Campbell et al. v. The Mississippi Union Bank, 6 Howard 625

Mr. Chief Justice Sharkey delivered the opinion of the court. The defendants in error instituted suit against the plaintiffs in error on a promissory note, dated the 18th of March, 1839, and due nine months after the 19th of April, 1839, negotiated and payable at the banking house of the Union Bank, at Jackson. The defendants below pleaded six special pleas, all of which, for different reasons, bring directly in question the right of the Union Bank to recover on notes discounted by the bank for the accommodation of the makers.

To all these pleas the plaintiffs below demurred, and the court sustained the demurrers. The defendants failing to plead further, judgment was rendered against them, to reverse which this writ of error is brought. Each plea presents a distinct question for the consideration of the court; some of them deny the constitutional existence of the corporation, and others set up a forfeiture of the corporate capacity, and deny the right of recovery. After a few preliminary remarks, we shall proceed to the several questions which have been so ably and lengthily discussed on both sides.

On the one side it has been contended that the bank charter is unconstitutional. On the other, that the act of 1840, requiring the banks to resume specie payments or forfeit their charters, is unconstitutional. It is at all times a delicate judicial duty to declare

an act of the legislature unconstitutional. In doubtful cases this should be avoided; but if

an act be palpably unconstitutional, the question should be met with firmness. The constitution is the paramount law — the supreme rule — to which all others must yield, and it operates with equal force on the different departments of government. To the legislature belongs the power of making laws, and it is for the judiciary to expound them. We must presume that all laws were designed for the public good; hence, whatever our opinions may be in regard to the good or bad policy of a law, we must sustain it, if possible. With the consequences we have nothing to do.

And the good or bad effects of a law in its practical operation, can have no weight in deciding whether it be constitutional. We must look at it as it was made, and judge of it as it would then have been judged. We cannot treat lightly that which the legislature has solemnly determined to be politic and necessary, although it may have become odious. Having premised thus much, I shall proceed in the matter presented in the several pleas, taking them up as they stand on the record.

The substance of the first plea is, that on the 10th day of July, 1840, the holder of a note of ten dollars, made by the bank, presented it at the bank and demaded payment in specie, which payment the bank was bound to make according to the provisions of the act of the 21st of February, 1840; that payment was refused, which refusal being made known to the governor, as by the act was required, and it appearing to him that presentment had been made, and payment refused, he issued his proclamation, declaring that all the banking powers and privileges of the Union Bank were forfeited.

The plea states the facts which are said to constitute the forfeiture of the charter, and all the facts that are well pleaded are admitted by the demurrer. The demurrer does not admit that the charter was forfeited, but only the truth of the facts pleaded, and we are therefore to enquire whether the facts constituted a forfeiture of the corporate powers. This will depend upon the provisions of the act of 1840, under which the forfeiture is pleaded, and also on the constitutionality of that act. The act referred to is entitled, “

An act requiring the several banks in this state to pay specie, and for other purposes.” By the 8th section, it is provided that the several banks should pay their notes of the denomination of five dollars on the first day of April ensuing; their notes of ten dollars on the first day of July; their notes of twenty dollars on the first day of October; and notes of all denominations after the first day of January, 1841. The 9th

section provides that in case of failure to pay as directed, the president, cashier, or teller should indorse such refusal on the note, which was to be equivalent to a. protest, and evidence of a refusal to pay. The 10th

section is in these words: “That whenever the governor, either from the certificate of the president, cashier, or teller, as aforesaid, or by affidavit of the holder of any such note, bill, or other evidence of debt, shall be satisfied that such presentment has been duly made, and payment refused, he shall forthwith issue his proclamation, declaring that said corporation has forfeited all its banking powers and privileges; a copy of which proclama, tion he shall forward to such corporation, after which such corporation shall retain and use its corporate name for the purpose of luinding up and liquidating its affairs, and for no other purpose whatever.” The 11th

section provides that whenever a corporation should be proclaimed to have forfeited its charter, two commissioners should be appointed, one by the president or stockholders, and another by the governor, to make out a

schedule of all the effects of the bank, and also of her liabilities, a copy of which

schedule was to be forwarded to the governor, for inspection of all concerned, and another copy to remain in the bank; and the 13th

section declares that no dividend shall be made whilst the bank should be in a state of liquidation. These several provisions are all that are necessary to consider under the first plea. Although much of the argument was directed to the provisions of this act and its constitutional validity, we must believe that it was done from a laudable zeal to discuss the whole case in all its possible aspects. Whatever I may think of the constitutional power of the legislature to impose restrictions, limitations and forfeitures orí a bank, by

an act subsequent to the charter, without the consent of the corporation, I cannot conceive that any such question is presented in the present case. The act does not profess to impose an absolute and instantaneous forfeiture of a bank charter for a failure to pay specie, but it declares that it shall work a forfeiture of “its banking powers and privileges.” But again: the latter part of the 10th

section declares, that, after such proclamation, “such corporation shall retain and use its corporate name for the purpose of winding up and liquidating its affairs, and for no other purpose whatever.” Here is an express continuance of its corporate existence, for the purpose of winding up and liquidating its affairs. By its charter it had been authorized, to discount notes; its effects, therefore, necessarily consisted of bills, receivable.

The power to wind up its affairs necessarily reserved to it the power to collect all notes previously taken, either by suit or otherwise; for, without the power to sue, the power to wind up and liquidate amounted to nothing, if its legal remedy was taken from it, its rights were destroyed, and there was nothing, or but very little, to wind up. This note was given long before the act of 1840 was passed, and on any such'note it has a right to sue. This power has not been taken from it. It is impossible that the legislature could have intended to take away its capacity to sue or. be sued.

If they had really done so, the note holders would have had the greatest right to complain; for there is no reservation in the act in favor of the creditors of the bank, except that' which I have mentioned; and if the corporation was absolutely annihilated, the holders of the circulation were left without any remedy. They might well have complained that the act impaired the obligation of contracts.

Admitting, then, that the act of 1840 is valid in all its parts, still there is nothing in it which prevented the plaintiffs below from suing on contracts previously made, and the matter pleaded in the first plea was, therefore, no bar to the action. The second plea is, in substance, that the act supplemental to the charter of the Union Bank was not agreed to by a majority of each house of the legislature, and entered on the journals with the yeas and nays, and referred to the next succeeding legislature, after publication in the newspapers, according to the provisions of the 9th

section of the 7th

article of the constitution; but that said supplemental act made material alterations in the original act, and was only passed by one legislature, and that no loan of money can be raised on the faith of the state without the assent of two legislatures, given in the manner presented by the constitution.

On this point it is argued that the whole of any law by which the faith of the state is pledged, must be entered upon the journals, with the yeas and nays, and be published in the newspapers the required time, and that it must afterwards be submitted to the succeeding legislature for approval; and that, as the supplemental act is a part of the charter, by which material alterations are made, that the action of two legislatures was also, necessary as to this supplemental act, and that, as it was only passed at the regular session of 1838, the whole charter is therefore unconstitutional and void.

I shall, then, proceed to notice the constitutional provision, and to inquire, by an application of it to the bank charter, whether the position taken can be sustained. The 9th

section of the 7th

article of the constitution is in these words: “No law shall ever be passed to raise a loan of money upon the credit of the state, or to pledge the faith of the state for the payment or redemption of any loan or debt, unless such law be proposed in the senate or house of representatives, and be agreed to by a majority of the members of each house, and entered on their journals, with the yeas and nays taken thereon, and be referred to the next succeeding legislature, and published for three months previous to the next regular election, in three newspapers of the state, and unless a majority of each branch of the legislature so elected, after such publication, shall agree to pass such law; and in such case the yeas and nays shall be taken and entered on the journals of each house.” The 5th

section of the original charter provides, “That, in order to, facilitate the said Union Bank for the said loan of fifteen millions five hundred thousand dollars, the faith of this state be and is hereby pledged, both for the security of the capital and interest,” &c. It appears that the original charter, in which this provision is contained, was passed in accordance with the provision in the constitution. The supplemental act makes no alteration whatever in regard to this section.

It changes, in some respects, the mere detail of the original charter, in the mode of carrying the corporation into successful operation, and authorizes the governor to subscribe for the stock on the part of the state. The object of the pledge is not changed; on the contrary, the supplemental act was passed in aid of the original design. In applying the constitutional test to the 5th section, I am not able to perceive any reason which to me seems sufficient to justify the conclusion that it is unconstitutional.

The object of the framers of the constitution was doubtless to give the people an opportunity of judging of the policy and propriety of making a pledge of the faith of the state, and it would seem to be reasonable that enough of the law should be published to inform them as to the object. If this could be done by publishing one

section alone, then the reason for requiring publication would be fully answered, as much so as it would be by publishing the whole law. The 5th

section alone contains ample information on the object in view in making the pledge. Indeed it is the only part of the whole act which does declare for what purpose and in what manner the faith of the state should be pledged. By it the object was declared and the pledge made, and the manner and time at which it was to be fulfilled, fully specified. The people must have been as fully informed, for all useful purposes, by the publication of this

section as by the publication of the whole act; so that the reason which operated in the formation of the constitutional provision, and which has been so strenuously contended for, as showing the necessity for publishing also the supplement, was fully secured. But there is no necessity for sustaining the publication of this

section alone, since, for any thing that appears in this plea, the whole charter was published, and must be free from objection, unless it be contaminated by the unconstitutionality of the supplement. Let it be supposed, then, that the supplemental act was void, does it necessarily follow that the original act is for that reason also void? I cannot perceive how such a consequence would follow. That which is valid cannot be destroyed by that which is void.

A void act can have no influence on a valid one; and if it be true, and it is not denied, that the original act would have been valid without the supplement, then it would seem to follow that its validity could not be shaken by a void' supplement.1 They, áre separate acts, and it ■would seem to be an anomaly in legislation, that a previous valid act could be destroyed by a subsequent void one.

I am aware that acts on the same subject are to be construed together for the purpose of carrying out fully the provision's of such laws, but this is a mere rule of construction; but when their validity is attacked, then they may be considered as having a separate and independent existence.

If one be void the other will not be affected, unless they be so essentially connected and blended together as to make one useless and inoperative without the .other. ' But suppose we consider them as making but one law, does it then follow that, if the provisions of the supplement be void, the provisions of the first act are also lost? It undoubtedly does not. This, again, would depend on the connection or dependence of the several provisions. If part of the act can be carried out, and that part be constitutional, it must stand, and the portion which is unconstitutional must be rejected.

Suppose the legislature were to make in one act a,n entire code of law, either with or' without a title, and one

section or one provision of that code should turn out to be unconstitutional, surely it would not necessarily follow that the whole code must for that reason be declared unconstitutional. The void would be separate from the valid, and that which was not unconstitutional would remain in force. It is not at all uncommon for the courts of the country to declare a

section or a provision in a law unconstitutional, and to retain and enforce the balance. Thus in the case of Thomson v. The Grand Gulf Railroad Company, 3 Howard, 240, this court held a single provision in the charter unconstitutional, but this did not induce us to declare the whole charter void. The same, doctrine is recognized in the case of Sturges v. Crowninshield, reported in 4 Wheaton; and again in the case of the Bank of Hamilton v. Dudley’s lessee, 2 Peters, 492, in which the constitutionality of

an act of the Legislature of Ohio was questioned. In deciding the case, Chief Justice Marshall remarked, that “if any part of,,the act be unconstitutional, the provisions of that part may be disregarded, while full effect will be given to such as are not repugnant to the constitution of the United States, or of the state, or to the ordinance of 1787.” It would then necessarily follow, that, even if the supplement be void, the original act is not for that reason also void. It is not, therefore, material whether they be regarded as one law, or as different laws.

If they be but one law, then the provisions which are unconstitutional must be' rejected, and the remainder must be enforced or carried out. If they be regarded as separate laws, then the one must be, rejected and the other retained. The position taken by counsel necessarily destroys the force of the argument advanced, as will be seen by reference to the dates of the acts. On the 21st of January, 1837, the original charter was passed and approved. It was by the 47th

section referred to the next legislature, and directed to be published as the constitution required, and it is not denied but what this was done. On the 5th of February, 1838, the act, aá it had originally passed, without any alteration, was passed by the succeeding legislature, and approved by the governor. It then became a law, confessedly constitutional. On this state of things let the mind for a moment pause and survey the past. Here is a bank charter constitutionally enacted by the legislature, and which must, therefore be valid. It is not void for ambiguity, or because it cannot be carried out.

Its details are such as the legislature thought necessary and sufficient, and they have not been attacked. ■ In this condition, things remained for ten days, but on the 15th of the same month, the legislature passed the supplemental act, and it received the approval of •the executive, and this is the act which it is said is unconstitutional, and which, being so, must also vitiate the original act, after it had a constitutional existence for. ten days, merely because the supplemental act professed to make alterations in the original act.

Now, if this act be absolutely void, how, I would ask, can it interfere with a law which was valid, and which had been in force ten days before the void act was passed? If it was void, it could alter nothing; it had no constitutional being; it could not connect itself with the original law; it was powerless, and can present no impediment whatever to the validity of the charter. If, then, the position taken be the true one, we get clear of nothing but the supplemental act, and this does not interfere with the right of action.

By the original act, the power to take notes and sue on them is fully provided for, and if that be valid, as I think I have shown, it to be, then the remedy is undoubted, and the plea presents no bar .to the action. The third plea is, that the note sued on was given for a loan of post notes, issued'by the bank to circulate as money, when by the charter the bank could only issue notes payable on demand, and that the contract is void.

The charter is entirely silent as to what description of notes the bank should issue, and if we were to declare that they could only issue notes payable on demand, it Would be engrafting a condition on the charter which its provisions would not authorize.

By the ninth section, the subscribers for stock were created a body corporate, with power to hold property, and they were authorized “to loan, to negotiate, to take mortgages and pledges, and to discount on such terms and such securities as they should think pro-' per.” By the 18th section, it was provided that the bank should not issue any bill, note, or check,, for less than ten dollars. ' Although the power is no where expressly given to issue notes of any description, yet it is clearly an implied, power, arising from these two. provisions. ■ It was evidently the design of the Legislature that it should do so.

This is manifested as well by the foregoing provisions, as by the nature of the institution'which it was creating. It was designed that its discounts should be made in its own notes. Having, then, the power to issue notes and put them in circulation, there is no rule by which we can arrive at the conclusion that notes on demand were intended, and not post notes. It would be fair to construe the act in reference to the power éxercised by similar institutions, as we may fairly presume such custom was known to the legislature.

The custom of issuing post notes had previously prevailed with the banks both in this state and elsewhere, and the inference is, that the legislature intended to confer on this institution such powers as were generally exercised by banks. Certainly they authorized the bank to issue notes, and not having fixed the precise description of the notes it should issue, it is not with us to do so. Neither post notes nor notes on demand are money, nor can they in strictness be said to be the representatives of money.

How can the notes of a bank be the representatives of its money, when it may issue three times as much in notes as it has in money? They are but a substituted, currency, circulated by legislative approbation, and for many purposes regarded as money, merely because they are used as a circulating medium. If, then, neither be money, post notes Avould constitute a consideration for a note given for them, quite as legal as would a note on demand. Both are but promissory notes, and they differ in nothing but in the time of payment. If one be a legal consideration for a contract, the other must also be.

They may differ in their value, but this is not a question before us. Mutual promises constitute sufficient considerations the one for the other. It is but by common consent that bank notes circulate as money; the legislature has no power to declare them to be money; and if, by common consent, one description of note may be considered as money, so may another be.

Perhaps it has not been as common for banks to issue post notes as notes on demand; but when issued, they have circulated as money in the same way that notes on demand have, and as the legislature was silent on this subject in the charter, their tacit consent may be implied; but, at all events, there is nothing which enables us to say that the bank had no right to issue such notes. Believing, then, that the bank had the power to issue post notes, independent of the subsequent act which conferred such authority, we have not thought it necessary to determine whether that act applied to the Union Bank or not.

This plea is consequently bad. The fourth ,plea is, in substance, that on the 8th of June, 1840, a majority of the stockholders of the bank assembled at the banking houses in the respective bank districts, and, by resolutions, refused to receive the state bonds issued in pursuance of the charter for the benefit of the stockholders, and that they also refused to permit the bonds to be sold for their benefit, but ordered them to be delivered up to the authorities of the state. That they were not, in truth, stockholders in the bank, and by the resolutions renounced their privileges as such.

That they thereby surrendered the charter of the bank, and that the surrender had been accepted by the proclamation of the governor, in pursuance of the provisions of the act of 1840. If any of the matter here pleaded would be a bar to the action, still the manner of pleading it would render it subject to the demurrer. The plea sets up three distinct matters, which are repugnant and contradictory. 1st. That the stockholders refused to receive the state bonds. 2d. That they were not stockholders. 3d. That they had surrendered their charter.

If they were not stockholders, they had no right to refuse the bonds, or to surrender the bank charter. If they were stockholders, they could not divest themselves of that character by their mere resolutions. We might leave this plea without further comment, but it is perhaps proper that we should give some consideration to the matter pleaded.

If the corporation could only exist on condition that the bonds intended for the benefit of the stockholders should be received by them, then this plea would present a question whether the corporation had not been dissolved by their refusal; but it was provided that the state should become a stockholder, and if the state has taken its stock, then the corporation may still exist. And again, whether the supposed stockholders were really so or not, still the state may be the only stockholder, (a question which the record does not enable us to decide,) and in that case the corporation was not necessarily dissolved.

And lastly, even if the charter was surrendered as the plea avers, and accepted according to the provisions of the act of 1840, still there is a saving in the 16th

section of that act of all corporate powers, necessary for the liquidation of its affairs, and under this saving it may still sue for the purposes of collection. The fifth plea is, that the post notes received on the loan had printed on them the words, “the faith of the state pledged,” which was a material part of the contract; and it avers that the bank had not the right to issue notes pledging the faith of the state for their redemption. The plea does not allege that the defendant was deceived or defrauded by this, nor does it allege that any deception was practised on him.

He was probably as well informed at the time he took the notes as he is now, that the bank had no right to make any such pledge. It was a matter about which he is presumed to have been informed. The faith of the state can only be pledged in a particular way, and when it is done, every person is informed of it. These words did not amount to a pledge of the faith of the state, and the defendant must have known that they did not, and I cannot perceive how this matter, pleaded as it is, could be considered as a bar to the action. The last plea is, that neither the entire original charter, nor the fifth

section thereof, was published for the length of time required by the constitution; but that the same were published in the Mississippian for eleven weeks only previous to the election, and in certain other papers only ten weeks, and that being

an act pledging the faith of the state for the payment of money, it is void unless the constitution has been strictly followed. The answer to this is, that it was only necessary to publish the charter, because by the fifth

section the faith of the state was pledged for the payment of a contepaplated loan; and if the charter may still exist without the aid of the fifth section, then the plea is bad. We have already seen that part of a law may be valid and another

part invalid, unless their dependence be such as necessarily to destroy both. The fifth

section is not a condition on which the charter depends, but it is a provision, merely, in aid of the general object. The legislature had it in view to establish a bank, but it was evident that capital would be wanting to ensure their success. The bank was established by the first section, with a capital of fifteen millions five hundred thousand dollars, to be raised by means of a loan, to be obtained by the directors of the institution. To enable them to effect this loan, the state agreed to lend its aid: hence the fifth

section declares, “that in order to facilitate the said Union Bank for the said loan of fifteen millions five hundred thousand dollars, the faith of the state be, and is hereby pledged, both for the security of the capital and interest.” The state, then, undertook to become responsible that the loan should be paid, but the stockholders were, by the 8th section, required to give mortgages on real estate, for the payment of the capital and interest; and although the governor was directed to execute the bonds to be given for the loan, yet the bank was required to pay the bonds at maturity.

That which is intended to facilitate or aid the subscribers for stock, cannot be regarded as a limitation or condition in the charter. If the fifth section, and all others in relation to the pledge of the faith of the state, were stricken out, the charter is still sufficiently perfect to be valid. Suppose the subscribers for stock had chosen to reject this aid, and had actually paid the amount of their stock in money, could their right to do so be questioned? It seems to me that it could not. The fifth

section professes to do nothing more than to point out the means to accomplish the end, but it does not deprive the stockholders from accomplishing the end by other means. It is a proffer on the part of the state to become security for the stockholders, on condition of being indemnified by mortgage on real estate. Surely, then, this provision may be void without affecting the balance of the charter, and, if so, the plea was bad on demurrer.

I have thus examined the several pleas, and have endeavored to confine my remarks strictly to the questions presented by the record, with a view to avoid even an intimation of an opinion on any question which is not directly raised. My conclusion is, that none of these pleas, in the form in which they are presented, constitute a good bar to the action, and consequently the demurrers were properly sustained. The judgment must be affirmed.