State v. Commercial Bank

| Miss. | Oct 15, 1857

Fisher, J.,

delivered the opinion of the court.

This was a proceeding in the nature of a writ of quo warranto, commenced in the Circuit Court of Yazoo county, against the Commercial Bank of Manchester, with a view of having a judgment of forfeiture of its charter declared.

The information being against the corporation, by its corporate name, the defendant appeared, and pleaded the charter granted by an Act of the legislature, on the 26th day of February, 1836. The district attorney demurred to this plea, on the ground that it omitted to aver a performance of those acts, which were required to be performed, before the corporation could be organized, or have a legal existence.

The court below overruled the demurrer; and this is the first error assigned.

As already remarked, the information is against the corporation, and not against individuals, alleged to have usurped the franchises, granted by the charter to be exercised by the corporation alone, when completely organized; and whatever the rule might be in the latter case, it is certain that it can have no application to the case at bar, for the obvious reason that it is the corporation (and not individuals), that is alleged to have been guilty of the several acts of usurpation specified in the pleading on behalf of the State; and if it be true that the corporation never had a legal existence, it must follow, as a natural consequence, that it could neither do wrong nor omit to perform a duty. That which never existed cannot be the subject of judicial investigation, for the reason, that being incapable of action, it can neither be commanded by the law, or operated upon by a judicial sentence; and hence, to sustain the position assumed by the counsel representing the prosecution, would be equivalent to saying, that the prosecution was groundless. But the rule on this subject is a familiar one, that by proceeding directly against the corporation, the State has admitted that the corporation was in existence, and what is thus admitted cannot afterwards be controverted. The rule is, that a party is always bound by the admissions made in his own pleadings, and it is immaterial whether these admissions are expressly made, or arise from necessary implication.

But we do not deem this point of sufficient importance to dwell upon it; and it is therefore dismissed with the remark, that the court below committed no error in overruling the demurrer.

The demurrer being disposed of, the district attorney filed sundry replications to the plea, all of which will be noticed in regular order.

The first presents in substance the same point as that presented by the demurrer to the plea, and does not, therefore, require special notice.

The second replication"’alleges, that the bank, for more than six: months last past (being the date of the information), had refused to loan money, for periods of twelve months and less, on good and sufficient security offered therefor, at the rate of seven per cent, per annum ; but that she had, during the same term, continually made loans, having twelve months and less to run to maturity, and charged and received on account of said loans, at the rate of ten, eleven, and twelve per cent, interest per annum. To this replication, as well as all the others, except the fourth, the' counsel for the bank demurred, and the court below having sustained the several demurrers, the question is, whether the replications set forth sufficient grounds or causes of forfeiture of the charter of the bank, and whether the matters thus alleged are well pleaded. To return therefore to the replication under consideration. It is assigned as a cause of special demurrer, that the replication is double, because, as alleged, it sets forth two distinct grounds of forfeiture; and as cause of general demurrer, that the matter pleaded presents no cause of forfeiture. “Duplicity in pleading consists in alleging, for one single purpose or object, two or more distinct grounds of complaint or defence, when one of them would be as effectual in law, as both or all.” Gould on Pleading, p. 419. By which must be understood, that each ground presents a separate and distinct cause of action, or of defence. That which is mere surplusage cannot make a pleading double, because the matter is not issuable. It requires no answer. Nor does a fact.alleged by way of inducement, or for the purpose of giving importance to another fact, render a pleading double, for the reason, “ that when there is a sufficient answer to the main fact alleged, it is also an answer to the inducement, or introductory matter.” This brings us to the point presented by the demurrer. The charge is, that the bank refused, during a certain period, to make loans at seven per cent.; but made loans, during the same period, at ten, eleven, and twelve per cent, interest per annum. There is nothing either in the general law of the State, or in the charter, compelling the bank to make loans at seven per cent, interest per annum. There is, however, a provision in the charter, requiring the bank “ to loan at least one-half of the amount of the capital stock actually paid in, at periods of not less than twelve months, in sums not exceeding four thousand dollars, to any one individual or company,” at a discount of eight per. cent, per annum. But as to the other half of the capital the charter is silent, at least there is nothing compelling the bank to loan it; but if the bank should, in the exercise of its discretion, elect to make loans, based upon the other half of the capital stock, and if such loans should have less -than twelve months to run to maturity, the bank is restricted by an express provision of the charter to a discount of seven per cent, per annum. But it being merely a matter of discretion with the bank to make such loans or to decline them, suppose issue were taken upon this part of the replication, and found in favor of the State, it would result' in nothing, because it would not establish a violation of the charter or of a legal duty, and there would consequently be no law which the court could apply to the fact established in pronouncing judgment. The court can only apply the law to the fact ascertained, and if there be no law applicable to the fact, there can of course be no judgment of the qourt. The fact does not make the law. It can only suggest the law, or call into action the law applicable to it; and hence, if there be no law applicable to the case, there can be no investigation of the fact, because the parties would be left in the same situation after the trial, that they were in before going into it. Thus viewing this part of the replication, we are of opinion, that the fact alleged is merely inducement, or introductory to the main fact alleged, to wit, that the bank made loans, for the space of six months, at ten, eleven, and twelve per cent, per annum; and this brings us to the consideration of the replication, as upon general demurrer.

The bank has pleaded her charter, and in her defence has elected to stand upon it, as indeed she could not do otherwise. The question therefore is, does she, by confessing this replication, at the same time show that her action has been consistent with that law, which was prescribed for her government in the particular transactions when she was created a body politic ? While it is true that it is not every accidental omission of a duty, or accidental commission of an error, that will be cause of forfeiture, yet this is very different from a deliberate abandonment of a salutary rule prescribed by the charter, and the substitution of another rule for the transaction of business, where it is manifest that the substituted rule which had regulated the course of business for the space of six months, had, and would if continued, defeat one of the primary objects of the legislature in granting the charter, that of furnishing, to a portion of the community, a currency at a cheap rate of discount. The bank being allowed to issue and put into circulation bills to pass as money, to double the amount of her capital stock actually paid in, it was but reasonable that in consideration of the ■privilege thus granted, there should be a restriction imposed as to the rate of discount to be received by the bank. The same law which gave her existence, imposed the restriction and prescribed to her certain rules of action, which must be regarded as so many conditions annexed to the grant, and as tantamount to saying to the bank: “You are now endowed with certain rights and privileges, which you can exercise and enjoy during the period specified in the charter, upon condition that you act according to the rules therein prescribed.” The rule prescribed as applicable to the case before us is, that the bank shall not take exceeding seven per cent, discount per annum on notes having less than twelve months to run to maturity. This rule is the law, which must govern the case before us, and the replication alleging a course of business persevered in for at least six month's, in palpable violation of this rule, presents, in our opinion, a good cause of forfeiture. Suppose we should hold otherwise, what would the effect of such holding be, but a license to the bank to establish for herself a rule, which if it had even been suggested, would have been deemed sufficient for the legislature, having a due regard to the public interest, to have refused the charter. Having the right to issue bills to double the amount of her capital stock paid, it was, even at seven per cent, discount, in her power to make fourteen per cent, per annum on the money actually invested; but under her own rule, this would be increased from fourteen to twenty, or to twenty-four per cent, per annum, and thus defeating one of the very objects sought to be accomplished by the legislature, that of benefiting the community, by allowing this privilege to the bank, of making her circulation twice the amount of her capital; for we must presume all legislation, which is not strictly of a private nature, is intended for the benefit of the public, whether it so proves or not, in point of fact. Under the rule however, established by the bank, this benefit, or supposed benefit to the public, is converted into an evil, oppressive to every person dealing with the bank, saying nothing as to the violation of the laws of the State, regulating the rate of interest in such cases.

We are however cited to authorities supposed to be in opposition to this view of the law. The court, in the case of the State of Ohio v. The Com. Bank et al., 10 Ohio R. p. 540, hold that usury, in making a contract by the bank, is not a cause of forfeiture of the franchise, at least such appears to be the conclusion to which the court seem to have arrived on this branch of the case then before them. They first say that the charter contains no restriction as to the rate of interest, and that the bank was therefore like a natural person, only restricted by the general law in this respect; and that, having the power to make the contract, it was valid, as in case of a natural person, to the extent that it was not by the law, declared void. They accordingly held, that the taking of an illegal rate of interest was not a ground of forfeiture.

Again, that even if the charter contained a restriction as to the rate of interest to be taken, it would be no ground of forfeiture, because they say it would be a case, where the contract would be void for want of power to make it; and that this attempt to do what the corporation was unable to do, would not destroy its power to do what it might lawfully do. This reasoning, however plausible it may seem, wholly fails to meet the point. The bank certainly has the power to make contracts to loan her money; but in doing so, the question is not whether the contract is valid or void, but whether the bank, by the exactions she has thought proper to make", has violated some one of the fundamental rules prescribed by her charter. It is not necessary, at this time, to pass upon the validity of the contract, but merely to ascertain what has been violated, and the consequence which must follow such violation.

The question is, whether a corporation, having only such powers as are conferred by its charter, and such others as are merely incidental to the granted powers, may with impunity, disregard a plain and palpable rule prescribed for its action in a particular case, and adopt at pleasure a different rule, which, if persevered in, must defeat the very object contemplated by the charter. But the answer to the authority may be given in a few words: whenever the corporation confesses, as in this case, that the act was done, under color of the authority conferred by the charter, it will not, in a proceeding of this kind, be permitted to deny its authority to act, for this is the very gist of the charge, that it has done what it was not permitted to do under the charter; and it is difficult, under the reasoning of the court, to see how a corporation could ever be proceeded against for doing acts in violation of its charter, unless the act was one of omission of duty, and not of commission of a wrong, for if it can take the ground, in one case, and say that it is true the act was done as alleged, but having no power to do the act, or to perform it in the particular mode alleged, why may it not take this ground in every case ?

If this is not the proposition established by the authority, it is certainly difficult to understand what was really intended.

Dismissing the further investigation of this point, we only deem it necessary to remark, that we are of opinion that the court below erred in sustaining the demurrer.

The third replication sets forth that the bank, in 1851, surrendered her charter, and had, by selling her property, disabled herself, so that she could not again resume banking; and finally, that she had ever since, continued in a state of suspension, &c. This replication is bad for duplicity; for although the facts are defectively pleaded, yet two of them, if well pleaded, would constitute each a ground of forfeiture. We therefore see no error in sustaining the demurrer to this replication.

The fourth replication presents an issue of fact, which was tried by the jury, and found for the bank.

The fifth replication is bad for duplicity, and the reasons already assigned dispose of it.

The sixth replication is also bad for duplicity, and requires no special notice. It is almost unnecessary to state, that the trustees could not sell the charter of the bank, nor could the corporation itself make such sale.

The seventh replication fails to allege that the bank had put in circulation its issues, to more than double the amount of its capital stock paid in, and is therefore defective.

The eighth replication is, in our opinion, good. The corporation was bound under its charter to hold an election annually for directors, or to show a valid reason for its failure to do so. Not having held an election for five years, the presumption would be, that the failure arose from a design not to hold such election, and not from casualty, as contemplated by the charter, as no casualty could be presumed to continue such a length of time. It is true, the failure to hold an election may not of itself be a forfeiture; but it may be a cause of forfeiture, — the law making a distinction between that which is of itself a forfeiture, and that which may be alleged as a cause of forfeiture.

The demurrer therefore to this replication should have been overruled.

Judgment reversed, and demurrers to second and eighth replications overruled, leave to rejoin by defendant, and cause remanded.