Case Name: Joseph Medill v. James Collier et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1866-12
Citations: 16 Ohio St. 599
Docket Number: 
Parties: Joseph Medill v. James Collier et al.
Judges: Scott,C. J., and White, Welch, andBmtiKERHOEE, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 16
Pages: 545–558

Head Matter:
Joseph Medill v. James Collier et al.
1. A banking corporation, organized under tbe act of March 21, 1851, “ to authorize free banking,” has no power, and is forbidden by section 44 of said act to engage in tbe business of banking mentioned in section 10 thereof, until it has deposited with the auditor of state tbe securities required by said act.
2. Persons who carry on a banking business, in tbe name of sneb corporation, in violation of said section 44, are not protected by tbe corporate privileges from personal liability for debts contracted by them in tbe transaction of such unlawful business.
3. Such liability does not attach to tbe stockholders of snob corporation as partners, but to those only who engage in such business, and to those who authorize or sanction it.
Error to the court of common picas of Jefferson county. Be-served in the district court.
On the 9th day of May, 1860, the plaintiff filed, in the *court of common pleas for the county of Jefferson, his petition again'st the defendants, which is as follows :
“ J oseph Medill, plaintiff, says, that there is due to him from J ames Collier, Edwin H. Collier, Frederick Collier, John A. Collier, Arnold H. Dohrman, Jno. S. Patterson, James O’Neal, Bobert Mears, Joseph-Means, William Stanton, William Elliott, Thomas Johnston, James Turnbull, Henry G-. Comingo, Charles O. Beatty, William Inglebright, Thomas S. Hening, Peter A. Dohrman, David W Steir, David McGowan, William Nash, Bernard Scullion, Ann Ward, William Waggoner, Jr., John T.. Leslie, Onias Clark, and John McGuire (surviving partners of Elizabeth Garrett and William McDonald); lately trading under the name and style of The Citizens’ Bank of Steubenville, defendants, the sum of one thousand dollars, with interest thereon, at the rate of five .per cent, per annum, from September 3,1859, until November 18,1859; and with interest thereon at the rate of six per cent, per annum, after November 18,1859, on a certain certificate of deposit dated September 3,1859, whereby the defendants, under said firm name of The Citizens’ Bank of Steubenville, by E. D. Collier, their agent and teller, acknowledged to have received from the plaintiff said sum of one thousand dollars, •and promised to pay the same, with interest thereon from date, at :the rate of five per cent, per annum, to the plaintiff’s order on demand, one and a half months after date, which period has long since •elapsed, yet the said defendants have hitherto neglected and refused to pay the same, or any part thereof, although payment thereof has been demanded, and still neglect and refuse to pay the same, or any part thereof.
■ “Plaintiff files herewith a copy of said certificate of deposit marked (A), and made part of this petition.”
Prayer for judgment for $1,000 and interest as above stated.
There was a second cause -of action on another certificate for $1,644.64, included in the petition, but plaintiff dismissed as to that cause.
*(A) [copy.]
“ Citizens’ Bank or Steubenville,
“ Steubenville, Ohio, September 3, 1859.
' “Jos. Medill has deposited one thousand dolls, bankable funds, payable to his order on demand, one and one-half months after date, with interest at the rate of five por cent, per annum, to cease' at maturity.
“E. D. Collier, Teller.”
Defendants filed separate answers, in form following:
“David McGowan, one of the defendants, comes, and for answer, says, that he is not indebted to the plaintiff, either individually, or jointly with the other defendants, or as partner with them under any name or style whatsoever.”
At the June term, 1863, the case was tried to the court, which stated the facts found upon the evidence in substance as follows :
The defendants, with others, executed a certificate in the words and figures following:
“ The Citizens’ Bank oe Steubenville :
“ To all whom it may concern: This is to certify, that the undersigned have associated themselves together for the purpose of organizing a banking company, to be established at Steubenville, Jefferson county, Ohio, and to be incorporated under the act entitled ‘ an act to authorize free banking,’ passed March 21,1851. And it is further certified, that we have agreed upon ‘ The Citizens’ Bank of Steubenville,’ as the name of the company by which it shall be known in its dealings; that the amount of the capital stock of said company shall be fifty thousand dollars, to be divided in one thousand shares; that the name and place of residence, and the number of shares held by each member of the company, will appear by reference to the signatures hereto attached; that the company was formed on the 20th day of October, and that said company has elected to carry on its operations as 1 The Citizens’ Bank of Steubenville.’
“ Witness our hands and seals, at Steubenville, this 20th day of October, 1851.”
*Each of the parties who signed the foregoing instrument duly acknowledged its execution before a notary public; and it was recorded in the recorder’s office for the county of Jefferson, on the 22d day of November, 1851.
On the 29th day of November, 1851, the following certificate was signed by the governor, auditor of state, and secretary of state, and was by them furnished to the said Citizens’ Bank of Steubenville, under tbe great seal of the State of Ohio, and was duly recorded in the office of the secretary of state:
“ Executive Oefice, Columbus, November 29,1851.
“ It is hereby certified, that the Citizen’s Bank of Steubenville, located at Steubenville, in Jefferson county, Ohio, has complied with the several provisions of the first, 'second, third, and fourth sections of the act to authorize free banking-, passed March 21,1851.”
On the 20th day of October, 1851, the defendants and others, the stockholders of said banking company, elected five directors, according to the provisions of the act of March 21, 1851, entitled “ an act to authorize free banking.” The directors so elected were duly qualified, and entered upon the duties of their office.
Immediately thereafter, on the 18th of December, 1851, the company proceeded to transact banking business in Steubenville, Jefferson county, Ohio, under the name of The Citizens’ Bank of Steubenville, which business, so transacted, included loaning money, buying, selling, and discounting bills of exchange, receiving deposits, buying and selling gold and silver coin and bullion, and transacting all other business properly appertaining to banking, except the issuing of notes for circulation.
State bonds to the amount of ten thousand dollars were left with the auditor of state soon after the 22d day of January, 1852, for the purpose of receiving notes for circulation to that amount.
The president of the bank, in an interview with the then auditor of state, John Woods, as to the amount in bonds necessary to be deposited, was informed that the sixty per *centum was not necessary to be deposited; that this construction was made by the department, and that this was the practice in his office. And in the interview subsequently with Mr. Morgan, the same construction was given to the law; and, in fact, only twenty thousand dollars in notes had been prepared by the authorities of the state, and the refusal to deliver the circulating notes was wholly on the ground that the act was not in force by reason of the operation of the constitution of 1851.
Auditor Woods’ term expired and auditor Morgan’s commenced January 12, 1852.
The auditor of state refused to issue such notes for circulation to said company, and requested its officers to make application to the Supreme Court, then in session at Columbus, for a mandamus, in order that their right to demand notes for circulation might be determined; which they declined to do, and withdrew said bonds; and the banking company never, before or afterward, offered to deposit any other stock issued by the State of Ohio, or by the United States, or any other state, with the auditor of state of the State of Ohio.
No election of directors was ever held after the first Monday of January, 1855. On the fourth day of May, 1857, William D. Nash and William Stanton were appointed directors, to fill vacancies, by the remaining directors.
The last meeting of directors was held on the 24th day of August, 1857, and after that date the president and cashier passed upon paper that was offered for discount, without the concurrence of any director.
No minute of proceedings of any of the officers of the bank was kept after the 25th day of April, 1859, except the proceedings of the stockholders’ meeting, held on the 4th day of October, 1859.
Plaintiff, at and before the making of said deposit, had no information or belief as to the true character of said Citizens’ Bank of Steubenville. He believed the institution to be solvent, and relied upon it for his Security. He had heard and knew the fact that Colonel James Collier, a gentleman of reputed wealth, was president of the bank.
The defendants never held themselves out to the plaintiff, *nor to any other persons, as partners ; and they acted in good faith, believing themselves to be incorporated ; and up to the time of the failure of the bank, all of the defendants, with the exception of Edwin D. Collier, believed the bank to be solvent.
The certificate of deposit set forth in the plaintiff’s first cause of action, was given on the day of its date, and, together with another certificate of the same date, includes the principal and the interest that had accrued thereon, said principal being $2,594.81, and which had been deposited in said bank in the early part of April, 1859, bearing interest at the rate of four per cent, per annum.
Said banking company commenced to receive deposits, agreeing at the time of making the deposit to pay interest thereon, on the 21st day of December, 1851, and continued to receive such deposits of money bearing interest, until the 28th day of September, 1859, and continued to transact banking business, as above found, until the 29th day of September, 1859, when it suspended payment, was insolvent, and made an assignment for the benefit of creditors.
James Collier was the acting j>resident of. said banking company during the whole period in which it transacted business.
Edwin D. Collier was acting as teller of said banking company during the same time.
Joseph Means acted as a director of said banking company from its organization to the 24th day of August, 1857.
William D. Nash and William Stanton acted as directors of said banking company from May 4, 1857, to August 24, 1857.
William Elliott, William Waggoner, Jr., David McGowan, John A. Collier, and Robert Mears were stockholders in said banking .company from the time of its organization to the time when it stopped payment; and knew that banking business was transacted there by the cashier, teller, and clerk, for the benefit of the stockholders ; and had deposit accounts with said banking company; and knew that the cashier, teller, and clerk were in the habit of receiving deposits of money, and agreeing to pay interest thereon for a long time prior to April *1,1859, on behalf of said banking company, and that they continued to receive deposits of money, and agreed to pay interest thereon on behalf of said banking company, until within a few days before the failure of said banking company; and they acquiesced in the acts of the cashier, teller, and clerk; and the said James Collier, president, and Edwin D. Collier knew of, and were the parties, together with the cashier and clerk, who transacted the business of receiving such dejjosits on interest. None of said parties took any measures to prevent the receiving of such deposits on interest, or the transaction of such banking business. Said Edwin D. Collier, John A. Collier, William Elliott, William Nash, and William Waggoner, Jr., received semi-annual dividends from time to time, as stockholders in said company, the last in the months of May and June, 1859 ; and David McGowan received dividends from time to time, as such stockholder, the last on December 2, 1858.
After the failure of said banking company, there was a meeting of stockholders called by the president, which met on the 4th day of October, 1859, and the following stockholders were present: Eunice Collier, E. D. Collier, James Collier, John A. Collier, Andrew Bustard, B. T. E. Dohrman, Margaret Dohrman, William Elliott, Wm. Inglebright, Robert Mears, Joseph Means, David McGowan, "William D. Nash, James O’Neal, Eezin Permar, William Stanton, D. W. Stier, Emanuel Thornpont, and Ann Ward, representing 803 shares of stock in the aggregate; and. the following resolution was passed:
“ Resolved, That all the moneys, credits, and assets, together with the books, papers, and correspondence of the bank, be handed over and delivered to Geo. W. McCook, as attorney, to collect, adjust, and settle, and distribute and pay over proceeds to the creditors of the bank without preference.”
James O’Neal, Henry G. Comingo, David W. Stier, Ann Ward, and Onias Clark died after the commencement of this action; and A. H. Dohrman, John S. Patterson, Thomas Johnson, James Turn-bull, Charles 0. Beatty, Thomas S. Hening, Peter A. Dohrman, Bernard Scullion, and George McGuire *were not the holders of any of the stock of said banking company when the plaintiff’s cause of action accrued.
Judgment was thereupon rendered in favor of the defendants and against the plaintiff for costs.
To reverse this judgment, a petition in error was filed in the district court, which was reserved for decision in this court.
Ranney, and Miller & Sherrard, for plaintiff in error.
McCook and Moody, for defendants in error.

Opinion:
Day, J.
There is no controversy but that the defendants, while • doing business under the name of the Citizens' Bank of Steuben-ville, by their agents, received of the plaintiff the amount of money sued for, and promised to pay him the same, as stipulated in the instrument mentioned in the petition. These facts, as well as the averment in the petition that they refused, on demand, to pay the plaintiff such money due him, the defendants do not deny in their answers ; but they severally deny that they are jointly or individually indebted to the plaintiff therefor".
They claim that the transaction was wholly between the plaintiff and the Citizen's Bank of Steubenville as an incorporated institution ; and that, therefore, they are not responsible therefor.
The question for our determination, then, is, whether, upon the showing in this record, the plaintiff was entitled to a judgment against any or all of the defendants in their individual capacity.
This involves the consideration of at least one, possibly two questions; first, whether the Citizens' Bank of Steubenville was a corporation with power to make the contract mentioned in the petition; and, if not, secondly, were the defendants individually liable to the plaintiff for the money in controversy.
It appears from the facts, as found by the court of common pleas, that the defendants, on the 20th day of October, 1851, signed a certificate, and took other necessary steps to associate ^themselves as a banking company, and to become incorporated by the name of " The Citizens' Bank of Steubenville," under the act of March 21,1851, "to authorize free banking." S. & C. Stat. 168.
On the 29th day of November following, they procured the certificate of the " auditor, governor, and secretary of state," and were then, as declared in the tenth section of the act, " created a body politic and corporate."
The Citizens' Bank of Steubenville was then a corporation, by means of which the corporators might become authorized to " engage in the business of banking, with all the rights, privileges, and powers conferred by and subject to the restrictions " of the act under which the corporation was created.
The powers of the corporation are thus generally indicated in the first section of the act; and in the remaining portions thereof, such powers only are conferred as appertain to banking, and to enable the corporators to commence and carry on that business.
The "business of banking," mentioned in the first section of the act, is more specifically defined in the tenth section, wherein the corporation is authorized "to loan money, buy, sell, and discount bills of exchange, notes, and all other written evidences of debt, except such as may be herein prohibited; to receive deposits, buy and sell gold and silver coin and bullion, collect and pay over money, and transact all other business properly appertaining to banking, subject to the provisions and restrictions of this act."
It will be seen that in this section the power " to receive deposits " is connected with the 'items of " other business properly appertaining to banking," thereby showing that receiving deposits is, within the meaning of the act, banking business.
Moreover, the language of the first section is reported in this— that these banking privileges are conferred " subject to the provisions and restrictions of this act."
Among other restrictive provisions of the act, a very significant one is expressed in the forty-fourth section, in terms too explicit to be misapprehended, viz:
*"No banking company shall commence the business of banking under this act until such company shall have deposited with the auditor the securities required by law, equal in amount to sixty per centum of the capital stock of such banking company."
The deposit of the securities here mentioned, is, by this section, made a condition to be performed before the corporation had the right or power to engage in the "business of banking," as authorized in the first and tenth sections of the act.
The securities referred to in this section are the stocks of the State of Ohio, or United States, required under the seventh section to be deposited with the auditor for the purpose of procuring and securing the circulating notes to be issued by the company. These notes could be procured of the auditor only; and not until after the stocks referred to were deposited with him; there was therefore no necessity for the prohibition in the forty-fourth section, further than to fix the amount required to be deposited, unless it applied to banking business other than the issue of circulating notes. That it does so apply, is evident from the language of the section; for the prohibition is as broad as the authority given under the act for doing a banking business.
This construction is strengthened by reference to a similar provision in the thirtieth section of the act of February 24,1845, "to incorporate the State Bank of Ohio, and other banking companies," and which was in force when the act of 1851 was passed. It is provided in that section that each independent banking company, organized under that act, "shall, before it shall commence banking business, and before it shall be held to have acquired corporate powers, deposit with and transfer to the treasurer of state, certificates of the funded debt of this state, or of the United States, at least equal in amount to the amount of its capital stock at such time paid in." S. &. C. 128.
The obvious intent of these sections is substantially the same thing. While in one case no corporate power was acquired, in the other its exercise was prohibited as to the business for which it was granted until the requisite stocks *were deposited. All that could be done by the company, under the act of 1851, before such deposit, was to organize, deposit stocks as required by the act, and make needful preparations for the business contemplated by tbe law of its creation.
The construction we have given to section 44, is rendered more clear by section 41 of the same act. It is provided in that section, that " whenever any such company, being desirous of relinquishing its banking business," may redeem eighty-five per cent, of its circulating notes, fully secure the payment of the balance, on six months' published notice may withdraw the stocks so deposited, "and thereupon all the corporate powers of such company, except such as shall bo necessary to close up its affairs, shall cease."
The statutory provision for annihilating the-banking powers of the company, is the withdrawal of the stocks from the auditor. The act contemplates, that all such powers exist only while such stocks remain with the auditor.
Under the act of March 12,1845, "to prohibit unauthorized banking," etc., corporations are prohibited from engaging in the business of banking, "without express authority of a law of this state." S. & C. Stat. 152. From this statute, and the two acts to authorize banking, before referred to, it would seem to be the manifest purpose of the legislation of this state, on this subject, to confine all banking done by corporations to such banks as, under the guarded provisions of the statute, furnished the circulating medium of the state. To such banks, only, wore committed general banking powers. It is inconsistent with the legislative policy of this state, to suppose that it was intended, by the act of 1851, to confer corporate privileges upon associations for a brokerage business only. That business, except as authorized to be done by banks duly qualified as banks of issue, has been left to the enterprise of private persons, coupled with their full responsibilities.
It appears from the facts found by the court, that the company, under the name of the Citizens' Bank of Steubenville, engaged in every species of banking, except the issue of notes *of circulation, without depositing stocks as required by law; and that, in the transaction of such business, the money of the plaintiff was received, and that the certificate of deposit shown in the record was given therefor.
All this business with the plaintiff, done in the name of the bank, the corporation was forbidden to transact, and therefore had no power to do, or to authorize its officers to do. Indeed, it had no power to carry on the business in which its officers were engaged, or to engage in the business for which it was organized. It was a corporate body, it is true, but lifeless for all the purposes of its creation. It could be animated with banking powers only by complying with the requisition of section 44.
The contract with the plaintiff, then, as to the corporation, the defendants must concede, was void. Ang. & Ames on Corp., sec. 256.
A banking business was carried on in the corporate name by the defendants, and it is claimed that, since they had neither the right nor power so to do as a corporation, but possessed both as partners, the law will presume that they carried on the business in their lawful right, and will hold them.responsible as partners. On the other hand, it is claimed that the defendants were duly incorporated, and that, having acted in good faith in that capacity in their transactions with the plaintiff, they are shielded from private liability. And this brings us to the inquiry, whether the defendants, or any of them, are liable in their individual capacity.
It is not disputed but that the officers and agents of corporations are protected from private liability while acting within the scope of the corporate powers ; but how far such protection is extended when they transcend the corporate authority, is not clearly defined. That in such cases a personal liability exists, seems to be recognized, in many eases, in this and other states. Lawler v. Walker, 18 Ohio, 157; Kearnoy v. Buttles, 1 Ohio St. 362; Salem Bank v. Gloucester Bank, 17 Mass. 29; Lawler v. Burt, 7 Ohio St. 353 ; Fry v. Noble, 7 Cush. 188; Hood v. The New York and New Haven R. R. Co., 22 Conn. 502.
*It is well settled that they, who occasion injury to others by the fraudulent use of corporate powers, are personally liable in damages therefor. Bartholomew v. Bentley, 15 Ohio, 659; Bartholomew v. Bentley, 1 Ohio St. 37 ; Vose v. Grant, 15 Mass. 519; Trowbridge v. Scudder, 11 Cush. 83.
It was hold, in the case of Fry v. Noble (7 Cush. 188), that the stockholders in a defectively organized corporation, and which had transacted business under such organization, do not thereby become partners in such business, for the reason that innocent parties might thereby become involved in liabilities to which they never gave their assent, or which were not embraced in their stock subscriptions. But it was held in that case, that an agent acting in the name of such unorganized corporation, would be personally liable upon a "familial1 principle of law, that a person who acts as agent without authority, or without a principal, is himself regarded as a principal, and has all the rights, and is subject to all the liabilities, of a principal."
It is clear, that the persons who carried on banking business in the name of the Citizens' Bank of Steubenville, had no authority from the corporation of that name for so doing. So far were they from having such authority, that some of my brethren hold that, in legal effect, there was no corporation for doing a banking business in existence, in this case. If so, the persons who carried on such business as agents, without a principal, did so for themselves, and are personally responsible. Story on Agency, sec. 280; 2 Kent's Com. *630, sec. 41; Ang. & Ames on Corp., sec. 303.
While it is true that the defendants acted in good faith, as the record shows, and, doubtless believed themselves to be protected from private liability under corporate privileges, it is equally clear, that the plaintiff had no information as to whether they were doing business as a corporation, or as private bankers. He seems to have trusted them in the latter capacity. At all events, he did not know that they had failed to comply with the requisitions of the statute, and that, therefore, the certificate he received for his money, was, to say the least of doubtful availability against the corporation.
By reason of the mistake or negligence of the defendants *in not depositing stocks with the auditor, the receiving the deposit of the plaintiff by them as a corporate bank, was forbidden by law; and whether the law would afford any remedy in favor of the plaintiff against the corporation, upon a contract, express or implied, made on its part in violation of law, may well be doubted, both upon principle and authority. As the corporation was prohibited from receiving the deposit, there is the same reason for holding the implied as well as the express promise, void. Clearly the plaintiff would have no remedy against the corporation, unless he could bring to his aid the doctrine of estoppel, where the transaction is forbidden, as may be done where it is merely unauthorized. Although the court do not deem it necessary to decide this point, the following authorities tend to show that the plaintiff is remediless against the corporation : Ang. & Ames on Corporations, secs. 256, 265, and note 7; 22 Conn. 502; 8 Gill & Johns. 248; 8 Barb. 233; 36 Barb. 210 ; 22 N. Y. 258; 3 Comst. 19.
Whether the plaintiff could avail himself of the aid of the doctrine of estoppel against the corporation or not, the defendants are not -in a position to insist on his right in that respect, to exculpate themselves from any liability against them, arising out of a want of remedy by the plaintiff against the company.
The plaintiff has elected not to experiment upon a doubtful right against the company, but has resorted to those whom he trusted, and who received his money. They admit that they received his money, and that it remains unpaid. Upon the just principles of the common law applicable to individuals, they are personally liable to pay it, unless they are excused or protected by the intervention of some recognized rule of law. They interpose the privilege corporators enjoy, shielding them from private responsibility for debts incurred in their corporate capacity. But the record discloses that the defendants not only lacked the power, but were positively forbidden to receive the money of the plaintiff, in the corporate capacity claimed by them. To suffer this to be available to the defendants, would render that legal which is prohibited by law—it would annul the statute; nay, it would be giving *to corporators, who carry on business without authority and in violation of law, rights equal with those who are careful to observe its wholesome provisions. The well established principles of legal justice must be " reconstructed," before they will suffer such a defense to avail against the payment of a just debt.
A plain distinction exists between acts simply without authority, and those which are forbidden by law; the former may be without right; the latter can be done not only without right, but only in the commission of a positive wrong. This case belongs to the latter class. Nor was this a single instance. The record shows that the entire business, carried on in the corporate name, was done in violation of law. It is not, therefore, necessary for us to determine in this case whether those acting for a corporation, duly organized and authorized to do business, are personally liable for every obligation incurred in violation of its charter, or of the law of the state; much less is it necessary to consider whether they are so liable when they simply transcend the corporate authority.
Without undertaking to determine how far the principle may be extended, it is decisive of this case to hold as we do, that where the entire business, carried on by persons in the name of a corporation, is such as the corporation is prohibited by law from doing, they can not interpose the corporate privileges between them and the liabilities which the law imposes upon individuals in the transaction of similar business without the use of the corporate Dame.
It by no means follows that.all the subscribers to the stock of the corporation are personally responsible for the debts contracted in the transaction of such business; for that is not the legal import of the-subscription contract, and the business may be thus carried on without the knowledge or participation of all the stockholders. The law would imply that they alone assumed the liabilities of such business who engaged in it, or who authorized or sanctioned it.
Applying this principle to the facts as disclosed by the record in this case, it can not be doubted but that the business, carried on in the name of the corporation by some of *the defendants, was fully understood, authorized, and sanctioned by all.
The transaction with the plaintiff was but a part of an entire business, and must, therefore, have been as fully authorized as any business done in the name of the bank. It was carried on through a series of years; and during its progress the stockholders elected directors to carry on this very business, as it must be presumed, since it was the only business it did, or attempted to do.
It follows that the judgment of the court of common pleas must be reversed. But, as it is insisted by counsel for the defendants that there are facts rendered material to some of the defendants under the conclusion to which we have, come, not shown by the record; and as it is left doubtful by the record whether some of the defendants were members of the association when the indebtedness to the plaintiff was incui'red; and as it is desired to bring in the representatives of deceased parties and make them parties to the record; on motion of the defendants, the cause is remanded to the court of common pleas for further proceedings, trial, and judgment.
Scott,C. J., and White, Welch, andBmtiKERHOEE, JJ., concurred.