# The Bank of the United States v. Dandridge/Dissent Marshall

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* Opinion of the Court
* Dissenting Opinion Marshall
Mr. Chief Justice MARSHALL dissented.
I should now, as is my custom, when I have the misfortune to differ from this Court, acquiesce silently in its opinion, did I not believe that the judgment of the Circuit Court of Virginia gave general surprize to the profession, and was generally condemned. A full conviction that the commission of even gross error, after a deliberate exercise of the judgment, is more excusable than the rash and hasty decision of an important question, without due consideration, will, I trust, constitute some apology for the time I consume in stating the reasons and the imposing authorities which guided the Circuit Court in the judgment that has been reversed.
The case before that Court depended on the question whether the official bond of the cashier, on which the suit was brought, bound the defendants.
As preliminary to the investigation of this question, I shall state some propositions belonging to it, which are supposed to be incontrovertible. All admit that delivery is essential to the validity of a deed, and that acceptance is essential to a complete delivery. If this be true, they must be proved in every case where they are put in issue by the pleadings. This proof varies according to circumstances. If there be subscribing witnesses to the instrument, it can be proved only by them, if attainable. If unattainable, or if there be no subscribing witnesses, other proof may be admitted; but, in every case, a delivery and acceptance must be legally proved.
If, in transactions between individuals, where a deed is without a subscribing witness, proof of the signature of the maker, accompanied with the facts that the instrument has passed out of his hands, and is in the possession of the person for whose benefit it was made, be prima facie evidence of its delivery, it is because delivery by mere manual tradition, without witnesses, is good; and the assertion of title under it is proof of acceptance, because that requires only the assent of the mind, which assent is legally manifested by asserting a claim to it. That a plaintiff may maintain his action by this evidence, does not show that delivery and acceptance are unnecessary, or that proof of them can be dispensed with; but that, in ordinary cases, this evidence amounts to such proof. If, however, a case should occur in which the possession of the instrument by the party claiming under it, does not afford legal prima facie evidence of delivery and acceptance, because such party is incapable of receiving and assenting to the instrument in a form which can be legally proved or inferred from those facts, then such other facts must be shown on the trial as will establish a lawful delivery and acceptance.
I state these legal axioms, at the hazard of being thought tedious, because they appear to me to have a direct bearing on the case before the Court.
The plaintiff is a corporation aggregate; a being created by law; itself impersonal, though composed of many individuals. These individuals change at will; and, even while members of the corporation, can, in virtue of such membership, perform no corporate act, but are responsible in their natural capacities, both while members of the corporation, and after they cease to be so, for every thing they do, whether in the name of the corporation or otherwise. The corporation being one entire impersonal entity, distinct from the individuls who compose it, must be endowed with a mode of action peculiar to itself, which will always distinguish its transactions from those of its members. This faculty must be exercised according to its own nature.
Can such a being speak, or act otherwise than in writing? Being destitute of the natural organs of man, being distinct from all its members, can it communicate its resolutions, or declare its will, without the aid of some adequate substitute for those organs? If the answer to this question must be in the negative, what is that substitute? I can imagine no other than writing. The will to be announced is the aggregate will. The voice which utters it must be the aggregate voice. Human organs belong only to individuals. The words they utter are the words of individuals. These individuals must speak collectively to speak corporately, and must use a collective voice. They have no such voice, and must communicate this collective will in some other mode. That other mode, as it seems to me, must be by writing.
A corporation will generally act by its agents; but those agents have no self-existing power. It must be created by law, or communicated by the body itself. This can be done only by writing.
If, then, corporations were novelties, and we were required now to devise the means by which they should transact their affairs, or communicate their will, we should, I think, from a consideration of their nature, of their capacities and disabilities, be compelled to say, that where other means were not provided by statute, such will must be expressed in writing.
But they are not novelties. They are institutions of very ancient date; and the books abound with cases, in which their character, and their means of action, have been thoroughly investigated. In Brooke's Abridgement, (title Corporation,) we find many cases, cited chiefly from the Year Books, from which the general principle is to be extracted, that a corporation aggregate can neither give nor receive, nor do any thing of importance, without deed. Lord Coke, in his commentary on Littleton, (66 b.) says, 'But no corporation aggregate of many persons capable' 'can do homage.' 'And the reason is, because homage must be done in person, and a corporation aggregate of many cannot appear in person; for, albeit, the bodies natural, whereupon the body politique consists, may be seen, yet the body politique or corporate, itself, cannot be seen, nor do any act, but by attorney.' So, too, a corporation is incapable of attorning otherwise than by deed, (6 Co. 386.) or of surrendering a lease for years, (10 Co. 676.) or of presenting a clerk to a living, (Br. Corp. 83.) or of appointing a person to seize forfeited goods, (1 Vent. 47.) or agreeing to a disseisin to their use. (Br. Corp. 34.) These incapacities are founded on the impersonal character of a corporation aggregate, and the principle must be equally applicable to every act of a personal nature.
Sir William Blackstone, in his Commentaries, (v. 1. p. 475.) enumerates, among the incidents to a corporation, the right 'to have a common seal.' 'For,' he adds, 'a corporation being an invisible body, cannot manifest its intention by any personal act or oral discourse. It therefore acts and speaks only by a common seal. For though the particular members may express their private consents to any acts, by words, or signing their names, yet this does not bind the corporation; it is the fixing of the seal, and that only, which unites the several assents of the individuals who compose the community, and makes one joint assent of the whole.'
Though this general principle, that the assent of a corporation can appear only by its seal, has been in part overruled, yet it has been overruled so far only as respects the seal. The corporate character remains what Blackstone states it to be. The reasons he assigns for requiring their seal as the evidence of their acts, are drawn from the nature of corporations, and must always exist. If the seal may be exchanged for something else, that something must yet be of the same character, must be equally capable of 'uniting the several assents of the individuals who compose the community, and of making one joint assent of the whole.' The declaration, that a seal is indispensable, is equally a declaration of the necessity of writing; for the sole purpose of a seal is to give full faith and credit to the writing to which it is appended. The seal in itself, not affixed to an instrument of writing, is nothing; is meant as nothing, and can operate nothing. The writing is the substance, and the seal appropriates it to the corporation.
Though the rule stated by Blackstone may not be so universal as his language indicates, it is certainty of extensive application, and the exceptions prove its extent. Mr. Hargrave, in his notes on Co. Litt, (99.) says, 'In general, a corporation aggregate cannot take or pass away any interest in lands, or do any act of importance, without deed, but there are several exceptions to the rule.' The question before the Court depends very much on the extent of these exceptions, and on the manner in which this invisible impersonal being must act and speak, when it may act and speak without using its seal.
It is stated in the old books, (Br. Corp. 49.) that a corporation may have a ploughman, butler, cook, &c. without retaining them by deed; and, in the same book, (50.) Wood says, 'small things need not be in writing, as to light a candle, make a fire, and turn cattle off the land.' Fairfax said, 'A corporation cannot have a servant but by deed. Small things are admissible on account of custom, and the trouble of a deed in such cases, not by strict law.' Some subsequent cases show the officers may be appointed without deed, but not that they may be appointed without writing. Every instrument under seal was designated as a deed, and all writings not under seal were considered as acts by parol. Consequently, when the old books say a thing may be done without deed, or by parol, nothing more is intended than that it may be done without a sealed instrument. It may still require to be in writing. In 2 Bac. Abr. 13. it is said, 'Aggregate corporations, consisting of a constant succession of various persons, can regularly do no act without writing; therefore, gifts by and to them, must be by deed.' In page 340, it is said, 'if a corporation aggregate disseise to the use of another, they are disseisors in their natural capacity,' 'as a corporation they can regularly do no act without writing.'
In the case of The King v. Bigg, (Strange, 18.) the prisoner was convicted for erasing an endorsement on a bank note. The indictment and verdict are set forth at large by Peere Williams, (v. 3. p. 419.) and it appears that the note was signed by Joshua Adams, who was intrusted and employed by the Bank of England to sign bank notes, but not under their common seal. It was contended by Peere Williams, in an able argument, that the appointment was not valid, because not made under their common seal; and his argument contains an enumeration of decisions previously made, which go far in support of his proposition. The prisoner, however, was condemned, and, consequently, the appointment was held valid. But there is no reason to suppose that it was not made by writing. The verdict finds 'that he was intrusted and employed by the governor and company of the Bank of England, but not under their common seal.' Consequently his employment was evidenced by writing, if it was necessary; and the negative finding that it was not under their common seal, strengthens the presumption that it was in writing. Peere Williams has reported his argument, and would certainly have taken this objection, had the case afforded it. I consider the appointment of Adams, then, as having been made in writing, though not under seal.
Mr. Fonblanque says, (vol. 1. p. 296. note o,) 'And the agreement of the major part of the corporation, being entered in the corporation books, though not under the corporate seal, will be decreed in equity.' The inference is strong that it will not be decreed unless it be entered on the corporation books. Consequently, unless it be so entered, it is not an agreement, for every lawful agreement which is in itself equitable, will be decreed in equity.
In the Mayor of Thetford's case, (1 Salk. 192.) Lord Holt said, that though a corporation cannot do an act in pais without their common seal, they may do an act on record, and that is the case with the city of London, which makes an attorney in Court annually by warrant; and the reason is, they are estopped by the record. Upon the same principle, a return to a mandamus is good, though not under the common seal. In these exceptions to the general rule, the substitute for the common seal must be writing; and the exceptions are stated in terms which exclude every idea that the act can be evidenced otherwise.
Yarborough v. The Bank of England, (16 East, 6.) was an action of trover and coversion, in which, after verdict for the plaintiff, it was moved in arrest of judgment, that the action would not lie, because a corporation was incapable of committing a tort. The action was sustained; and Lord Ellenborough, in delivering the opinion of the Court, said, that a corporation can act only through the instrumentality of others; and wherever they can act, or order any act to be done on their behalf, which, as by their common seal they may do, they are liable to the consequences of such acts. 'A corporation cannot be aiding to a trespass, nor give a warrant for a trespass, without writing.' His lordship cited several old cases, showing the incompetency of a corporation to act in important matters otherwise than by deed; and added, 'But many little things require no special command, as to chase cattle out of their land. Those things are incident to the appointment.' Several cases are put, in which a corporation may be liable for a trespass; but they are all consistent with his first proposition, that the liability of a corporation must be founded on writing. 'If,' he says, 'the mayor and commonalty disseise me, and I release to 20 or 200 of the commonalty, this will not save the corporation, and the reason is, because the disseisin is in their corporate character, and the release to individuals.' So in trespass against the mayor and commonalty of York, they cannot justify under a right of the inhabitants to common, because the right in natural persons gave no right to a corporation. Nor could the corporation give a warrant without writing, to commit a trespass. The foundation of this action is, was the authority in writing given by the corporation? It stands on the same principle with the action of assumpsit made by an agent acting under a written power. The idea that their seal was indispensable to the validity of all corporate acts, which is laid down in such strong terms by Blackstone, and by others, on whom he relied, probably grew out of the state of the times in which it originated; seals were then more frequent and better known than signatures. An instrument was much more certainly authenticated by the seal, than by the name of the maker. This circumstance would bring seals into common use; and as every corporation possessed a seal of extensive notoriety, and any other mode of authenticating its acts would, in those simple times, be attended with difficulties and perplexities, it is not matter of surprise that this rule should prevail. As writing has become more common, and seals are less distinguishable from each other, the good sense of mankind gradually receives the writing without the seal, in all the less formal and less important transactions of the corporate body. All the reasons derived from the corporate character, which have been assigned for requiring the seal, are satisfied by the writing without it.
The English cases on this subject are very well summed up by Mr. Kyd, (p. 259.) The result of the whole appears to be, that in England the general rule is, that a corporation acts and speaks by its common seal, at least so far as respects the appointment of officers, whose duties and powers are important. In those transactions, where the use of the seal would be unnecessary, and extremely inconvenient, it is frequently dispensed with; but in all of them, I think, writing is indispensable. In almost every case which I can imagine, there ought to be, and is, a record is the corporation books. With respect to the necessity of a seal, the difference is certainly great between ancient and modern times; and between corporations, whose principal transactions respected land, and those which are commercial in their character. This distinction may, and ought to influence the use of the seal, but not the use of writing. The inability of a corporation aggregate to speak or act otherwise than by writing, is constitutional, and must be immutable, unless it be endowed by the legislature with other qualities than belong to the corporate character. The English cases, so far as I have had an opportunity of examining them, concur in the principle, that a corporation aggregate can act only by writing. A case from 4 Barnw. & Cresw. has been cited at the bar, and undoubtedly deserves attention. I regret that it has not been in my power to examine it. As far, however, as I could judge of it from the statement made at the bar, I did not think that it had over turned what appears to me to be the settled low of EnglandI will now inquire whether the decisions of this Court vary in principle from those of England.
Head & Amory v. The Providence Insurance Company, (2 Cranch, 127.) was an action on a policy of insurance, which the defendants contended had been vacated by a subsequent agreement; and the validity of this agreement constituted the sole question in the cause.
The plaintiffs had proposed terms for vacating the policy, and some communications had taken place through Brown & Ives, their correspondents, which showed a misunderstanding between the parties, and that mutual propositions had been mistaken by the plaintiffs for an acceptance of the terms they had proposed. This produced a letter from the plaintiffs, of the 3d of September, 1800, which was understood by the defendants, and was considered by the Court, as amounting to a renewal of propositions for vacating the policy. The secretary of the company delivered to Brown & Ives, on the 6th of September, the following note:
'Sept. 6th, 1800.
'As there appears to have been a misunderstanding in the business as it respects the first propositions of the company, the directors are willing to accede to Messrs. Head & Amory's proposition, (viz.) to settle the policy on the merchandise at 25 per cent., although it was their intention and expectation to have both policies included in the settlement. Messrs. Head & Amory will please to forward the policy, and have it annulled immediately. Premium due 12-15 September.
'You will please to govern yourself accordingly, and we will attend to your wishes.'
This paper was in the handwriting of the secretary, but without signature.
Testimony was given at the trial to show the usage of the insurance companies, to consider an agreement to do an act as equivalent to the performance of the act.
This paper was forwarded by Brown & Ives, on the 9th of September, to the house of Head & Amory, in Boston, and its receipt was acknowledged by their clerks on the 12th, they being at the time absent. On the 17th of September, the plaintiffs wrote to Brown & Ives, informing them that, previous to their seeing the letter of the 9th, intelligence was received of the capture of the vessel, which would, of course, prevent any farther negotiation on the subject.
The Circuit Court determined that the agreement to vacate the policy was complete; and the jury found for the defendants. The judgment was brought before this Court, and was reversed; because this informal paper did not amount to an acceptance of the terms proposed by the plaintiffs. The act incorporating the company, enacted, 'that policies of insurance, and other instruments, made and signed by the president of the said company, or any other officer thereof, according to the ordinances, by-laws,' &c. 'shall be good and effectual,' &c. The Court considered the company as the mere creature of the incorporating act, and as being capable of exerting its faculties only in the manner which the act authorizes. This paper, not being executed in the form prescribed by law, could not be considered as the act of the company.
On the testimony of the witness concerning usage, the Court observed, that 'if he was to be understood as stating that an assent to the formation or dissolution of a policy, if manifested according to the forms required by law, is as binding as the performance of the act agreed to be done, it is probable that the practice he alludes to is correct. But if he means to say that this assent may be manifested by parol, the practice cannot receive the sanction of this Court. It would be to dispense with the formalities required by law for valuable purposes, and to enable these artificial bodies to act and to contract, in a manner essentially different from that prescribed for them by the legislature.'
'An individual,' the Court added, 'has an original capacity to contract and bind himself in such manner as he pleases.' 'He who acts by another, acts by himself. He who authorizes another to make a writing for him, makes it himself; but with these bodies, which have only a legal existence, it is otherwise. The act of incorporation is to them, an enabling act. It gives them all the power they possess. It enables them to contract; and when it prescribes to them a mode of contracting, they must observe that mode, or the instrument no more creates a contract than if the body had never been incorporated.'
The Court considered the note of the 6th of September 'as a mere informal paper, which might perhaps amount to notice of an act, if such act was really performed, but which is not in itself an act of any legal obligation on the company. That if the proposition contained in the letter of the 3d of September, had been regularly accepted, this note might possibly have been considered as notice of that acceptance, but is not in itself an acceptance.'
I have gone the more fully into this case, because, both the decision itself, and the reasoning by which it is supported, appear to me to apply throughout to the case now before the Court.
This subject came on to be again considered in The Bank of Columbia v. Patterson's Administrators, (7 Cranch, 299.) That was an action of assumpsit brought by Patterson's administrators for work and labour done by their intestate for the bank. It was founded on an agreement in writing between Patterson and 'a duly authorized committee of the directors of the bank,' in their own names. Judgment was given in favour of the administrators, upon which the cause was brought by a writ of error into this Court; and, among other objections to the proceedings below, it was contended, that a corporation aggregate could not promise otherwise than under its seal.
In considering this objection, the Court did not controvert the ancient rule. But this rule, if it ever existed to the extent claimed by the plaintiffs in error, had been relaxed; and it seems at length to have been established, that though corporations could not contract directly, except under their corporate seal, yet they might, by mere vote, or other corporate act, not under their corporate seal, appoint an agent, whose acts and contracts, within the scope of his authority, would be binding on the corporation. It being conceded that the committee were authorized to make agreements, there could be no doubt that a contract made by them in the name of the corporation, would be binding on the corporation. But as this promise is made in their own names, if the principle stopped here, the remedy would be only against the committee.
The Court proceeds to consider it as a sound rule of law, that wherever a corporation is acting within the scope of the legitimate purposes of its institution, all parol contracts made by its authorized agents are express promises of the corporation.
In applying this rule of law to the case then under consideration, the Court reviewed the evidence from which the jury might legally infer, 'that the corporation had adopted the contracts of the committee, and had voted to pay the whole sum which should become due under the contracts, and that the plaintiffs' intestate had accepted the engagement.'
The Bank of Columbia v. Patterson's Administrators, differed from the case of the Providence Insurance Company v. Head & Amory, in two essential circumstances. The contract which was sustained against the bank was made through the instrumentality of a legally constituted agent; that which the insurance company attempted to set up, purported to be a direct contract between the company and the plaintiffs in the cause. In the case of The Bank of Columbia, the Court said, 'At length it seems to have been established, that though they (corporations) could not contract directly, except under their corporate seal, yet they might, by mere vote, or other corporate act, not under their corporate seal, appoint an agent, whose acts and contracts, within the scope of his authority, would be binding on the corporation.'
The obligation on which this suit was instituted, if it be an obligation, purports to be a direct contract between the bank and the individuals who signed the instrument. It is not alleged that any agent was authorized to act for the bank.
Another very essential difference between the two cases cited from Cranch is this: In that of the Providence Insurance Company, the corporation attempted to set up an agreement, which, if it existed, was in its own possession. It claimed to imply that an act had been performed by itself, the evidence of which was in its own possession, and might be produced. The Court disallowed this implication.
In the case of The Bank of Columbia, as in that of the insurance company, the act to be implied was an act performed by the corporation in its own office, without witnesses, the evidence of which remained in its own possession; but it was set up against, not by the corporation. The Court was not of opinion that the suit could be maintained without the existence of this act. No such idea is indicated. On the contrary, the language of the opinion shows very clearly that the act was necessary. If, in order to charge the bank, it was necessary that the corporation should have 'adopted the contracts of the committee,' and should have 'voted to pay the whole sum which should become due under the contracts.' The Court enumerates circumstances which were deemed sufficient to justify a jury in implying against the corporation that the bank had performed these acts.
In the case at bar, the suit is brought by the corporation, and the corporation asks the Court to imply that it has performed those acts which are necessary to the validity of the bond on which it sues, although the evidence of its having performed them is in its own possession.
Fleckner v. The Bank of the United States, (8 Wheat. Rep. 338.) was a writ of error to a judgment given by the Court of the United States for the District of Louisiana, in favour of the bank, in a suit instituted against Fleckner on a note given by him, and endorsed to the Bank of the United States by the President, Directors and Company of the Planters' Bank of New-Orleans, through their cashier, as their agent. One of the errors alleged in the proceedings of the Court below was, that the cashier of the Planters' Bank had no authority to make the transfer. The authority was given by a vote of the board of directors to the president and cashier, and the act itself was afterwards affirmed by an instrument of writing under the corporate seal. It was contended that the original vote, empowering the president and cashier to perform the act, ought to have been a power under the corporate seal. In noticing this objection, the Court said, 'Whatever may be the original correctness of this doctrine as applied to corporations existing by the common law, in respect even to which it has been certainly broken in upon in modern times, it has no application to corporations created by statute, whose charters contemplate the business of the corporation to be transacted exclusively by a special body or board of directors. And the acts of such body or board, evidenced by a written vote, are as completely binding upon the corporation, and as complete authority to their agents, as the most solemn acts under the corporate seal.'
The Court then proceeded, in a very elaborate and well digested opinion to maintain that the endorsement was within the official duty of the cashier, that it was within the original power given to the president and cashier, and that, were this otherwise, it was sanctioned by the concluding act under the corporate seal. The whole of this case, as of the two preceding cases, turns upon the idea, that a writing, in due form, on the part of the corporation, is indispensable to the validity of its contracts.
According to the decisions of the Courts of England, then, and of this Court, a corporation, unless it be in matters to which the maxim de minimis non curat lex applies, can act or speak, and, of course, contract, only by writing. This principle, which seems to be an essential ingredient of its very being, has been maintained by all the judges who have ever discussed the subject. Upon this principle, and the authority of these cases, I have supposed that a corporation cannot receive and assent to a deed of any description, unless this assent be expressed regularly in writing. It ought to be entered on the books of the corporation.
The counsel for the plaintiffs in error insist, that the proof offered in the Circuit Court was sufficient to establish the full execution of the bond; and they support this proposition upon principle, upon convenience, upon usage, and upon the authority of cases decided in the different States of the Union.
It is, we are told, a general rule, that acceptance by a corporation is a fact which may be proved before a jury, and the acceptance of a new charter is mentioned to illustrate the rule.
Without question, acceptance is a fact, and is to be proved before a jury; but the inquiry is, by what evidence may it be proved? I have supposed that it must be proved by testimony which shows that the corporation has acted in the form in which alone it is capable of acting; that it has expressed its acceptance in the mode in which such a being is capable of expressing it. I receive readily the case put of the acceptance of a new charter as an apt illustration of the principle we are investigating, and should be surprised, indeed, if a new charter were to be accepted without a vote of acceptance entered upon the record. The case cited from 1 Term Rep. 575. does not appear to me to sanction the doctrine it is adduced to support.
We are told, too, that there was never a time when a corporation might not take by a deed poll. But, if this be admitted, I cannot perceive its influence on the case. A deed poll is in writing, and there is the same necessity that its acceptance should be evidenced by writing as if it were an indenture. The general assertion which we find in all the books, that a corporation can take only by deed, that is, as I understand it, that the act of taking must be by deed, applies as well to conveyances by deed poll, as by indenture.
We have been also referred to a time anterior to writing, and are asked how corporations then acquired property?
We have no knowledge of such a time. Since Europe was subdued and civilized by the arms and literature of Rome, the science of writing, though rare, has never been entirely lost. So much of it as remained was found most generally in corporate bodies. If the corporation was not entirely ecclesiastical, which in early times was most frequent, yet there can be little reason to doubt their having, among themselves, or being able to command, a scribe. Be this as it may, the earliest information we have on the subject tells us that corporations aggregate could only take or grant by deed, under their corporate seal. Even when land passed from man to man by livery, a corporation could not so grant or take. Livery could not be made by, or to, a corporation aggregate, because they are personal acts, and it is an impersonal being. These acts were to be performed through the agency of an individual having a power to perform them under the corporate seal.
We are also told, that the title of the bank to the ground purchased for a banking house, and to all mortgages taken for the security of its debts, will be put in hazard by the principle which I have endeavoured to maintain; that it is probable not a single conveyance will stand the test by which the defendant in error proposes to try its validity, and that the usage is, to receive and deposit them among the papers of the institution without taking any notice of them on its records.
I can scarcely suppose it possible that so loose a practice can have prevailed. I can scarcely suppose it possible, that, on points of such vital importance, and of such rare occurrence, the plain requisites of law can have been so entirely disregarded. Deeds of mortgage, as well as of ground for necessary buildings, are conveyances of lands, and if any one legal proposition is laid down without a single exception, it is this, that a corporation aggregate cannot take lands otherwise than by deed. To me it would appear very incautious to take such conveyances otherwise than as is prescribed in the books, that is, by appointing an attorney under the corporate seal to receive them; but, however this may be, I can scarcely suppose it possible, that an act so easily performed as to enter their assent in their own books, should be habitually neglected. That the current business of the bank should sometimes want the requisite forms, might be excused, but that the same failure should take place in single transactions, which seldom take place, and are yet of great importance, seems to me to be scarcely possible. I should not be inclined to act judicially on the presumption that the fact exists. If it does, the mischief may be corrected by correcting the practice.
The counsel for the plaintiff rely very much on the cases which have been decided in the States of Pennsylvania, New-York, and Massachusetts.
In the case mentioned at the bar, from Pennsylvania, a demurrer was filed to a plea in bar of the action on a cashier's bond, which brought up the very question in consideration before this Court. The argument was opened by the counsel for the plaintiff, but he stopped in the midst of it, and withdrew his demurrer without submitting the point to the Court.
The cases in New-York have not, I think, gone farther than The Bank of Columbia v. Patterson's Administrators. Those of Massachusetts have, I admit, gone the full length for which the plaintiffs contend, and the point is probably settled in that State. It would be presumptuous in me to place my understanding of those decisions in opposition to that of professional gentlemen from that State, but to me it seems, that even there the doctrine has not been uniformly maintained. Bigelow's Digest of Massachusetts cases contains this passage: 'Aggregate corporations cannot make a parol contract, unless by the intervention of some agent or attorney duly authorized by a corporate vote to contract on their part, because there is no other way in which they can express their assent.' He cites 7 Mass. Rep. 102. in which Chief Justice Parsons said, 'We cannot admit that a corporation can make a parol contract unless by the intervention of some agent or attorney duly authorized to contract on their part.'
In the Essex Turnpike Company v. Collins, (8 Mass. Rep. 292.) the Court said, 'Aggregate corporations cannot contract without vote, because there is no other way in which they can express their assent.'
In the case of Hayden v. The Middlesex Turnpike Corporation, (10 Mass. Rep. 397.) the work for which the action was brought was performed on the road. The committee appointed to contract for, and superintend it, was frequently present while it was going on, and directed the workmen. Other directors were also present, and one of them swore that he supposed the work to be going on by order of the directors. But the contract was not in exact conformity with the written authority under which the committee acted. A verdict taken for the plaintiff, subject to the opinion of the Court, was set aside, and the Court said, 'No individual member can represent the corporation in their aggregate capacity, but in consequence of their consent. The requisite evidence of this, at common law, was a deed under the seal of the corporation. Aggregate corporations, established by statute, are not restricted to that formality. They have power given them to order their affairs, and to appoint and employ agents by votes, or in such other manner as the corporation may by their by-laws appoint.' Again: 'Nor can a parol declaration, made to the corporators at a corporate meeting, by any individual, amount to a contract between such individual and the corporation.'
In The Proprietors of the Canal Bridge v. Gordon, (1 Pick. Rep. 297.) the Court decided, that a corporation could be bound without a vote, by implication from corporate acts. This, however, was in a suit brought against a corporation, and attended with circumstances extremely well calculated to strengthen every presumption against them. The corporation might have passed the vote, though it was not in the power of the plaintiff to produce it, and their acts afforded the strongest probability in favour of the implication that they had passed it. I should not consider this case as conclusive evidence that the same Court would have drawn the same inference from the same circumstances, in a case in which the corporation was plaintiff. But, in the case of The Inhabitants of the First Parish in Sutton v. Cole, the corporation was plaintiff, and the validity of an entry into land was one of the points made in the cause. The corporation had appointed two agents for the purpose, but the entry was made by one only. This entry was held to be made not in pursuance of the authority, but it was also held, that the action brought by the corporation was a ratification of the entry. This I admit to be a decision expressly in point. But, thinking it a case in opposition to the whole course of decision in England, as well as in this Court, and not supported by decisions in other States, or by a long course of decisions even in the State of Massachusetts, I should not, perhaps, highly respectable as it undoubtedly is, and as I certainly think it, have felt myself warranted in yielding to it, had it even been known to me.
It has been contended, that the act of Congress incorporating the bank, does not, in terms, require that it shall keep a record of its proceedings; and from this omission, it has been inferred, that a record is unnecessary. I cannot assent to the correctness of this inference.
When a being is created without the organs of speech, and endowed only with the faculty of communicating its will by writing, we need not look in the laws given by its creator, for a prohibition to speak, or a mandate to write. These are organic laws which it is compelled to observe. If we find, in the act of its creation, an enumeration of duties and powers which are to be performed and exercised by writing, it is evidence that the creator considered it as certain that the creature would write, and that the evidence of its conformity to the will of the creator would be found in writing. It is equivalent to a declaration that it shall act by writing.
Let the charter be examined with this principle in our minds.
The 8th section empowers the stockholders to choose directors for the management of their affairs, but does not require that the election shall be evidenced by writing. Is it to be believed, that Congress could have intended that an act, on which all the operations of the corporation depended, which might be controverted in every action it should institute, might rest upon the uncertain, and, perhaps, contradictory recollection of the individuals who were present.
The fairness of an election may be contested; the mode of voting is prescribed by law. Can it be that Congress supposed no provision was made which secured written testimony, by which such contests might be tried?
The directors are to elect one of their body as president; is no record to be kept of this election? Can we presume so much carelessness in Congress, as to suppose it possible that matters of such consequence should be left to the loose proof which the memory of individuals might furnish? The act prescribes the notice which shall be given of the time and place of holding the election; and adds, 'it shall be lawful for such election to be then and there made.' The legality of the election depends on time and place. Did Congress mean that these facts should rest on memory?
The 10th section empowers the directors, for the time being, to appoint officers, and to allow them a compensation; and to exercise such other powers for the well governing of the officers of the corporation, as shall be prescribed by its laws. May all these acts be found only in the frail memory of individuals?
The 4th rule of the fundamental articles provides, that not less than seven directors, of whom the president, or some person deputed by him, shall be one, shall constitute a board for the transaction of business; but there is no clause in the charter requiring a board. Can it be pretended, that not less than seven directors may make a board, and yet, that the directors may act without being assembled as a board? Congress has not thought it necessary to forbid their acting otherwise than as a board, because the whole law of corporations forbids it.
In the event of making unlawful loans, the directors are made personally responsible; but those are exempted who were absent, or who dissented from the resolution or act whereby the same was so contracted or created.
No clause in the charter directs that loans shall be created only by writing. The bond of the debtor may be said to be sufficient. Yet this clause is obviously drawn in the idea, that all the proceedings on the subject would necessarily be in writing. The absentees and dissentients are excused. How is this absence or dissent to be proved? Is it to depend on vague and uncertain memory?
The same observations apply to the limitations and restrictions which are found in the 9th and 10th rules of the fundamental articles.
The 13th rule declares, that semi-annual dividends shall be made, but does not direct that they shall be declared in writing. May the bank so manage its affairs, that no trace of these dividends shall be found on its books?
The 16th rule declares, that no stockholder, unless he be a citizen of the United States, shall vote in the choice of directors, but does not direct that written lists shall be taken. May they be dispensed with? Is the question who has voted to depend on recollection solely?
The 23d section subjects the books of the corporation to the inspection of a committee of either house of Congress But there is no clause in the charter which directs the corporation to keep any books. May this be set up as an excuse for not opening books containing their transactions for the inspection of a committee of Congress?
How are we to account for all these strange omissions? Strange and unaccountable they would certainly be, on any other hypothesis, than that the law of its being, required that it should speak and act by writing. Aware of this, Congress did not deem it necessary to enjoin upon it, that it should act in the only mode in which its organs enabled it to act, and that it should abstain from what its organs did not enable it to do.
It may be said, that although certain things ought to appear in writing, it is not necessary that all the transactions of a bank should so appear; and the assent of the directors to the bonds given by their cashiers, need not appear. Such grave acts or omissions as may justify the suing out a scire facias, to vacate the charter, ought to be evidenced by their records; but such unimportant acts as taking bonds from their officers, need not appear. These may be inferred.
I do not concur in this proposition. I neither admit the distinction which has been alleged, nor do I admit that the bond of a cashier is to be classed with unimportant transactions. Congress has not prescribed the intrinsic importance which shall entitle any transaction of a bank to a place on its record, but has legislated on the idea that a record of its proceedings will be kept. And if such a distinction could be found, the bonds of officers, intrusted with all the money of the bank, are among the most interesting of its duties. Congress has manifested this opinion, by enacting, that 'Each cashier or treasurer, before he enters upon the duties of his office, shall be required to give bond, with two or more sureties, to the satisfaction of the directors, in a sum not less than 50,000 dollars, with a condition for his good behaviour, and the faithful performance of his duties to the corporation.'
Congress, then, considered the bonds to be given by the cashiers as a subject of real importance; and Congress was right in this opinion. It requires very little knowledge of the interior of banks, to know that the interests of the stockholders are committed, to a very great extent, to these and other officers. It was, and ought to have been, the intention of Congress to secure the government, which took a deep interest in this institution, and to secure individuals, who embarked their fortunes in it, on the faith of government, as far as possible, from the mal-practices of its officers. One of the means employed for this purpose is the bond required from the cashier. Are the directors at liberty to dispense with this requisition? I think they are not.
Should a committee of Congress, on inspecting the books of the corporation, find that cashiers were acting without bonds, would not such gross negligence, such utter disregard of the positive mandate of the law, furnish serious cause for a scire facias to vacate the charter?
It has been urged, that the rule for which the defendants contend, would break in upon all the usages of the bank, invalidate all the notes they have discounted, and destroy their liability for deposits.
I do not think so. I do not profess to understand banking operations; but I think the counsel for the defendants has plainly shown, that not a single note is discounted, without evidence, in writing, on the note itself, or on the books of the bank, or on both. It is admitted, that the official acts of the officers of the bank are binding, and, of course, written memorandums made by such officer, in pursuance of orders of the board, whether on the note itself, or in a book, is a corporate act, is written evidence of such order of the board of direct is as the writing imports. The counsel for the defendant has, I think, shown from 'the rules and regulations for condutiting the business of the Bank of the United States,' as well as from the practice under those rules, that all transactions of that character are, as they ought to be, in wriring. He has shown also, conclusively, as I think, that full provision is made both for general and special deposits; and, in my judgment, every difficulty of this description is removed by the 23d rule, which shows that a regular record is, as it ought to be, kept of all the proceedings of the board of directors. So much of that rule as applies to this subject is in these words:
'The proceedings of the board of directors, when conducting their business as a deliberative body, shall be governed by the following articles:
'1st. When the president takes the chair, the members shall take their seats.
'2d. The minutes of the preceding meeting shall be read before the board proceeds to any other business; and no debate shall be admitted, nor question taken at such reading, except as to errors and inaccuracies. The state of the bank shall then be read, and the discounts settled.'
The board, then, does act as a deliberative body and does keep a minute of its proceedings, which are to be read over and corrected. On what subject does the board deliberate, if not on the measures which are to be taken for the security of its debts, and on the sufficiency of the sureties in the bonds given by the officers who have the management of its funds? Most especially is it bound to deliberate on the bonds to be given by the cashiers of the bank. This is a subject on which the directors are particularly commanded to exercise their judgment by one of the fundamental articles of the constitution of the corporation. That article requires, that 'each cashier or treasurer, before he enters upon the duties of his office, shall be required to give bond, with two or more sureties, to the satisfaction of the directors, in the sum of 50,000 dollars, with a condition,' &c. Is not the sufficiency of this bond, then, most especially a subject for deliberation? If it be, how is this deliberation to be conducted? The rules prescribe the mode with precision, and go so far as to direct, that 'at the request of any two of the board, the names of the members who make and second a motion, shall be entered on the minutes.' The bond must be offered, and the question ought to be put, and must be put, whether it shall be accepted. The acceptance is necessary to the completion of delivery, and is the only proof which can be given of that fact, unless it be delivered to an attorney, previously appointed by a board to receive it. Acceptance, undoubtedly, includes approbation, but is the deliberate act of the board, and must appear in their minutes. If it must, a copy of those minutes is, in a suit brought by the bank, the only admissible evidence of the fact.
I think it worthy of remark, that among these rules and regulations, not one is found which ordains that a record shall be kept, in which the proceedings of the directors shall be inserted. They are framed upon the idea, that one must be kept. We find them speaking of the minutes, as if their existence was indispensable, and need not be prescribed. Imitating the charter, in this respect, it was deemed unnecessary to ordain that a being should write, whose organization gave it not the means of transacting business otherwise than by writing.
The counsel for the plaintiffs has sought to escape the almost insuperable difficulties which must attend any attempt to maintain the proposition, that a corporation aggregate can act without writing, by insisting that the directors are not the corporation, but are to be considered merely as individuals who are its agents.
If this proposition can be successfully maintained, it becomes a talisman, by whose magic power the whole fabric which the law has erected respecting corporations, is at once dissolved. In examining it, we encounter a difficulty in the commencement. Agents are constituted for special purposes, and the extent of their power is prescribed, in writing, by the corporate body itself. The directors are elected by the stockholders, and manage all their affairs, in virtue of the power conferred by the election. The stockholders impart no authority to them, except by electing them as directors. But, we are told, and are told truly, that the authority is given in the charter. The charter authorizes the directors to manage all the business of the orporation. But do they act as individuals, or in a corporate character? If they act as a corporate body, then the whole law applies to them as to other corporate bodies. If they act as individuals, then we have a corporation which never acts in its corporate character, except in the instances of electing its directors, or instructing them. The corporation possesses many important powers, and is, as a corporation, to perform many important acts, scarcely one of which is to be performed in a corporate character. They are all to be performed by agents, acting as individuals, under general powers conferred by the charter.
It cannot escape notice, that this rule, if it be one, would apply to almost all corporations aggregate, and would abolish the distinction which has been taken between those which act by an individual, and those which act by an aggregate of persons. The first partakes of the qualities of a sole corporation, the last of a corporation aggregate.
This rule would apply to almost every corporation aggregate which exists, or which ever has existed. The exceptions are the very few in which all the members are active, or in which the corporation acts by a single individual who is its head. All others act by boards usually described in the charter. If the president and directors of the Bank of the United States act as individuals, then it would seem, that the managers of every other corporation, being in like manner created by charter, and being in like manner empowered by charter to transact all the affairs of the corporation, would likewise act as individuals, and the whole doctrines of the law upon the subject, would find nothing to which they are applicable.
But these doctrines grow out of adjudged cases, and Courts have always considered those official agents, whose powers are described in the charter, and who act collectively, as acting in a corporate character. The idea has, I believe, never before been suggested, that their acts were to be treated as the acts of individuals. They do not appear as individual acts; they are not in the name of individuals, but of the corporate body. In all the cases which have come before this Court, that of The Bank of Columbia v. Patterson's Administrators, as well as all others, directors are considered as acting in their corporate character. In the cases in England, where the Bank of England has been a party, and in all others, the same view has always been taken of the subject.
The president and directors form, by the charter, a select body, in which the general powers of the corporation are placed. This body is, I think, the acting corporation; and, according to the 4th article of the fundamental rules, seven of them, including the president, or the director deputed by the president, are necessary to constitute a board. The act of the major part of the board, is the act of the whole, and binds the corporation; but this act must on general principles, be done at one and the same time, and at a regular meeting held for the purpose. (Kyd. Corp. 309.) Its validity depends on the legal constitution of the board, and on its being the act of the body. These essential requisites must be shown; and to show them, the board must keep a record of its proceedings. Were the by-laws silent on the subject, this would be, as I think, rendered indispensable, by the fact, that it is the act of a corporation aggregate.
If there must be a record of their proceedings, and, even were this necessity not absolute, if the by-laws show that there is one, it follows that this record, not the oral testimony of the members, or of bystanders, must prove their acts. Their acceptance of any deed, or their assent to any contract, if it be their own act, must appear on this record; if it be by agents, authorized for the purpose, the vote giving the authority must appear in like manner.
The 6th article of the fundamental rules directs, that 'each cashier or treasurer, before he enters upon the duties of his office, shall be required to give bond, with two or more sureties, to the satisfaction of the directors, in a sum not less than 50,000 dollars, with a condition,' &c.
As the bond is to be given before the cashier enters upon the duties of his office, it must be given before he can rightfully perform any official act; and it will be admitted, that the sureties to an official bond are responsible only for the official acts of the officer. This bond cannot be given till it is received, for they are different, and equally necessary parts of one and the same act; but, if it could, the law specially requires that it shall be 'to the satisfaction of the directors.' The 'satisfaction' must be as to the sufficiency of the sureties, for the amount of the penalty is fixed by law. This is a subject on which the judgment of the directors must be exercised, and it can be exercised only at a regular meeting of a board, legally constituted. This must appear by the record. Any opinion given otherwise, is the opinion of individual members, but is not the corporate opinion of the board, is not a corporate act binding on the corporation, or of which the corporation can avail itself.
It appears to me, that the bond must be received and approved by the board, before the cashier can regularly perform any official act. This reception and approbation are required by the law which enables the corporation to act. They cannot be dispensed with. That they have been performed must be proved or presumed. If they have been performed, they are upon record, for the very act of performance places them upon record. This record, or an authentic copy of it, must, according to the rules of evidence be produced, that it may prove itself.
May its existence be presumed in this case?
The corporation, which claims this presumption, keeps the record, and is now in possession of it, if it exists. No rule of evidence is more familiar to the profession, than that a paper cannot be presumed under such circumstances.
I have stated the view which was taken by the Circuit Court of this case. I have only to add, that the law is now settled otherwise, perhaps to the advancement of public convenience. I acquiesce, as I ought, in the decision which has been made, though I could not concur in it.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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