Carey v. Smith

11 Ga. 539 | Ga. | 1852

By the Court.

Warner, J.

delivering the opinion.

This bill is filed by the complainant, for the purpose of enjoining a suit instituted against him by Edward Carey, assignee of the Bank of Columbus, on the Common Law side of the Court, as one of the stockholders of the Planters’ and Mechanics’ Bank of Columbus, for the ultimate redemption of the bills issued by that bank, according to the provisions of the 11th section of the charter thereof.

The complainant alleges in his bill, that there are various equitable circumstances which ought to exonerate him from the payment of the bills sued on, as a stockholder, and especially, that there was a fraudulent combination between a portion of the directors of the Planters’ and Mechanics’ Bank and the Bank of Columbus, for the benefit of said directors; and that the bills in question were not received by the Bank of Columbus (the assignee of which is now seeking to enforce the payment thereof) on the credit of the Planters’ and Mechanics’ Bank, but on the credit of a personal guarantee made by a portion of the directors of the Planters’ and Mechanics’ Bank, for their own personal benefit and private speculation ; all of which was well known to the Bank of Columbus, when the bills now sued on were received by the last mentioned bank. The prayer of the bill is, that the assignee of the Bank of Columbus may be perpetually enjoined from prosecuting his said suit on the bills of the Planters’ and Mechanics’ Bank against the complainant, as a stockholder in the last named bank, and for other relief, &c. To so much of the complainant’s bill as sought a discovery from the defendant in relation to the banking house and lot of the Planters’ and Mechanics’ Bank, and the alleged contract or agreement in regard to the same, the defendant answered. To the other portions of the bill, the defendant demurred. After the demurrer was filed by the defendant, the complainant obtained leave of the Court to amend his bill, by striking out material parts thereof and to make new and distinct allegations in relation to the same subject matter; which was allowed bj the Court.

[1.] The defendant objected to the amendment of the complainant’s bill, by striking out material allegations, admissions, and averments contained therein ; insisting that he was entitled to demur to the bill as it originally stood, with the additional matter introduced by way of amendment.

The first question to be considered and decided, is, whether a complainant in an injunction bill, which has been sworn to by him, can amend it by striking out material averments and allegations contained therein ? Such a practice cannot, in our judgment, be sustained, either upon principle or by authority. In Verplanck vs. The Mercantile Insurance Company, (1 Edwards’ Ch. Rep. 46,) this identical question appears to have been well considered, on an application to amend an injunction bill.

[2.] In that case it was held, that material and substantive matter, and statements, allegations and charges, which have been sworn to, cannot be stricken out; they are to be corrected' by the addition of explanatory or supplemental statements; and this regulation was held to be as applicable to ordinary sworn bills, as to those where injunctions are outstanding. It was also held in that case, that amendments to a bill can only be granted when the bill is defective in parties, or in prayer for relief, or in the omission or mistake of a fact or circumstance connected with the substance, but not forming the substance itself, nor repugnant thereto ; and that a party under the privilege of amending, is not to introduce matter which would constitute a new hill.

[3.] In Rodgers vs. Rodgers, (1 Page’s Ch. R. 424,) it was held that an injunction bill will not be amended, unless the proposed amendments are distinctly stated to the Court, and verified by the oath of the complainant, nor unless a sufficient excuse is rendered for not incorporating them in the original bill, and that the application to amend must be made as soon as the necessity of the amendment is discovered. One cogent reason for not allowing a party complainant in a sworn injunction bill to ■strike out material allegations and averments therein, by way of amendment, is, that if he should 'swear falsely for the purpose of obtaining the injunction, he might by that means, destroy and obliterate all trace of the evidence of his offence. The Court below erred, in our judgment, in allowing the complainant to strike out of his bill the averments and allegations marked and designated in the record before us.

The defendant was entitled to demur to the complainant’s bill as it stood, before the order to strike out was made; that is to say, he wras entitled to demur to the complainant’s bill, as amended by the insertion of the new matter, without any portion thereof being stricken out. The bill as it was originally sworn to by the complainant and filed in office, together with the additional matter introduced by way of amendment, constituted the complainant’s bill, at the time the demurrer was heard and determined in the Court below.

[4.] An amended bill is considered as an original bill. 2 Maddock’s Ch. Prac. 369. At the May Term, 1852, the defendant filed additional grounds of demurrer to the complainant’s bill, as amended, the second ground of which is in the following words— “And for further cause of demurrer to said bill as amended, this defendant sheweth that the complainant shews by his said amended bill, he has been guilty of a violation of the charter of the Planters’ and Mechanics’ Bank, and of committing a gross fraud in the organization of the same, and therefore is not entitled to come into a Court of Equity, and ask relief from the consequences thereof.”

[5.J It is undoubtedly a principle of Equity jurisprudence, that he who seeks equity, must come into Court with clean hands. The general rule is, that where parties are concerned in illegal agreements or other illegal transactions,' whether they are mala prohihita, or mala in se, Courts of Equity, following the rule of Law, as to participators in a common crime, will not interpose to grant any relief; acting upon the well known maxim, In pari delicto potior est conditio defendenlis et possidentis. In all such cases the rule is, to leave the parties where it finds them, giving no relief and no countenance to claims of that character. 1 Story’s Equity, 295, sec. 298. Thompsons. Thompson, 7 Vesey, 470. This doctrine has been fully recognized and adopted by this Court, in Howell, adm. vs. Fountain et al., 3 Kelly’s Rep. 176. The question raised by the defendant’s second ground of demurrer to the complainant’s bill as amended, necessarily leads us to inquire whether the complainant by his own allegations in his bill, clearly shows that he actively participated in the organization of the Planters’ and Mechanics’ Bank, as one of the stockholders thereof; and whether he was such stockholder, at the time the bills in controversy were issued by the bank? Was the bank organized by the stockholders in accordance with the provisions of the charter ? Were the bills of the bank, from the payment of which the complainant seeks to be protected, issued according to the provisions of the charter ?

To answer these several inquiries satisfactorily, wre must refer to the charter of the bank, and to the statements and allegations contained in the complainant’s bill.

By the second section of the charter incorporating the Planters’ and Mechanics’ Bank of Columbus, it is declared, “ that the stock of the company shall consist of one million of dollars, in shares of one hundred dollars each, and the stockholders in said bank, are hereby required to pay twenty-five per cent, on the amount of their capital stock, in specie, before the Board of Directors shall be permitted to issue their bank notes."

' The charter of the bank then, it will be perceived, imperatively required that the stockholders should pay in the sum of two hundred and fifty thousand dollars in specie, before the company should be permitted to issue their bank notes.

By the 4th section of the charter it is declared, that “ for the well ordering of the affairs of said corporation, there shall be seven directors, who shall be elected as soon as the sum of two hundred and fifty thousand dollars in specie, shall have been paid in by the stockholders of the bank, and the President, Directors, and Cashier, are hereby expressly inhibited from the issuing of their bank notes, until they have officially and under oath, notified the Governor that the provisions of this charter have been literally and strictly complied with." Prince, 125-6.

This section of the charter demonstrates, in unequivocal terms, the meaning and intention of the Legislature, in regard to the organization of this bank.

•It was the intention of the Legislature to protect the community against the evil consequences of a depreciated paper currency, by expressly inhibiting the company from issuing their bank notes, until the provisions of the charter had been literally and strictly complied with. This charter was accepted by the stockholders in the terms which the Legislature enacted it, and they consequently are bound by its provisions. The complainant was one of the original corporators and stockholders in the Planters’ and Mechanics’ Bank. Now let us turn our attention to the statements and allegations contained in the complainant’s bill, and see in what manner this bank was organized, and under what circumstances most of the bills, now the subject matter of controversy, were issued by the bank.

The complainant in the amendment to his bill, avers, that on the 30th December, 1836, he with others, accepted the charter, and that he subscribed for stock to the number of twelve hundred and sixty-four shares, and paid upon the same thirty-one thousand six hundred dollars, or twenty-five per cent.; that shortly after the organization of the bank, the complainant, with the other stockholders, held a meeting, when it was resolved, that in consequence of the derangement of the monetary system in the United States, it would be imprudent for the bank to make any issue of bills, and that the bank would not commence operations under the charter, but would for the present, put out at interest, the capital paid in; that in the beginning of the year 1838, a portion of the stockholders, deemed it advisable to call in their capital stock, and commence-business, and that Terry, Pope, and others, who owned thirty-six hundred and thirty-five shares of stock, being unable or unwilling to continue their investment in stock, transferred the-same to the complainant, so that he might transfer it to such persons as might apply therefor, and that said shares were transferred by him, to Bailey, Banks, and others, before the bank issued any bills; except seventy-one shares, which complainant retained for himself, making him the owner, on the 8th day of February, 1838, of thirteen hundred and thirty-five shares of stock; prior to which day the bank had made no issue. In Septembnr, 1838, the complainant purchased forty shares of stock, and in January, 1839, he purchased fifty shares, making his aggregate number of shares of stock in the bank, on the 5th • day of January, 1839, fourteen hundred and seventy-five shares. ■By reference to the declaration which is attached to the com•plainant’s bill, and made a part thereof, it appears that most of ■the bills sued on, were issued by the bank in the year 1838, ■during the time the complainant was a stockholder, he having ■ sold his stock as he alleges, in October, 1839.

The complainant then, was one of the original stockholders ■■when the bank was organized; originally subscribed for twelve (hundred and sixty-four shares of the stock; was the owner of thirteen hundred and thirty-five shares of stock on the 8th February, 1838, and on the 5th day of January, 1839, owned fourteen hundred and seventy-five shares of the stock of the Planters’ and Mechanics’ Bank of Columbus. In October, 1839, he ¡so'ld, and transferred all his stock in. the bank. From the 30th December, 1836, up' to the 28th day of October, 1839, the ■complainant was a large stockholder in this banking company.

W»e have seen, that by a resolution of the stockholders, the ■capital stock of the bank paid in, was put out at interest shortly •after its organization; but whether it was put out at interest in •the '-hands of the stockholders or other persons, this record does ¡not ¡inform us. The complainant alleges that in the beginning ■of the year 1838, a portion of the stockholders deemed it advisable to .call in their capital stock, and commence business; but it ns not alleged that any portion of the stockholders did in fad, icaU’ÜH, -and adually pay in, the capital stock of the bank, which had been by resolution, put out at interest. Deeming it advisable •to call in the capital stock of a bank, which had been put out at interest by the stockholders thereof, is one thing — the odual ,calling iit in, and paying it in, is another and quite a different thing, at feast, so far as the bill-holders are concerned.

One .©£ ¡the counsel for the complainant states, that the omission to allege that the capital stock put out at interest, was actually paid in, was a ¡mistake ofthepleader. We have only to say, that if such fo.e the cause of the omission, it is a most fortunate circumstance ¡for the complainant, if the record in the case of Lane vs. Thorn-ion, which has been argued in connexion with this case, be true.

It appears from the testimony of Ragan, which is in the record of that case, that he was the Cashier of the bank in 1838, when it first commenced issuing bills; that the bank did not have but little specie on hand, or in its vault — not exceeding eight hundred or one thousand dollars ; and that two hundred and eighty, or three hundred thousand dollars in bills, were issued by the bank in 1838. The facts, as disclosed by the record, in the case of Lane vs. Thornton, being judicially made known to us,, and that case having been argued in connexion with this, has induced us to scrutinize the complainant’s allegation in regard to calling in the stock, more closely than we otherwise should have done. With that record before us, we conclude-that the omission of the complainant to state that the capital stock of the -bank put out at interest was actually paid in, when the bank commenced issuing bills in 1838, was not a mistake-of the pleader. The complainant shews by his bill, that the capital stock of the bank was put out at interest previous to the year-1838, but does not shew, that it was returned to the bank when most of the bills in controversy were issued during that year.. The complainant has failed to shew affirmatively, that the provisions of the charter were complied with in that particular. When the bills were issued in 1838, he shews that the capital stock of the bank was put out, but has failed to shew' that it was ever again put into the bank. We have thus far considered this question, as if the capital stock of the bank had been originally paid in by the stockholders, in specie, as required by the charter. Does the complainant shew that it was so- paid in ? So far from shewing that the capital stock of the bank was paid in by the-stockholders in specie, the contrary is most clearly demonstrated. The complainant alleges in his amendment to his bill, that “ the-books of subscription were opened in pursuance of the charter, and that he subscribed for stock in the bank to the number of twelve1 hundred and sixty-four shares, and paid upon the same the sum of thirty-one thousand six hundred dollars, or twenty-five percent.” By the second, section of the charter, as we have already shewn, the stockholders were required to pay twenty-five per ■cent, on the amount of their capital stock in specie, before the company could issue their bank notes.

Although the complainant states that “ the books of subscription were opened in pursuance of the charter,” he does not allege that the thirty-one thousand six hundred dollars was paid by him in specie; or that it was paid in pursuance of the charter. The books of subscription may have been opened in pursuance of ike charier, -but it does not necessarily follow, that the complainant paid the twenty-five per cent, on the amount of his capital stock in specie, in pursuance of the charter.

If the twenty-five per cent, on the amount of the complainant’s capital stock was in fact paid by him in specie in pursuance of the charter, why did he not so allege it? It was a most material averment for him to make, in order to invoke the aid of a Court of Equity to grant him the relief which he seeks.

Whether the thirty-one thousand six hundred dollars was paid in by the complainant in the bills of suspended banks, or in stock notes, this record does not inform us. In regard to the thirty-five hundred and sixty-four shares of the stock which was transferred to the complainant in the beginning of the year 1838, by Terry, Pope, and others, and by him re-transferred to Bailey, Banks, Perry and McDougald, there is no allegation that any thing was ever paid into the bank on that stock, either by the original subscribers, the complainant, or those to whom he transferred it, at the time the company commenced issuing their bank notes, in 1838; but the presumption is very strong, from what the complainant does allege, that nothing was paid on that stock up to that time.

The complainant states in the original portion of his bill, that that stock was not transferred with a view to any ownership thereof by him; that he at no time made any payment therefor, either in money, by note, or otherwise, or any promise or contract for payment therefor, except a premium of one dollar per share to S. A. Bailey, which was paid by direction of D. McDougald ; that in the year 1838, it was concluded to prosecute the enterprise, and complainant was induced, for the benefit, and at the instance of others, to collect together other.purchasers of said stock, and in so doing, procured it' to be transferred to him, without his assuming any liabilities therefor, either to the bank or to any other person, except the payment to Bailey, as before stated.

Now, if Terry, Pope, and others, who were the original subscribers for the thirty-five hundred and sixty-four shares of stock, had paid in thereon, the twenty-five per cent, in specie, as required by the charter, it is not reasonable to conclude that they would have transferred their stock to the complainant without his paying, or at least assuming a liability therefor; which he expressly states he did not do. Nor does the complainant allege, that those to whom he transferred the stock paid him any thing for it, or that they paid into the bank any thing for the stock, at the time the complainant as a stockholder, and his transferrees as stockholders, “prosecuted the enterprise” of issuing the bills of the bank, in 1838. But we are not left in doubt that the bank went into operation in 1838, and commenced issuing its bills in open violation of its charter; the statements of the complainant furnish the most conclusive evidence upon that point. Most of the bills sued on, it will be recollected,' were issued by the bank in 1838, and that no bills were issued until the beginning of that year. On the third page of his original bill, the complainant alleges, “ that long prior to said bills being issued and put in circulation by the said Planters’ and Mechanics’ Bank, the same was in a state of failure and suspension, and so known to be to the said Bank of Columbus, &c.” On page nine of the original bill, the complainant further states, “ that when the Planters’ and Mechanics’ Bank of Columbus went into operation, and commenced issues and discount, and the receipt of deposits, in February, 1838, it went into operation and commenced, and prosecuted its business as a suspended and non-specie-paying bank.” The complainant, as it appears by his own shewing, was one of the original stockholders who actively contributed to put this banking company into operation — owned a large amount of the stock at the time most of the bills were issued, from the payment of which he nowr seeks relief as such stockholder. And so far from the stockholders in said banking company paying twenty-five per cent, on the amo'unt of their capital stock in specie, before issuing their bank notes, as specially required by the charter, the bank, in the language of the complainant, “ long prior to the bills being issued and put in circulation, was 1n a state of failure and suspension.”

It is true, the complainant alleges in the amendment to his bill, that on the 28th day of October, 1839, when he bona fide sold out all his stock in said bank, it was perfectly solvent, having a large surplus fund. In what that large surplus fund consisted, we are not informed. It however required no prophetic vision to discover, that a bank organized as this was, without any specie basis for the redemption of its bills, could not long maintain its credit, when settlement dayshould arrive; especially, as when its bills were first issued and put in circulation, “ it was in a state of failure and suspension.” The consequences resulting from this illegal transaction, furnishes a melancholy portion of the history of our State,. as those who confidingly exchanged their labor and produce for the bills of the bank, can bear ample testimony. It was urged on the argument, that the Act of 10th Dec. 1841, granted a pardon to all the banks in this State which had failed to redeem their liabilities in specie, which included the Planters’ and Mechanics’ Bank. Conceding that Act was intended to embrace such banks as went into operation in open violation of their charters; yet, the complainant very clearly shows, that this bank is not within its provisions, for the reason, it did not comply with the requisitions of the Act of 1841. That Act extended to such banks only, as should commence to redeem their liabilities on demand, in specie, by or before the 1st day of January, 1842, and shall continue thereafter to pay on demand, all their liabilities in specie. Hotchkiss, 363.

The complainant alleges in the amendment to his bill, “ that in March or April of 1841, the Planters’ and Mechanics’ Bank, and the Bank of Columbus, each failed to redeem their bills in specie; in consequence thereof, proceedings were instituted against both of said banks, for the forfeiture of their charters, and upon said proceedings, judgments of forfeiture were severally rendered, as will appear by the proceedings hereunto annexed, marked exhibit A and B.” The Planters’ and Mechanics’ Bank did not accept the terms of pardon offered by the Legislature, by redeeming their liabilities on demand in specie; consequently, judicial procedings were not arrested, and the charter was forfeited by the judgment of the Superior Court of Muscogee County. There is another fact apparent on the face of the complainant’s bill, to which our attention was called on the argument. The stock account of the complainant, which he alleges was taken from the books of the bank, shows, that John E. Morgan, Wm. A. Redd, and Wm. Redd, sen. were the owners of three hundred shares each, of the capital stock of the Planters’ and Mechanics’ Bank.

The complainant, however, alleges, that although the stock appears on the books of the bank to have been owned by Morgan, Wm. A. Redd, and Wm. Redd, sen. yet he was in fact the owner thereof; although the same was transferred by him to them on the 27th March, 1838, it was done for the complainant’s benefit. In view of the laws of the State, which required semiannual returns to be made to the Governor of the names of all the stockholders, and the amount of stock owned by each, &c. for the information of the public, the names of solvent, responsible men, appearing, as stockholders on the books of the bank, when in truth and in fact, they were not such stockholders, was eminently calculated to mislead and deceive the community in which the bills of the bank were circulated, to say the least of it. Persons knowing the Messrs. Redds and Morgan, who were represented to be the owners of ninety thousand dollars of the capital stock of the bank, may have taken the bills on their credit, when they would have been unwilling to have received them on the credit of the unknown real owner. When we take into view the imperative provisions of the charter of the Planters’ and Mechanics’ Bank, and the principles by which Courts of Equity are governed in granting relief to a party, against the consequences of his own illegal transactions; to state the facts of this case, as the same appear by the complainant’s own showing, is to decide it. A Court of Equity will not interfere to assist him, but leave him to defend himself at Law, as best he can. Let the judgment of the Court below, overruling the demurrer to the relief sought by the complainant, be reversed.