People ex rel. Attorney General v. President of the Bank of Pontiac , 1864 Mich. LEXIS 47 ( 1864 )

Ciiristiancy J.:

By an act of the Legislature, of April 5th, 1839 — Laws of 1839, p. 104, § 49 (which, with slight alterations of phraseology, was incorporated in- the Revised Statutes of 1846, Chap. 117, § 8.; Comp. L. Ch. 155,) — it was expressly provided that, “whenever any incorporated company shall have remained insolvent, or shall have neglected or refused to pay its notes or other evidences of debt, or shall have suspended the proper and legitimate business of such corporation, for one whole year; it shall, in either case, be deemed to have surrendered its rights, privileges and franchises, and -shall be adjudged to be dissolved.”

The rejoinder of the respondents to the second replication admits that, having previously organized and entered upon the business of banking, the corporation became insolvent on' the first day of May, 1840, and on that day ceased, discontinued and closed their banking operations, and from that time until the first day of February, 1864, neglected to resume such banking operations; but alleges that, on the second day of February, 1864, they became and were, and ever since have been, and still are, solvent; that, on the last mentioned day, they resumed and have since continued their banking business.

The rejoinder to the third replication admits that, having previously organized and entered upon the business of banking, the corporation became insolvent on the first day of May, 1840; that on that day they discontinued, ceased and closed their banking operations, and that from that time until the first day of February, 1864, they remained insolvent and neglected to resume their banking operations; but alleges that, on the second day of February, 1864, they became and were, and ever since have been, and still are, solvent; and that they then resumed their banking operations, and have ever since exercised, and still do exercise them, &c.

These admissions bring the corporation directly within the provisions of the act of 1839, and the Revised Statutes above cited, so far as relates to the continued insolvency and suspension of business for a year.

We see no reason to doubt the validity of the statute, either in its application to charters of incorporation previously existing, or to those subsequently passed. Any of the grounds mentioned in the statute, upon which a surrender is to be presumed and the corporation is to be. dissolved,, would, have been good cause of forfeiture at common law; and this though they might not have continued for an entire year. Each would constitute a violation of the duty, which the corporation, by accepting the charter, undertook to perform, as the consideration of the grant. And it is well settled that it is a tacit condition annexed to every grant of incorporation, that the corporation shall act up to the end or design for which it was incorporated:'— Ang. & A. on Corp. § 774. And see Matter of Jackson Marine & Fire Ins. Co., 4 Sandf. Ch. 559 ; Ward v. Sea Ins. Co., 7 Paige, 294; State v. Bank of South Carolina, 1 Speers, 433.

The respondents do not deny the correctness of this position: they admit that the acts or derelictions stated in these replications, and admitted by the rejoinder, would constitute good ground of .forfeiture if the bank had not become solvent and resumed business before the filing of the information. But it is insisted that the bank did not become, • ipso facto, dissolved for the causes mentioned; that its corporate existence continued till the State should see fit to enforce the forfeiture; that the failure of the’ State to insist upon the forfeiture, by the institution of judicial proceedings, must be construed as an acquiescence, on the part of the State, in the failure of the corporation to perform the condition of the grant, and that this acquiescence, having continued until the corporation became solvent and resumed business, operates in some way as a remission of such past transgressions, or a waiver of the right to insist upon a forfeiture on that ground.

It is true the facts admitted did not operate, ipso facto, to dissolve the corporation without a judicial proceeding for that purpose; this was necessary on the part of the State to ascertain judicially the existence of these facts; and until the State chose to insist upon the forfeiture, no one had a right to question the existence of the corporation collaterally. The State might, through the Legislature, choose to waive the forfeiture entirely; and we are bound to presume they would do so in all proper oases. But I am not aware of any case in which it has been decided that a corporation, having been guilty of such a breach of the conditions of its existence or continuance as to authorize a forfeiture of its charter, could legally atone for such misconduct, and avoid the forfeiture by subsequent good behavior. The contrary has been several times held in the courts of New York: — People v. Fishkill and Beekman Plank Road Co., 27 Barb. 458; People v. Hillsdale and Chatham Turnpike Co., 23 Wend. 254; and see Matter of Jackson Marine and Fire Ins. Co., 4 Sandf. Ch. 559. In the case above cited from 23 Wendell, 254, was it justly said by the court that “the argument [the same here urged by the respondents] goes to prove that a corporation may practice all manner of abuses, by com. mission or omission, if it be careful to stop before the Attorney General can be informed and institute a prosecution.” In The People v. Bank of Niagara, 6 Cow. 211, relied upon by the counsel for the respondents, no such question was involved.

We can see no ground for holding that the neglect of the State to prosecute for a forfeiture in this case should operate as an acquiescence on the part of the State in the breach of the conditions of the charter, or as a waiver of any forfeiture for such breach. This corporation became insolvent and suspended its corporate business in the face of an express statute of the State then and ever since in force, which expressly declared that any corporation, remaining thus insolvent or thus suspending its business for [one year, should be deemed to have surrendered its corporate rights and franchises. The neglect, therefore, of the corporation for one year to restore its solvency, or to resume its business, would justly authorize the legislative and the executive departments of the State to infer that the corporation intended, by this neglect, to abandon or surrender to the State all claim to any corporate rights or franchises; that it had no intention to attempt their resumption, and that no proceeding on the part of the State would therefore become necessary to put an end to its corporate existence; and this inference would naturally be strengthened with every year’s continuance of such neglect. The Legislature would naturally act upon this inference, in judging of the propriety of granting other charters of incorporation, to supply the public wants or convenience which this corporation had once been designed but had failed to subserve. See opinion of the Vice Chancellor in Matter of Jackson Marine and Fire Ins. Co. above cited.

We think, therefore, that after this corporation, in the face of this statute, had allowed itself to remain insolvent •and its corporate powers to lie dormant without an attempt to fulfill the purposes of its creation for a whole year, the State •shows sufficient diligence (if any be required) if it proceed to institute proceedings, and to claim a forfeiture, within a reasonable time after it is informed of the first visible manifestations of returning life, or of the first public indication of an intent to assert its legal existence by the exercise of its original franchises. The resumption of business, therefore, or the attempt to resume after having remained insolvent, and to all outward appearance inanimate, for nearly a quarter of a century, is rather a justification for, than a bar to, this proceeding by quo warranto. The People •are therefore entitled to judgment upon the demurrer to the rejoinder, with costs.

In some cases of quo warranto against corporations, where the forfeiture is sought on the ground of a usurpation of «orne power not granted by the charter, or for some single act of misfeasance, malfeasance or neglect, and the corporation has been found guilty, courts have exercised a discretion, and imposed a fine, instead of adjudging a forfeiture of the charter. But if we have any discretion under this statute, which expressly declares that the corporation shall for such acts or dereliction he dissolved — a question we shall not here discuss — we are unable to discover any fact or circumstance iu the conduct of the respondents to call for the exercise of such discretion in mitigating the penalty of forfeiture which the statute has pronounced.

After having remained insolvent and ceased to transact business for nearly twenty-four years, they make this ostensible attempt to resume, and to assert the right of issuing hank notes, when less than fourteen months of their chartered life remained, and when, if it had all along continued its business, and been actuated by honest motives, it would naturally be making arrangements to call in its paper and to close its business. The attempt to resume under such circumstances, and at so late a period of its chartered existence, is at least somewhat suspicious, and not calculated to produce the conviction of an honest purpose. The judgment of the Court must therefore he, that this corporation has surrendered its rights, privileges and franchises ; that it he ousted and altogether excluded therefrom, and that the corporation he dissolved.

The other Justices concurred.