text:
Averill v. Smith/Opinion of the Court

'In order to maintain such an action (trespass) there must have been an actual seizure of plaintiff's goods.'

The goods were simply examined and returned. In the suit at bar they were seized, carried away, and never returned.

The property, when the collector seized it, was put into a warehouse not owned by himself. The marshal attached the property, and gave the proper notices; but he did not remove the property from the warehouse where it was deposited by the collector's order; and, so far as appears from the special verdict, he did not in any way interfere with the possession of it by the warehouseman, as the bailee of the collector.

Assume, however, for the purposes of the argument, that the return of the marshal is conclusive, and that either by the indorsement and delivery to him of the warehouse receipt for the property, or otherwise, he had properly executed his process, and afterwards held the property under legal arrest until it was discharged by the judgment of the District Court.

The question then to be determined is, whether the certificate of reasonable cause, granted by the District Court, is a good defence to this action; as the property seized was never returned or offered to be returned to the owner.

In a case like that complained of here, probable and reasonable cause is confessedly no defence, except where some statute creates and defines the exemption from damages.

In this case the exemption is claimed under the first section of the act of the 24th of February, 1807, and the eighty-ninth section of the Customs Act of 1799. Now the case of Hoit v. Hook, decided in the Supreme Judicial Court of Massachusetts, by Chief Justice Parker, and Justices Thatcher, Putnam, and Wild, in 1817, seems in point.

The property in that case (certain cattle) had been seized and libelled and then sold, pendente lite, under the order of the District Court of the United States. After it had been sold the cause was tried, and Hoit, the plaintiff, as the then claimant, had a verdict. The district judge thereupon decreed that the property was not liable to forfeiture; that there was reasonable cause for the seizure; that $384.43 for the expenses which had been incurred for the custody and sustenance of the cattle should be deducted from the proceeds of sale; and that the residue, $151.57, should be paid to the claimant.

A verdict having been taken for the plaintiff in the State court, subject to the opinion of that court, upon the facts stated, the question whether the certificate and decree of the District Court were a defence was argued, and the court decided that the certificate of reasonable cause could operate as a bar to an action only when the property was restored, according to the proviso in the statutes above referred to, and ordered judgment for the plaintiff on the verdict.

This case was decided by judges of the highest character for learning and ability.

In the case before us all will agree that it was not the duty of the marshal to make return of the property to the claimant; and that the District Court could only require him to release the property from the arrest. But if it were the duty of the marshal to make the return, and the court had power to require him to perform such duty, it would nevertheless by very doubtful whether the marshal's neglect of duty would not prevent the statute from operating as a protection to the defendant. The return of the property forthwith after judgment is a condition precedent to the exemption from liability declared by the statute; and it is clear that it was the intention of Congress that a failure to make such return should fix the liability of the seizing officer. If the marshal neglected his duty to the injury of the seizing officer, the latter must seek his remedy against the marshal; and if any application to the District Court was necessary to secure such return, it was the defendant's duty, and not that of the plaintiff, to take care that such application was made, in order to secure the protection of the statute.

But the marshal had no such duty imposed upon him in this case. The defendant of course was liable to the warehouseman for storage, for which the latter could probably retain the possession of the property-at least as against the defendant-and perhaps as against the plaintiff, and against the marshal after the order or judgment of the District Court that the property should be discharged, and that there was reasonable cause for the seizure.

It is enough to require a citizen, when his goods have been seized and not forfeited, to come into court and establish his title by judgment of the court; and when this has been done, and the party who has committed the admitted and gross wrong is protected by what is called a 'certificate of probable cause,' it is little enough to require him to return the goods, or procure their return, and especially where they remain under his own personal control, as it can hardly be doubted that they did in this case.

The judgment upon the verdict in favor of the plaintiff was right, and the judgment should be affirmed.

Mr. Justice CLIFFORD delivered the opinion of the court.

Judgments rendered in the Circuit Court, in any civil action against a collector or other officer of the revenue, for any act done by him in the performance of his official duty, or for the recovery of any money exacted by or paid to him, which shall have been paid into the treasury, may, at the instance of either party, be re-examined and reversed or affirmed in this court upon writ of error, without regard to the sum or value in controversy in such action.

Certain personal property belonging to the plaintiff, consisting of four hundred and three gallons of whisky and the barrels in which it was contained were seized by the defendant, as the collector of internal revenue for the 27th district of the State, and it appears that such proceedings were had that the district attorney for the district filed an information against the same, in behalf of the United States, founded upon that seizure, in which he alleged that the property was subject to certain duties and taxes which had been duly imposed upon the same, and that the property was found by the defendant, as such collector, in the possession and custody, and within the control of the plaintiff, for the purpose of being sold by him in fraud of the internal revenue laws, and with the design to avoid the payment of the duties and taxes so imposed. Process in due form was issued and the marshal made return upon the same that he had seized and attached the property, and cited all persons to appear and assert their claims, as the process commanded. Subsequently the plaintiff appeared and made claim that he was the true bon a fide owner of the property, and filed a claim and answer denying all the material allegations of the information, to which the district attorney replied tendering an issue, upon which the parties went to trial and the jury found that the property did not become forfeited as alleged by the district attorney. Pursuant to the verdict the court rendered judgment in favor of the claimant, and that the property be discharged, and the court also adjudged and certified that there was probable cause for the seizure of the property. Judgment was rendered for the claimant in the District Court on the 21st of August, 1868, and the plaintiff, on the 25th of January of the next year, commenced the present suit, which is an action of trespass, against the defendant, in the State court, wherein the plaintiff alleged that the defendant, on the 4th of February, 1868, being the day the defendant seized the property described in the information, with force and arms, at the place therein named, seized, took, and carried away the described chattels, of the value therein alleged, and that he converted the same to his own use, and still unlawfully detains the same from the plaintiff. Due application was made by the defendant for the removal of the cause from the State court into the Circuit Court, and it was accordingly removed as prayed by the defendant, and he appeared and pleaded the general issue, that he is not guilty in manner and form as the plaintiff has alleged in his complaint. Issue having been joined the cause came to trial, and the jury, under the instructions of the court, returned a verdict for the plaintiff in the sum of $1014.46, 'subject to the opinion of the court upon the questions of law arising upon the proof of a certificate of probable cause, and upon the fact of the non-return of the property.' Considerable delay ensued, but the case was finally turned into a special verdict, and the court rendered judgment in favor of the plaintiff for the sum found by the jury. Whereupon the defendant sued out the present writ of error and removed the cause into this court.

Trespass certainly will not lie in such a case for the act of seizure, unless it appears that the act was tortious or unauthorized, neither of which is proved or can properly be presumed in the present case, as the act of seizure was made by the party as the collector of the revenue and in a case where it was his duty to make it if he really believed, what he alleged, that the property was forfeited to the United States. Attempt to sell such property to avoid the payment of the internal revenue duties imposed thereon is a legal cause of forfeiture, and if the defendant, as such collector, had good cause to believe and did believe that the property described in the information was forfeited to the United States by any such attempt of the owner, it was his duty to make the seizure, and inasmuch as the District Court, having jurisdiction of the subject-matter, have adjudged and certified that there was probable cause for the seizure, the court is of the opinion that trespass will not lie for that act. Nothing of the kind is pretended, even by the plaintiff, but he insists that the decree discharging the property from the attachment made by the marshal, under the process issued by the District Court in pursuance of the prayer contained in the information, made it the duty of the defendant to return the property to him as the lawful claimant, and that inasmuch as the defendant neglected to return the property, he became a trespasser ab initio; but the court, in view of the circumstances, is not able to concur in that proposition, for several reasons: (1.) Because it is settled law, and always has been, since the decision in the case of Vaux v. Newman, that a mere nonfeasance does not amount to such an abuse of authority as will render the party a trespasser ab initio. (2.) Because the District Court, which had jurisdiction of the subject-matter, adjudged and certified that there was probable cause for the seizure of the property. (3.) Because the property was taken out of the possession of the defendant by virtue of the judicial process issued by the District Court, pursuant to the prayer contained in the information, and remained, throughout the litigation, in the custody of the marshal as the officer of the court which issued the process. (4.) Because the property under such circumstances, though in the custody of the marshal for safekeeping, is, in contemplation of law, in the possession of the court for adjudication. (5.) Because the plaintiff did not obtain any order from the District Court for a return of the property nor make any demand for the same either of the marshal or of the defendant.

1. Extended argument to show that a mere omission of duty, or neglect to do what another has a right to exact, or any other mere nonfeasance, will not amount to such an abuse of authority as will render the party a trespasser ab initio, is quite unnecessary, as the proposition is not controverted, nor can it be, as it is supported by the highest judicial authority. It was resolved in the leading case that not doing a thing cannot make a party a trespasser ab initio, because not doing is no trespass, and, therefore, if the lessor distrains for his rent and thereupon the lessee tenders him the rent and arrears, and requires his beasts again, and the lessor will not deliver them, this not doing cannot make him a trespasser, and that rule was affirmed in the case of West v. Nibbs, by the whole court. When an act is legally done, said Spencer, C. J., it cannot be made illegal ab initio, unless by some positive act incompatible with the exercise of the legal right to do the first act.

2. Proof of probable cause, if shown by the certificate of the District Court which rendered the decree discharging the property, is a good defence to an action of trespass brought by the claimant against the collector who made the executive seizure, provided it appears that judicial proceedings were instituted and that the charge against the property was prosecuted to a final judicial determination. Where the respondent prevails in such an information, the court, says Mr. Parsons, give to the prosecuting or seizing officers a certificate of probable cause, if in their judgment he had such cause for the seizure, and that, he says, protects the officer who made the seizure from prosecution for making the same; and he adds, that the final decree of the court in a case of forfeiture regularly before the court is conclusive. In cases of acquittal in revenue instance causes, says Mr. Dunlap, the decree is for the restitution of the property in the custody of the court, and a warrant of delivery is immediately issued, but where there is reasonable cause of seizure the judge certifies that fact or causes an entry thereof to be made, which protects the seizing officer from any prosecution for the seizure. Probable cause, he says, means less than evidence which would justify a condemnation; and the same author says, if the court before whom the cause is tried shall cause a certificate or entry to be made that there appeared to be a reasonable cause of seizure, the seizing officer shall be protected from all costs, suits, and actions on account of the seizure and prosecution. Differences of opinion existed for a time as to the legal meaning of the term probable cause, but it is settled that it imports circumstances which warrant suspicion, and that a doubt respecting the true construction of the law is as reasonable a cause of seizure as a doubt respecting the fact.

Property seized under the internal revenue laws, when the same is attached by the marshal under judicial process, remains in his possession and is not in general delivered over to the collector, and in respect to all such property the rule is well established that it is in the custody of the law or of the court, and that it is held by the marshal as the officer of the court.

Goods of a maritime character seized under the principal collection act were at one time required to be put into the custody of the collector, and it is undoubtedly true that in respect to such goods the collector is responsible for the safe custody of the same to the same extent as the marshal is for such as remain in his possession and keeping, and the rule applied to each alike is that the keeper is responsible for any loss or injury which the goods sustain by his neglect or want of due care.

Owners of property seized cannot maintain an action for the property pending the proceeding in rem to enforce the forfeiture, as it cannot be determined before the final decree, whether the taking be rightful or tortious. Consequently the pendency of the suit in rem would be a good plea in abatement, as was decided by this court more than half a century ago. Two other propositions were decided in that case which are of controlling importance in the present investigation: (1.) That the certificate that there was reasonable cause of seizure would be a good bar to an action commenced after the decree of condemnation. (2.) That the decree of acquittal, if accompanied by a denial of such a certificate, establishes the fact conclusively that the seizure was tortious and that the owner of the property is entitled to his damages for the injury.

Where the seizure is made in a case of capture jure belli it is conceded that these principles apply without qualification, but it is insisted that probable cause never furnishes a defence to an action for damages in the case of a municipal seizure, except in cases where some act of Congress authorizes the courts to give it that force and effect, and it must be admitted that such is the law as expounded by this court. Concede that, but it should be observed that this court in the very case in which that rule is established, refer to the 89th section of the principal collection act, and to the subsequent 'act respecting seizures,' as containing express provisions upon the subject, and the court decides that they show the clear opinion of Congress that the claimant in such a case shall not be entitled to costs, nor shall the person who made the seizure or the prosecution be liable to an action, suit, or judgment on account of such seizure, or prosecution. Appended to the section enacting such an exemption as exhibited in the first two acts is the following, to wit: 'Provided that the ship or vessel, goods, wares, or merchandise be, after judgment, forthwith returned to such claimant or claimants, his, her, or their agent or agents.' Taken literally, it is quite clear that the language in those provisos, respectively, would require what the defendant in a case like the present could not perform, as he could not compel the court to make an order for the return of the property, nor could he compel the marshal to do what it is insisted the language of the provisos require the defendant to do, but the proviso in the act last referred to is of a very different character, and reads as follows: 'Provided such property or articles as may be held in custody by the defendant, if any, be, after judgment, forthwith returned to the claimant or claimants, his, her, or their agent or agents.' Beyond all doubt the construction which this court put upon the provisos in the first two acts in the case referred to, was the same as the language employed by Congress in the third act imports, and it is believed that such is the construction which has always been given to those two provisos ever since they were enacted.

Imported goods when seized and subsequently attached by the marshal are sometimes deposited with the collector for safe custody, and in respect to such the rule would be a reasonable one which should require him to surrender the same to the owner as soon as the goods are acquitted, but it would be monstrous to deny the collector the benefit to which he would otherwise be entitled from the certificate of probable cause, for the reason that he did not return the property which was taken out of his possession by judicial process, and which the law requires the marshal to keep in his custody as the officer of the court having jurisdiction of the controversy.

Process in rem is founded on a right in the thing, and the object of the process is to obtain the thing itself or a satisfaction out of it, and the executive seizure is required to bring the property within the reach of judicial process and as affording some protection to the owners against the causeless interference of irresponsible persons with their property, but it is merely a preliminary requirement, as the judicial arrest must follow, and the law makes it the duty of the marshal to keep the property seized in such safe and secure manner as to protect it from injury while it is in his custody, so that if it be condemned or be restored to the owner its value to the parties may be unimpaired. Perishable property may be sold and the proceeds paid into the registry of the court, in which event the proceeds represent the property seized, but it must be obvious that the defendant in that state of the case could not return the proceeds, as money in the registry of the court can only be drawn out of the registry pursuant to the order of the court, signed by the judge and entered and certified of record by the clerk. Viewed in any light the better opinion is that it is the duty of the claimant to move the court for the necessary orders to cause the property or its proceeds to be returned to the rightful owner.

Reference is made to the case of Hoit v. Hook, as prescribing a different rule. Suffice it to say in respect to that case that it is one of an exceptional character, and one which is not very satisfactorily explained, but if it is understood as supporting the views of the plaintiff the court here cannot accept the conclusion as applied to the present case.

3. Sufficient proof was exhibited, of the most satisfactory character, showing that the property was attached by the marshal, and was by him taken out of the possession of the defendant, and that the defendant never afterwards obtained its possession, which is all that need be said on that subject, as it is quite clear that the defendant could not return property which was in the possession of an officer of the court.

4. Enough has already been remarked to show that the property was in the possession of the court for adjudication, and that it was the appropriate duty of the claimant to move the court that it be restored to the rightful owner.

5. Argument to support the fifth proposition is quite unnecessary, as the special verdict finds that the plaintiff never made claim of the defendant for the property except by bringing the action, which of itself is sufficient to show that the judgment should be reversed.

JUDGMENT REVERSED, and the cause remanded with directions to issue

A NEW VENIRE.

title: Averill v. Smith/Opinion of the Court


text: Talk:Averill v. Smith/Opinion of the Court

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text: Dictionary of National Biography, 1885-1900/Waldegrave, George Granville


text:
Bailey v. Hannibal and St. Joseph Railroad Company

ERROR to the Circuit Court for Missouri; the case being thus:

The Hannibal and St. Joseph Railroad, in Missouri, with an income of but $450,000, and having a capital stock of $3,000,000, a debt of $8,000,000 of 7 per cent. bonds, and an arrear in interest of $4,000,000-both bonds and interest-secured by mortgage on all the property of the company, found itself, A. D. 1862, in consequence of the then universal depression of values brought about by the rebellion, in such embarrassments that it could neither pay dividends on its stock nor interest on its debt; and as the State of Missouri had a lien of $3,000,000 upon it, which had precedence of every other claim, it became obvious that some vigorous measures of reorganization were necessary if anything was to be saved for either bond creditors or stockholders.

In this state of things, on the 15th of October, 1862, the company issued to the several holders of its bonds a circular entitled, 'A plan for extricating it from its present difficulties, and improving its securities.' In this plan the company proposed to these several bondholders that they should exchange their bonds in part for other bonds, having a longer time to run, and in part for preferred stock; 'the preferred stock to be 7 per cent., and not cumulative, but to share with the common stock any surplus which may be earned over and above 7 per cent., UPON BOTH, in any one year.'

Prior to November 24th, 1862, all the bondholders had come into this plan; their assent being signified by an agreement in these words annexed to the plan itself:

'We, the subscribers, owners of bonds issued by the Hannibal and St. Joseph Railroad Company, of the kinds and amounts set opposite our names, respectively, hereby agree to surrender the same and receive in exchange therefor new bonds and preferred stock, in accordance with the provisions of the plan for extricating the company from its present difficulties and improving its securities, dated 15th October, 1862, and hereunto annexed.'

On the same 24th of November, 1862, the board of directors of the road

'Voled, that Messrs. Bartlett, Thayer, and Hunnewell be, and they are hereby appointed a committee with power to carry out the intention of the circular of October 15th, 1862, entitled 'A plan for extricating it from its present difficulties and improving its securities,' and that they are authorized to make such expenditures therefor as to them may seem discreet.'

This committee, in discharge of the duties of their appointment, reported an 'indenture' to be executed by the company on the one hand, and the bondholders or the trustees of the mortgage on the other, which, after referring to the embarrassments of the company, went on to give effect to the plan; though no reference was anywhere made in the instrument to this agreement itself. The indenture contained this clause:

'And said corporation covenants and agrees that said preferred stock shall be entitled to a dividend of 7 per cent. from the net earnings of said road in each year, whenever a dividend of said net earnings shall be made, before any dividend shall be declared upon other unpreferred shares of said corporation, and to an equal dividend with said other shares in the net earnings of said corporation beyond SAID 7 per cent., but in no case to be entitled to an accumulated dividend (in case a dividend shall fail to be made in any one or more years, or, if made, be insufficient to pay said 7 per cent.) in any subsequent division of said net earnings, but shall be entitled only in that event to SAID 7 per cent., and to share in said surplus earnings as aforesaid.'

On the 1st April, 1863, this form of indenture being laid before the board of directors, was by it referred to a stockholders' meeting to be held on the 30th May, 1863. At this meeting the board of directors were

'Instructed to procure and adopt, on behalf of the corporation, such certificates in relation to the preferred stock, to be issued under said agreement, as may be necessary to carry the same into effect, and cause the same to be executed in behalf of this corporation in such manner as they may think best.'

Under this authority the indenture was accordingly executed by Mr. W. H. Swift and others, trustees for the bondholders, on the one part, and the company on the other; and the directors, on the 26th June, 1863, prepared and adopted a form of certificate thus:

NUMBER. [STATE OF MISSOURI.] SHARES.

Hannibal and St. Joseph Railroad Company.

PREFERRED STOCK. }

SHARES $100 EACH.}

SEVEN PER CENT.

Issued in adjustment of the bonds of said company,. . . and subject to the terms and conditions of an indenture between said corporation and W. H. Swift and others, trustees, dated April 1st, 1863, and with the rights set forth therein, and may be transferred upon the books of the company and new certificates issued, and may be used, with the bonds of said company bearing date April 1st, 1863, in the purchase of its lands, as provided in said indenture.

The Hannibal and St. Joseph Railroad Company hereby certifies that, in consideration of the surrender and placing in trust of bonds and coupons in pursuance of said indenture, ..... is entitled to ..... shares of the preferred stock of said corporation, and to receive all the net earnings of said company which may be divided pursuant to said indenture in each year, up to $7 per share, and to share in any surplus beyond $7 per share which may be divided upon the common stock.

WITNESS the seal of the corporation and the signatures of the transfer agent and of one of the directors, at Boston, Mass., the ... day of ....., A. D. 186....

Transfer Agent.

Certificates were made out accordingly in this form, and given to the bondholders, who received them without any expressed exception to their tenor.

In January, 1870, the company had so far retrieved its disasters as to declare a dividend of 7 per cent. on the preferred stock. Having yet a surplus it made a dividend of 3 1/2 per cent. of it to the common or unpreferred stock, to the exclusion of the preferred stock, and was about to make another dividend of 3 1/2 per cent. in the same way.

Hereupon one Bailey, owner of several shares of the preferred stock, filed a bill, annexing the indenture and form of certificate, but not the plan, as exhibits, to enjoin this further dividend on the unpreferred stock, and to have it appropriated to the preferred stock.

The defendants answered the bill, annexing the plan and form of certificate, but not the indenture, as exhibits, and contending that on a true construction of the documents in the case no such appropriation ought to be made; and on the hearing they introduced, against the objection of the plaintiff, the evidence of persons who had prepared the indenture, that it was drawn with the purpose of giving effect to the plan, and that from the commencement of the transaction to its conclusion parties concerned understood the transaction as they, the defendants, alleged it when rightly construed to be.

The court dismissed the bill and the complainant appealed.

Messrs. Glover and Shepley, for the appellant:

1. The evidence as to how parties other than Bailey understood the arrangement was so palpably improper that we spend no time in arguing the point that it was so.

2. The indenture is the contract, and the only contract in the case. All preceding suggestions and propositions were merged in this more solemn instrument. Now, the words 'said 7 per cent.' in it show that the meaning of the parties was that the holders of the preferred stock should equally share in any dividend which might be declared from the net earnings beyond 'the said 7 per cent.,' which by the terms of the indenture was first to be set apart for a dividend upon the preferred stock.

3. There is nothing in the concluding language of the certificate opposed to this idea. Contrariwise, that language accords with the idea. When, after speaking of the dividend of $7 per share to be applied as a dividend upon the preferred stock, the sentence continues 'and to share in any surplus beyond $7 per share,' it has reference to the surplus remaining after the $7 had been applied to the payment of a dividend of that amount on the preferred stock. At best the language is doubtful, and as the certificate on its face declares that it is issued 'subject to the terms and conditions of the indenture,' and 'with the rights therein set forth,' the doubt must be cleared up by the plain language of the solemn and fundamental instrument of the contract. Nay, if the concluding language of the certificate were opposed to Bailey's claim he would have a right to have the certificate reformed, according to the indenture to whose 'terms and conditions' it declares that it is issued. The indenture does not state that it is made in pursuance of execution of the plan, or even so much as refer to it.

The fact is that the defendants, to overturn our claim, have to reconstruct the whole contract. They have to add to the sentence a new phrase, containing a new idea, as thus:

'And to an equal dividend with said other shares in the net earnings of said corporation beyond said 7 per cent., after an equal dividend shall have been next declared upon the said unpreferred stock.'

Messrs. T. T. Gantt and J. Carr, contra:

There is a radical defect in the argument of the opposing counsel in supposing that the indenture is the fundamental contract. The plan, which was so specifically assented to by the bondholders as that their assent is on a paper appended to it, is the basis of everything. The indenture was undoubtedly prepared and executed to carry it out, and if giving rights varying from it, might be reformed by it. Now, by the plan, the 7 per cent. is to be 'not cumulative, but to share with the common stock any surplus which may be earned over and above 7 per cent. upon both in any one year.' This language is fatal to the complainant's case.

The word 'said,' which makes the complainant's strongest point, is exceedingly apt, even in carefully drawn documents, to be inadvertently repeated. In this case, unlike most cases, the inadvertence somewhat affects the meaning. But all the documents form part of one transaction, and of course are to be taken together. The indenture is to be read by the light of the plan which preceded and the certificate which followed it. The maxim of the law is, 'Ex antecedentibus et consequentibus optima fit interpretatio.' And when we look at the plan submitted, the circumstances under which the committee which drafted the indenture was appointed, the agreement with the bondholders which the committee was instructed to embody and carry out, the action of the directors upon the indenture, the reference of the question of its adoption to a stockholders' meeting, the guarded terms of the resolution then passed, and, finally, the definition unequivocally given, of the nature of the preferred stock by both the corporation and its bondholders, by the form of the certificate adopted, all doubt vanishes as to the construction which must be placed on all the documents.

To all this may be added, though it is unnecessary, the concurrent testimony of persons who prepared the indenture and other parties concerned in the matter; a sort of testimony not, we think, improper, and which, if received, is in its nature strong.

Mr. Justice CLIFFORD delivered the opinion of the court.


text: Talk:Bailey v. Hannibal and St. Joseph Railroad Company


text:
Bailey v. Hannibal and St. Joseph Railroad Company/Opinion of the Court

Certificates of stock, described in the bill of complaint as common or unpreferred stock, amounting to $3,000,000, were issued by the respondents, divided into shares of one hundred dollars each, which constituted their capital stock. Pecuniary obligations were contracted by the company in constructing the road, much beyond their means of payment, which consisted of three classes of bonds, issued by the company at different times, in aid of the construction and equipment of the road, and which were secured by three several mortgages, and were known as land bonds, convertible bonds, and second mortgage bonds. Embarrassment necessarily ensued, as the stock of the company had become of no value in the market, and as the respondents were unable to pay the interest on their bonds or to make any dividends, they issued to the holders of the bonds a circular or plan for extricating the company from their difficulties and for improving their securities. By that plan they proposed to the several holders of the bonds that they should exchange the same in part for other bonds and in part for preferred stock of such a nature that its holders should have the right to receive '7 per cent., not cumulative, but to share with the common stock any surplus which may be carried over and above 7 per cent. upon both in any one year.' Measures were adopted to send that circular to all the holders of the bonds, and it appears that a large majority of the bondholders approved and accepted the terms and conditions of the proposed arrangement, and as evidence thereof signed an instrument by which they agreed to surrender the mortgage bonds which they held, and receive, in exchange therefor, new bonds and preferred stock in accordance with the provisions of the plan for extricating the company from its present difficulties and for improving their securities; that the respondents thereupon appointed a committee with power to carry it into effect; that the committee prepared an indenture to accomplish that end; that they subsequently, by order of the directors, submitted the same to a meeting of the stockholders convened for that purpose, and that the stockholders did then and there accept and ratify the action of the directors and of the committee and ordered that the indenture should be duly executed and delivered. Authority was also conferred upon the directors, at the same meeting, to adopt, in behalf of the company, such certificates in relation to the preferred stock to be issued under the agreement 'as may be necessary to carry the same into effect,' and to cause the same to be executed, in behalf of the company, as they may think best. They, the directors, accordingly prepared and adopted, in behalf of the company, the form in which all of the certificates of the preferred stock were for a time issued by the respondents, which contains the recital that the holder 'shall be entitled to receive all the net earnings of said company which may be divided pursuant to said indenture in each year, up to $7 per share, and to share in any surplus beyond $7 per share which may be divided upon the common stock.' Certificates of preferred stock were issued in that form until the legislature passed the act authorizing the company to convert their bonds secured by mortgage into preferred stock, when the certificates issued in that form were recalled and a new form was adopted, but inasmuch as it contains the same provision in respect to the right of the holder to participate in the yearly net earnings of the company it need not be reproduced, except to say that the certificates in the second form, as well as in the first, purport, on their face, to be issued subject to the terms and conditions of the indenture between the company and the trustees, which the stockholders directed should be executed and delivered to carry the plan sent to the bondholders into effect. Pursuant to that order it was executed, and it contains the following provision: 'That said preferred stock shall be entitled to a dividend of 7 1/2 per cent. from the net earnings of said road in each year, whenever a dividend of said net earnings shall be made, before any dividend shall be declared upon other unpreferred shares of said corporation, and to an equal dividend with said other shares of the net earnings of the company beyond said 7 per cent., but shall at no time be entitled to an accumulated dividend in any subsequent division of said net earnings.' Eight hundred shares of the preferred stock are owned by the complainant, and he filed the bill of complaint claiming that by the true construction of the indenture the preferred stock is entitled, not only to a dividend of 7 per cent. from the net earnings of the road in each year, before any dividend is declared in favor of the unpreferred stock, but also to an equal dividend with the unpreferred stock in the net earnings of the same year beyond the amount required to discharge the dividend of 7 per cent. secured to the preferred stock.

Shares of the preferred stock, it is conceded, are entitled to a dividend of 7 per cent. from the net earnings of the road in each year whenever a dividend of net earnings is made, before any dividend can be claimed for the shares of the unpreferred stock, as that is a matter of priority created by the indenture, but it is insisted by the respondents that the priority does not extend beyond the 7 per cent., that when that priority is satisfied the preferred stock is not entitled to any further dividend in that year until the unpreferred stock shall receive a 7 per cent. dividend from the net earnings of the road in the same year.

Ten and a half per cent. net having been earned by the road in one year, the directors, adopting the views of the respondents, made a dividend of 7 per cent. upon the preferred stock, and having satisfied that priority, they made a dividend of 3 1/2 per cent. from the residue of the net earnings beyond the 7 per cent. upon the unpreferred stock, and the complainant insisting that the fund of 3 1/2 per cent. was to be shared equally between the preferred and the unpreferred stock, filed the present bill of complaint and prayed for an injunction to restrain the company from paying any such dividend upon the unpreferred stock. Proofs were taken and the parties having been heard the court entered a decree for the respondents, dismissing the bill of complaint.

Evidence was introduced showing that all the parties understood the transaction, from its commencement to its final consummation, as it is understood by the respondents, but it is insisted by the complainant that such evidence is inadmissible, as its tendency is to explain and qualify what is in writing, and the court is inclined to concur with the complainant in that proposition. Such evidence cannot be admitted in the case except for the purpose of connecting the several written instruments together, and of showing that they are all parts of one transaction; nor is it admitted that the evidence is necessary in this case, even for that purpose, as the instruments themselves contain the most persuasive evidence to establish that fact, and inasmuch as it appears that they were all introduced, either by the complainant or by the respondents, without objection, they are properly before the court. Such being the fact it is quite clear that they must all be regarded as instruments in pari materia, and that as such they are the proper subjects of consideration in order to ascertain and determine what is the true nature of the transaction and the true construction of the contract between the parties. All of these writings were executed as means to the same end, which was to enable the company to find relief from the impending dangers and great embarrassments with which they and all interested in their affairs were surrounded. They could command nothing, nor were the bondholders in much better condition, as a foreclosure would not, in all probability, accomplish much except to sacrifice the interests of all concerned. Everything connected with the enterprise was in jeopardy except the interest of the State, whose loan of $3,000,000 was secured by a first mortgage, covering the franchise, road-bed, and all the rolling stock of the company, whose lands, franchise, roadbed, and other property were also incumbered by the other three mortgages before mentioned, amounting to $8,000,000.

No attempt was made to negotiate with the State, but the relief sought was obtained by the arrangement with the holders of the bonds issued by the company, and which were secured by the three mortgages aforesaid which were subject to the mortgage given to the State, as follows: (1.) Holders of bonds under the first of the three mortgages were to surrender 30 per cent. of their bonds and all their unpaid coupons, and to accept preferred stock for the amount. (2.) Persons holding bonds under the second mortgage were to surrender 40 per cent. of their bonds and all their unpaid coupons, and they were to accept preferred stock as stipulated in the indenture. (3.) Those holding bonds under the third mortgage were to surrender the whole of their bonds and unpaid coupons, and were to accept preferred stock for both bonds and coupons.

Priority was thus secured by the bondholders over the unpreferred stock amounting to a lien, as against the holders of the latter stock, for a yearly dividend of 7 per cent., if the net earnings of the road were sufficient for that purpose, as conceded by both parties. Prior stockholders yielded them that preference, but they insist that no just construction of the contract will give them any more in any one year until the net earnings of the road will also give to the holders of the unpreferred stock a dividend for the same amount, and the court is inclined to adopt the same conclusion.

Test the question by the circular addressed to the bondholders, which they all signed as the preliminary step to the arrangement, and the inquiry is too clear for argument, as the statement is that the preferred stock shall 'be 7 per cent., not cumulative, but to share with the common stock any surplus which may be carried over and above 7 per cent. upon both in any one year,' which means, as plainly as language can express the idea, that the preferred stock shall share in the surplus arising from the net earnings of the company, in any one year, beyond what is necessary to pay a dividend to the whole stock, preferred and unpreferred, of 7 per cent. Nothing more favorable could be expected by the bondholders, as they signed the circular and agreed to surrender the number of bonds set against their respective names and to receive in exchange therefor new bonds and preferred stock in accordance with the provisions of the plan for extricating the company from their present difficulties and for improving their securities, showing that their attention had been called to the plan and that they were satisfied with its terms and conditions. Beyond doubt the directors understood the matter in the same way, as they invested the committee, which they appointed, with the power to make such expenditures as to them should seem discreet to carry out the plan, which was sent to all the bondholders for their approval.

Suppose that is so, still it is insisted that the indenture is the only evidence of the contract between the parties, but it is too late to advance that proposition, as all the other instruments are before the court without objection, and several of them were introduced by the complainant as exhibits to the bill of complaint. Seasonable objections, however, could not have availed the complainant if they had been made, as it is well-settled law that several writings executed between the same parties substantially at the same time and relating to the same subject-matter may be read together as forming parts of one transaction, nor is it necessary that the instruments should in terms refer to each other if in point of fact they are parts of a single transaction. Until it appears that the several writings are parts of a single transaction, either from the writings themselves or by extrinsic evidence, the case is not brought within the rule, as it may be that the same parties may have had more than one transaction in one day of the same general nature. Doubt upon that subject, however, cannot arise in this case, as the due relation of the several writings to each other is conceded by both parties.

Standing alone it may be admitted that the indenture furnishes some support to the views of the complainant, but it is clear that all ambiguity disappears when it is read in connection with the writings which preceded and followed it in respect to the same subject-matter. Ample justification for that remark is found in the plan which preceded it and which was approved and signed by all the bondholders, and in the form prepared for the certificate of the preferred stock which was adopted subsequently to the execution of the indenture, and which was accepted by all the holders of the preferred stock as a complete fulfilment of the arrangement between them and the company. Holders of preferred stock, as there provided, are entitled to receive all the net earnings of the company which may be divided pursuant to the indenture in each year up to $7 per share, and to share in any surplus beyond $7 per share which may be divided upon the common stock, which in substance and legal effect is the same regulation as that contained in the circular or plan, and all the other writings upon the subject which were given in evidence at the final hearing.

Viewed in any reasonable light the court is of the opinion that the decision of the Circuit Court is correct, and that there is no error in the record.

DECREE AFFIRMED.


text: Talk:Bailey v. Hannibal and St. Joseph Railroad Company/Opinion of the Court


text: Dictionary of National Biography, 1885-1900/Waldegrave, James (1685-1741)


text:
Oulton v. Savings Institution

ERROR to the Circuit Court for the District of California.

The German Savings and Loan Society, at San Francisco, California, brought a suit in the court below against Oulton, collector of internal revenue, to recover back a tax of 1/24th of 1 per cent. per month, for moneys deposited in the savings bank during the month of August, 1870.

The case was thus:

The 79th section of the act of June 30th, 1864, as amended by an act of July 13th, 1866, enacts:

'That every incorporated or other bank, and every company having a place of business where credits are opened by the deposit. . . of money or currency subject to be paid. . . upon draft, check, or order, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange or promissory notes. . . shall be regarded as a bank.'

The 110th section of the same act as amended in the same way, enacts:

'That there shall be levied, collected, and paid a tax of 1/24th of 1 per cent. each month upon the average amount of the deposits of money, subject to payment by check or draft, or represented by certificates of deposits or otherwise, whether payable on demand or at some future day, with any person, bank, association, company, or corporation engaged in the business of banking.'

But this section contains a proviso, thus:

'Provided that the deposits in associations or companies, known as provident institutions, savings banks, savings funds, or savings institutions, having no capital stock, and doing no other business than receiving deposits to be loaned or invested for the sole benefit of the parties making such deposits, without profit or compensation to the association or company, shall be exempt from tax on so much of their deposits as they have invested in securities of the United States, and on all deposits less than $500 made in the name of any one person.'

With these enactments in force, Oulton, collector of internal revenue at San Francisco, laid the aforesaid tax of 1/24th of 1 per cent. on the loan and savings institution named.

The society was organized under a statute of California, 'to provide for the formation of corporations for accumulations and investment of funds and savings,' &c. It had a capital stock of $100,000, of which $60,000 had been paid in cash, the notes of the stockholders being given for the balance.

The capital stock was a part of the security which the depositors had. After paying expenses, 5 per cent. of the net profit of the bank was set aside for a reserve fund, and then 10 per cent. of the remainder set apart for the stockholders, who did not otherwise share in the dividends. And the reserve fund and the interest thereon was lent out and disposed of in the same manner as the deposits, and was kept in the same manner as the capital stock, as security for the depositors.

The bank received deposits, lent the money so deposited, and repaid it, together with the dividends arising from the interest on loans, to depositors, in accordance with the terms, conditions, and plans stated in a prospectus issued by the bank to depositors in a pamphlet, and an agreement thereto appended, which every depositor, upon making a deposit, signed.

Among these terms and conditions were these:

'All moneys now or hereafter deposited by me, shall be reimbursable only out of the first disposable funds that shall come into the hands of the corporation, after the date of any demand for the reimbursement thereof, and after payment of all sums for the reimbursement of which demand shall have been made prior to the date of my demand.

'The corporation will only engage to repay depositors when there is money on hand which the board of directors may not deem it necessary to reserve for other payments.

'When there is not money enough on hand to repay all the deposits applied for, the directors shall make no new loans nor investments until there is again sufficient money on hand to meet the current applications; and if the demand shall, in their judgment, become excessive or general, they shall have power to set aside all applications previously made which may not have been satisfied, and to order an apportionment of all the funds, as they may be got in, and at such short intervals as they may judge proper, among all the ordinary depositors, in proportion to the amount of their deposits.'

No money was received on deposit or held otherwise than upon the terms and conditions thus set forth in the prospectus and agreement.

No accounts had ever been opened or moneys received subject to payment on draft, check, or order. When a deposit was made a pass-book was given to the depositor, and an entry of the deposit made in it and in the books of the bank. When the money was drawn the depositor presented his pass-book, received his money and signed a receipt for it in the books of the bank, and an entry was made in the pass-book. When the depositor could not appear in person to receive his money, he sent an order with the pass-book, and on the production of the pass-book and order the order was taken as a receipt and pasted in the receipt book in the place of the receipt, and the entry made in the pass-book. No such order was ever paid without a presentation of the pass-book with the order. In practice, although not obliged to do so, the company always intended to keep sufficient money on hand to meet all ordinary calls when made, and it always paid upon call, so long as there was money to do so. There had been one or two occasions when there was a heavy demand for money, and when it had not been able to meet on call all ordinary demands. Loans were usually made on real estate. This was the company's regular mode and business; but when unable to put all the deposits out on real estate, it lent them on other securities, such as mint certificates, bonds of the United States, State bonds, Oakland, San Francisco, and other bonds, San Francisco Gas Company and Spring Valley Water Works Company's stocks. But this was not the regular business of the company, and such loans were but temporary. The company did not lend on bills of exchange, or promissory notes without mortgages, and did not pay out money on drafts or checks. It issued certificates for 'term deposits' not transferable, but the certificates were issued subject to the foregoing agreement. The certificate when made out was cut from a corresponding stump, and before delivery the party receiving it signed the receipt upon the stump, showing that it was received subject to the conditions of the said agreement upon which deposits were received.

As conclusions of law, the court found:

1st. That the company received no deposits of money subject to payment by check or draft, or represented by certificates of deposits, or otherwise, payable on demand, or at some future day, within the meaning of the revenue acts of the United States.

2d. That the moneys deposited with it were not subject to the tax assessed thereon and collected by the defendant.

3d. That the plaintiff was entitled to recover.

Judgment being entered accordingly in favor of the company, the collector brought the case here.

Mr. G. H. Williams, Attorney-General, and Mr. C. H. Hill, Assistant Attorney-General, for the plaintiff in error:

1. As this bank had a capital stock of $100,000, it does not fall within the proviso of the act of July 13th, 1866, exempting certain savings banks from taxation. In that Bank for Savings v. The Collector (a case which, though on a former statute, covers the principle of the present one), this court held that, independently of some proviso exempting it, a savings bank, though without any capital and without shareholders or corporators, interested in it or entitled to participate in its profits, was liable to taxation as 'a bank.' A fortiori, a savings bank with a capital stock falls within the rule; and the proviso by expressly excluding from the operation of the body of the section, savings banks with no capital stock, shows that savings banks having a capital stock fall within it.

2. As the bank set aside nearly 10 per cent. of the net profits for the stockholders, who furnished the capital, it did other business than receiving deposits 'to be loaned or invested for the sole benefit of the parties making such deposits without profit or compensation to the association or company.' It was in fact carried on as much for the profit and benefit of the stockholders as of the depositors. Indeed if the company had large deposits and did much business, it would have been carried on much more so.

3. The deposits made in this bank were deposits 'subject to payment by check or draft, or represented by certificate of deposit or otherwise,' within the meaning of the statute. The entry in the pass-book was a 'certificate of deposit.' If not, the deposit was represented by it, otherwise than by such certificate.

Messrs. J. R. Jardoe and C. E. Whitehead, contra:

1. The intention of Congress was to impose a tax upon capital engaged in what is commonly known as 'banking.'

No interest is paid by ordinary banks on moneys deposited with them. All the profits belong to the bank. Interest, however, is paid in savings banks to their depositors. Ordinary banks make vast profits from their deposits; because, unlike savings societies, they pay nothing for the use of them. Therefore, the act to tax bank capital provides a tax upon all such deposits as were represented in the hands of the depositors by certain designated certificates, 'or otherwise,' meaning by any other means which could possibly make the depositor a holder or user, or give him credit upon the moneys which were deposited with the bank. Ordinary banks derive great profits from them, and to such banks, the only ones that do make great profits, the provision should be confined.

2. This company was not a bank, nor engaged in the business of banking within the meaning of the act. To render a company liable as a bank it must be a corporation engaged in the business of banking, and holding deposits subject to payment by check, draft, or otherwise.

This society received deposits which it lent out for the benefit of the depositors, giving the depositors all the net profits. These deposits were in nowise payable to the depositors by the bank, except when the loan should be paid in by the person to whom it might be lent. The bank had neither circulation, checks, drafts, certificates of deposit, or exchange. It was simply a trustee to invest. Such institutions have been decided not to be banks in legal language.

The provisions of contracts between these saving institutions and their depositors have been held to be strictly enforceable even to their smallest detail.

It is clear, therefore, from the provisions of these contracts that no depositor could ever maintain an action for debt or in assumpsit upon these contracts; nor has he any money with either of these banks which is ex necessitate payable at any time either on check, draft or order, or is represented by certificate of deposit, or otherwise.

These banks, therefore, occupy an anomalous position, and one clearly not contemplated by the revenue act. In them the depositors receive the profits and bear the risks of the business, and in so doing occupy a position different from that held by any other class of persons known to the law. If A. deposit with a bank of California, his claim is good whether the bank wins or loses by its management of his funds; but if he deposits with a company like this one, he has no claim for recovery if the company shall lose its money by untoward circumstances, national bankruptcy, or any cause that may produce a fall in commercial values. Thus the Bank of Savings v. Collector, cited by opposing counsel, is not in point. The plaintiff in that case, could be called on to make payments on four stated days in the year, and therefore four times in each year an action at law would lie against it; it therefore held money payable at some future time, and its funds were repayable on draft. The case was put by the court on the very point of obligation of repayment. Our banks, as we have seen, hold no funds payable by draft, or otherwise, and none of which it can absolutely be predicated that they will ever be repaid.

Again; it would seem plain that the general enactment in section 110 does not impose a tax upon this society. Reliance has to be had on the proviso in the same section. But when you resort to the proviso you can impose the tax only by implication. Now you cannot lawfully so impose a tax. A proviso does not enlarge the powers of a statute, and any man who will bring an action for a penalty under an act of Parliament must show that he is entitled thereto under the enactory clauses. If a statute imposed a tax on all dwelling-houses and stores, and if a proviso exempted all manufactories where steam was used, this would not make manufactories where steam was not used liable, nor indeed make anything liable except what the statute declared should be liable.

Mr. Justice CLIFFORD delivered the opinion of the court.

title: Oulton v. Savings Institution


text: Talk:Oulton v. Savings Institution

title: Talk:Oulton v. Savings Institution


text:
Oulton v. Savings Institution/Opinion of the Court

Associations engaged in moneyed transactions, whether incorporated or not, having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order; or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes; or where stock, bonds, bullion, bills of exchange, or promissory notes are received for discount or for sale, are regarded as banks, subject to taxation, under the internal revenue laws which were in operation when the taxes in controversy in the present suit were assessed and collected; but the same section which created the liability and authorized the assessment of the taxes, also provided that savings banks, having no capital stock and doing no other business than receiving deposits to be loaned or invested for the sole benefit of the parties making such deposits, without profit or compensation to the association or company, shall be exempt from tax on so much of their deposits as they have invested in securities of the United States, and on all deposits less than five hundred dollars made in the name of any one person.

Such taxes as are authorized by that act, to the amount of $2697.84, were assessed against the plaintiffs by the assessor of the district, and the record shows that they paid the same under protest to the collector of the same district, and that they instituted the present suit in the State court to recover back the amount, which was duly removed, on motion of the defendant, into the Circuit Court. Due appeal, it appears, was taken by the plaintiff from the decision of the assessor levying the tax to the commissioner, and the commissioner affirmed the action of the assessor and decided that the tax was legally assessed. Service was made, and the defendant appeared and filed an answer, which amounted to the general issue, and prayed to be dismissed with judgment against the plaintiffs for his costs, which is a motion in the nature of a demurrer. Hearing was had before Mr. Justice Field, and he denied the application, holding that the plaintiffs, if they proved all of the allegations of their complaint, would be entitled to recover. Leave was subsequently granted to the defendant by the circuit judge to amend his answer, and he accordingly filed the amended answer which is exhibited in the record. Evidence was taken, and the parties, having waived a jury, submitted the case, law and fact, to the determination of the court, and the court rendered judgment in favor of the plaintiffs for the whole amount claimed in the declaration, and the defendant sued out the present writ of error.

Three errors are assigned by the present plaintiff, in substance and effect as follows. (1.) That the bank is not within the proviso exempting certain savings banks from such taxation, as the bank had a capital stock of $100,000, as stated in the finding of the Circuit Court. (2.) Because the bank did other business than receiving the deposits to be loaned or invested for the sole benefit of the depositors, without compensation to the association or company. (3.) Because the deposits made in the bank are deposits subject to payment by check or draft, or represented in a way to bring the bank within the operation of the body of the section imposing the tax.

Unrestrained by the proviso, it is quite clear that the bank would fall within the body of the section and be subject to the tax which the section levies, as the managers of the institution have a place of business where credits are opened by deposit, or collection of money or currency, subject to be paid or remitted by check or draft, or represented by certificates of deposit. Attempt is made to controvert the proposition that the money deposited is represented by certificates of deposit, or that it is subject to check or draft, but it is quite clear that the pass-book furnished to the depositor performs the same office as the certificate, check, or draft, as between the person making the deposit and the bank, showing to the entire satisfaction of the court that the evidence brings the bank within the material words of the section, and that the framers of the act intended to recognize the well known fact that there are banks of deposit without authority to make discounts, or to issue a circulating medium.

Banks in the commercial sense are of three kinds, to wit: 1, of deposit; 2, of discount; 3, of circulation. Strictly speaking the term bank implies a place for the deposit of money, as that is the most obvious purpose of such an institution. Originally the business of banking consisted only in receiving deposits, such as bullion, plate, and the like, for safe-keeping until the depositor should see fit to draw it out for use, but the business, in the progress of events, was extended, and bankers assumed to discount bills and notes and to loan money upon mortgage, pawn, or other security, and at a still later period to issue notes of their own intended as a circulating currency and a medium of exchange instead of gold and silver. Modern bankers frequently exercise any two or even all three of those functions, but it is still true that an institution prohibited from exercising any more than one of those functions is a bank in the strictest commercial sense, and unless such a bank is brought within the proviso under consideration, is equally subject to taxation as if authorized to make discounts and issue circulation as well as to receive deposits.

Tested by these considerations it is clear that the judgment must be reversed unless it appears that the bank is within the proviso to the section which imposes the tax, and such was the decision of this court in a case involving the same question, though it arose under the prior act of Congress levying internal revenue duties.

Two propositions were decided in that case, which are directly applicable to the case before the court, and the court is of the opinion that the same principles should be applied in the present case. They are as follows:

1. That savings banks which receive deposits and lend the same for the benefit of their depositors, if the bank is under obligations to repay the amount when demanded, agreeably to their by-laws and charter, whether upon check, draft, or certificate of deposit, are engaged in the business of banking within the meaning of the body of the section imposing the tax, though the bank has no capital stock and does no other business of banking.

2. That savings banks, described in the proviso and thereby exempted from taxation, became subject to the duty imposed by the body of the section on the repeal of the proviso, though they had no capital stock, and neither made discounts nor issued currency as circulation, nor transacted any business of banking except to receive deposits, loan the same for the benefit of the depositors, and repay the amount as aforesaid in pursuance of their by-laws and charter.

Apply those rules to the present case, and it is evident that the only inquiry open is whether the plaintiff bank is exempted by the proviso from the taxation which the body of the section imposes.

Savings banks are not exempt from such taxation, except in certain cases, nor are any entirely exempted unless they have invested the whole of their deposits in the securities of the United States, if any of the deposits made in the name of one person amounted to, or exceeded, $500. Deposits in sums less than $500, and all such as are invested in the public securities, if the bank falls within the category described in the proviso, are exempt from such taxation, but every savings bank which does not fall within the category described in the proviso, is subject to taxation the same as any other bank coming within the purview of the act imposing the tax.

Such banks are not exempt from such taxation if they have a capital stock, nor if they do any other business than receiving deposits to be loaned or invested for the sole benefit of the person making such deposits. Both of those conditions are expressed in plain and unambiguous terms, and the law-makers, as if to place the second beyond cavil, provided not only that the deposits should be loaned or invested for the sole benefit of the depositors, but added, 'and without profit or compensation to the association,' showing beyond controversy that Congress did not intend to exempt any savings banks from such taxation, except such as were devoted to charitable purposes and were managed solely for the benefit of the indigent, or of persons of small means.

Savings institutions undoubtedly exist which were established solely for charitable purposes, and many of them are conducted in the spirit in which they were established, as a means of benefiting the indigent, and it is plain that Congress intended to exempt all such from the taxation imposed by the body of the section, but it is equally well known that there is another large class of such institutions which are doing an extensive and profitable business, and being the depositories of vast sums of money are earning large profits, which are as justly subject to taxation as the profits of any other banking corporation in the country.

Power to lay and collect taxes is vested in Congress, and Congress has enacted to the effect that all banks, except such as fall within the category described in the proviso under consideration, shall be subject to the tax imposed by the body of the section, and it is clear that the plaintiff bank does not come within either of the two conditions specified in the proviso, both of which must concur in order that the bank may claim to be exempt from the tax.

Argument to show that the bank does not come within the first condition is certainly unnecessary, as it is admitted that the bank has a capital stock of $100,000, of which $60,000 has been paid in cash, and that the bank holds the notes of the shareholders for the residue, the capital stock being a part of the security held for the benefit of the depositors. Five per cent. of the net profits of the bank is set aside as a reserved fund, and ten per cent. of the remainder is set apart for the stockholders who do not otherwise share in the dividends. It also appears that the reserved fund and the interest thereon is loaned and invested in the same manner as the deposits, and like the capital stock is kept as a security for the depositors; that the bank receives deposits, lends the money deposited and repays it, together with the dividends arising from interest, in accordance with the terms and conditions stated in a prospectus issued by the bank to the depositors and an agreement thereto appended, which are exhibited in the record. Every depositor upon making a deposit signs the agreement, and no money is received on deposit or held otherwise than upon the terms and conditions set forth in the prospectus and agreement. Accounts have never been opened nor moneys received subject to payment on draft, check, or order, nor has the bank ever issued certificates of deposit, except such as were temporary, to give time to a depositor to determine whether he will make a term deposit or one subject to be drawn when wanted. When a deposit is made a pass-book is given to the depositor and an entry of the deposit is made in it and in the books of the bank, and the money is drawn out by the depositor on presenting the pass book or by a person holding his order. Money sufficient to meet all ordinary demands is always intended to be kept on hand, and the bank always pays money upon calls, and it appears that there has never been a time since the bank was organized that it was not able to meet all ordinary demands. Generally the bank asks the depositor to give a day or more notice on large amounts, but the managers have never found it necessary to make any rule upon the subject. Loans are usually made on security of real estate, but in some cases upon bullion or personal property, nor are any loans made upon bills of exchange, promissory notes, or other evidences of private indebtedness. Prompt payments have always been made, but the agreement contains the stipulation that money deposited with the bank shall be reimbursed only out of the first disposable funds that shall come into the hands of the bank after demand; and the defendants refer to that provision as distinguishing the case from the prior decision of this court, but the court is of the opinion that the proposition cannot be sustained, as the regulation is evidently one adopted merely for an emergency, and that it was never intended to control the general dealings of the bank with its depositors. Money deposited in such a bank by one of its customers becomes a debt for which the bank is liable, and it cannot be admitted that the managers could lawfully adopt any rule which should postpone its payment indefinitely. They may, doubtless, make any reasonable rule under that stipulation to enable them to raise means for such an extraordinary occasion, but they could not refuse payment altogether or provide for such delay as would essentially impair the value of the just claim of a depositor. Throughout, the amount of the deposit would continue to be a debt due to the depositor, demandable of the bank on presenting the pass-book, under such reasonable regulations as the bank or its managers may adopt.

Prior regulations had been made in the reported case containing our former decision which gave the depositor the right to make such demand at four stated periods in the year, but in the case before the court no regulation upon the subject has been adopted other than what appears in the written agreement, which has never been enforced. Whether it ever will be or not is a matter which cannot be known, nor is such an inquiry of any importance in the present case, as the court is of the opinion that the stipulation, inasmuch as it has never become operative, cannot avail the plaintiffs in this controversy.

Beyond all question the bank has capital stock, and inasmuch as 10 per cent. of it is set apart for the stockholders, it is not correct to say that the business which the bank does in receiving deposits and loaning and investing the same is done without compensation to the association.

Viewed in the light of these suggestions it is clear that the bank does not fall within the category described in the proviso, and that the tax was legally assessed and collected.

JUDGMENT REVERSED, and the cause remanded with directions to issue a NEW VENIRE.


text: Talk:Oulton v. Savings Institution/Opinion of the Court


text:
Page:Lectures on Modern History.djvu/311

 the ablest and most successful rulers in modern times. For the machine which Peter created was strong enough to endure. It still exists as he made it, an amalgam of power and servility, never leading, but often supplying the deciding force in the history of the world. It was the empire of Peter the Great that destroyed the empire of Napoleon.

Such a Power, limited by feeble neighbours, would have been a danger to the whole of Europe, but that another great Power, founded in the same generation, became a bulwark against a menacing expansion. The rise of Prussia preserved the Continent from being submerged. This new phase of northern monarchy was very unlike that which we have just considered. Prussia, like Russia, was a military Power, living on the hope of expansion. But it was infinitely inferior, as to extent and population. It was not a giant but an athlete; and its future depended, not on the intrusion of foreign elements, but on its own development and practical organisation. Nature had done nothing to promise greatness. The country was open and arid, and the inhabitants were hard, unimaginative, and poor. Religion had less power over them than over any other part of Germany. To this day the sky-line of Berlin is more unbroken by church towers than that of almost any other city. Neither their situation on the map of Europe nor hereditary endowment fitted the Prussians for empire. It was the work of the dynasty that a country which was less than Scotland, and was protected by no barrier of land or water, became greater than France.

The Prussian people, by which I mean the people of Brandenburg and its vicinity, were conscious that Nature had not favoured them excessively, and that they could prosper only by the action of their government. No people were more submissive, or more ready to suffer, for the sake of the State. And none have gone farther in asserting its omnipotence, or in abdicating in its hands. They had no silver streak, no natural barriers. As a consequence of the Reformation the dominions of the


text: Goddard v. Foster

title: Goddard v. Foster


text: Talk:Goddard v. Foster

title: Talk:Goddard v. Foster