Irvine v. Lumbermen's Bank

2 Watts & Serg. 190

• Court: Supreme Court of Pennsylvania
• Decided: September 15, 1841
• Status: Published

Opinion

The opinion of the Court was delivered by

Rogers, J.

This is an action of assumpsit', to recover the amount due on a note. The defendants pleaded non assumpsit, and payment with leave, &c. On the trial, they offered three special pleas in bar, stating in substance that the debt, on which suit is brought, was attached by process issued out of the courts of the state of New York since the commencement of the suit, to secure the payment of several sums of money, therein mentioned, owing by the Lumbermen’s Bank to citizens of said state. These pleas were rejected by the court.

The plaintiff, after exhibiting the charter and the Act of incorporation, proved the signatures of Irvine, Lowry, and Foote, three of the defendants; the witness saw the note in January or February 1838; the three names were then signed to the note, but Brigham’s name was not; to the best of the knowledge of the witness, it was not to it when the note was before the investigating committee. The defendants also proved, that the name of Brigham signed to the note, is in his hand-writing. On this evidence, the counsel for the defendants objected to the admission of the note, but the court admitted it, because this is the ordinary evidence of its execution, and has always been deemed sufficient' preliminary proof. If there is any thing in the fact on which stress was laid, that Brigham’s name was affixed to the note after it was discounted by the bank, it may be alleged by way of defence, but it is no reason for excluding it from the jury.

The defence rests on several grounds; and as far as I have been able to understand the case, from the confused paper-book, they may be included under the following general heads: — ■

The defendants insist that the plaintiffs cannot recover, 1st, Because the charter is forfeited; 2d, Because the note, on which the suit is brought, is not authorized, but is taken contrary to the Act of incorporation; 3d, For fraud; 4th, That the debt was attached under process from the courts of the state of New York; and 5th, That the court erred in the rule as to the measure of damages. These points, with some preliminary matters which form the subject of several bills of exception, and which will be noticed in the first instance, will, it is believed, embrace the whole case.

The objection to the juror. As a general rule, a juror must be superior to all exception; but this principle is not of universal application. It must not be carried to such a length as to run the risk of defeating the ends of justice, by excluding from the panel, persons who have expressed an indefinite opinion of the merits of a case, where, from the magnitude of the sum in controversy, or other incidents which may attend it, it has become a subject of general conversation. It may be sometimes difficult to find a competent juror who may not have heard something of the dispute, and who may not have expressed an opinion favourable or unfavourable on a given and partial state of facts. And this was all that was done by the juror. He never formed nor expressed an opinion as to the indebtedness of the defendants, but he had expressed one from the statement of others. He had formed no opinion as to the merits of the case, for of this, as he states, he knew nothing. It is like the case of Donnell v. Master, (8 Johns. Rep. 445). A juror said, “ that if the reports of the neighbourhood were correct, the defendant was wrong and the plaintiff was right.” This was held not to be a sufficient objection to his being sworn and impanelled. The court say, his declaration being hypothetical, it is not such a bias as ought to exclude him.

The evidence offered to prove the consideration of the note was competent for that purpose, for we cannot doubt that evidence of a joint indebtedness of six persons, .would be a valuable consideration for a note given by four. Nor can the fact that there are no money counts alter the case. The cause was tried on a statement, which is intended to dispense with form; and had there been any objection on that ground, it ought to have been disclosed on the trial, when the plaintiff would have had an opportunity to amend.

There is nothing in the exception to the competency of Mr Falconer. He was not a stockholder at the time he was admitted to testify. He is therefore entirely disinterested on that ground. Nor is there any force in the objection, that it was understood at the time the note was discounted, that he and Shepard, the cashier, were also to sign it. If he has any interest, it is rather to defeat the suit: for supposing the fact to be that he is a joint debtor, and as such bound to sign the note, he would be liable in a suit for contribution, in which the judgment here rendered, connected with proof that it was a joint debt, would be evidence. At any rate, it is a matter of-indifference to him whether he remains the debtor of the bank, or becomes, as he will if there be a recovery, the debtor of the defendants for his portion of the debt. This part of the objection belongs to another portion of the case, which will be noticed hereafter. Again, if the witness violated the duty prescribed in the 20th article of the Act of the 25th of March 1824, as is alleged, —which has been urged as an argument against his competency — ■ he is liable, in his individual capacity, to pay the amount of the excess of discount, to any person or persons, holders of the notes of the bank, or having a claim for a deposit to an equal amount, who shall first sue for its recovery. He is in no way liable to the bank, nor to the debtors of the bank, and the most that can be made of it is, that if this money be recovered, it increases the funds of the bank, and consequently there would be less necessity for the depositors and note-holders to resort to the extraordinary remedy by suit against the delinquent directors. But this is a contingent liability merely, which has never yet been held cause for the exclusion of a witness, although it may be urged with some force against his credit.

Having disposed thus briefly of the preliminary matters (in none of which have I been able to discover any cause for the reversal of the judgment) I shall now' consider the remaining objections in their order:

1. And, first, the forfeiture of the charter. The alleged delinquency of the bank consists in this: a failure of the bank to comply with the 10th section of the Act of 1814, and the 24th article of the 2d section of the Act of the 25th of March 1824; the allegation that the capital stock of the bank, as authorized by the Act of Incorporation of the 28th of February 1834, was not all paid in, as is directed by the Act, before discounting any note or issuing any of its bills; and that the capital stock was not all paid in before the transaction on which this suit is brought. The Act of the 25 th of March declares the charter of a bank, neglecting to pay or declare dividends, absolutely null and void, and of no. effect whatsoever; and that the bank from thenceforth shall be deemed and taken as dissolved, unlawful, and unincorporated. The 7th section of the Act incorporating the Lumbermen’s Bank, also declares that no discount shall be made, or any note issued by the bank, until the whole of the capital stock shall be paid in. These prohibitions and restrictions are very positive, and expressed in strong language; and if the bank has omitted or neglected to comply with them, and the proper steps had been taken, the charter would have been declared by the proper authority null and void. But the difficulty which meets the defendants, is, that we cannot judicially know, nor can we now investigate the truth of these allegations; for if there be anything settled beyond all cavil and controversy, it is, that the violation of a charter of incorporation cannot be made the subject of judicial investigation in a collateral suit. The only evidence, competent to prove the forfeiture of a charter, is the judgment of a court directly on the point; and no inferior evidence can be admitted for that purpose, unless it is otherwise directed by the legislature in express and positive terms. The objection comes with a peculiar ill grace from the defendants, some of whom were directors of the institution, and all of whom received and used the funds of the bank, of which they now wish to deprive the innocent stockholders, and the honest creditors, under this flimsy pretext. The provisions for a forfeiture of the charter are not intended for the benefit of the debtors, to shield them and enable them to commit a fraud: but it is designed to protect the public; for notwithstanding the 10th section declares, that in certain cases the charter shall be absolutely .null and void, yet it also provides that the bank. shall be liable in its corporate capacity, for the fulfilment of all its contracts, &c., previously made, and shall be capable of compelling the fulfilment of any contract entered into previous to the delinquency. So in the 20th article of the 3d section of the Act of 25th of March 1824, it is provided that the Act shall not be so construed as to prevent the bank from recovering the notes or obligations of those who may be indebted to it as occasion may require. For the purpose of collecting its debts, the charter is still in existence, notwithstanding it may be forfeited on account of the delinquency or neglect of its directors; and this principle must be engrafted into every Act of incorporation, to prevent the most monstrous and glaring injustice to creditors and stockholders. If the charter had been regularly forfeited, a question of some delicacy on the wording of this Act would have arisen; that is, whether any debts, contracted after this cause of forfeiture, could be recovered. We are, however, happily relieved from a consideration of that point, because, as the case stands, the question cannot arise.

2. Second point. Because the note is not authorized, but is taken contrary to the Act of incorporation. The note being made payable in the office notes of the bank, is said to be contrary to the 14th article of the Act of the 25 th of March 1824, which prohibits corporations, either directly or through the agency of others, either in trust or confidence, to deal or trade with any profits, stock, money or effects of the bank, in buying any goods, wares, or merchandise whatever; that corporations shall not deal nor trade in any thing, but bills of exchange, gold or silver bullion, and in stock and treasury notes, or in the sale of goods really and truly pledged for money lent and not redeemed in good time, or goods which may be the produce of their lands. This Act must receive a reasonable construction, and the intention of the legislature is manifest: it is to prohibit the banks under the pretence of loaning money, from becoming dealers, traders and merchants, and thereby interfering with the legitimate pursuits of individuals. In this view, the restriction which confines them to buying and selling certain things enumerated in the Act, is highly salutary and conservative. In neither of these characters is the bank exhibited. It would be an abuse of terms to call them in this respect dealers, traders, or merchants. There is nothing in the transaction which interferes with the policy which dictated the restriction. The legislature never could intend, under the penalty of a forfeiture of the debts, so great an absurdity, as to prohibit them from expressing on the face of the note that which is a necessary implication from the law itself; for it cannot be doubted that it would be a palpable breach of law and of good faith, if the bank were to refuse to receive its own notes in payment of debts. It is intended that the issues in the shape of notes shall be a substitute for specie, which they would not be, unless receivable by the institution by whom they were issued. Nor can I perceive in what way notes made payable in this form can be made to operate to the injury of depositors or other creditors. By these means the indebtedness of the bank to the holders of their notes is discharged, and the liability of the bank is decreased in the same proportion, leaving the other funds applicable in liquidation of debts. We must not confound the negotiability of the paper with the liability of the defendants. The questions are entirely distinct, for the note may want the character of negotiability, and yet the plaintiff may have a perfect right to sue and recover the amount expressed on its face. There is nothing to prevent the institution from taking any form of security it thinks best, whether a note under seal, bond, ynortgage, judgment, or what is most usual, negotiable paper, payable to bearer or order, and transferable by endorsement or delivery.

3. The third point is the alleged fraud. And this is included in the answer to the third, fourth, and fifth points of the defendants. From the imperfect manner in which the case is presented, it is difficult to understand precisely the nature of the testimony on the points themselves; but from the best consideration I have been able to give it, it seems to me that the answer of the court is as favourable to the defendants as they had any reason to expect. The court say that if the jury believe from the evidence that the paper was signed by the defendants, and handed to the president and cashier with an understanding that they were to sign it before it was discounted, and they discounted the note without signing it, it would be a fraud on the defendants, and the plaintiff could not recover. This, I say, was as favourable to the defendants as they had any right to require; for it maybe doubted whether, admitting the fact to be as stated, the court was right in declaring to the jury that the plaintiff could not recover. It is not very clear that an understanding between the parties themselves, although one was president and the other cashier, would avoid the note unless knowledge of that understanding was brought home to a quorum of the directors, whose duty it is to discount notes. If it would, it puts the bank very much in the power of one or more fraudulent directors. It is a breach of faith, to be sure, among themselves, but from this it does not necessarily follow that the security is void, operating as it would in this case to the injury of the innocent stockholders and creditors. But be this as it may, there was no evidence of any such understanding. The note was handed to Falconer for discount, in renewal of other notes then in bank, without any agreement or understanding on the subject. The testimony of Judge M’Calmont and others was only admitted to impeach the recollection of Falconer, who was examined as a witness ; and supposing that the defendants had been successful in this to the utmost extent, it would leave the jury without any testimony further than the inference which may arise from their joint liability. Sensible of this consequence, the defendants take the ground that under the circumstances the onus is thrown upon the plaintiff. They contend that the bank must show negatively that there was no such understanding between the parties as that Falconer and Shepard were to sign the note which was given in renewal of notes on which they were joint debtors. Even if this were required, there is negative evidence in the testimony of Falconer. But I will not rest the case on that point, for I cannot agree that the onus is thrown upon the plaintiff. The allegation amounts to a charge of fraud, which cannot be presumed, but must be proved. In support of this charge, the defendants must show in substance that discounting the note in that manner was in contravention of an express agreement, and that the bank participated in the fraud committed by two of the debtors, in omitting to sign the note before it was discounted.

But the bank had nothing to do with their private arrangements. All they «were required to attend to, was to have an adequate security for the money loaned; and they were not bound to suspect a fraud merely because the names offered in renewal of the note were different, at. different times. There is truth in the observation of the court, that it is difficult to say at what time Brigham put his name to the note; but even admitting that he signed his name after it was discounted, it would be no objection to the plaintiffs’ right to recover. It was ratified by the bank and by Brigham, and surely the others have no right to complain of an act which adds to their security. It is impossible to avoid seeing that if there has been any fraud or misunderstanding in the last renewal, it has been among the debtors themselves; but this ought not to operate to the injury of the bank. The transaction seems to have arisen from a joint purchase of real estate. The note was discounted to pay purchase-money originally on their joint account. It was renewed from time to time, sometimes with all their names, sometimes with one, and sometimes with two or more of these joint debtors, as suited their own convenience, they having mutual confidence in each other. What is there in this state of things to lead the plaintiffs to suspect that there was any thing unusual or unfair in the last renewal, merely because certain names were then omitted 1 And why should they be visited with a loss which has arisen, if at all, from the loose manner in which the defendants themselves have chosen to transact the business ? We cannot help perceiving that this is a mere subterfuge to escape the payment of an honest debt. I have also to add, that if the defendants have been wronged, it has been by the jury, and this is not the proper mode for them to obtain redress.

4. Next, as to the effect of the attachments. The defendants, on the trial of the cause, offered special pleas, purporting to be in bar, setting forth that Sedgwick Benham, of the county of Chautauque, in the State of New York, sued out an attachment according to the statutes of that state, against the Lumbermen’s Bank, being a foreign corporation, for the sum of $1473, a debt due from the plaintiff to Benham, and attached the debt of the bank against the defendants. Also, an attachment in favour of Henry B. Van Burén, against the same, for a debt of $1200, and in favour of Nathaniel P. Copp, for a debt of $1750. These pleas were rejected, but on the trial the two last were received in evidence, reserving the point: and the first, viz. the attachment in favour of Ben-ham, was rejected, and rightly, because it appeared that the certified copy did not contain the whole record. The debt in suit was attached by the sheriff of Chautauque county, the 22d of February 1838, which was before the commencement of this suit.

By the inventory attached to the sheriff’s return, it appears that this debt was attached in the following manner. After stating other property, consisting of notes, See. belonging to the bank, the sheriff says, “ And also, that on the 5th day of March aforesaid, I notified Nathaniel A. Lowry, by leaving at the store of the said Lowry, in the village of-, a notice, written, that I had the annexed attachments, and by virtue of the said attachments, made a demand of him of a list of his indebtedness to the Lumbermen’s Bank at Warren, Pa., which was not furnished.” For the purposes of this case, I shall assume that under the statute law of New York a debt due from a foreign corporation to a citizen of that state, coming under the denomination of personal property, may be attached, and that this debt was attached under the process issuing from regular and competent authority. But although these facts are conceded, yet, it nowhere appears that any more was done under this process. There was no execution executed, nor was there, so far as appears, a judgment rendered by the court in favour of the attaching creditors against the bank. Vide 24th section Revised Statutes of New York 460. All that was done was to file the affidavit of the debts, and to give the bonds which are required by the Act. The sheriff has now, under his control, and in his custody, all the effects of the bank, attached by virtue of the process in his hands. This is, therefore, a foreign attachment pending, lis pendens, without execution executed, and without a judgment rendered for the debt. And the questions arise, — Is this a defence to a suit subsequently commenced in this state ? and if it be, in what manner must the defendants avail themselves of the defence? That the proceedings in New York are a defence in this state, admits not of doubt. They are a defence to the same extent, and must be pleaded in the same manner as if they had been laid in this state, there being a manifest distinction between a suit pending in a foreign country, between the same parties, commenced by process against the person, and a proceeding by process of foreign attachment, which acts in rem. The latter may be pleaded either in abatement or in bai% according to the distinction which will be hereafter noticed; whereas the former can neither be pleaded in abatement nor in bar, unless perhaps where the cause has proceeded to judgment. Vide note to 4 Cow. R. 521, where ail the authorities are collected. Sed qucere. Whether upon the principle of comity between sister states, and convenience, the pendency of a personal action may not be pleaded in abatement. Can it be that a suit for the same cause of action, between the same parties, can be carried on at the same time in every state in the Union ? This, however, is not the point in difficulty, but the doubt is, whether it must be pleaded in abatement, or may be pleaded in bar, or given in evidence under the general issue. The attachments which were given in evidence, as has been already observed, were sued out on the 24th of 'February 1838, previous to the commencement of this suit. There was no execution executed, there was no judgment rendered. The proceedings amount to a foreign attachment pending, which is pleadable only in abatement. If, after a foreign attachment has been issued, and been executed in the hands of a garnishee, the original creditor sues the garnishee for- the debt, he may plead the attachment in abatement. But if the plaintiff in a foreign attachment has obtained judgment against the garnishee and received the money, or execution has been executed, and the original creditor shall afterwards sue the garnishee for the debt, he may plead the condemnation in the foreign attachment, and this will be an effectual bar for the amount. If the judgment in the attachment is equal to, or exceeds the amount demanded from the farnishee on the, original debt, it is a flat bar; if for less, it is a ar pro tanto only. Fitzgerald v. Caldwell, 1 Yeates 279; 17 E. Com. L. R. 269 ; 5 Johns. R. 101; 3 Rawle 320; 9 Johns. R. 221; 1 Penn. R. 442. And the distinction between pleas in abatement and in bar, is not technical, but necessary to prevent injustice. Where pleaded in abatement, after the disability is removed by disproving the debt, as may be the case, the plaintiff may renew his suit; but if pleadable in bar, this cannot be, and the plaintiff may be exposed to have the claim of the attaching creditors defalked, although it may be afterwards disproved, and the garnishee may be allowed for a debt which he may fail to pay. The plaintiff may be defalked and afterwards compelled to pay the attaching creditors the amount of their debts, for an attachment without satisfaction would not of itself prevent them from resorting to their original debtor.

If, then, this was pleadable in abatemenl, the court were right in rejecting the special pleas in bar, which, although concluding in bar, disclosed matter pleadable in abatement only. So, matter pleadable in abatement cannot be given in evidence under the general issue, nor can it be pleaded after a plea in bar. 2 Serg. & Rawle 537; 15 Serg. & Rawle 150; 4 Cow. R. 521.

But it is contended that a plea in abatement was not the proper plea, because the defence being for part only, the writ cannot abate in part. The argument is, that if pleadable at all, it must be pleaded in bar; because the defence is to part and not to the whole. And it is very true, that where the judgment and execution are for a sum less than the plaintiffs’ demand, iit may be pleaded in bar; and the defence is pro tanto only. 1 Com. Dig. 585; Dyer's R. 83; 1 Sid. 327. But the fallacy of the argument consists in this. It is a misapprehension of the fact to suppose that part of the debt only was attached; on the contrary, the whole debt, together with other assets, was attached by the creditors in New York. Although the amount due the attaching creditors, on their own showing, was less than $3000, they have attached a debt due the bank of upwards of $20,000. Nor has the bank any reason to complain of this, as, to say the least of it, it may be doubtful, under the statutes of New York, whether the sheriff would be justifiable in attaching part and not the entire debt. At any rate, he,has not thought proper to attach part, but has attached the whole debt. The sheriff to whom the process is directed in the case of a foreign corporation, is bound to proceed, in all respects, in the manner prescribed in the case of attachments against absent debtors. 21st section Revised Statutes of New York 460. And in case of absent debtors he is directed to attach all the real and personal estate of the debtor, and to take into his custody all the books, accounts, vouchers, and papers relating to the pro- • perty, credits, and effects of such debtor. The sheriff would seem, therefore, to have no discretion, and this would appear to have been his own understanding of his duty. He must take into his possession all the property of the bank in his bailiwick, without any regard to the amount of the debt against the bank, or the value of the property attached. The defendant had a complete defence, by a proper plea, which, if pleaded, the whole writ would abate; but, not having thought proper to avail himself of this plea in proper time, he shall not now be permitted to retrieve the slip in pleading after a plea in bar; nor can he have the advantage of it on the general issue. We cannot, therefore, perceive any error in the negative answer of the court to the defendants’ seventh point.

5. It only remains to consider the rule as to the measure of damages. On this point we agree with the Court of Common Pleas. The correct rule is, the cash value of the note at the time it is payable; but what is the cash value as between these parties ? If the defendants had performed their part of the contract by payment of the note at its maturity, who can doubt that it would have been equal to specie to the plaintiffs ? It would have enabled them to pay so much of their debts, or redeem that amount of their liabilities, which otherwise they might be compelled to pay in specie. The defendants have expressed some apprehension that after judgment they may be required to pay in specie ; but this is a groundless fear; for, as the court have control over the execution, they will, under their equitable powers, take care that no injustice be done.

Judgment affirmed.