Litchfield Bank v. Church

Ellsworth, J. We will dispose of some of the minor questions in the case before we proceed to express our views upon those which have been treated as more serious and important. And first, as to the motion in arrest. This is founded, in part, on the circumstance that the court adjourned to the house of Mr. Spencer, a few rods from the court house, for — 147 — the purpose of receiving the verdict of the jury, because of the sudden illness of one of the jurors. We know of no law or practice of our courts which is inconsistent with this proceeding. An unavoidable emergency made it necessary. The court was still holden in Litchfield, the place appointed by law, while no precise place in the town is designated by the statute. The house or room may be selected or changed, as necessity or convenience may require. Again, it is said the damages are too large for the declaration. But they do not appear to be beyond the face of some of the counts in the declaration, which would be necessary to sustain a motion like the present; and it certainly does not appear upon what count or counts the plaintiffs recovered their damages. The exact consideration of the notes in suit, whether it was more or less than is expressed in them, does not appear. Doubtless the notes grew out of the defendant’s subscription for one hundred shares of the stock of the bank, but exactly how, or in what manner, does not appear. Only twenty shares seem to have been retained by the defendant on a final settlement with the bank, which, for some reason not apparent, were agreed to be taken and paid for at par. The rest were taken back. If in this settlement there was a mistake or misapprehension, (of which however we see no evidence,) it should have been put right on the trial, and for aught we know, this very matter was brought up on the trial and decided against the defendant. That it might have been is sufficient for the present occasion. We admit, or at least it seems so to us now, that if the only cause of action was the defendant’s subscription for twenty shares of stock, at par, and an installment of ten dollars had been paid on them, the plaintiffs have recovered too large a verdict; but we can not say that this is the case. We apprehend that it is not. The bank undoubtedly made some new arrangement with the defendant, and agreed to take his notes for just what they express and to release him from any thing beyond. Besides, the objection to the excess of damages can not be made on the present motion. To reach that error the motion should have been for a new trial for a verdict against evidence, — 148 — As to the real merits of the defense, considered either in relation to the notes of the defendant or his subscription out of which they sprung, they are much less obvious to us than they seem to be to the learned counsel of the defendant, who has so largely dwelt upon them in his argument. We do not think that any one of the points made by him has been or can be established upon the facts detailed in the motion. Much the greatest stress has been laid upon the supposed want of organization and legal existence in the bank. It is said that the corporation never came into being, because not formed in the manner pointed out in the charter, and therefore, in legal contemplation, was not at the first, and is not now, a legal corporation or bank; and the reasons stated are, that the one hundred shares, of the one thousand required to be subscribed before the bank could go into operation, were really never perfected in the defendant, because, as he says, he did not pay the first installment of ten dollars on a share; and further, that the subscription for another hundred shares was made by E. L. Houghton, in the name of his wife, J. R. Houghton. To this conclusion of the defendant’s counsel we can not give our assent: for, first, the question of the organization and existence of the corporation can not be raised under the general issue, which is the issue on trial. So this and other courts have repeatedly decided. The objection goes only to the character of the plaintiffs. It is of a preliminary nature, and must be made, if at all, in an early stage of the case. Phœnix Bank v. Curtis, 14 Conn., 437. West Winsted Savings Bank v. Ford, 27 id., 288. Champlin v. Tilley, 3 Day, 303. Sutton v. Cole, 3 Pick., 232, 245. Penobscot Boom Corporation v. Lamson, 16 Maine, 224. Bank of Manchester v. Allen, 11 Verm., 302. Bank of Utica v. Smalley, 2 Cowen, 770. School District v. Blaisdell, 6 N. Hamp., 197. In the next place, we think the doings of the commissioners are conclusive on this point. The commissioners under this charter were specially deputed by the legislature to repair to Litchfield, in order to superintend the subscription to the bank, and decide and certify to the subscribers when the requisite — 149 — amount of stock had been taken, and by whom, in order that the stockholders might make choice of directors and enter upon the appropriate business of the institution. This they did, and they gave their certificate that the one thousand shares were subscribed, naming the defendant and J. E. Houghton therein as stockholders, each to the amount of one hundred shares, and the corporation commenced business and issued bills to a large amount. If after this the defendant can attack the commissioners’ certificate and show it to be untrue, especially for the reason that the one thousand shares were never effectually subscribed, there is no safety for any one in relying upon the preliminary and initiatory proceedings in such cases, and the form had better be abandoned as deceptive and useless. And now that we are upon the conclusive effect of the commissioners’ doings, we can not avoid remarking that commissioners appointed for such a purpose are charged with a trust of no ordinary responsibility. The legislature most justly expects of them that they will bring to the discharge of this duty vigilance, firmness and integrity. They are called to launch upon the community a monied corporation invested with the franchise of issuing bank notes, and they are bound to see, as far as it may be in their power, that the proceedings are in good faith, and the foundation of the bank real, and not formal merely, and illusory. They certify that the subscription is fairly and fully made up as required by law and that the installment is paid and applied, so that the bank can commence its business with the capital prescribed, and is worthy of credit as having received their sanction and approval. All this may properly be inferred and is inferred by the public from their doings, and if the necessary vigilance and firmness are wanting on their part, nothing is more likely to occur than fraudulent practices by unscrupulous speculators, and in the end consequent loss and damage to the uninitiated and confiding. We do not mean to intimate that the commissioners in this case could have discovered more of the character of the early proceedings of the corporation, or should have sifted — 150 — the subscription more thoroughly than was done, but obviously, if the subscription is closely scanned, it presents some very weak points as the basis of a solid institution ; and it was in fact a very bad basis if the defendant has spoken the truth in the notice of his defense. Certainly the bank itself has turned out to be a great fraud, and the management with regard to it a breach of law of no ordinary turpitude. Again, so far as the notes are the ground of the plaintiffs’ action, made as they were for and in consideration of the subscription for stock, to give the bank credit to do business, we can not allow them to be called in question by the defendant for the reasons assigned. What if he had not paid his first installment, or what if J. R. Houghton was a married woman and could not be sued herself on her subscription, what is that to the defendant, who came forward and claimed to be a stockholder by reason of his subscription, and was admitted to be such, and gave his notes for the amount of twenty shares at par value, and was released by the bank from the remaining eighty ? This must operate to estop him forever from pleading this defense. Much was said on the argument about fraud committed on the defendant by the bank. It was said, in the language of the defendant’s notice, “ that the bank was a fraudulent and bogus concern from the beginning, intended and calculated to deceive and defraud whoever might be drawn in to make contracts with it, that its pretended organization and all its transactions were fraudulent and illegal,” and much more of the same character. We believe this statement to be substantially correct. But what then ? Who, we ask, is the bank that has done this ? And who ought to bear the loss of such frauds ? The creditors of the bank, (represented here by these receivers,) who have been induced to trust the bank as a legal and upright institution, or the stockholders, who held themselves out as constituting the bank, and who were recognized and adjudged to be .so by the commissioners ? There can be but one answer to these questions. The defendant should remember that he was one of the actors himself, and, judging from his large subscription, (one tenth of the whole,) a — 151 — prominent actor. He gave his name, and must have understood that it would be used, and wished it to be used, by Mr. Graves, his attorney, just as it was used. He afterwards acted personally as a stockholder, and made a settlement with the bank, cancelling his entire subscription by giving his notes for just twenty shares at par; a settlement, by the by, of a piece with the rest of the business and which will not very well bear the scrutiny of the law. But it closes his mouth. But as to this first installment, we say further that it was paid at the time of the subscription, and has never been repudiated by any one, and so the defense has not even any fact upon which it can rest. Mr. Graves was fully and duly empowered to subscribe for the defendant, and hence to do whatever was essential to make the subscription binding and effectual, and therefore to pay the installment for the defendant, as else the subscription could not have been taken by the commissioners, but would have been rejected. We are satisfied therefore that these one hundred shares were well subscribed for and the installment well paid. Nor is there any force in the objection that one hundred shares were subscribed in the name of Mrs. Houghton. We have already said that this question can not be raised in this stage of the case, but if it can, it does not appear on the face of the proceeding but that the husband intended to give the stock to his wife, just as a parent takes stock in the name of a minor child, pays for it himself and gives it to his child. This can lawfully be done, and might properly enough have been done in this instance if Houghton himself had been a man of means. So the balance of eighty dollars on a share might then or afterwards have been paid. The thing is possible though not very probable. So the defendant, or his attorney present at the time and conversant with the fact and the form of this large subscription, (the husband and wife taking twenty thousand dollars,) as we must believe, should have raised his objection before the commissioners, when the subscription could have been found incomplete and have been rejected. If indeed there was anything of a bogus character about this subscription, anything wrong and deceptive, then — 152 — if ever was the time to make it known to the commissioners. Probably this entire subscription of twenty thousand dollars by Houghton, (though, as it now appears from what is said, he was then an adventurer from New York wholly destitute of property,) was indispensable to make up the amount necessary to place the institution on a “ firm basis.” Besides, we think the defendant’s subscription would not of course become void though some part of the one thousand shares subscribed in the whole should fail or become uncollectible, as if some subscriber should be proved to have been under age at the time of subscribing. The defendant having himself subscribed, and with others presented to and induced the commissioners to accept the subscription as full and complete, in order that the bank might be started and its bills put in circulation, can not now complain that the creditors call upon him to make good his own engagements. We have thus endeavored to answer the defendant’s objections to the validity of his subscription and his notes therefor, and to show that he ought not on any principle of law or equity to prevail in his defense. We think we have succeeded in the attempt. Some other objections were alluded to on the argument, but they were not much pressed, and certainly were of a trifling nature, while the great features of the case are obvious and controlling. The defendant united with others to get up a bank in the town of Litchfield. They succeeded in the effort, and the defendant, with more or less culpability on his part, palmed off, or enabled and countenanced others in palming off, upon the people of the county and the public generally, a rotten bogus corporation. In our judgment the smallest atonement he can possibly make for this violation of law, is readily and cheerfully to pay his notes, and enable the receivers of the bank to do something towards paying the creditors, who, after all, must sustain a very great loss in the winding up of the institution. If he can escape by paying one-fifth of his subscription instead of the whole, he has no reason to complain of the receivers. A new trial is not advised. — 153 — In this opinion the other judges concurred; except Hinman, J., who, having tried the case in the court below, did not sit. New trial not advised.