Court Opinion

ID: 7185195
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:51:50.556279+00
Date Added: 2024-06-11T16:16:02.912524
License: Public Domain

Spofrord, J.,
dissenting. I take it to bo well settled that the misuse and abuse of corporate functions in Louisiana, as at the common law, are sufficient grounds upon which to declare the forfeiture of an act of incorporation. Indeed such is the express provision of Art. 438 of the Civil Code.
It is also settled, that it is a tacit condition of every act of incorporation, and that the violation of the tacit condition is a ground of forfeiture. The State v. the New Orleans Gas Light and Banking Company, 2 R. 522; Angel & Ame’s on Corp. 510.
Whether a corporation, in a particular place, has violated this tacit condition upon which it was created, is a judicial inquiry, the solution of which depends first upon the object or end of the corporation, and secondly upon the mode in which the corporators have carried out their end, in other words, upon the proven facts of the case.
The object of a savings institution is not to enrich the corporators, or to provide them funds to speculate upon, but to benefit the poorer classes of society.
The preamble of the act in this case, intimates its design, “Experience having proven that savings institutions have been productive of great benefit to the laboring classes, by inducing habits of economy and industry, therefore bo it enacted, &c.
The charter and the by-laws, in this case, show that inducements wore held out to people of small means, to deposit their savings in sums from one dime upwards, with the corporation, upon the assurance that funds so deposited should be secured in the most ample manner; should be returnable on call or at a fixed period, as agreed upon at the time of the deposit, and pay an interest of three per cent, on sums deposited for a time longer than sixty days, five per cent, for a time between three and six months, and five per cent, for a longer period than six months.
It was therefore implied among the conditions of the continuance of the franchises of this company, that they should conduct their affairs with economy, prudence and skill, sufficient to ensure the safety of the entire capital deposited with them as a sacred trust, and to pajr continually, and at the times stipulated in their contracts with depositors, the principle and the conventional interest. Any course of management which, after a fair and reasonable trial, should show that all this was not secured to the beneficiaries of the corporation, would justify a revocation of the grant for misuse, or for a violation of its implied conditions.
And now for the facts. After being about two years in operation under this charter, the directors of the Louisiana Savings Company published, in the gazettes of Now Orleans, the following notice:
“ The Commissioners of the Louisiana Savings Company are constrained to say that, after due consideration, they deem it their duty to place in liquidation, the affairs of the institution. We pledge ourselves that the assets shall be faithfully appropriated.
*575“ The liabilities of tlio company do not exceed $50,000'- T&ffassots will roa-lize about $45,000, although they are nominally more.
(Signed) R. L. Robektson, President., pro tem.
J. N. Phillips, Treasurer.
New Orleans, March 3d, 1856.”
On the 5th of March, a carefully prepared statement was published', which was intended to assure the public that the insolvency was not so great as admitted by the previous notice. But in this statement, it is now proven by the company, that there was a remarkable error. Among their assets they classed a claim on Win.- IT. Garland, for over-draft, $1,542, which the treasurer testifies was a mistake, and that so far from being a creditor of Garland, the company owed him at that time, in cash, an amount of which is not stated.
The twelve bonds of the city of New Orleans, would seem to have boon put in the list of assets' at $12,000, when it is well known that they never were at par, and the record shows that they had once been pledged to the Bank of New Orleans for a credit of only $10,000. Counting those bonds at their market value, which certainly did not depreciate in the hands of the company, and deducting the erroneous claim against Garland, it appears that the assets of the company were, at the most favorable estimate?, five thousand dollars less than their liabilities to depositors, exclusive of interest, house rent and the balance due Garland. The statement made by the directors on the 3d of March, that the institution was insolvent, is thus proved to have been true, after the more mature examination published on the 5th. This insolvency was not denied in the answer, and it is not pretended that, at any time since, the assets have become equal to the liabilities. Indeed the appellant’s counsel, in his printed argument, has stated that “ The directors must have made good the deposit, in their assets, out of their private funds,” in other words, the corporation borrowed from Peter to pay Paul. This of course, could not change the real pecuniary condition of the company. But the step was taken, after a deliberation of several days, when the directors changed their minds, and concluded that they would rescind their resolution to go into liquidation, and endeavor to resume the corporate franchises which they had for a time, abandoned.
They therefore gave notice that the institution would “resume business, and meet all its engagements, whether for its deposits on time or on call.” Accordingly it is stated, that up to the time of trial in the court below, it had continued to receive deposits and pay claims on demand.
This was relied'on, as the sole reason why the. charter should not be forfeited.
It may be conceded, that if the resolution to go into liquidation on account of the acknowledged inadequacy of the assets to meet the liabilities of the company, was based upon a mistake as to that vital fact, the suspension for a week would not work a forfeiture. But if there was no mistake as to that fact, I apprehend that the company could not be permitted to play fast and loose, to suspend and go into liquidation one week, and then to resume upon a borrowed capital, with the hope of working out of embarassment and real insolvency by fortunate investments or speculations.
And that is precisely what I understand the company contends it had a right to do. Eor it is not pretended that the assets of this company have everequalled its liabilities- It has had a trial of about three years, surely a trial *576süfficiently long to test its capacity; no showing of any bétteí condition than an ability to pay ninety cents on the dollar, (upon a full statement) has beeri made by the company. Indeed it is argued, in thé printed argument, filed on its behalf, as a reason why indulgence should be extended to it, that a judgment of forfeiture now, “would involve in losses consequent upon the liquidation all the depositors and others connected with this institution.”
xVnd it is not shown that any temporary or inevitable misfortune produced this disastrous result. No depreciation of property is pretended to have occurred. The suspension is now attributed to the panic created by the flight of its President, Ga/i'lamd, for alleged defalcations. But,"at the time, it was attributed to the inadequacy of the assets to meet the liabilities, an inadequacy which it amply proved in this record. There was no mistake as to that fact, and the only mistake the directors made at the time, was that they had a claim on Garland, when Garland, had a claim on them; that is, they supposed the institution to be better off than it turned out to be. The repeated mistakes as to this account, shows that the business was, to say the least, negligently conducted.
After a fair and reasonable trial, I do not think this corporation has shown that it is in a sound and healthy condition, so as to meet the public wants out of its own resources. The commendable liberality of some of the directors, ( who are not individually liable to the depositors,) in loaning- to the company the means to resume payment lor the time being, does not require that its life should bo prolonged, in order to give them an opportunity to reimburse themselves by anticipated profits. An institution whose assets, after two years’ operation, can only pay ninety cents in the dollar to its intended beneficiaries, but real benefactors, is not such a “savings institution” as was contemplated by the Legislature. It fails to satisfy the object of its c'reafio'n, and, in my judgment,- should be dissolved.
I therefore, think the judgment of the Third District Court should be affirmed.
Mi’. Justice Toorhies, concurred in the above dissenting opinion of Mr. Justice Spofford.