Case ID: serg-rawl_15/html/0140-01.html
Source: Caselaw Access Project
Author: {"author": "Tirghman, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

[Philadelphia,
    January, 17, 1827.]
    GRANT and another against The MECHANICS’ BANK of Philadelphia.
    Under the act of the 21st of March, 1814, regulating banks, (section 7, article 11,) the bank was justifiable in refusing to permit a stockholder to transfer his stock. who was the drawer of a note discounted at the bank, but not payable when the transfer was requested, he and the indorser having then become insolvent.
    The meaning of the word, “ indebted,” in the 11th article.
    This was an action on the case, brought by Grant and Taylor, assignees of Thomas and Benjamin Williams, against the Mechanics’ Bank of Philadelphia, for refusing to permit the said T. and B. Williams to make a transfer to the plaintiffs of thirty shares in the said bank. The deed of assignment under which the plaintiffs claimed, was dated the third of August, 1822. On the 7th of August, the plaintiffs called at the bank, in company with Messrs. Williams, and asked permission to have a transfer made on the books of the bank, agreeably to th.e provisions of the act o£ assembly of the 21st of March, 1S14, by which the company was incorporated. The bank refused permission, unless payment was made, or satisfactory security given for the amount of several promissory notes drawn by T. and B. Williams, and indorsed by John Pray, which had been discounted by the said bank, but had not fallen due at the time the transfer was demanded. It was understood, that at that time both the drawer and indorser of the notes were insolvent. This action was brought to recover damages, for the refusal to.permit the transfer.
    
      J. R. Ingersoll, for the plaintiff.
    The question is, whether the notes, with evidence that both drawer and indorser were insolvent, justified the bank in refusing the transfer; and it depends on the eleventh article, contained in the seventh section of the act of the 21st of March, IS 14, under which this bank was incorporated, which provides that “ no stockholder indebted to the institution shall be authorized to make a transfer or receive a dividend,"till. such debt shall have been discharged, or security to the satisfaction of the directors given for the same.” These notes were not due, and, in the meaning of the act, a person was .not indebted, to the bank until his note was due. Until the statute 7 Geo. 1, no creditor whose debt was not due could prove under a commission of bankruptcy, or claim a dividend. Blackstone defines a debt to be a contract, by which a sum of money is due. The act renewing this and other charters, passed the 25th of March, 1S24, restricts the power of the bank to withhold a transfer to the case of a person indebted to the bank for a debt actually due and unpaid. This may be considered a legislative exposition of the former act. The construction contended for by the defendant is contrary to the custom and usage of banks. . It was proved, on .the trial, that it was customary, for this bank to make loans on actual security of stock expressly pledged, and also that it was the usage to permit tranfers and pay di vid' nds wheee the debt was not actually due. . He cited, 2 P. Wms. 209. 4 Burr. 2220. 8 Term Rep. 199.
    
      Broome and Binney, contra.
    The question arises properly on the construction of the eleventh article of the act of the 21st of March, 1814. The plaintiffs have no equity to induce the court to strain the law. Indebted means a note discounted, but not due. Johnson’s Dictionary defines indebted, “ having incurred a debt.” All money owing, is a debt in the language of the acts of assembly. Article 6th speaks of the total amount of debts of the bank; and section 15th, of a yearly abstract of debts and credits of the bank, to be transmitted to the auditor general. By section 16, the legislature appoints a committee to ascertain the debts and credits of the bank. Surely all debts are included in this phraseology, though not actually payable. So, in the Insolvent Debtors’ Act, of March 26th, 1814, Purd. Dig. 361, where the debtor is required to exhibit an account of his debts: and the court mky make an order to discharge him from all debts contracted and due. This has been construed to include debts not then payable. 3 Serg. & Rawle, 559. The language of the Intestate Act must receive the same construction. The act of March, 1824, was an alteration, not an explanation of the act of 1814.. It was a new law, conferring a new charter. No usage has been proved, bearing on the case. The witness knew no instance where a stockholder had transferred after he had failed. The act, therefore, must be construed according to its words, under which we cohtend that the drawer of a note is indebted to the holder the moment he delivers the note. The clause was meant to benefit the Bank;.but the benefit is little, if the bank may not stop a transfer, on account of a note discounted, but not yet payable. One bound in a bond to pay, when J. S. comes from beyond sea: it is a debt presently. Neal v. Sheffield, Cro. Jac. 254. A bond payable in futuro, is released by a release of all debts. Cro. Jac. 300. Yelv. 215, S. C. The drawer of a foreign bill is indebted from the date of the bill. 3 Wils. 17. The statute 7 Geo. 1, we takee.to be declaratory. It recites, that it hath been a question, and then goes on to enact. Not only in legal strictness, but in popular use one is indebted before the time of» payment. All our numerous assignments, in trust for the use of creditors, use it in this' sense. There is a marked distinction between the words of the act in. question, and those of the act incorporating the Philadelphia Bank, on this subject. In the latter, which was passed the 5th of March, 1804, all debts due to the bank from a stockholder, days of grace being past, must be satisfied before transfer.
    
      Chauncey, in reply.-
    When the act of March, 1814, was passed, it was not. considered that a stockholder pledged his stock by obtaining discount. By section 9, these banks are required to make loans t« the amount of one fifth of the capital paid in to farmers, mechanics, and manufacturers for one year, taking security by bond, mortgage, or otherwise. The inconvenience would be great, if a stockholder who has given a note to a third person, which is by him discounted at the bank, shall be cut off from his dividends and right of transfer. Indebted is, it is true, a word of large import, hut may, if the subject requires it, be properly restricted to a debt actually due: on the contrary, if .the subject requires it, it may be include debts contracted but not actually due. Whatever may have been the case in the country, the city banks always took an express lien on stock when they meant to rely on it as security.
   The opinion of the court was delivered by

Tirghman, C. J.

The case depends on the eleventh fundamental article in the seventh section of the act of the 21st of March, 1814, entitled “ an act regulating banks.” This article, so far as concerns the present question, is in the words following: “The stock of each of the said companies shall be assignable and transferable on the books of the company only, and in such manner as the byrlaws shall ordain, but no stockholder indebted to the institution, shall be authorized to make a transfer, or receive a dividend, till such such debt shall have been discharged, or security, to the satisfaction of the directors, given for the same.”

It will be recollected that this act brought into existence forty banks, scattered through the state, and most of them out of the city of Philadelphia; so that, in a doubtful case, it would be wrong to give it a construction different from the common import of the words, in order to make.its provisions conformable to any supposed custom of doing business in the city. Indeed, no custom of the Mechanics’ Bank, which can affect the present question, was proved,- so that I throw out of consideration all arguments drawn from that source. Where words have acquired a technical meaning, it is to be presumed that they are used in that sense, unless there be something in the statute which shows a contrary intent; for wherever the-intent of the legislature plainly appears, it governs the construction. But where words are not technical, their meaning is, in general, best ascertained by common par-lances. Laws afe made for the people, ánd should be expressed in language which they understand. Now the word indebted has not acquired a technical signification, and, in common understanding, means a sum of money which one has contracted to pay to another, whether the day of pajunent be come or not. Even in law language we speak of debitum in prsesenti, solvendum in futuro,—a present debt, to be paid in a future time. So, in act of assembly language, a debt signifies money payable at a future time. For example,- the Intestate Law of the 19th of %Upril,\794, section 14, enacts, that “ all debts owing by any person within this state at the time of his decease,” shall be paid by his executor or administrator in a certain order prescribed by the said act. No man ever doubted that this order extended to all money which the intestate was bound to pay, whether actually due at the time of bis death or not. Suppose one who had drawn notes and circulated them, to a large amount, should make a voluntary transfer of his property before they fell due, could it be said that this was fair, because, at the time of transfer, he was not indebted on these notes? But let us consider whether there is any thing in the general policy of the act of March, 1814, which should divest this word indebted, of its usual meaning. It is said by the counsel for the plaintiffs, that it would be extremely inconvenient, and hard, on stockholders, if (hey were to lose the right of making transfers, or receiving dividends, merely because they happened to draw or indorse a note, which was discounted in a bank, perhaps without their knowledge. That' an inconvenience might sometimes happen in this way, is .true; but it is believed not often, because the directors would not be apt to refuse permission to transfer, or withhold dividends in stock, unless there was danger of loss; besides, the stockholders derived no small advantage from the facility with which they obtained discounts on the faith of a lien on their stock. The question is, however, not whether stockholders might be put to inconvenience, but what was the intent of the law. Now, no doubt, this restraint on the transfer of stock was intended for the benefit'of the bank. But of what benefit would it be, if the stockholder had the unrestrained right of transfer, at atiy time before his note fell due? The time of making this loan, is that at which the directors must look out for security. If the stock was pledged by law, they might be easy as to other security. But if, trusting to this pledge, they discounted a stockholder’s note, who had the right to withdraw his stock at pleasure, then the security in fact amounted to nothing. To be sure, if it were clearly ascertained, that by indebted the law meant nothing but a debt actually due, the bank directors would have no right to complain; because they would know that the stock was no security, and therefore they must look well to the character and property, (other than stock,) of the drawers and indorsers, before a note was discounted, or demand an actual pledge of the stock. And indeed this is the actual situation of the Mechanics’ Bank and many others incorporated by the same original act of March, 1814, and rechartered by the act of the 25th of March, 1824, entitled “ An- Act to recharter certain Banks.” In this last act, the words of the eleventh fundamental article are strikingly different from those of the same article in the act of 1814. Instead of saying, “no stockholder indebted to the institution,” the expressions are, “ no stockholder indebted to the bank, for a debt actually due and unpaid, shall be authorized to make a transfer,” &c. This, however, was not intended as an explanation of the first law, but an alteration, in consequence of a change of policy. What occasioned this change of policy, it is unnecessary to inquire. This right of lien in the bank was brought before the court, in the case of Rogers and others v. The Huntingdon Bank, at Chambersburg, October Term, 1824, which will be reported in 12 Serg. & Rawle, now in the press. I will not undertake to be positive that the very point now in question was decided, but I am satisfied that it was in the mind of the court, and their opinion was in favour of the lien. In the present case, therefore, the plaintiffs had no right to a transfer, the notes of Messrs. Williams, (the owners of the stock,) which had been discounted by the bank, not having been paid, or security given for payment, and consequently this action is not maintainable.

There was a second count in the declaration, for money had and received, &c.-, intended for the recovery of the dividends on the stock which fell due after the 7th of August, 1822. As the plaintiffs’ claim of dividends stands precisely on the same ground as their right to receive a transfer, I have thought it unnecessary to say any thing particular on that head.

Judgment for the defendants. 
      
       Since reported.