61 N.Y.S. 85 | N.Y. App. Div. | 1899
The elaborate and exhaustive opinion of the learned tidal justice (Barnes v. Arnold, 23 Misc. Rep. 197) would render a further decis
As has been suggested, the Merchants’ Bank was organized unde, the statutes relative to banks, as the same were revised by chapter 409 of the Laws of 1882, and the liability of its stockholders, if any was fixed by section 125 of thak act, which reads as follows, viz.,: “Whenever default shall be made in the payment of any debt or. liability contracted by any corporation.or joint-stock association, for banking purposes,- issuing bank-notes, or any kind of paper'credits-to circulate as money, the stockholders of such corporation or association shall be individually responsible, equally and ratably, such' responsibility to be enforced as hereinafter provided and in no other manner, for the amount of such debt or liability, with interest, to the extent- of their respective shares of stock in any such corporation or association, as hereinafter provided.”
Ten years later the Banking Law was again revised and as the result of such revision the-provision relative to. the stockholders’’ liability was so far modified as to declare that: “ Except as prescribed in the stock corporation law, the. stockholders of every such corporation shall be individually responsible, equally and ratably, and not one. for another, for all contracts, debts and engagements of such corporation to the extent of the amount of their stock therein at the par value thereof, in addition to the- amount invested in such shares * * (Laws of 1892,- chap. 689, § 52.)
This law went into effect on the nineteenth day of June after its ■enactment, which was a little more than two years subsequent to the organization of the Merchants’ Bank, and consequently, the vital question which presents itself at the threshold of this case is, whether the effect of the act of 1892 was to impose a new liability upon the stockholders of a bank already existing, and if so,.whether the crea
It was said by the Court of Appeals in a recent decision that while the act of 1892 did change in some respects the methods of enforcing the liability of stockholders in banks, it did not change the essential character of such liability from what it was under the statute of 1882; that under both acts stockholders are liable to the same extent, and that the change in the method of enforcement is not the creation of a new liability. (Hirshfeld v. Bopp, 145 N. Y. 84.)
It is insisted, however, that the learned judge who delivered the cpinion in the case just cited overlooked the distinction, which undoubtedly does exist, between these two statutes, one of which apparently' restricts the liability of stockholders to banks of issue, while the latter imposes the liability upon stockholders of every banking institution, without reference to its being a bank of issue; and it is argued that for this reason the decision is deprived of the force and authority which it would otherwise possess. But whether the language to which reference has just been made may be regarded as an adjudication of the constitutionality of the act of 1892, or as a mere dietum, it was asserted by the Appellate Division of the first department, upon a review of the same case after a ■ second trial, that it contained a correct-statement of the law, although such assertion was based upon reasons different from those assigned by the ‘Court of Appeals. (Hirshfeld v. Bopp, 27 App. Div. 180.)
The case was subsequently reversed by the Court of Appeals, but such reversal left the question we are now considering undisturbed. (S. C., sub nom. Hirshfeld v. Fitzgerald, 157 N. Y. 166.)
It may be assumed, therefore, for the purposes of this review, that the act of 1892 did create a new liability and one which, so far as the defendant stockholders are concerned, did not theretofore exist, inasihuch as the Merchants’ Bank-was not a bank of issue. It may also be assumed that when the stockholders of the Merchants’ Bank accepted the privileges and franchises extended to them under the general laws of the State they entered into a contract with the State' which was as inviolable as one created by special statute. (Matter of Lee's Bank, 21 N. Y. 9.) And, with this much settled, we come at once to the question of whether or not the additional lia
, But it seems to us that it is not necessary .to have recourse in this instance to what is termed the “ reserve power ” of the Legislature, for the reason that- the right to alter and amend any corporate privileges granted by the State is clearly conferred by the fundamental law itself. . •
By article VIII of the Constitution of 1846, to which it is conceded on all hands the enactment of 1892 must conform, it was provided, among other things, as follows, viz. : “ Section 1. Corporations may be formed under general laws, but shall not (except in certain cases) be created by special act,” and that “ All general laws and special acts passed pursuant to this section mayvbe altered from time to time or repealed.
Ҥ 2. Dues from corporations shall be secured by such individual liability of the corporators and other means as may be prescribed by law.
“ § 3. The term corporation as used in this article shall be construed to include all associations and joint-stock companies having any of the powers or privileges of corporations not possessed by individuáis or partnerships.”
Here, then, is conferred upon the Legislature in unmistakable
This proposition is certainly presented with much ingenuity and it is supported by an argument abounding in subtle reasoning and forceful, if not persuasive, suggestion. But this argument, followed
It is a familiar rule of construction that a Constitution is not to be interpreted in the same manner and upon precisely the same lines as in an act of the Legislature. (Matter of Lee's Bank, supra.)
It is rather to be regarded as the embodiment of such principles as in the opinion of its framers are best calculated to produce good government and promote general prosperity. It is- not to be doubted that this was the animating spirit of those who were responsible for the Constitution of 1846, and we think it is impossible to study that instrument with any degree of care without reaching the conclusion that among the reforms which it was designed to inaugurate was that of creating corporations by general laws, instead of by special act, as theretofore, and of amplifying the powers of the Legislatiire to such an extent that the charter of any and all corporations thus created might- be altered, suspended or repealed in any reasonable manner whenever, in the wisdom of that body, it might seem ■expedient to do so.
It may be said in explanation of the preference which is apparently given by the language of section 7 to the creditors of banks ■of issue that at the time that the Constitution of 1846 was adopted, a very large majority of banking institutions aside from those organized and conducted for savings only were banks of issue ; and while such institutions were in one- sense a public convenience, they were nevertheless a disturbing element in commercial and private interests, for the security which the holders of such .a circulating medium possessed was frequently inadequate, and it was doubtless- because of this fact, that special, pro vision was made to guard and protect as far as possible the creditors of such institutions. But this was done, as we think, without any design of excluding from.similar
We do not pretend to have answered specifically every argument -advanced by the learned counsel in support of his contention ; that could not be done within the limits of an ordinary opinion ; but we have endeavored to indicate in a general way why we think the conclusion reached by the trial court upon this feature of the case is •correct, and that must suffice so far as this appeal is concerned.
In this connection it is proper to add that this case is easily distinguishable from that of R. & C. Turnpike Co. v. Joel (41 App. Div. 43), recently decided by this court, and we trust that we have not failed to make clear such distinction. However that may be, the distinguishing features may be briefly summarized as follows, viz.:
The case cited was one in which the Legislature in the exercise ■of its reserve power attempted to deprive a corporation of its property. This we held could not be-done, although we recognized and conceded the right of the Legislature to limit or increase the burdens of a corporation to any extent within the scope and object for which it was created. In the present case we simply decide that the liability of stockholders may be increased by legislative enactment, not by virtue of any reserve power, but because expressly authorized by the fundamental law itself.
The further point is made that the defendant stockholders are not liable for any debt existing by reason of deposits in the bank made in the ordinary course of banking business, nor for moneys deposited for which certificates of deposit are furnished by the bank.
It will be remembered that section 52 of the act of 1892 excepted from its operation a certain provision, which will be found in section 55 of the Stock Corporation Law, and which declares that “ No stockholder shall be personally liable for any debt of the corporation not payable within two years from the time it is contracted, nor unless an action for its collection shall be brought against the corporation within two years after the debt becomes due.” (Laws of 1890, chap. 564, § 55, as amd. by Laws of 1882, chap. 688.)
In view of this qualifying clause it is now contended that even if it be held that the liability imposed by the act of 1892 was a valid exercise of legislative power, the claims for which this action is brought
The learned counsel invokes what is known as the rule of reasonable construction in aid of his contention. This certainly is a safe rule to adopt in any case, for it is one which often requires more stress to be laid upon the- spirit than upon the letter of a statute, and it is also one which, if followed, will generally avoid “ palpable injustice, contradiction and absurdity.” (1 Kent’s Com. 462.) When applied to the statute now under consideration we think it will demonstrate at once that deposits payable on demand are, within the true intent and meaning of the statute, debts payable within two. years; for, now that there are no State banks of issue, deposits constitute a very large proportion of every bank’s indebtedness, and unless such debts are Avithin the contemplation of the act of 1892,. the-liability imposed by the statute would be of little .or no benefit,,- and as a protective measure it would consequently prove an absurdity.
But if necessary another perfect and complete answer could be furnished to the contention of the learned counsel. It will hardly be denied, we assume, that had the plaintiffs made a formal demand-of the amount of their respective deposits of the bank' before commencing this action, and Such demand had been, refused, their claims-would not then have become due; and if so, Avhy does not the commencement of the action, which is in effect a demand, produce the same result? We think there' can be but one answer to this question, especially when it is remembered that the bank had closed its-doors and was in á condition of such notorious insolvency as to-
It only remains to add that the right claimed by the defendant Thompson, to offset an indebtedness due him from the bank against his liability for its debts, appears to have been settled adversely to> his contention. (Garrison v. Howe, 17 N. Y. 458; Matter of Empire City Bank, 18 id. 199.)
Our conclusion of the whole matter, therefore, is that the case was correctly disposed of by the trial court, and that the judgment appealed from should, consequently, be affirmed.
All concurred, except Hardin, P. J., not acting.
Judgment affirmed, with costs.