Court Opinion

ID: 6413295
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:54:17.813291+00
Date Added: 2024-06-11T15:51:26.813030
License: Public Domain

Bigelow, C. J.
The authority of this court to issue an injunction against a bank on the application of the bank commissioners, and to make such injunction perpetual, as set forth in Gen. Sts. c. 57, § 7, is very broad and comprehensive. It is not limited to cases where the corporation is insolvent, or its further continuance in business will be hazardous to its creditors, but extends to all cases where a bank has exceeded the powers conferred on it, or has failed to comply with any of the rules, restrictions or conditions provided by law for its regulation and management. Nor is the nature of the injunction which the court is empowered to issue in such cases defined or limited by any legislative restriction. This is left to be determined by a sound judicial discretion. It may be absolute, and restrain a corporation from the exercise of all its powers; or it may be partial, prohibiting only such acts as may be hazardous and unlawful. And, upon a hearing of the corporation, the preliminary injunction may be dissolved, modified or made perpetual, or the court may pass such orders and decrees to suspend, *9restrain or prohibit the further prosecution of the business of the corporation as may be needful to insure the safety of the public or the creditors of the bank against loss, or to compel the corporation to keep within the sphere of its legitimate functions and duties, and to comply with the various provisions of law enacted for the due management of its business. The object of conferring this very extensive jurisdiction in equity over this class of corporations is obvious. The nature of the important powers and duties with which they are intrusted renders it expedient and necessary that they should be subjected to a careful supervision, and that any irregularity or illegality in their mode of conducting business should be promptly checked and prevented.
The allegations in the information before us, on which the bank commissioners now seek to restrain the actions of the defendants, are three. The first and most prominent one is, that the officers of the corporation have violated the provision of Gen. Sts. c. 57, § 19, in failing to keep in the bank an amount of specie equal to fifteen per cent, of its liability for circulation and deposits. This allegation is supported by proof that from October 8 to November 16, 1861, on seven different days, the specie in the bank fell below the required amount of fifteen per cent., so that on those days the amount varied from about four per cent, to a little over thirteen per cent.; on one day falling as low as four, and on another day only to about thirteen per cent, of the liability for circulation and deposits. It is contended on the part of the defendants that this proof of the allegations contained in the information shows no infraction of the law ; that the statute does not require the corporation to keep on hand a daily or constant reserve of specie of any specified amount; that the requisitions of the statute are fully complied with if it appears that the bank has had a weekly average of specie equivalent to fifteen per cent, of the amount of its liability for circulation and deposits; that it is wholly immaterial to inquire whether on any specific day or days in the course of a week the specie in the bank has fallen below the given standard, if it is shown by the weekly returns, which the bank is required to *10make in pursuance of the provisions contained in Gen. Sts. c. 57, §§ 93, 94, that the average of specie on hand during the previous week has been equal to the percentage required by law. It is on this view of the meaning of the statute that the defendants rest their defence to the first allegation in the information. They do not contend that their omission to have on hand the amount of specie designated in the statute has been the result of accidental circumstances, or has arisen from any unforeseen exigency or unexpected demand on the resources of the bank. On the contrary, they insist that it is the legitimate result of a mode of conducting their business which does not in any respect contravene the statute regulating the specie reserve of the bank.
From this statement of the question at issue between the parties under the first allegation in the information it is manifest, that the difference between the construction put on the statute by the defendants, and that on which the commissioners rely, is wide and essential. It is a difference which does not touch merely the form of doing business, or the mode in which a specific result is to be attained; but it goes directly to the substantial principle on which the affairs of a bank are to be administered. If the interpretation for which the defendants contend is correct, then it would seem to follow that the banks of this commonwealth, instead of managing their business in such a way as to render it practicable and certain that they will keep from day to day in their possession and control a specific amount of specie, which shall not fall below a certain definite proportion of their liabilities, and with which they shall be ready at all times to respond to the claims of their creditors, may continue their loans and discounts and enlarge their circulation even to the extreme limits allowed by law, without reference tc the amount of specie kept by them, if they are able to make it appear, by borrowing specie for the purpose, or by a temporary purchase of it, or in any other way, that their specie average for the week previously, if the bank is situated in Boston, or if elsewhere, then for the month previously to the making of their weekly or monthly returns, has been equal to the sums which the statute requires them to keep.
*11What then is the true interpretation of this clause of the statute ? If the words are to have their literal signification, and are to be construed by themselves as containing a separate and distinct mandate without reference to the subsequent provision in the same section, there is no room for doubt as to their true intent and meaning. “ Every bank shall keep in the bank an amount of specie equal to fifteen per cent, of its liability for circulation and deposits.” This is a plain and unequivocal requisition. Unless modified by the clause which follows, it imposes the duty on every bank of having on hand in its banking-house the prescribed amount of specie. The word “ keep,” in the connection in which it stands with the residue of the sentence, can have no other interpretation than that given by lexicographers. It means to hold, retain, reserve, or have in possession and control. Indeed, the defendants, in the very able and ingenious argument which has been presented through their counsel, do not deny that such would be the true construction of this provision if it stood by itself, with nothing to modify or restrict its meaning. But they urge, with great force and plausibility, that it is to be construed in connection with the clause which follows it, by which it is provided that when it appears by the weekly or monthly returns which banks are required to make to the secretary of the Commonwealth, that “ the weekly or monthly average of specie required thereby to be returned by a bank is less than that amount, such bank shall make no new loans until its specie is restored to such amount.” The argument is, that this clause by implication recognizes the right of a bank so to conduct its business as to reduce its specie below the designated percentage, because a weekly or monthly average of specie to a certain amount necessarily presupposes that at some time during the week or month it must have fallen below the given standard. But we cannot think that any just canon of interpretation will warrant us in construing this clause as intended to modify and essentially change the previous clearly expressed requisition of the statute. It is difficult to believe that the legislature would have enacted an explicit and unambiguous mandate by which banks were required to keep a specific amount of specie on hand. *12if they intended only to require that by their weekly or monthly returns there should appear to be a certain average of specie in each bank. The requisitions are certainly essentially different from each other. If the latter was in contemplation by the framers of the statute, it would have been easy to express it in direct and unmistakable terms, without resorting to an obscure circumlocution, which leaves their meaning in great doubt and uncertainty. But it seems to us that this latter provision was inserted with no design to alter the previously declared rule regulating the specie reserve. It had a different object. It placed a direct prohibition on the officers of the bank, restraining them from making loans and discounts until the deficiency of specie was made up. Its purpose was to provide a means by which to enforce the rule of keeping the specie up to the prescribed limit; not to modify or alter it. Such a provision was the more necessary, because the actual condition of the bank as to specie might not be known to directors, by whom loans or discounts are usually made, unless it was required of them to ascertain it, by examining the returns of their president or cashier, before extending the liability of the bank by additional loans. But all doubt concerning the meaning of this clause is put at rest by a consideration of the extent of the prohibition restraining discounts. It is not limited to a time when the bank is in such condition that its weekly or monthly average of specie will reach to the requisite amount. This would be the limit, if only an average of specie was required. But it extends until “ the amount of specie shall be restored to the proportion of fifteen per centum of its aggregate liability for circulation and deposits.” This is the express language of Si. 1858, c. 69, § 1, from which the provision in Gen. Sts. c. 57, § 19 is taken. This clearly shows that the normal and legal condition of a bank, which the statute was designed to secure and preserve, and to which it is to be restored in case of deficiency, is, that it shall have on hand a reserve of specie equal to the amount designated in the statute.
Nor are we able to see that any other construction of the language of the statute would cony out the object which the *13legislature intended to accomplish by these provisions. The title of the original statute is, “ An act to increase the amount of specie in the Commonwealth.” This purpose could be effected only by adopting some measure which should compel banking corporations to hold in their possession and control a constant specie reserve, and thus to carry into practical operation the theory of a financial system based on specie, and a currency redeemable at all times in coin. It certainly is difficult to see how the intention of the legislature, as declared in the title of the act, could be promoted by requiring of banks only the appearance or show of a weekly or monthly average of specie. If such is the true construction of the statute, a bank may conduct its business without keeping on hand any definite amount of specie in proportion to its liabilities. Its transactions may rest almost exclusively in paper. It may own or possess but a very small sum in coin. It can comply with the statute by having on. hand for a single day in a week or month sufficient coin to make up the required average in its returns; and this amount may be procured for the purpose by borrowing or a temporary purchase, to be restored or resold as soon as the return is made, instead of being kept as the property of the bank, and forming a part of the specie basis, on which the banking system of the Commonwealth is intended to be founded. If the language of the statute were more ambiguous than it really is, we should be slow to give such a construction to it as would lead to a result so much at variance with the manifest design of the framers of the act.
It is urged in behalf of the defendants that, as the business of a bank, however cautiously and prudently conducted, is of a nature to expose it to unusual and unexpected demands for specie, either to redeem its circulation or to answer the calls of depositors for coin, and as a sudden and large increase of deposits may, at any time, cause the specie kept in reserve to fall below the required percentage, a literal compliance with the requisition to keep on hand fifteen per cent, of its liabilities would be impracticable. Doubtless there may be cases where an emergency may arise, which could not have been anticipated, *14by which a reduction in the amount of specie below the given standard might temporarily occur. But such deficiency, if promptly supplied, would not be deemed an infraction of the statute, if it was made to appear that it was the result of accidental circumstances, and that the business of the bank was so managed as in the ordinary course of its operations to keep in its vaults the required amount of specie. This would be a sub stantial compliance with the requirement of the statute. Noi are we able to see why a bank may not conduct its affairs in such manner as to have in its possession a specified amount of specie, as well as to maintain a prescribed average. An unu suai demand might reduce this average in like manner as the same cause would operate to diminish a certain percentage below the required amount. The argument applies with equal force to either view of the statute, and as an argument ah inconvenienti is not entitled to much weight.
These views of the construction to be given to the statute have led us to the conclusion, that it imposes on a bank the obligation of keeping on hand a sufficient amount of specie for the ordinary demands of its daily business, and also a reserve of fifteen per cent, on its liabilities for circulation and deposits, after meeting and discharging those which are presented for liquidation and payment. As the defendants do not show that their omission to have this amount of specie in their keeping, on the days when it is shown to have fallen below the given standard, was the result of any unexpected demand on them by their creditors, but, on the contrary, that it was caused by a course of business conducted with a view to keep only a weekly average of specie to the amount designated in the statute, it follows that they have violated the statute; and on this point the allegations in the information are sustained.
The remaining allegations in the information, which are now insisted on, may be briefly disposed of. The right of a bank to borrow money from another bank is nowhere expressly prohibited. On the contrary, the right to do so would seem to be recognized in Gen. Sts. c. 57, § 26, by which it is expressly provided that debts due from one bank to another, including bills of the *15bank indebted, shall not be considered as within the prohibition of § 25, which limits the indebtedness of a bank to twice the amount of its capital stock, exclusive of sums due for deposits not bearing interest. The only restraint on the power to contract such a debt is contained in § 63 of the same chapter, which provides that no bank shall make any contract for the payment of money at a future day certain, or with interest. This language is certainly broad enough to cover a contract by one bank with another to pay money at a future day. That it was intended to include such contracts is strongly implied from the exception to the prohibition, by which it is provided that “ all debts due to one bank from another may draw interest.” The conclusion would seem to be inevitable that the legislature, in making this provision, had in view debts due from one bank to another, and intended to bring them within that part of the section which prohibits them from being made payable on time, but to exempt them from the prohibition of drawing interest. We can see no sufficient reason for limiting this exception to any particular class of debts existing between banks. It is applicable to every species of indebtment which may lawfully be due from one bank to another. It was suggested by the counsel for the defendants that in Faneuil Hall Bank v. Bank of Brighton, 16 Gray, , this court had given such construction to this provision of the law as to authorize a bank to borrow money from another bank payable at a future day. But this is a misapprehension. No question arose in that case as to the right or power of one bank to borrow money from another bank. The point there decided was, that a draft drawn by one bank' on another, payable at a future day, was not on its face unlawful, because there might be transactions between banks, creating balances due from one to another, which might well authorize the making of drafts on time. But there was nothing in that case which tends to sanction the creation of a debt by the borrowing of money by one bank of another payable at a future day. So far, therefore, as the defendants entered into contracts by which they borrowed money of another bank payable at a fixed time, they violated the law; but beyond this the allegation *16in the information, setting forth that they borrowed money of other banks payable with interest, in violation of the statute, is not sustained.
The only remaining ground on which it is claimed that the defendants have acted contrary to any of the requirements of the statute, is, that they have delivered their bills to other banks for specie lent, with an agreement that they should not be returned for redemption until after the expiration of a certain number of days. This transaction was in direct contravention of the express provisions contained in Gen. Sts. c. 57, § 67, which impose a penalty on any bank “ which loans or issues any of its notes or bills with an .agreement or understanding that they shall not be put into immediate unrestricted circulation, or that they shall not be returned to the bank within a limited time.” On language so clear and explicit we cannot engraft exceptions derived from the supposed causes which originally gave rise to the enactment.
In considering the decree which ought to be passed in the case, it has seemed to us that, as the acts of the defendants, so far as they were contrary to law, were done under a mistake or misapprehension of the provisions of the statutes, and with no intent to commit a wilful violation of the enactments for the regulation of banks; and as no other or further similar acts are threatened or intended by the defendants, the further prosecution of this suit is not required in furtherance of justice, or to enforce a due observance of the laws. We therefore are of opinion that, on payment of costs by the defendants, the injunction heretofore granted should be dissolved, and further proceedings in the case discontinued. Decree accordingly.