Case Name: The Bank of the State of South Carolina vs. James H. Hammond
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1845-01
Citations: 1 Rich. 281
Docket Number: 
Parties: The Bank of the State of South Carolina vs. James H. Hammond.
Judges: Richardson, O’Neall, Evans, Butler, and Frost, JJ. concurred.
Reporter: South Carolina Law Reports
Volume: 30
Pages: 281–289

Head Matter:
The Bank of the State of South Carolina vs. James H. Hammond.
H, wishing to borrow money, executed a bond which was partly blank, and defendant guaranteed the payment, by writing endorsed on the bond. Held that if defendant authorized H. to complete the bond, and deliver the guaranty along with it, he was bound.
The guarantor of a bond, who engages to pay absolutely, if the obligor should not, is not entitled to notice of non-payment; nor will he be discharged on the ground of laches, f there was no ex' tension of time to the obligor, or other act of the obligee, by which he was injured.
A bond taken by the Bank of the State of South Carolina, for a loan of money, is not illegal and void, because it is not secured by a mortgage.
A contract with a corporation may be binding on the parties, though it may be an abuse of the corporate powers, for which 'the corporation may be answerable to the government which created it.
Before Wardlaw, J. at Charleston, Spring Term, 1844.
This was an action of assumpsit, brought upon the defendant’s guaranty of a bond. The bond was made by James Hamilton, dated 1st March, 1840, in the penalty of $40,000, conditioned for the payment to the plaintiffs of $20,000, with lawful interest, twelve months from the date. On its back was the guaranty — a writing without seal, signed by the defendant, M‘Duffie, Pinckney and M‘Rae, whereby, as expressed, in consideration of the loan, at their request, to Hamilton, of the money secured by the bond, they severally guaranty the payment to the extent of the sums opposite to their names and opposite to each name was the sum of $5,000..
The bond had been a printed blank, and had been filled up by different hands, and probably at different times. The writing on the .back, (except the signatures and sums annexed,) and all the writing, by which the blanks inside had been filled up, were in Mr. Petigm’s handwriting, and in black ink, except “ first” and “ March” in the date, which were in Gen. Hamilton’s handwriting, and in blue ink: and except also the name of the plaintiffs, which was in Gen. Hamilton’s handwriting, in black ink. All the signatures were in blue ink.
Mr. Gordon, witness to the bond, without distinct remembrance,' expressed his confident belief that the whole bond was filled up before it was signed ; and Mr. Furman, Cashier of the Bank, said that the bond, in its present condition, was handed to him by Mr. Elmore, President of the Bank, who had just been left by Gen. Hamilton, and that the money was thereupon placed to the credit of Gen. Hamilton.
It was admitted that the bond was in its present condition when it was brought to Elmore by Hamilton; but from the statement of Gen. Hamilton, which was admitted as evidence, it appeared that the bond and guaranty had been signed before the name of the plaintiffs was inserted in the bond, with a view to the convenience of substituting the secutity to any bank .that might be applied to for the loan.
No mortgage accompanied the bond.
Gen. Hamilton went to Europe in April or May, 1840, and did not return till March, 1842. Mr. Bounetheau was his partner in the house of Hamilton & Co., and was left as his general agent, but had no knowledge of this bond, nor means to meet its payment. Gen Hamilton’s separate dealings and liabilities were large. He and the House of Hamilton & Co. were greatly embarrassed by his cotton speculations in 1839. His indebtness and the derangement of his affairs, were known before he went, but the hopes entertained of his effecting certain loans, kept up the credit of the house until the latter end of 1841, when, by the failure of those hopes, the relief of himself and the house was defeated, and the reputation of his general insolvency, with actual inability to meet his engagements, ensued. A large property remained in his name, but it was understood to be mostly subject to a settlement on his wife, and to mortgages.
In December, 1841, the cashier of the bank wrote to the defendant, giving notice of the non-payment of the bond, and of the probable necessity for plaintiffs resorting to the guaranty. In February, 1842, the defendant, along with his co-guarantor, Pinckney, had a conversation with the cashier of the bank, in which he said that he had expected to meet his guaranty in time, but had been disappointed — suggested a defence, but still wished a conference with his co-guarantors, and evidently expected to be called on, and to be obliged to pay, if no good defence could be made.
Pinckney paid his share, M'Duffie made satisfactory arrangements as to his, M‘Rea became insane and died, and suit had been brought against Singleton, his representative.
In March, 1842, when Gen. Hamilton first appeared in Charleston, after his return from Europe, the bond was sent to H. Bailey, Esq. solicitor, of the bank, with instructions for him to apply to Gen. Hamilton, and pursue the guarantors if necessary. He made personal application to Hamilton, and received no - definite answer. He then wrote to Hamilton, and in reply received a letter requesting that the bank would let the matter stand, and stating expectations of arrangements with the sureties. Before this reply was received, Mr. Bailey wrote to the defendant, stating that proceedings must be had on the guaranty, and received the defendant’s answer, dated 6th April, 1842, in which the defendant said his impression was that he would make no defence ; he assented to accept the service of a writ for Charleston district, and suggested that Hamilton should be made a party. Writs at the next term, (October, 1842,) were returned against the defendant, and against Hamilton. Judgment by default was had against Hamilton in 1843, and execution against him was entered and marked “lodged to bind.” He was considered notoriously insolvent. His property in this State had been attached and was subject to prior liens. The first attachment against him was at the suit of the bank of Charleston, and was levied after his return from Europe. He was said to have lands in Texas, Alabama and Georgia, and to be managing- a large plantation in Alabama, as agent of a company of which he is a member ; but although he had never taken the benefit of the bankrupt or insolvent’s Act, he was notoriously insolvent.
The presiding judge held that the bond was not void, because no mortgage accompanied it. He further held, that if the bond and guaranty were complete before their delivery to the plaintiffs, it was not material in what order their various parts had been written ; unless it should appear that some writing had been done in fraud of the person to be charged thereby, or without his assent or authority. That the guaranty did not take effect until the completion of the contract by delivery of the bond; and so, if it should appear to the jury that the defendant, by bis previous signature and conduct, had authorized the filling up of the bond by Gen. Hamilton, it was no less binding, (even if the bond was partly blank when the guaranty was signed) than it would have been if the bond, regularly filled up, had been first delivered, and then the guaranty signed. He also held, that the bank was not bound to give to the defendant notice of the non-payment of the bond, as to an endorser notice of non-payment of a note ; that if there had been no extension of time to Hamilton, or other act by which the defendant had been injured, his contract required him to pay, if the bond had not been paid; and that if it should appear to the jury that the bond was unpaid, and that no injury had ensued to the defendant from the conduct of the plaintiffs, the defendant, was not discharged, because notice to him had not been given, until after the expiration of ten months from the day the bond became due. Yerdict for the plaintiffs.
The defendant appealed, and now moved
For a Non-suit — Because the bond is illegal and void, and therefore the guarantors were never liable on it.
And that motion failing, then
For a New Trial — 1. Because the court erred in charging that the guarantors were bound, although the bond was in blank when signed by them, there being no evidence that Hamilton, or any one else, was authorized to fill it up.
2. Because the court erred in charging that the bank was not bound to notify the defendant of the default of payment by Gen. Hamilton.
3. Because the plaintiffs were proved to have been guilty of such laches as discharges the defendant.
Walker, for the appellant,
on the ground taken for a non-suit, referred to the charter of the bank, and said that corporations are bound strictly to pursue their charters ; 2 Kent, 298 — 9 ; Ang. and Ames, 139. The charter authorized the bank to lend money on bonds and mortgages, but not on bonds alone ; 4 Peters, 171.
On the first ground taken for a new trial, he cited 1 Hill, 267 ; on the second, Ch. on Con. 567 ; 7 Cranch, 69 ; and on the third, 1 Hill, 759.
Bailey, Attorney General, contra,
was directed to confine himself to the ground taken for a non-suit. The right, he said, to make a contract or take a bond is incident to every corporation, provided it be not inconsistent with the object of the charter. The charter here requires loans to be made on bonds and mortgages, and for this reason, it is said, the bank cannot take a bond without a mortgage. That provision of the charter is merely directory. Its effect is not to make the bond void, but to make the officers liable, in case there should be a loss. 2 Kent, 277-8.

Opinion:
Curia, per
Wardlaw, J.
This court is entirely satisfied with the views taken on the circuit, of the objection that a portion of the bond was blank when the guaranty was signed. The verdict has established that the defendant authorized the completion of the bond, and the delivery of the guaranty along with it.
So also, the verdict has established that there was no extension of time to Hamilton, or other act of the plaintiffs, by which the defendant was injured ; and the guaranty is absolute, amounting to an engagement to pay according to the tenor of the bond, if the obligor should not. To the maker of such a guaranty, notice is no more important than to an ordinary surety; 20 John. 365 ; 1 M'M. 76. If the bond was unpaid at its maturity, his liability became fixed, and it is the debtor's duty to seek the creditor.
Upon the power of the plaintiffs asan incorporated bank to take for a loan of money a bond secured only by guaranty, the argument on the part of the defendant has been strongly pressed.
The preamble of the "Act to establish a Bank on behalf of and for the benefit of the State," by which this bank was incorporated, (8 Stat. 24) shows that its design was to establish a bank on the funds of the State, for the purpose of discounting paper, and making loans for longer periods than has heretofore been customary; and on security different from what has hitherto been required. The 16th clause of the first section bestows upon the President and Directors the franchise of being a corporation, with all the usual powers of corporations, especially the power " to have, purchase, receive, possess, enjoy and retain, to them and their successors, lands, rents, tenements, hereditaments, goods, chattels, and effects, of what kind, nature or quality soever, and the same to sell, grant, demise, alien or dispose of," and the power to ordain by-laws. The 17th clause declares that "they shall also be capable of exercising such other powers and authorities as may be necessary for the well governing and ordering the affairs of the said corporation, and of promoting its interest and its credit; any law, usage or custom, to the contrary notwithstanding."
Under these expressions of the legislative will, standing alone, the power to make loans upon bonds secured at the discretion of the directors, may have resulted, without other restriction than such as would arise from the nature of the trusts for which the power was to be exercised.
The 4th clause of the first section, however, provides that the President and Directors " shall receive money on deposit, and pay away the same to order, free of expense ; discount bills of exchange, accepted and payable within the State of South Carolina, and notes with two or more good names thereon, or secured by a deposit of bank or other public stock, at a rate of interest not exceeding one per cent, discount for sixty days; and shall also have power to make loans to citizens of this State, in the nature of discount, on real or personal property, secured by mortgage and power of attorney to confess judgment on default of payment. Provided, that the sum so loaned shall never exceed the one-third part or the real unincumbered value of the property so mortgaged ; and provided further, that the loan shall never be for a longer term than one year, nor draw a greater interest than at the rate of seven per cent, which shall always be paid in advance, and shall always be payable in the months of February or March next succeeding such loan, unless an earlier day be fixed by the borrower ; and provided farther, that no loan be in any case whatever renewed, unless the interest for the ensuing year be paid in advance" and provided farther, that no individual be permitted to borrow on his own account, on the security of real property, a greater sum than two thousand dollars."
Yarious other clauses of-the Act make special provisions concerning loans upon mortgages, as to the mode of application, the form of the mortgage, its effects, and the manner of selling under it, the means to be taken for ascertaining the value of the property mortgaged, .and the course to be pursued in calling in the loans. The 2nd section subjects the President and Directors to an action at law, or a suit in equity, to answer to the State for damages incurred "by taking insufficient security" — with certain provisoes ; and the 9lh section of an amendatory Act, (8 Stat. 32) authorizes and requires loans upon mortgage to be made at the Branch Bank at Columbia, as at the principal Bank at Charleston.
It is contended for the defendant, that the express grant of the power to discount bills of exchange and promissory notes, and of the power to make loans on bonds secured by mortgage, impliedly forbids the taking of a bond secured iu any other way, and renders such bond and its guaranty void.
Corporations have only such powers as are specifically granted, or as are necessary for the purpose of carrying into effect the powers expressly granted. 'When the grant is silent as to the contract in question, we are to consider whether a power to make such a contract may not be implied, as directly or indirectly necessary to enable the corporation to fulfil the purpose of its existence, or whether the contract is entirely foreign to that purpose.
In the case of the Utica Ins. Co. vs. Scott, 19 John. 1, and other cases in New York, where securities taken by corporations were held void, there was a statute expressly forbidding such corporations from taking such securities ; bat a distinction was taken between the security and the contract of lending, the latter not being covered by the statute. It will be observed in the case now betore us, that if the bond be void, so is the contract of lending; for if the implied prohibition arise, it extends to every loan not made in the prescribed form. It is, however, too strict to insist that a power which is contained in a general grant, and which in various forms may be pertinent to the purpose of a corporation, may be restricted to a particular form of directions for its exercise in that form. Whether the power to take bonds for money lent, would in general result from the grant of ordinary banking powers or no, loans for long pei'iods on bonds were contemplated by the' charter of the bank now before us. The directions concerning bonds secured by mortgage, seem to amount rather to an express permission for an unusual course of dealing, with guards to prevent abuses in it, than to create any inhibition of other loans, consistent with the purpose of the institution. The State is the sole stockholder in this bank. The Act establishing it contains not only the usual grant of corporate powers, but als'o instructions for the agents of the State who manage it. These instructions have been modified from time to time, at the will of the legislature ; and the long continued usage of the bank to lend money, in certain cases, upon bond secured by personal sureties, appears to have been well known to the legislature. To this case there is particularly applicable the doctrine applied in the cases of Little vs. O'Brien, 9 Mass. 423, and Chester Glass Co. vs. Dewey, 16 Mass. 94; that the contract is good, as between the corporation and the defendant, although, for abuse of its powers, the corporation may be answerable to the government which created it. If the law will not permit a defendant to refuse payment upon his contract with a private corporation, upon the ground that there was mismanagement of the corporate powers in making such contract, it cannot discharge a security, taken within the general scope of the powers of a public corporation, because the public agents may be reprehensible for the neglect of some of the duties prescribed to them. To the personal responsibility of the agents, the State looks for the security of loans irregularly made, but does not reject as worthless a security taken because it may be insufficient. Would a note discounted by. this bank be void, because it had less than two good names 1 or a loan be void because it was made to a person not a citizen of this State ? In either of these cases, as in the one before us, the departure of the agents from their instruc-" tions, would be matter for the consideration of the principal, and not of the person contending with them.
The motion is dismissed.
Richardson, O'Neall, Evans, Butler, and Frost, JJ. concurred.