Comstock v. Willoughby

By the Court,

The defendant, being about to establish a banking institution under the law of 1838, was desirous to obtain state stock to deposit with the comptroller as security for circulating notes to be issued by his bank. For this purpose he made an arrangement with the Mechanics’ Banking Association, of which the plaintiff was president, and with Messrs. Parker & Co., by which he agreed to give to said association his bond and mortgage for the stock of the state of Maine, which he desired to procure; the association, at the same time, contracting to issue the like amount of their own stock to Parker & Co. in exchange for the state stock which the latter were to furnish. Parker & Co. accordingly transfered to the association the required fifty thousand dollars of stock of the state of Maine, and received therefor that amount of the stock of the association. This amount of Maine stock was received by the defendant, and the association also issued to him ten thousand dollars of their own stock for which he subscribed, and for these two parcels of stock, amounting together to sixty thousand dollars, the defendant gave the bond and mortgage now in question.

The judge charged the jury that if this was a real purchase of state stock by the defendant, and not a loan in disguise, the bond was free from usury.

*301There was nothing in this part of the charge of which the defendant can rightfully complain. He hardly gave a shadow of proof to raise the presumption that this was in any sense a loan; but had the testimony on that point been of a more decided character in his favor, the instruction would still have been correct in point of law. It submitted to the jury the controlling fact, that is, whether the transaction was really a purchase or a disguised loan, and their verdict has disposed of the question of usury. There was nothing to show a case of usury per se; it was apparently a purchase rather than a loan, and the jury have found that it was not a loan, in disguise. The objection that the bond was usurious must be held to be without any just foundation.

It is assumed that the association, of which the plaintiff was president, was duly formed and organized, as no objection on that ground was made. Nor is the validity of the act under which the organization took place called into question; the case will therefore be disposed of without regard to such objections, if they could at the proper time have been interposed with plausibility or even with success.

It can hardly be denied that an institution organized under the general banking act may, for the purpose of transfering the same to the comptroller as security for circulating notes, lawfully acquire title to state stocks and bonds and mortgages. This power may not be confered in express terms, nor can that be necessary; it is too plainly implied by what is expressly declared, to admit of a serious doubt. Associations under this act are in terms authorized to transfer such stock, and bonds and mortgages, to the comptroller and receive from him circulating notes in return. (Laws of 1838, p. 245, §§2 to 14.) Some of these sections expressly refer to the associations as owners of the stock and bonds and mortgages thus transfered, and they all plainly imply such ownership.

Having undoubted power thus to own and use such securities the right to acquire them necessarily exists. They may be purchased by the association with the capital paid in lay the shareholders or other funds of the institution, and I see no objection to shareholders making payment for the *302stock they receive on subscription in the same manner. The terms on which these securities should be received in payment for stock, so as to make the same equal to cash, and therefore just between the several associates and shareholders, is material and important amongst themselves, but can not affect the Capacity of the association thus to acquire such " property, or the validity of a title conveyed upon such consideration and for such purpose. The power seems to me to be incontestable, and a title thus acquired above all impeachment.

The twentieth section of the act makes it “ lawful for any association of persons organized under this act, by their articles of association, to provide for an increase of their capital and of the number of the associates from time to time as they may think proper.” These articles may have contained such a provision and thus the new issue of stock to the Messrs. Parker & Co., and the defendant, would have been clearly authorized. But it is objected in the argument submitted on behalf of the defendant, that although it may be lawful to receive state stock or bonds and mortgages from subscribers for stock in the association, and in payment of such subscriptions, yet, in this case, the association having gone into operation, no power existed to make a new issue of stock to Parker & Co. and the defendant. At all events that such a power was not to be presumed or taken by intendment, and if the plaintiff relied upon anything contained in the articles of association to uphold the act, he was bound to give those articles in evidence. But this objection was not taken on the trial nor any one to that effect. It was there objected that associations formed under the general banking law had “ no power to change their stock for the stock of any other company or state;” not, as is now objected, that this association, at the time and under the circumstances as they existed, had no power to issue the sixty thousand dollars of stock refered to. Had this objection been made it might have called for the production of the articles of association, but the ground of objection which was stated, so far from creating a necessity for their production, virtually conceded that the association was full}' authorized to issue *303such new stock. The objection was to the manner of disposing of its stock; a want of “power to change their stock for the stock of any other company or state,” and not a want of authority to issue it. The objection now taken, as it seems to me, comes too late and should be disregarded.

What then is this case 1 An association is formed under the “ act to authorize the business of banking,” the association providing by their articles, as we must assume, “ for an increase of their capital and of the number of the associates, from time to time.” Under this authority, after they had gone into operation, the association issued fifty thousand dollars of new stock to Parker & Co., who subscribed for the same, and received in payment therefor the same amount of the stock of the state of Maine. This is the form which that part of the transaction assumed, but in substance, the association, being desirous to obtain the defendant’s bond and mortgage to deposit with the comptroller, issued sixty thousand dollars of new stock of which the defendant received as a subscriber ten thousand dollars, and Parker & Co. subscribed for and received the remaining fifty thousand dollars, the same being delivered to them by the direction and for the benefit of the defendant. This is the advance which the association made, in return for which they received the defendant’s bond and mortgage for sixty thousand dollars, and he received the fifty thousand dollars of stock of the state of Maine, which the Messrs. Parker & Co. advanced. I see nothing illegal in this transaction, nothing against the terms or the policy of the general banking act. The charge, in my opinion, was correct, and the judgment should be affirmed.

Judgment affirmed.