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Reports of cases adjudged in the Supreme court of Pennsylvania [May term 1841 - May term 1845] (Volume 2) online

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find a competent juror who may not have heard something of the
dispute, and who may not have expressed an opinion favourable
or unfavourable on a given and partial state of facts. And this
was all that was done by the juror. He never formed nor
expressed an opinion as to the indebtedness of the defendants,
but he had expressed one from the statement of others. He had
formed no opinion as to the merits of the case, for of this, as he
states, he knew nothing. It is like the case of Donnell v. Master,
(8 Johns. Rep. 445). A juror said, " that if the reports of the
neighbourhood were correct, the defendant was wrong and the
plaintiff was right." This was held not to be a sufficient objec-
tion to his being sworn and impanelled. The court say> his
declaration being hypothetical, it is not such a bias as ought to
exclude him.

The evidence offered to prove the consideration of the note was
competent for that purpose, for we cannot doubt that evidence of
a joint indebtedness of six persons, would be a valuable consider-
ation for a note given by four. Nor can the fact that there are no
money counts alter the case. The cause was tried on a state-
ment, which is intended to dispense with form; and had there been
any objection on that ground, it ought to have been disclosed on
the trial, when the plaintiff would have had an opportunity to
amend.

There is nothing in the exception to the competency of Mr Fal-
coner. He was not a stockholder at the time he was admitted to



Sept. 1841.] OF PENNSYLVANIA. 203

[Irvine v. Lumbermen's Bank.]

testify. He is therefore entirely disinterested on that ground.
Nor is there any force in the objection, that it was understood at
the time the note was discounted, that he and Shepard, the
cashier, were also to sign it. If he has any interest, it is rather to
defeat the suit : for supposing the fact to be that he is a joint debtor,
and as such bound to sign the note, he would be liable in a suit
for contribution, in which the judgment here rendered, connected
with proof that it was a joint debt, would be evidence. At any rate,
it is a matter of indifference to him whether he remains the debtor
of the bank, or becomes, as he will if there be a recovery, the debtor
of the defendants for his portion of the debt. This part of the objec-
tion belongs to another portion of the case, which will be noticed
hereafter. Again, if the witness violated the duty prescribed in
the 20th article of the Act of the 25th of March 1824, as is alleged,
which has been urged as an argument against his competency
he is liable, in his individual capacity, to pay the amount of the
excess of discount, to any person or persons, holders of the notes
of the bank, or having a claim for a deposit to an equal amount,
who shall first sue for its recovery. He is in no way liable to the
bank, nor to the debtors of the bank, and the most that can be
made of it is, that if this money be recovered, it increases the
funds of the bank, and consequently there would be less necessity
for the depositors and note-holders to resort to the extraordinary
remedy by suit against the delinquent directors. But this is a
contingent liability merely, which has never yet been held cause
for the exclusion of a witness, although it may be urged with
some force against his credit.

Having disposed thus briefly of the preliminary matters (in
none of which have I been able to discover any cause for the
reversal of the judgment) I shall now consider the remaining ob-
jections in their order :

1. And, first, the forfeiture of the charter. The alleged delin-
quency of the bank consists in this : a failure of the bank to comply
with the lOfh section of the Act of 1814, and the 24th article of the
2d section of the Act of the 25th of March 1824; the allegation
that the capital stock of the bank, as authorized by the Act of
Incorporation of the 28th of February 1834, was not all paid in,
as is directed by the Act, before discounting any note or issuing
any of its bills ; and that the capital stock was not all paid in
before the transaction on which this suit is brought. The Act of
the 25th of March declares the charter of a bank, neglecting to
pay or declare dividends, absolutely null and void, and of no
effect whatsoever; and that the bank from thenceforth shall be
deemed and taken as dissolved, unlawful, and unincorporated.
The 7th section of the Act incorporating the Lumbermen's Bank,
also declares that no discount shall be made, or any note issued
by the bank, until the whole of the capital stock shall be paid in.
These prohibitions and restrictions are very positive, and expressed



204 SUPREME COURT [Pittsburgh

[Irvine v. Lumbermen's Bank.]

in strong language ; and if the bank has omitted or neglected to
comply with them, and the proper steps had been taken, the
charter would have been declared by the proper authority null
and void. But the difficulty which meets the defendants, is, that
we cannot judicially know, nor can we now investigate the truth
of these allegations ; for if there be anything settled beyond all
cavil and controversy, it is, that the violation of a charter of in-
corporation cannot be made the subject of judicial investigation
in a collateral suit. The only evidence, competent to prove the
forfeiture of a charter, is the judgment of a court directly on the
point ; and no inferior evidence can be admitted for that purpose,
unless it is otherwise directed by the legislature in express and
positive terms. The objection comes with a peculiar ill grace
from the defendants, some of whom were directors of the institu-
tion, and all of whom received and used the funds of the bank, of
which they now wish to deprive the innocent stockholders, and
the honest creditors, under this flimsy pretext. The provisions
for a forfeiture of the charter are not intended for the benefit of
the debtors, to shield them and enable them to commit a fraud:
but it is designed to protect the public ; for notwithstanding the
10th section declares, that in certain cases the charter shall be
absolutely null and void, yet it also provides that the bank shall
be liable in its corporate capacity, for the fulfilment of all its
contracts, &c., previously made, and shall be capable of compel-
ling the fulfilment of any contract entered into previous to the
delinquency. So in the 20th article of the 3d section of the Act of
25th of March 1824, it is provided that the Act shall not be so
construed as to prevent the bank from recovering the notes or obli-
gations of those who may be indebted to it as occasion may
require. For the purpose of collecting its debts, the charter is
still in existence, notwithstanding it may be forfeited on account
of the delinquency or neglect of its directors ; and this principle
must be engrafted into every Act of incorporation, to prevent the
most monstrous and glaring injustice to creditors and stockholders.
If the charter had been regularly forfeited, a question of some
delicacy on the wording of this Act would have arisen ; that is,
whether any debts, contracted after this cause of forfeiture, could
be recovered. We are, however, happily relieved from a consi-
deration of that point, because, as the case stands, the question
cannot arise.

2. Second point. Because the note is not authorized, but is taken
contrary to the Act of incorporation. The note being made pay-
able in the office notes of the bank, is said to be contrary to the
14th article of the Act of the 25th of March 1824, which prohibits
corporations, either directly or through the agency of others, either
in trust .or confidence, to deal or trade with any profits, stock,
money or effects of the bank, in buying any goods, wares, or mer-
chandise whatever; that corporations shall not deal nor trade



Sept. 1841.] OF PENNSYLVANIA. 205

[Irvine v. Lumbermen's Bank.]

in any thing, but bills of exchange, gold or silver bullion, and in
stock and treasury notes, or in the sale of goods really and truly
pledged for money lent and not redeemed in good time, or goods
which may be the produce of their lands. This Act must receive
a reasonable construction, and the intention of the legislature is
manifest : it is to prohibit the banks under the pretence of loaning
money, from becoming dealers, traders and merchants, and there-
by interfering with the legitimate pursuits of individuals. In this
view, the restriction which confines them to buying and selling
certain things enumerated in the Act, is highly salutary and con-
servative. In neither of these characters is the bank exhibited.
It would be an abuse of terms to call them in this respect dealers,
traders, or merchants. There is nothing in the transaction which
interferes with the policy which dictated the restriction. The
legislature never could intend, under the penalty of a forfeiture
of the debts, so great an absurdity, as to prohibit them from ex-
pressing on the face of the note that which is a necessary implica-
tion from the law itself; for it cannot be doubted that it would be
a palpable breach of law and of good faith, if the bank were to
refuse to receive its own notes in payment of debts. It is intended
that the issues in the shape of notes shall be a substitute for specie,
which they would not be, unless receivable by the institution by
whom they were issued. Nor can I perceive in what way notes
made payable in this form can be made to operate to the injury
of depositors or other creditors. By these means the indebtedness
of the bank to the holders of their notes is discharged, and the
liability of the bank is decreased in the same proportion, leaving
the other funds applicable in liquidation of debts. We must not con-
found the negotiability of the paper with the liability of the defend-
ants. The questions are entirely distinct, for the note may want
the character of negotiability, and yet the plaintiff may have a
perfect right to sue and recover the amount expressed on its face.
There is nothing to prevent the institution from taking any form
of security it thinks best, whether a note under seal, bond, mort-
gage, judgment, or what is most usual, negotiable paper, payable
to bearer or order, and transferable by endorsement or delivery.

3. The third point is the alleged fraud. And this is included in
the answer to the third, fourth, and fifth points of the defendants.
From the imperfect manner in which the case is presented, it is
difficult to understand precisely the nature of the testimony on
the points themselves; but from the best consideration I have been
able to give it, it seems to me that the answer of the court is as
favourable to the defendants as they had any reason to expect.
The court say that if the jury believe from the evidence that the
paper was signed by the defendants, and handed to the president
and cashier with an understanding that they were to sign it be-
fore it was discounted, and they discounted the note without sign-
ing it, it would be a fraud on the defendants, and the plaintiff

s



206 SUPREME COURT [Pittsburgh

[Irvine v. Lumbermen's Bank.]

could not recover. This, I say, was as favourable to the defend-
ants as they had any right to require; for it maybe doubted whether,
admitting the fact to be as stated, the court was right in declaring
to the jury that the plaintiff" could not recover. It is not very clear
that an understanding between the parties themselves, although one
was president and the other cashier, would avoid the note unless
knowledge of that understanding was brought home to a quorum
of the directors, whose duty it is to discount notes. If it would,
it puts the bank very much in the power of one or more fraudulent
directors. It is a breach of faith, to be sure, among themselves,
but from this it does not necessarily follow that the security is
void, operating as it would in this case to the injury of the inno-
cent stockholders and creditors. But be this as it may, there was
no evidence of any such understanding. The note was handed to
Falconer for discount, in renewal of other notes then in bank,
without any agreement or understanding on the subject. The
testimony of Judge M'Calmont and others was only admitted to
impeach the recollection of Falconer, who was examined as a wit-
ness ; and supposing that the defendants had been successful in
this to the utmost extent, it would leave the jury without any tes-
timony further than the inference which may arise from their
joint liability. Sensible of this consequence, the defendants take
the ground that under the circumstances the onus is thrown upon
the plaintiff. They contend that the bank must show negatively
that there was no such understanding between the parties as that
Falconer and Shepard were to sign the note which was given in
renewal of notes on which they were joint debtors. Even if this
were required, there is negative evidence in the testimony of Fal-
coner. But I will not rest the case on that point, for I cannot
agree that the onus is thrown upon the plaintiff. The allegation
amounts to a charge of fraud, which cannot be presumed, but
must be proved. In support of this charge, the defendants must
show in substance that discounting the note in that manner was
in contravention of an express agreement, and that the bank par-
ticipated in the fraud committed by two of the debtors, in omitting
to sign the note before it was discounted.

But the bank had nothing to do with their private arrangements.
All they were required to attend to, was to have an adequate
security for the money loaned ; and they were not bound to sus-
pect a fraud merely because the names offered in renewal of the
note were different, at different times. There is truth in the ob-
servation of the court, that it is difficult to say at what time Brig-
ham put his name to the note ; but even admitting that he signed
his name after it was discounted, it would be no objection to the
plaintiffs' right to recover. It was ratified by the bank and by
Brigham, and surely the others have no right to complain of an
act which adds to their security. It is impossible to avoid seeing
that if there has been any fraud or misunderstanding in the last



Sept. 1841.] OF PENNSYLVANIA. 207

[Irvine v. Lumbermen's Bank.J

renewal, it has been among the debtors themselves ; but this ought
not to operate to the injury of the bank. The transaction seems
to have arisen from a joint purchase of real estate. The note
was discounted to pay purchase-money originally on their joint
account. It was renewed from time to time, sometimes with all
their names, sometimes with one, and sometimes with two or more
of these joint debtors, as suited their own convenience, they hav-
ing mutual confidence in each other. What is there in this state
of things to lead the plaintiffs to suspect that there was any thing
unusual or unfair in the last renewal, merely because certain names
were then omitted ? And why should they be visited with a loss
which has arisen, if at all, from the loose manner in which the
defendants themselves have chosen to transact the business ? We
cannot help perceiving that this is a mere subterfuge to escape the
payment of an honest debt. I have also to add, that if the de-
fendants have been wronged, it has been by the jury, and this is
not the proper mode for them to obtain redress.

4. Next, as to the effect of the attachments. The defendants, on
the trial of the cause, offered special pleas, purporting to be in bar,
setting forth that Sedgwick Benham, of the county of Chautauque,
in the State of New York, sued out an attachment according to
the statutes of that state, against the Lumbermen's Bank, being
a foreign corporation, for the sum of $1473, a debt due from
the plaintiff to Benham, and attached the debt of the bank against
the defendants. Also, an attachment in favour of Henry B. Van
Buren, against the same, for a debt of $1200, and in favour of
Nathaniel P. Copp, for a debt of $1750. These pleas were reject-
ed, but on the trial the two last were received in evidence, reserv-
ing the point : and the first, viz. the attachment in favour of Ben-
ham, was rejected, and rightly, because it appeared that the certi-
fied copy did not contain the whole record. The debt in suit was
attached by the sheriff of Chautauque county, the 22d of Febru-
ary 1838, which was before the commencement of this suit.

By the inventory attached to the sheriff's return, it appears that
this debt was attached in the following manner. After stating
other property, consisting of notes, &c. belonging to the bank, the
sheriff says, " And also, that on the 5th day of March aforesaid, I
notified Nathaniel A. Lowry, by leaving at the store of the said

Lowry, in the village of , a notice, written, that I had

the annexed attachments, and by virtue of the said attachments,
made a demand of him of a list of his indebtedness to the Lum-
bermen's Bank at Warren, Pa., which was not furnished." For
the purposes of this case, I shall assume that under the statute
law of New York a debt due from a foreign corporation to a citi-
zen of that state, coming under the denomination of personal pro-
perty, may be attached, and thai this debt was attached under
the process issuing from regular and competent authority- But
although these facts are conceded, yet, it nowhere appears that



SUPREME COURT [Pittsburgh

[Irvine v. Lumbermen's Bank.]

any more was done under this process. There was no execution
executed, nor was there, so far as appears, a judgment rendered
by the court in favour of the attaching creditors against the bank.
Vide 24th section Revised Statutes of New York 460. All that was
done was to file the affidavit of the debts, and to give the bonds
which are required by the Act. The sheriff has now, under his
control, and in his custody, all the effects of the bank, attached
by virtue of the process in his hands. This is, therefore, a foreign
attachment pending, Us pendens, without execution executed, and
without a judgment rendered for the debt. And the questions
arise, Is this a defence to a suit subsequently commenced in this
state ? and if it be, in what manner must the defendants avail
themselves of the defence ? That the proceedings in New York
are a defence in this state, admits not of doubt. They are a de-
fence to the same extent, and must be pleaded in the same man-
ner as if they had been laid in this state, there being a manifest
distinction between a suit pending in a foreign country, between
the same parties, commenced by process against the person, and
a proceeding by process of foreign attachment, which acts in rem.
The latter may be pleaded either in abatement or in bar, accord*
ing to the distinction which will be hereafter noticed ; whereas
the former can neither be pleaded in abatement nor in bar, unless
perhaps where the cause has proceeded to judgment. Vide note
to 4 Cow. R. 521, where all the authorities are collected. Sed
qucere. Whether upon the principle of comity between sister states,
and convenience, the pendency of a personal action may not be
pleaded in abatement. Can it be that a suit for the" same cause
of action, between the same parties, can be carried on at the same
time in every state in the Union ? This, however, is not the point
in difficulty, but the doubt is, whether it must be pleaded in abate-
ment, or may be pleaded in bar, or given in evidence under the
general issue. The attachments which were given in evidence, as
has been already observed, were sued out on the 24th of Febru-
ary 1838, previous to the commencement of this suit. There was
no execution executed, there was no judgment rendered. The
proceedings amount to a foreign attachment pending, which is
pleadable only in abatement. If, after a foreign attachment has
been issued, and been executed in the hands of a garnishee, the
original creditor sues the garnishee for the debt, he may plead
the attachment in abatement. But if the plaintiff in a foreign
attachment has obtained judgment against the garnishee and
received the money, or execution has been executed, and the ori-
ginal creditor shall afterwards sue the garnishee for the debt, he
may plead the condemnation in the foreign attachment, and this
will be an effectual bar for the amount. If the judgment in the
attachment is equal to, or exceeds the amount demanded from the
garnishee on the original debt, it is a flat bar ; if for less, it is a
bar pro tanto only. Fitzgerald v. Caldwell, 1 Yeates 279; 17



Sept. 1841.] OF PENNSYLVANIA. 209

[Irvine v. Lumbermen's Bank.]

E. Com. L. R. 209 ; 5 Johns. R. 101 ; 3 Rawle 320 ; 9 Johns, ft. 221 ;
1 Penn. R. 442. And the distinction between pleas in abatement
and in bar, is not technical, but necessary to prevent injustice.
Where pleaded in abatement, after the disability is removed by
disproving the debt, as may be the case, the plaintiff may renew
his suit ; but if pleadable in bar, this cannot be, and the plaintiff
may be exposed to have the claim of the attaching creditors de-
falked, although it may be afterwards disproved, and the gar-
nishee may be allowed for a debt which he may fail to pay. The
plaintiff may be defalked and afterwards compelled to pay the
attaching creditors the amount of their debts, for an attachment
without satisfaction would not of itself prevent them from resort-
ing to their original debtor.

If, then, this was pleadable in abatement, the court were right
in rejecting the special pleas in bar, which, although concluding in
bar, disclosed matter pleadable in abatement only. So, matter
pleadable in abatement cannot be given in evidence under the
general issue, nor can it be pleaded after a plea in bar. 2 Serg. fy
Rawle 537; 15 Serg. $ Rawle 150; 4 Cow. R. 521.

But it is contended that a plea in abatement was not the pro-
per plea, because the defence being for part only, the writ cannot
abate in part. The argument is, that if pleadable at all, it must
be pleaded in bar ; because the defence is to part and not to the
whole. And it is very true, that where the judgment and execu-
tion are for a sum less than the plaintiffs' demand, it may be plead-
ed in bar, and the defence is pro tanto only. 1 Com. Dig. 585 ;
Dyer's R. 83 ; 1 Sid. 327. But the fallacy of the argument con-
sists in this. It is a misapprehension of the fact to suppose that
part of the debt only was attached ; on the contrary, the whole
debt, together with other assets, was attached by the creditors
in New York. Although the amount due the attaching creditors,
on their own showing, was less than 83000, they have attached
a debt due the bank of upwards of $20,000. Nor has the bank
any reason to complain of this, as, to say the least of it, it may
be doubtful, under the statutes of New York, whether the sheriff
would be justifiable in attaching part and not the entire debt. At
any rate, he has not thought proper to attach part, but has attach-
ed the whole debt. The sheriff to whom the process is directed
in the case of a foreign corporation, is bound to proceed, in all
respects, in the manner prescribed in the case of attachments
against absent debtors. 2lst section Revised Statutes of New York
460. And in case of absent debtors he is directed to attach all the
real and personal estate of the debtor, and to take into his custody
all the books, accounts, vouchers, and papers relating to the pro-
perty, credits, and effects of such debtor. The sheriff would
seem, therefore, to have no discretion, and this would appear to
have been his own understanding of his duty. He must take into
his possession all the property of the bank in his bailiwick, with-
n. 27 s*



210 SUPREME COURT [Pittsburgh

[Irvine v. Lumbermen's Bank.]

out any regard to the amount of the debt against the bank, or the
value of the property attached. The defendant had a complete
defence, by a proper plea, which, if pleaded, the whole writ would
abate ; but, not having thought proper to avail himself of this plea
in proper time, he shall not now be permitted to retrieve the slip
in pleading after a plea in bar ; nor can he have the advantage of
it on the general issue. We cannot, therefore, perceive any error
in the negative answer of the court to the defendants' seventh point.
5. It only remains to consider the rule as to the measure of dam-
ages. On this point we agree with the Court of Common Pleas.
The correct rule is, the cash value of the note at the time it is
payable ; but what is the cash value as between these parties ?
If the defendants had performed their part of the contract by pay-
ment of the note at its maturity, who can doubt that it would



Online LibraryPennsylvania. Supreme CourtReports of cases adjudged in the Supreme court of Pennsylvania [May term 1841 - May term 1845] (Volume 2) → online text (page 23 of 68)