Case Name: Davis B. Lawler et al. v. James H. Walker et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1849-12
Citations: 18 Ohio 151
Docket Number: 
Parties: Davis B. Lawler et al. v. James H. Walker et al.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 18
Pages: 151–161

Head Matter:
Davis B. Lawler et al. v. James H. Walker et al.
Under tke act of 1816, entitled “ an act to prohibit the issuing and circulation of unauthorized bank paper,” and the act amendatory thereof, passed March 18, 1839, the stockholders of the Cincinnati and Whitewater Canal Company are holden in their individual capacity for notes issued by the company, intended to circulate as money.
Notes of this description axe not barred by the Btatute of limitations till after the lapse of fifteen years.
This is a writ of error to the Court of Common Pleas of Hamilton county.
The suit below was brought against the plaintiffs in error, to recover the amount due on certain notes issued by the Cincha nati and Whitewater Canal Company.
The first count in the declaration charges, that the defend ants were stockholders and shareholders, and otherwise interested in a certain association not incorporated as a bank, nor authorized to loan money or to act as a bank, called the Cin cinnati and Whitewater Canal Company.
That the said company, by its officers, the defendants and others, on the 2d day of January, 1841, issued certain notes and bills calculated and intended to circulate by delivery, and certain other notes and bills payable to order and indorsed by the payee for the purpose of putting the s.ame in circulation to circulate by delivery; and that said company used such shifts and devices that, thereby, the said notes and bills so-issued by said company, did pass and circulate by delivery.
That the plaintiffs, on the 1st day of Januray, 1842, became the holders of said notes and bills to the amount of two thousand dollars; and they aver that the defendants were stockholders and directors, or otherwise interested in said company, and ■thereby became liable to pay to plaintiffs the amount of said notes, and being liable, promised, etc.
The second count is like the first, except it avers that the plaintiffs became the holders of the notes at the request of defendants.
The third count is the common count for money had and received, paid, laid-out, etc.
The defendants plead, 1st, non-assumpsit; 2d, the statute of limitations to the first, and second counts; that they did not assume, etc., within four years next preceding the commencement of the suit. To this last plea the defendants demurred, and the court of common pleas sustained the demurrer.
On the trial of the cause, the plaintiffs offered in evidence certain notes in the similitude of bank notes, to the amount of two thousand four hundred and ninety-seven dollars. They purport to be promises by the Cincinnati and Whitewater Canal Company to^pay the person named therein, or order, twelve months after date, a certain • sum (1, 2, 3, and 5 dollars) for value received, at their office.
They are signed J. Bonsall, president, and Samuel C. Eoote, secretary, and indorsed by the payees respectively.
They also proved by the resolutions passed by the board of directors, that these notes were issued by order of said board; and a resolution, passed March 5, 1840, authorizes the president to prosecute the work on the canal, if it can be done on the credit of the company, and that he cause to be issued the promissory notes of the company, payable at twelve months, in payment of the debts of the company contracted for the execution of the work, if the creditors and contractors are willing to receive the same in payment of their claims. No proof was ■offered of the handwriting of the indorsers. It was also proved that the company never acted as a bank ■ in loaning money, •buying and selling bills, or in receiving deposits. None of the notes were ever re-issued. It was proved that the notes passed and circulated as other paper currency for more than a year.
It was also proved that the plates from which the notes were struck, were engraved on the order of the president of the .company, and the price of engraving was charged to the company, and was finally paid in the notes of the company struck from said plates. The introduction of the notes in evidence was objected to by defendants for several reasons, which appear in the bill of exceptions. The objections were overruled, and, .after refusing to charge the jury specifically as requested by defendants, the court did charge as follows :
1. If the paper was issued under the direction of the defendants, and was intended to circulate as currency, they would be liable, whether issued for their individual benefit or for the benefit of the company. But if the company had issued notes not intended to circulate as currency, as bank paper generally does, but merely to pay off their creditors, defendants would not be liable.
2. If the defendants, in issuing the notes, merely acted as directors of the company, and within the limits of their corporate powers, they would not be personally liable. But that the charter of the company did not authorize the issuing of notes calculated to be circulated as money; and therefore could not protect the defendants, if the jury should be satisfied that they issued such notes.
8. That although .in' ordinary cases, where notes are made payable to order, it may be necessary for a plaintiff to prove the indorsement, yet if the jury find that these notes were issued, and intended to circulate as a currency, it is not necessary to prove the handwriting of the indorser; and the mere fact of the plaintiffs having the notes in their possession, is prima facie evidence of ownership.
To these charges the defendants excepted. The jury having returned a verdict for plaintiffs, a motion was made for a new trial, which was overruled; and the whole case is now before this court to be decided on its merits.
W. 8. Cfroesbeck and Charles Fox, for plaintiffs in error.
1. The notes offered in evidence were oblgatory on the company. In a suit against the company, it cannot allege a want of power to defeat the action. Whether the company has exceeded its power in issuing the notes cannot be inquired into .this collateral way. The Bank of Chillicothe v. The Town of Chillicothe, 7 Ohio Rep., 2d part, 32; Johnson v. Bentley et al., 16 Ohio Rep. 97; Moss v. Lead Mining Co., 5 Hill’s Rep. 139; State of Indiana v. Woram, 6 Hill’s Rep. 37; 9 Paige’s Rep. 476; 8 Ohio Rep. 552; 9 Ohio Rep. 287; 15 Ohio Rep. 337.
2. The company has never sought to avoid liability upon these notes, but recognizes its obligation to pay them. The officers issuing them were acting in accordance with resolutions of the company. Their acts were the acts of the company, and the company alone is liable. The holders of the paper cannot have a double remedy. Mott v. Hicks, 1 Cowen’s Rep. 513.
3. The plaintiffs in error are not liable, individually, even if the company had no power to issue the notes. They have not, in terms, acknowledged their liability, nor is there any implied of obligation. The law only presumes a promise where there is no special agreement. Nor will it imply a promise where the contract is unlawful. 2 Greenl. Ev. sec. 108, 111; Nichols v. Poulson, 6 Ohio Rep. 305; Spurgeon v. McIlvaine, Ibid. 442; Smith v. Commissioners of Portage County, 9 Ohio Rep. 25.
4. If the officers did. exceed their authority in issuing this paper, they are not liable in this form of action. The remedy against them is an action for deceit. Story on Agency, sec. 264, 274; 2 Greenl. Rep. 358; 2 Wend. Rep. 251; 3 Barn. & Adol. Rep. 114; 11 Mass. Rep. 97; 11 Serg. & Rawle’s Rep. 129; 19 Johns. Rep. 60.
5. The liability, if any exists, is not a contract liability, but a liability in the nature of a penalty, and therefore barred, by the statute of limitations, after the lapse of four years. Chit. on Con. 692; Bailey v. Turner, 5 Mass. Rep. 286.
Chase, Ball Hoadley, for defendants in error.
1. It is not necessary, in a declaration under the act of 1816, to “ prohibit the issuing and circulating of unauthorized bank paper,” to set out the notes sued on, specifically. Stephens on Pleading, 359.
2. The plaintiffs can recover, notwithstanding it appears that the notes were issued in payment of debts of the company; or that the company did not do a banking business in any form. Bonsall v. The State, 11 Ohio Rep. 81.
3. The notes are admissible in evidence, although they appear to be the obligations of an incorporated association.
4. The act of 1839, though passed subsequently to the charter of the Cincinnati and Whitewater Canal Company, impairs the obligation of no contract, and is binding on its stockholders.
5. It is not necessary to prove that the indorsements in blank were made before the notes were issued by the company.
6. To establish ownership of the notes sued on, the blank in dorsements need not be filled up, and made special to the plaintiffs. 2 Greenl. Ev. sec. 167, 168; Ord v. Portal, 3 Camp. Rep. 239; 6 Moore’s Rep. 579; 1 Stark. Rep. 446.
7. It is not necessary to prove the handwriting of the indorser.
8. It is not necessary to prove that the plaintiffs received the notes while they were circulating as currency. Porter et al. v Kepler et al., 14 Ohio Rep. 127.
9. The liability of the stockholders of an unauthorized banking association, under the 11th and 12th sections of the act of 1816, is upon the written contract itself, and therefore is not barred by the statute of limitations until the lapse of fifteen years. Harger v. McCullough, 2 Denio’s Rep. 119; Moss v. Oakley, 2 Hill’s Rep. 265; Ex parte Van Riper, 20 Wend. Rep. 614; 14 Ohio Rep. 127; 26 Wend. Rep. 43; 3 Denio’s Rep. 589; Corning et al. v. McCullough, 1 Comstock’s Rep. 47.

Opinion:
Spalding, J.
The defendants in this case are stockholders, :and, at the time the notes in question were issued, were directors and agents of the Cincinnati and Whitewater Canal Company.
This association was incorporated by an act of the general .assembly, passed April 1st, 1837, with full power to locate and •construct a navigable canal from some suitable point in the city of Cincinnati, along the valleys of the Ohio, Great Miami, and Whitewater rivers, to a junction with the Indiana Whitewater •canal, at or near the town of Harrison.
The charter confers ample powers upon the company for all purposes connected with the construction of their contemplated •canal, and for the protection of their works; but it nowhere authorizes the company to transact a banking business, or to issue bills of credit to circulate as money.
It appears that -in January, 1841, the company was in want of funds to pay the contractors upon their line of canal, and •the directors resolved that they would issue the notes of the company, for the purpose of liquidating the claims of such of .their creditors as might be willing to receive them. These notes were carefully struck from engraved plates, upon banknote paper; were signed by the president, and countersigned by the secretary, and in all respects were made to resemble the bank-notes or bills then circulating as a currency in the com munity. They were evidently intended by the officers of the company, who directed their issue, to circulate as money, and they did in fact so circulate for more than a year.
The company, as such, is irresponsible. Many of its stock holders who were instrumental in creating this spurious currency have abundant means. The plaintiffs are endeavoring to obtain payment at their hands, and it is objected to a recovery that inasmuch as the notes are the notes of an incorporated company,, and as a legal liability exists against the company, the defendants are not holden in law for their payment.
I will confess that I have no veneration for corporate immunities.
Immense mischief has been done in the world under the supposed sanctity of corporations. The industry of our own country has been more severely taxed through the broken promises of worthless corporations, and the supposed exemption of its component members from an individual responsibility, than for all the expenses of the general and state governments.
I would, therefore, as one member of the court, feel prepared to say that the defendants were liable for the redemption of these notes, by the rules of the common law. True, they are individual members of a corporation; but it must be kept in view that they were incorporated to make canals — not to make paper money.
They can escape from pecuniary responsibility by taking refuge behind their franchises only when found pursuing the-legitimate object for which those franchises were granted.
If they lose sight of the object for which they were incorporated and engage in other and different pursuits, they must do so under all the obligations and responsibilities of ordinary partners in business.
But the plaintiffs are not left to a doubtful remedy, in their endeavors to enforce the individual liability of the shareholders in the Cincinnati and Whitewater Canal Company.
The action is predicated upon the provisions contained in the act passed January 27,1816, entitled " an act to prohibit the issuing and circulating of unauthorized bank paper," as amended by the act of March 18,1839.
The 11th section of the act of 1816, provides — " That every stockholder, shareholder, or partner hereafter interested in any such bank, shall be jointly and severally answerable, in their individual capacity, for the whole amount of the bonds, bills, notes and contracts of such bank, hereafter executed; any agreement, shift or device in such bond, bill, note or contract to the contrary notwithstanding."
And the 13th and 14th sections of the same act, read as follows : '
" That the holder of any bond, bill, note or contract of such bank, may institute suit and recover judgment thereon against any part or the whale of the persons who were interested in such bank at the date of such bond, bill, note or contract, or who became interested in such bank at any time between that and the commencement of such suit."
" That in such suit it shall be sufficient for the plaintiff to set forth, in substance, that he is the holder of such bond, bill, note or contract; that the defendants were interested in said bank at the date of such bond, bill, note or contract, or subsequently thereto, and that it remains unpaid."
This law was in full force in 1841, when the notes in question were issued by the company; and so was the act amendatory thereof, passed March 19, 1839, which provides, in sec. 1 — " That every company or association, except a bank incorporated by a law of this state, that shall lend notes, bonds, bills, checks, orders, certificates of deposit or any other evidence of debt, and shall issue by their officer or officers, agents or any other person or persons, notes, bonds, bills, checks, orders, certificates of deposit or other evidence (of debt) payable to order and indorsed in blank, or payable to bearer, designed, calculated or intended to circulate as money; or shall issue, put in ármir lation, or pay out for debts or property, with or without any such loan, any such notes, bonds, bills, checks, order, certificates of deposit, or other evidence of debt, or use other shift or device when by any such notes, etc., so issued, put in circulation or paid out by said company or association, or on their behalf, pass or circulate by delivery, shall be taken and deemed an unauthorized bank, within the meaning of the act to which this is an amendment."
If there be any doubt remaining as to the question whether the Cincinnati and Whitewater Canal Company, by paying out said notes, brought itself within the operation of the act of 1816, that doubt will be put at rest when we advert to a decision of this court, made in the winter of 1841-2. Joseph Bonsal v. The State of Ohio, 11 Ohio Rep. 72. In that case Bonsai, the president of the company, was indicted for acting as " an officer of an unauthorized bank," in putting his signature to these very notes, in violation of the 3d section of said act; and the, judgment of the common pleas was affirmed, which imposed upon said Bonsai a penalty of one thousand dollars for acting as such officer. Indeed we consider that the decision of this court, in the case last cited, is decisive of the most prominent questions made in the one under consideration, if we except the plea of the statute of limitations.
It brings the compaiiy, as an unauthorized bank, within the meaning and influence of the act of 1816, which we feel disposed to construe with great liberality as an act designed to protect the community against the greatest of all frauds, that of a spurious and insecure currency.
It is contended by counsel for defendants, that the court of common pleas erred in admitting the notes in evidence at all, because they were the obligations of an incorporated company, and were obligatory on the company as such.
The corporation of which the defendants are members, is supposed to derive all its powers, immunities and privileges from the legislative act which created it; and so long as it confines its operations within the sphere to which it is limited by that act of creation, it must be sued by its corporate name. The • same power which gave to it vitality, however, had also ordained that if any company, except an incorporated bank, shall issue, put in circulation, or pay out for debts, any notes designed to circulate as money, the stockholders thereof shall be jointly and severally answerable, in their individual capacity, for the whole amount of such notes, and the holder of such notes may institute suit and recover judgment thereon against any part or the whole of the persons interested in such company.
Unless we concede to members of a corporation immunities that will place them beyond the reach of legislative enactment, the notes were properly admitted in evidence against the defendants.
It matters not, in our opinion, whether the defendants attached their own or the name of the company to these written promises for the payment of money. By the force and effect of the existing law, all such promises emanating from an incorporated company, were deemed to be the promises of the indi vidual members of such company, and the " assumpsit " necessarily attached, on the part of the individual members, the instant the corporate body put the notes in circulation. It is further objected, that the plaintiffs offered no evidence on the trial to prove the indorsement of these notes. We hold that no such proof was necessary. The plaintiffs wefe holders of the notes, and if the jury found they were intended to circulate as cur rency, they wer e prima facie the owners thereof.
We are now brought to the consideration of that which counsel seems to regard as the chief ground of defense to this action.
It is argued with much confidence by counsel for defendants, and the cause has been argued with singular ability, that inasmuch as the liability is created by. statute, the claim of the plaintiffs falls within the bar imposed upon non-enumerated actions — that of four years. We have given to this objection all the consideration that its importance seemed to demand.
If the act of incorporation of the Cincinnati and Whitewater Canal Company had contained the individual liability clause, it will not be pretended that a right of action against the defendants would be barrel in less time than fifteen years. Such is the recent decision in New York, made in the case of Corning and Horner, by McCullough. 1 Comstock, 47.
By the operation of a general law of our state, in force at the time, so soon as this company ventured to travel out of its charter and issue notes to circulate as money, the individual members of the company were, quo ad hoc, disrobed of their corporate mantle and placed in the condition of partners in trade, " against any part or the whole " of whom, the statute provides, suit may be brought. Their liability under such circumstances would be one arising ex contractu, and not a liability in the nature of a penalty imposed by the statute.
The demurrer to the defendants' plea of the statute of limitations was therefore properly sustained.
We are satisfied with the instructions given to the jury on the trial. They really placed the liability of defendants on the ground that the notes were intended by them to circulate as currency. This was taking the most favorable view of their position, and they have no cause for complaint.
Judgment affirmed.