59 U.S. 331 (1856), Dodge v. Woolsey

Citation:59 U.S. 331, 15 L.Ed. 401
Case Date:April 08, 1856
Court:United States Supreme Court

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59 U.S. 331 (1856)

15 L.Ed. 401




United States Supreme Court.

April 08, 1856


THIS was an appeal from the circuit court of the United States for the District of Ohio.

The circumstances of the case are fully stated in the opinion of the court.

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It was argued by Mr. Spalding and Mr. Pugh, for the appellant, and byMr. Stanberry and Mr. Vinton, for the appellee.

The points made by the counsel for the appellant, in this court, were substantially the same with the reasons assigned by Dodge, in the circuit court in support of a motion to dissolve the injunction.

They were the following, namely:----

1. The complainant cannot sustain a suit in equity against the defendant, George C. Dodge; for in the event of his making distress for the tax in said bill mentioned, the complainant will have 'plain, adequate, and complete remedy at law.'

2. The complainant, as one of the stockholders of said Commercial Branch Bank, has no right to call the directors of said bank to account, in a court of equity, for an error of judgment in respect to any matter confided to their discretion.

3. There is no allegation in the bill that the bank or its directors refuse, by collusion with this defendant, or with other persons, to prosecute a suit, or to take other measures to prevent the collection of said tax.

4. The complainant, in the character of a stockholder, has no right to call the bank to account in a court of equity for a breach of trust, as the relation of trustee and cestui que trust does not exist between the corporation and its several stockholders.

5. The said Commercial Branch Bank is the creature of the laws of Ohio, and has no corporate existence in any other State. In the law, such corporation is regarded in the light of a citizen and inhabitant of the State which creates and sustains it. The Commercial Branch Bank can have no right to institute a suit in the federal court against George C. Dodge, also a citizen and inhabitant of Ohio.

6. A stockholder of the Commercial Branch Bank is one of the component parts of the corporation. He has no distinct individuality, so far as it respects the interests of the bank, that will enable him to sue a citizen of Ohio in the federal court, although he may be a citizen and inhabitant of the State of Connecticut.

7. The complainant, in his bill, does not show himself entitled to the interposition of this honorable court, sitting as a court of equity.

8. The tax law of April 13, 1852, is a valid, constitutional enactment by the general assembly of the State of Ohio.

9. It is contrary to sound public policy, that the collection of the State revenue should be arrested by the instrumentality of a writ of injunction.

In support of the first point it was alleged that the damages

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which the complainant estimated that he would sustain by the tax were not more than $500, whereas the answer of Dodge, showed him to be worth $80,000. Baldwin, C. C. R. 394.

In the case of Osborn v. The United States Bank, the whole franchise of the bank was in jeopardy, so far as it respected that State, 9 Wheat. 738.

The right called in question was the right of the bank, an artificial person, but having a legal existence within the State of Ohio, of which State, Dodge, the other party was a citizen. No suit could therefore be carried on between them in the circuit court of the United States.

2d, 3d, 4th, 5th, and 6th, points. A stockholder had no right to intervene for the protection of the bank. The persons specified in the charter, and they alone, are or can be the agents of the corporation. 1 Kyd on Corporations, 13; Angell & Ames, on Corporations, 259; 8 Sergeant & Rawle, 521; 6 Sergeant & Rawle, 508.

It is definitively settled, however, by a great weight of authority, that where the charter has invested the board of directors with power to manage the concerns of the corporation, no one stockholder, nor any number of stockholders, has a right to compel these, the charter agents of the body corporate, to do any act contrary to their own judgment exercised in good faith. The Commonwealth v. The Trustees of St. Mary's Church, 6 Sergeant & Rawle, 508; Hersey v. Veazie, 24 Maine, 9; Smith v. Hurd et al. 12 Metcalf, 371; State of Louisiana v. Bank of Louisiana, 6 Louisiana, 745; Scott v. Depeyster, 1 Edward's N. Y. Chan. Rep. 513; Robinson v. Smith, 3 Paige, Chan. Rep. 222; Baylies v. Orne et al. 1 Freeman's Chan. Rep. 161; Hodges v. New England Screw Co. 1 Rhode Island, 312; The Oswego Falls Bridge Co. v. Fish et al. 1 Barbour's Chan. Rep. 547; Forbes v. Whitlock, 3 Edward's Chan. Rep. 446; Russell v. McLellan, 14 Pickering, 69; Angell & Ames on Corporations, 565, § 560; 2 How. 461; 1 Phillips, 790; 11 Georgia, 556.

This bill is a contrivance to give jurisdiction to the federal courts, where none fairly exists, and must therefore be discountenanced. 4 Dallas, 330; 1 Wash. C. C. R. 83; 5 Cranch, 87.

8. The tax law of 1852, is a valid, constitutional enactment.

When the case of the Piqua Branch Bank was decided, 16 How. 369, it was with reference to this circumstance, namely, that the law imposing the additional tax was imposed by a legislature which was sitting under the same constitution as that which granted the charter of 1845. But this case is different in this respect.

The constitution of 1802, contained in article 8, § 1, this clause.

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'For the great purpose of protecting their rights and liberties, and securing their independence, they (the people), have at all times a complete power to alter, reform, or abolish their government whenever they may deem it necessary.'

And in the mode prescribed by another article they altered their constitution in 1851, so far as to require that all property employed in banking, whether by banks then existing or thereafter to be created, should always bear a burden of taxation, equal to that imposed upon the property of individuals.

Therefore, the immunity granted to the banking companies of Ohio, by the 60th section of the act of February 24, 1845, was accepted by them with a tacit understanding that its efficacy might be impaired by the sovereignty of the State, upon the reformation of the government, and the adoption of a new constitution.

In McCullough v. The State of Maryland, 4 Wheat. p. 404, Mr. Chief Justice Marshall says: 'It has been said that the people had already surrendered all their powers to the state sovereignties, and had nothing more to give. But, surely, the qauestion whether they may resume and modify the powers granted to government does not remain to be settled in this country.'

In Terrett v. Taylor, 9 Cranch, 43, Mr. Justice Story says: 'Upon a change of government, too, it may be admitted that such exclusive privileges attached to a private corporation as are inconsistent with the new government, may be abolished.'

In Mumma v. Potomac Company, 8 Peters, 281, the same learned justice remarks as follows:----

'A corporation, by the very terms and nature of its political existence, is subject to dissolution by a surrender of its corporate franchises, and by a forfeiture of them for wilful misuser and non-user.

'Every creditor must be presumed to understand the nature and incidents of such a body politic, and to contract with reference to them. And it would be a doctrine new in the law, that the existence of a private contract of the corporation should force upon it a perpetuity of existence contrary to public policy, and the nature and objects of its charter.'

The counsel for the appellee contended that as the tax, for 1853, amounted to nine per cent. upon the capital of the bank, the case was brought within Osborn v. United States Bank, 9 Wheat. 738; that there was danger of irreparable mischief to the franchise, and a necessity for protecting the moneys, and choses in action of the bank from sale, and alienation under the tax proceedings.

In the two cases cited on the other side, namely, 3 Ohio, 370,

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and the Mechanics' and Traders' Bank v. Debolt, the amount of tax would not have been destructive.

The next point is as to the right of the plaintiff to bring this bill.

He sues in the character of a stockholder, and makes the bank and the directors parties defendant. The case which he makes is, that an act is threatened to be done by Dodge, the tax collector, in violation of law, which, if not prevented, will result in irreparable mischief to the corporation, and to his interest as a stockholder; and that the directors of the bank refuse to take any step to prevent the threatened injury. It further appears, that although the directors have protested against the doing of the act as a violation of the charter of the bank, yet they did suffer the distraint to be made for the tax of 1852, and took no step to prevent the distraint for the tax of 1853, which was impending when the bill was filed. It appears that there was no time for delay; for the distraint was to be made on the 21st of December, and the injunction was not applied for until the day previous.

We claim that, under such circumstances, a stockholder has a clear right to intervene. 11 Georgia, 569; 3 Paige, 233; 1 Freeman, 173; 4 Russ. 575; Hodges v. New England Screw Co. 1 R. I. 312; 7 Ohio, Pt. 1, 218; 16 How. 288; Angell & Ames, on Corp. § 312.

Upon the other branch of the case, the counsel contended that the case of Piqua Branch Bank v. Knoop, 16 How. 369, decided that the 60th section of the charter was a contract, and therefore it was no longer an open question. The ground assumed by the other side, namely, that the adoption of a new constitution in 1851, gave validity to the act of 1852, cannot be sustained.

1. Because the constitution of every State must be made in subordination to the constitution of the United States; and that in this respect, the constitution of a State in no way differs...

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