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still there must be a loss of interest on the amount of coin in actual cir-` culation. And so in a bank which maintains specie payments, there must be an offset for the coin necessarily kept on hand to meet demands for specie. But a bank in a state of suspension declares that it has no such offset to offer; and the suspension itself releases them from the necessity of holding such unproductive capital.
It would seem demonstrated, then, that the great end and purpose,' contemplated by the public in granting a bank charter, is the attainment of a sound, convertible bank-note currency; and that to create and preserve such a currency is the great public trust which the bank has undertaken to furnish as a consideration for the grant. What then is the chief, in fact, the only means of keeping such a currency sound? It is answered on every side, immediate convertibility into coin. This presents the only test of soundness; the only check to over issues; and while it continues to be applied, a bank-note currency so entirely satisfies the public demands that it displaces every other; and all specie of the country becomes either absorbed by the banks, or, if they are tempted to over issues, it is driven from the market of the country.
When the banks, therefore, suspend payment in specie, they voluntarily put aside the only means of preserving the very currency which they undertook to keep sound; and they compel the public, from the necessity of the case, to receive and circulate the currency which they have thus impaired. If they have any coin on hand, and refuse to pay it, they refuse to apply the very remedy needed; for, by paying coin they would at once apply two means of cure: they would thereby withdraw some of the redundant paper, and at the same time supply the demand for coin. Indeed, it is affirmed by very competent judges that the second suspension in Charleston could easily have been prevented by the banks paying out freely from the coin which they then had on hand. The actual demand was so small that it could easily have been met. But the refusal to pay, of itself, created a factitious demand by impairing confidence and deranging anew the whole course of trade.
This is not the place to enlarge upon the evils which a suspension of specie payments inflicts upon the country. The experience of the last six years has written these evils in characters too deep to be easily forgotten; and it is only necessary to ask the questions, whether a suspension of specie payments does not entirely pervert, or destroy, the end which the State contemplated in creating a bank of issues? and whether the failure to preserve a sound currency is not a breach of the trust upon which the bank was created? There can be but one answer to these questions.
The bank, then, by a suspension of specie payments, is shown to have failed in all the essential ends for which it was created. It has perverted
and abused the power to discount; it has failed to perform the trust of furnishing a place of deposit for the moneys of the country; and instead of a sound convertible currency, it has visited the community with all the evils of an irredeemable paper currency. It has, in fact, plunged the country back into the very evils, from which it was intended that the banks should relieve them.
4. The last of the four propositions which I proposed to establish in the argument of the main question in this case, follows, as a necessary consequence of the delinquency, which has thus been made out. The charter of incorporation has become forfeited; the tacit condition is broken; and the State, by the law of the land, may now resume her grant under a judicial judgment upon this scire facias.
Objections.-1. But it is objected that the charter in express terms has placed the notes of the bank upon the same footing with those of individuals; and, therefore, that no other remedies can be used against the bank, but those which the law allows against individuals.
This objection rests upon a fallacy which confounds the State remedy with the individual remedy. The clause of the charter which is referred to merely contemplated the liability of the bank to individuals. At the date of this charter the law was settled that a corporation must contract under seal; and when the charter allowed the corporation to contract by bills, under the hands of its officers, it created a new kind of obligation, the character of which it became necessary to define. The clause which created this new species of obligation, is the one now under consideration, and it merely declares, that under such an obligation, the bank should be liable in the same manner as an individual upon a note of hand.
It would be contrary, then, to every rule of sound construction to imply that such an enactment thus made was intended to deprive the State of a great political power; nay, more, to renounce a paramount public duty. The contract between the State and the corporators in the charter, is a totally different contract from any which is formed afterwards between the corporation and strangers. The remedies for their breach are altogether different. The charter does not attempt to prescribe the public remedy. It leaves that to the common law. It did not need to be prescribed, as by the very words of the law the charter is held upon a tacit, not an expressed condition.
In fact, it would amount to a tyranny intolerable, under our institutions, for the State to create great moneyed corporations, and surrender its governing and controlling power over them. Under the decisions of the Supreme Court, upon the Constitution of the United States, a charter cannot be annulled otherwise than by judicial authority, enforcing this tacit condition of forfeiture. If the General Assembly, then, should, by construction, be held to have surrendered this right,
the individual is left single-handed to cope with a great moneyed power, which must necessarily overwhelm him.
Besides, it may well be doubted whether, by any law, the General Assembly could surrender this right of government and control the legitimate functions of those who might succeed them in office. But, in any event, it is clearly the duty of the State which creates such an institution to hold it accountable and see that it discharges its duty to the public. Such was Mr. Burke's opinion in his speech on the East India bill as to the duty of the British Parliament, and the duty of our General Assembly is rendered stronger by the paramount intangibility secured to charters by the Supreme Court of the United States.
These views furnish an answer to the case from Alabama of The State v. The Tombeckbee Bank, 2 Stewart's Rep. 30, which will be relied on upon the other side so far as it has any bearing on this case; for although the circuit judge has laid much stress upon it, yet upon examination it will be found that for the purposes of an authority a clause of the Constitution of Alabama subjects it to a principle which entirely separates it from the case now before this court, and as an obiter dictum it is based entirely upon the three cases in 6 Cowen's Reports, 196, 211. 217, which have already been cited, and which are very erroneously supposed to decide the point.
There is another fallacy pervading this reasoning which confounds together the remedies against individuals and corporations. It consists in overlooking the consequences arising from that rule of the law which declares that corporations can exercise no power but such as is actually granted by the charter. 4 Wheat. 636; 2 Cowen, 711. An individual may issue as many notes as he pleases, without any grant from the State; but a corporation, without such grant, can issue none. The individual, therefore, is under no liability for his exercise of the right; whilst the corporation, on the contrary, is fully responsible. By reversing the picture, the differences are made yet more obvious. As regards the right of the individual to issue notes, the State may restrict or take it away, at any time, by a simple enactment; but when once the right has been granted to a corporation, by a charter, it cannot be divested by any legislation, and no control remains to the State but the exercise of its judicial power on a question of forfeiture.
2. It is further objected, that the bank is authorized by its charter to issue notes to three times the amount of its capital; and, consequently, cannot be subjected to a forfeiture for suspending, if its issues be within that limit. This objection is founded upon a mistaken view of the object of the clause. A bank, alone, of all corporations, has authority to create debts without any definite object. A railroad or a bridge company could only borrow money to be applied to the purposes of their institution; and those purposes would necessarily limit the extent of such
loans. But from the nature of a bank, there is no limitation of this sort; and nothing short of a limitation in the charter would restrain a bank from contracting debts or making issues to any extent, however large. It was indispensably necessary, therefore, to prescribe a limit in the charter; and it accordingly does provide that the total amount of all the debts (not issues alone) should not exceed three times the capital. By what process of reasoning can it be maintained, however, that within this limitation the bank is released from the obligation to preserve its issues sound? Is it contended that the State designed to remove all the checks which prudence might suggest, and let the bank run wild within this limitation? For it must be admitted, on the other side, that if this clause can bear the construction which is contended for, it would sustain the bank in any course of management within the limitation, however wild and speculative; and thus a measure of security and precaution would be converted into a license for the wildest extravagance. Upon every just principle of construction, the clause must be regarded as analogous to those laws which subject the accounts of certain public officers to a scrutiny, merely, as an additional security to the public. The sureties of such officers have again and again endeavored to excuse their liability, on the ground that the accounts had not been examined as the law provided; but the courts have as uniformly held that a mere precaution, prescribed for the security of the public,· should not be construed to affect any other right which the public had. United States v. Kirkpatrick, 9 Wheat. 720.
In the nature of things, one limitation already existed to restrain the over issues of a bank. It was in that paramount law of the Constitution which makes every obligation payable in gold and silver. To this was added, by the charter, the limitation of the amount of indebtedness. The General Assembly may be presumed to have said to the bank: Though you pay coin, as the law requires, you shall not exceed three times your capital; to that amount you may go, but take care that even within this amount you preserve the currency sound. If you fail to do so, you will become a public nuisance, and we must abate you.
In proof that this is the correct view of the subject, stands the fact that the amount of the indebtedness of a bank has nothing to do with the soundness of its currency. For a bank with a very small circulation may be utterly worthless, while on the other hand a bank with a very large issue might, for the whole amount, have in its vaults dollar for dollar. Take the case of a bank with $100,000 of issues and a capital of a million of Mississippi or Ocmulgee stock, or any other unavailable assets; and suppose, on the other side, a bank with a million of issues and a million of dollars in its vaults. The safety of a bank does not depend upon the indebtedness, but upon the relative proportion between its
debts and available assets; and it is the keeping these proportions true which constitutes prudence in their management.
3. Certain cases will be cited from 6 Cowen, 196, 211, and 217, in support of the positions relied on upon the other side. These cases all arose upon certain statutes of New York, and when examined, will be found to stand entirely clear of the propositions involved in the present case. They belong to that class of cases where a special remedy has been provided by the charter, for the particular case; and that remedy, it was held, must be strictly followed.
But they have no relation to the common law remedy, where it stands unimpaired by legislation; and, indeed, the opinion of Mr. Justice Woodworth implies, that but for the protection which the statute afforded, the forfeiture at common law must have ensued. 2 Cowen, 215, 216. In fact, these cases give the only just idea which can be applied to a suspension per se, as it has been termed: they treat it as perfect slumber of the bank; an entire suspension of all its functions. So that when it ceases to discharge its duty, it must cease also to make profits, or to do business for its stockholders.
The case of Alberti v. The Bank of the United States, in Philadelphia, of which a report has appeared in the newspapers, is the only case in which a distinct declaration is made, as it certainly was made by the judge, who delivered the opinion of the court in that case, that a suspension is not a cause of forfeiture at the common law. But this opinion was not necessary to the judgment in the case, inasmuch as it went off upon another ground. Still, however, the point was argued, and an opinion expressed; and as far as that goes, it is against the action in this case. But we apprehend, that Pennsylvania is not the region from which this court will introduce new law as to banks, either for the use or the instruction of South Carolina.
The stupendous frauds which have been practiced in that region, and that most disastrous of all bank failures, the failure of the Bank of the United States, have there shaken loose the moorings of public virtue. We may set off with confidence against this case the honest and straightforward judgment and reasoning of the court of Indiana in the case of The State v. The State Bank, in 1 Blackford's Reports, 267, in which alone, of all the cases, a judgment of the court is given directly upon the point of suspension.
The result of all these cases is to leave the court free to take such course as its own judgment may dictate, unfettered by any direct authority upon the point. The issue is fairly joined between the parties, and it remains for the court to determine whether the stern morality of the common law shall form the standard of commercial probity with us, or whether the failure to comply with obligations shall be decked with new names and established as the fashion of the day in this State also.