Lewis Curtis, John L. Graham and Richard M. Blatchford, trustees, vs. David Leavitt, receiver of the North American Trust and Banking Company, John Horsley Palmer, James Mackillop and Thomas Dent; David Leavitt, receiver of the North American Trust and Banking Company, vs. Richard M. Blatchford, Lewis Curtis and John L. Graham, John Horsley Palmer, James Mackillop, and Thomas Dent, and others, 17 Barb. 309

Roosevelt, J. The North American Trust and Banking Company, although possessed of several millions in bonds and mortgages, having soon after its formation become embarrassed for want of sufficient cash capital, resorted to various expedients —some, at least, of a questionable character—to obtain relief. These embarrassments, notwithstanding, became more and more aggravated, until they ended finally in the dissolution of the company, and the appointment of Mr. Leavitt as receiver to wind up its affajrs.

The receiver so appointed, representing-the interest of both creditors and stockholders, deemed it his duty to deny the validity of a great number of the previous acts of the company, or rather, as he says, of the officers of the company, done in the company’s name; and thus compelled, or induced, the parties claiming" the benefit of those acts to file a bill to establish and give effect to their alleged rights. To this bill, Mr.

Leavitt not only put in a defensive answer, but met it also by a cross-bill, on his own part, praying that the several bonds, notes, assignments and certificates of deposit complained of by him, might be declared illegal and void, and be delivered up to be canceled, and for an injunction and account.

The magnitude of the amount in controversy, represented to be about two millions of dollars, and the number and difficulty of the questions involved in it, and to be extracted from six printed volumes of more than twenty-five thousand folios of pleadings and evidence, indicate, in some degree, the labor imposed both on court and counsel, and the impossibility of a literal compliance with the requisition of the code, which directs decisions to be rendered “ within twenty days after the court at which the trial took place.” The primary object of the receiver’s bill is to invalidate the two mortgages—for that I conceive to be the true character of those instruments—executed by the company to Blatchford and others, as trustees, and designated in the case as The Million and First Half Million Trusts.

Various grounds of invalidity are urged as well against the trust mortgages as against the bonds referred to in, and which, it is presumed, have little value without, them. Among the objections most relied on are alleged violations of the statute of frauds; of the statute of usury; of the statute regulating corporations; of the statute authorizing the formation of banldng associations or free banks ; and of the statute prohibiting the issue by the free banks of bills or no,tes .on time or interest. The statute of frauds (2 R.

S.137) declares that every assignment given “ with the intent to delay, hinder or defraud creditors,” shall, as against the persons so delayed, hindered or defrauded, “be void.” And ono of the forms of this species of fraud, specifically prohibited, is that of assignments made in trust “ for the use” (as the statute expresses it) “ of the person making the same.” (Id. p. 135.) In the latter case, the act itself, being on its face fraudulent, is made (for the purpose only of avoiding it) conclusive evidence in law of fraudulent intent.

In all other cases the question of fraudulent intent is declared to be “ a question of fact and not of law,” to be submitted, of course, to the jury, if there be one; and if none, as in the present case, to the court acting as a jury, and as a jury taking all the attendant circumstances into consideration. (Smith v. Acker, in the court of errors, 23 Wend,. 653, and Butler v.

Van Wyck, in the supreme court, 1 Hill, 438.) And further, to show the kind of fraud contemplated by the law in these latter provisions, it is enacted that every person who shall be a party to such fraudulent assignments or securities, made with intent to delay, hinder or defraud creditors or others, or shall knowingly avail himself of them as if made in good faith, “ shall, upon conviction, be adjudged guilty of a misdemeanor,” punishable by fine and imprisonment. (2 R.

S.135, 137, 690.) The two chief matters in controversy in respect to this question of fraud, are the million and first half million trust mortgages, (for that, as already observed, I consider to be the true character of the assignments,) executed by the company in the early part of the year 1840, and bearing date on the 1st February of that year, and the bonds, fifteen hundred in number, each for £250 sterling, payable in London, executed simultaneously with, and purporting to be secured by, the mortgages respectively.

These securities—and the fact, it seems to me. is of controlling importance—as alleged on one side, and conceded on the other, were created by the company, for the purpose of “ raising a temporary cash capital.” Instead of making 1500 separate mortgages for each separate bond—a plan which, if not entirely impracticable, would have been intolerably troublesome and expensive—a resort was had to the common expedient, common especially with railroad companies, of one or two mortgages, executed to trustees, for the equal benefit of all the bondholders, who should from time to time see fit so to invest their money, according to their respective interests.

And the question is, are such mortgages, in all cases, fraudulent in law and void; or weré the two, in this particular case, made with an actual intent to defraud? The tens of millions of railroad bonds in which so large a portion of the funds of all classes and charitable institutions are invested, it is a matter of public notoriety, are secured precisely in this manner; and the consequences, therefore, of an adverse decision, demand for the question the gravest consideration.

In 1838, the Merchants’ Exchange Company, as appears by the report of the case in the court of appeals, raised $400,000, to complete their building, by the creation of 400 bonds in the name of James G.

King, as obligee, secured by a deed (by way of mortgage) to the same person, of their ground and premises, in trust as security for the holders from time to time of the bonds so created; authorizing him to take possession and receive the rent of the premises, with a proviso, nevertheless, that if the company paid the bonds which had been or might be “ negotiated or put in circulation,” the grant was to cease and become void.

The bonds not being paid, King claiming in virtue of the deed or assignment to be a mortgagee in possession, filed his bill for a foreclosure and sale) and in December, 1851, the court of appeals made a decree accordingly. (1 Selden, 547.) Although in the form of a trust deed, the instrument in that case was held to be a mortgage, and a valid mortgage-, for the benefit of the holders of the bonds “ negotiated” upon the strength of it. The same court, a year before, in the 'case of Leitch v.

Hollister, (4 Comst. 211,) had affirmed the validity of an assignment of a chose in action, to three trustees, in trust to be “ applied in paying the indebtedness to each of the above assignees, (they were several and not joint creditors,) in equal proportion to the amount of them respective demands against me, and the balance to me.” It is manifest that the three assignees, in the case cited, were as much trustees tor them separate claims, as if any other three persons had been selected, and that the instrument if a mortgage in the one form) would have been equally so in the other.

These two authorities, it seems to me, (and they are the highest and latest on the subject,) if binding, conclusively establish the proposition that the two trust deeds or assignments in question were mortgages, and that a valid transfer by way of mortgage in that form may be made to trustees, whether of real or of personal estate, and that a provision, whether expressed or implied, contained in it, and which is incident to all mortgages, directing the payment of the surplus, if any, to the mortgagor, is not á trust made for the use of the mortgagor within the meaning of the statute, and does not avoid or in any manner vitiate the transaction.

It would seem to be obvious, independently of authority, that instruments, executed bona fide for the purpose of “ raising” money, do not come within the principle of assignments made “ in trust for the use of the person making the same,” or. made bjr an insolvent debtor to give preferences to particular existing creditors, of to secure dishonest advantages to himself. Where, as observed by Mr. Justice Edmonds in the court of appeals, in the late case of Nicholson v. Leavitt, the hindrance and delay (of the general creditors) is the necessary consequence of

an act, otherwise lawful of itself, that circumstance will not vitiate the deed ; but when the intent and object are to hinder and delay the final payment, the deed framed with that view will be void. “ The legislature,” says Mr. Justice Gardiner in the same case, “have conferred upon the debtor the right to create a trust of his property for certain purposes. He may also prefer one creditor to another. Of course, the delay necessarily resulting from a fair exercise of these rights is not prohibited by any statute.” “ Where it becomes the principal motive,” the case is different.

Ho such motive or intent is imputed to the Palmers or to the company, except as it is to be inferred from the instruments themselves) and any such inference, it appears to me, is clearly rebutted by the obvious scope of the instruments, the circumstances of the transaction, and the whole history of the case. The fraud, if any, was not by, but upon the Palmers; and the preference, if that were a circumstance to be considered, instead of being one of benefit, was a preference of burthen.

It should be borne in mind, besides, that these instruments', while they created liens upon, unlike the assignments so often and justly condemned, brought corresponding accessions to, the assets of the company, and corresponding means for paying, instead of defrailding, tho creditors.

To characterize the act of the Palmer's, in seeking to avail themselves of such securities to repay the moneys advanced directly or indirectly upon the faith of them, as a misdemeanor, deserving of fine and imprisonment as well as the loss of their debt, or even as a fraud in any degree or in any sense, shocks the commonest notions of right and wrong. “No one”—I use the strong language again of Mr.

Justice Gardiner—“ no one would imagine, in the instance supposed, that the debtor and the fortunate creditor, one, or both, were liable in a penal action for fraud.” There being no moral fraud then in the case, no fraud recognized or even suggested as such by the general conscience of mankind, the Palmers are not responsible, even if the^ct were prohibited by a special statute of this state. If citizens of another state of the union—and so the court of appeals have just decided in the case of the Merchants' Bank v.

Spalding—are not chargeable with a knowledge of our laws, of course the subjects of a distant, unconnected, transatlantic government are not. Again, it is objected, that the company had ho authority to issue bills or notes on time ; that the instruments^ called bonds, which the assignments were made to secure, being merely stamped, and not impressed on wax or wafer, were not sealed instruments within the meaning of the law, but post bills or notes, and therefore unlawful; and that as a consequence, the assignments collateral to them are, on that ground, null and void.

The Statute of May, 1840, which went into operation on the 3d of June in that year, prohibited every “ banking association” from issuing or putting in circulation, “ any bill or note of said association, unless made payable on demand and without interest and subjected the officer or member violating the law to the charge of misdemeanor and to fine and imprisonment. Negotiable securities, it is conceded, and not sealed instruments, are the'subject of the prohibition. Mow, the bonds in question; in form, at least, have not the slightest resemblance to bank notes of this state.

They commence, like all other bonds, with the technical introduction, “ Know all men by these presents,” and like other bonds, end with the equally technical conclusion, “In witness whereof, the said North American Trust and Banking Company have caused this bond to be attested in their behalf by their president and cashier, and their seal to be thereunto affixed, this first day of February, in the year of our Lord one thousand eight hundred and forty.” They are, besides, very long and special instruments, with fourteen coupons attached to each, and the whole contents, both capital and coupons, made payable, not in the United States, or in the currency of the United States, but in sterling pounds, and at the banking house of Palmers, Mackillop, Dent & Co., London, and they purport, not only in words, to be sealed, but bear on their face an impression stamped like a seal into the very texture of the paper, which, in this instance at least, whatever it may be ordinarily, is, as is obvious from inspection, a “ tenacious substance,” as susceptible of impression as either wafer or wax, or as clay, iron or silver, appended to the instrument.

We consider these bonds, therefore, as sealed instruments. At all events, it being perfectly incontrovertible that they were so intended, and that the omission, if it be one, of wax and wafer, was a mere oversight, the defect, as in the case of the indenture not indented, can now be supplied by the application by the court of a small quantity of wax, or according to the established rule in equity, by treating that as already done, which it is so manifest was intended, and if necessary, in justice and fair dealing, ought to be done.

The whole discussion on this point, every sensible man must admit, were it not for some unfortunate dicta in the books, would look very much like childish trifling. Independently, however, of what we consider the conclusive answer, already given to the objection, the paper in question does not, in our judgment, come at all within the spirit or scope of the prohibition. The evil intended to be remedied by the legislature was the adulteration of the practical, if not legal, currency of the state.

Is it to be believed that these prolix, special, technical documents, for more than a thousand dollars in value each, payable in seven years, in sterling pounds^ at a merchant’s counting house in London, with a long tail of interest coupons attached, transmitted immediately to England, and intended so to be, were likely to be imposed upon, or received by, or circulated among, the people of New-York, as money or currency; or, on the other hand, that the legislature of this enlightened state, distrusting the vigilance of the British parliament, in the spirit of a universal philanthropy, intended, by the act of 1840, to guard the circulating medium of the British nation from an unsafe infusion of American credits ?

I am aware that in the case of Leavitt v. Palmer, (3 Comst, 19,) a case of a mere unequivocal promissory note, adapted to pass from hand to hand, it was held that, although for nearly $5000 in value, and payable in England, and in sterling money, the security was void, on account of its not having been made payable on demand, and without interest.

The distinction, however, which to my mind appears so decisive, and wddeh the court above, I am persuaded, will, on reconsideration, regard as entitled to some weight, arising .from the magnitude of the note, and the material and place of payment, although presented by the counsel in the argument, was not, judging from the report, at all adverted to by the court.

It seems to have escaped attention that such instruments, when drawn in one country, and payable in, and in the coin of, another, are in effect bills of exchange, drawn by the makers on and accepted by themselves, directing the transfer by their foreign agents of so many pounds or francs, or other foreign coins, to whoever may present the order in a foreign country; and that associations organized under the general banking law are expressly authorized by that law to sell foreign coins, and also to sell, and, of course, to draw, under the name of bills of exchange, precisely such instruments, as above described, for evidencing the transfer.

What is the sale of a foreign bill, or of a certificate payable in foreign coin, in a foreign country, but the sale of so much bullion ip a foreign country ? The mere paper on which the order is written is not the subject of purchase, but the commodity mentioned in it; the paper is worthless, it is the pounds alone that constitute value.

Written out at large, the transaction would simply read, “ for five thousand dollars, (or any other price agreed upon,) I sell you one thousand gold sovereigns, deliverable on a certain future day in London on presentation and surrender of this order; and I promise faithfully that the

article shall be punctually delivered according to the terms of the sale.” Such a sale and engagement, the North American Trust and Banking Company, it seems to me, were clearly authorized to make and enter into, under the power “ to sell foreign coinsand, as already observed, to give the proper written evidence of the act, under the power “ to sell bills of exchange.” These two . powers, .expressly and deliberately granted in 1888, and in regard to which no complaints existed, it can hardly be said, were intended to be taken away by the vague terms of the act of 1840.

Indeed, so immediate was the alarm and surprise created by the first judicial intimation in that direction, that the legislature in 1850 were called upon to pass, and did actually adopt, an explanatory amendment, declaring “ bills of exchange on foreign countries,” payable at the customary usance or within ninety days sight, to be excepted from the prohibition. And yet. if the

interpretation suggested in the case referred to, were correct, the sale of even such bills was previously a misdemeanor. So expounded and enforced, the act might justly be designated—as it was—a legislative trap to catch the unwary.

True, the act as it stood in 1840, declared as is contended, in general unqualified terms, that “no banking association or individual banker, as such, should issue or put in circulation any bill or note of said association or individual banker, unless the same shall be made payable on demand and without interest.” And so the former constitution of' the state declared that a two-third vote should be necessary to the creating of “ any body politic or corporate.” Yet the court of. errors, looking to the intent and not the words of the instrument, in the case of Beers v.

Warner, (23 Wend. 103,) by an almost unanimous opinion, since confirmed by the court of appeals., held that the general banking act, although authorizing the creation by their own volition of associations having all the essential features of corporate bodies, was a valid exercise of legislative power, for the reason that such associations, not partaking of the character of monopolies or special grants of privilege, were not corporations within the spirit of the constitution; in othep words, within the evil intended to be remedied.

And the same doctrine was reiterated by the court of errors in the case of Gifford v. Livingston, (2 Denio, 380,) and by the coqrt of appeals, as already observed, in the case of Palmer v. Lawrence, (1 Seld. 389.) What then, we are to inquire, was the dry letter of the act of 1840, but the evil against which it was intended to be directed ? Public history tells us that it was the poisoning of the circulating medium, not of Great Britain, but of this state, by putting in circulation as money, or issuing, for that purpose, time paper, in the form, and with all the seeming attributes of ordinary bank notes.

Such paper was calculated to deceive the masses, and certain to inflate the currency. But suppose an individual banker—for the act applies as well to individual as to associated bankers—should borrow of a London merchant a thousand pounds, payable with interest in London, after twelve months, and should give him, bona fide, an ordinary promissory note as evidence of the loan, would, or in common sense, ought such a transaction to be unlawful? would it be a misdemeanor ? would it, within the spirit and meaning of the act, be issuing or putting in circulation a prohibited medium, or prohibited substitute for money?

It is. unnecessary, however, at present, to carry the discussion further. The instruments, upon the validity of which we ape now to pass, were neither “ notes” nor “ bills nor were they issued after the act of 1840 had gone into operation. On either ground, they are not subject to its provisions, whichever way those provisions may be construed. Again, it is said, .that banking associations, formed under the free banking act, havq no power to borrow, and, of consequence, none to give bonds for the repayment of money.

Suppose a sud.den and unexpected run upon a particular institution, may it not appeal to its neighbors for temporary relief, till a portion of its assets- can be converted into cash ? Or must it, with millions of surplus securities or even bars of uncoined gold lying ready in its vaults, stop payment ? Of what possible use would be the right of banking, by “ receiving deposits” and “ discounting notes,” if all the deposits so received must at all times be kept untouched for fear of a possible run ?

Occasional borrowing by a banking institution, to meet an emergency, it would seem, is but the exercise, in the language of the statute, of an “ incidental power necessary to carry on such businessand therefore expressly allowed. Besides, the power to make a note or bill, is, in effect, a power to borrow.

And the 31st section, by providing for the form of notes of a less denomination than $1,000, when “ to be put in circulation as money.” necessarily implies that there might be other notes lawfully made, not so to be put in circulation ; in other words, that a free banking association, like other merchants, might give a common promissory note, provided the transaction, -was in good faith and not designed as a fraud upon the law. • "[.Whether such a note on time could now be made, since the act .of 1840, is a question already adverted to, but not necessary, except in- respect of the claims of the Philadelphia banks, to the decision of the case at bar.

Every act of receiving a deposit, if inmash, and' not to be returned specifically, is

an act of borrowing; and; if allowed by law, implies the'right of incurring a borrower’s obligation. Such obligations are universally incurred by bankers, whether incorporated or unincorporated; and they are usually evidenced by a brief entry in the lender’s pass book. That entry, written out according to its legal effect, on a separate sheet, would be a promissory note, payable to order, and with interest or without interest, as might be agreed upon. It would be a promissory note, lawfully given under the power to bank and receive deposits.

The restraining act, it may be, would qualify this implied right in virtue of the clause declaring that no person or association of persons, should issue bills or notes, “ for the purpose of loaning them or putting them in circulation as money, unless thereto specially authorized by law inasmuch as the only special authority granted to the general banking associations to issue notes as money, or as the law expresses it, u circulating notes in the similitude of bank notes,” is contained in the clause which allows them to “ loan and circulate notes payable on demand at their place of business in this state, engraved and printed, and countersigned under the direction of the comptroller, and secured by public stocks or bonds and mortgages.” Making this concession, however, to its fullest extent, still the common, and we may almost say natural, right of giving a promissory note for money borrowed, or left on deposit, remains untouched, provided the note so issued be not a “ circulating note,” devised in the similitude of what is generally understood as a “ bank note,” to be loaned or put in circulation “ as money.” Public policy, beyond this, required no restriction on the right of borrowing money or giving promissory notes.

Individuals were competent to take care of themselves'. Théy asked no guardianship, legislative or judicial, except against a vicious or fraudulent currency. These views, in the main, are borne oút, as I conceive, by the réasoning in thecaphof errors, in the case of Safford v. Wyckoff, (4 Hill 442 law inflicting penalties and forfeitures, it shouIdroaJ^SbmberecTaSo, are not to be enlarged by implication; ESdden meama^^^lPiy expressed, or doubtfully inferred, are nottiph^simed to tnjem$ they are to be considered as addressed |o the cpeaa^Bi^ipr^ilar understanding.

Acts hot likely to stride tM^OTainaf^jHÍnd as morally wrong, if made misdemeanors by pfehávfffoa^ oi intended so to be, should be clearly described and as clearly forbid•den; otherwise the statute becomes', as already remarked, a meré trap to catch the unwary, partaking in that resp'e'ct of the worst features of tyrannical power. And in the present instance, the result of siich an

interpretation would be, not only to punish the morally innoceht, but if there be any wrong at all in the transaction, to reward the legally guilty, to take from the unsuspecting foreign creditors the money honestly advanced by them and bestow it upon the well informed domestic stockholders, whose knowing, deliberately appointed, plenipotentiary agents, themselves stockholders also, contrived and perpetrated the wrong, if wrong there be. A conclusion so revolting is not lightly to be adopted, nor to be adopted at all, unless, if such a case- be presumable, under the clearest and most inevitable legal compulsion.

Construing the statute's; then, on this subject, in the manner above indicated, the question again recurs, were the bonds issued to the Palmers; using that name as designating all the foreign creditors, unlawful bills or notes; fraudulently intended for circulation in this state as money ? We think it quite palpable they were not. First. They were not bills Or notes, but sealed bonds. Second. If bills or notes, they were in the nature of bills of exchange which the company might lawfully sell. Third. At all events they were not adapted or designed for circulation as money, either in this state or in.

Great Britain. Fourth. The legislature of this state did not intend to enact or regulate a policy for foreign countries.

As to a large number of the bonds, it is further insisted, that having been sold at 90 per cent instead of par, they are void for usury; and that the associate stockholders, while holding on to the proceeds of the sale, have a right to repudiate its obligation; The receiver, Mr; Leavitt, took the same grotind in the case of BeLauny & Co;,' the-particulars of which I shall presently advert to; and affcef Seyetal years of various fortune was finally defeated in the court of last resort. (4 Comstock, 363.) There is no pretence, or if there be, it is wholly unsupported, that these bonds, by whatever name they may be called, were got up or employed as a cover for usury ; if usurious at all, the transaction is so per se on its own naked merits.

Bivested then.of the mere formalities of written instruments, what, in substance, só far as this point is concerned, was the actual transaction between the parties ? A pound sterling is a foreign gold coin; commonly denominated a. sovereign-. ' The banking c'ompany in question Were invested with the express power of “buying and selling foreign coins and bills of exchange.” They sold accordingly from time to time, a certain number of English Sovereigns, deliverable at periods agreed to by the purchasers, and in London where the purchasers lived. As usual in such cases, they sold the

article on more favorable terms for bash than if on credit: The

article being deliverable also at a remote future day, and not immediately, was another reason for a less price: The bond , was but the written evidence of the bargain ; it was the bill of sale, sealed and delivered, as the Palmers say, but none the less a bill of sale; it acknowledged the right of the obligee to the number of sovereigns sold, and admitted the promise, and contained the order of the obligors to deliver them at the time and place specified. What is there usurious per se in such a transaction, whether we take the laws of Bew-York or the laws of England, as the rule for our decision ?

That such a sale might be made a cover for-usury, all must admit; but so may any sale of merchandise. We are to look, not to what it might be, but to what it was. Where a transaction otherwise lawful , is impeached as a cover for usury, the averment must be distinctly and specifically made in pleading, and as held by the court in the DeLauny case, fully established in proof; here there is no pretense of disguise, and certainly no proof of any.

In the case of the DeLaunys, (4 Comstock, 363,) which is the latest authority on this subject, there were in effect two sales of foreign coins, one made by the DeLaunys to the company, deliverable in Paris, in 60 days, and the other for the same amount made by the company to DeLauny, deliverable in 55 days thereafter. The company thus in effect had the use of Messrs. DeLaunys’ 250,000 francs for 55 days, and the latter by the agreement were to receive not only seven per cent interest, but a commission.

This commission; the receiver contended, made the transaction usurious; and he sought then on that ground, as he does now, in the case of the Palmers, to have the collaterals delivered up, and the obligation declared void.

The company received the avails of the DeLaunys’ bills of exchange; but the receiver repudiated the company’s obligation to pay for them; in this, the court of appeals very justly; as I conceive, refused to sustain him, and affirming the previous judgment of the supreme court, dismissed his bill: On the point of usury I see no distinction in principle between the two cases; in the one the company virtually sold them bills for credit, in the other for cash; in both actually or virtually, for less than their face; and in both too, the effect was, and was almost inevitably calculated to be, the same as that of borrowing money at a higher rate than 7 per cent.

In both cases there was alike a chance of gain; much more favorable however to the company in the English than in the French sale. Pounds sterling or gold sovereigns might be much less valuable in 1847 than in 1840, whereas French francs were not very likely to change for either better or worse in two months. In the matter of commissions and interest, taking the different rates and periods into consideration, of the two bargains, the English, it will be seen, was far the most favorable to the company.

The DeLaunys, however, unlike the Palmers, instead of cash, gave the company in payment sixty day bills, which the company could, and no doubt did, sell for cash, at a discount. If this circumstance creates any difference between the two cases, it is obviously in favor of the Palmers; so that on the point of usury the decision of the court of app'éáls, in the ¿asó of Leavitt and DeLauny as an authority must be considered conclusive.

When, say the court, the transaction is a sale or exchange of credits, and there has been no application or treaty for a loan, “ the vendor may reserve moré than seven per cent.” A sale of francs, or gold sovereigns, deliverable in a foreign country, whether immediately; or at sixty days, or six years, is thus placed upon the same footing as a sale of iron or copper, or other metal not fashioned with the image or superscription of any prince or potentate.

Again; it is said, the assignments or mortgages made to secure these sterling bonds are void, as in violation of the 8th and 9th séetions of the statutory “ regulations, to prevent the insolvency of moneyed corporations, and to secure the rights of their creditors and stockholders.” (1 R.

S. 590.) Admitting, for the present, that the regulations adopted in 1830, to govern the conduct of monopoly corporations, as then understood, are by construction to be applied to limited partnerships, like the free banks, deriving their existence from the mere volition of individuals under a general law passed in 1838, and which, instead of creating any legal entity which might by possibility be adjudged a “body politic or corporate,” was studiously framed to avoid or evade such a result ; admitting, I say, for the present, this seemingly extraordinary proposition, let us see whether, on that assumption, there has been any such violation of law as is alleged.

Section 9 of the regulations referred to, provides, among other things, that no securities given by any such corporation, when insolvent, or in contemplation of insolvency, with the intent of securing a preference to any particular creditor over other creditors of the company, shall be valid in law.

Now the trust mortgages, under which the Palmers claim, instead of being executed with the intent of giving them a preference, were designed emphatically and palpably, (and that alone would dispose of the argument,) for the purpose of extracting from their unfortunate confidence further advances and larger indulgence; and instead of being made by the institution when insolvent, or in contemplation of insolvency, were as palpably and emphatically devised under the full conviction, that by turning dead securities into living cash, they were to operate as a panacea to infuse life and vigor into the feverish institution and insure it immortality.

Nor was the institution supposed to be, nor, under the evidence, was it, in fact, insolvent. Embarrassment may exist without insolvency. The owner of a million, in real estate, may, at times, it has been said, be embarrassed for a meal. To say, however, that a laAvyer, for instance, with a perfectly good professional business, and with surplus earnings, well invested, to the amount of $100,000, is insolvent because from inadvertence or carelessness, he may not have in ready cash at the moment, enough to pay a fifty-dollar tailor’s bill, would seem an absurd perversion of language.

In the framing of technical bankrupt laws, it is, perhaps, found necessary, or, at all events, is sometimes deemed politic, to declare that want of punctuality shall be deemed want of honesty. Hence, under such a law, men have been declared bankrupt, with means sufficient to pay forty shillings in the pound. The statute in question, however, is not a bankrupt law.

It uses the term insolvency, without any special definition; and, therefore, in its ordinary acceptation, that is, as meaning a want of sufficient property, whether cash or other valuables, to pay, if disposed of in the ordinary way, without unnatural or protracted nursing, certainly and absolutely, all demands upon it. To say that a banker raising money on mortgage is, for that reason, to be deemed insolvent, and that being thus insolvent he is to be deemed incapable of mortgaging, is an absurdity.

He mortgages to enable him to be punctual; it is the appropriate method of attaining the end; how, then, can the appropriate means be made void, while the end is enjoined ? To prevent misapprehension it should be observed, that insolvency, whether existing or contemplated, is not, of itself) sufficient by the law to avoid the security; there must be superadded the intent to give a preference. Both conditions must concur; and the absence of either, according to the terms of the law, defeats the objection and leaves the security in full force.

It is said again, that, being transfers of assets of the company to the value of more than $1000 each, the assignments were also a violation of the 8th

section of the regulations referred to, which prohibits such transfers, unless “ authorized by a previous resolution of its board of directors.” On this point, as matter, of fact, we think there is sufficient evidence of authorization or ratification; but at all events, the instruments- on their face being signed by the proper officers, and purporting to be regular, cannot be impeached “ in the hands of a purchaser for a valuable consideration and without notice.’^ Such is the express exception in the section, and such, as we conceive, is the precise position of these securities.

On this point, too, and on another of the same character made by the receiver, it may be proper to observe that the objection .comes with a bad grace from stockholders (or any. one in their behalf) who had deliberately and irrevocably in their public articles of association “ delegated” not only to the directors, but to such officers and agents as the directors should appoint, “all the power, rights and privileges of each and all the associates.” Ho directors, moreover, and no boards of any kind are required by the general banking law, either- expressly or by implication.

The terms are no where used in any of its' provisions; they are studiously avoided. The only agents named are a president or vice president and a cashier: and they are the only agents by whom “ contracts made by any such association, and all notes and bills by them issued and put in circulation as money, shall be signed.” (§ 21.) How, then, can penal regulations, made in reference to “ boards of directors” of chartered corporations, be applied, by construction, to these unchartered partnerships, in whose organization such boards were neither required nor contemplated, nor even mentioned or alluded to ?

To associations which were not only exempt from any obligation to elect boards of directors, but after choosing (without any such intervention) a president and cashier, the only officers made necessary by the law, were authorized, ad libitum, like other partnerships, “ to appoint such other officers and agents as their business may require, and to remove such president, cashier, officers and agents at pleasure, and appoint others in their stead;” , (§ 18.) Associations which, in the words of the law, might be formed of any number of persons, even as few as two, who should see fit to “ establish an office of discount, deposit and circulation, upon the terms and conditions, and subject to the liabilities prescribed (not in the restraining acts or other statutes, but) in this act.” Was the election of a “board of directors,” or any other board, one of those term and conditions ?

The whole frame and scope and history of the act, conclusively show that it was not. Its creations, or rather the creations authorized under it, were to be free banks ; banks neither fostered by special privileges nor fettered by special restrictions ; but, like ordinary commercial partnerships, left, with the exception of the currency, to regulate their own affairs in their own way, giving to their managers and officers and agents whatever powers, and imposing upon them whatever limitations, they saw fit.

Much of the litigation which has grown, and still threatens to grow out of these associations, may be traced to what I conceive to be a false issue.

The question is not, do these partnerships, by their members more or less numerous, possess the essential powers of a corporation; but are they corporations within the intent and meaning of the restriction in the former constitution of this state, in regard to corporations ? and, if not—and so the court of last resort has three times decided—did the legislature bringing them into being under the constitution, and under the belief that they were not corporations, and with the full purpose that, whatever might be their nature, they should not be deemed corporations, intend nevertheless, or rather, is the legislature to be judicially forced to have intended, that all previous legislation in regard to express corporations should, by implication^ be applied to these new existences ?

That they are not corporations within the meaning of the constitution, and therefore not guaranteed by it, was long since, as already shown, fully and finally established by the court of last resort. And its seems to me to follow,- as a necessary consequence, that they are not to be deemed to have been, as they certainly were not, corporations within the meaning of acts of the legislature, whose constitutional validity depended upon the assumption that they were not.

For it will hardly be contended, I presume, that it is competent to the judiciary to force upon the legislature any more than upon the convention, a meaning they notoriously did not entertain, and which, in ho way necessarily or fairly results from their language, and is at variance with the whole policy and scope of their enactments, contemporaneous and subsequent.

It may not be within the power of the legislature, by its mere willr to make that not a corporation which, in fact, is a corporation; but it certainly is within the power of the legislature to ordain, and to ordain effectually, that partnerships may be formed of a particular kind, with certain privileges and exemptions; and that although possessed of certain corporate attributes, they shall not be defined or deemed to be corporations ; and that regulations made in respect of corporations eo nomine shall not apply to them.

Sow, if the legislature, in regard to the general banking companies, have not expressly said all this, they have, as clearly appears from numerous provisions cited by counsel, said what is tantamount to it.

Under the old system, prior to 1838, banks were uniformly denominated in the statutes, “ moneyed corporationsor “ corporations having banking powersand the rules for their government were entitled “[Regulations of moneyed corporations” and “ Special provisions relating to certain corporations whereas the act of 1838, -instead of authorizing the forming of corporations, is entitled “An act to authorize the business of banking,” and provides for a conditional repeal of existing restraining enactments, arid for the formation of associations, not by the privileged few, but by any person's “ declaring’,” not that any persons may incorporate themselves, but that any persons may “ associate to establish offices of disco'unt, deposit and circulation,” and that when suit's are brought or conveyances made by, to or against such associations, instead of employing an artificial name, as in the case of corporations, it shall be lawful and necessary to use the individual “ name of the president,” and that if any “ such association shall violate any of the provisions of this act, it may be proceeded against and dissolved by the court of chancery, in the same manner as any, not as any other, moneyed corporation may be proceeded against and dissolved;” and, as it were, to crown the long list of almost hypercritical exclusions of the much dreaded conclusion, that the members of the newly authorized firms, instead of “ stockholders,” a term which had contracted a sort of corporation odor, should be denominated “ shareholders,” and “associates” therein.

Indeed, any person who will take the limited partnership act of 1822, and compare it with the general banking law of 1838, will perceive, in a moment, that the former served, to a great extent, as the model of the latter.

By the former, partnerships were allowed to be organized, in which all but one member might be exempted from personal liability.5 by the latter, all might be exempted; by the former, a certificate containing all the particulars in which the public had an interest, was to be made and filed in a public office; by the latter the same; by the former, suits might be brought by or against the general partner, in the same manner as if there were no special partners; by the latter, in the same manner, by or against the president of the association $ by the former, contracts were to be signed by the general partners for the firm ; by the latter, by the president and cashier for the association.

Wherein, then, so far as respects the question of corporation or no corporation, do these two classes of partnerships differ in principle ?

If there be any such difference, it can only be found in the provision which declares that “ such associations (those under the general banking law) shall not be dissolved by the death or insanity of the shareholders therein.” But suppose such a provision to be enacted embracing all partnerships, would all partnerships thereby become corporations, and be subjected, nolens nolens, so far as the legislature are concerned, to all the statutory provisions relating to corporations'? Further, to show the sense of the legislature, look at their enactments subsequent to the law of 1838.

In May, 1839, they declared that, after the passage of the act of that date, it should not be lawful for “ any incorporated banking institution within this state, and for any association,” &c., to receive or pay out certain foreign bills, repeating, in the act, fhe same form of expression no less than ten times. In May, 1840, they declared that every moneyed incorporation in the state, having banking powers, &c., and every banking association, &c., should appoint a redemption agent; repeating the same form of expression ten times again.

And again, in tho Same month, ádmittihg, by the most conclusive implication, that previous enactments in regard to corporations, as such; did not extend to these associations, they provided, as had already been done as to corporations, that “ associations” should not circulate notes on time, and should be subject to the supervision of the bank commissioners, not like others, but like “incorporated banks.” In March, 1841, asserting again by the most decisive implication, that the general law of corporations did not apply to these associations, they removed a difficulty attending banking like other partnerships, by authorizing suits by or against the individual associates, against or by the association.

And á few days after, in another act, repeating, the expressions no less than four times, they speak of “ associations” as distinct from, and not comprehended in “ corporations,” and as requiring an express - specification to include them.

In April, 1843, the incorporated institutions are distinguished as “ chartered banks;” and not deeming the term bank sufficiently explicit to include all, it is provided that “ every bank mid banking association, shall make a quarterly report.” And if any bank or banking association shall neglect or refuse it shall forfeit its charter; if an incorported bank, and its privileges as a banking company, if organized under the law of April, 1838.” Hot till April, 1847, was there any act speaking of directors of the unchartered banks.

In that year, for the first, the legislature enacted that every banking association, formed under the general law, should be subject to the provisions of the revised statutes containing the “ regulations concerning the election of directors of moneyed corporations.” And in 1849, it was provided that the stockholders of incorporated banks” whose charters were about expiring, might organize as associations under the general law; treating the two classes as distinct, and the latter as not incorporated.

Other acts still later might be referred to, of a similar character, and leading to the same inference; but it is unnecessary to swell the list. That inference is, as before stated, that the legislature in authorizing the formation of a certain class of limited partnerships, exempt from dissolution by death or insanity, never supposed they were creating corporations, or creating a class of legal entities, to which mere positive corporate prohibitions, without any expression of such intention; necessarily applied.

I am aware that there are some seeming; and perhaps real, contradictions in the authorities on this, as well as other points involved in the present discussion: To state and comment on the facts and reasonings of these cases ■ at length, would involve, in my judgment, a very unnecessary and unprofitable prolixity. One remark may be made in reference to the whole: they illustrate how a forced, and of consequence a false; construction of a statute, as of any other writing; may, as it inevitably must, lead in the progress of events, to all sorts of embarrassment.

The only thing that harmonizes with itself, and with all other truth, is truth.

When the late court of errors, by a unanimous vote, declared that the convention in framing, and the people in adopting the constitutional restriction of 1821, in regard to the creation of corporate bodies, referred solely to specially privileged monopolies, deriving their existence from legislative favoritism and direct legislative action, and not to commercial partnerships, endowed, it may be, with certain corporate attributes, but authorized by general laws, and open to all men alike; when that court, I say, so declared, they did but announce a known public fact •; and when, further, they held that knowing the intention of the law making power (in that case the sovereign people themselves) it was their duty to execute it, they did but apply a sound and well established rule of government.

Had the principle of this decision been subsequently observed, leaving legislative omissions, if any, to be supplied by legislative, instead of judicial enactments, much litigation and confusion would have been avoided, and the judicial history of the state would have been preserved from the opprobrium, seemingly not altogether unmerited, of inflicting ex post facto penalties, for acts, which, at the time they were done, had, to the common understanding, and to the common conscience, all the appearance of legality, and which were sanctioned, we may add, by the soundest and ablest legal advisers in the state, fortified subsequently, if not contemporaneously, by direct adjudications of the highest courts in the state.

The first adjudication, (that in Beers v. Warner,) it should be remembered, was announced and published on the 7th of April, 1840. In the “summary” furnished to the court by the receiver’s counsel, it is stated that the million trust was “ created” on the 20th of April, 1840, and the first half million trust on the 28th; the second not till July, 1840. The parties, therefore; in the creation of these securities, had before them, and we may fairly presume relied on, the decision of the 7th April, then just published.

It was a decision, moreover, to which this very company was a party; and a decision, the principle of which was again directly re-affirmed by the same court in Gifford v. Livingston, in December, 1845, (2 Denio, 380,) and by the present court of appeals, in the recent case of Palmer v. Lawrence, (1 Selden, 389.) How, then, does the argument stand?.

In 1821, the convention, or rather the sovereign people, legislating directly instead of by representatives, declare.that a two-third vote in each branch of the legislature shall be requisite in each particular case, to every bill creating any body politic or corporate.” In 1838, seven years after, the then legislature, sworn to support this constitution, pass

an act, without a two-third vote, authorizing the formation of a class of partnerships differing in no essential respect from other limited partnerships, except in not being dissolved by death or insanity; and they declare, by necessary implication from the whole structure of the law, and from its mode of enactment, that the associations so to be formed are not, as they the legislature view them, and shall not be deemed or taken to be, corporations.

Two years after this, the highest court in the state, on full argument upon the precise issue, declare, and their decision is published abroad, that the legislature, in-this view taken by them of the matter, were right, and that the law was valid; in other words, that these “ associations,” whatever their nature might be, were not corporations, as that term had been previously used, and was generally understood.

On the faith of these solemn legislative declarations and judicial expositions, the public at large deal with these special limited partnerships as associations unincorporated, as that term was then understood; and not subject, therefore,-to certain penalties and forfeitures which had been prescribed by previous legislatures (whose acts, be it remembered, their successors had a perfect right, prospectively, to expound, modify or repeal) for the government of corporations, as such, and by that name.

And now, after immense sums of money have been obtained by these associations, especially from unsuspecting strangers, on the faith of these repeated, solemn, deliberate and duly authorized announcements, shall the plea be tolerated, whether made by the associations themselves, or by receivers in their name, that the transactions thus impliedly sanctioned were unlawful, (as being prohibited to corporations,) and as a consequence, that the money advanced upon the faith so reposed has become forfeited 1 And forfeited, too, not to the injured or presumed to be injured public, but to the authors and promoters of the guilt, if guilt there be % Justice has no attribute that can side with such a defense, and public honor indignantly repudiates it.

Much severity of criticism, and perhaps very justly, has been bestowed upon the officers and agents of the association in question. But did not the shareholders appoint them? Did not the shareholders place all power in their hands ? Did not the shareholders so declare expressly, and we may add very unnecessarily, in their published articles of copartnership ?

As between the agents and their injured principals, if the ■ latter really were injured, (volenti non Jit injuria,) these criticisms might perhaps be allowable; but what application have they to a case of injury done by those agents to third parties, through the very faith and confidence which their principals had so prodigally solicited? Is denunciation, however well deserved, of the agents, to be deemed a satisfaction of the debt of their principals ?

If the agents have been guilty of improvident, or even, if you please,-of fraudulent acts, who should take the consequences ; they who held them forth as vested with “ all power, rights and privileges,” or they who trusted them on the faith of such credentials ? Did not the shareholders, moreover, know— indeed, was not that the leading object of forming" the association— that their dead securities, in the form of mortgages or unavailable real estate estimated at more than forty per cent beyond its convertible value, (see the receiver’s

summary,) were, somehow or other, to be transmuted into the precious metals ? And did they not select the agents, whose jproeeedings they now denounce, with an express view to their known, or at least reputed, abilities in that branch of art ? How else was their cash capital, if any, to be raised?

The association, in its inc'eption, as appears by its articles of copartnership, consisted of twenty members, with one thousand shares' each, of one hundred dollars, making an aggregate of two millions of nominal capital, and which it was provided “ might be paid in any of the securities in which the directors were authorized to invest their capital stockin other words, in bonds and mortgages.

Borrowing and not lending, therefore, at least in the outset, was' palpably the object of the associates; and as that object, at the time, could not very readily be effected to the extent desired, on this side of the Atlantic, it became necessary to convert the bonds and mortgages, unavailable in their primitive formation, into a sort of bank stock, to be used as machinery for extracting gold from the mines of London, Such, I say, was palpably the design of the associates, and what right have they to complain if their agents, men of their own selection, and members, too, of their own body, carried it out 1 And was not the general banking law itself, whatever may be in other respects its merits, framed in this same spirit ? • It originated, notoriously, with the holders of inflated real estate, whose ambitious aspirations could not endure the collapse of 1837.

Its first provisions, therefore, from

section one to fourteen, were directed to the repletion of the exhausted currency, by authorizing the comptroller, out of the mixed metal of state stocks and individual mortgages, to¡ coin “ a quantity of circulating notes in the similitude of bank notes,” to be delivered to such persons as should have furnished him with the raw material.

The leading object of the remaining sections was to declare that if banking partnerships would deposit copies of their articles of copartnership, in certain designated public places, they might (notwithstanding the restraining act) establish offices of discount, deposit and circulation, make the interests and liabilities of the partners transferable, exempt them from individual responsibility, and continue their associated existence, notwithstanding the death or insanity of particular members.

No provision, it will be seen, was made for any capital to be paid in, or for any individual liability; and if business men saw fit to trust such associations they were at liberty to do so; they would do it with their eyes open and with full notice. Guarding, as was supposed the currency, which was deemed a public concern, the legislature left all the rest to" individual control.

And as the associations, although authorized, were not obliged to issue circulating notes, if they waived that privilege, they needed only subscriptions in form, but no capital in fact; an omission so extraordinary, although no doubt intentional, that the legislature, in 1840, were compelled to declare that no association thereafter should commence business until they had at least $>100,000 in securities, such as the comptroller was allowed to receive.

To say, then, that the association in question was not authorized to borrow, on a pledge of securities, is to deny the vital principle of its existence, the very object for which it was created and for Avhich its creation was authorized.

If the officers, therefore, borrowed money, if they bought stocks on credit and sold them for cash to raise money, if they solicited deposits and tempted their continuance by the promise of interest to the depositor, they did that Avhich their associates and constituents Avished and expected them to do, and which the latter have no right (with the proceeds in their pockets) to repudiate now that it is done.

It should not be overlooked, in this, connection, that not only did the general banking laAV expressly and in broad, unrestricted terms, authorize these associations to “ receive deposits,” but in the present instance, the associates, not willing to leave the right to receive deposits on time to necessary implication, expressly provide in their articles for receiving deposits on interest or otherwise.” And what is a loan of money but a general deposit, on interest or otherwise, as the parties agree ?

And if on interest, of course on time, shorter or longer, certain or uncertain, according to agreement; for interest is a compensation for the use of money, and without time there can be no use. Besides, to receive deposits on time is now and ever has been, an acknowledged part of the business of banking, and may, on occasion, as an incidental power, be necessary to carry on that business ; especially in the case of associations, whose whole capital as the law stood, might, if they chose to issue no currency “ in the similitude of bank notes,” consist of bonds and mortgages on réal estate.

Indeed the power of receiving deposits at a low rate and reloaning them at a comparatively high rate of interest, would seem to be not only the legitimate, but the most natural source of profit to such an institution, and also indispensable at times to guard its credit against a sudden run. The power, like any other, may be abused; but that is no reason for either destroying or denying its existence.

And, even admitting its abuse, what interest have the public that they should interfere by penalties and forfeitures, to be put into the pockets of the conniving, if not consenting, shareholders ? and to be extorted from innocent, unsuspecting strangers, by the forced, ex post facto imposition of positive arbitrary enactments, which the legislature itself studiously avoided applying to such cases, and which, from their penal nature, are by a fundamental rule of legal

interpretation, as well as by the commonest dictates of natural justice, precluded from being extended by inference ? (Sprague v. Birdsall, 2 Cowen, 419. Jones v. Estis, 2 John. 379. Dash v. Van Kleeck, 7 Id. 477. Johnson v. Burrell, 2 Hill, 238. Myers v. Foster, 6 Cowen, 567.) But, although not necessary to the argument, it may also be contended, and very justly, that to grant the power of carrying on the business of banking upon a mere mortgage capital, carries with it, by necessary implication, without reference to the power of receiving deposits, the right of borrowing money.

How else, with such a capital, were they to discount notes, or buy bills of ' exchange, or foreign coin or bullion, all expressly allowed to them, and confessedly within the range of a banker’s business 1 They might, it is true, make such purchases on credit; but what, for the purposes of this question, is a purchase on credit, but, in effect, a borrowing of the amount of the price agreed on for the period stipulated in the credit 1 That they can buy on credit was decided by the court of appeals in the recent case of He Launy, already referred to; which was the purchase of a sixty day bill, to be paid for in two or (more properly speaking) in four months; or, in other words, the company borrowed of DeLauny a certain number of francs deliverable in two months, on á promise to return a like amount, with interest and commission added, in two months thereafter.

This contract was adjudged to be valid, and also the written instruments', on both sides, which evidenced the "obligation. We have seen, then, that the "association, "both in express terms, and by necessary implication, authorized its officers, whenever they should deem it necessary, to raise money, either on a simple promise to repay, or on a pledge of securities. We have also seen that the general banking law, in like manner, gave the association the right to delegate • such a power to its officers.

And further, we have seen that evidences of such indebtedness might be given either by entries in pass-books, or by bills of exchange drawn on a foreign agency, or by bonds with or without coupons attached, or in any other form, except such as should bear “ the similitude of bank notes,” or be artfully contrived tó defeat or evade that prohibition. After June 3d, 1840, when the act of May previous went into operation, it may be that the association Could not give a “ note or bill” unless made “ payable on demand and without interest.” (§4. Leavitt v.

Palmer, 3 Comst. 19.) But were it necessary to the argument, and were it an open question, as we think it ought to be, we should say that that act applied only to *“ circulating notes.” Its language is; that “ no banking association shall issue or put in circulation any bill. or note,” See:.

It was bitt an extension to these partnership associations, of one of the. prohibitions then existing against monopoly cárporationsi (10 Paige, 109.) For by the act of April 2d, 1829, commonly called the safety fund act, then in force, it was provided that “no moneyed corporation, subject to the provisions of that act; should issue any bill or note of the said corporation; unless the same should be made payable on demand and without interest;” (And here, in passing, it may .be proper te observe a decisive evidence that the legislature did not consider these newly authorized associations as coming within the description of moneyed corporations; else why such an enactment ?) What then was the meaning of the terms “ issue" or put in'circulation” as-applied to. the business :of banking, whether carried on by corporations or by free banking associations ?-; In other words; what was the thing intended to be prohibited 1 For, as very justly expressed in one" of the receiver’s printed points,- 16 statutes prohibit things, riot names.” : Chancellor Walworth, in the case of the Ontario Bank v.

Schermerhorn, (10 Paige, 109,) gives the answer to this question.

The provision-was intended, he says', “to prevent the banks from issuing post notes, or post bills of exchange, which might pass from hand to hand as part of the circulating medium of the country.” As the paper, in that case,- was a-'draft drawn by the bank in Canandaigua on a bank in Albany, not to order or bearer, he held that it was valid, although not payable on demand, but thirty days after date. “ Notes and drafts not negotiable, said the chancellor, and which for that reason, cannot be used or circulated as a substitute for money, when issued by banks in the course of their business, either ás evidences of indebtedness to particular individuals or for other legitimate purposes, are clearly not within the mischiefs which the legislature intended to guard against by those prohibitory provisions, although the language tised by the legislature is broad enough to cover that kind of securities also, where they assume the character of promissory notes or bills of exchange.” This case, like that of Beers v; Warner, is a direct authority also for the proposition that words, however general, and whether used in a statute or in a constitution, are to be restrained to the particular subject tinder consideration; that, as the legislature in the enactment in question were directing their attention to paper which was to be “ issued or put in circulation,” they were to be deemed, when using the term “ any bill or notes,” to have intended any circulating bill or note adapted and likely to be used as a substitute for money; and that a draft not payable by its terms to order or bearer, although expressed in dollars and not in foreign coins, and drawn on a domestic and not a foreign place, was, therefore, not within the prohibition, and if issued in good faith, was valid.

The result is that the terms “ issue or put in circulation,” when used in reference to banking in this state, have a restricted, special and almost technical meaning relating exclusively to the moneyed currency of the country, or, in the language of the general banking law, to “ circulating notes in the similitude of bank notes.” No banking association, it was provided, should put out suck notes, directly or indirectly, unless they were made conformable to the legal standard; that is, first, unless the holder Was made safe by a previous deposit of the required security; and second, unless the whole community were protected from moneyed inflations^ by a strict liability on the one hand to pay in coin on demand, and on the other to lose all interest if not promptly demanded.

It was suck notes and such only, and suck issuing and putting in circulation, that the legislature had in view, when they created this new misdemeanor. All this, it is said, may be very good reasoning, and the decision of Chancellor Walworth, when pronounced, might have been very good authority, but the court of appeals, a higher tribunal, now holds, or at least have held, a different doctrine. In the case of Palmer v. Leavitt, the notes then in litigation, we admit, were adjudged to be illegal and void, as issued after and in contravention of the act of 1840.

They were negotiable, could pass from hand to hand, and were in all respects in the ordinary form, (unless in three particulars to which I shall presently advert,) and being made payable expressly on time and with interest, they were, unless those three particulars make a distinction, palpable violations of the law. Those three particulars, however, as already observed, although to some minds, and I confess to my own, they may appear important and even controlling, were not adverted to by the learned judge, who delivered the opinion of the court.

They were, the magnitude of the amount, the place of payment, and the kind of payment. And these particulars, when considered, cannot fail to suggest the question to every practical mind, could promissory notes on time; made payable in founds sterling, in London, and in sums exceeding in value five thousand dollars each, and intended to be negotiated, not here, but in London, have an influence on, or be likely to become part of, the currency of the state of Hew-York 1 And if not, why should the legislature of the state of Hew-York have prohibited, or be deemed to have prohibited the use of such paper ?

Or rather, is the prohibition so clear and the reason for it so palpable, that the act should, or by any just rule of

interpretation can, be pro7 nounced a misdemeanor punishable by fine and imprisonment 1 For it should be kept in mind throughout all the stages of the argument that the contracts in .question cannot be void unless they are at the same time criminal misdemeanors. If void, .they are so because prohibited by statute; and where the performance of any act is prohibited by statute, the doing such act, (unless otherwise specially declared,) “ shall be deemed a misdemeanor.” (2 R. S. 696, §§ 39, 40.) And in this particular case the very

section containing the supposed prohibition, makes every violation of its provisions, as already observed,

an act punishable by fine and imprisonment.

Does any man then suppose, however much he may denounce, and perhaps justly, the general conduct of the officers and managers of the North American Trust and Banking Company, that were they brought to trial criminally on a charge of issuing a promissory note in London for £1000 sterling, payable, with interest, in sixty days, any jury could be found to convict them of a misdemeanor, or any judge to sentence them to fine and imprisonment 1 Even the learned justice of the court of appeals, who delivered the opinion of that court on the occasion referred to, and who is now one of the learned counsel of the receiver, would hardly go that length.

And yet, unless the act was a misdemeanor, and a misdemeanor of a criminal character, it was not void; for it is the prohibition by statute which alone makes it void; and it is the same prohibition which makes it a misdemeanor. It may be that, to test this question, a criminal prosecution is now pending, and that the accused, waiving the statute of limitations, puts himself upon what he is advised and believes to be the fair and just

interpretation of the language and of the intent and meaning of the legislature; if so, what judge will be found, to charge the jury that making a bill for £1000, payable in England at sixty days sight, and sending it bona fide to London to be sold for cash, is prohibited by the

section already so often cited; that the mere note itself, in spite of all evidence to the contrary, is conclusive proof of an intention to issue and put in circulation a spurious currency, within the meaning of the law; and that the accused must of consequence be found guilty of a misdemeanor, and be punished accordingly. Admitting, however, such a result, improbable as it may be, we are driven then to the mere letter of the law, and to assume, contrary to the general rule, that the legislature intended to prohibit words, not things.

On that assumption, the prohibition must be confined, for they are the only words used, to bills and notes. Literally and strictly, and in some respects (such as the right of offset) even substantially, a bond is not a bill or note. If then, as already shown, the bonds in question, were really and truly bonds, and not notes, the conclusion, in that view, would be that, even if issued after June 3d, 1840, they were not prohibited, and are valid securities.

Hence, in the case of the Merchants’ Exchange Company, an admitted corporation, where the notes issued were precisely the same as the present, neither court nor counsel • suggested a doubt of their validity, notwithstanding that the company, by the 3d title of the law in relation to corporations, (1 R.

S. 599,) were expressly prohibited “ from issuing bills or notes or other evidences of debt upon loan or for circulation as money.” And the court accordingly decreed the mortgage given to secure such bonds a valid instrument, and ordered a foreclosure and sale, And this, too, was done after the discussion and decision in the case of Leavitt v. Palmer. But the case of Leavitt v.

Palmer, even when the instruments are literally bills or notes, does not appear to have been followed in the subsequent Case already cited from the same court. * The instruments stipulated by the association to be given to the Delaunys were bills, and were bills at 60 days, and of course not on demand ; and yet the stipulation was held valid, and the stock transfers, made to secure it, enforced as legal acts. And how could a stipulation to give bills be valid, if the bills, when given, would have been illegal, and the act of giving them a misdemeanor?

And if a bill on time, payable in French coin and in a French city, was valid, how, under a statute speaking indiscriminately of “ both bills and notes,” could a note payable in English coin and in an English city be void; or how, stating the case criminally, could the latter act be palpably a misdemeanor, while the former, under the same law, was innocent and legal ?

In the one case, the promise held to be void, was to pay, not on demand, but at a future time, one thousand sovereigns in London; in the other case, the promise, held to be valid, was to pay, not on demand, but at a future time, two hundred and fifty thousand francs in Paris. If these two decisions be not contradictory, it would be difficult to conceive what is a contradiction. And if they are, then the rule (of the law as well as of the gospel) clearly applies that the last shall be first, and the first last.

One thing cannot fail to strike every thinking mind with astonishment in looking at this cause, and that is, that a charge of criminal misdemeanor should be extracted from a law thus differently interpreted by the ablest courts and the ablest counsel, and that, too, under a system .of jurisprudence which inculcates, as fundamental, the principle that pains and penalties are to be clearly prescribed in advance, and not to be extended by ex post facto implications.

It may be urged, perhaps, that in the case of DeLauny, and in the case of the Merchants’ Exchange Company, the time feature was not adverted to by bar or bench. And can it bo contended that in two strongly contested cases, involving, one of them fifty thousand dollars and Upwards, and the other more than one million; a circumstance, fully in the view of both bar and bench, should be treated by both as innocent and legal, and yet be a misdemeanor subject to fine and imprisonment ? • Where court and counsel are blind, a confiding community, especially of strangers, may be pardoned for not seeing.

Indeed in the case of the Merchants’ Bank v. Spalding, decided only a few days .since, the court of appeals expressly held “ that citizens of' another state, making contracts in that state to be performed there, are not chargeable with a knowledge of our laws.” That was a case of a circulation of foreign bank bills of a less denomination than five dollars, which the statute prohibits: and yet the charge of the judge, that the plaintiffs, in the absence of proof of any actual knowledge of the prohibition, were entitled to recover on the note discounted, was sustained by the court above.

Admitting the bonds issued by the company, and the trust mortgages created to secure them to be otherwise valid, it is contended that the debts or considerations, which they were given to pay or secure, had an unlawful origin, and that the securities for that reason cannot be enforced. The question of invalidity on the supposed ground of usury, incident to some of the bonds, (those sold at 90 per cent,) has already been considered.

A sale of foreign coin, or a purchase of foreign coin, or an exchange of foreign coin deliverable in four months, for a less amount of the same coin deliverable in two months, although the difference computed as interest, may be more than seven per cent for the use of the money, unless it be a mere cover, and so designed by both .parties, is not usurious. In the case of Leavitt v. DeLauny that was the precise question argued, considered and decided.

As to others of the bonds, they were received or held for advances made by the Palmers to take up bills of exchange, which the company were authorized by law to draw and sell, or for moneys paid at the special instance and request of the company to redeem certificates of deposit, which the company had issued, and which they saw fit to recognize. Whether these bills and certificates were strictly binding or not, the company elected to take them up; and having requested the Palmers to advance the money for that purpose, cannot now repudiate the obligation to refund.

In my view of the law, however, as already stated, both the bills of exchange and certificates of deposit were legal and binding. They were not currency ; they were not negotiated or designed to be negotiated as currency; they were not an infringement of the restriction, admitting it to be applicable to the free banks, which prohibited the issuing of bills or notes, or other evidences of debt, upon loan or for circulation, as money; they were not loaned as money, nor put in circulation as money, nor were they (within the meaning of the statute) put in circulation at all.

This, it appears to me, as matter of fact, is the inevitable result of the evidence. Mr. Justice Bronson, it is true, in the case of the Cooke certificates, seemingly arrived at a different conclusion. It is not an uncommon thing, however, .and not contrary to any rule of law, for a second jury to find a different verdict from the first. A more elaborate investigation of the issue, and a more direct, and perhaps a more sharpened concentration of attention on the exact point of difficulty, is well adapted, and very likely to detect, and when detected to dissipate error. “ Ho man,” says Mr.

Justice Bronson, (a name whose authority I shall have frequent occasion to invoke,) “ no man can feel entirely sure in his conclusions until the subject has been viewed in all its various aspects.” Stare decisis, I am aware, is a sound doctrine, but not so stubborn as to exclude every new light. Error, when clearly shown, may be corrected, even when venerable for its years; much more so in a case of recent impression.

How a promissory note (for in that light I am willing to consider these certificates of deposit) for one thousand (and it might as well have been one hundred thousand) pounds sterling, payable with interest, twelve months after date in London, with a special postscript at the bottom informing the prudent subjects of Great Britain that it was issued in pursuance of, and was secured by a certain deed of trust, &c.; how, I say, such a document could inflate the currency of the state of Hew-York, or bo circulated here as a bank note, or be capable from any similitude to a bank note, of deceiving the most confiding citizen of this republic, I am unable to perceive.

That the issue of such a document in Great Britain, by a company of Hew-York merchants, should have been denounced by a Hew-York legislature as a misdemeanor, worthy of fine and imprisonment, is quite incomprehensible; To repudiate the obligation on such grounds, while keeping the fruits of the transaction,

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