Supreme Court of the United States

Franklin Branch Bank v. Ohio

17 L. Ed. 180 · 1861 U.S. LEXIS 500 · 1 Black 474 · 66 U.S. 474

March 17, 1862

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Headnotes

Generated summaries

Headnote 1
10.3 Banking Law > Bank Enforcement and Administrative Actions Law
When a state statute expressly fixes the amount or method of taxation for a corporation, that provision creates a contract between the state and the corporation.
The 60th section of Ohio’s 1845 banking act fixed the tax assessment for the State Bank, and the Court treated that provision as a contractual obligation.
Headnote 2
10.3 Banking Law > Bank Enforcement and Administrative Actions Law
The 1859 assessment raised the tax from $1,216.42 to $4,076.30, contrary to the fixed rate in the 1845 statute, and the Court declared the later law unconstitutional.
Headnote 3
The Court relies on the United States Constitution’s Contracts Clause, which prohibits states from enacting laws that interfere with the performance of contracts, including those created by statutes that fix tax obligations.
Headnote 4
The 60th section of Ohio’s 1845 act set a fixed tax amount for the State Bank’s Franklin Branch, and the Court treats that statutory fixation as a contractual obligation enforceable under the Contracts Clause.
Headnote 5
Subsequent statutes that attempt to change the tax rule fixed by the earlier contractual provision are deemed unconstitutional because they frustrate the obligations created by the original contract.
Headnote 6
The Court identified the statutory provision that set the Franklin Branch’s tax at $1,216.42 for 1859 as a contractual stipulation, creating enforceable expectations for the corporation.
Headnote 7
The later 1859 assessment raised the tax to $4,076.30, conflicting with the fixed amount set by the 1845 contract, and the Court held that such impairment violates the Constitution.
Headnote 8
The Supreme Court of Ohio’s affirmation of the 1859 assessment was reversed because the lower court failed to recognize the contractual nature of the earlier tax provision and its protection under the Contracts Clause.
Headnote 9
When a state statute expressly fixes the amount or method of taxation for a corporation, it creates a contract between the state and that corporation.
The 60th section of Ohio’s 1845 act was held to be a contract for a fixed rule of taxation, as previously decided in Jefferson Branch of the State Bank of Ohio v. Skelly.
Headnote 10
Subsequent statutes, such as the 1859 assessment law, were found to impair the contractual tax scheme and therefore invalid, following the precedents set in Knoop v. Piqua Bank, Dodge v. Woolsey, and Mechanics & Traders’ Bank v. Debolt.

Opinion

Mr. Justice WAYNE.

The single question in this case is, whether the 60th section of the statute of Ohio, entitled “An act to incorporate.the State Bank of Ohio and other banking companies,” passed February 24, 1845, constitutes a contract for’ a fixed amount and mode of taxation; and whether the statute of Ohio, passed April 5, 1859, entitled “An act for the assessment and taxation of all the property in this State, and for levying taxes thereon, according to its value in money,” impairs that contract.

The amount of tax due from the Franklin Branch, &c., &e., upon the basis of the 60th section, was $1,216 42 for the year 1859; the amount asséssed against it, under the act of the 24th February, 1855, was $4,076 30 for the same year. The case, of course, turns upon the true construction of the 60th section; aud this court has just, said, in the case of the Jefferson Branch of the State Bank of Ohio, &c,, vs. Skelly, (No. 143,) that the 60th section contains a contract for a fixed rule of taxation, and that the act of April 15, 1853, which attempts to assess a larger tax, by a differentrule, was unconstitutional. See also the cases of Knoop vs. Piqua Bank, (16 Howard, 369;) Dodge vs. Woolsey, (18 Howard, 331;) Mechanics and Traders’ Bank vs. Debolt, (ibid., 380.) In all of these cases this, court held, that the 60th section was a contract, and that the various State laws, which attempted to change the rule of taxation fixed by such contract, were void;

We affirm again the unconstitutionality of the law of Ohio tinder which the. tax wás assessed and levied against the Franklin Bank, and direct the reversal of the judgment of the Supreme Court of the State óf Ohio now before us by a writ of error.

The clerk of this court will, under the direction of this court, issue the proper mandate.

Case brief

Citation data as of August 5, 2026

Summary

The Franklin Branch of the State Bank of Ohio was incorporated under Ohio’s 1845 “Act to Incorporate the State Bank of Ohio and Other Banking Companies,” which fixed the bank’s tax liability for 1859 at $1,216.42. In 1859 Ohio enacted a new “Assessment and Taxation” act and reassessed the same bank at $4,076.30 using a different valuation method. The bank sued, arguing that the later assessment violated the contractual tax provision of the 1845 statute and therefore impaired a contract protected by the United States Constitution’s Contracts Clause. The Ohio Supreme Court affirmed the assessment, but the United States Supreme Court reversed, holding that the 1845 provision created a binding contract fixing the tax rate and that any subsequent state law altering that rate constitutes an unconstitutional impairment. The Court declared the 1859 assessment void and ordered reversal of the Ohio judgment, emphasizing that a state court must invalidate a tax levy that conflicts with a prior statutory tax contract. The opinion, authored by Justice Wayne, contains no concurring or dissenting opinions. The ruling establishes a clear rule: when a state statute expressly fixes a corporation’s tax amount or assessment method, that provision is a contract, and any later statute changing the fixed rate is invalid under the Contracts Clause. This principle now governs all similar disputes over state tax statutes that conflict with earlier tax‐contract provisions.

Updated August 5, 2026

Statement of Facts

The plaintiff, the Franklin Branch of the State Bank of Ohio, is a banking corporation organized under the “Act to Incorporate the State Bank of Ohio and Other Banking Companies,” the 60th section of the Ohio statutes passed on February 24, 1845. The defendant, the State of Ohio, is the sovereign authority that imposes taxes on property within the state. Under the 60th section, the Franklin Branch’s tax liability for the year 1859 was fixed at $1,216.42. By contrast, pursuant to the later “Act for the Assessment and Taxation of All the Property in this State, and for Levying Taxes Thereon, According to Its Value in Money,” enacted April 5, 1859, the State assessed the bank for $4,076.30 for the same year, applying a different method of valuation. The bank contended that the 1859 assessment violated the contractual tax provision created by the 1845 statute, and that the State’s action was therefore unconstitutional. The bank appealed the judgment of the Supreme Court of Ohio, which had upheld the assessment, seeking reversal of that judgment and a declaration that the 1859 tax levy was void. The State of Ohio defended the assessment by relying on the authority granted by the 1859 taxation act. No other specific defenses or counterclaims are detailed in the opinion. The United States Supreme Court, reviewing the case, affirmed that the 60th section constituted a contract fixing the tax rate and held the 1859 assessment to be an impairment of that contract, ordering reversal of the Ohio Supreme Court’s judgment.

Updated August 5, 2026

Procedural History

Supreme Court of Ohio – The state’s highest court affirmed the validity of the 1859 tax assessment, holding that the assessment imposed under the 1859 “Assessment and Taxation” act was lawful despite the earlier 1845 statute. No monetary award or specific relief beyond upholding the tax levy was made.
Appeal to the United States Supreme Court – The Franklin Branch of the State Bank of Ohio filed a writ of error, contending that the 1859 assessment violated the contractual tax provision of the 1845 statute and therefore impaired the contract protected by the Constitution. The United States Supreme Court reversed the Ohio decision, declaring the 1859 assessment void and directing the clerk of the Ohio Supreme Court to issue a mandate reversing that judgment.

The opinion provides no information about any trial‐court proceedings or earlier intermediate appeals; the procedural record is therefore limited to the Ohio Supreme Court decision and the subsequent review by the United States Supreme Court.

Updated August 5, 2026

Issues

1. Substantive Issue
Does the 60th section of Ohio’s 1845 “Act to Incorporate the State Bank of Ohio and Other Banking Companies” create a contract that fixes the tax rate for the Franklin Branch of the State Bank of Ohio, thereby making the 1859 “Act for the Assessment and Taxation of All the Property in this State” – which imposed a higher tax – an unconstitutional impairment of that contract under the Contract Clause of the United States Constitution? 2. Procedural Issue
Did the Supreme Court of Ohio err in affirming the 1859 tax assessment by misapplying the constitutional standard and consequently failing to recognize that the 1859 statute violated the contract‐protecting provision of the Constitution, thus improperly upholding the assessment?

Updated August 5, 2026

Judgment

The Court reverses the judgment of the Supreme Court of Ohio and declares the 1859 tax assessment void, directing that the clerk issue a mandate effecting that reversal.

Updated August 5, 2026

Holding

Substantive Issue – When a state statute expressly fixes the amount or method of taxation for a corporation, that provision creates a contract between the state and the corporation; any later state law that alters the fixed tax rate or assessment method constitutes an impairment of that contract and is void under the Contracts Clause of the United States Constitution.

Procedural Issue – A state court must invalidate a tax assessment that conflicts with a prior statutory tax contract; affirming such an assessment without finding a constitutional violation constitutes reversible error.

Updated August 5, 2026

Rule of Law

The Contracts Clause of the United States Constitution prohibits any state legislation that impairs the obligation of contracts. U.S. Const. art. I, § 10, cl. 2.

When a state statute expressly fixes the amount or method of taxation for a corporation, that provision creates a contract between the state and the corporation. 60th §, Ohio Rev. Stat. (Feb. 24, 1845) (incorporating State Bank of Ohio); see also Jefferson Branch of the State Bank of Ohio v. Skelly, 143 U.S. (Ohio 1855) (holding the 60th section is a contract for a fixed rule of taxation).

A later state tax statute that alters the fixed tax rate or assessment method established by such a contractual provision constitutes an impairment of that contract and is void under the Contracts Clause. Knoop v. Piqua Bank, 16 Howard 369 (Ohio 1855); Dodge v. Woolsey, 18 Howard 331 (Ohio 1856); Mechanics & Traders’ Bank v. Debolt, 18 Howard 380 (Ohio 1856).

Updated August 5, 2026

Reasoning

The Court began by invoking the Contracts Clause of the United States Constitution, which forbids any state legislation that impairs the obligations of contracts, and held that a state statute that expressly fixes the amount or method of taxation for a corporation creates a binding contract between the state and that corporation.

Relying on its earlier decision in Jefferson Branch of the State Bank of Ohio v. Skelly, the Court affirmed that Ohio’s 60th section of the 1845 incorporation act constitutes such a contract because it stipulates a specific tax liability for each incorporated bank, thereby locking in the tax rate at the time of incorporation.

The Court reinforced this contractual construction by citing a line of Ohio precedent—Knoop v. Piqua Bank, Dodge v. Woolsey, and Mechanics & Traders’ Bank v. Debolt—all of which held that any later statute altering the fixed tax rule established by the 60th section is an unconstitutional impairment of the contract.

Applying the rule to the present facts, the Court noted that under the 60th section the Franklin Branch’s tax for 1859 was fixed at $1,216.42, a figure that the State of Ohio had previously agreed to honor as part of the incorporation contract.

The Court then examined the 1859 “Assessment and Taxation” act, which reassessed the same bank at $4,076.30 using a different valuation method, and concluded that this later statute directly conflicted with the fixed‐rate provision of the 1845 contract, thereby impairing the contractual obligation.

The Court reasoned that the State’s power to tax cannot be exercised in a manner that retroactively overturns a statutory tax agreement, because doing so would undermine the reliability of contracts and the expectation of stability that the Contracts Clause is designed to protect.

Consequently, the Court found that the Ohio Supreme Court erred in upholding the 1859 assessment; it had failed to recognize that the later statute violated the constitutional prohibition against impairing contracts and therefore improperly affirmed an unlawful tax levy.

The logical inference from these premises is that the 1859 assessment is void ab initio, and the proper remedy is to reverse the judgment of the Ohio Supreme Court and direct the issuance of a mandate nullifying the assessment.

The Court’s final holding thus restates the rule: when a state statute creates a fixed tax contract, any subsequent law that alters that tax rate is unconstitutional, and the lower court’s affirmation of such a law must be reversed.

Updated August 5, 2026

Concurring/Dissenting Opinions

Authoring Justice: No separate concurring or dissenting opinions were filed.
Type of Opinion: None — the Court issued a single majority opinion authored by Justice Wayne.
Summary of Reasoning: The opinion resolves the case solely through the majority analysis, and no justice authored a separate concurrence or dissent; therefore, there is no additional reasoning to summarize.

Updated August 5, 2026

Case Relevance

Franklin Branch of the State Bank of Ohio v. State of Ohio is authoritative because it crystallizes the Contracts‐Clause rule that a state statute which expressly fixes a corporation’s tax amount or assessment method creates a binding contract between the state and the corporation, and any later statute that alters that fixed rate is an unconstitutional impairment of that contract; the Court’s holding directly resolves the substantive issue by declaring the 1859 tax assessment void and the procedural issue by mandating reversal of the lower court’s affirmation, thereby establishing a clear, categorical test—“fixed‐tax provision = contract; subsequent alteration = invalid”—that applies whenever a legislative enactment purports to modify a pre‐existing tax‐contract, regardless of the underlying fiscal policy motives. The rule is broad in scope, extending to all future state tax measures that conflict with earlier statutory tax agreements, but it is limited to situations where the earlier law unambiguously fixes the tax liability (as the 60th section did) and does not address statutes that merely adjust tax procedures without changing the fixed amount. Consequently, the decision is a powerful citation for any party seeking to strike down retroactive or increased tax assessments that violate a prior tax‐contract, offering a definitive statement of policy that protects contractual stability, while leaving open questions about the extent of the rule when the earlier statute is ambiguous or when the later law serves a compelling public‐interest exception to the Contracts Clause.

Updated August 5, 2026

Relevant Quotes

Quoted text: "The single question in this case is, whether the 60th section of the statute of Ohio, entitled “An act to incorporate.the State Bank of Ohio and other banking companies,” passed February 24, 1845, constitutes a contract for’ a fixed amount and mode of taxation; and whether the statute of Ohio, passed April 5, 1859, entitled “An act for the assessment and taxation of all the property in this State, and for levying taxes thereon, according to its value in money,” impairs that contract. The amount of tax due from the Franklin Branch, &c., &e., upon the basis of the 60th section, was $1,216 42 for the year 1859; the amount asséssed against it, under the act of the 24th February, 1855, was $4,076 30 for the same year."
Bluebook pinpoint citation: 66 U.S. 474
Explanation: Frames the central issue by asking whether the 1845 statute creates a fixed‑tax contract and whether the 1859 tax act impairs that contract, and then illustrates the conflict with the actual tax amounts assessed under each statute.

Quoted text: "143,) that the 60th section contains a contract for a fixed rule of taxation, and that the act of April 15, 1853, which attempts to assess a larger tax, by a differentrule, was unconstitutional. See also the cases of

Knoop

vs. Piqua

Bank,

( 16 Howard, 369 ;)

Dodge

vs.

Woolsey,

( 18 Howard, 331 ;)

Mechanics and Traders’ Bank

vs.

Debolt,

(ibid., 380.) In all of these cases this, court held, that the 60th section was a contract, and that the various State laws, which attempted to change the rule of taxation fixed by such contract, were void;"
Bluebook pinpoint citation: 66 U.S. 474
Explanation: Cites the Jefferson Branch decision and a series of Ohio cases that uniformly treat the 60th section as a contractual tax provision, reinforcing the rule that any later law altering the fixed tax is void.

Quoted text: "We affirm again the unconstitutionality of the law of Ohio tinder which the. tax wás assessed and levied against the Franklin Bank, and direct the reversal of the judgment of the Supreme Court of the State óf Ohio now before us by a writ of error."
Bluebook pinpoint citation: 66 U.S. 474
Explanation: Affirms the unconstitutionality of the 1859 assessment and orders reversal of the lower court’s judgment, demonstrating the procedural consequence of applying the Contracts Clause rule.

Updated August 5, 2026

Synthesis

Not available

All jurisdictions

Not available.

Additional Comments

Franklin Branch Bank v. Ohio · 66 U.S. 474

Monetary awards

No monetary awards found.

Related opinions

Jefferson Branch Bank v. Skelly
17 L. Ed. 173 · 1861 U.S. LEXIS 496 · 1 Black 436 · 66 U.S. 436
Branch v. Franklin
2007 U.S. Dist. LEXIS 49958 · 2007 WL 2029337 · 499 F. Supp. 2d 1321
United States v. City Bank of Columbus
16 L. Ed. 130 · 1858 U.S. LEXIS 652 · 21 How. 356 · 62 U.S. 356
United States v. Bank of the Metropolis
10 L. Ed. 774 · 15 Pet. 377 · 1841 U.S. LEXIS 275 · 40 U.S. 377
Walker v. President of the Bank of Washington
11 L. Ed. 494 · 1845 U.S. LEXIS 419 · 3 How. 62 · 44 U.S. 62
The Union Bank of Tennessee v. Jolly's Adm'rs.
15 L. Ed. 472 · 1855 U.S. LEXIS 724 · 18 How. 503 · 59 U.S. 503

Metadata

Court

Supreme Court of the United States

Decided

March 17, 1862

Precedential status

Published

Franklin Branch Bank v. Ohio

Citing opinions

Headnotes

Opinion