Leavitt v. . Blatchford , 17 N.Y. 521 ( 1858 )

One of the points made by the appellant's counsel in this case is, that the trust deed in question is void, because not authorized by a previous resolution of the board of directors, as required by section 8, article 1, of the statute concerning "moneyed corporations." (1 R.S., 589.) Upon the second argument of the cause, this point, which depends primarily upon the question whether the provisions of that statute apply to banking corporations organized under the law of 1838, was elaborately discussed, and our first inquiry will be, whether this can properly be regarded as an open question.

I am not disposed to exaggerate the value of the maxim staredecisis. Decisions are often made and precedents created, either from a defective argument at the bar, or a want of thorough examination upon the bench, or some other cause, which are plainly in conflict with principle; and this maxim is frequently made use of in such cases to perpetuate the error. On the other hand, none will deny the importance of stability and fixedness in the rules by which the business affairs of the community are to be controlled. Aside from the positive injustice necessarily done by changing a rule in reference to which arrangements have been made and rights acquired, nothing can be more paralyzing to all prudent and well regulated enterprise than a consciousness that the laws by which its results are to be governed are fluctuating and uncertain.

But there is another aspect in which an unstable court of last resort is productive, in this country, of evils far more serious than any amount of individual injustice, however great. Such courts are frequently called upon to decide questions in which, not individuals merely, but the whole people, take an interest, and in regard to which prejudices have become excited and passions inflamed. There must be an arbiter somewhere, to decide such questions, which will command respect, or they will be brought to the arbitrament of force; and nothing will contribute so much to secure this respect as a steady uniformity of decision, especially in regard to questions which affect large classes of men, and which lead, therefore, more or less, to the formation of parties. The overthrow of a single decision in a case of that character, unless upon reasons so clear and conclusive as scarcely to admit of controversy, is seriously to be deprecated, as tending to perpetuate an exciting conflict of opinion.

Let us see, then, how the question under consideration stands upon precedent. One of the first cases in which the question arose was that of Gillet v. Campbell (1 Denio, 520). It was then held, BRONSON, Ch. J., delivering the opinion, that the provisions of the statute "to prevent the insolvency of moneyed corporations," did not apply to banking associations organized under the general banking law. Although the question was directly involved, it appears to have received but slight attention, and was summarily disposed of by the chief justice, solely upon the ground that the St. Lawrence Bank had not provided in its charter for a board of directors. It had a board of directors by whom its whole affairs were managed, but because such a board was not required by the charter, the statute was held not to apply. It is not surprising that the chief justice availed himself of the first opportunity to review this ruling. In Gillet v. Moody (3 Comst., 479), the same question arose and was again examined by the same learned judge. In speaking of the case of Gillet v.Campbell, he says: "Although I delivered the opinion of the court in that case, I do not feel entirely certain that the decision stands upon a firm foundation." It is plain that these words imply far more than they would seem literally to express, for the judge immediately proceeds to assert the applicability of the provisions in question to the St. Lawrence Bank, in the strongest and most unequivocal language. He says: "The case comes in every particular within the express words of the prohibition. This is a moneyed corporation; it has directors, and they have applied the funds of the institution to a forbidden object. The case is not only within the letter, but it is, if possible, still more plainly within the policy of the statute. The object of the legislature, as appears from the title of the act, was to prevent the insolvency of moneyed corporations, and to secure the rights of the creditors and stockholders." This decision is, in my judgment, entitled to greater weight than if that in Gillet v. Campbell had never been made. However it may be with courts whose members have changed, the same judges are not ordinarily inclined to reverse their own decisions, unless for the most satisfactory reasons.

Following this case came that of Talmage v. Pell (3Seld., 328), in which the point was again directly involved. It is apparent from the report of the case that the question must have been there elaborately argued, at least by the counsel for the defendant, as the printed points on that side embrace a summary of the arguments against the applicability of the statute. As this question lay directly in the way of the defendant's counsel, and as the last previous decision of the court in Gillet v. Moody was against him, it may safely be inferred, from the ability of the counsel employed, that the whole argument on that side of the case was presented. Under these circumstances, great significance and force are given to the resolution adopted by the court upon the decision of the case. That resolution declares, in the most explicit terms, that associations organized under the general banking law are moneyed corporations, within the meaning of the statutes relating to such corporations, and are bound by those statutes, excepting so far as their provisions may be inconsistent with the general law and the subsequent amendatory acts. This was the third time the question had been directly before the court; and it was apparently for the purpose of preventing any renewal of the discussion that this resolution was adopted.

The point was directly before the court and fully discussed; and I see nothing whatever to detract from the case as an authority. The argument of Judge GARDINER upon the subject is not as elaborate as upon some other parts in the case, probably because he considered it settled by the decision in Gillet v.Moody, but it is nevertheless clear and explicit. We see good reason, therefore, why the court, in the case of Gillet v.Phillips (3 Kern., 114), should treat the question as resjudicata. It had been twice adjudged by the same court upon full consideration, and rightfully regarded as settled.

In regard to the reopening of questions which have thus been repeatedly decided, much, in my view, depends upon the nature of the question. If, in a process of logical deduction from elementary principles universally admitted, the courts have fallen into an error, and that error can be clearly shown, I should, as a general rule, be in favor of correcting it, however often it may have been repeated. While errors of this kind rarely affect existing rights of property to any great degree, or extensively involve the passions or prejudices of men, they serve to introduce a false and spurious logic into a great variety of cases with which the erroneous principle may be collaterally connected or to which it may by analogy be extended. But questions like that under consideration, which enlist the feelings of many, and upon which the community in general is to some extent inclined to take sides, ought, in my judgment, to be regarded as finally settled by a single deliberate decision. If such a decision is to be overturned whenever the unavoidable changes in the court have brought in a majority of judges belonging to that class who differ with those who made it, the opinion of the latter will be likely to share no better fate, should the course of events afterwards restore the court to its former condition. If such questions are opened on one side they will be on the other, and the conflict will be without end.

But I feel no reluctance to discussing this as an original question, independent of all authority. Whether the ingenious and cogent reasoning urged in opposition to the series of decisions referred to can be wholly refuted or not, it may I think at least be shown that this reasoning is not so entirely conclusive as to justify the disregard and overthrow of those decisions; especially as the effect of such overthrow will be, not to mitigate or remove any admitted evil, or to introduce any rule which justice requires, but to exempt a large and important class of corporations or their officers from certain legislative restraints, enacted for the sole purpose of securing integrity and prudence in the management of their corporate affairs.

The argument against the decisions in question is very clearly and forcibly presented in the opinion delivered by my learned associate, Judge COMSTOCK, in the case of Curtis v. Leavitt (15 N.Y., 9). As this argument was virtually adopted by the counsel for the respondents upon the reärgument of this cause, and as nothing very material was added to it upon that occasion, it is safe to assume that it embraces, substantially, all that can be said upon that side of the question. Its main positions are these: That the system of banking which prevailed in this state from 1791, when the Bank of New-York was chartered, to 1838, when the general banking law was passed, was false and vicious, and wholly failed in accomplishing that which should have been its chief object, viz., the protection of the public against an unsound currency: that it imposed unnecessary restrictions upon the business of banking, and erected it into a monopoly which ultimately became odious: that after various legislative efforts to improve and perfect the system, among which were the act to prevent the insolvency of moneyed corporations, passed in 1827, and the safety fund law of 1829, all of which proved ineffectual, the truth was at last perceived that banking is a mere business, and not a franchise: that the whole duty of government in regard to it consists in so regulating the department of issues as to render the currency secure, and that, in all other respects, it may, like any other business, be safely left to individual and associated enterprise: that a new policy was thereupon adopted, in accordance with this theory, leading, first, to the act of 1837, by which the restraining law was partially repealed, and then to the law of 1838, by which the previous system of banking was wholly subverted and a new system instituted in its place: that the leading idea of the new system was, that all issues for the purposes of currency should be rendered secure, and that, beyond this, the business of banking should be left entirely free and untrammeled; that this was the obvious design of the legislature, in enacting the general banking law, and hence it could not have been intended to retain any of the restrictions of the old and exploded systems.

Full justice could not, of course, be done, in this brief summary, to the argument of my learned associate, which will be found at large in the case of Curtis v. Leavitt (15 N.Y., 74-83); but it is sufficiently set forth to render my answer to it intelligible. Its success in convincing some of my associates is to be attributed to the many elements of truth which it contains. Its history of our former banking system: of the entire failure of the various restrictions, successively imposed upon it, to accomplish the object of producing a sound currency: its account of the gradual progress of public opinion, both in England and in this country, towards what it calls the grand central idea, that the whole duty of government, in respect to the business of banking, is performed when it has rendered the currency secure: and its assumption that the law of 1838 was enacted under the influence of this idea, and was intended to inaugurate a system entirely new, in place of that which had so signally failed, were all just and true.

But the inference drawn from this series of undeniable truths is entirely unwarranted, as can, I think, be very clearly shown. While it is true that banking, when carried on by individuals or by unincorporated associations, is a business and not a franchise, and perhaps, also, that when so conducted it requires at the hands of government no regulation except such as will secure the issues made for the purposes of currency, yet, banking by a corporation, under a legislative act, is a franchise, and is attended by various contingencies and hazards peculiar to corporate bodies. It is indispensable, in considering this question, to discriminate between those provisions and principles of law which apply to banking as a mere matter of business, and those which apply to banks as corporations. The non-observance of this distinction has, in my judgment, led to most of the difficulty on this subject.

The act to prevent the insolvency of moneyed corporations is part of a general code, embracing all corporations. The first title of the chapter in which it is found relates to turnpike corporations, the second to moneyed corporations, and the third to corporations in general. This code was the result of the experience of the state in regard to the liability of corporations, as such, to certain peculiar species of abuses and frauds. Of course, the nature of the abuses would depend somewhat upon the nature and objects of the corporation; and hence, provisions intended to guard against these abuses would naturally be adapted to the peculiar character of the corporation. Thus, we find turnpike corporations in one class, and moneyed corporations in another; but the provisions concerning the latter class are not made applicable to them as banks, but as corporations. If the banks to which these provisions apply had consisted of mere associations, not incorporated, there would have been no necessity for the enactments.

That the act in question was not aimed at the banking powers of these institutions, but at their corporate powers, is conclusively shown by the fact that it embraces two other classes of corporations, as well as those for banking purposes. A very few only of its provisions apply exclusively to banking corporations; by far the greater portion, including those in question here, being applicable to insurance and pawnbrokers' companies, as well as to banks. It is evident that the act had no special relation to the business of banking, except as that, in common with many other kinds of business, was connected with the usual corporate powers and franchises. The truth is, that the act is a part of the general policy of the state in regard to corporations. That policy embraces every kind of business carried on through the instrumentality of corporate bodies, including, of course, that of banking, so far as it is connected with the exercise of corporate powers, but no further.

This view of the subject, which seems to me so plain and simple as to admit of no dispute, is, if just, entirely fatal to the argument under review. That argument is, that the state, having adopted a policy wholly new in regard to banking, all its previous policy on the subject was evidently intended to be abandoned. But what, I ask, has any change in the policy of the state, with respect exclusively to banking, to do with its established policy in regard to corporations in general? Take, for instance, section seven of the act in question, which provides, in substance, that no conveyance made for the benefit of a moneyed corporation shall be valid, unless made directly to the corporation by name. The object of this provision appears to have been to prevent the property of the corporation from being placed beyond the control of its board of directors. It was intended as much for the benefit of stockholders as of creditors, and is applicable as well to the other corporations named in the act as to those for banking purposes. Hence, it could have had no peculiar connection with the banking policy of the state, and could not possibly be affected by any change in that policy. It would, therefore, have applied in all its force to banking corporations under the law of 1838, but for the provision in section 24 of that law, requiring conveyances of real estate to be made to the president, or such other officer as should be designated for that purpose. To the extent of this latter provision, the legislature appears to have departed from the policy which prevailed in 1828.

What has been said in regard to the objects of section seven is also true of section eight. The original note of the revisors upon these two sections is as follows: "To prevent a fraudulent application or transfer of the property and funds of a company, by its directors or officers." It is plainly to be inferred, from this note, that these sections were intended for the protection, not only of creditors, but of stockholders also. That the legislature had the interests of stockholders in view, in passing the act, is conclusively shown, not only by its title, which expressly declares that it is enacted "to secure the rights of creditors and stockholders," but also by several provisions in the body of the act itself. Thus, section 10 provides that "every director, who shall violate or be concerned in violating any provision in the preceding sections of this article contained, shall be liable personally to the creditors and stockholders, respectively." Again, section 15 provides that, "in every case of fraudulent insolvency, the directors of the insolvent company by whose acts or omissions the insolvency was wholly or in part occasioned, and whether then in office or not, shall each be liable to the stockholders and creditors of the company."

It will be difficult, I think, to show that a change of policy, in regard to the proper mode of securing the public against the frauds or abuses of banks, can legitimately operate to subvert provisions designed to prevent the stockholders of every species of moneyed corporations from being defrauded by their official agents. In so far as the law of 1838 has severed the connection between banks and corporations, it has, no doubt, exempted the former from all previous restrictions. I entirely assent, therefore, to the reasoning of Judge COMSTOCK, when, in speaking of the law of 1838 (15 N.Y., 79), he says that we have, in the first fourteen sections, a system of banking, in the particular department of issuing currency, "so rounded and complete in itself as to exclude all antecedent legislation," and that there would seem to be no "possibility of incorporating into it either the provisions or policy of the codes of 1828 or 1829, relating to a system fundamentally different."

Certainly not: because those provisions apply solely to corporations, and the first fourteen sections of the law of 1838 confer no corporate powers. But when, by the subsequent sections, the creation of corporations is authorized, what prevents the application to them of the permanent statutory regulations intended for all such cases? There has been no change of policy which affects in the least the reasons upon which those regulations were adopted. Individual bankers, and unincorporated banking associations, act under all the restraints of a personal responsibility for the debts incurred; but banking corporations are exempted from these restraints, as well under the general banking law as prior thereto, and their officers possess the same facilities, and are under the same temptation, to perpetrate frauds since as before its enactment. It is in accordance, therefore, with the policy of the state, which has undergone no change since 1825, to apply to banks, when incorporated, restrictions not imposed upon private individuals or mere associations engaged in banking. The argument under consideration may be regarded as conclusive, when applied to the provisions of the safety fund act of 1829, which consisted simply of a system of banking, for which, as an entirety, the general banking law may well be considered as a substitute. But in regard to the provisions which form a part of the general policy of the state in respect to corporations, it is, in my judgment, without force, except such as it derives from a more or less confused intermingling of ideas relating to banking, as a mere species of business, with those which relate to corporations as such.

My learned associate has, however, found one or two other reasons for his conclusion. In speaking of the act concerning moneyed corporations, he says: "Some of the provisions of that act are absolutely incongruous, and cannot by any ingenuity be made to harmonize with the law of 1838." This remark must, I apprehend, refer to those portions of the act of 1838 which permit the business of banking to be carried on by private bankers and unincorporated associations. I have not discovered that there are any provisions of the act to prevent the insolvency of moneyed corporations which may not be applied to banking corporations created under the law of 1838, as well as to those previously existing; and as no one ever contended for the application of those provisions to individuals or associations not incorporated, the suggestion referred to is, of course, without weight. But were it true that some parts of the act in question could not readily be applied to this new class of corporations, it would argue nothing against the applicability of other portions concerning which no such difficulty exists. The act is general, and intended to apply to different classes of corporations, and there is no incongruity in applying them to each class so far as they are applicable, and no further.

I come now to the only branch of the argument which strikes me as entitled to any very serious consideration. It is said that some of the provisions of the act to prevent the insolvency of moneyed corporations are inserted in the general banking law itself, and this is very properly insisted upon as evidence that it was not intended that the whole of those provisions should apply. I am not disposed to deny the force of this argument, but I nevertheless contend that it is met in this case by an argument of still greater weight. Section 61 of the act in question (1R.S., 599) defines the term "moneyed corporations" as including, among others, all corporations for banking purposes; and section 62 provides that the provisions of that act should be construed to apply to every moneyed corporation created, or whose charter should be renewed or extended, after that time, unless such corporation should be "expressly exempted" from its provisions "in the act creating, renewing or extending such corporation."

These, in common with all the other provisions of the act, remained in full force when the law of 1838, authorizing the creation of any number of banking corporations, was passed, and yet the latter law contained no provision "exempting" such corporations from the act in question. By the terms of these several enactments, therefore, the new class of corporations are as directly within the provisions of that act as it is possible for language to bring them. This my learned associate calls a "logic of words." True, it is a logic of words; but it is equally a logic of ideas, if words can be made to express ideas. Here, then, we have the only real arguments upon this question, face to face. On the one hand, we have the plain, explicit and unequivocal language of the statutes, expressly subjecting these corporations to the provisions in question. On the other, we have nothing in the nature of an express exemption, but merely an inference, founded upon the maxim expressio unius exclusio estalterius. Under these circumstances, ought not the express provisions to prevail over the inference? especially as no reason can be seen, or has ever been suggested, for enacting the law in reference to former moneyed corporations, which does not apply with equal force to those authorized by the law of 1838.

But it has been said, and was said by one of the learned counsel upon the argument of this case, that the legislature did not intend to make associations under the general banking law, corporations at all, and therefore could not have intended to subject them to provisions applicable solely to corporations; and we were furnished with an able and elaborate printed argument to sustain this position. It is too late now to consider the question whether these associations are corporations. That question, at least, is settled, as has been generally conceded by both judges and counsel ever since this and its kindred cases arose. Can we then hold that banking associations are corporations, and at the same time assume that the legislature did not intend to make them so? This would be a judicial solecism of the grossest kind. Statutes are but the expression of the legislative will; and the two ideas, that the legislature has made a law, and that it did not intend to make it, are mutually and directly repugnant.

It is judicially settled, therefore, that the legislature, in passing the general banking law, intended to provide for the creation of an important class of moneyed corporations; and, upon the well settled rules of statutory construction, we are bound to presume that they did this with full knowledge of the provisions subjecting all such corporations to the statute in question, unless "expressly exempted" therefrom. The inference, from the want of any such exemption under such circumstances, that the legislature intended to leave these new corporations to the operation of that statute, is irresistible, and must supersede any inference to be drawn from the circumstance that two or three of the provisions of the statute were inserted in the general banking law itself. The insertion of those provisions is easily accounted for, from the well known fact that some at least, if not all those originally concerned in framing the law, imagined that they had succeeded in providing for the existence of a class of associations which should be endowed with all the powers, privileges and immunities of corporations, without being subject to any of their disabilities; and it is not in the least surprising that the legislature was not careful to strike them out, as their remaining could do no harm.

Nor does the fact, that by several statutes passed subsequently to the law of 1838 certain provisions of the act to prevent the insolvency of moneyed corporations were made applicable to banking associations under that law, militate at all against the argument which has been here advanced. When those statutes were passed, the judicial controversy as to the nature of those associations was still pending, and it was uncertain whether they would ultimately be held to be corporations or not. The statutes in question show at least the legislative sense of the propriety of the provisions; and as they would not apply in case the associations were decided not to be corporations, there was good reason for their being made the subject of special enactment.

But I will not pursue the argument further. If what has been said does not prove, as I think it does, that the decisions of this court upon the question under consideration rest upon the soundest principles of statutory construction, it is, I trust, sufficient at least to show that they are not so manifestly erroneous as to justify their being overruled after being so often deliberately repeated. No question of practical justice is involved. It is a mere conflict of opinion. As, therefore, no valuable end is to be attained by reversing what has been heretofore decided, I, for one, protest against such an exhibition of mutability on the part of the court.

My conclusion, therefore, is, that the provisions of section eight of the article of the Revised Statutes, concerning moneyed corporations, are applicable to this case; and I am unable to concur in the opinions expressed by some of my associates, that, assuming the applicability of that section, the want of a previous resolution may be supplied by a subsequent ratification of the conveyance.

The judgment of the Supreme Court, therefore, should, in my opinion, be reversed.

STRONG, J., also dissented; DENIO, J., having been consulted while at the bar, did not sit in the case.

Judgment affirmed.