McCulloch v. State

11 Ind. 424

• Court: Indiana Supreme Court
• Decided: January 4, 1859
• Status: Published

Opinion

Davison, J.

The complaint in this case, being an information in the nature of a writ of quo warranto, alleges that there is an association of persons transacting business as a banking corporation in this state, having their principal office at Indianapolis, called by themselves “ The Bank of the State of Indiana,” of which association Hugh Mc-Culloch is the acting president, and lames M. Bay the acting cashier, who are members of the association — which association, and said McCulloch and Bay, are made defendants. It is further alleged, that the association claims to be a lawful corporation, under a pretended law of this state, entitled “An act to establish a bank with branches and that they have assumed to act and are acting as such, exercising the powers and franchises attempted to be conferred by the provisions of said pretended act, but all without authority of law; that the pretended act was and is null and void; that the passage thereof was by the fraud and bribery of several of the members who voted for the same; that it was passed in both houses without a constitutional majority of either house, and by other unconstitutional and illegal means; and that the association and its branches were organized and put in operation by irregular, illegal, and fraudulent practices. After these general averments, the complaint proceeds in five paragraphs, and concludes with a prayer that the defendants be enjoined from the exercise of the powers and franchises named in the act, &c.; and for general relief, &c.

The defendants demurred to the whole complaint, and to each paragraph, severally. The demurrers to the whole complaint, and to the third paragraph, were overruled. To the other paragraphs, they were sustained. Upon final hearing, there was judgment for the defendants.

The first paragraph charges that the persons named in the act, as commissioners, met at Indianapolis within the time prescribed, &c.; divided the state into seventeen bank districts; pretended to locate each district; and appointed two sub-commissioners for each, to receive subscriptions to the capital stock in the several branches; that under their management, stock to the required amount in each branch was subscribed; and that, thereupon, delegates were appointed by the several branches, who met at Indianapolis, and pretended to organize “ The Bank of the State of Indiana!’ — elected a president and cashier — formed a board of directors, consisting of a delegate from and of each branch —and filed in the office of the secretary of state a paper purporting to be a statement of the proceedings in the organization of the bank and branches — by virtue of all which, they claim to be a lawful corporation, and are acting as such; but it is averred that the proceedings of the commissioners and sub-commissioners were and are void, because—

1. The sub-commissioners so acted in and conducted the opening and closing of the books for subscription, as to prevent and exclude many persons from subscribing to the capital stock in each and all of the branches-'who desired to do so, and who were entitled to subscribe.

2. That they secretly and fraudulently opened and closed the subscription books so as to enable only those persons to subscribe who had been previously named and fixed upon by the persons who had procured the passage of the pretended act of the legislature, and their confederates.

3. That the sub-commissioners, and each of them, fraudulently kept away from the places appointed for subscribing, and kept the subscription books also away, and out of the view of all persons desirous to subscribe, except the favored persons, till five or ten minutes before the hour of twelve o’clock, M., the hour for closing the books, and allowed no one to subscribe till all the stock had been taken by and in the name of the defendants and their confederates, and then instantly closed the books, whereby large numbers of citizens of the state, at each of the branches, were excluded, viz., John Hunt, William T. Dennis, John Robbins, and others.

4. That, for the purpose of giving all the stock to the defendants and their confederates, the sub-commissioners, fraudulently and in contravention of the meaning and intent of the act, permitted the defendants and their confederates to take all the stock in the several branches, excluding all others, they, the commissioners and sub-commissioners, declaring and giving out in speeches beforehand that none but them, and those who had taken an interest in the passage of the act, would be permitted to subscribe; that thus the defendants and their confederates monopolized all the stock in the several branches; and that the persons claiming to have been elected directors in the several branches, and in the pretended bank, had full knowledge of all the frauds, &c., herein charged, at and before their several elections, and their organization as branch boards and bank boards.

This paragraph, in effect, concedes the validity of the act incorporating the bank, and directly admits that the required amount of stock was taken; but complains that many citizens who desired to subscribe for stock were, by the fraudulent conduct of others, namely, the officers appointed to open the books, and those who were instrumental in procuring the passage of the act, prevented from making subscriptions. The act itself appoints five commissioners, who are directed to meet at Indianapolis within ninety days after its passage, and divide the state into not less than fifteen, nor more than twenty bank districts, to locate a branch in each district, and appoint two sub-commissioners for each district, to receive subscriptions for stock, &c. The sub-commissioners are required to open books between the hours of nine and twelve o’clock, A. M., on the days and at the place specified, &c.; and if the requisite amount of stock shall not sooner be subscribed, said books may be kept open between the same hours each day, for the space of thirty days. If more than the requisite amount shall be subscribed while the books are open for any branch, the excess shall be taken, in proportion, from subscribers over 1,000 dollars, until all are reduced to that amount, and then from all equally, &c. Acts of 1855, pp. 229, 245, §§ 3, 79. These sections allow the books to be closed when the requisite amount of stock shall be subscribed; but they evidently intend that all who are present at the place designated, between the hours prescribed, if desirous of subscribing, shall be allowed to do so. And, here, the sub-commissioners, having intentionally prevented the persons named, and others, from making subscriptions, acted not only without the intent of the law, but committed direct fraud upon all who were thus deprived of the right of subscribing. They did not, however, commit a fraud upon the state. So far as she was concerned, they were guilty of a mere irregularity. The required amount of stock was taken. That requirement of the act has been substantially complied with. And such being the case, the persons defrauded, and not the state, have the right to complain; because the bank, though her stock was, in the first instance, irregularly subscribed, is not, for that reason, less able to carry out, with safety to the citizens of the state, the objects of her charter. The Commercial Bank, &c. v. The State, 6 Sm. and Marsh. 599, is, in our opinion, much in point. In that case, which was a proceeding by quo warrcmto against the bank, the charter provided that no person, firm, or corporation, should, in the original subscription for stock, on any. one day, subscribe, directly or indirectly, or procure any other person to subscribe with the understanding that it should be transferred after the books were closed, for more than fifty shares of stock. And, as a ground of forfeiture, it was alleged that more than fifty shares had been subscribed for, in violation of that provision of the charter, and that the stock had been afterwards transferred. Held, that these subscriptions being under the superintendence of eight commissioners named in the charter, and under their supervision, before the bank had a corporate existence, the bank, as such, could not be held responsible.

In this case, the state, in pursuance of the act before us, assumed, through her own agents, the superintendence of. the subscriptions. Over the proceedings of these agents, the corporation could have no control; because they acted in advance of its existence. Hence, the state cannot, with any degree of propriety, be allowed to charge the corporation, as now organized, with the mala fides of those who controlled the original subscriptions. There is, it is true, an averment to the effect that the persons elected directors, &c., had, before and at the time of their election, and their pretended organization as branch boards and bank boards, full knowledge of all the frauds, &c., alleged in the complaint. Still it is not averred that these persons, or any of them, were stockholders in the bank when it became a corporation, or parties in interest when this suit was commenced. For aught that appears, the ownership of the stock originally subscribed may have all changed hands, and those who did subscribe under the supervision of the sub-commissioner, may not now hold any stock in the corporation. It cannot, therefore, be intended that the present stockholders had notice of the manner in which the subscriptions were originally made. But suppose they had such notice, it would be no reason why the state should complain. As we have seen, the stock was taken under the superintendence of her own agents — the requisite amount was subscribed — and, in addition, the corporation stands just as it would have stood had the subscriptions been regularly made. Through the fraudulent conduct of the sub-commissioners, the persons named, and others, may have been deprived of their right of subscribing for stock; but these persons are not complaining. When they do complain, it will then be a proper inquiry whether the law affords them a remedy for the injury which they have sustained. We deem the facts set forth in this paragraph insufficient to constitute a cause of action

(1).

The second and fourth paragraphs present the same question, and will, therefore, be considered as being within the same rule of decision. The second avers that the act incorporating the bank was not passed by a majority of all the members of each branch of the legislature; that two of the members of the house of representatives, viz., Andrew Humphreys and James Wood, whose names appear in the journal of the house as being present and voting for the bill on its final passage, after the governor’s veto, were not present, and did not vote on such final passage — the names of these members being fraudulently recorded in said journal. And the fourth alleges, that on the passage of the bill in the house, before it was vetoed, James Me-Murray, a member whose name appears in the journal recorded in favor of its passage, did not, in fact, vote in its favor, but voted in the negative and against it; that his name was and is recorded in the journal by mistake, fraud, or corruption, as in favor of the bill; and that the bill on its passage did not receive a majority of all the members elected to said house, there being only fifty votes recorded in its favor on its passage, exclusive of the name of McMurray.

The facts thus alleged, raise the question, whether the journals of the houses of the General Assembly can be contradicted or impeached on the ground of mistake or fraud. The affirmative of this inquiry cannot, in our opinion, be maintained. Article 4, § 12 of the constitution requires each house to keep a journal of its proceedings, and publish the same. This journal must be held conclusive evidence of the facts which appear on its face; because it must be presumed that the members, as a body, inspected it and made all necessary corrections, before they allowed it to assume the character of a journal of their proceedings. As well might evidence be received to contradict a statute, to show that it contained certain provisions inserted through mistake, as to contradict an entry made upon the journal. The house keeping the journal is the only tribunal by which it can be corrected, and until corrected by such authority it must be considered conclusive as to the facts which it contains. The State v. Moffit, 5 Ohio R. 358.—Turley v. Logan County, 17 Ill. R. 151.

We must, therefore, hold that the members alleged to have been absent when the bill passed over the governor’s veto, were present and voted as averred in the journal; and that McMurray did vote in favor of the bill on its final passage in the house.

In this connection, we are led to notice a question raised upon the demurrer to the whole complaint. It is averred that the bill was passed by the fraud, corruption, and bribery of several members of the legislature. In Wright v. Defrees, 8 Ind. R. 298, it was held that this Court cannot inquire by what motives the members of the legislature were governed in the enactment of a law. That, however, was a case between citizens; and the Court, in the opinion delivered, use this language: “We say nothing as to what rights the state may have in a case of this kind. The state is no party in these proceedings.” Thus, the Court withhold an opinion in regard to the question whether on the complaint of the state, a law can be impeached for the fraud, &c., of members voting for it.

In the present case, the state is the plaintiff. But is there any reason why she, as a party litigant, should be allowed, more than an individual citizen, to put in issue the conduct and motives of the legislature, or any of its members? We know of no principle or authority upon which an issue of that character can, in any case, be tried beforé a judicial tribunal. To institute such an inquiry would, as said in Wright v. Defrees, be a direct attack upon the independence of the legislature, and an usurpation of power subversive of the constitution. The Sunbury and Erie Railroad Co. v. Cooper, 7 Am. Law Reg. 158.

By the fifth paragraph, certain provisions of the act are alleged to be unconstitutional, which are thus pointed out:

1. It exempts from taxation the capital stock of the bank for municipal purposes.

2. It gives the bank a lien on the capital stock of all stockholders for all debts bona fide due, &c., although it declares such stock personal property and subjects it to be sold on execution against the owner — thereby giving the bank a privilege not accorded to other citizens.

3. It authorizes indirectly the suspension of specie payments by the bank, by suspending all suits, &c., against any branch, when the directors of the bank may suspend such branch — thereby creating a special stay of execution, &c.

4. It limits the number of branches to twenty, and not less than fifteen, in the discretion of the commissioners, declaring counties wherein a branch of the state bank is already established entitled to a branch in such county— thereby conferring a privilege on citizens and classes of citizens which belongs equally to all citizens.

These provisions, as connected with the act of incorporation, were duly considered in Wright v. Defrees, supra. We adhere to that decision. An act of the legislature may be valid in part and void in part. It follows that, were the provisions to which the paragraph refers stricken out of the act, the validity of the corporation would not be affected. Sujipose, then, that they are in conflict with the constitution, their being so would furnish no ground for declaring the whole act void, or enjoining proceedings under it.

The third paragraph avers that the bill in question was not read by sections on three several days in each house; that two-thirds of neither house where it was pending, did dispense with the rule requiring every bill to be so read; nor was any emergency declared, &c. There was an answer to this paragraph, to which the plaintiff demurred; but her demurrer was overruled. The paragraph and answer thus noticed each professes to show, by reference to the journals of both houses, the legislative history of the bill from its introduction till its final passage. The facts believed to be material are these: The bill originated in the senate. It was introduced on the 31st of January, 1855, when the rules, by a vote of yeas and nays, were dispensed with, and it was read a first time by its title. Afterwards, on the same day, the rules were again dispensed with, by a vote of yeas and nays, and it was read a second time by its title. On the 7th of February, the bill was referred to a committee, who, on the 17th of that month, reported it back to the senate with amendments, when it was made the special order of the day for Monday then next ensuing. On the 19th of February, the report of the committee was ooncúrred in, the amendments adopted, and the bill ordered to be engrossed. It was read a third time on the 22d, and on the 24th, being the special order of that day, it was passed by a vote of yeas and nays, and the house was informed, &c. In the house, the bill was, in like manner as in the senate, subjected to a first and second reading, and referred to a committee, who, on the 28th of February, 1855, reported it back to the house with amendments, when the report was concurred in, the amendments adopted and ordered to be engrossed. On the first of March, it was read a third time, passed by a vote of yeas and nays, and returned to the senate, where, on the 2d of March, the amendments adopted by the house were concurred in, &c.

Thus, it will be'seen that the journals fail to show that the bill was, in either house, read by sections, or that an emergency existed; but they do show, affirmatively, that it was read a first and second time by its title only.

The constitution, art. 4, § 18, says: “Every bill shall be read by sections, on three several days, in each house; unless, in cases of emergency, two-thirds of the house where such bill may be depending shall, by a vote of yeas and nays, deem it expedient to dispense with this rule; but the reading of a bill by sections on its final passage shall in no case be dispensed with, and the vote on the passage of every bill, &c., shall be taken by yeas and nays.”

As we have seen, the bill was subjected to a first and second reading, on the same day, by its title. In accordance with the rule, this could not be done, unless there was a case of emergency and the rule was dispensed with in the mode pointed out by the section to which we have referred. Are we, then, to presume, the journals being silent on the subject, that the action of the legislature was not in conflict with the constitution? Presumptions are often indulged, in support of the proceedings of Courts; and it would be difficult to perceive why their proceedings should be entitled to more favor than those of the legislature. It has been repeatedly decided, that, where the record-0f a Court possessing general powers is silent as to whether a party defendant had notice of suit, it will be presumed that the steps necessary to give jurisdiction of the person were properly taken. There is, indeed, no reason why legislative records should be more full and perfect than judicial. The journals, in this instance, aver that,the rules, by a vote of yeas and nays, were dispensed with, and the bill read a first and second time by its title. Now, in support of the act in question, it seems to us that we may presume not only that the vote taken was a two-thirds vote, but that there was a case of emergency, within the meaning of the section above quoted. Carpenter v. Montgomery, 7 Blackf. 415. Nor is it unfair to presume, from the averment, that the bill was read a third time; that it was read by sections. In a well considered case, in which the precise point now under discussion was involved, it was said: “If a strict literal compliance with every constitutional requirement, however minute, is necessary to the validity of a law, and the Courts are bound to hold that nothing was done but what appears in the legislative journals, it is easy to demonstrate that not a single statute enacted since the constitution took effect can be upheld.” Miller v. The State, 3 Ohio R. 475 (2). The language thus used aptly applies to the past legislation of this state, under the new constitution.

But it is argued that the bill, having been amended in the house — having passed that body — and being returned to the senate, where it originated, should, with the amendments, have been passed in the senate by a constitutional majority; that it was not enough that the amendments were simply concurred in. In answer to this, it might be said, that for aught that appears in the journal, the bill may have so passed the senate. But suppose the journal, in reference to the point thus made, shows all that was done; still the proceeding would, in our opinion, be unobjectionable; because the bill, before it was sent to the house, had passed the senate by a majority of all the members elected to that body, and it cannot be assumed that the amendments of th'e house converted the original into a new bill. Indeed, such construction might result in the necessity of the whole series of readings being commenced anew every time an amendment is made. We incline to the opinion that, in this instance, the mere concurrence in the amendments was sufficient without any further proceeding by the senate.

J. W. Gordon, J. Morrison, and C. A. Ray, for the state (3). T. L. Smith, D. M’Donald, and H. O’Neal, for the appellee (4).

It is true, where the journals, on their face, show that a bill on its final passage did not receive, in its favor, [the votes of] a majority of all the members elected, as prescribed by the constitution, the whole legislative proceeding would be a nullity; because, if the requisite number do not vote in the affirmative upon such final passage, there is a defect of power, and no bill so passed can ever have the force of a law. And to this effect are certain New York decisions to which we have been referred. The constitution of that state required, on the passage of every bill creating a corporation, the assent of two-thirds of the members elected to each branch of the legislature; and the Courts have decided that they would, for the purpose of ascertaining whether such act was passed by a vote of two-thirds, look behind the printed statute-book, and resort to the journals of each house. 4 Hill, 384.—1 Denio, 11.—2 id. 97. These decisions, in our opinion, enounce a proper exposition of the law. For the purpose indicated, Courts may resort to the journals. Still those cases are not applicable to the case at bar, because the bill in question passed both houses by the required vote. What we decide is, that upon the face of the journals, there is enough to induce the conclusion that the statute incorporating the bank was constitutionally enacted. The rulings of the ' Circuit Court must be sustained.

Per Curiam. — The judgment is affirmed with costs.

See Wright v. Defrees, 8 Ind. R. 298.

See Coleman v. Dobbins, 8 Ind. R. 156, note.