The case was McCulloch v. Maryland (1819).
The legal issue: Could the state of Maryland tax the Second Bank of the United States? It was a private bank.
The issue, as stated by Chief Justice Marshall in a long, detailed decision, was this: Does the Constitution allow Congress to charter a bank? That was what Congress did in 1791: the [First] Bank of the United States. It was a central bank. Its charter lapsed in 1811.
The Second Bank of the United States was chartered by Congress in 1816.
In 1818, Maryland voted to tax the Bank. The Bank refused to pay. The Supreme Court decided in favor of McCulloch, an agent of the Bank.
Here is the standard version: “The case presented two questions: Did Congress have the authority to establish the bank? Did the Maryland law unconstitutionally interfere with congressional powers?” (http://www.oyez.org/cases/1792-1850/1819/1819_0) This is the textbook account. It is Marshall’s account.
The historical record does not support this limited description.
Marshall deliberately refused to deal with the central legal issue raised by the state of Maryland. That issue was not whether the Congress had the authority to charter a corporation. Rather, it was this:
Does the United States Constitution authorize Congress to delegate federal sovereignty to a private corporation?
In Marshall’s long decision, he summarized the position of the state of Maryland.
In truth, the directors have exercised the power, and they hold it, without any control from the government of the United States; and, as is now contended, without any control of the state governments. A most extravagant power to be vested in a body of men, chosen annually by a very small portion of our citizens, for the purpose of loaning and trading with their money to the best advantage! . . .If this power belongs to congress, it cannot be delegated to the directors of a bank, any more than any other legislative power may be transferred to any other body of citizens: if this doctrine of necessity is without any known limits, but such as those who defend themselves by it, may choose, for the time, to give it; and if the powers derived from it, are assignable by the congress to the directors of a bank; and by the directors of the bank to anybody else; we have really spent a great deal of labor and learning to very little purpose, in our attempt to establish a form of government in which the powers of those who govern shall be strictly defined and controlled; and the rights of the government secured from the usurpations of unlimited or unknown powers.
Marshall never responded to this crucial issue. Instead, he asserted federal sovereignty in general, but never again mentioned the issue of a transfer of this sovereignty to a privately owned central bank. I have outlined his strategy here: http://www.garynorth.com/public/12008.cfm.
(For the rest of my article, click the link.)