Court Opinion

ID: 6407528
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:50:07.503478+00
Date Added: 2024-06-11T15:51:15.739409
License: Public Domain

Morton J.
delivered the opinion of the Court. This is a bill in equity by one of the creditors of the Chelsea bank against a part of the stockholders, to recover of them indi*339vidually, the amount of two bank notes of $ 1000 each. To this bill some of the defendants have filed pleas, and others have demurred. Several questions were started in relation to the state of the pleadings, and some doubts occurred whether the bill could be maintained at all in its present form. But as these subjects were not fully discussed, we have not deemed it proper to investigate them, and not having formed a decisive opinion, we will not give any intimation in relation to them. With the aid of the great liberality always allowed in chancery proceedings, it may, even without investigation, be assumed, that any defects in form may, in the progress of the suit, be remedied.
Two questions, which arise upon the demurrer, and lie at the foundation of a recovery by the creditors of the bank against its stockholders, have been fully and abljr argued. And as their decision will speed the final termination of the controversy, whatever form the claim may eventually assume, we have carefully considered them and agreed upon a result, which I will state, with some of the reasons which have led us to it.
The plaintiff, in support of his bill, relies upon the 31st section of the 36th chapter of the Revised Statutes ; which provides, that “ the holders of stock in any bank, at the time when its charter shall expire, shall be liable, in their individual capacities, for the payment and redemption of all bills which may have been issued by said bank, and which shall remain unpaid, in proportion to the stock they may respectively hold, at the dissolution of the charter.” It is not necessary to stop here to remark, that this provision is extremely general, and that much is left to implication, in relation, not only to its import, but especially to the mode of carrying it into execution. It is not even stated to whom the stockholders shall be liable, whether to the corporation, by assessments to raise .the funds for redeeming the outstanding bills, or directly to the bill-holders, in a bill in their own names. And if the latter remedy be intended, it does not appear, except by inference, whether the actions are to be joint or several, in equity or at law. If the stockholders are liable to suits, it is very obvious that a bill in chancery is well adapted to the case and will lie.
This bank was incorporated April 16th, 1836, to continue *340till October 1st, 1851, and has not expired by its own limitation. St. 1836, c. 274. On the 19th of April, 1837, the legislature passed an act repealing its charter. St. 1837, c. 225. This, if it has the force and operation of a law, terminated the corporate existence of the bank long before the expiration of the term for which it was granted. But the validity of this act is disputed. Its constitutionality is denied ; and this raises the first and most important question which we are called upon to decide.
That a charter of incorporation is a contract between the government and the corporators, is a proposition which seems to be fully supported by the highest judicial authorities. 2 Kent’s Comm. (3d ed.) 272, 306 ; Dartmouth College v. Woodward, 4 Wheat. 518 ; Charles River Bridge v. Warren Bridge, 7 Pick. 344. That it is exempt from the ordinary action of legislative power, beyond the reservations, express or implied, contained in it, is equally well supported. In other words, the government can rightfully do nothing inconsistent with the fair meaning of the contract which it has made. If therefore the legislature grant a charter for a definite period, they cannot at their will and pleasure revoke it. This comes within the prohibition of the 10th section of the 1st article of the Constitution of the United States, But it is not necessary further to discuss these general principles, which are not in controversy between the counsel, and which will furnish very little aid in the decision of the question under consideration. That depends upon the proper construction of the several statutes to which I am about to refer.
The Chelsea bank charter expressly entitled it “ to all the powers and privileges,” and subjected it“ to all the duties, liabilities and requirements contained in the 36th chapter of the Revised Statutes.” By that chapter, and by the terms of the charters granted after the enactment of these statutes, all the banks in the Commonwealth are put upon the same legal and constitutional footing. The limits of the powers and duties of all must be found in that chapter. It was intended to regulate the banking operations of the Commonwealth, and virtually constitutes the charters of all the banks.
It is not disputed that the contract with the corporators of *341the Chelsea bank must be defined by this act. Indeed it derives all its powers from this source. The 40th section contains very important reservations applicable to this and other bank charters, which have been relied upon by the plaintiff’s counsel. It contains a reserved right to the legislature, by its committees, to examine into the doings and the vaults and books of all the banks, and for certain specified causes, to declare any of their charters forfeited. To the constitutionality of this reservation it is objected, that although a charter may be forfeited for many causes, yet the declaration of a forfeiture is a judicial act, which by the thirtieth article of the Bill of Rights the legislature is prohibited from exercising.
The objections of the defendants’ counsel to this section, are entitled to grave consideration, and we perceive great difficulty in the proper construction of it. But we do not think it necessary, in this case, to give any opinion upon it. The 2d section of the 36th chapter expressly provides, that each bank shall be entitled to all the powers and privileges, and be subject to all the liabilities contained in the 44th chapter. As all the revised statutes were enacted at the same time and came into existence by the same legislative fiat, by a well known rule of construction they must all be considered together and construed as one act. And when the Chelsea bank charter is expressly made subject to the provisions of the 36th chapter, which refers to the 44th, it must be taken to be subject to the same rules of construction which govern in all other cases. Nothing can be plainer than the intention of the legislature to place all the banks upon an equal footing.
The last section of the 13th title, upon the subject of corporations, is general and manifestly applies to and governs all the preceding regulations upon the subject, as much as if it had been repeated at the end of each chapter. No one doubts that it applies to banks. It provides, that all acts of incorporation passed after a certain time, “ shall, at all times, be subject to amendment, alteration or repeal, at the pleasure of the legislature ; provided that no act of incorporation shall be repealed, unless for some violation of its charter or other default, when such charter shall contain an express provision limiting the duration of the same.” This section constitutes a part and *342must govern the construction of the contract with the Cueisea bank, as much as if it had been recited verbatim in its charter. Upon the import of this language must depend the repealing act. Whatever may be its meaning, the corporators have directly agreed to it by accepting their charter, of which this was a constituent part.
We think there can be no doubt of the right of the legisla ture to make such a contract. Their power to make an unlimited charter, without some such reservation, express or implied, so as to bind their own and their successors’ constituents forever, we apprehend, would be more liable to be questioned. How far they might part with any portion of sovereign power, irrevocably, beyond the recovery of the people themselves, we have no occasion to inquire.
' The making of grants of real and personal estate, of franchises and other rights and privileges, whether strictly speaking it may be deemed legislation or not, is undoubtedly within the competence of our legislative body. The power has always been exercised by them, and undoubtedly is more safe in their hands and falls more appropriately within their province than any other department of the government.
If they have a right to make grants, they of necessity must prescribe the terms -upon which they shall be made. If the) may limit their duration, they may also impose other restrictions. They may determine how much or how little, bow large or how small, an estate or franchise, they will grant. They may grant absolutely or on condition ; so they may grant during pleasure, or until a certain event happens. And if a grant be accepted on the terms prescribed, it becomes a compact ; and the grantees can have no reason to complain of the execution of their own contract. And Chancellor Kent, though with some appearance of reluctance, (2 Kent’s Comm.. 306,) says, “if a charter be granted and accepted, with that reservation, there seems to be no ground to question the validity and efficiency of the reservation.” Angell & Ames on Corp. 504.
The case of M' Laren v. Pennington, 1 Paige, 107, is a strong case to this point. The legislature of New Jersey granted a bank charter, for which they received a bonus of $ 25,000. In the act of incorporation, they reserved the *343power to alter, amend or repeal it. The bank went into operation, paid its bonus, and in less than one year, a shorter time than the Chelsea bank continued, the legislature deemed it necessary to intérfere and actually repealed the charter. This, upon fui' consideration, was adjudged to be a valid re peal. It was contended that the reservation was repugnant to the grant, and therefore void. But this ground was, distinctly overruled by the chancellor ; who said, this reservation “ is not a condition repugnant to the grant; it is only a limitation of the grant.”
Had the proviso to this section been omitted, this charter might have been amended, altered or repealed, “at the pleasure of the legislature ; ” but the defendants’ counsel argue that the proviso not only restricts the power to repeal, but entirely takes it away, because t,he inquiry whether the bank has violated its charter or committed any default, is a judicial act, and therefore cannot constitutionally be performed by the legislature. The effect of this argument is to raise banks above the control of the legislature, and place them and all corporations with limited charters, upon a different basis from other corporations.
All acts of incorporation are supposed to be granted with a view to the public welfare, as well as to promote private interest and individual enterprise, and therefore it is to be presumed that the legislature, when charters are holden at their pleasure, will not repeal them capriciously, nor without due inquiry into all the facts, and satisfactory evidence that they have ceased or failed to accomplish the objects, for which they were established. In such case, the exercise of the reserved power to repeal, could not be vitiated or invalidated, because, the legislature investigated the case to see whether it was reasonable to exercise the power before they actually repealed a charter.
The true question-is whether the legislature can in any case repeal an act of incorporation granted for a term of years. Any charter may be forfeited by a violation or for other sufficient cause ; and on a proper process a judgment of forfeiture might be decreed. But this would be a judicial act and might be done without the concurrence, and against the will of the leg*344islature. It is entirely independent of and unconnected with the power to repeal.
But the legislature clearly intended to reserve the power to discontinue corporations, not only for violations of their charters, but also for other defaults; which must mean, if-any thing-, some acts short of violations, but which were inconsistent with, if not subversive of the ends for which the corporation was established.
They reserve the power to repeal at pleasure, provided that on certain charters, they will not exercise it, unless the corporations have committed some default. If a default has been committed, then, by the express terms of the compact, they have a right to exercise the power. They have exercised it, and therefore by the courtesy and confidence, which is due from one department of the government to another, we are bound to presume that the contingency, upon which the right to exercise it depended, has happened. Nor is the objection that the legislature had no power to inquire into the existence of the contingency, valid. If any man or body of men is invested with power to do a certain act upon the occurrence of a certain event, when the event happens they have a right to perform the act, and the most that can be urged against zit is, that if it be exercised before the event happens, it is void. And this is true by whomsoever the fact is to be ascertained.
But we do not believe that the inquiry into the affairs or defaults of a corporation, with a view to continue or discontinue it, is a judicial act. No issue is formed. No decree or judgment is passed. No forfeiture is adjudged. No fine or punishment is imposed. But an inquiry is had in such form as is deemed most wise and expedient, with a view to ascertain facts upon which to exert legislative power; or to learn wheth er a contingency has happened upon which legislative action is required.
This is the constant and necessary course of proceeding, not only in relation to private and special acts, but also to many public acts. In granting new charters, or enlarging, modifying or renewing old ones, and in a large portion of ordinary legislation, it is the duty of the legislature to inquire and ascertain, whether existing facts render their action expe*345dient or necessary. These proceedings, though they bear some resemblance to, and have in view the same general object, the ascertainment of truth, yet in no proper sense can they be called judicial acts.
It is indispensable that this inquiry should, in the first instance, be made by the legislature. No other body can do it for them. They have restricted themselves from exercising the power of repeal, until a certain event happens. This they must necessarily ascertain before they can properly exercise the power. Their decision must, primâ facie, be presumed to be right. Whether it be conclusive or not, is a question which it is not necessary now to determine.
From a careful examination of the whole subject, my own opinion is, that the true construction of the 23d section is this. The legislature reserve to themselves the right to amend, alter and repeal, at their pleasure, all acts of incorporation, passed after 1831, provided that they will not repeal any such act, granted for a term of years, without ascertaining to their satis faction that the corporation has violated its charter or committed some other default. This restriction is imposed upon the legislative will, and the corporators confide in the wisdom and justice of the legislature not to exercise the power unless the facts clearly authorize and require them to do it. This is not an unreasonable confidence. It is to be recollected, that this restriction applies only to a total repeal, and not to an alteration or amendment, which they may exercise at pleasure in limited as well as unlimited corporations. Now if corporators are willing to accept charters with an unlimited power to amend or alter, why should they hesitate to accept them with this guarded and restricted power to repeal ?
In whatever light, therefore, I view the subject, I am satisfied that the legislature had the power to repeal the Chelsea bank charter, and that their act of April 19th, 1837, was valid and effectual to repeal the act by which the bank was established.
We are next to inquire what consequences ensued upon this repeal of the charter. By Revised Stat. c. 44, § 7, it is proxided, that all corporations, whose charters shall expire or be annulled by forfeiture or otherwise, shall be contbued bodies *346corporate, for certain purposes therein mentioned. The object of this section is to authorize them to collect their dues, ' to dispose of their property, to pay their debts, and to distribute their capital stock ; but not to transact any business other than what is necessary to settle and close their concerns.
It is argued for the defendants, that the stockholders are entitled to three years, after the repeal, to close the affairs of the bank, before they are liable for the bills which the corporation has refused to pay. The provision in the 31st section is, that those who are stockholders ivhen the charter expires, shall be liable. If the charter could not be said to expire till three years after its repeal, it would furnish the stockholders of an insolvent bank with ample opportunity to dispose of their stock to individuals wholly unable to redeem the bills, and thus avoid their responsibility and render this important safeguard for the public nugatory. The bills outstanding at the time of the dissolution, are to be paid ; and the amount is to be apportioned among the stockholders according to the amount of stock held by each at the time of the dissolution.
When the charter is repealed, it has ceased to have force as a charter. It has expired. This is its dissolution. The corporation derives no power from it. It cannot carry on business. It exists by virtue of the 7th section, and that gives it force only for certain, definite, specific and limited purposes. This qualified prolongation of the existence of the corporate body, is in the nature of an administration of its estate. All rights under the defunct corporation were fixed at its dissolution. But it has a nominal existence for the purpose of closing its concerns in the most convenient manner, and especially of compelling it to execute its contracts and discharge its obligations and liabilities. Foster et al. v. Essex Bank, 16 Mass. R. 245.
The result to which our investigation has brought us is, that the repealing act is constitutional and valid ; that by force of it the charter of the. Chelsea bank expired and was dissolved on the 19th of April, 1837, within the meaning of the 31st section before cited, and the bill-holders and other creditors of the bank, from that time became entitled to all the remedies against the officers and stockholders, provided in the 36th chanter of the Revised Statutes.