- In 1861, Texas seceded from the United States of America and joined the Confederate States.
- Texas had received $10 million in United States bonds as part of the Compromise of 1850. While many of the bonds were sold, there were still some remaining in 1861.
- The legislature authorised the sale of the remaining bonds. State law required the Texas governor to sign his endorsement on any bonds which were sold, but the state feared that the sale price would be depressed if the United States Treasury refused to honour bonds sold by a Confederate state. The legislature repealed the requirement for the governor’s endorsement in order to hide the origin of the bonds.
- The US Treasury said it would not honour any illegally sold bonds. 136 bonds were purchased by a brokerage owned by George W. White and John Chiles.
- After the Civil War, the Texan government sued White and Chiles for the illegally sold bonds.
- Because Texas had left the Union during the Civil War, were the bonds valid?
- The US Supreme Court, led by Chief Justice Salmon Chase, delivered judgment on 12 April 1869.
- The Court held that Texas had incorporated itself into an already existing indissoluble body.
- Texas had never been outside the Union and any state actions taken to declare secession or implement the Ordinance of Secession were null and void. The rights of Texas itself, as well as the rights of Texan citizens of the United States, remained unimpaired.
- Texas’ suspension of the prewar government did require the United States to suppress the rebellion and reestablish the proper relationship between Texas and the federal government. These obligations were created by the Constitution in its grant of the power to suppress insurrections and the responsibility to insure for every state a republican model of government.
- Due to Texas’ rebellion, the US Supreme Court treated its actions of issuing bonds to White and Chiles as “treasonable and void” – this was because the bonds were issued to fund a rebellion against the United States.
- Accordingly, Texas still retained ownership of the bonds and were entitled to either the return of the bonds or the payment of a cash equivalent from those parties who had successfully redeemed the bonds
“Considered therefore as transactions under the Constitution, the ordinance of secession, adopted by the convention and ratified by a majority of the citizens of Texas, and all the acts of her legislature intended to give effect to that ordinance, were absolutely null. They were utterly without operation in law. The obligations of the State, as a member of the Union, and of every citizen of the State, as a citizen of the United States, remained perfect and unimpaired. It certainly follows that the State did not cease to be a State, nor her citizens to be citizens of the Union. If this were otherwise, the State must have become foreign, and her citizens foreigners. The war must have ceased to be a war for the suppression of rebellion, and must have become a war for conquest and subjugation”
The full text is available here: https://www.law.cornell.edu/supremecourt/text/74/700
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