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law, which declares that the traverse is bad if the inducement be in the nature of confession and avoidance. Stephen, 185.
But let us consider whether the inducement is substantially any answer to the declaration, even if the defendants be allowed to waive the form in which they have chosen to present it. Surely it cannot be gravely contended that because the banks elsewhere suspended specie payments that furnishes a justification for suspensions here. If the plea had averred positively, what it avers arguendo, that it became impossible to pay, then an inquiry might have been instituted as to such impossibility by joining issue upon it as a fact.
The second matter of excuse urged by the inducement is that gold and silver became so much appreciated in relation to paper that it could not be paid without ruinous exactions upon the debtors of the bank. If this be urged as a legal defense it would change the whole character of courts of justice. How, as a matter of law, is it to be ascertained whether gold and silver had appreciated, when they are themselves the only measures of value. In fact, the question as to this appreciation involves the whole political question as to suspensions and will be considered when the main question is discussed. And in what manner would the court proceed to ascertain whether the exactions from the debtors of the bank are ruinous or not? Supposing that such an inquiry could lead to anything approximating legal certainty, can it be gravely urged that because the fulfilment of its contracts by the bank would lead to its injury, therefore it is excused from its performance? And yet that is the substance of this portion of the plea.
Take the next fact alleged in this plea, and let us ascertain how far it affords an answer to the declaration. It is said that the bank issued no more notes than it was allowed by its charter to issue, or than it was ordinarily prudent to be issued. If the bank issued no more notes thàn the charter allowed, then it is unnecessary to plead that fact at all as a defense, because the scire facias undertakes to prove that they violated their charter. But if it be intended to offer this allegation as a defense for their refusal to pay their deposits, or for their continuance to make profits and pay dividends while in a state of suspension, it is obvious that it cannot avail as a plea, as it leaves these material charges entirely unanswerable.
The next fact asserted in this plea is that neither the notes nor deposits in bank were lost, or depreciated, to the holders. This assertion alone, of all the others, the counsel for the State deemed of any importance; and but for the admission of its truth, which would be implied by a demurrer, they would have filed a general demurrer to the whole plea. But not being willing to concede so important a fact, which they could readily disprove, they have availed themselves of the departure of the defendants from technical rules, to bring them back to the real issue.
For it is laid down as one of the leading rules in relation to special traverses that the absque hoc must be a denial of the fact alleged in the opposite pleading. Stephen, 184, 187. And if it be taken upon matter of law, it may be passed by, and a new traverse taken upon the inducement. Stephen, 191, 188. Now the absque hoc of this plea traverses no fact at all; it says absque hoc that the said suspensions are in violation of any rules, etc., in the charter, or to the perversion of the ends, etc., of the institution. This is a traverse purely of matter of law. It ought, in terms, to have denied the four special allegations of fact in the declaration; but instead of taking that course, it has undertaken to traverse the conclusion which the law would draw from those facts. The result is, that under the rule above cited the State is at liberty to pass by the traverse, and to take issue upon the inducement, or such part of it as is deemed material. This has been done by the replication to the fifth plea, and the defendants have demurred to that replication. If this demurrer be sustained, the court must then pronounce upon the legal efficacy of the plea itself; and, if overruled, as the counsel for the State insist that it must be, then there is added to the allegations in the declaration an admission, on the record, that the notes and deposits of the bank were depreciated or lost in the hands of the holders.
The State has, therefore, by its pleading secured, at all events, the trial of the main question, and what has been gained, in addition thereto, by the failure of the defendants' pleading, the counsel for the State freely waive, conceiving that they will better discharge their duty to the country by fairly trying the main issue, rather than by insisting upon any technical advantage in this particular case. We are, therefore, brought to consider the main question, without being trammelled in any degree by the pleadings.
I proceed, then, to the great question in this case, whether an incorporated bank forfeits its charter by a suspension of specie payments; and, in arguing this question, I propose to establish, consecutively, the following propositions:
1. That to every charter of incorporation there is annexed a tacit condition that such charter becomes forfeited whenever the corporation ceases to perform the trusts for which it was created, or abuses the powers or privileges conferred upon it.
2. That banking corporations, as they exist in this country, embrace three essential elements, constituting the primary objects of their formation: first, discounting bills and making loans; second, receiving and paying out deposits; and, third, issuing notes in the nature of currency.
3. That a suspension of specie payments defeats two of the primary objects or ends for which banks are created, and indirectly perverts the third; that it destroys the character of a bank as an institution for
receiving and paying deposits; removes the only barrier against abuses of currency; imposes upon the community an unsound, depreciated, and inconvertible paper medium, and re-acts upon the discounts of the bank by compelling them to be made in the same depreciated medium.
4. That the primary objects or ends for which banks were chartered being thus defeated, and the franchises and powers granted being thus misused or abused, the condition implied for the protection of the public is broken, and the charter becomes forfeited.
1. But for the strenuous effort made on the other side to establish that a bank charter is no franchise, I should have deemed it unnecessary to do more than state the proposition from which our argument starts, that corporate existence is itself a franchise, and that every charter of incorporation, whether of a banking company or any other association, is the grant of a franchise, and subject to the condition implied in all such grants. We do not mean by a franchise, neither does the law intend by the term, merely that class of franchises which are placed in the text-books in the same category with waifs, wrecks, or even escheats; but we include every grant from the government, through any of its branches, of a privilege which gives to one citizen, or one set of citizens, rights or immunities which vary their position from that of the general mass. Our position is, that government is instituted for the good of the public, and is, therefore, a public trust; that a distinction created between the citizens can only be legitimately made when its object is the public benefit; and that a grant, therefore, which creates such distinction must assume that the grantee is to furnish to the public the consideration in some form. The grant of a charter of incorporation to certain individuals has, usually, the effect of exempting them personally from those actions to which, without such charter, they would have been liable. They cannot be held to bail; their bodies cannot be arrested; nor can their estates be charged in execution. They have a perpetual existence, under their newly created form, and may sue and be sued, without any of the embarrassments to which their unchartered neighbors are exposed. They thus have certain privileges and exemptions which are derived from their charter; and this is precisely what, according to our view of the matter, the law means by a franchise or privilege.
This view of the subject is not only sustained by elementary writers, 2 Bl. Com. 37, 3 Kent's Com. 459, but it has the support of the Supreme Court of the United States in the celebrated case of Dartmouth College v. Woodward, 4 Wheat. 657. In that case a charter of incorporation is expressly declared to be a franchise, and is put upon the footing of a contract executed between the public and the corporators, and protected as a contract by the Constitution of the United States. In this contract the public are one of the parties; and the consideration to be furnished
by the corporation is, therefore, to the public. It is generally some great public advantage which it is proposed to afford; such as the advantages to traveling and intercommunication offered by a railroad or bridge; or to education by a college; or to commerce and currency by a bank. The corporation undertakes to afford to the public these advantages as the consideration for the privilege of being made a corporation, and consequently becomes, as it were, a trustee of this consideration for the use of the public. Hence, in Comyn's Digest, Franchises, G. 3, it is distinctly called a trust; and Lord Holt and Mr. Justice Buller placed corporations upon the same footing in the cases hereafter to be cited.
It follows, from the law in relation to all franchises, that if the corporation abuse this trust, or fail to perform the objects for which it was created, its franchise of being a corporation may be forfeited. The consideration has failed, or the trustee has abused his trust, and so the contract may be rescinded, and the privilege which the public had granted may be resumed.
This proposition has been asserted, in terms, by every elementary writer who treats of the subject; and it has the sanction of every court before which it has been brought in judgment. Com. Dig. Franchises, G. 3. Bac. Abr. Corporations, G. 1 Bl. Com. 485. 2 Kyd on Corp. 474, 512.
In the courts it was established by the great case of the city of London, which, although open to condemnation on other accounts, is good authority on this-the more especially as it was confirmed after the Revolution by the case of Sir James Smith, 8 Cobbett's State Trials, 1343, in note-and in Rex v. Amery, 2 T. R. 515; in Rex v. Pasmore, 3 T. R. 199; and in Colchester v. Seaber, 3 Burr. 1866.
So, too, the authorities in the United States are equally conclusive. In the Supreme Court of the United States, in the case of Terrett v. Taylor, 9 Cranch, 43, it is distinctly laid down that a private corporation created by the Legislature may lose its franchises by a misuser or nonuser of them; and that they may be resumed by the government under a judicial judgment to enforce the forfeiture. This, says Mr. Justice Story, is the common law of the land, and is a tacit condition annexed to the creation of every such corporation. This doctrine is repeated in the same court in the case of Mumma v. The Potomac Company, 8 Peters, 281.
In our own State the same doctrine is announced in White v. City Council, 2 Hill, 576. In New York it has been repeatedly asserted: Slee v. Bloom, 5 Johns. Ch. R 380, 19 Johns. 456; The People v. Bank of Niagara, 6 Cowen, 209; and in two other cases in the same book, pp. 216, 219. In Massachusetts it is affirmed in two cases in 5 Mass. Rep. 230 and 420. In Vermont, in The People v. The Society for Propagating
the Gospel, 1 Paine C. C. Rep. 656. In Maryland in the Canal Company v. Railroad Company, 4 Gill. & Johns. 122. And in Indiana, in the case . of the State v. The State Bank, 1 Blackford's Rep. 267..
It is then clear that a charter of incorporation may be forfeited whenever the corporation abuses the trust upon which it was created, or the powers and privileges with which it is invested, or fails to accomplish the ends and purposes for which the public granted the franchise of being a corporation.
The question then which we are discussing becomes changed in form and resolves itself into an inquiry, whether the Bank of South Carolina has thus abused its powers, or failed to fulfil the ends or purposes for which it was created.
2. And this inquiry leads us directly to ascertain in the next place what are the ends or purposes contemplated and intended by the grant of a bank charter.
These may be ascertained in this case with sufficient distinctness from the various clauses of the charter. But it is not at all necessary that the charter should say a word on the subject. Usage and common understanding ascertain these points with a reasonable certainty. Thus in the grant of the charter of a ferry, or bridge, or church, no one would be at a loss to declare what public objects were contemplated; and, with equal certainty, a mere charter for a bank would imply the objects intended by the grant.
In the work of Angel & Ames on Corporations, this principle is confirmed at page 59, 145. And in the same work at page 132, the ends or purposes implied in a bank charter are stated. But in the case of the New York Firemen Insurance Company v. Ely, 2 Cowen, 711, these ends are more authoritatively declared. In that case it is expressly declared that a grant of banking powers implies that the bank is to exercise three functions or powers: 1, to discount notes and bills; 2, to receive deposits; and 3, to issue bank notes in the nature of currency.
Upon examining the charter of this bank it will be found in the various clauses that all three of these powers were distinctly expected by both parties to be exercised by the bank.
They are all of great importance to society, and are absolutely necessary to a commercial community; and the fact that no bank has ever existed in this country without exercising them all, would seem to be conclusive in establishing the intention of the parties, and the usual meaning of a bank. No institution in this country which should merely discount paper should ever be called a bank; neither would such a term be applied to a mere place of deposit. In fact, a deposit bank merely would be an anomalous institution, in which expense must be voluntarily incurred for the benefit of the public without any compensation; a thing unknown in the present circumstances of man