Case Name: William B. Johnston, survivor, v. The South Western Rail Road Bank
Court: South Carolina Court of Errors
Jurisdiction: South Carolina
Decision Date: 1849
Citations: 3 Strob. Eq. 263
Docket Number: 
Parties: William B. Johnston, survivor, v. The South Western Rail Road Bank.
Judges: O’Neall, J. — Evans, J. — Wardlaw, J. and Dargan, Ch. concurred.
Reporter: South Carolina Equity Reports
Volume: 22
Pages: 263–370

Head Matter:
William B. Johnston, survivor, v. The South Western Rail Road Bank.
Court of Errors.
The complainant, to whom its bills were delivered by the Ocmulgee Bank, as coL lateral security for advancements made or to be made, bitt who agreed that they should not be put in circulation, was held not to be a bill holder so as to charge the persons and property of the stockholders, under the ninth section of their charter, over and above the amount of stock paid in.
Although the Ocmulgee Bank was required by its charter to have twenty-five per cent of its capital stock paid in before it should proceed to banking, the noncompliance with the charter in that particular does not constitute a valid defence either for the corporation, or for its stockholders, when sued on its bills.
The transfer and delivery of assets made to the defendants by the Ocmulgee Bank, to secure a preexisting debt, was set aside as fraudulent, but it was adjudged not to be a forfeiture of their debt. They are only deprived of the benefit of any security which they acquired by the transfer.
All other countries are bound to follow the construction of a statute which has been adopted by the Judiciary of the country in which it was enacted.
A party is bound civiliter by the fraud of his agent: he will not be permitted to 1 retain advantages gained through that fraud; nor can he resist the unravelling 1 of transactions brought about by his misconduct. *
Although a principal is not answerable criminaliter for the conduct of his agent A he is responsible dviliter for all acts done by him in the course of his employ-M ment. »
Where the end to be effected, only is pointed out, while the means are left to tire agent’s discretion, the principal is bound, not only as to .the end, but the means also; and all third persons dealing with the agent have a right to insist upon the responsibility of the prinepal to this extent.
When, and when not, necessary to file a creditor’s bill. — In what cases a plaintiff may sue alone, and when it is necessary to join other parties. Points of pleading discussed by Johnston, Ch.
Prince's Digest, 118.
Before Joi-iNstoN, Ch. at Charleston, February and March, 1848.
The following Circuit Decree contains a full statement of all the pleadings and evidence necessary to an understanding of the points adjudicated in this case.
JohnstoN, Ch. The bill is filed by William B. Johnston, a citizen of Georgia, against the South Western Rail Road Bank of this State, and against the Ocmulgee Bank, and Robert Collins, both of Georgia; and the pleadings and evidence in the cause relate to certain dealings between the parties, respecting the Ocmulgee Bank.
This Ocmulgee Bank, situated in the town of Macon, was incorporated by an Act of the Georgia Legislature, approved the 30th of December, 1836; and its charter contains, among others, the following provisions, which were much commented on at the hearing.
Prince’s Digest, 118 See also Rule 1. Prince, 120.
Prince, 123.
Prince, 122Í
Prince, 123.
Prince 123. ’
Sec. 1. The capital stock to be $500,000; divided into ^ <jj>5,ooo shares of $100 each.
Sec. 2. After prescribing the times, places, &c., of taking subscriptions for stock, directed that the subscriptions should be li payable in gold or silver coin, or in current bills” ofspe-cified Banks, in the following manner: — 5 per cent, at the time of subscription; 25 per cent, at such times as the commissioners should designate; and the remaining 70 per cent. ’at such times and in such sums as the Directors (when elected) should appoint. When the first two payments of 5 and 25 (amounting to 30) per cent, were paid in to the commissioners, the stockholders were to be convened and proceed to the election of seven Directors ; which Directors, when chosen, were to receive from the commissioners the 30 per cent. paid in by the stockholders, and “forthwith commence the operation of said Bank in the city of Macon.” But by sec, 11 “ nothing should be so construed as to authorize the Directors to proceed to banking, until 25 per cent, of the capital stock is paid in, in specie.”
Sec. 5. Rule 9. — “The bills obligatory and of credit, notes * and other contracts, whatever, on behalf of said corporation, Í¡shall be binding and obligatory on said company; Provided, the same be signed by the President and countersigned or attested by the Cashier of said corporation,” but not otherwise, “ except only checks on any other Bank in the United States, shall be binding, if signed by the Cashier only.”
Sec. 5. Rule 13. No loan or credit tobe made on pledges of stocks of the Bank, but “should any of the corporators be indebted by note, draft, bills of exchange, or other obligation, which shall be past due, under protest, or in suit, then and in that case, it shall be lawful for the Board of Directors, for the time being, to declare the stock or shares, belonging to such persons, forfeited to the Bank, to the amount he or she or they may be so indebted to the said corporation, as above.”
Sec. 7. “ The said corporation shall not, at any time, suspend or refuse payment, in gold or silver, of any of its notes, bills or obligations; and if the said corporation shall, at any time, refuse or neglect to pay, on demand, any note, bill or obligation, issued by the corporation, according to the contract, promise or understanding therein expressed, the charter hereby granted shall be forfeited.” Provided, however, that the Bank might redeem its bills, when demanded by any other Bank, with the bills of the demandant, instead of specie.
Sec, 9. (The most important.) “ The persons and pro-pevty of the stockholders, for the time being, of said Bank, shall be pledged and bound, over and above the amount of said stock paid in, in proportion to the amount of the shares that each individual, copartnership, corporation, or body politic may hold in said Bank, for the ultimate redemption of the bills or notes issued by or from said Bank, in the same manner as in common commercial cases, or cases of debt.” i
Prince, 49.
Prince, 633.
Sec. 10. Limits the charter to the expiration of the year 1856.
At the time of the incorporation of this Bank, there were, and still remain, of force, two statutes of the State of Georgia, which were frequently referred to at the hearing.
The first of them was approved the 24th of December, 1832; by which the President and Directors of every Bank in the State were required to make semi-annual returns to the Governor, upon the oath of the President and Cashier, on the first Monday in April and October, of the names of the stockholders, with the amount of stock owned by each, and the amount of money actually paid in upon their shares; and in their return, to set forth “ a minute statement of the standing and management of each incorporated Bank,” and their branches, “ showing particularly the amount of bills (held by them) on other Banks of Georgia; the amount of gold, silver and bullion in their vaults; the amount of debts due them at the north or elsewhere, which may be denominated specie funds; the amount of active or running paper; the amount in suit; and clearly stating what amount of all the debts due the Bank is considered good; what bad, and lost to the Bank; the amount of issues by each Bank; the amount of bills in circulation, and the amount of bills of said Bank in circulation under the amount” [head or account] “of deposit; and the highest amount due and owing by each Bank.”
The other was an Act, approved the 23d of December, 1833: the 40th section of which declares that “all conveyances, assignments, transfers of stock, effects, or other contracts made by any Bank, in contemplation of insolvency, or after insolvency, except for the benefit of all the creditors and stockholders of said Bank, shall, unless made to an innocent purchaser for a valuable consideration, and without knowledge or notice of the condition of said Bank, be fraudulent and void. And the President, Directors and other officers of said Bank, or any of them, making, or consenting to the making of such conveyance, assignment, transfer, or contract, whether the same be made to an innocent purchaser, or any other, shall, severally, be guilty of a misdemeanor, and on indictment and conviction thereof, shall be punished by imprisonment and labor in the penitentiary for any time, not less than four years, nor longer than ten years.”
The full amount of stock having been subscribed, the Oc- mulgee Bank was organized and proceeded to business in 1837.
On the 25th of February, 1839, an Indenture, purporting to be an indenture tripartite between Henry G. Lamar, in his own right, and as executor of B. B. Lamar, as trustee for Victoria Lamar, and attorney for Mrs. G. Lamar, Geo. Jewitt, Charles Collins, E. Sinclair, Win. B. Johnston, (the plaintiff,) David Flanders, and John D. Winne, stockholders in said Ocmulgee Bank, of thq first part: James Hamilton, for himself, and as agent for Robert Collins, (a defendant;) A. Bland-ing, Alex. Black, C. Edmondston, I. E. Holmes, C. A. Mag-wood, William Patton, James Legare, L. Trapman, William Gregg, J. C. Kerr, and M. 0. Mordecai, stockholders in the South Western Rail Road Bank, of the second part: and Jafiaes Hamilton, agent for the South Western Rail Road Bank, (a defendant,) of the third part: was executed by the parties aforesaid, (except that instead of John D. Winne, Mortin N. Burch appears to have sealed the same.)
This indenture, after reciting that the parties of the first part had purchased and transferred to the parties of the second part, one thousand shares, stock of the Ocmulgee bank, (inclusive of shares previously held by Robert Collins,) and had also “purchased and transferred to the South Western Rail Road Bank aforesaid,” (the third party,) “ two thousand five hundred shares of said stock, on each of which shares, the sum of forty dollars has been paid,” covenants as follows:
1. That the parties of the first part have and will retain, among them, one thousand shares in the Ocmulgee Bank.
2. That the parties of the second part will hold, among them, not less than one thousand shares.
3. That the third party will hold two thousand five hundred shares.
4. That no person, not parties to the indenture, shall hold exceeding five hundred shares.
5. The parties of the first and second part, always to give pr0xies to the President of the South Western Rail Road Bank, or to such person as he or the Directors of his bank may ¿ppoint
6. The parties of the second part not to sell their shares to any other than the South Western Rail Road Bank, a director thereof, or such stockholders as shall be approved by its Board of Directors,
7. The parties of the first part to be restricted, as to alienation of their shares, in the same way, except under particular circumstances, not material in this case.
8. The third parly, (the South Western Rail Road Bank,) not to sell its shares without a previous offer of them to the first party, except that for the purpose of enabling the said South Western Rail Road Bank to give as many votes as could be given by strangers to the indenture, it might sell a number of its shares, not exceeding five hundred, to “ individuals in its confidence.”
9. Lastly, the parties of the first part, and Robert Collins, one of the parties of the second part, guaranteed the goodness of all debts then owing to the Ocmulgee Bank.
The bill has been ordered pro confesso against the Ocmul-gee Bank. Answers have been put in by the South Western Rail Road Bank and Robert Collins.
The bill states (what is very evident from the foregoing indenture,) that the object of the South Western Rail Road Bank, in becoming a stockholder in the Ocmulgee Bank, was to obtain entire control of the latter, and to use it in its own business operations: and it further states that at the final stoppage of the latter, the South Western Rail Road Bank held two thousand seven hundred and fifty shares of its stock.
That in the month of July, 1841, (the said South Western Rail Road Bank then owning the said two thousand seven hundred and fifty shares,) the Ocmulgee Bank applied to the firm of William B. Johnston <fc Co. of whom the plaintiff is the surviving partner, to advance cash funds to it, from time to time, to enable it to continue its operations; and to secure such advances, offered to place in the hands of said firm, its bills, which it represented to be (in virtue of its charter) undoubted security. That, accordingly, the said firm advanced said bank various sums, amounting in July, 1841, to $87,308 ; and the said bank issued to the said firm, as collateral security for the same, $50,000 of its bills.
That the said bank desiring to continue a credit with the said firm of William B. Johnston & Co. agreed that the said bills should continue in the hands of the firm, to cover the said advances, and any other sums which might become or remain due, throughout their mutual dealings; and that, accordingly, the said firm continued their dealings with said bank, and made other advances, until, on the 7th of September, 1842, by an adjustment between them, the indebtedness^1" of the bank was duly recognized by its Board of Directors,' at the sum of $96,951 05.
That the said William B. Johnston & Co. continued to hold the notes of said bank, issued to them as aforesaid, and the bank’s indebtedness to them remained undischarged until the final stoppage and failure of the bank, which took place the 25th of November, 1842; at which time the said bánk owed the said firm of William B. Johnston & Co. $52,210 80, together with interest, and the said firm held bills of the bank, issued to them as aforesaid, amounting to the sum of $49,165; which are now in the hands of the plaintiff, and upon which he claims as bill holder.
That the President, Directors and officers of the South Western Rail Road Bank, were well aware of the condition and business of the Ocmulgee Bank; and well advised of its embarrassments, which induced it to ask the said advances ; and that on the 18th of January, 1842, Mr. lames Rose, President of the South Western Rail Road Bank, attended a meeting of the Directors of the Ocmulgee Bank, in Macon, and was then notified of the indebtedness of the latter bank to William B. Johnston & Co, and also that the said firm held $50,000 of the bills of said bank, as security for the said advances.
The bill charges that Mr. Rose, then and there made himself fully acquainted with the affairs of the Ocmulgee Bank, and knew the liabilities of the South Western Rail Road Bank, as stockholder, to the plaintiff’s firm; and communicated this information to the Board of Directors of the South Western Rail Road Bank: whereupon that bank concerted a scheme to rid itself of its liability by transferring its stock to other persons.
That by the amount of their stock, they were enabled to control the action of the Ocmulgee Bank; and with a view to defeat the rights of the plaintiff, they selected, as their means, the 6th section, rule 7th, of the charter; thus converting a statutory provision, whicfc was intended as a protection and security to the Ocmulgee Bank, into an engine for defeating the very purposes designed by the charter.
“ Your orator believes,” (says the bill,) “and so charges, that the said South Western Rail Road Bank, knowing that Dr. Robert Collins was a large debtor to the Ocmulgee Bank, by some arrangement between them, the nature ichereof your orator is not precisely acquainted with, proposed that the said Robert Collins should become the purchaser of the stock held by the said South Western Rail Road Bank, or a portion thereof, at a nominal and inadequate price ; and that the inducement held out to the said Robert was, that the Ocmul- gee Bank would, under the provisions of their charter last mentioned, declare so much of the said stock forfeited, as, at Par> wou^ e(lual in amount to the debt due by the said j^0¿ert Qollins, and thereby extinguish, at the same time, the liability of the South Western Rail Road Bank as stockholder, and the indebtedness of the said Robert Collins.”
The bill, then, states that the Directors of ttie Ocmulgee Bank having received some intimation of the plan in agitation, did, on the 14th of May, 1842, adopt the following resolution :
“ Whereas the South Western Rail Road Bank has transferred, or made an agreement to transfer, the entire amount of stock held by it, as well as the' debts due from the Oc-mulgee Bank of the State of Georgia, to said South Western Rail Róad Bank, in a way and to an extent not contemplated by this Board, and which would diminish the security of the bill holders and others, to whom this bank is indebted. Be it, therefore,
Resolved, That we refuse to grant any order, whereby the officers of this institution, or either of them, shall declare as forfeited, any part of the stock which may be transferred to Robert Collins, by which his debts might be extinguished.”
The bill proceeds to charge that the said South Western Rail Road Bank, still persisting in their purpose of avoiding their liability, either by securing a more pliant Board of Directors, or by other means, on the 16th of May, 1842, transferred one thousand of their .shares in the Ocmulgee Bank to D. F. Fleming, one of the directors of their own bank, nominally and without any consideration paid, and in the beginning of November following, when the term of the acting directors of the Ocmulgee Bank was about to expire, sent him as their agent to Macon, to carry out their schemes.
That at this time, the plaintiff, William B. Johnston, was the acting cashier of the Ocmulgee Bank, and being called on by the said Fleming, in relation to its affairs, a full exposition thereof was made to him ;. and he and the plaintiff consumed nearly a day in examining into its affairs, with the most unreserved confiderttee : and the plaintiff distinctly avers that Fleming, then and there, told him that the South Western Rail Road Bank owned the greater part of the stock of the Ocmulgee Bank, and, as stockholders, were bound to pay the debt due to the said William B. Johnston & Co. That an estimate was then made of the assets and debts of said bank, and the plaintiff parted with Fleming, under the belief that he was satisfied, and that the South Western Rail Road Bank was about to place funds in the Ocmulgee Bank to enable it to proceed with its business. That the next day, the election of directors took place; when the plaintiff, to his great surprise, found that he had received a vote only proportioned to the proxies which he himself held ; and that the whole Board of Directors had been elected exactly cording to the dictation of Fleming. And that upon inquiry, the plaintiff discovered that the said Fleming, acting as agent of the South Western Rail Road Bank, had proposed to some of the old directors that if they would put in such a direction as he would select, the South Western Rail Road Bank would place funds in the Ocmulgee Bank, and enable it successfully to carry on its business, and that he had agreed with others of the old directors, and with the President, that the stock held by them should be taken at par, or set down to extinguish their debts to the Ocmulgee Bank. That by these various means, he secured a majority of the directors, and himself voted in their favor the one thousand seven hundred and fifty shares still standing in the name of the South Western Rail Road Bank. And in order to qualify some of these newly elected directors, he transferred to them a portion of the one thousand shares which the South Western Rail Road Bank had transferred to him. These preparations having been made, and the plaintiff as cashier, having, upon being .required to do so, summoned the new directors, and having, upon further requirement, resigned his office of cashier, the Board of Directors proceeded to elect, as cashier, William C. Breese, one of the officers of the South Western Rail Road Bank, at Charleston, and the South Western Rail Road Bank became the surety to the official bond of said Breese.
That the South Western Rail Road Bank, having thus secured the entire control of the Ocmulgee Bank, proceeded to ' consummate their scheme to relieve themselves of their stock ; and on the 22d of November, 1842, sent to Macon, as agent, another of its directors, who transferred to Dr. Robert Collins, one thousand seven hundred and fifty stock shares in the Ocmulgee Bank; and that on the same day, the Oc-mulgee Bank was debited with about $30,000 of the bonds of the Central Rail Road and Banking Company, which were passed to the credit of the South Western Rail Road Bank, which had, some how or other, been paid in by the said Collins, in purchase of the said stock thus transferred to him, whereupon Collins’s obligations to the Ocmulgee Bank were surrendered to him, and his shares in the bank cancelled to a large amount; thus, at the same time, giving up the assets of the bank to a great amount, and relieving the stock from liability to the creditors of the bank. The bill charges that this whole transaction was a fraud upon the p:ovisions of the Ocmulgee Bank charter, and more especially upon the said William B. Johnston & Co. then holding the bills of the said bank; and that the said transfers of stock were intended by the South Western Rail Road Bank3 -to defeat the rights of said firm, and were, therefore, fraudu-|ent an(j vo¡¿. an(j jn proof that the whole arose from a scheme, unfounded upon due consideration, it is alleged that at t^e ¿ate t|le transfer t0 Collins, the South Western Rail Bank had already, in addition to the one thousand shares transferred to Fleming, as aforesaid, transferred to him three hundred other shares, and to Breese two hundred shares; making in all, one thousand five hundred shares, and thereby incapacitated itself to transfer one thousand seven hundred and fifty shares to Collins ; and that in order to make good the transfer to Collins, Fleming and Breese were under the necessity of re-transferring some of the stock which had been transferred to them.
The bill further alleges, that while this fraudulent scheme was in the course of execution, the South Western Rail Road Bank held out, through Fleming and others, promises that it would furnish ample means to sustain the Ocmulgee Bank, in paying its debts and carrying on its business ; by which, and by the before mentioned contrivances, it induced the directors of the Ocmulgee Bank to place the management of that bank under its control and direction ; and that, accordingly, the said South Western Rail Road Bank advanced to the Ocmulgee Bank the sum of $5000; and under pretext of securing that sum and the Central Rail Road bonds paid in by Collins, as aforesaid, the said South Western Rail Road Bank, on the 23d November, 1842, induced the Board of Directors of the Ocmulgee Bank to select the best assets of the latter bank, to the amount of $137,764, and transfer the same to the South Western Rail Road Bank, and the said assets were so transferred and delivered, at Macon, to the agent of the South Western Rail Road Bank, and have been received, and as the plaintiff believes, collected by the South Western Rail Road Bank, and applied to its own use ; which transfer was not compleled until the 25th of November, 1842, on which very day the Ocmulgee Bank stopped payment and closed its doors, and has proved utterly insolvent. And the bill, averring that this transfer of assets by the Ocmulgee Bank, was not intended for the benefit of all its creditors and stockholders, but for the exclusive benefit of the South Western Rail Road Bank, who knew their insolvent condition, charges that it was fraudulent and void, under the Act of 1833, before stated; and that the latter bank is bound to account to the plaintiff, as creditor, for the assets so received by it.
Finally, the bill states that since the failure of the said Ocmulgee Bank, in November, 1842, its President and Directors have resigned their offices to the stockholders, and there is now no acting President or Director, who can be served with process.
The bill prays a discovery of the stock held from time to time by the South Western Rail Road Bank in the Ocmulgee Bank, and when, to whom, and under what particular agreement it was, at any time, transferred, and particularly in relation to the stock transferred to Collins, and the arrangement for forfeiting the same. Whether Fleming was agent for the South Western Rail Road Bank; the circumstances attending the transaction; the particulars as to the transfer and assignment of the Ocmulgee Bank’s assets, with a schedule of the assets assigned; what amount of the said assets have been received — what disposition has been made thereof, and where they are now.
That the said transfer and assignment of assets may be declared null and void; and the South Western Rail Road Bank decreed to account for said assets to the creditors of the Ocmulgee Bank. That an account be taken of the assets of the latter bank, and the plaintiif’s claim established against the same ; also, that an account be taken of the bills of said bank, and those in plaintiff’s possession declared a charge upon the stockholders agreeably to the charter, and the South Western Rail Road Bank decreed to pay in proportion to their stock in the Ocmulgee Bank, — and for general relief.
Although the bill has been taken pro confesso, against the Ocmulgee Bank, I cannot consider that corporation a party to this suit, because the bill itself states that there are no officers of the institution in existence, upon whom process can be served, or who can appear and answer for it, nor does the bill affect to make its stockholders parties.
The answer of the South Western Rail Road Bank admits the incorporation of the Ocmulgee Bank, and that the subscribers to its stock were organized by electing a President and Directors, who assumed to act as a corporation. That subsequently, these respondents were induced by specious representations made to them by the plaintiff and others, of the condition of the Ocmulgee Bank, to enter into the agreement of the 25th of February, 1839, (before stated :) in which the plaintiff expressly, stipulated that the shares thereby transferred to the South Western Rail Road Bank had been paid up, to the extent of forty dollars per share; in pursuance of which agreement, two thousand five hundred shares in the Ocmulgee Bank were transferred to said South Western Rail Road Bank, for which it paid to the plaintiff and his companions the sum of $100,000, being $40 per-share — and afterwards 250 shares more were transferred to this defendant, for which it paid the plaintiff and those contracting with him ten thousand dollars; these last mentioned 250 shares having been, in the first instance, transferred, nominally, to certain directors of the South Western Rail Road Bank, and by them to the corporation, and paid for by the latter to the plaintiff and his associates. That when this defendant contracted for the purchase of this stock, it supposed it had received correct information of the state of the Ocmulgee Bank, and the plaintiff then asserted, as he .does m the bill, that the provisions of the charter had been faithfully complied with, and more particularly the clause making it an indispensable condition that 25 per cent, of the stock should be paid in specie before the corporation should proceed to banking. But in these particulars, these defendants were deceived, and are informed, and hope to prove, that the Ocmulgee Bank was a mere bubble, and its shares a mere deception upon the public.
That the plaintiff, "Wiiliam B. Johnston, was one of her original subscribers, and upon organization of the bank, became a leading and influential director, and though these defendants are informed that the 5 per cent, per share, required by the charter, to be paid by subscribers at the time of their subscription, was in some way made up; yet the subscribers entered into a scheme to evade the condition imposed by the charter, that 25 per cent, of the stock be furnished in specie, and did, in fact, take measures to dispense with the payment of the stock in any funds whatever. That the second instalment (of twenty five dollars per share) was called for in April, 1837, and the charter required that instalment to be paid in specie ; to' evade which requisition, the subscribers combined with the Macon branch of the Bank of the State of Georgia, and with the Macon branch of the Central Rail Road and Banking Company of Georgia, to obtain large discounts, and to receive as the proceeds thereof, certificates of specie deposites ; which certificates were exhibited as evidence of specie paid in to the capital of the Ocmulgee Bank, to wit: $76,000 in the certificates of the Central Rail Road and Banking Company, and $49,000 in the certificates of the Bank of the State of Georgia. That, thereupon, the subscribers elected a Board of Directors, and chose their officers. That the plaintiff, Johnston, was one of the directors so chosen, and cognizant of the whole scheme of evasion; and the Board of Directors, in pursuance of the agreement under which the specie certificates had been obtained, returned them to the banks from which they came, and received in exchange the notes of their subscribers, which were immediately re-discounted — and the company did, in fact, commence business without any specie whatever, and no funds, except about the sum of $19,277 80, in notes of other banking companies of the State of Georgia.
That the whole of this scheme and combination was studiously concealed from the South Western Rail Road Bank, who were the dupes of plausible representations of the plaintiff and his associates, and who, in ignorance of the true state of the Ocmulgee Bank, were drawn in to pay the large sum of $110,000 to the plaintiff and his associates, without, any valuable consideration ; and having got the shares aforesaid, they admit that they continued to hold them, because, in fact, it was impossible to dispose of them. i
These defendants say that they are strangers to the circumstances under which the plaintiff advanced to the Oc-mulgee Bank, the large sums of money for which he claims payment; and they deny the right of the Directors of said Bank to bind these defendants to pay to one of their associates a further contribution under pretence of a deposite of bank bills, and insist that the liability of these defendants, as stockholders, can only inure to the benefit of bona fide holders of bills of the Bank, taken in the way of business. That the plaintiff, so far from having any just claim on these defendants, is justly responsible to them for the fraud and imposition practised upon them in the sale and transfer of a fictitious stock, under the pretence of shares in a capital actually paid in.
That in addition to the large sums obtained from the South Western Rail Road Bank, by this pretended sale and transfer, the plaintiff and his associates levied a further sum of $82,500, by pretending to call in another instalment of 30 per cent., when in fact the Ocmulgee Bank was in arrears to the South Western Rail Road Bank upwards of $100,000, on account of bills accepted and paid for the said Ocmulgee Bank, and which they failed to provide for; and, also, on account of collections made by the Ocmulgee Bank for the South Western Rail Road Bank; and the call for an additional instalment served as a pretext to charge against the South Western Rail Road Bank the pretended amount of such instalment on the shares
These defendants charge that the plaintiff was a Director of the Ocmulgee Bank from April, 1837, till the- Nov., 1842, and was intimately acquainted with the operations of that Bank, while the defendants were, on the contrary, strangers to them, and were purposely kept in the dark as to the transactions, which they had the greatest interest in knowing.
That Mr. Rose did visit the Ocmulgee Bank in the beginning of 1842 ; but it was impossible for him, without more information than the Directors chose to impart, to form any estimate of its real condition; and, so far isjt from being true, that the President and Directors of the South Western Rail Road Bank were correctly advised of its condition and business, that, in a statement of the condition of that Bank on the 30th of October, 1841, sworn to by the President and ( Cashier, and transmitted to the Governor of Georgia, and a copy of which was sent to the South Western Rail Road Bank, the whole amount of notes of the Ocmulgee Bank then issued was represented to be $10,000; and in a statement of its condition on the (blank) day of April, 1842, also furnished to the South Western Rail Road Bank, the issue of notes at that time was stated at the sum of (blank). And in the report of its condition, made under oath to the Governor on the (blank) day of October, 1842, the issue of notes was stated at the sum of (blank.) And they further say, that at the time of making each of the said statements, the plaintiff, William B. Johnston, was a Director of the Ocmulgee Bank, and at the date of the last mentioned statement, not only Director but Cashier.
These defendants deny, “that upon being informed of the alleged indebtedness of the Ocmulgee Bank to the complainant, and the liability of the stockholders to him, on account of his holding the notes of the Ocmulgee Bank, the South Western Rail Road Bank formed a design to rid themselves of their liability, by passing away their stock to others on the contrary, the South Western Rail Road Bank had determined, long before the time when the advances of the complainant to the Ocmulgee Bank are alleged to have been made, to dispose of their stock in that Bank. That at a meeting of the stockholders of the South Western Rail Road Bank, in November, 1839, being the first meeting which took place after the said stock was purchased, and nearly two years before the advances of the plaintiff to the Ocmulgee Bank are alleged to have been made, a resolution was adopted, instructing the President and Directors of the South Western Rail Road Bank to dispose of said stock as soon as practicable ; in pursuance of which instructions, the said President and Directors endeavored to dispose of said stock, and offered it to the parties of the first part, named in the articles of agreement before mentioned, and in conformity to said articles ; which offer they declined ; whereby the South Western Rail Road Bank were set at liberty to sell the stock to any other person.
That afterwards, about the 8th of November, 1841, Mr. Henry G, Lamar, then President of the Ocmulgee Bank, made an offer on behalf of that Bank, to purchase the stock at the nominal price of 80 per cent, of the amount paid in on the same, to be paid by transfer of debts to that amount due to the Ocmulgee Bank, to be selected from a schedule : whereof $130,000 were debts for which Robert Collins was liable, either as principal or surety, and which he had declared he would not pay, and the residue consisted of debts of other persons, of whose ability.- to pay these defendants had no knowledge, but supposed they were no better than the debts of the said Robert Collins; and the offer was, therefore, de- v dined.
That, about this time, the said Collins proposed to treat for the purchase of the said stock, and a negociation was opened i with him, which resulted, about the 16th of February, 1842, in an agreement that the South Western Rail Road Bank should transfer to him 1750 of their shares in the Ocmulgee Bank for $61,250 of bonds of the Georgia Central Rail Road and Banking Company, — $30,000 of said bonds to be delivered immediately, and the residue by instalments of $5,000, at intervals of ninety days — and it was understood that the shares so to be transferred to said Robert Collins, Avere to be taken and forfeited by the Ocmulgee Bank in payment of debts of the said Collins to said Bank, to the amount of $122,000, to be selected by Mr. Lamar, President of the Bank, from among all the liabilities of Collins to the Bank. These defendants believe that Collins had, before entering into this agreement, ascertained that the President and Directors of the Ocmulgee Bank Avould consent to forfeit said stoc'k for his indebtedness as aforesaid; and that in truth, the said President and Directors did, at that time, assent to the forfeiture; and their subsequent dissent, expressed in their resolution of the 14th of May, 1842, set forth in the bill, was induced by circumstances which arose afterwards, and remain to be stated.
These defendants deny that the arrangement for forfeiting the stock, sold by them to Collins, for his indebtedness to the Ocmulgee Bank, was contrived, suggested, or proposed by them.
They state that Mr. Henry G. Lamar, not as President of the Ocmulgee Bank, but in his individual character, was authorized to receive from Collins, for them, the Central Rail Road and Banking Company’s bonds, which Collins was to give for their stock; but, during Mr. Lamar’s absence from Macon, Collins delivered 30,000 of these bonds, in part execution of his contract, to J. A. White, the Cashier of the Oc: mulgee Bank; which the Directors of that Bank took possession of, and appropriated to their own purposes. That after-wards, about the 12th of April, 1842, D. F. Fleming, then a Director of the South Western Rail Road Bank, was appointed agent of that Bank, to proceed to Macon, for the purpose of disposing of the remaining one thousand shares, still held by them in the Ocmulgee Bank ; and also to obtain a settlement of a debt of the Ocmulgee Bank, and debts of Collins to the South Western Rail Road Bank — and for the more convenient execution of the business thus entrusted to him, the said one thousand shares, and the debts of the Ocmulgee Bank and of Collins to the South Western Rail Road Bank, were transferred to said Fleming, who accordingly went to : Macon, and on the 1st of May, 1842, made a contract with ' Collins for the sale of said stock and debts to him, (Collins,) which contract was reduced to writing, and signed by Collins and Fleming, and a copy of it marked B., is exhibited with this answer.
The agreement of the 1st of May, 1842, thus exhibited, after reciting that Fleming had become the owner of one thousand shares in the Ocmulgee Bank; of a debt of $50,-394 26, (principal and interest,) due by the said Bank to the South Western Rail Road Bank; and a debt of $42,297 31, due to the same by Collins, and Collins & Cleaveland; and had, that day, sold the one thousand shares of stock to Collins, and taken therefor Collins’ note of that date, and due at one day, for the sum of $35,000; and that he had also sold him the debt on the Ocmulgee Bank, for which and for Collins, and Collins and Cleveland’s debt, Collins had delivered to Fleming, at par, Georgia 6 per cent, bonds to the amount of $10,000 ; and also his (Collins’) notes of that date, (set forth in a schedule marked A.) for the payment (in instal-ments, beginning the 13th of October, 1842, and ending 13th of January, 1844,) of $70,345 78 — it was then covenanted that Fleming should retain possession of the evidence of the debt on the Ocmulgee Bank, and the evidences of the debt of Collins, and Collins &. Cleaveland, (set forth in a schedule marked B.) and of 220 shares in the Central Rail Road and Banking Company, previously delivered to him as collateral security for Collins, and Collins & Cleaveland’s said debt; and of the note of35,000 dollars, that day executed by Collins, as aforesaid — that Collins should pay respectively, at maturity, his notes, (amounting to $70,-345 78) set forth in schedule A, — in Georgia 6 per cent, bonds, at par value; and should he fail to pay any one of said notes within fifteen days after its maturity, all his rights under the agreement should become forfeited, and in that event, Fleming should retain, as his own property, the $10,000 advanced to him as aforesaid, the said $35,000 note given by Collins, and whatever amount of the debt of the Ocmulgee Bank and of the debt of Collins, and Collins &. Cleaveland, might remain due at the time of such failure; and should also retain, as collateral security, for the last mentioned debt, the 220 shares of the Central Rail Road and Banking Company. It being expressly understood, that upon failure to pay any one of the notes in schedule A., as aforesaid, the contract should be held to be fully executed, so far as at that time it had been fulfilled, as to both parties — but void, so far as it remained unfulfilled ; and so far as unfulfilled, the parties should be remitted to the conditions existing before the contract was made. It was further covenanted, that upon Collins’ payment to Fleming, in Georgia bonds, as aforesaid, of the said notes, schedule A., or any part of them, or either k of them, Fleming should give him an order on the Ocmul-gee Bank, (without recourse) to operate as a transfer, pro tanto, to Collins of the debt on said Bank; and when the : whole of said Ocmulgee Bank debt should thus be paid to Fleming, all sums afterwards paid by Collins on the notes, schedule A., should count, in double said sums, as credits upon the debt of Collins, and Collins & Cleaveland, until the same should be satisfied. Finally, it was agreed, that upon Collins fully discharging the notes in schedule A., in the manner aforesaid, Fleming should give him up his note of $35,000, and all the evidences of his and Collins & Cleave-land’s debt, together with the 220 shares of stock held as collateral security thereto, and also deliver to'him all evidences of the Ocmulgee Bank debt remaining in his possession.
This contract might have been stated in fewer words, for, stripped of burdensome technicalities, its evident intention "was, that when Collins should pay the debt due by the Ocmulgee Bank, and half the debt due by himself, and his .copartner, Cleveland, (to which he was enforced.by stringent conditions) a present should be -made him of .1000. shares of Ocmulgee stock. •
The answer of the South Western Rail Road Bank proceeds:
That after the aforesaid agreement was' made, the Ocmul-gee Bank finding that this Bank was about to dispose of its whole stock in that institution, and to terminate'its connexion therewith, did (as they believe, at the instigation of the plaintiff) adopt the resolution of the 14th of May, 1842; not (as defendants believe) from any regard to the bill holders and other creditors of the Ocmulgee Bank, but in order to prevent, the South Western Rail Road Bank from dissolving a con-' nexion which was so profitable to the Directors of the Ocmul-gee Bank.
Further answering, they say, that afterwards (about the 2d of November, 1842,) Collins not having performed his part of either of his aforesaid contracts, and the stock held by the South Western Rail Road Bank still standing as at the date of Fleming's contract, Fleming was again sent to Macon, as agent of the South Western Rail Road Bank, to effect a settlement of their affairs, as connected with the Ocmulgee Rank, both in relation to the stock therein he]cl by the South Western Rail Road Bank, and in relation to the bonds of the Central Rail Road and Banking Company for 30,000 dollars, which Collins had delivered as aforesaid, to J. A. While, cashier of the Ocmulgee Bank, for the South Western Rail Road Bank, and by the Directors of the former disposed of for their own purposes without authority. Fleming was present at the election of directors, in November, 1842, held proxies for the 1750 shares, standing in the name of his Bank, and voted for these shares.
“ They admit that the complainant was, at the time of the said election, Cashier of the Ocmulgee Bank, but they cannot admit that Fleming proposed to any of the directors that if they should put in such a direction as he would select, the South Western Rail Road Bank would place funds in the Ocmulgee Bank, to enable it to carry on its business — nor that he agreed with others of the directors and the President, that the stock held by them should be taken at par, to extinguish their indebtedness; and they positively declare that he Was not instructed, nor authorized, nor employed, by the South Western Rail Road Bank, to make any such promises or agreements.” They say it may be true that Fleming did, for the purpose of qualifying some of the newly elected directors, transfer to them some of the shares previously transferred by the South Western Rail Road Bank to him.
They admit that, upon plaintiff’s resignation of the office of Cashier, Breese was elected Cashier, and the South Western Rail Road Bank became surety on his official bond. He had been, but was not then, an officer of the South Western Rail Road Bank, and knowing his integrity and capacity, they deemed it important to all persons interested in the honest and skilful management of the Ocmulgee Bank, that he should be Cashier; and, therefore, were willing to become his surety.
“And these defendants, further answering, say, that the said D. F. Fleming not having effected the transfer of the stock of the Ocmulgee Bank, formerly held by the South Western Rail Road Bank, in conformity with the contracts of sale, made with the said Robert Collins, as aforesaid, and a settlement with the Ocmulgee Bank for the 30,000 dollars of Central Rail Road Bonds, received by them as above mentioned — Mr. M. C. Mordecai, another director of the South Western Rail Road Bank, was sent to Macon to complete said transfer and settlement, and did transfer the said shares to the said Robert Collins, and the same were immediately af-terwards forfeited by the Board of Directors, for the indebtedness of the said Robert Collins to the Ocmulgee Bank; and the President and Directors of the Ocmulgee Bank (having parted with the said 30,000 dollars of bonds of the Central Rail Road and Banking Company, and being unable to replace them by the like amounts of the same bonds) were induced by Mr. Mordecai, in consideration thereof, as the nearest approach to replacing their value which they were able; to make, and for the further consideration of $5000 cash, then and there paid them by Mr. Mordecai, to assign to the South Western Rail Road Bank, the securities set forth in an exhibit accompanying their answer, marked C.”
This exhibit sets forth 7 mortgages — 3 by .George Jewitt, 3 by Jewitt & Burch, and 1 by Mortin N. Burch — on all of which the equity of redemption was released.
These defendants for further answer say, that these securities, (exhibit C) were placed in the hands of Eugenius A. Nesbit, the Attorney of the South Western Rail Road Bank, at Macori, where they still are, and that nothing, so far as they know or believe, has been received on account of the same; and that said securities have been attached, in the hands of said Nesbit, in a suit instituted in the Superior Court of Georgia, by (Blank) against the said South Western Rail Road Bank. “And these defendants are advised, that they have no right to hold the said assets against the bona fide creditors of the Ocmulgee Bank.”
And they, further say, that soon after the said settlement was completed as aforesaid, the Ocmulgee Bank stopped payment and closed its doors, but at what precise time this stoppage took place, they do not now remember. And before the said settlement and stoppage, the President and Directors (of the South Western Rail Road Bank) were aware, from the representations of Mr. Fleming and Mr. Breese, that the condition of the Ocmulgee Bank was very unsound, but they had made no particular examination of the same, and were incapable, from their ignorance of the circumstances of its debtors, of forming a correct judgment as to the extent of its insolvency — “ and these defendants deny that they are accountable to the complainant at all; but if accountable, it must be only pro rata with the other stockholders.”
Collins’ answer states, that about the 23d of February, 1842, he entered into an agreement with the Southwestern Rail Road Bank for the purchase of 1750 Ocmulgee Bank shares amounting to $122,500 — at its par value of 70 dollars per share, the amount paid in on said stock — upon the terms and conditions, and with the object and intentions set forth in the resolution of the Directors of the said South Western Rail Road Bank, and transmitted to him by James Rose, in the following words.
South Western Rail Road Bank, } Charleston, ¡S. C. Feb’y. 23, 1842. )
Robert Collins, Esa.
Dear ¿Sir: — I have sent Col. Lamar the resolution of.the Board on your offer; and he is authorized to act under it, on our part, if the Ocmulgee Bank consents. Resolved, that this Bank will sell to R. Collins $122,500 — stock of the Ocmulgee Bank — or 1750 shares, in the following manner, viz: — That he pays $61,250, in Central Rail Road and 8 per cent, bonds, and that H. G. Lamar, Esq. shall select such liabilities of R. Collins, as drawer, endorser, or guarantee to the Ocmulgee Bank, as he may deem to the interest of the institution, to the amount of $122,500, and upon R. Collins’ paying $61,250 in said Central Rail Road bonds, the stock will be vested in him, and the Ocmulgee Bank will declare it forfeited to the payment of debts, so selected — $30,000 of ihe bonds to be delivered at once, and not less than $5,000 every ninety days, until the whole is paid. The purchase to be a cash transaction.
Very respectfully,
JAMES ROSE, President.
This defendant further answering, says, that according to such agreement, he did, a few days after receiving the above resolution, say about the 1st of March, 1842, deliver at the Ocmulgee Bank, $30,000 Central Rail Road bonds, and took from J. A. White, their Cashier, a receipt therefor, specifying that he was entitled to a credit on his liabilities accordingly, but no stock was transferred to him, nor anything else done at that time. But that soon thereafter, a difficulty seemed to arise between the Ocmulgee Bank and the South Western Rail Road Bank respecting the disposition and possession of the $30,000 bonds above referred to, which difficulty appeared to result in the determination on the part of the Ocmulgee Bank, not to allow the transfer and forfeiture of said stock;' and, therefore, nothing further was done in relation to the 1750 shares, until after Fleming came to Macon, as agent the South Western Rail Road Bank, and by the election of new directors, got possession of the Ocmulgee Bank, as stated in the bill — after which, on or about the 23d of Nov. 1842, Mordecai also came to Macon as agent of the South Western Rail Road Bank, and among other things, as stated in the bill, he transferred the 1750 shares to this defendant, and, at the same time, caused them to be declared forfeited in payment of this defendant’s liabilities to said Ocmulgee Bank; and took out of said Bank about $60,000 of the liabilities of this defendant, (all or mostly endorsements) which he took in place of the stock which he had just caused to be forfeited in payment of said papers. He then came to this defendant and proposed to carry out the original resolution of the 23d of February, by giving up said papers upon one-half of their amount in Rail Road bonds. But this defendant not having the bonds in hand, gave his notes, payable in said bonds, at different periods, for $30,000 or thereabouts, and took a receipt or obligation from Mordecai, as agent of the South Western Rail Road Bank, stating that when said notes should be paid, the South Western Rail Road Bank would deliver to this defendant the notes (for about $60,000) taken by them from the Ocmulgee Bank; but in consequence of the Ocmulgee Bank failing, two days afterwards, this defendant never made any attempt to pay any of the notes he gave Mordecai, considering them void in law, nor has any attempt ever been made to collect aqy part of them.
This defendant further answering, says, that in addition to the transaction before related, Fleming, acting as agent of the South Western Rail Road Bank, came to Macon about the month of May, 1842, and sold to this defendant 1000 shares in the Ocmulgee Bank, upon the same terms and conditions as had been agreed upon for the 1750 shares, and transferred the 1000 shares to him in the books of the Ocmulgee Bank; for which he gave his notes; which was included in a general settlement, then agreed upon between himself and Fleming, agent as aforesaid, embracing various other matters.
This general settlement had been but partially carried into effect at the time the Ocmulgee Bank failed, and nothing has been done about it since. Of the 1000, shares then transferred to him, between 600 and 700 still stand in his name, the rest were declared forfeited in the fall of 1842, to pay some liabilities of this defendant on Messrs. Jewitt &• Hamilton’s paper.
It will appear from this statement of the pleadings, (which I have made very full, in order that the parties shall be , allowed to speak for themselves,) that if the evidence estab- ’ lishes the plaintiff’s advances to the Ocmnlgee Bank, and the hypothecation of its bills to him as collateral thereto, the ..defence of the South Western Rail Road Bank is,
1. That by fraudulent misrepresentations made by him, he imposed the stock upon them, as . holders of which he seeks to make them liable to him ; and that they are released, in Equity, from liability to him by this fraud, and also by the concealment and misrepresentations of its condition, in the Bank’s statements and returns.
2. That he has not such a right in .the bills of the Ocmul-gee Bank on which he now claims, as entitles him to payment threof from them, as stockholders.
3. That, as a general creditor for advances, he cannot maintain his bill as now filed.
The preliminary question is, therefore, whether the plaintiff is a creditor for advances to the Ocmnlgee Bank, and to what amount. After this is disposed of, the defences of the Bank will be considered.
In relation to this question, there is an unbroken current of testimony. It appears that in the year 1840, there was a general suspension of specie payments by the banks of Georgia, including the Ocmnlgee Bank. .There seems to have been an apprehension of these difficulties in the minds of the directors Of this bank for some time before they actually took place. The bank appears, from the evidence, to have done a safe business, until some time in 1839 ; but between the middle of June and the latter end of October of that year, the discounts were increased from $199,152 26 to $303,-928 90. It may be material to observe, by the way, that the plaintiff, who was one of the directors at the time, is probably not chargeable with this mismanagement, having been absent from the board on a visit to the north, from the 2d of July to the 21st of October. To provide for the exigencies of the bank, (according to the testimony of Mr. Lamar, the President, and others of the direction, who have been examined,) a requisition was made upon the stockholders for an instalment of 30 per cent, upon their shares, as early as the 10th of September, 1839. To this the South Western Rail Road Bank objected, (the Ocmulgee Bank being then considerably in arrears to her;) and at her instance, the requisition was postponed at different meetings in November, December, January, February, and March. The suspension, at length, took place, and continued until the 1st Feb. 1841, when the Legislature, by stringent enactments, required the banks to resume specie payments. To meet this requirement, it became necessary for- this bank to obtain aid; and, accordingly, in January, 1841, Mr. Lamar, the President, together with the plaintiff, proceeded to Charleston, and on behalf of the Oc-mulgee Bank obtained assistance from the South Rail Road Bank, to the extent of about $40,000. Specie payments were resumed on the 1st of February, but by March or April, it was discovered that without further assist-anee, they could'not be maintained. Application was, then, made by the Board of Directors, to the firm of William B. Johnston & Co. to-enable them to redeem their bills as they were presented, and they advanced them in specie and in bills of exchange, payable at sight, to an amount exceeding $70,000, under a stipulation that they should be well secured for the advances thus made. It is in evidence that, at this time, exchanges were very high, and specie difficult to obtain. The bank agreed to place in the hands of these lenders, a package of about 50,000 dollars of its own bills, as collateral security, for the repayment of the advances made and to be made, stipulating that they should not be put into general circulation, until the bank should fail to reimburse the advances made to them. These bills were afterwards regularly brought in by the plaintiff’s firm on counting days, and counted with the other issues, and remained on deposite to the credit of the pledgees, until the count and semi-annual returns of the bank were completed, when the depositor withdrew them again. The advances are proved to have been actually made, and the whole arrangement entered into in good faith, and for the benefit of the bank. The bills pledged were actually delivered to the lenders and placed in their control, and beyond that of the bank. “ The sums borrowed went to enable the bank to continue cash payments.”— The advances .continued, fiom time to time, until they' amounted to a very large sum. On the 30th of August, 1842, the plaintiff laid an.account of them before the directors, and a committee, consisting of Messrs. Winn, McLaughlin, and Flanders, was appointed to examine it.
The plaintiff’s charges were, for Principal, $77,094 83 Exchange, 12,335 3 7 Interest, " 10,513 02
Sum, $99,943 02
On the 7th of September, 1842, the committee reported “ that the average of 16 per cent, charged as exchange, was probably over the customary rates current, at the dates in the account,” and that having taken pains to ascertain the correct value of the different kinds of funds advanced, they had reported accordingly.
“ For principal, $77,094 83
Interest to 1st September, ... 10,204 13
Exchange, - 9,652 09
$96,951 05 and which sum we consider due to them in specie, or its eqUjva]e]Qt;” — which report was confirmed by the board. It will be observed that in this account thus stated by the bank, tkere js no diSpUte as to the principal advanced, nor proba-about the interest, and that as to the exchange, it was adjusted at the rates customary and current at the dates of the advances.
Certainly the bank was competent to state an account with its creditor; and we must regard the adjustment as conclusive of their indebtedness at the time it Avas made; more especially as every witness concurs in its justness.
But the amount was afterwards reduced; and the ascertainment of what remains due, rvill be a fit subject for reference. There were also advances made subsequent to the transactions of November, 1842, referred to in the pleadings, which will also be taken into the inquiry.
This brings us to the inquiry, 1st. As to the fraudulent misrepresentations alleged to have been made use of to impose the stock on the defendants ; and the fraudulent concealment and misrepresentations of the condition of the bank in its statements and returns to them.
The charges of the misrepresentation by Avhich the answer of the South Western Rail Road Bank alleges the plaintiff imposed the stock on them, are very ambiguous. At one time it is said that he and his associates represented that 40 per cent, had been paid in upon those shares; and then it is intimated, rather than averred, that this was not true. Again, the charge is more general, that the condition of the Ocmul-gee Bank was misrepresented. The argument assumed a still wider range, and the representation of the plaintiff was treated as if it had been that 40 per cent, had been paid in, (and in specie too,) not only upon the shares transferred to the Rail Road Bank, but upon every share in the Ocmulgee Bank.
It is sufficient that no representation whatever is proved to have been made, except the one set forth in the contract of the 25th of February, 1839, to Avit: that 40 per cent, had been paid in on the shares transferred. Besides this, there is a covenant in that contract, from which a further representation may be implied, that the debts then owing to the Georgia bank, were good.
There is no evidence in the case, so far as I can see, that 40 per cent, was not paid in on the shares transferred on the 25th of February, 1839. But if the representation of the plaintiff had gone to all the stock of ¡the Ocmulgee Bank, the proof, it appears to me, would bear it out. The evidence is, that the stockholders paid 5 per cent, at the time of the subscription, and 25 per cent, on or before the 10th of April, 1837, when the first Board of Directors was elected. These instalments, amounting to 30 per cent, or $j150,000, were all paid to the commissioners, and by them turned over to directors, at the organization of the company. It. is true they were not paid (except to a limited extent) in specie, nor did the charter require it. By the charter, the subscribers or stockholders were required to pay in specie or in the notes of specie paying banks, and this is proved to have been substantially and in good faith complied with. The requisition of the charter as to specie was, that the company should not proceed to banking until 25 per cent, in specie should be paid in.
The instalments I have spoken of were paid in, as I have stated, by the 10th of April; and the company was organized on that day, but it did not proceed to banking until the 22d June; and in the mean time had converted its funds into specie. That is, having no vaults of its own, and not being fully prepared for business, the funds were employed in the purchase of specie certificates, from two of the banks in the town, in which the specie was deposited. A committee was appointed to verify the fact, and to count the money, and reported accordingly. It seems to me this was a full and substantial compliance with the charter. Then, on the 7th of December, 1838, the stockholders paid in another in-stalment of 10 per cent, making 40 contributed by them.
There is a transaction connected with the payment of the second instalment of 25 per cent, out of which something was attempted to be made in argument. Several of the stockholders had enabled themselves to pay their instalments by discounting their notes at the two neighboring banks, before mentioned. On the 10th of May, the Oemulgee-Bank, having as yet neither banking house nor vaults, and no bills having been struck or ready for issuing-, it was resolved that the President be authorized to loan its funds to the Central Rail Road Bank for an indefinite time, provided it could be done at an interest of six per cent. This proposal was declined by the latter bank, but led to a negotiation not previously contemplated, and proved to have been conducted in good faith, by which the notes given by the aforesaid stockholders were discounted at the Ocmulgee Bank, on the 22d of June, by the banks then holding them, and the specie certificates thus taken up. The effect of this was, to realize interest on the funds of the bank, until it should be ready to do a regular business. The preponderating proof is positive that this transaction was not the effect of any previous arrangement, nor intended to be evasive; that the notes thus discounted were good, and were all > paid, so that no loss whatever arose from what was done.
I do not doubt, if the specie certificates had been procured under an agreement that they should be merely illusory, and that they should be withdrawn as soon as they had served a deceptive purpose, that no stratagem by which this was done, would have sanctified the fraud, nor entitled the transaction to stand as a compliance with the charter. 1 mean if the public authorities chose to question it.
But the evidence is clear that nothing of this sort was contemplated ; indeed what was done was not intended nor considered as a regular banking transaction. It was a loan of the funds, until the company should be ready to go into regular business, which was not until November or December of that year.
The result of this inquiry, then, is, that the stockholders had, at the time of the transfer to the Rail Road Bank, paid in 40 per cent, of the shares, as required by the charter, and the bank had not proceeded to business until it had 25 per cent, in specie.
But the view most satisfactory to the conscience, is this: that the defendants who object to this measure, have suffered nodoss nor injury from it. If it was technically a breach of the charter, it was for the State to take notice of that.— But can a complaint be listened to on behalf of an individual, who it is conceded has suffered no detriment? ¥e may even suppose that the plaintiff made a misrepresentation, varying the condition of the bank on the 22d of June, 1837, from that in which this transaction placed it. Even that would not make out a case for these defendants; for the principle is clear that it is not immaterial, but material, misrepresentation ; not falsity, merely, but falsity producing injury to the party complaining, that lays the ground for relief in this Court.
The other representation contained in the contract of the 25th of February, 1839, is, that the debts then due the bank, were good. There is no proof that any one debt then existing was bad, or was lost; and as to the general condition of the bank at that time, the whole testimony conspires to prove it sound and prosperous. The officers best acquainted with its condition prove this. It was only after the South Western Rail Road Bank became a leading stockholder that the foundation of its embarrassments was laid in the over issues of the summer and autumn of 1839. Indeed, the defendant’s own witness, Mr. President Lamar, after stating that up to the time of this connexion, the Ocmulgee Bank was in as sound a condition as any in Georgia, goes so far as to ascribe the over issues which ensued, to the temptation generated by the manifest confidence with which this new accession of strength had inspired the community.
There still remains to be considered, under this head, the false returns and statements ascribed to the Ocmulgee Bank, and imputed in argument to the plaintiff, by which it is said the real condition of the bank, and particularly its indebtedness to the plaintiff, and its pledge of notes to him, weret concealed from the South Western Rail Road Bank.
I do not perceive, in the testimony, any evidence that the concealment of the general condition of the Ocmulgee Bank, if concealment there was, is ascribable to the plaintiff individually; or that he contributed, in any manner, to create its difficulties. From the time the South Western Rail Road Bank became a stockholder, it resulted, from the compact of February, 1839, that the appointment of directors, and the whole administration of the Ocmulgee Bank, was under her control. It is difficult to perceive, therefore, how any course of management could have been adopted without her authority ; could have been concealed from her; or could not have been arrested by her. ,
Weekly statements were made up and frequently transmitted to her. She was furnished with copies of the semi' annual statements, made to the Governor: she had, at all .times, access to the books and papers of the Georgia institution, and frequently availed herself of it; and by her special agents, investigated its condition, — a steady correspondence was kept up with its officers, and, in all respects, it was supervised as a branch bank.
The returns made to the Governor were required to be very minute ; embracing, among other things, the amount of bullion and specie funds, the bills in circulation, and the amount of circulating bills on deposit. We have evidence that in these,returns, there was frequent misrepresentation to the Governor and to the public, in relation to the specie; but the Rail Road Bank was not deceived by it. So far from it, she was consulted on the subject, and assisted in the public deception. On various occasions, from 1840 (which was before the plaintiff’s advances to the bank) to 3841-2, inclusive — the correspondence put in evidence, shows that applications were made by the Ocmulgee Bank to the South Western Rail Road Bank, — and granted, — for the loan of specie or specie certificates, to be used by the former, in her semi-annual returns; and on one of these occasions (the preparation for the return of April, 1841,) it is ludicrous to observe the distress which the application occasioned. The Cashier of the South Western Rail Road Bank was obliged to answer. “ We have to'make a statement for our Comptroller General, to be made public, which will prevent my sending you, before to-morrow, the certificates you desire — I will then do so.”
But the misstatements and concealments most relied on at the hearing, were in relation to the plaintiff’s debt, and the pledge of bills, made by the Bank to secure it; particularly the latter. One of the returns was much commented on. It js impossible to describe it here, or to make the inferences were drawn from it, clearly understood, without setting out the return itself, at length. It is supposed to have deceive(j tjje Southwestern Rail Road Bank, by setting forth the bills issued as farless in amount than the sum pledged to the plaintiff, which representation, it was said, must necessarily have tended to conceal from the South Western Rail Road Bank, the fact that such a pledge of bills had been made. It is, as I have said, difficult to explain the matter without the exhibition of the return; but it may be stated thus. The evidence is, that on each day of counting, preparatory to the semi-annual returns, the plaintiff was required to bring in the bills pledged to him, which were then credited to him as deposites, until the count and return were made, upon which he withdrew them. In the return specified, if we add to the bills in circulation, those specially deposited, the whole amount of bills issued, is manifest: — There is much force in an observation of Mr. Memminger. That the fact that Johnston’s bills were brought in and set down among the deposites, in the returns, does not necessarily infer a fraudulent intention, or an intention to deceive the public. By the terms of his pledge, he was not to pass away the bills. How could the Bank know that he had kept his agreement, unless the bills were brought in and counted ? While in Bank, for that purpose, it was necessary to the preservation of Mr. Johnston’s right in them, that they should be entered as a deposite by him.
But what puts this matter in the most satisfactory light is this: that there is plenary proof from the witnesses of both parties (and no proof to the contrary) that the agents and officers of the South Western Rail Road Bank had repeated and explicit notice, both of the advances of the plaintiff'and the pledge made to secure him; and were not, and could not be, deceived in the matter.
White says, “ that on the 1st of June, 1841, Messrs. Fleming <fc Breese, as a committee of the South Western Rail Road Bank, came to examine into the condition of the (Ocmulgee) Bank.” “The whole condition of the Bank was exposed to them fully; they were allowed access to the books and vaults of the Bank, and nothing was concealed from them. That, on the 31st of May, 1841, appears a statement of bonds, due by the Bank, of $80,000, which included the amount due Mr, Johnston. The same item appears m each statement of the Bank, from the 1st of April, 1841. The statements were weekly. This item, appears by the Journal of the Bank, or Teller’s settlement book, 5th April, 1841, to be to William B. Johnstoir & Co., (made up of bonds) $80,000. This debt is taken from a settlement made with Mr. Johnston’s account for advances to the Bank. This appears to be the first time the debt appears in this form in the boohs. This item was in the weekly statement account, when the committee examined the books. The committee took a very special list of the assets and liabilities of the Bank.”
It appears by a letter from the President of the South Western Rail Road Bank to the President of the Ocmulgee Bank, dated 24th of May, 1841, that Fleming and Breese were sent up to investigate the condition of the latter. The letter says, “ various and contradictory rumors are afloat respecting your institution, and I should be glad to answer, satisfactorily, the numerous enquiries which were made relative to its condition and by a letter from the same to the same, dated June 4, J 841, upon the return of Fleming and Breese, it appears that the facilities which had been afforded them, to arrive at a correct understanding of the affairs of the Ocmulgee Bank, were satisfactory. As the investigation was prompted by various contradictory rumors, and was made with a view to satisfy numerous inquiries, we may presume that it was thorough and minute.
Breese says, that he was sent with Fleming in May, 1841, to examine the condition of the Ocmulgee Bank. “In this investigation, it appeared from the books that Wm. B. Johnston & Co. were creditors of the Bank to the amount of $80,-000, by bonds issued by the Bank to Wm. B. Johnston & Co. Witness understood from the President and Directors of the Ocmulgee Bank that the debt arose from monies advanced by them from time to time. Witness made a communication to the Rail Road Bank, in which he thinks he stated the facts above mentioned. When witness went to make the examination, he understood that the bills of the Bank had been given to Mr. Johnston as collateral security; but they were to remain in Bank, and not to he sued or circulated; not to go out of Bank.” In relation to the latter matter, by the way, (that of the bills being retained by the Bank,) the witness, according to the current of testimony, is mistaken.
McLaughlin testifies that the South Western Rail Road Bank were notified of the advances made by plaintiff. “ Mr. Rose, as President of the South Western Rail Road Bank, when in Macon, had frequent conversations with the officers of the Ocmulgee Bank, and with witness — in reference to said advances, and the general condition of the Ocmulgee Bank,” — “ and witness is certain he must have knotvn of the bills having been deposited with plaintiff, as it was a matter of conversation.” “ The Books of the Ocmulgee Bank were submitted to the examination of Mr. Rose, he was acquainted with every thing connected with the Bank, and made no protest against said debt, or the security given, although he was disappointed in the general condition of the Bank.” “Mr. Rose urged the burning of the redeemed notes in hand, which was done; — but the $50,000 in plaintiff’s hands, he was notified couj^ not |^0 controlled for that purpose.” “The committee 0f t[ie South Western Rail Road Bank were advised of the deposit 0f the bills of the Ocmulgee Bank, made to plaintiff.”
Bennet testifies, that the South Western Rail Road Bank knew of the debt due to the plaintiff, and of the delivery of the Ocmulgee bills to him as security, “ which information was communicated to Win. 0. Breese, an officer of the South Western Rail Road Bank, and D. F- Fleming, a director, in the month of May, 1841, while at Macon, as a committee from the South Western Rail Road Bank to examine the affairs of the Ocmulgee Bank.” “ On the 18th January, 1842, James Rose, President of the South Western Rail Road Bank, was at Macon, and attended a meeting of the Board of Directors of the Ocmulgee Bank, when the subject of burning the notes of the Ocmulgee Bank was introduced by him. He was informed that the plaintiff held $50,000, or about that sum, of the notes of the Ocmulgee Bank, as security for his advances, which he would not surrender to the Bank, and which plaintiff had held ever since the Bank had resumed, except at the semi-annual reports, they were brought in, to make the returns to the Governor.” “The South Western Rail Road Bank knew of the fact and object of bringing in said notes.” “ The books of the Ocmulgee Bank were submitted to Mr. Rose for his examination. He was acquainted with the indebtedness of the Ocmulgee Bank to plaintiff, and the security he held, and made no objection to the debt or the security given. There was a conversation by Mr. Rose with the Directors of the Ocmulgee Bank in relation to burning the notes of the Ocmulgee Bank, and he was informed that plaintiff held $50,000, or about that sum, as security for his advances, and they could not be burned.”
Lamar says (see answers to 13th and 15th cross interrogatories :) “ There was at no time any concealment as to Wrn. B. Johnston &, Go’s loan. I am not able to answer when the South Western Rail Road Bank, or its officers, first became advised of it. As near as I recollect, in 1841, the South Western Rail Road Bank sent up Messrs. Fleming and Breese to examine into the condition of the Ocmulgee Bank. They did so thoroughly, and they were advised then and knew of Messrs. Johnston & Co’s loan. In the spring of 1842, when Mr. Rose visited this place” (Macon) “ he «vas advised fully of it, and how the notes or bills were held; and when he proposed burning all the bills, mention was made to him of bills of the Bank in the Treasury of the State, and the nature of their deposit there, as well as those held by Wm. B. Johnston & Co, which could not be burned.” — “I have already answered” (says he,) “ as to the South Western Rail Road Bank being advised of the loan, and knew how it stood and appeared in the return — most of the stockholders knew the same, also; I do not know whether any one ested was deceived or not; but I cannot conceive how the South Western Rail Road Bank or its managers could be.”
In the face of this evidence, how is it possible to believe that the South Western Rail Road Bank was deceived by the non-exhibition of these bills, as bills issued, or bills circulating, in the returns of the Georgia institution? Besides, how is the plaintiff, — one out of many directors, — all under the control of the Rail Road Bank, to be singled out as the author of whatever deceptions may have appeared in the returns to the Governor? Did he vote for the measure, or oppose it? We have no evidence upon the subject. And is he to lose his claim equally whether he did the one or the other ? It deserves also to be considered that he was not only a director, but a creditor; and is a creditor to lose his debt, because the debtor, who is bound by law to make an exposition of his affairs to a third party, makes a false one?
I observe that it is roundly charged in the Bank’s answer, that the plaintiff was at the date of the last return, Cashier of the Ocmulgee Bank, implying that he must at least be charged with that return, which by law was to be made on the oath of the cashier. But this allegation must have been made at a venture, for the'evidence shows that the plaintiff did not become cashier until after that time.
I have found in no part of the evidence, any trace of fraud or misrepresentation on the part of the plaintiff. He-appears to be a creditor for advances actually and bona fide made; which advances were employed- in redeeming the bills and circulation of the Georgia Bank. The pledge of bills made to him for his security, appears to have been made in good faith. We are, then, to enquire—
2. Whether he is entitled to claim payment of these bills, as against the stockholders, under the 9th section of the charter of the Ocmulgee Bank?
A question was rather intimated than raised in the argument : whether the plaintiff’s remedy, as bill holder, (if he is a bill holder,) is not at law. But there is no difficulty in this. Claiming against the Rail Road Bank, as a stockholder, it would have been necessary for him to have shown on the trial, that the title of the stock was in them at the commencement of his action. It was necessary to come into this Court to set aside the fraudulent transfer of it to Collins, and reinstate the liability’of the Rail Road Bank. The real question must therefore be considered and decided: — whether the plaintiff is entitled to rank as a bill holder, and, .as such, to call on the stockholders to redeem the bills in his hands.
If the bills had been paid to him, towards satisfying his advances to the Ocmulgee Bank, there could have been no ques tion in the case. If, instead of loaning his funds to that institution to redeem its bills in circulation, he had employed the "same funds directly in taking up the bills for the credit of the ganjCj andhacj then presented the bills thus taken up by him, there would have been as little difficulty. In either of these cases it would be readily conceded, that he took the bills upon their credit as bank notes; and was, therefore, entitled to the same remedies upon them as any other person who might have taken them in the course of trade. The difference is, that instead of having taken the bills in payment, or purchased them from those who had taken them from others in payment; — (in either of which cases the bills would have come into his hands as absolute property,) he took them with a qualified right, as a pledge or security. The whole question turns upon this distinction. Under the evidence, there can be no objection of want of consideration advanced for these bank notes ; no objection of want of good faith in the transaction ; none that the Bank and its stockholders were not benefitted by it; none that in taking the bills as a security, the plaintiff did not give full credit to them as bills, and rely on them as bills, with all the remedies incident to them as such, whenever, under the contract, made with the Bank, the contingency should happen, entitling him to enforce them. The objection is simply, that he did not receive them in present payment, but as a pledge.
The argument is, that the object of chartering Banks is to secure a currency capable of displacing specie, as the ordinary medium of exchange; thereby increasing the productive income of the community. That in order to effect this end, it is necessary that those who are to receive the Bank currency, in their daily business, should be assured that it is as good as money. That a credit must be enstamped upon it, so that it shall pass from hand to hand without doubt or question, as money.
From this it was inferred, that the object of the legislature in providing so fully for the redemption of the Ocmulgee Bank bills, was to secure those who should receive them as currency, or money, in payment; and not those who should receive them, under circumstances implying that when they took them they did not consider them as money.
No doubt is felt that the great object of creating Banks is truly stated in this argument; nor that while bank bills, in themselves, are not money, but merely contracts for money, the object of the legislature, in authorisiftg the issue of them, is, that they shall, in circulation, and as a medium of exchange, represent money. — Nor that the design is, that they shall circulate as constantly and as freely as the exigencies of commerce may require — nor that the remedies on them are given in order to this circulation, and to lend them credit for that purpose. I hare, still, very considerable doubts whether any of these considerations throw the plaintiff without the, remedies provided by the legislature of Georgia, for holders of bills on the Ocmulgee Bank.
His contract with the Bank was, in effect, that the bills de- ¡ livered to him should be retained by him as security for his advances, and not circulated nor enforced by him until the loan expired. In what respect does this vary the principle which would have obtained, if the bills had been paid to him on his advances, and thereupon he had immediately presented them for payment, but consented to forbear for a given time, upon condition of recovering interest from the time of the demand 7 I suppose that contract would have been lawful ; and that in such a case, not only the Bank, but the stockholders, would have been bound for the bills, — with this distinction, that the latter possibly might not have been bound for the interest, — though I doubt that. It seems to me that he who receives the bills of a Bank, with a view or under an arrangement to retain them, or to forbear their present collection, extends even a greater degree of confidence to the bills, and the security which, they import, than he who receives and passes them off in the course of a rapid circulation ; and that the protection extended by the legislature, was not meant to be withheld from those who might receive the bills of the Banks, but might be under no necessity to make a present use of them, or to pass them away. Bank notes, so far as the contract they import and the remedies on that contract are concerned, are nothing but a security for money; and whoever receives them, receives them trusting to the security they afford. If he takes them for present use, he is entitled to a present remedy on them. If he takes them under an agreement to postpone his remedy, or to suspend it upon a contingency, he is a bill holder in prcesenti, entitled to his remedy whenever the contingency happens.
In receiving these bills, Mr. Johnston obtained possession of a legal obligation, executed in the form which, according to the charter, bound both the Bank and the stockholders. If there had been no stipulation binding him to retain them for a certain time, or for a certain purpose, he would have been at liberty to have put them instantly into general circulation, or to have sued the Bank and stockholders upon them. There was such a stipulation, however, but it did not in my conception cut down the bills iti his hands to any thing less than legal obligations, according to their face.
He held, in each bill, a contract valid, at law, against the Bank and stockholders. Against that they held an equity to restrain him until the happening of a contingency. Suppose that, contrary to his stipulation, he had passed the bills away to a third person, ignorant of the existing equity; that third person could have enforced them against any party bound by c^ar|.er for their redemption. This shows that the bills can-y jQ them an inherent legal obligation against those par-tjeg> g0) again, if before the happening of the contingency, he had endeavored to enforce the bills against the Bank or the stockholders, their defence could not have been that there was no binding legal obligation in the bills; but that the contract with Mr. Johnston created an equity to restrain him until the happening of a contingency. But when the contingency has happened, their equity is gone, and nothing remains but the legal obligation of the bills.
9 Paige, 12.
My opinion is, that Mr. Johnston took these bills upon a full and fair consideration, which entitles himin law and equity, to enforce them according to the terms of the contract under which they came into his hands.
If the objection be urged that he did not take them as money, the answer is, he took them for whatever they were, be they regarded as money or securities for money. He took them with all their qualities, and is entitled to circulate them as money, or insist on them as securities.
If it be further urged that he took them under a restricted right as to the free use of them, the answer to that is, that the restriction was suspended on a contingency which has happened, and therefore his right is now absolute.
It was argued thai the bills intended to be sustained by the 9th section of the charter,, were bills in circulation, and such only ; and much ingenious argument was directed to the question, whether the bills were put in circulation by the Bank when deposited by them in the hands of Johnston & Co. I can frame no definition of bills in circulation which does not cover bills pledged or deposited. A Bank has issued or put in circulation her notes, whenever she has emitted them; imparted a right in them to a third person ; and divested herself of the control over them. Such was the case as to these bills — they were not put into the general, but certainly into a qualified circulation. Did the bills lose their quality, because they were not actually passing from hand to hand 1
1° Davenport v. The City Bank of Buffalo, we have an opinion expressed, though not necessary to the case, that a Bank, by pledging her bills, puts them in circulation. Chancellor Walworth says, “when the bills of a Bank are legally pledged for the securing of a debt or demand, due to any other person or institution, so as to entitle the pledgee to hold and use such bills for his indemnity, in case the debt is not paid, such bills must be considered as issued and in circulation, within the true meaning and intent of the statute, limiting such issues — as such bills are no longer under the control of the Bank.” In this opinion I concur, and, I apprehend, there could be no diversity of judgment upon this point, were it not for an authoritative construction of a dif- ( ferent import which is supposed to have been put upon a similar statute of Georgia, by the Supreme Court of that State, in the case of CoUi?is v. The Central Bank. l
1 Kelly, 435.
Prince, 372.
The contest, in that case, was between the creditors of the Monroe Kail Road and Banking Company, for the payment of their demands out of the proceeds of the Company’s Railway equipments, <fcc. which had been sold for the benefit of the creditors. The 11th section of the Company’s charter provided that “ the Rail Road to be built by said Company, from,” &c. “ together with all revenue arising therefrom, and all the property, equipments, and effects therewith connected, shall be pledged and bound for the redemption of the notes or bills issued by or from said Company.” Collins had constructed part of the Rail Way, under a contract with the Company; as security for which, he held a mortgage from the Company .for the whole of the Rail Way. It had been adjudged that this mortgage was infeiior in rank to the claims of the bill holders, so far as it extended to parts of the road not constructed by Collins. This decision left part of his demand unsatisfied. He then made it to appear, (says the report of the case) that cotemporaneously with the mortgage, it was also agreed that $300,000 of the Company’s bills should be set apart, in the hands of a third party, to be held as further security, and to be delivered to him, Collins, in the event that it should be judicially determined that the bills of the Company were preferable over other claims, under the 11th section of its charter. Such a decision having been made, he caused the bills which had thus been set apart for his benefit, to be brought forward and delivered o the auditors, and required that his claim should be sustained on the score of these bills — but the auditors, supported by Mr. Justice Floyd, ruled, “ that said bills could not be considered as bills issued by the said Compauy; and, therefore, they could not be admitted to receive from the fund any pro rata or other share with other bank bills.” The case was brought before the Supreme Court, by appeal from the decision. The argument was very extensive, but the opinion of the Court on this point, was very summary. Warne:, Justice, in delivering the judgment, says, “ on looking into the manner in which this security was taken by the plaintiff in error, as disclosed by the record, we are decidedly of opinion he is not entitled to receive any portion of said fund as bill holder. The bills were not issued as was contemplated by the charter of the Company, and the manner in which they are now attempted to be used, for the purpose of placing the holder ■thereof on the same footing as the holder of bills issued and put into circulation as money, according to the terms of the charier, cannot receive the sanction of this Court. To per-mjt ^ wou]¿ pe) jn our judgment, to sanction a fraud on the rights of those bill holders whose bills are legitimately issued and put in circulation as money — according to the terms and provisions of the charter. On this ground of exception taken, we most cheerfully concur in opiniori with the Court below.”
5 Crunch,22. 9 Id. 98, 1 YoTJJ9' u 2Peters, 85. 5 id 280 6 Id. 291. l Brock. 539.
10Wheat. 152.
Although the subjects bound by this charter are different from those bound by the charter of the Ocmulgee Bank, the contracts intended to be secured, are the same in both; in the one case, “ the notes or bills issued by or from said company,” in the other, “ the bills or notes issued by or from said Bank;” and if this decision intended to affirm that Monroe Rail Road bills, pledged by that company for a fair consideration, and placed under the control of the pledgee, and beyond that of the Company, were not “ issued by or from said Company,” so as to entitle the holder of them to all the securities provided by the charter for their redemption, then the very point before us in this case is decided, and such a construction put upon the words of the Ocmulgee charter, as this Court is bound to adopt.
1° numerous cases, (see McKeenv. Delany, Polk v. Win-dell, Mutucd Insurance Society v. Watts, Elmendorf v. Taylor, Shelly v. Grey, Gardner v. Collins, United States Morrison, Cathcart v. Robinson, Green v. Neal, and Coates v. Muse,) the deference which all courts, of all other countries, are bound to pay to the construction of a statute adopted by the judiciary of the country where it was enacted, is clearly pointed out.
In Coates v. Muse, one of these cases, a statute of Virginia, which had never yet been expounded by the State Judiciary, came before Chief Justice Marshall for construction. His language manifests the anxiety and distrust which the task thus imposed on him occasioned. “It is always,” says he, “ with extreme reluctance that I break the way in expounding the statute of a State; for the exposition of the Acts of any Legislature, is, I think, the peculiar and appropriate duty of the tribunals erected by that Legislature.— Although, if a case depending on a statute not yet construed by the appropriate tribunal, comes on to be tried, the Judge is under the necessity of construing the statute, because it forms part of the case, yet he will yield to this necessity only when it is real, and where the case depends on the statute.”
In Elmendorf v. Taylor, depending upon the construction of statutes of Kentucky, the same great Judge observes, that it would bo unnecessary to discuss the construction, if it should appear to have been settled in Kentucky. “This Court,” says he, “has uniformly professed its disposition, in cases depending on the laws of a particular State, to adopt the construction which the Courts of the State have given to those laws. This course is founded on the principle, supposed to be universally recognized, that the judicial department of every government, where such department exists, is the appropriate organ for construing the Legislative acts of that government. Thus, no court in the univeise which professed to be governed by principle, would, we presume, undertake to say, that the Courts of Great Britain or France, or of any other nation, had misunderstood their own statutes, and, therefore, erect itself into a tribunal which should correct such misunderstanding. We receive the construction given by the Courts of the nation as the true sense of the law, and feel ourselves no more at liberty to depart from that construction, than to depart from the words of the statute.”
5 Craneh, 22.
5 peters, 280.
4 Id> 184-
6 Id. 291.
In several of the cases referred to, the Court adopted State constructions contrary to its own opinion.; in some of them, it held that the principle under which it acted, extended so far as to compel it to put a different construction upon the same words of a statute, common to several States, according to the judicial construction adopted in those States respectively. In one of the cases, a State construction intervened, between the decision of the Circuit Court, and the hearing of the appeal in the Supreme Court; and the Court immediately and implicitly obeyed it. In another, it appears that the Court had, in previous cases, conformed its decisions to the construction given by the State Courts; but the Supreme Court of the State having recently changed the former construction, the Supreme Court of the United States instantly conformed to the recent decision.
It is true that the cases in which this doctrine was thus applied, were nearly all of them cases in which the laws to be construed were local in their nature, as forming rules of property, or as applying to the forum ; as, for instance, registry laws, laws of inheritance and distribution, statutes of limitation, or laws regulating the lien and operation of judgments, and the like. But the words of Chief J ustice Marshal, in Elmendorf v. Taylor, are too emphatic to.be mistaken. The principle announced by him goes to establish a comity which must extend to the implicit adoption of the construction put by the Courts of each nation or State, upon their own statutes, whatever their character. This, and this only, can give the same operation to the same statute in all parts of the world; and secure to those effected by it the same rights, and ensure that they shall be subjected to only the same degrees of liability under it.
But the obligation to follow the decisions of a State, implies that they shall be clearly understood; and for this purpose, their purport and meaning, and the extent and operation in tended to be given to them, where dubious, must be investigated. Instances of such investigation occur in the cases frorn the United States Courts, to which I have referred,
Kelly, 454 Noté.
jt- ^ groun(j Up0n which the Supreme Court of Georgia degraded the bills presented by Collins, was not the mere fact that they had been pledged to him, but a conviction that the pledge had not been effectually created, or a persuasion, arising from the circumstances, that it was simulated and unreal; and if the Court, apart from the attending circumstances, would have held that a pledge had been actually and bona fide made, and was effectual to give Collins the rank of a bill holder, then, instead of conforming to the construction of that Court, we should contravene and defeat its true meaning, if we should rule Johnston out of the list of the bill holders in this case.
It is impossible to read the decisions of this newly organized Court, of which we have the first report in Kelly, without profound respect for the ability, diligence and research displayed by the Judges who determined the cases, as well as by the counsel who argued them. It is clearly impossible, however, where such a vast amount of business is despatch-ed, as seems to have been transacted by this Court at each term, for any degree of care or assiduity, however great, to prevent occasional manifestations of ambiguity or want of precision in the judgments pronounced. We all know that in the hurry and ardor of the moment, general expressions escape a Judge, beyond his deliberate opinion and. beyond the exigencies of the case. It would be unfair, both to him and to the cause of justice, in the subsequent application of his decision, to take hold of these expressions as the decision, or to allow them to pervert the judgment really intended. It would be equally unfair to the other members of the Court, concurring in the result of his judgment, to impute to them an assent to every expression dropped by him, though not necessary to that result. What we wish to know in this case is, what was intended to be decided in Collins y. The Central Bank; and what, in Georgia, is the known and accepted principle of that decision.
Now, in that case, Judge Warner delivered an opinion only for himself and Judge Nesbit — Judge Lumpkin being a bill holder, did not sit in the case. It is said by the Reporter, “after the judgment was delivered, the same being adverse to his interest,” he gave it his approbation. There is no intimation that he held the bills by way of pledge; and if not, I apprehend that the concurrence expressed by him, did not relate to the point now under discussion ; upon which point the decision was favorable to his interest as a bill holder; but related to another point in the case, in which Collins’ mortgage lien was applied to the proceeds of so much of the Rail Way as he had constructed, in exclusion of, and adverse to, the bill holders. ^
1 Kelly, 454.
9 Paige, 12.
Judge Warner, speaking in very general terms, refers to “ the manner in which this security was taken,” seeming to object not to the fact of taking the security, but to the man-% ner of doing it.
Again, he says, “ the bills were not issued as was contemplated by the charter.” Does he here mean that the bills were issued contrary to the spirit of the charter, and in a case not contemplated by it, or that the emission oí them was incomplete?
These observations were made on the 6th exception taken to the judgment below, which judgment, as described in the exception, was, “ that the said bills set apart as collateral security,” &c. “ had not been legally issued by said Bank.” Does this mean that the bills were not parted from by the Bank, but only set apart and still retained under her control ? In the affirmation that the bills had not been “legally issued,” was stress intended to be laid on the word “ issued” or the word “ legally ?”
The statement, by the Reporter, of the facts relating to this transaction, is vague and uncertain throughout. Occasionally we have glimpses at the facts in the argument of counsel, from which it would appear the Bank never parted from the bills; and that out of the $300,000 set apart in the package, the Bank made use of $100,000. The pledge is said to have been made in 1842, but Mr. Law, arguing in support of it, does not pretend that there was any delivery, or even schedule taken, till 1845, which was after the insolvency of the Company, and, possibly, after the decree for the sale of its property, which was made at May Term, 1845. If this was so, the case is like that of Davenport v. The City Bank of Buffalo, before referred to. In that case, the Bank had obtained from the plaintiffs an accommodation note, which was discounted at another institution for the benefit of the Bank. When it was delivered to the Cashier for that purpose, he sealed up a package, containing bills of the Bank, sufficient to cover the amount of the note, and endorsed on the package a memorandum, that it was intended to protect the plaintiffs against loss on the note; and placed the package thus endorsed, in the vaults of the Bank. But no entry of the transaction was made in the books of the Bank; nor wore the bills entered on the books, as part of the bills issued or in circulation. The Bank failed, and a receiver was appointed ; and the accommodation note being protested, the plaintiffs applied for a decree that the receiver deliver the package to them. The Chancellor decided that this was a “ mere fictitious hypothecation of the .¡gills of the Bank, contained in the package — while the same still remained under the absolute control of the institution, in its own vaults. ^n(j tjje piaintifts, by such nominal hypothecation, obtained neither a legal nor an equitable lien on the bills in the package^ even jp arrangement under which they were sealed up, was made with the sanction of the Directors of the Bank.”
I am confirmed in the impression, that the bills were never delivered as a pledge to Collins, nor put out of the control of the company, by subsequent proceedings in the same case, in the Superior Court; and the view then taken by Judge Floyd, shows me what he understood to be the true meaning of the Supreme Court, when they affirmed his previous judgment.
A claim was filed by the Planters’s Bank, and traversed before the auditors — the auditors, reporting upon it, say “the Monroe Rail Road and Banking Company, on the 20th of October, 1841, applied to and obtained, from the Planters’s Bank, a loan of $20,000; to secure which, the Monroe Rail Road and Banking Company gave to the said Planters’s Bank four promissory notes, each for the sum. of $5000, with three endorsers, and also deposited, at the same time, $20,000 of the bills of the Monroe Rail Road and Banking Company, with the Pianters’s Bank, as collateral security, for the repayment of the sum borrowed. Three of said notes have been paid by returning $15,000 of the sum borrowed, leaving one of the notes unpaid. At the time of this transaction,. the Monroe Rail Road Banking Company were paying out their bills to the contractors and other creditors of said company.
“ The Planters’ Bank claims the control of the whole $20,-000 of bills, to secure payment of the balance due said bank ; and objected to, on the part of the contestant, because it is alleged that said bills deposited, were not issued bp the bank; and it is insisted that the Planters’s Bank stands, in regard to the bills deposited as collateral security, in the same situation that Dr. Robert Collins did, in relation to his claim to control $200,000 of the bills of the said Monroe Rail Road and Banking Company, under contract with said bank. If this be so, the claim under consideration ought not to be allowed, as it has been determined both by the Superior Court,” (Judge Floyd,) “and Supreme Court, that Dr. Collins, claiming to control said $200,000, was not a bill holder under the charter of the bank.
“ The auditors cannot admit that the case under consideration, is situated as the case of Collins. In the case of Collins there was no delivery, and the bills were left in the bank. Collins was not to control the bills until after it should be determined by the judicial authority of the State, that bill holders had a prior lien on the road and equipments to other claimants. In the case under consideration, no such agreement was made. The bills were delivered,, after being signed by the proper officers, to the Planters’s Bank. The Monroe Rail Road and Banking Company parted with the bills. The Planlers’s Bank had the control and dominion of bills, and could have passed them to others. The bills were, therefore, in the opinion of the auditors, issued by and from the bank.”
Allen & Sewall, 2 Ward 397.
8 Co- 65-
This report was confirmed by the Superior Court, and so little does it appear to have contradicted the decision of the -Supreme Court, as understood by the profession and the parties interested, that no appeal was taken.
When, in addition to this evidence of the accepted ■ meaning of the judgment delivered in Collins’s case, I find that, thus interpreted, it corresponds with the decision in Davenport’s, made by Chancellor Walworth, and I might add, with the justice of the case, I do not feel that I am putting an unwarranted construction upon the 9th section of the Ocmul-gee charter, when I hold that Mr. Johnston has a good right to enforce the bills pledged to him.
It cannot be doubted that bank bills are capable of being pledged. They are so far bona et cattalla, as contra-distinguished from choses, that a common carrier is liable for the loss of them. They have been likened to deeds, &c. “and if one brings a bag or chest of evidences into the inn, or obligations, deeds or other specialties, and by default of the innkeeper, they are taken away, the inn-keeper shall answer for them, aud the writ shall be bona et cattalla, generally, and the declaration shall be special.”
The objection has been made that though a bank may pledge the bills of other banks, it cannot pledge its own. I know no reason why any person, real or artificial, capable of making a note, and entering into a contract, may not deposite his note or promise, coupled with any condition, as to its present or future operation, which he may choose to stipulate.— Such transactions are not unknown among individuals; and I think the cases referred to show that they are-not unfre-quent among banks, or unacknowledged by the general sense of men engaged in trade. Suppose the Ocmulgee Bank had placed these bills in the hands of Mr. Johnston, as the security for the debt of a third person, to be used if that third person failed to pay; what objection could the bank or its stockholders make to their liability on the bills ?
It has been argued, again, that the bank was not chartered to issue bills for such purposes, that it was a fraud upon the stockholders to issue them for such purposes, and that he who received them for such purposes, was a party to the fraud, and cannot enforce the bills against the party defrauded. The bank was chartered to issue bills for all purposes which bills would answer; and the stockholders, by enter-jng ¡nto tbe association, with the charter before them, constituted the directors their agents to issue bills in all such cases.
• j cannot conceive how any fraud, upon the stockholders, be seriously pretended in this case. The money advanced by Johnston was employed to redeem bills upon which, the stockholders were indubitably liable. It would be singular if a Court of Equity should deny him the security of the bills purchased in by the bank, with his money. Can it make his case less equitable that the bills upon which he claims, although imposing the same degree of liability on the stockholders, are not the identical bills taken up with his money?
I shall close my observations upon this point of the case, by attending to an argument of Mr. Memminger. He contends that if the issue of bills, as money, and the taking them in payment or as money, be necessary to establish a liability on the stockholders, Johnston comes within these conditions. White says, “ the item of bonds, $80,000,”— (Johnston’s debt,) “ appears in every weekly statement to the 30th August, 1842. In the statement of 3d September, 1842, it does not appear, but was then considered as cash. On the 30th August, 1842, while the committee were investigating the accounts,” (presented that day by Johnston,) “ this item of $80,000, was withdrawn from the weekly statements — -as a balance to the debit of bonds — and deducted from the cash on hands — to be held to Mr. Johnston's order vjhen the committee adjusted.” “On the 3d of October, 1842, the amount reported by the committee,” (the 7th of September, 1842,) viz: “ $96,951 65, is carried to the credit of Mr. Johnston, in the personal ledger, as cash, and in the weekly statement to the debit of the bank, as deposits bearing interest.” In the examination of this witness, in reply, “ the daily cash book is produced, and on the 30th August, 1842, to the credit of cash, are the following entries : bonds due to William B. Johnston & Co. cancelled and given up, $80,000.” “ Witness says, that due bills or memoranda were given to Mr. Johnston, until his account was adjusted by the Board of Directors. On the 3d of October, 1842, there is a debit to cash’in favor of Wm. B. Johnston & Co. as follows, cash, (see minute book,) $96,951 05.”
The argument from this evidence is, that after this adjustment, Johnston carried his bills out of bank, as cash paid him on account. There is great plausibility in this ; but I cannot decide that to be a fact, which I do not, from the evidence, believe to be a fact. Whether bills delivered to a party, are a payment, depends upon the question whether they were delivered to, and accepted by, him as payment; and the case stated by the plaintiff himself, (and it is borne out by all the evidence,) is, that the bills, whenever received back by Mr. Johnston, after being brought in and deposited by him, were received as a pledge or security, and not in ( payment. I understand the entries in the bank, to be a mere form of keeping the account between the parties. But, as I have said, regarding the bills as pledged, I think the plaintiif is entitled to enforce them against the South Western Rail Road Bank, in proportion to their stock in the Ocmulgee Bank.
The question, then, is, whether the South Western Rail Road Bank is absolved from its liability as stockholder, in consequence of the transfer of its stock to Fleming & Mor-decai, and ultimately to Collins, in whose hands it was declared forfeited. I apprehend it is not; because in the first two' instances, as appears from the answer and the evidence, the transfer was to the parties as' mere agents, and the last transfer, as well as the forfeiture, was fraudulent.
It appears that shortly after the Rail Road Bank became possessed of its stock, it was voted, at its Board of Directors, that, it was desirable to dispose of it. A resolution to that effect was given in evidence; and this may serve to refute the suspicion expressed in the bill, that the determination of the Rail Road Bank to get rid of its shares, originated in a desire to evade the liability for Johnston’s demand. But it is manifest from the circumstances, that when the general condition of the Ocmulgee Bank became known to the officers of the Rail Road Bank, the disposition to part from its shares became fixed. When it first proceeded to direct measures for accomplishing the sale, it appears that it hesitated to accept such offers as were made it. The evidence offered, is disjointed, and in some instances, shows that there has existed other evidence which has not reached the Court— probably lost or mislaid. It may be inferred from a MS. letter from President Lamar to President Rose, of the 8th of November, 1841, that when Mr. Lamar was in Charleston, in the preceding January, he had engaged to give his assistance in finding a purchaser of* the stock belonging to the Rail Road Bank. In this letter, he speaks of aspersions which had been cast on the value of the stock, and states that after making several ineffectual efforts to dispose of it, he had desisted for a time. “ Knowing,” says he, “ your solicitude to sell, I had encountered unparalled difficulties, and made heavy sacrifices to maintain specie, payments; conceiving it the only alternative, to redeem promptly the character of the bank; satified that, as its character and credit were elevated, the prospect of a sale of your stock would be increased.” He concludes thus: “ I am authorized to make the subjoined proposition to you. We will give you 80 per cent, on the amount paid in by you, to be selected from any of the papers herein mentioned, with the lien stated in the schedule furnished Mr. Breese, all to be assigned without recourse on this bank, most of which is in suit and in progress of collection.” November 16, 1841, the Rail Road Bank, in its minutes, declines this proposition, which it characterizes as “ offering to purchase the stock held by the bank in that institution, by the tender of paper of the nominal value of $187,000, of which $130,000 is Robert Collins’s paper, rvho is already under protest in this bank, and who has declared he will not pay the said paper. The remainder of the paper offered, is unknown to this board, but is presumed to be of no better character.” Then, we have Mr. Rose’s visit to Macon, in January, 1842, and his investigation of the bank there, spoken of by the witnesses. It would seem that Mr. Mordecai went up to Macon, upon the return of Mr. Rose, and that he was there when, on the 27th of January, 1842, Collins addressed the following letter to Mr. Rose in Charleston: “ Dear sir,- — In accordance with our understanding when you left here, I now make the following statexent of what I am willing to undertake to give for so much of your stock in the Ocmulgee Bank, as may answer the purposes we design, say for $120,000 of stock, I will undertake to give $60,000, payable as follows:
Central Rail Road <fc Banking Co. Savannah,
8 per cent, bonds, and having less than
five years to run, $50,000
Stock of same company, 10,000
“The stock and $20,000 bonds to be delivered at once; and the remaining $30,000 in bonds, to be delivered in sums of $5,000 every 90 days, until all is paid.
“ The stock in the Ocmu[gee Bank, to be transferred, in proportion, as the payments are made. And the Southwestern Rail Road Bank, also, to take $12,000 of their own stock, (which I transferred to the Ocm'ulgep Bank,) and give the same amount of Ocmulgee Bank stock, in its place. This, I believe, embraces the substance of our conversation, and is all I can do, or am able to do.” '
On the next day he dropped a note to Mr. Mordecai, to inform him that he had, by that day’s mail, “made a direct proposition to your (his) bank for the purchase of as much stock as will answer the purpose intended.” He then states the substance of his oiler to Mr. Rose, and observes, “ This is three limes what the stock in the Ocmulgee Bank is worth, in reality, or to any other person ; but, as it is to answer a certain purpose, its real value is of no consequence to me; and I have, therefore, offered all that I am able to give.”
Mr. Rose replies to Collins, under date of February 3,1842, “ The board declines accepting the proposals contained in your letter of the 27th ult. Neither Central Rail Road stock, nor the shares in our bank and road, which you transferred to the Ocmulgee Bank, and are liable to forfeiture on the 1st April next, would be taken. A simple proposition to give 50 cents in the dollar, payable in Central Rail Road 8 per cent, bonds, for $120,000 of your debt, to be selected by Col. Lamar, might meet their views. Thirty thousand dollars of the bonds in hand ; the balance every 90 days, in sums not less than $5000. The indebtedness to the bank to be given up as the payments are made. The market value of these bonds being but $60, you would, in fact, pay $120,000 with 60, or more properly with $36,000. If you think it for your interest to make the offer, I will submit it for the final consideration of the board, and inform yóu forthwith.” Collins replies, on the 7th February, 1842, “ I have determined to accept the proposition you suggest, to wit: to give 50 cents in the dollar for $120,000 of the liabilities in the Ocmulgee Bank, or such other sums as may be necessary to relieve me. You may, therefore, direct Col. Lamar to receive the Central Rail Road bonds, and hand me over the papers, say one half now, and the balance in sums of $5000 every 90 days. The papers to be handed over to me in proportion as the payments are made.” He then appeals to the South Western Rail Road Bank, to “ take the $12,000 of stock in your own bank and road, and give me that amount of your stock, or my liability here. You have had the money, and I am not able to lose it, and I, therefore, ask this, to deal liberally with me, (as my situation requires it,) and relieve me from that amount of my liabilities here, and which, in fact, I am not, otherwise, able to pay.” On the same day, (Feb. 7th, 1842,) Mr. President Lamar, answering a letter of Mr. Rose of the 31st of the preceding month, (which is not put in evidence,) says: “On examination of our penal Code, I discover that the directors of this institution áre prohibited from purchasing the stock directly from you, — should you, therefore, consummate your arrangement with Dr. Collins, it will have to be done by your vesting the stock in him, and our declaring it forfeited to the payments of his debts; which will effect the same object to all parties, without our becoming liable, any way, to the criminal enactments of our code.” Then followed the resolution of the South Western Rail Road Bank, communicated in Mr. President Rose’s letter of the 23d Feb. 1842, as set out in Collins’s answer. It appears that that letter, which was directed to Mr. Lamar, the President of the Ocmulgee Bank, was received by White, the cashier, in his absence. While, in a letter to Rose, dated the 4th of March, informs him of that fact, and also advises him of the pay ment, on the part of Collins, of $30,000, in Central Rail Road bonds, bearing 8 per cent, interest, as per your instructions, ' “ Mr. C. claims the interest accruing on said bonds, to date of payment, which I will admit, unless otherwise instructed. . It will be necessary for you to furnish Col. Lamar with a power of attorney, to transfer the stock, as per agreement.”— The power was forwarded, but some minor difficulties impeded the arrangement. Mr. Rose gave instructions to allow Collins the interest claimed by him on the bonds he had delivered, and on the 10th of April, writes Mr. Lamar, “ I will thank you to complete the arrangement with Dr. Collins.” — • But still it was not carried out; and on the 22d of April, a resolution was adopted by the Board of the South Western Rail Road Bank, that Fleming (who, it will be remembered, had been, in conjunction with Breese, a committee in May, 1841, to examine the Ocmulgee Bank,) proceed to Macon, as the agent of the Rail Road Bank, to settle with the Ocmul-gee Bank, with Collins, and with Collins & Cleaveland.— What instructions he received, does not appear ; but his mission resulted in the contract of the 1st May, 1842, already noticed; which he subsequently reported to his principals, in a report dated May, 1842, as having been made “ under the instructions, and with the consent of the committee.” This report is in MS. and will be found among the evidence. It was read and approved the 31st of May, 1842, and it appears that in the meantime, to wit: on the 16th of May, Jas. Rose transferred 1000 Ocmulgee shares to Fleming, who, on the same day, transferred them to Collins. But the resolution of the Board of the Ocmulgee Bank, of the 14th May, 1842, referred to in the bill, frustrated this contract; which it will be observed included 1750 shares standing in the name of the South Western Rail Road Bank, and the 1000 shares which had been held for them by Fleming the agent. This was not the only impediment. The Ocmulgee Bank laid claim to the $30,000 of Central Rail Road bonds, which had been delivered by Collins. These difficulties were to be overcome ; and on the 18th of October, 1842, the Board of the Rail Road Bank gave a direction, in conformity with which, on the 2d November, Mr. Rose constituted Fleming his “ attorney, in fact, with full power and authority to settle with the Ocmulgee Bank, in relation to the stock of that bank, lately or now held by me, and also in relation- to certain bonds received by the Ocmulgee Bank for me, and to do all other acts,” <fcc. “ he may deem necessary to effect the object of a full and final settlement with the Ocmulgee Bank, and, if expedient to appoint,” &c. for the purpose aforesaid, “ and t'o take such legal and equitable proceedings as maybe advisable to check the operations of the Ocmulgee Bank, so far as they may be deemed prejudicial to my interests,” Flem ing proceeded to Macon accordingly. Whether Breese went with him is not very clear. It is probable he did not go up till some time after. From the time Fleming arrived in that place, he was very active. The main difficulty had arisen from the opposition of the existing board of the Ocmulgee ¡ Bank. Fleming set himself to revolutionize that board at the approaching annual election, by bringing in directors who would conform to his wishes. He was fully provided with all necessary power, having, besides the prower already mentioned, obtained the proxy of the President of the South Western Rail Road Bank, to represent him at the next meeting of the stockolders of the Ocmulgee Bank, to vote on all questions before that meeting, in any adjourned meetings thereof, and to vote for directors; and a separate power to transfer the shares in that institution, held by the Rail Road Bank.
The election was to come on shortly, and he was not sparing in his efforts to control it. He gave out that he had come, as the agent of the Rail Road Bank, to obtain the complete control of the Georgia institution, by purchasing shares and otherwise, for the purpose of paying off its debts, and then with funds, to be supplied by his principals, to carry on a sound and beneficial and profitable business, under the old charter. This was his general language. With some particular stockholders he made agreements to take their stock, and cause it to be forfeited in satisfaction of their debts, if they would vote for directors nominated by him. He sought out individuals upon whom he impressed it as for the good of the institution that stock should be declared forfeited agreeably to his desire, that thus the institution might be reduced within the control of his Bank, and the latter enabled, un-trammelled, to proceed with more energy under the charter. When his representations and promises took effect, and the persons whom he wished to make directors were not qualified as stockholders, he transferred stock to .them to qualify them. Having obtained the control of the stock of several stockholders, by purchases made upon the conditions that they would vote his ticket for directors, and that their stock should afterwards be forfeited to their debts, as already mentioned, and made all other necessary preparations, the election came on, on the 7th of November, and resulted according to his wishes. After it was over, he stated that “ a board of directors had been elected such as suited him.” Fleming himself was one of them, Breese was another; and him, with such others as were unqualified, he qualified, by transfers of stock.
Breese was, without any previous solicitation on his part, elected cashier, on the nomination of Fleming. A bond, of which he had no previous intimation, was entered into by (the Rail Road Bank as his surety.
The revolution was complete.
On the day the old Board of refractory directors was turned out, one of the witnesses enquired of Fleming, “ what he proposed doing with Johnston’s debt,” to which he replied, “ we intend to pay him, we intend to pay every body.” Having put matters in a train to suit him, he returned to Charleston to make preparations, as he said, for the more energetic and sounder administration of the Ocmulgee Bank, under the new order of things. It was on this occasion that he drew further advances from the plaintiff, Johnston. “ When,” says Mr. Lamar, “Fleming was on the eve of starting for Charleston, he came to Washington Hall, where I was standing, and requested me,” (Mr. Lamar had been re-elected President,) “ to go with him to the store of Wm. B. Johnston & Co., on the opposite side of the street. After reaching the place, he stated that he was about to set off for Charleston, for the purpose of procuring means to redeem the entire circulation of the Ocmulgee Bank. Although the condition of the Bank was notas good as he expected, yet he intended to carry out his engagements. That the South Western Rail Road Bank had the means to doit; and he requested Wm. B. Johnston, of the firm of Wm. B. Johnston & Co., to make the necessary advances to sustain the Ocmulgee Bank until his return. Wm. B. Johnston promised to do so, and did make some advances for Wm. B. Johnston & Co., but the amount I do not now recollect, without referring to the book of the Bank.” There is some other evidence to the same effect.
It appears that Fleming did not leave Macon until the 14th of the month.
On the 19th of November, 1842, Mr. Rose gave Mr. M. C. Mordecai a power of attorney to transfer the stock standing in his name in the Ocmulgee Bank, “ to any person or persons whomsoever.” And on the 22d, he “ reported-, that under the advice of the committee of stockholders, he had employed him to proceed to Macon for the purpose of completing a sale of the Ocmulgee stock.” In the mean time, to wit, on the 14th, Fleming, Breese, and Warren, three of the new directors of the Ocmulgee Bank, had been appointed a committee to examine the cash assets of the institution ; and on the 16th, Breese had written to the South Western Rail Road Bank, that “ the immediate liability of the (Ocmulgee) Bank, for notes actually in circulation, and to depositors, will nearly absorb the whole of the assets as they now stand, that is to say, if the information I have obtained can be relied on, exclusive of the debt due by Collins. Whether he has property enough to pay his own debts, is considered by many very questionable j some say he can, — others say he cannot.”
Mordecai proceeded to Macon. One important object to which he attended, among others, was the securing the debt which his Bank claimed for the $30,000 of Central Rail Road Bonds which Collins had delivered to the Ocmulgee Bank. “ He proposed,” says Nesbit, “ that if the Board- would transfer certain real estate, which it owned, as security for the $15,000 debt, before spoken of” (the estimated value of the Central Rail Road bonds,) “ and also as security for the advance, the South Western Rail Road Bank would advance $5000 for its present relief; which was done; both the advance and the transfer. He also held out inducements to believe that further means would be furnished in a few days, to prevent a failure.”
On the 22d of November, 1842, the Board of the Ocmulgee Bank assembled, and it was,
“ On motion, ordered, that this Bank does hereby recognize the contract made by the South Western Rail Road Bank, with Dr. Robert Collins, in the sale of 1750 shares of the stock of the Ocmulgee Bank of the State of Georgia to him, made and entered into on the 23d day of February, 1842, and hereby declares the said shares to be forfeited to this institution — said forfeiture to take effect on the 23d day of February, 1842, as though the forfeiture had been on that day declared. Ordered, that inasmuch as Dr. Collins has paid on the contract above named, in bonds of the Central Rail Road and Banking Company, the sum of $61,250, — a credit is hereby allowed to him on his indebtedness to this Bank, to the amount of $58,187 50, it being at the rate of 95 per centum upon the sum aforesaid, so paid by him.
“kOrdered, that notes or other evidences of debts due by Dr. Robert Collins to this Bank, to the amount of $58,187 50, be transferred to the South Western Rail Road Bank, or its agents, to be held by that corporation for the purpose of further and finally executing their aforesaid contract with Dr. Collins.
“ Ordered, that the President transfer to the South Western Rail Road Bank, all the mortgages executed to this institution by George Jewitt, Jewitt & Burch, together with the notes upon which the same are respectively predicated, as security for $30,000 in bonds of the Central Rail Road and Banking Company due by this Bank to said South Western Rail Road Bank, and/or the payment of $5000, this day advanced by said South Western Rail Road Bank, for and on account of the Ocmulgee Bank of the State of Georgia ; it being understood, that when the sum of $15,000, with interest thereon, from the 23d day of February, 1842, (being the value of said bonds in market,) and the sum of $5000, with interest thereon from this date, are realized upon said mortgages, the balance, if any, raised from, the sale of the mort gaged premises, shall be subject to the order of this Bank; that said South Western Rail Road Bank shall bring said mortgaged property into the market, at such time and manner as they may think conduciye to their interest.”
Then the Board proceeded to forfeit the stock which Fleming had contracted for, to the debts owing by those from whom he purchased it, as also the stock which had been transferred to certain directors to qualify them for office; and it was “ Ordered, that a credit be, and the same is hereby allowed to the amount of $32,000, upon the indebtedness of Col. H. G. Lamar to this institution, and that stock to the amount of that held by him, of this Bank, be and the same is hereby declared forfeited.” “ Ordered, that the stock held by A. P. Powers, John D. Winn, and A. R. McLaughlin, be and the same is hereby declared forfeited, in payment of their notes in Bank, due and lying over, the same being stock notes. Ordered, that inasmuch as W m. W. Chapman became a director under assurances that the stock, held by him, should revert to the Bank in payment of his note given for the same, the Board does hereby confirm this agreement, and does declare said stock forfeited whenever he shall tender his resignation as director of this Bank. And that the stock held by E. A. Nesbit and G. L. Warren, be declared for like reason in like manner forfeited, whenever they shall tender their resignations, as directors of this Board.”
The next day (November 23, 1842,) a Board was formed again, and at the request of Messrs. Nesbit and Warren, the order of the preceding day, forfeiting their stock, was rescinded, and Mr. Nesbit gave in his resignation, as a director, to take effect from the adjournment of that meeting, and his stock was subsequently re-transferred. At this meeting, it was “ Ordered, that the President pro tem. of this Board be, and is hereby authorized and instructed (in addition to the mortgages heretofore transferred to the South Western Rail Road Bank, made by Jewitt & Burch and George Jewitt,) to transfer to that Bank a mortgage deed, executed by Mortin N. Burch to this Bank, dated 29th December, 1840, and recorded 27th March, 1841. Ordered, that the notes of George Jewitt, and George Jewitt & Co., and Jewitt & Burch, secured by mortgage from said parties, and Mortin N. Burch, to this Bank, and which has heretofore been placed in the hands of Col. Powers, for collection, be handed to E. A. Nesbit, attorney for the South Western Rail Road Bank, for the purpose of foreclosing said mortgage.
“Ordered, that the balance of the stock held by Robert Collins in this Bank, not heretofore forfeited, and not to be applied in extinguishment of the indebtedness of G. Jewitt &> Co., R. Carver & Co., W. J. Anderson & Co., and Jewitt & Burch, upon which R. Collins, and Collins &. Cleaveland, are liable in pursuance of an order of this Board, passed 22 d day of No- ( vember, (Nov.) 1842, be, and the same is hereby declared forfeited, in extinguishment of his (R. Collins’) indebtedness to this Bank, so far as it will go, at the rate of 95 per centum f to the dollar.”
The latter order, relating to the forfeiture of Collins’ stock, was rescinded at a meeting of the Board the 25th of November, (1842.)
Át the same meeting, a letter from Fleming, dated the 15th of the same month, was handed in; and his resignation as a director, therein tendered, was accepted. And it was voted that the rents and profits of the premises under mortgage from Jewitt, and Jewitt & Burch, since the 23d instant, belonged to the S. W. R. R. Bank, and that the securities therefor be turned over to Mr. Nesbit, their agent. Mr. Lamar-resigned as President and director, and Mr. Chapman was elected President, and Mr. Wakeman, director, in his place, and the Bank suspended.
It should have been mentioned that the several transfers of stock and of assets, and forfeitures of stock, contemplated by the proceedings already narrated, were carried into execution ; of which a particular account is given in the evidence.
The Bank lingered from the 25th of November, 1842, till the 30th of March, 1843, but it did no effectual business. On the 26th Mr. Warren resigned as a director, at a meeting in the morning. At a meeting in the afternoon, a committee reported that it had counted and burned $170,150 of the Bank’s issues. On the 29th Nov. Chapman resigned as President and director, by letter dated the 20th. No action was • taken on it.
This was the last meeting that could be obtained of the Board of Directors.
On the 10th of March, 1843, a limited number of stockholders convened upon the call of Mr. Breese, the Cashier, to whom he addressed a written communication, excusing himself for calling them together, a duty imposed upon him, as he said, by “ the peculiarity of his situation, being the Cashier of a Bank without President or directors.” The Stockholders, without taking any action, agreed to adjourn over to the 30th. On the day last mentioned, (March 30, 1843,) a limited number of stockholders assembled, but did not organize their meeting; but before they dispersed, Mr. A. Fleming, the teller and book keeper, offered them his resignation. Mr. Breese also addressed them a note: !! Gentlemen, I tender this day my resignation as Cashier of the institution, and surrender the cash, other assets, books, papers, &.C., for your examination and control ”
Thus ended this business.
On the 25th Nov. 1842, Mr. Mordecai addressed a letter to presj(jent 0f tjje g, “VY. r. R. Bank, by way of report, in sPeaks of a letter from the President to himself, and of another addressed by a committee of stockholders to the President, which have not been produced.
The minutes of the Bank shew that “ Mr. Mordecai offered the report of his mission to the Ocmulgee Bank, at Macon, the [ consideration of which was postponed until the next meeting.” At an adjourned meeting of the Board of Directors, held at 1 o’clock P. M. the same day, (Nov. 25th, 1842J) “ the report of Mr. M. 0. Mordecai, of the result of his mission to Macon, to complete the sale of the Ocmulgee Bank, was read, and ordered to be placed on the minutes.”
If we look to the charter of the Ocmulgee Bank, and to its condition when the stock held in it by the Rail Road Bank was passed off, and the assets of that institution selected and received by the Rail Road Bank, there is great reason to question the propriety of the transaction. There was a large circulation existing, of which the Rail Road Bank, as stockholders, were bound to take notice, and of which I think they had notice, and for the redemption of this they were proportionably bound. The evidence is, that the assets of the Georgia Bank were entirely insufficient to meet these liabilities. I think there is reasonable proof that this was known to, or strongly suspected by, the Rail Road Bank, before the contract was completed, if not before it was entered into. Certaily Breese’s letter, which was before the execution of the contract, should have created hesitation. On the contrary, it seems to have been only an incentive to “prompt action.” The duty of these stockholders, under these circumstances, a duty arising from the plainest principles of justice, having reference to the charter, was this: — they should have wound up the concern, at least for a time, by using their control of the Bank, to compel an application of its assets to the creditors indifferently, and if any demand, consisting of bills of the Bank, remained, to have paid their proportion of them. But to pass off their stock with a condition that it be forfeited, was both a clear evasion of their liability to bill holders, and a shocking perversion of that clause of the charter under which the forfeiture was declared. And their selection of the assets of the institution, in its manifestly failing condition, was as palpable an infraction of that clause in the statute of December, 1833, prohibiting undue preferences.
If the matter stopped here, I should hold the transaction fraudulent. But when we contemplate the means adopted by the agent, they are sufficient to stamp an unfavorable impression on it, though it • were, in itself, less questionable. Gan there be any doubt that all the transfers of stock, in respect to which the South Western Rail Road Bank was liable to bill holders, was fraudulent, as against the plaintiff ( and all others in possession of bills, and, therefore, void as to them 1 I shall not stop to argue such a question.
1 Camp. 137.
Can there be any doubt that the assets of the Ocmulgee ¡ Bank, received by the South Western Rail Road Bank, remained in their hands as liable to the debts of the former, as if no transfer had been made of them ? This was conceded in the argument — and if it had not been conceded, it admits of no question. They were received through the Rail Road Bank’s agent; and they can take no benefit through that fraud. A party is bound, civiliter, by the fraud of his agent, whether he concurred in it or not. Certainly, in Equity, he will not be permitted to retain advantages gained through the fraud of his agent; and without deeming it necessary to say, in this place, (though I shall say so hereafter) that he is bound to make good the representations of his agent, or to answer positively for his acts, it may be affirmed that he cannot resist the unravelling of transactions brought about by his misconduct.
It is necessary, however, to enquire further, whether the Rail Road Bank is not bound for all the assets of the Georgia institution, which were squandered by the different forfeitures made and declared after the 7th November, 1842, and for the promises made by their agent, in consequence of which the plaintiff was drawn in to make further advances. I think this Bank is bound for these latter assets, as well as for those she received herself, (and at their value when they were withdrawn from the Ocmulgee Bank) and that she is also bound for the advances just mentioned.
It is a familiar principle, that though a principal is not answerable, criminaliter, for the conduct of his agent, he is responsible, civilly, for all acts done by him in the course of his employment. For acts wholly foreign to the business in which the agent is engaged, the principal is not bound. But that cannot be extrinsic to the employment, which is adopted as a means of accomplishing the object of the agency. Where an agent is limited as to the means to be employed by him, those who deal with him in reference to the power under which he acts, cannot, indeed, hold his principal liable where the means selected are beyond the limits of the agent’s authority. But where, as in this case, the end only is point • ed out, while the means are left to the agent’s discretion, tire principals are bound not only as to the end, but the means also; and all third persons dealing with the agent, (I mean dealing in good faith, so far as themselves are concerned) have a right to insist upon their responsibility to this extent. As to all such persons, the agent shall be regarded as acting within his authority, not only in relation to the object of his agency, but in relation to the means selected by him for its attainment; as to which he has been entrusted with discretionary powers.
To apply these observations to the promises made to Johnston, by which he was induced to make further advances. There was nothing unlawful or fraudulent in these engagements, in themselves considered; though with reference to the intention of Fleming, in the making of them, there was. Had it been true that the South Western Rail Road Bank intended to put in its funds and’ continue its branch in Macon, under the charter of the Ocmulgee Bank, the application to Johnston for temporary advances was natural and proper, under the circumstances; and no doubt the Rail Road Bank would have been responsible for the accommodation extended at the request of its agent. I think they are bound, though the application was a mere ruse to gain time, and to keep up appearances, until the transfers, mainly desired by Fleming and his principals, could be completed. Johnston, on his part, for any thing that appears, acted fairly, and was deceived, in common with Nesbit — and, it may be, others ,• and should not lose his money.
Is the Rail Road Bank liable for the assets squandered by the forfeiture of the stock of Lamar and others 1 I think she is. It was brought about by her agent. These forfeitures may have been honestly declared by those who were induced to believe that the Rail Road Bank intended to clear out the institution, and begin a new business. But on the part of Fleming, unless his representations were based on previous assurances of his principals, the measure was most-fraudulent, and the benefits accruing to the parties whose debts were thus cancelled, were nothing but lures held out by him to induce them to concur in his own peculiar design. Whether he had the representations from his Bank, of which I have spoken, or had them not, in either case they are bound for what followed from his arrangements.
The assets of the institution represented its capital, and were a trust fund for its creditors. The combination was to diminish it at the expense of the creditors.
If this had been done by the Board of Directors alone, and of their own head, can it be doubted that they would have been responsible 7 They were trustees in respect to the funds. The cestui que trusts were their creditors, to the extent of their demands, and the stockholders, for any balance that might have remained beyond the debts.
The case is, that instead of the trustees alone perpetrating this fraud upon the creditors, it has been effected by a combination between them and some of the stockholders, the ultimate cestui que trusts. All the parties to it are liable for its consequences. These defendants, (the Rail Road Bank) received, in the assets transferred to themselves, the equivalent which they contemplated for the other assets wasted. For the former, they are clearly liable. But it would be a defect of justice to confine their liability to the benefits they received in the assets which came to their own hands, The creditors have lost the others also, and have a right to redress against those by whom this result was brought about. It may be said the primary remedy is against the Ocmulgee Bank. Where is that to be found? where are its officers? where “are its stockholders? in whom is the stock now vested ? Every party to a fraud is answerable to the party defrauded, and when he has got hold of one of them, he is not to be turned round to a vain litigation with the others, — to a suit against a broken institution, without a President and without a Director.
3 Mason, 308.
The general result of this investigation, then, is, that the defendants (the South Western Rail Road Bank) are liable directly to the plaintiff for the advances made by him after the 7th November, 1842, with interest; and this without reference to their character of stockholders in the Ocmulgee Bank, or the assets of the same which they assisted to waste.
That the plaintiff is entitled to his prior advances, (with interest) as settled by the Ocmulgee Bank; rvhich settlement, (there being no proof of fraud) is conclusive on the defendants, as stockholders, represented by the Directors in said settlement. That the Rail Road Bank is bound, in proportion to its stock, to pay the bills held by the plaintiff, with interest from the filing of the bill, so far as they may extend towards satisfying the advances for which said bills were pledged.
On this latter point, the case of Wood v. Dummer is a full and satisfactory authority. In that case, it was held that the capital stock of the Bank was a trust fund, for the payment of Bank notes, and might be followed into the hands of the stockholders; that a bill in Equity for such purpose might be maintained by some of the holders of the Bank notes, against some of the stockholders, the impossibility of bringing all before the Court being sufficient to dispense with the ordinary rule of making all parties in interest parties to the suit; and that, in such case, the decree against the stockholders before the Court, should be only for their contributory share of the debt, in the proportion which their stock bore to the whole capital stock. So far there is little difficulty.
But in this case there will remain a portion of the plaintiff’s claim for advances, after the share of the bills for which the South Western Rail Road Bank is bound, is paid, and for this balance the plaintiff must claim as a general creditor against these defendants, in respect to the assets of the Oc-mulgee Bank, for which I have said they are liable.
The case of Wood v. Dummer does not reach this latter point, A bill holder may maintain a bill under such circumstances, without bringing in all interested parties. The reason is, that the bills, themselves, in his hands, serve to ascertain the quantum °I liability to which the stockholder is to pe subjected. Can a general creditor maintain such a bill 1 I think he can, if he bring the other creditors before the Court, who may have claims similar to his own. The dispensing with the Bank and all its stockholders, as parties, is extended to the bill holders in Wood v. Dummer, not because they are bill holders, but because of the impracticability of bringing those parties into Court. Any other creditor would have been entitled to the same indulgence, provided his claim, when presented, carried on its face evidence that no other claimant could come forward entitled to participate in the sum demanded.
The misfortune of a general creditor is, that there may be other creditors equally entitled to a decree against the defendants. In Wood v. Dummer, the stockholders were secure against any other claim to be made on the bills in the plaintiff’s hands; and the degree of their liability to. him was ascertained by a simple inquiry into the proportion of stock held by them, and making them liable to a corresponding portion of the bills held by him. In the case before us, two things are to be ascertained — the value of assets chargeable to the Rail Road Bank, and the portion of those assets to which Johnston is entitled as a general creditor. The former can be ascertained without the addition of other parties, the latter cannot, without giving other creditors a right to come in and prove their demands. And so I think the decree must be.
It was contended that the Rail Road Bank is entitled to come in as a creditor pari passu with other creditors against this fund. It does not appear, that in the transactions of Nov. 1842, she pretended to be a creditor for any thing beyond $15,000, the estimated value of the bonds deposited by Collins. For that, and for the $5000 advanced by Mordecai, she took her security. If the Ocmulgee Bank was, at any prior time, indebted to her, the presumption is, the demand was settled; otherwise, why was it omitted to be secured on this occasion ? According to the view I have taken, the security taken, as well as the contract with Collins, upon which it was founded, the whole transaction was fraudulent and void, as against this plaintiff and all other creditors of the Ocmulgee Bank; and no debt, so far as they are concerned, can be predicated of it. But if the Rail Road Bank, contrary to appearances, had any other demand, I think, according to the recognized principles of this Court, the assets which came to their hands by fraud, and the other assets for which they are chargeable on the ground of fraud, cannot be allowed to stand as a security for it, to the prejudice of bona fide creditors. As between the parties to the fraud the matter stands differently, and therefore their demands, if any, must be postponed until bona fide creditors are paid; after which it may be allowed.
It is adjudged and decreed that the South-western Rail Road Bank do pay to the plaintiff the sums advanced by him to the Ocmulgee bank, after the 7th of November, 1842, with interest, according to the laws of Georgia, from the dates of said advancement; to be ascertained and reported by the commissioner.
And it is also decreed that the several transfers of the stock held by the South-western Rail Road Bank, in the Ocmulgee Bank, as also the forfeitures of said stock, as well as those of other Stockholders, herein before mentioned, and the assignment of the assets of said Ocmulgee Bank to said Rail Road Bank, as well as the cancelling or delivery of notes or other-evidences of debt to persons indebted to the Ocmulgee Bank, in consequence of the forfeiture of their stock, are fraudulent and void as against the plaintiff.
That the plaintiff is entitled to the repayment of advances made by him prior to the 7th of November, 1842, (as stated by the Ocmulgee Bank) with interest thereon, according to the laws of Georgia, but subject to proof of reductions on the amount of said account, as stated after the date of said statement, to be ascertained and reported by the Commissioner, on reference.
That for the amount of bills held by the plaintiff (proved to be $49,165) with Georgia interest thereon from the filing of this bill, the South-western Rail road Bank are bound to contribute as Stockholders, in the proportion their stock, 2750 shares, bears to the whole 5000 shares- of the Ocmulgee Bank, to be applied towards satisfying the advances for which said bills were pledged to the plaintiff.
That, for whatever of said advances may still remain after said contribution, the South-western Rail road Bank, are bound to account to him for the assets of the Ocmulgee Bank, assigned to them, at their value when assigned, and for the assets delivered up or cancelled, in consequence of the forfeiture of the stock of the debtors, at their value, when this was done,’ with interest from the time of the assignment, delivery, or cancelling, as the case may be; and that when the amount of this account is taken and established, a call be made, by publication in the newspapers of Macon as well as of Charleston, by the Commissioner, for all creditors of the Ocmulgee Bank, interested in said assets, to come in and prove their demands or claims against the same, to be report ed by the Commissioner, with the proportion of said assets properly allowable to said claimants, including the .plaintiff.
That the Souih-western Rail road Bank pay the costs of gu^ Up t0 tjjjg time. Further costs to abide further or-Ordered that the accounts be referred to the Commissioner.
' The South-western Rail Road Bank, by their counsel, appealed from the decree of Chancellor Johnston, and moved that the same be modified, upon the following grounds.
1st. Because the plaintiff was not entitled to relief, on account of the misrepresentations’ and concealments in regard to the condition of the Ocmulgee Bank, to which he was a party.
2d. Because the evidence, as to the manner in which the plaintiff received, and the circumstances under which he retained, the bills of the Ocmulgee Bank, showed that they were not issued as contemplated by the provision of the charter of the company, making the Stockholders individually liable for their redemption — the said bills not having been received or put into circulation as money.
3d. Because the relief decreed to him as a. general creditor, was not authorized by the pleadings.
4th. Because the decree required of the S. W. R. R. Bank to account for the value of assets shown to have been wrested from them by the laws of Georgia — which are now in the custody of the law in Georgia, for the benefit of the creditors generally of the Ocmulgee Bank, and to which defendants have renounced all claim.
5th. Because relief for other creditors than the complainant was not sought by the bill, nor was there any motion to that effect before the Court.
6th. Because the relief given by the decree was extended beyond the objects of complainant’s bill, in making the S. W. R. R. Bank liable for the extinguished debts of Lamar, &c. and no decree was made against Collins, although a party to this suit, and a principal in the transactions.
7th. Because it is respectfully submitted that his Honor’s decree is otherwise contrary to the evidence and the equity and justice of-the case.
8th. Because complainant’s claim was not an .ascertained demand, as supposed in the decree.
9th. Because the decree makes no allowance to the Rail Road Bank for the debt of the Ocmulgee Bank to them.
Petigru, Hayne, for the motion.
McCready, Memminger, contra.
The first set of Directors to serve until the first Monday of November, succeeding their election, and succeeding elections to take place annually thereafter.
EXHIBIT A,
Georgia, BiM> CownMj.
This Indenture, made and entered into this twenty-fifth, day of February, in the year of our Lord eighteen hundred and thirty-nine, between Henry G. Lamar, in his own right, as executor of the last will and testament of B. B. Lamar; as trustee for Miss Victoria Lamar, and as attorney for Mrs. G. Lamar, George Jewitt, Charles Collins, E. Sinclair, William B. Johnston, David Flanders, and John D. Winne, stockholders in the Ocmulgee Bank, of the State of Georgia, at Macon, of the first part: — James Hamilton for himself, and as agent for Robert Collins, A. Blanding, Alexander Black, C. Edmondston, 1. E. Holmes, C. A. Magwood, William Patton, James Legare, L. Trapman, William Gregg, J. C. Kerr, M. C. Mordecai, stockholders in the South Western Hail Road Bank, of the second part: — And James Hamilton, agent for the said South Western Rail Road Bank, of the third part— WiPaesseth, That whereas said party of the first part, having purshased and transferred to the said-party of the second part, one thousand shares of the stock of the said Ocmulgee Bank of the State of Georgia, including shares now held by the said Robert Collins; and also having purchased and transferred to the South Western Rail Road Bank aforesaid, two thousand five hundred shares of said stock, on each of which shares the sum of forty dollars has been paid. Now, therefore, it is by this Indenture, stipulated and agreed between the aforesaid parties of the first, second and third parts as follows:—
1st. That the parties of the first part will retain among themselves one thousand shares of the stock of the said Ocmulgee Bank, and do, at the execution hereof, hold and retain the said one thousand shares aforesaid.
2d. The aforesaid party of the second part shall hold among themselves, not less than one thousand shares of said stock; and the party of the third part, the South Western Rail Road Bank, shall hold two thousand five hundred shares of the stock of the said Ocmulgee Bank; and that persons, not parties to this Indenture, shall not hold in all more than five hundred shares: And the party of the first part, hereby agree and bind themselves, severally, to the party of the third part, to give, at all times, their proxies in the said Ocmulgee Bank, to the President of the Southwestern Rail Road Bank, or such person as he or the Board of Directors of the last mentioned Bank may appoint.
3d. And the party of the first part does hereby agree, and itis hereby stipulated by them severally, to and with the aforesaid party of the third part, not to sell or transfer the shares of the aforesaid stock, which they may severally and respectively hold, to any person but a party to this contract, or to such other person as the Board of Directors of the South Western Rail Road Bank shall approve. But in case an offer to sell shall be made, and within sixty days therefrom, no person approved by said Bank shall offer to purchase at the par value of the said stock, and such advance thereon as shall be equal to the proportion of the clear nett profits, which the shares offered shall be entitled to, then and in that event, the holders thereof shall be at liberty to sell to any other person. And it is in like manner hereby stipulated and agreed, that the aforesaid party of the second part, shall not sell the shares held by them tu any other person than the South Western Rail Road Bank, a Director thereof, or such stockholders as shall be approved by the said Direction of said South Western Rail Road Bank.
4th. That if the South Western Rail Road Bank shall desire to sell its stocky or any part thereof, it shall offer the same to the parties of the first part, and if within sixty days after notice thereof to them, or such of them as reside in Macon, they or some of them shall not take said stock at its par value, and an advance thereon equal to the clear nett profits thereon, as aforesaid, then, and in that event, the said South Western Rail Road Bank may sell the same to any other person: Provided, that the party of-the third part may, at any time, sell so many of their shares to individuals in their confidence, as may enable them to give as many votes as the votes which may be given by persons not parties to this contract: Provided also, that such sale shall not extend beyond five hundred shares.
5th. And the party of the second part, hereby agree and bind themselves, severally, to the party of the third part, to give at all times their proxies, in the said Ocmulgee Bank, to the President of the South Western Rail Road Bank, or such person as he or the Board of Direction of the last mentioned Bank may appoint.
6th. In consideration of all which stipulations, the party hereto"of the first part, and Robert Collins, one of the parties of.the second part, hereby guarantee the goodness of all the debts that may, in any manner, be owing to the said Oc-mulgee Bank, at the execution hereof.
In testimony whereof, the parties hereto have set their hands and seals.
Test, H. S. Jewitt, Edward R. Pease, L. J. Moses, witness to the signature of Mortin N. Burch. Geo. Jewitt, [l.sv Henry G. Lamar, [l.s% W. B. Johnston, [l.s( Charles Collins, ' [l.s.' David Flanders, [l.sv E. Sinclair, [l.s., Mortin N. Burch, 'l-s% J. Hamilton for himself, and [l.s.' trustee Osweechee Co. J. Hamilton, as agent for R. [l,s.] Collins and others. J. Hamilton, as agent of the [l.s.] So. W. R. R, Bank,
Does this statement mean that the instalment of $82,500, was actually paid in ? or only that it was set off against the $100,000, due by the Ogmulgec Bank to this stockholder ? thus leaving a balance fat that time-) due on that debt, of $17,500? J
EXHIBIT B.
Georgia, Bibb Cownty.
Articles of agreement, made and concluded this first day of May, eighteen hundred and forty-trvo, between Daniel F. Fleming, of the City of Charleston and State of South Carolina, of the one part, and Robert Collins of the county and State first aforesaid, of the other part: Wiimessetli, That whereas the said Daniel F. Fleming has become the owner in his own right of one thousand shares of the stock of the Ocmulgee Bank, of the State of Georgia, and of a debt due by said Bank, to the South Western Rail Road Bank of Charleston, amounting at this day,principal and interest, to the sum of fifty thousand three hundred and ninety-four, twenty-six one hundred dollars : and also of a debt due by said Robert Collins, and Collins & Cleaveland, to the said South Western Rail Road Bank of Charleston, amounting at this day to the sum of forty-two thousand two hundred and ninety-seven dollars, thirty-one cents; by transfer to him from said South Western Rail Road Bank of Charleston, duly made before execution of these presents. And whereas, said Robert Collins has this day purchased of said Daniel F. Fleming, the one thousand shares of the stock of the Ocmulgee Bank of the State of Georgia aforesaid; for which he has made and delivered to said Daniel F. Fleming, his note, bearing even date with these presents, and due one day after date, for the sum of thirty-five thousand dollars; and has also purchased of said Daniel F. Fleming, the said debt due to him by said Ocmulgee Bank of the State of Georgia, and in consideration therefor, and with a view to the gradual payment of the aforesaid debt, so due as aforesaid, to said Daniel F. Fleming, by said Robert,Collins, and Collins & Cleaveland, he, the said Robert Collins, hath this day paid to said Daniel F. Fleming, in bonds of the State of Georgia, at par value, bearing six per cent, interest, the sum often thousand dollars,. the receipt whereof is'hereby acknowledged; and hath made and delivered to him, said Fleming, his several promissory notes, due and in amount, according to the schedule of ¿said notes hereto attached, (marked A.), all bearing even date with these articles, and amounting to the aggregate sum of twenty-one thousand three hundred and forty-five dollars, seventy-eight cents. 'Now, therefore, in consideration of all the aforesaid premises; it is agreed and understood by these presents, and the parties aforesaid of the first and second parts, do hereby agree, stipulate and covenant to and with each other, and to and with the heirs, executors, administrators and assigns of each, as follows, to wit: The said Robert Collins, on his part, doth covenant and agree to and with tire said Daniel F. Fleming, that he shall retain in his possession, the evidence of the aforesaid debt due to him as aforesaid, by the said the Ocmulgee Bank of the State of Georgia; together with all the evidences of the debt due to him as aforesaid, by said Collins, and Collins & Cleaveland, a schedule of which is hereunto attached, (marked B.) Also, two hundred and twenty shares of the stock of the Central Rail Road .and Banking Company, heretofore delivered to him as collateral security, for said last named debt; together with the thirty-five thousand dollar note, this day made to him by sáid Collins in purchase of tire aforesaid stock of the Ocmul-gee Bank of the State of Georgia.
That he -will pay to said • Daniel F. Fleming, respectively, -at maturity, the notes herein before referred to, and hereto attached in schedule A. in bonds of the State of Georgia, at par value, bearing interest at six per centum.
That ill the event that the said Robert Collins shall fail to pay as aforesaid, any one of said notes embraced in schedule A. at their maturity, respectively; or within fifteen days thereafter; then all his rights in and by virtue Of this entire contract, shall cease and determine, and the said Fleming shall, in that event, retain as his own property, the ten thousand dollars advanced to him as herein-before described; shall retain, as his own property, the aforesaid note of thirty-five thousand dollars, given for stock.as aforesaid; together with whatever amount of said debt, due by said Ocmulgee Bank of the State of Georgia, and by said Robert Collins, and Collins & Cleaveland, shall remain due at the time of such failure, as also the two hundred and twenty shares of the stock of the Central Rail Road and Banking Company,-as collateral security, for the debt last aforesaid. It being expressly understood, that upon failure to pay any one of the aforesaid notes in schedule A. as herein provided, this contract shall be held, according to the stipulations in this .covenant, as fully executed, so far as at the time of such failure it has been fulfilled, as to both parties, and as void in relation to all parts of- it at that time remaining unfulfilled, and that so far as relates to all such parts of the same as then, are unexecuted, the parties to tills agreement are remitted to their respective conditions, as existing before the execution of these, articles. And the said' Daniel F. Fleming, on his part, doth hereby covenant and agree to and with the said Robert Collins, that .upon payment to him in bonds of the State of Georgia at par, bearing interest at six per centum, at any time, of any one or more of said notes in schedule A. or of any part of any one of said notes, he will give to said Robert Collins, or to his order, an order for such sum of money as may be at any time, as aforesaid, paid upon said last named notes upon the Ocmulgee Bank of the State of Georgia, without recourse upon him, and which order shall be a transfer to said Robert Collins, to the amount thereof, of all right or title in and to the debt due by said bank to him, as herein set forth.
And the said Daniel'F. Fleming doth hereby further stipulate and agree on his part, that when the whole debt due to him by said Ocmulgee Bank of the State of Georgia, shall be, as herein stated, extinguished as to him, and transferred to the said Robert Collins, all payments thereafter made upon said notes in schedule A. by said Collins, shall pass in double the amounts of said payments, respectively, as a credit upon the debt due to him by said Collins, and Collins & Cleaveland, until the whole of said debt shall be extinguished.
And .that upon payment, in full - of the whole amount, principal and interest, due upon all the said notes in schedule A. according to the stipulations herein provided, he will deliver to said Robert Collins, or his order, the aforesaid note of thirty-five thousand dollars — all the evidences of debt due by the Ocmulgee Bank of the Staté of Georgia, in-his possession; and also all the evidences of the debt due by said Collins, and Collins & Cleaveland, mentioned in schedule B. together with the two hundred and seventy shares of the stock of the Central Rail Road and Banking Company, held now- as collateral security for the same.
In testimony whereoij the said parties have hereto set their hands and seals, the day and year aforesaid.
Executed in duplicate.
Inpresence of ) ROB’T. COLLINS, [seal.] E. A. Nesbit, $ D. P. FLEMING, [seal.] C. A. Higgins, J. P.
Schedule A. referred to in tlte annexed Agreement.
Dr. Robert Collins’s Notes to Daniel P. Fleming.
One Note, dated 1st May, 1842, due 13th Oct. 1842, Do. do. do. 13th Dec. “ do. 13th Jan. 1843, do. 13th Peb. “ do. 13th April, “ do. 13th Nov. “ do. 13th Jan. 1844, Do. Do. Do. Do. Do. Do. do. do. do. do. do. do. $10,000 00 10,000 00 4,500 00 10,500 00 10,000 00 15,000 00 10,345 78 $71,345 78
Sehednile B. referred to in the annexed Agreement.
Debts due by Robert Collins, and Collins & Cleaveland, to D. F. Fleming.
Collins & Cleaveland’s Note, dated 26th April, 1841, at 60 days, Do. do. 25th May, 184Í, at 60 days, Do. do. 12th June, “ 90 “ Robert Collins’s Note, dated 1st “ “ 6 months, Do. do. 1st “ “ 6 “ E. Sinclair’s Bill, endorsed by Charles and Robert Collins, > 13th Sept. 3839, at 7 months. ) R. Carns’s Bill, endorsed by Jewitt & Burch, and R. Collins, \ due 10th April, 1839. $ Interest to 1st of May, 1842, $ 995 00 1,075 00 4,990 00 3,508 38 25,000 00 2,390 00 2,500 00 $40,458 38 1,838 93 $42,297 31
EXHIBIT G.
Received from Mr. M. C. Mordecai, agent and attorney of the South Western Rail Road Bank, for foreclosure, the following mortgage Deeds, to wit:—
A mortgage made by Jewitt & Burch, to the Ocmulgee Bank of the State of Georgia, bearing date on the 29th day of December, 1840, and recorded on the 6th January, 1841.
A mortgage made by George Jewitt to the Ocmulgee Bank, dated on 29th December, 1840, and recorded the 6th January, 1841.
A mortgage made by Jewitt & Burch, to the Ocmulgee Bank, dated 29th December, 1840, and recorded 6th January, 1841.
A mortgage made by George Jewitt to the Ocmulgee Bank, dated 29th December, 1840, and recorded 6th January, 1841.
A mortgage made by Jewitt & Burch to the Ocmulgee Bank, on the 25th day of March, 1840, and recorded 3d April, 1840.
A mortgage made by George Jewitt to the Ocmulgee Bank, dated the 25th March, 1840, recorded ad April, 1840.
A mortgage made by Mortin N. Burch to the Ocmulgee Bank, on the 29th December, 1840 — also a relinquishment from George Jewitt and Mortin N. Burch, of their equity of redemption in and to all the before described mortgages, dated on the 26th October, 1842, made to the Ocmulgee Bank.
(Signed) E, A, NESBIT,
Attorney at Law, Macon, Ga,
November 23, 1842.
The statement following was necessarily prolix, because the facts which appeared in the printed evidence, were not arranged; and other facts were added, by proofs at the hearing. A particular statement was, therefore, necessary to put the Appeal Court in possession of the facts of the case, and enable them to correct the legal positions ruled in the decree, if erroneous.

Opinion:
Curia, fer
Dunkin, Ch.
This Court is well satisfied with the judgment of the Chancellor, that whatever might . have been the irregularities in the organization of the Oc- mulgee Bank, they afford no ground of defence to the claims of the complainant.
A. A. 1818. Prince's Dig 61.
Ene. Tit. Banks.
The question, which ha-s been most elaborately discussed, and which is of most importance to the parties interested, is the claim of the complainant as a bill holder under ninth clause of the charter of the Ocmulgee Bank. The difficulties of the question were felt by the presiding Chancellor, who,'after stating the facts, and the objections of the defendants, commences the discussion of the point by observing, "I have, still, very considerable doubts whether any of these considerations throw the plaintiff without the remedies provided by the Legislature of Georgia for holders of bills on the Ocmulgee Bankand he ultimately adopted the conclusion, that he-was entitled to the rank of a bill holder under the provisions of the charier.
This statute provides that " the persons and property of the. stockholders, Jfor the time being, of said Bank, shall be pledged and bound, over and above the amount of said stock paid in, in proportion to the amount of the shares that each individual, copartnership, corporation or body politic, may hold in said Bank, for the ultimate redemption of the bills or notes issued by or from said Bank, in the same manner as in common commercial cases, or cases of debt."
The principal object of obtaining an Act of incorporation, in ordinary cases, is that the liability of the stockholders should be limited to - the amount of their stock, and that their liability should cease when they cease to be stockholders. This clause would, therefore, in ordinary cases, defeat the leading purpose of the charter. But the laws of Georgia, with a view to the protection of her citizens from a,spurious currency, render it an offence highly penal- for any individual or incorporation, other than a chartered Bank, to -issue bills or promissory notes as private Bankers, "unless thereunto specially authorized by law." In Georgia, therefore, an Act of incorporation vests in the stockholders óf a Bank high and exclusive privileges, and the Legislature thought proper to guard against the abuse of the privilege, and secure the interests of the public, by this stringent provision.
A standard authority upon such subjects has stated that, "Banks are of three kinds, viz: — of deposit, of discount, and of circulation." After defining the appropriate functions of a Bank of deposit, as well as of a Bank of discount, he proceeds to the third class — " a Bank of circulation issues bills or notes of its own, intended to be the circulating currency or medium of exchanges, instead of gold and-silver." He adds that, "in the- United States, most of the-Banks-'are public, and, in some of the States, private Banks of circulation are prohibited by law." It might also have been added that, in this country, one Bank ordinarily unites the office of the three, and serves as an. office of discount and deposit, as -well as a Bank of circulation. In order to preserve the Banks in a safe condition, and to prevenMhe currency from being debased and the community defrauded by an amount °f Bank bills in circulation disproporlioned to the means of redeeming them, the Act of 1832 provided that every Bank should make semi-annual returns to the Governor, upon the oath of the President and Cashier, in April and October, setting forth, among other things, the issues of the Banks, the amount of bills in circulation, &c. To this provision, some reference may hereafter be necessary.
It is quite obvious that, by the ninth clause of the charter, it was not intended to render the stockholders liable, as indi-vidhals or partners, for all the debts or contracts of the Bank, nor is it so contended; a bond creditor would,.confessedly, have no claim beyond the assets of the corporation. If the complainant had built the banking house, or had sold it to the Bank, for which they had .given him an unnegotiable note, or due bill, for five thousand dollars, signed. by the President and countersigned by the Cashier, this, by the express terms of the fifth clause, would be binding and obligatory on the company, and might be termed, literally, "a note or bill issued by said Bank," in the terms of the ninth clause, yet no one would affirm that the stockholders were personally liable for this note or due bill, more than for a bond of the corporation. For the payment of such debts, the Legislature left every one to the protection of his own sagacity or vigilance. It was not, then, every bill or note of the Bank for which the stockholders were rendered liable, but only for those bills or notes which chartered Banks had the exclusive privilege of issuing; for Bank bills issued by virtue of its charter as a Bank of circulation — for, " bills intended to be the circulating currency or medium of exchanges, instead of gold and silver." Against bills thus putin circulation, as part of the currency, instead of gold and silver, it was well known the community had no practical means of protecting themselves, and those who asked for the privilege of thus supplying the circulating medium, were rendered personally responsible for the ultimate redemption of the bills. If the bills were not issued by the Bank by virtue of the privilege thus conferred upon them — if they were not bills issued for the purpose of forming part of the circulating medium of the country, they do not induce the mischief against which the law intended to provide, by fixing the personal responsibility of the stockholders. Ordinarily, the stockholders are respon-, sible for the acts of the directors of the Bank, only to the extent of the loss of their stock. But for creating a fictitious currency, for putting in circulation Bank bills to an amount which they have not the means of redeeming, the miscon duct of the directors is visited upon the stockholders in their persons and property. The inquiry then is, whether the bills in the possession of the complainant came within this description.
The facts, are detailed in the testimony of Joseph A. White, the first and principal witness of the complainant. He was clerk to the Commissioners who received subscriptions to the Ocmulgee Bank. In November, 1839, he was elected Cashier, in which office he continued until 22d October, 1842, when he was succeeded by?- the complainant. The complainant was always a director of the Bank from its organization in April, 1837, until November, 1842. There seem to have been six directors besides the President. Mr. White testifies that Wm. B. Johnston & Co, commenced to make advances to the Bank as early as March or April, 1841. On the 31st May, 1841, the amount due to the complainant appeared in the weekly statement of the Bank, under the head of Bonds, and amounted to $80,000. In the latter part of May or beginning of June, 1841, a committee was sent from the South Western Rail Road Bank in Charleston, to examine the condition of the Bank, which they did, and reported to their principals. "In the latter part of June, or beginning of July, 1841," continues Mr. White, "Mr. Johnston, being so much in advance, required security, and called on the Bank for it, and. the Bank put in his possession $50,000 of the bills of the Bank, on condition that, he was not to put them in circulation. Witness delivered them to him by order of the Board." It will be thus observed that this was not an original agreement when the complainant commenced to make advances, but that his advances had been for some time at $80,000 before he required security. It will also be remarked, that security was not asked, nor were the bills put in his possession, until a month after the examination of the committee of the Rail Road Bank had closed. Although, if these circumstances had been different, it would not have varied the result. There can be no doubt of the fact, (for in this all the witnesses concur) that it was an express stipulation that the bills were not to be put in circulation. They were put in his possession, says White, on this condition. It is perfectly manifest that, so long as this condition attached, the bills constituted no part of the circulating medium of the country, and were not so intended, but that the contrary was expressly stipulated. Accordingly, when the semi-annual statements were prepared under the oath of the President and Cashier, as required by law, these bills were always brought in, and never appear in .the return as ' bills in circulation.' Until they became a part of the circulation, the mischief contemplated by the ninth clause of the charter could not arise, and the liability of the stockhold ers would not, therefore, attach. Whatever may have been the object of the complainant, or the views of the other directors, it would be great injustice to the stockholders, not only to make them liable for an excessive circulation, but for the contract of the directors that they should be liable as if there had been an excessive circulation. Seeing this obstacle, it is suggested that this condition against the circulation of the bills was to cease when the bonds to the complainant became due. It is very difficult to suppose that any bond was given to the complainant, although the amount due him appeared in the statement under the head of ' Bonds.' His bill makes no such allegation. It is not stated nor charged that he ever held the bond or bonds of'the Bank for his debt. But this condition ivas of an extraordinary character. It is incumbent on the complainant to shew that it was limited as to time. If he held the bond of the company, which was not yet due, it was altogether unnecessary to make a. special stipulation that he should not use the collateral pledge until there had been a default of payment on the part of the Bank. Ordinary good faith would have held him to this condition without any promise or agreement. And the same reply may be made to the suggestion that the condition was to be removed so soon as his account with the Bank was closed and adjusted. It was not so stated in the original agreement. When his account was adjusted in September, 1842, the only change made was, that liis demand appears as " a deposit bearing interest." He still held the bills, and the Bank . was still liable to him for the accruing interest on the debt due to him. ' When the Bank broke up in November following, the balance of his debt still existed and the bills remained in his possession, so far as the Court can perceive from the evidence, with the original condition still attaching, that they were not to be put in circulation. The indebtedness of the Bank, as such, to the complainant, nor the proof of it, did not depend on these bills, but on the personal ledger, and his bank book, which was a transcript from it. For the payment of this debt, he is entitled to an account of all the assets of the corporation. But his demand on the stoclchold- ers for the ultimate redemption of the bills depends on the proof, not of the indebtedness of the Bank, but that the bills have been in circulation. The evidence of the agreement is, that they were deposited on condition that they were not to be put in circulation — and the fact is, that they have not been circulated. The mere possession of the complainant is, m itself, not very important. If he had the right to circulate the bills whenever he thought proper, or when his debt became due and unpaid, although he had placed the bills for safe keeping as a special deposit in the custody of the Bank, his right, as a bill holder, would have been as perfect as if they had remained in his own strong box. But if he held them, in that box, or in the Bank, on the express condition that they should not be circulated, they were no part of circulation or circulating medium, and had not acquired that character which would subject the stockholders to individuals, liability. One other view remains to be considered. It was strongly urged that, if no other termination to this condition was to be inferred, it must have been understood by the parties that it was to end when the doors of the Bank were closed in November, 1842, and it virtually ceased to exist. It is necessary to analyze this proposition, or, rather, suggestion, and the effect of it. The complainant was a director, and one of the agents of the stockholders, in July, 1841. By the terms of the charter, the stockholders are only ultimately responsible for the redemption of the bills issued by the Bank. They are only responsible when the assets of the Bank are exhausted and it has become insolvent. The agreement then, or understanding of the parties, according to this proposition, was that the complainant should not be at liberty to avail himself of his collateral security, should not be permitted to circulate these bills so as to render the stockholders liable, except in the event that the Bank failed or became insolvent. If there was any limitation to the condition, that the bills were not to be put in circulation, (and none certainly was specified) I think this would be the most probable inference. It was not like a deposit of any property of the Bank, but it was a deposit of paper, the peculiar benefit of which as a security to the party, could only be rendered available on the insolvency of the Bank, and it was stipulated that the bills should not be put in circulation but in that event. But the 40th section of the Act of 1833 declares that all contracts made by any Bank in contemplation of insolvency, except for the benefit of all the creditors and stockholders of the Bank, shall be void, and the President and Directors, or any of them, making, or consenting to, such contract, shall be deemed guilty of a misdemeanor, and. be subjected to punishment. It may be, that the penalties of this Act would only attach on contracts made in relation to the assets of the Bank. But the manifest policy of the law is to guard against all preferences in contemplation of insolvency. Assignments or other contracts, made m contemplation of insolvency, must be for the benefit of all the creditors and stockholders, or they are void. How can the directors make a contract that bills shall be put in circulation only in the event of insolvency, and that, not for the purpose of creating or adding to the circulating medium, an end which they can no longer accomplish, but for the purpose of giving a security to one of their own body, who is also a creditor of the institution 1 If the case were res integra, a majority of the Court are of opinion that the complainant is not a bill holder within the perview of the ninth section of the charter.
But we agree with the Chancellor in the proposition which he has so fully sustained, both by reason and authority, that all other countries are bound to follow the construction of a statute which has been adopted by the Judiciary of the country where it was enacted. In the case of Collins v. The Central Bank, the report of the auditors has been submitted to us, but it does not, in any material point, vary the case as reported in 1 Kelly. It seems difficult to peruse the statement there presented, the able argument of the counsel, and the judgment of the Court, without clearly perceiving that, although the bills may have been considered as substantially placed in the custody of the stockholder as a conditional security, they were not entitled to the character of " bills issued as contemplated by the charter of the company," because they were " not issued and put into circulation as money." The language of the Judge is clear and emphatic. " The bills were not issued as contemplated by the charter of the company, and the manner in which they are now attempted to be used for the purpose of placing the holders thereof on the same footing as the holders of bills issued and put into circulation as money, according to the terms of the charter, cannot receive the sanction of this Court. To permit it, would be, in our judgment, to sanction a fraud on the right of those bill holders whose bills are legitimately issued and put in circulation as money, according to the terms and provisions of the charter. On this ground of exception, we most cheerfully concur in opinion with the Court below."
Nor does the subsequent case, Monroe R. R. and Banking Co. v. the Planters Bank, appear to the Court to afford any authority for the claim of the complainant as bill-holder under this clause of the charter. The Munroe R. R. Bank borrowed $>20,000 from the Planters Bank, in four promissory notes of $>5000 each, and, at the same time, deposited with them, as collateral security for the re-payment of the sum borrowed, $>20,000 of the bills of the Munroe Bank. There was no stipulation whatever in regard to these bills. The fourth note not having been paid, the Planters Bank claimed the benefit of their pledge as bill holders, and it was sustained. The report of the auditors says " the Munroe Rail Road and Banking Company parted with the bills. The Planters Bank had the control and dominion of the bills, and could have passed them to others. The bills were, therefore, in the opinion of the auditors, issued by and from the Bank f and this was confirmed by the Court. How can it be said in this case that the complainant had the control and dominion of the bills, and could have passed them, to others, when by the express terms of bis agreement he was "not to put the bills in circulation," "trot to pass them to others?" If it had been part of the agreement with the Planters Bank that the bills were not to be put in circulation, and they received them on that condition, would not the same Court that decided Collins and the Central Rail Road Company have held that they, i, e. the holders of bills which were not to be put in circulation, were not on " the same footing as the holders of bills issued and put into circulation as money according to the terms of the charter ?" The course of decisions in Georgia seems, then, entirely in accordance with the conclusions of this Court, that the complainant is not'entitled to the extraordinary remedies provided for a bill holder under the ninth clause of the Act.
Story Eq. Plead, s, 96.
But the complainant was a creditor of the Ocmulgee Bank for the amount ascertained by the directors to be due to him in September 1842, and is entitled, as such, to his proportion of the assets of that institution. This Court concurs with the Chancellor that the assignment of the assets of the institution to the South-western Rail Road Bank, under the orders of 22d November, 1842, was an infraction of the statute of December, 1833, prohibiting undue preferences, and is void. But it'is insisted on the part of the appellants that the relief granted to the complainant as a general creditor is not warranted by the pleadings, and that relief to the other creditors of the Ocmulgee Bank is not sought by the bill. It is not questioned that all the creditors of the Bank are interested in this fund, and it is a general rule of this Court that all parties interested should be represented, if it be practicable or be not attended with extraordinary difficulty. This rule and the reason of it is thus stated by Mr. Justice Story, at s. 76. a. The general rule ill Courts of Equity, as to parties, is that all persons materially interested in the subject matter ought to be made parties to the suit, either as plaintiffs or defendants, in order that complete justice maybe done, and that multiplicity of suits may be prevented, or, as Lord Hardwicke once said, in order to make the determination complete, and to quiet the question. The rigid observance of this rule would frequently be attended with inconvenience, and many exceptions have been engrafted on it. And where parties are all interested in a common fund, the Courts have adopted a course which enables them to do substantial justice, and that is by requiring the bill to be filed not only in behalf of the plaintiff, but also in behalf of all other persons interested who are not directly made parties (although, in a sense, they are thus made so) so that they may come in under the decree and take the benefit of it, or shew it to be erroneous, or entitle themselves to a re-hearing. At s. 103, it is said, a single creditor, in cases of this sort, would not be per mitted by a Court of Equity to sue for his own single demand wjthout bringing the other creditors, in some form or man-nerj before the Court, from the obvious inconvenience and ap-pajent injustice in deciding upon the extent of their rights and interest in their absence. The substitution, therefore, of a few to sue for the benefit of the whole, at the same time that it subserves the interests of all the creditors, by enabling them to make themselves active in the final apportionment and distribution of the trust funds, gives to the watchful and diligent an opportunity of having prompt justice done to them without any wanton sacrifice of the rights of others, or any sacrifice not caused by the laches or indifference of the latter. These are principles not only well founded in reaspn but have been sustained by the general practice of Courts of Equity. Formerly much strictness was observed; and a creditor, who had sued only for his own debt, was not permitted to convert it into a bill in behalf of himself and all other creditors, as may be seen by reference to the cases of Leigh v. Thomas, Baldwin v. Lawrence. But in Milligan v. Mitchell it is said by the Chancellor that the Court had, at the hearing, been in the frequent habit of permitting a creditor who sued in his own name, to alter the title of his bill so as to make it a suit in behalf of himself and all other persons interested as creditors. We think the plaintiff is entitled to leave so to amend his bill in this case, and that it should be remanded to the Circuit Court for that purpose— and this is the more readily done as, on the further hearing, the effect of the proceedings in the Courts of Georgia in relation to the assets of the Ocmulgee Bank may be more fully and distinctly considered and determined.
2 Yes. Sen. 2 Sim l& Stu 18. l M. & Craig 511
Although the attempt on the part of the agents of the S. W. Rail Road Bank to secure a preference out of the assets of their debtor, the Ocmulgee Bank, has proved entirely ineffectual, and the assignment set aside as against the provisions of the law, this does not, in the judgment of the Court, operate a forfeiture of their debt also. It is not so declared by the statute, nor is the Court aware of any principle of Equity which exacts this penalty. A party can be permitted to derive no advantage from his own wrong. This seems the extent of the rule. The S. W. Rail Road Bank must be permitted to establish their claim like any other creditor of the Ocmulgee Bank.
The Court concurs also in the judgment of the Chancellor in relation to the irregularity of the proceedings by which the stock of Dr. Collins was forfeited and his notes, &c. given up, and the liability of the S. W. Rail Road Bank for any losses sustained in consequence of such surrender. But in relation to the transactions with H. G. Lamar and others, there is no charge in the bill, and the defendants had no opportunity of answering in relation to these matters. It is enough that, in giving the complainant leave to amend the pleadings by con-v verting his bill into a creditor's bill, he have leave also to make such charges as will put these matters properly in issue, and to make such other parties defendant as he may be i advised. This, in the judgment of the Court, he should be permitted to do, if a motion to that effect be submitted to the' Circuit Court.
No objeetion'was made at the hearing, nor is there any specific ground of appeal, in relation to that part of the decree which declares the liability of the S. W. Rail Road Bank for the advances made to the Ocmulgee Bank after the 7 Nov. 1842. It is only necessary to say, that in this respect the decree is affirmed, and on all other matters it is affirmed, modified or reformed as expressed in this opinion.
O'Neall, J. — Evans, J. — Wardlaw, J. and Dargan, Ch. concurred.
Decree modified.
Caldwell, Ch. on account of interest as a stockholder in the S. W. R. R. Bank, did not hear the case.