Mok v. Detroit Building & Savings Ass'n No. 4

30 Mich. 511, 1875 Mich. LEXIS 5

• Court: Michigan Supreme Court
• Decided: January 6, 1875
• Status: Published

Opinion

Cooley, J.

The constitution of the state,provides that “No law shall be revised, altered or amended by reference to its title only; but the act revised, and the section or sections of the act altered or amended, shall be re-enacted and published at length.”--Art. IV., § @5. The application of this section to certain acts ■of legislation is the principal question presented by this record. No one questions the great importance and value of the provision, nor that the evil it was meant to remedy was one perpetually reourriug, and often serious. Alterations made in the statutes by mere reference, and amendments by the striking out or insertion of words, without reproducing the statute in its amended form, were well calculated to deceive and mislead, not only the legislature as to the etfect of the law proposed, but also the people as to the law they were to obey, and were perhaps sometimes presented in this obscure form from a doubt on the part of those desiring or proposing them of their being accepted if the exact change to be made were clearly understood. Harmony and consistency in the statute law, and such a clear and consecutive expression of the legislative will on any given subject as was desirable, it had been found impraebicable to secure without some provision of this nature; and as the section requires nothing in legislation that is not perfectly simple and easily followed, and nothing that a due regard to clearness, certainty and simplicity in the law would not favor, it is probable that if the requirement has at any time been disregarded by the legislature, the default has proceeded from inadvertence merely. Whether there has been such inadvertence in the legislation now questioned is the point in dispute.

The act “ to authorize the formation of corporations for building and leasing houses and other tenements ” ■ was passed by the legislature of 1855, and in a single section it provided that corporations for the purpose indicated in the title might be formed under the provisions of an act “ to authorize the formation of corporations for mining, smelting or manufacturing iron, copper, mineral coal, silver or other ores or minerals, and for other manufacturing purposes,” approved February 5, 1858, and should have and possess all the rights, and be subject to all the liabilities provided in said act and the acts amendatory thereof. A second section was subsequently added making special provision for corporate debts and obligations, and the acquisition, control and disposition of real and personal property, hut they are not material here. The first section was left to stand as first enacted, and the only method provided for the incorporation of building and leasing companies was by the reference made to the previous act, which had in view organizations for purposes essentially different. This was at least awkward, especially as some of the rights and liabilities given and provided for by the mining and manufacturing incorporations act were from their nature peculiar to the kinds of business those incorporations were to engage in, and to the reports they were required to make thereof; so that it could not be ^strictly true that tbe building and leasing corporations would possess all the rights and be subject to all tbe liabilities of the corporations after tbe model of which they were to be formed.

The act by permission of which tbe defendants claim to be incorporated was passed in 1869, and by its first section provides that “ corporations for building and savings associations may be formed and incorporated under the provisions ” of the act of 2855, tbe substance of which has been already given. Now, as it was impossible to organize under an act the whole purpose of which was to give permission to find in another act the outline of an organization which it did not itself provide, the reason for referring to the act of 1855 is not very manifest. Had there been any desire or design on the part of the draftsman of the act of 1869, to avoid presenting to the mind of the legislature the incongruities that must result from the attempt to organize corporations of a nature essentially different under the same enabling .statute, the wording of the act was well adapted to that end, for while it mentions building and leasing associations as those upon the model of which the corporations for building and savings purposes, — which might well be supposed akin to them, — were to be formed, mining and manufacturing corporations, wbicb were to be the real model, were not once named, nor was the act referred to under wbicb they are formed, except blindly by its number as a chapter of the compiled laws. But, whatever the real purpose, it cannot fail to be the subject of- conjecture, when we are thus sent to one act for no other ostensible object than to be there told we must go to still another, when a direct reference to such last mentioned act in the first instance would have been much more simple, natural and proper, and much less confusing and questionable.

But while the act of 1869 referred parties in this circuitous manner to that of 1853 for the requirements in organization, it undertook at the same time to dispense with some things required by that act, and to make some changes. It provided that the articles of association need not state the amount of capital stock actually paid in; that -it should be contributed in initiation fees and in weekly or monthly sums as should be provided by by-laws; that it should not exceed three hundred thousand dollars; that certain things specified should be set forth in the articles which were not required by the act of 1853; that in addition to facts required to appear by the annual reports under the last mentioned act, the uses of all moneys received and expended during the year should be reported; that no money should be used for any persons not stockholders; that parents and guardians might take stock for minor children and wards, and that no premium given for priority of loan or acquisition of building, or discount given on the redemption of shares, should be deemed usurious. This is a statement of the whole substance of the act, and it will be seen that its provisions are few and vague, and that for the whole frame-work of the corporations to be formed by its permission the associates are referred to the act of 1855, which in turn refers them to the act of 1853, where, except in a few particulars, and most of those unimportant, they are to find their law and their guide in organizing and conducting their corporate affairs.

Is this act constitutional ? We have hitherto had very little occasion to consider the section of the constitution under which this questioir is made, because there have been few cases in which such a question could plausibly be made. Amendments of statutes by implication, we have held, are not forbidden by it. — People v. Mahaney, 13 Mich., 481; Underwood v. McDuffee, 15 Mich., 361. But this is not a case of that nature, as all the alterations we have reason to suppose the legislature designed to make in the act of 1853, to adapt it to the purposes of' the act of 1869, are made in express terms. The present case is certainly peculiar. In one sense the mining and manufacturing act has not been amended at all, and it stands on the statute books, for all the purposes of the associations originally contemplated by it, quite unaffected by the act of 1869. But as regards the objects and purposes of building and savings associations it is quite otherwise. If private individuals had by contract in like manner referred to some pre-existing writing which' was to be the measure of their rights and obligations, except as by the contract may otherwise have been provided,, it would have been said that the previous writing as thus, modified had been incorporated in and made a part of the contract itself. The case is the same here. The act of 1853 has been, for the purposes of building and savings associations, incorporated in and made a part of the act of 1869, but with several changes and modifications, and these not made by the re-enactment of the sections changed or modified, but only by indicating the extent of the changes,, leaving the parties concerned to fit the new act to the old as best they may. It is unfortunate for those who have had occasion to attempt it, that this case illustrates so forcibly the evils of • this species of legislation; for on many points it is impossible, in seeking for the legislative intent, to get beyond the regions of pure conjecture.

It may be desirable here, in order to avoid all possible misapprehension, to state distinctly what the act of 1869 is not. It is not a statute which merely refers a body of associates to a pre-existing law which is suited to their purposes, and under which they are to be permitted to incorporate themselves. Upon a statute of that description we abstain from remarking, because the act of 1869 assumes that the act of 1853 was in many respects unsuited to its purposes, and undertook to modify and adapt it to them. It was in fact much more unsuitable than the legislature, judging from the changes made, seem to have supposed, as we shall have occasion to point out further on; but for our present purposes it is sufficient to state, that some changes were deemed essential, and that they were made by indirection. Had the act of 1853 been one for the incorporation of building and savings associations, a subsequent act attempting for their purposes such modifications of it as were designed to be made by the act of 1869 would be so manifestly in conflict with both the spirit and the letter of the constitution as to preclude any plausible argument in .its support; and it is not readily perceived that it can be less so because of its leaving the original act untouched for some purposes while altering it after the forbidden method for others.

It is possible that there may lie back of the constitutional difficulty the question whether the act of 1869, taken in connection with that of 1853, has prescribed any definite course of action by which associates can be sufficiently guided in perfecting organizations under it. It is certain at least that these associates have not found the two acts sufficient or satisfactory for their. purposes, and in several particulars have made law for themselves in.framing their articles. . The first act required the articles of association to state distinctly and definitely the term of existence of the proposed corporation, not to exceed thirty years. This provision has not been followed in this instance, but the associates provide by their articles that the association shall be dissolved “as soon as one and every shareholder shall have received on every one of his or her shares the sum of one hundred and twenty-five dollars, that is, including the premiums that have been granted by the shareholders themselves.” This indefinite period may be five years, or it may be twenty-five; it is an uncertain period which may depend upon the success of the corporation or the will of its members, while the statute contemplated a certain and fixed period subject to no such contingency. It is perhaps unfortunate that in thus departing from what would seem the purpose of the statute the associates did not succeed in making their own meaning more unequivocal; for this provision leaves us in very great doubt whether by the clause “as soon as one and every shareholder shall have received on every one of his or her shares the sum of one hundred and twenty-five dollars,” etc., we are to understand, as soon as the corporation shall have means sufficient to make such payments, or whether, on the other hand, the meaning is, as soon as the last shareholder shall have applied for and received his share under the rules of the association. Either construction is perhaps admissible, but the latter seems most natural, and, if lawful, might continue the corporation at the option of non-borrowing members for the full period of thirty years, which by the constitution is made the limit of all such corporations, and might result in very great injustice and oppression to borrowers. The other construction would be less open to objection on the score of justice, and would be likely to terminate the existence of the corporation within a short period unless it-should be managed badly and meet with serious losses.

The departure from the statute in some other particulars is equally manifest. Under the act of 1853 the shares of stock were to be twenty-five dollars each. There is no intimation in the act of 1869, that any departure from this standard was to be permitted. Nevertheless these associates have fixed their shares at one hundred and twenty-five dollars each. With the same warrant they might as well have made them either ten dollars or ten thousand.

This may be considered matter of form only, but some other particulars may be noticed of more importance. The act of 1853 as amended makes- particular provision by its fifth section for annual reports to be filed in the office of the secretary of state, and of the county clerk. The act of 1869 contemplates a similar report, and enumerates some further points to be covered by it. The failure to make the report under the first act is made a misdemeanor in the directors, punishable by a heavy fine; but the section which provides therefor applies by its terms only to mining companies, and it is, to say the least, matter of very grave doubt if the failure of the directors of building and savings associations to make report is punishable at all, or whether if they neglect to make one there is any means of compelling it. Counsel consulted on the subject might very probably advise them in entire sincerity that criminal laws were not to be extended by construction, and that, as this penalty by its terms was made applicable to mining companies only, the directors of building and saving associations could disregard the requirement of a report with impunity. It is not likely this was what the legislature intended, but it is one of the probable results of attempting to make incongruous things harmonize.

Are these building and savings associations to pay any taxes? On this very important subject we are left wholly to conjecture. Mining and manufacturing corporations are required to pay taxes, and the incorporation act contains penal provisions to compel separate reports as a basis of taxation. — See §§ 18, 19, '20, 21, 28. Permission to companies of another description to become incorporated “ under the provisions ” of this act would seem to imply an understanding that they were to do so subject to this very important requirement, unless the permissory act expressly exempted them, which the act of 1869 does not. But here again there are no penal provisions applicable to building and savings associations, by means of which to compel the performance of any duty looking to taxation, and no basis is prescribed according to which taxation can be laid. We may suppose, therefore, that the legislature regarded these associations as being rather benevolent or charitable societies than societies for the pecuniary profit of their members ; and, consequently, the proper subjects of exemption; or, with equal reason, that, without examining in detail the act for the incorporation of mining and manufacturing companies, they assumed that as all companies organized under it were taxable, so all permitted to organize “ under its provisions” would also be taxable. Whatever intent may have been in the mind of the legislature, we have no reason to believe that if these associations were to be incorporated for the pecuniary profit of their members, or of the non-borrowing portion thereof, the legislature would intentionally have sanctioned it, without some adequate provision compelling them to bear their proportion of the public burdens.

The act of 1853 makes the stock subscribed to corporations formed under it subject to be called in at any time by tbe directors. The act of 1869 makes the capital stock payable “in initiation fees and in weekly or monthly sums of money, as shall be provided by the by-laws of said corporations.” Under this provision it seems to be understood by those who organized the defendant association, that subscribers may be compelled to make the weekly or monthly payments, not only until the whole one hundred and twenty-five dollars per share is paid in, but afterwards as long as the corporation exists; and those who borrow from the corporation are required to give security that they will do so. What warrant there can be for this we do not very clearly perceive. A subscription for stock can call for no larger payment than the sum subscribed, and when that is completed the obligation is fulfilled. Whether by-laws requiring payments to be kept up during the whole life of the corporation can be burdensome or unjust must depend upon the period of its existence, and the provision, if any, for the distribution of its assets. If, as. the complainants understand the organization in this case, it is to continue until the expiration of thirty years, or until the non-borrowing members voluntarily wind up its affairs, and its assets are then to be divided among those who have not been borrowers, the injustice will be so enormous that no legislature would ever for a moment consider the proposition to permit it; for it might result in compelling the poor borrowers to pay many times over the sums borrowed, and to submit during the life of the corporation to have their real estate mortgaged to secure weekly or monthly payments on “stock,” in the accumulations of which they> although “stockholders,” were not to share. If, on the other hand, the corporation is to be dissolved -as soon as each stockholder can have made up and paid over to him the amount of the stock he has subscribed for, then there can be no serious inequality in the positions of borrowing and non-borrowing members, provided the statute or the articles of association made proper provisions for determinjug when the necessary moneys had been realized, and how the dissolution might be required or compelled; provisions exceedingly important in the case of corporations where continuous payments are required, but which have not been made for these corporations in any manner.

The twenty-fifth section of the act of 1853 provides that “the legislature may at any time, for just cause, rescind the powers of any corporation created pursuant to the provisions of this act, and prescribe such mode as may be necessary or expedient for the settlement of its affairs. The legislature may repeal, alter or amend this act.” This last provision was not necessary, as the power existed under the constitution independent of it; but the first was important. Nevertheless it is in the nature of a penal provision, and its application to the building and savings associations, without an express legislative declaration to that effect, is exceedingly doubtful. Other important provisions of the act would be equally affected by the principle that punitory laws are to be construed strictly.

But it is needless to extend this sort of inquiry further. Tt must be perfectly manifest that the three acts under which this building and savings association claims to be organized furnish no distinct outline for such an incorporation, and that it is impossible to say how much or what part of the general mining and manufacturing incorporations act was meant to be applicable to them. Counsel called upon to.frame articles for them under that act could at best only go from section to section, and say, this section is applicable,- and that is not; this it is politic to appropriate, and that to reject; but when he had concluded his labors, the result could only be the formation of a corporation under a law which, by selection and rejection of sections and parts of sections, he had made for the purpose, and not under any law which the legislature had made as his guide; for the act of 1853 has purposes and objects so entirely different that it cannot possibly be a guide in the premises.

The question then recurs whether the act of 1869 can be supported. In our opinion, formed upon deliberate consideration, and after most able argument, it cannot. While the act of 1853 is left untouched as to the organizations contemplated by its provisions, it is, for the purposes of building and savings associations,, altered in most important particulars in disregard of the constitutional requirement. The fourth and fifth sections are expressly amended without re-enacting them in full, and perhaps the same should be said of the eleventh, while the others are capable of being made available only by treating the act as revised to meet the exigencies of the case. Unfortunately the revision is not clearly made by the statute, but is left to the varying opinions, wishes and purposes of those who may have occasion to avail themselves of this legislation. What has been attempted here is, to duplicate an act, but at the same time to accommodate it by indirect amendments to a new class of cases, in disregard of the, constitutional provision which requires each act of legislation to be complete in itself, and forbids the enactment of fragments which are incapable of having effect or of being understood until fitted in to other acts after by construction or otherwise places have been made for them. No such legislation can be sustained. Persons claiming such extraordinary powers and privileges as some which are claimed here, should be able to claim them under legislation which is clear and unequivocal, and which leaves no doubt'of the purpose of the legislature to grant them.

The whole act of 1869 being in our view invalid, we give no attention to minor objections. The decree appealed from must be affirmed, with costs.

The other Justices concurred.