In April 1816, Congress passed an act entitled "An act to incorporate the subscribers to the Bank of the United States." The Bank organized in Philadelphia pursuant to the act and in 1817 established a branch in the City of Baltimore that from that time until May 1, 1818, transacted business by issuing bank notes, discounting promissory notes, and performing other customary operations under the authority of the corporate body established at Philadelphia.
On February 11, 1818, the General Assembly of Maryland passed an act entitled "An act to impose a tax on all banks, or branches thereof, in the State of Maryland, not chartered by the legislature." The Maryland statute provided that any such branch could not lawfully issue notes except upon stamped paper of specified denominations furnished by the Treasurer of the Western Shore, or could relieve itself from that requirement by paying annually in advance to the Treasurer the sum of $15,000. Officers offending against the provisions forfeited $500 for each offense, and persons circulating unstamped notes forfeited up to $100, with penalties recoverable by indictment or action of debt.
James W. McCulloch, cashier of the Baltimore branch, on the days set forth in the declaration issued bank notes to George Williams in Baltimore in part payment of a promissory note discounted by the branch, and those notes were not issued on stamped paper as prescribed by the Maryland act; neither the bank nor its branch had paid the $15,000 in advance before or since the issuance of those notes.
John James, who sued as well for himself as for the State of Maryland, brought an action of debt against McCulloch in the County Court of Baltimore County to recover the penalties. The parties submitted a statement of agreed facts to the court, which rendered judgment against McCulloch; the Court of Appeals of Maryland affirmed that judgment, and McCulloch brought the cause to the Supreme Court of the United States by writ of error.
View case