United Society v. President of Eagle Bank of New-Haven

7 Conn. 456

• Court: Supreme Court of Connecticut
• Decided: July 15, 1829
• Status: Published

Opinion

Hosmer, Ch. J.

The contestation of the parties is merely this. The plaintiffs contend, that they, by virtue of their, subscription, became neither stockholders in the Eagle Bank, nor a part of the body politic or corporation ; but on their giving notice of their intention to withdraw their shares, their original investment, from that time at least, was converted into a legal debt. On the other hand, the defendants insist, that the plaintiffs, by their subscription, became stockholders, and a part of the body politic or corporation ; and of consequence, the bank being utterly insolvent, they were incapable of withdrawing their shares.

The solution of the controversy depends on a construction of the defendants’ charter. Between that, however, and the act of May session 1821, there is no essential difference; the latter varying the method only, and explicitly declaring what the former clearly implied.

We will first bring into view the material clauses of the charter, and then attend to their construction. [Here the Chief Justice referred to the 1st section, the 2nd and 6th articles of the 2d section, and the 3rd, 6th, 7th, and 8th sections.]

The charter being thus brought before us, we will now proceed to an exposition of it. In doing this, we shall not forget, that a statute ought to be expounded according to its intent; (Com. Dig. tit. Parliament. R. 10. b.) at the same time remembering, what is often forgotten, that in many, perhaps in most cases, the plain meaning of the language used, is the best evidence of intention. Curtis v. Hurlburt, 2 Conn. Rep. 309.

For the purpose of simplifying the case, we will put out of consideration certain principles insisted on, as they reflect no light on the construction of the charter.

The plaintiffs have recurred to the charters of several banks, in which subscribers are permitted to withdraw “ their subscriptions” and “ their moneys,” after six months’ notice. These expressions are supposed to denote the same right, which the plaintiffs claim, by the words “ to withdraw their shares,” arid to give a construction to them, on the ground that the laws are in pari materia. I am of opinion that the acts referred to are not in pari materia; but that they are distinct and irrelevant to each other. Statutes are in pari materia, which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the term similis. It is used in opposition to it, as in the expression “magis pares sunt quam similesintimating not likeness merely, but identity. It is a phrase applicable to public statutes or general laws, made at different times, and in reference to the same subject. Thus, the English laws concerning paupers and their bankrupt acts, are construed together, as if they wcre one statute, an<I as forming a united system ; otherwise the system might, and probably would be. unharmonious and inconsistent. Such laws are in pari materia. But private acts of the legislature, conferring distinct rights on different individuals, which never can be considered as being one statute, or the parts of a general system, are not to be interpreted, by a mutual reference to each other. As well might a contract between two persons be construed by the terms of another contract between different persons. The obligation of a contract cannot be impaired, by this indirect proceeding.

If, however, the acts were in pari materia, it would not avail the plaintiffs. When it is provided, that subscriptions or moneys may be withdrawn, the meaning is the same as that there may be a withdrawal of shares; for the latter can only be withdrawn by money, which is the common standard of value.

It was insisted, by the plaintiffs, that by a practical construction of the banks, shares have usually been withdrawn at their par value. While sitting in this court, we have not the means of ascertaining the fact advanced, concerning which the motion ia silent. But admitting it, for the sake of argument, I do not deem it of much importance, If the charter of the defendants is clear and unambiguous, it must be construed by its provisions. A mistaken practical construction cannot destroy the unquestionable rights of the parties. In Cooke v. Booth, Cowp. 819. the contrary was decided ; but this determination has frequently been disapproved of, and a different rule is now established. Baynham v. Guy’s Hospital, 3 Ves. jun. 298. Eaton v. Lyon, 3 Ves. jun. 694. Iggulden v. May, 9 Ves. jun. 333. “ It cannot be a legal rule of construction,” said the master of the rolls, “ that the party who has done an act, which he was not bound to do, or from mistake, should therefore be bound forever, without the power of retracting.” Moore v. Foley, 6 Ves. jun, 238. These considerations I put out of the case, as possessing no essential importance.

I. In the first place, I am of opinion, that the plaintiffs, by their subscription, became stockholders.

Each hundred dollars subscribed, by the express provision of the charter, entitled them to a share in the Eagle Bank. What is intended by the word share ? In its popular and familiar meaning, it denotes a part or portion of a thing owned in common, By the 1st section of the charter, it is provided, that “ the capital stock shall be divided into shares and by the 3rd section, that “ the capital stock of said bank shall consist of five thousand shares.” These expressions are precisely synonymous with the assertion, that each share shall be a part of the capital stock. It is impossible, that language should be more definite and unequivocal. The word share having thus been defined, it is invariably used with the same meaning throughout the charter. Thus, it is said, that “ one vote shall be allowed for every share ;” that “ for two thousand five hundred [additional] shares” a new subscription may be opened ; and that the state and ecclesiastical societies may subscribe “for shares” Shares of what ? Undoubtedly, shares of the capital stock. This correlative of the word shares, had been expressly declared in the charter; and after this, a certain subject of reference having been given, it became unnecessary to repeat it. When, therefore, it was provided, that the state and ecclesiastical societies might subscribe for shares, it was equivalent to the assertion, shares of the capital stock. It is impossible to doubt it. In a statute or formal instrument, the same words regarding the same subject matter, must be taken to import the same signification. This is a self-evident principle, without the admission of which there is no rule to find out the true and genuine sense of language. By the stock of a company is intended its fund or capital. He who owns a share of the stock or capital, is a share-holder or stock-holder, words of equivalent meaning, unless all the stock is owned by a single person.

The meaning of the term under discussion, would scarcely have been questioned, were it not for the proviso to the section, under which the plaintiffs made their subscription. The proviso, however, so far from countenancing a different meaning of the word shares, affirms that which I have adopted. It declares, that the shares “ shall not be transferable.” If the plaintiffs’ shares could not become a part of the capital stock, why this provision ? It would have been entirely superfluous. A right to a sum of money is a chose in action, and incapable of transfer. It was because the shares were to be part of the capital, and, if unrestrained, transferable stock, that the provision was made.

In opposition to the meaning of a familiar word, whose signification is likewise defined, by the plain provisions of the charter, the plaintiffs have founded themselves on a supposed object of the legislature in authorizing their subscription. It was they assert, to confer on them a privilege ; but that, on the defendants’ construction, they are placed in a worse condition than any other persons interested in the bank. The privilege, they add, was by rendering them creditors, and not stockholders ; in this manner preserving them from responsibility and loss.

It is admitted, by the parties, that a privilege was intended the plaintiffs. It devolves, then, on the plaintiffs, to show, that on the defendants’ construction, they had no privilege, but the reverse of one ; and that the intended boon was to render them creditors, and not stockholders.

That their subscription, if they became stockholders, was not a privilege, is supposed to result from their incapacity to transfer their stock, and their subjection to the debts and responsibilities of the bank. On this part of the case, the ground taken in argument was too narrow. All the advantages and disadvantages of the plaintiffs’ condition should be recurred to, and then, on comparison made with the other stockholders, their relative situation will be discerned.

In the first place, without asking the consent of any one, they had a legal right to subscribe for shares at their pleasure, on the advancement of one hundred dollars for each share. Thus far, their privilege was peculiarly great. They might become interested in any bank within the state, and, at par value, take the benefit of its prosperous condition. To prevent pernicious stock-jobbing, they were not permitted to transfer their shares, This disadvantage was countervailed, in some measure, by allowing them to. withdraw them, on six months’ notice. This, it is believed, is not as valuable as the unrestrained right of transfer. At the same time, it did not greatly impair the value of the plaintiffs’ privilege. If, as a general truth, the insolvency of our banks is a rare occurrence, and from the apparent signs of danger to the solvency of those institutions, a prudent and discerning man may look ahead a few months, and render himself secure ; both of which suppositions are believed to be true; there is little abatement to be made from the before-mentioned privilege, by reason of the non-transferability of shares. On the other hand, those who become stockholders, by purchase, must wait for an opportunity of investing their money, and when it arrives, must pay the price above par, which stock bears in the market. I entertain no doubt, that the right of transfer, when they become purchasers, does not place them, in point of privilege, on a level with those who can always buy at par, and force themselves on the most prosperous banks ; and, as soon as they please, on the delay of six months, can retire with their share of the capital.

The plaintiffs asserted in the argument, that not only a privilege was intended, but that no loss should happen to them, except that which attends ordinary depositors. The assertion was made ; but how was it supported 1 To me it appears to have been wholly gratuitous. . The words of the charter give no intimation of such intent; nor has any ground been referred to, from which it can be implied.

It has been asserted, that the plaintiffs had not the right of voting in the corporate meetings, and that this was a diminution of a general and important privilege. For this remark, I discern no just foundation. If the plaintiffs were stockholders, they were voters, by the express provision of the charter.

A more serious objection has been made. It has been insisted, that the defendants’ construction is impracticable ; that it renders necessary the winding up of the concerns of the bank, on every notice to withdraw a share. The remark is founded on the principle, that the value of a share can in no other manner be ascertained.

That the legislature viewed the subject in a different light, is unquestionable. They have provided, that such part of the profits of the bank as the directors may judge proper, shall be divided semiannually. By profits is intended the acquisitions of the bank beyond the nominal capital. The condition of the bank must be ascertained, or how can the profits be known ? But the means of ascertainment, for this ordinary six months’ operation, are precisely those, and no other, that the directors have, in determining the value of a share. On the point in question, a defect has arisen in the omission to distinguish between a mathematical and a moral certainty. The semiannual profits to the stockholders, as a general truth, cannot be ascertained with mathematical precision ; nor is it expected, But the means of moral certainty are possessed ; the principle by which most of the concerns in human life, are regulated 5 and the value of a shai’e may be estimated as nearly as other probabilities are, on- which men act with a conciousness of safety.

On the whole, I entertain no doubt that the plaintiffs are stoc]i|10](jerS) an(j onerated with the responsibilities of such; nor can J consider them as creditors, unless by the indulgence of a latitude of construction, which more resembles legislation than judicial decision.

The shares of the plaintiffs may be withdrawn, if they exist. But the capital of the corporation is bound to creditors, and if the debts against it surmount Rhe capital, there are virtually no shares. The capital has perished, and the shares with it.

On the clearest principles of natural justice, the case demands this construction. It is in analogy with the maxim of the common law — Qui sentit commodum, sentiré debet et onus. To the favoured stockholders no injustice is done, who, in the day of the bank’s prosperity, received profits, perhaps great profits, on their investments. On the'other hand, the justice due to the creditors of’the bank, imperiously requires it. They trusted the capital of the bank ; that capital, which the plaintiffs with others put forward as an inducement to the trust. That the plaintiffs, under such circumstances, should be permitted to withdraw the value of their shares, and thus deepen the loss of the creditors, is too inequitable to justify the belief, that such could have been the legislative intent.

2. I come now to the question, whether the plaintiffs were part of the corporation or body politic, and subject to its debts.

They were stockholders; and, by a clear consequence, it would seem to follow, that they were a part of the corporation. An incorporation, generally speaking, is instituted for, and comprises, those who are owners of the capital, for the benefit of which the body politic was created. It is said, by the plaintiffs, that the legislature has limited the incorporation to the five thousand shares of transferable stock, with which the bank was to commence its operations. On this subject, I do not question the legal omnipotence of the legislature ; but it may be reasonably demanded, that the supposed limitation, so much at war, as it is, with all observation and experience, should be clearly established. The charter, in its 1st section, provides, that “ the capital stock shall be divided into shares of one hundred dollars each, which shall be transferable, &c. and the subscribers to the same &c. shall be and are hereby constituted a body politic and corporate and by the 3rd section, the capital stock is to consist of five thousand shares. By the letter of the act, thus far, the corporation appears to be limited to this original transferable stock ; but in my opinion, it is much too narrow an exposition of the charter. The spirit and intent of the law, taking into view all its provisions, is widely different. It was undoubtedly intended, at all times, to cover the whole capital. The reason of the case shows it. At its commencement, the bank was made to consist of a capital of five thousand transferable shares ; and referring to these, the corporation expressly covered them. But it was on the common principle, that the subscribers to the capital, and stockholders, should constitute the persons incorporated. By a subsequent provision of the law, twenty-five hundred transferable shares might be added. Was it the intent of the charter, that the owners of these shares should be excluded from the incorporation ? 1 cannot believe it. They are within the same reason as the first subscribers ; and they equally need the advantage of being a part of the body politic, and aiding in the superintendence of their own property. The state is, likewise, authorized, in a certain event, to appoint directors ; but are they thus to manage the concerns of the bank, while they are no part of the corporation ? The construction for which the plaintiffs contend, in my opinion, is obnoxious to the implied censure of the maxim, Qui hceret in litera, hceret in cortice.

But even the letter of the charter, when the whole of it is surveyed, has been misapprehended ; for by the 2nd article of the 2nd section, the point in question is settled. “ All stockholders shall be entitled to votethat is, every stockholder is a member of the corporation, and may exercise this act of a corporator.

To obviate this, it was said, that no transfer shall be allowed of any share, until the expiration of six months from the time of subscription, and therefore, that the power of voting was limited to transferable stock. By no means. We discern no relation between the premises and the inference. Besides, a suspension of the right of transfer, or a prohibition of it, or even a suspension of the right of voting, for a limited period, are not incompatible with a right of membership in a corporation. On the contrary, they presuppose it.

In conclusion, I entertain no doubt, that by their subscription, the plaintiffs became stockholders in the Eagle Bank, and a part of the body politic or corporation. Of consequence, I am of opinion, that judgment must be rendered for the defendants.

Bissbll’ v,as ^16 samc opinion, Peters, J. being interested in the event of the suit, and Daggett and Williams, Js., having been of counsel in the cause, gave no opinion.

Judgment to be for defendants,

(a)

By an act of the General Assembly, passed May session, 1829, it was provided, “That in all suits in law or chancery, depending in the Supreme Court of Errors in this state, where any three of the Judges of said Court are, or shall be, by reason of interest or otherwise, legally disqualified from acting or sitting in judgment, the other two Judges of said Court shall constitute a quorum, and shall be empowered to hear and determine said suits, and render judgment therein,”