counts upon the bills were upon the argument abandoned, as it was obvious, as Lord Ellenborough said in his judgment, that "on a bill of exchange drawn by one only it cannot be allowed to supply by intendment the names of others in order to charge them;" and it was held that on the mere discount of the bill no right could arise against the defendant by reason of the proceeds being used for partnership purposes, in other words that the transaction was nothing more than a purchase of the bills from the signing partner. The case of Ex parte Bolitho, 1 Buck. 100, is claimed as an authority for the defendant. There Peter Blackburn was a secret partner in a business carried on by Isaac Blackburn in his own name, and was sought to be made liable as drawer in respect of bills drawn in the name of Isaac Blackburn by Isaac himself. Upon the affidavits it appeared that Peter Blackburn also carried on a separate business, and that after Isaac Blackburu had drawn and indorsed the bills Peter Blackburn indorsed them also with his own name for the purpose of getting them discounted. The Lord Chancellor stated that it was impossible for him upon the affidavits to decide between the parties, and that this case must be sent to a court of law for its deliberation, and he directed an issue whether the two Blackburns were jointly liable upon all or any of the bills. In the course of his judgment, however, he said: "If the money is advanced to A and B, and the lender takes a bill from one of them only, he cannot maintain an action upon the bill against the two. Now if A and B are partners and also separate traders, and A draws a bill and indorses it in his own name, and B also indorses it, and they become bankrupts, what is there to prevent a holder of a bill from proving against the separate estate of each of them? And unless you can show that when A drew the bill he drew it not as A, but as A and B, there can be no legal contract upon the bill as against the two." In these remarks of Lord Eldon, the introduction of the element of separate trading by A and B, and of the further element of both A and B putting their names to the

bills, so differs Lord Eldon's supposed case from the case we are considering of a bill signed in a name common to a firm, and an individual member of the firm, where there is no trading separate from the trading of the firm, and no signature to the bill but that of the common name, that Ex parte Bolitho appears to us rather to support the contention of the plaintiffs' counsel than to assist the defendant Mycock. The case of the Bank of South Carolina v. Case, 8 B. & C. 427, was one in which three persons carried on business in partnership in England under the firm name of Crowder, Clough & Co. One of the partners-J. B.Clough - was sent out to America to form a branch house, which he did form, under his own individual name. He was restricted under the partnership articles from transacting any business in America except on the partnership account; and as a matter of fact, as appears from the report, p. 432, he had no individual business, and the name of J. B. Clough was never used by him in trade, or in drawing, indorsing, or accepting, or negotiating bills of exchange, except for the benefit and on account of the partnership. Under the circumstances it was held that all the partners were liable as indorsers in respect of certain bills indorsed by Clough in the name of J. B. Clough, and which were connected with partnership transactions, although Clough in indorsing them disregarded certain specific instructions given him by his partners, and exceeded his authority. It is not necessary to discuss whether the doubts raised by Crompton, J., in Nicholson v. Ricketts, 2 E. & E. 497, as to the correctness of this decision are or are not well founded. It is sufficient for our present purpose to say that the decision proceeded upon all the facts of the case, and not upon any doctrine as to presumption or burden of proof. But the case of Furze v. Sharwood, 2 Q. B. 388, is a distinct authority upon the point under consideration. There a business was carried on by trustees for creditors in the name of Samuel Maine, one of the persons who had previously carried it on in partnership. Maine had also for a time a separate business of his own. The plaintiff had discounted for the old partnership, and also had been accustomed to lend Maine money for the purposes of his private business. Maine after a time sold his separate business and ceased to carry it on, and, having subsequently indorsed bills in the name of "Samuel Maine," one of which had been discounted by the plaintiff, and was sued on, and the proceeds of which were placed to his credit at his bankers, and were drawn upon indiscriminately for the purposes of the business to which he was agent, and for his own private purposes, the trustees were held liable, as indorsers, and Lord Denman, C. J., in delivering the judgment of the court, said: "Prima facie, therefore, the signature Samuel Maine was their signature, and they would be bound by it. But it is said that Maine carried on a separate business of his own, and that the plaintiff was bound to show that the indorsements in question were on account of the business of the trustees, and not on account of his separate business. Now it appears that the bills were discounted with persons who were in the habit of discounting for the former firm who assigned their effects to the defendants as trustees, and moreover, that the bills in question were not discounted till after Maine had ceased to carry on his separate business. Under these circumstances we think that the onus of showing that the indorsements were made on account of the separate business, and not on that of the trustees, which was the general and ostensible business, lay on the defendants. Several cases were cited which it is not necessary minutely to examine; it is sufficient to say that they are not inconsistent with this view of the present case. We are therefore of opinion that the defendants were bound by the indorsement of Maine, and that the plaintiff on this ground of objection would be entitled