King v. Doolittle

• Decision Date: 30 September 1858
• Citation: 38 Tenn. 77
• Parties: JOSEPH L. KING v. DOOLITTLE et al.
• Court: Tennessee Supreme Court

38 Tenn. 77

JOSEPH L. KING

v.DOOLITTLE et al.

Supreme Court of Tennessee.

September Term, 1858.

FROM KNOX.

This cause was tried before Luckey, chancellor, who dismissed the bill. The complainant appealed.

Nelson, Maynard and Cocke, for the complainant; Trigg and Temple, for the defendants.

McKinney, J., delivered the opinion of the court.

This bill was filed in the Chancery Court at Knoxville, to have rescinded and annulled, a contract entered into on the 28th of September, 1855, for the purchase of a supposed banking institution, located at Knoxville, including the capital stock, debts, and effects of every description, by the complainant, from the defendants, Doolittle & Co., for the consideration of $37,500, for which the former executed his several promissory notes, payable to the latter.

The supposed institution claimed a legal existence, under and by virtue of an act of the General Assembly of this State, passed on the 2d of March, 1854. It went into operation in January, 1855, under the adopted name of “The Miners and Manufacturers' Bank,” the stock being owned by the defendants, Doolittle & Co.

The act of 2d of March, 1854, above referred to, contains seventy-five sections. By said act, various companies were incorporated for different purposes, having no connexion with, or relation to each other. By the four last sections of the act, certain persons therein named “were created a body politic and corporate, by the name and style of the Southern Mining Company.” In addition to numerous and extensive powers conferred upon said company, in express terms, there is a provision in the 73d section, that it should “have all the powers, franchises, rights, privileges, and immunities conferred upon the corporation and body politic, created by an act December 27th, 1843, ch. 60.” The act referred to, merely by the date of its passage and chapter, was the charter of incorporation of the “Bank of East Tennessee,” with a capital stock of $800,000.

Under the banking power thus derived, the “Miners and Manufacturers' Bank” was established.

The act of 2d March, 1854, under which said bank claimed to have been chartered, contained (in the 3d and 46th sections) the reservation of an express power to repeal and dissolve any company created by virtue of that act, “at the pleasure of the Legislature.” And in the exercise of the power thus reserved, the Legislature--for reasons deemed sufficient--by an act passed on the 28th of February, 1856, ch. 113, sec. 16, repealed and annulled, in toto, the charter granted to the before-named “Southern Mining Company,” so far as said charter conferred “banking privileges” on said company.

It appears, that not long after the passage of the act of March 2, 1854, the charter of the “Southern Mining Company” was offered for sale; and a copy of what purported to be the entire charter of said company, was procured. This copy embraced the four last sections (secs. 72, 73, 74, 75,) of the act above referred to; to which was appended, in full, the charter of the “Bank of East Tennessee.” This copy was duly certified by the Secretary of State, under the seal of the State, to be “a full and perfect copy of all that part of an act passed March 2, 1854, by the General Assembly of said State, which relates to the Southern Mining Company.” But in said copy, the sections reserving to the Legislature the right and power of repeal, at pleasure, were wholly omitted.

Upon the faith of this copy being what it imported upon its face, and was certified to be by the proper officers, a full and perfect copy of the charter of said company, the defendants, Doolittle & Co., became the purchasers thereof, in the latter part of the year 1854, for which they paid $12,500; and in the like faith, the complainant contracted with them for the purchase of the bank (established under said charter), in September, 1855. The fact, indeed, is placed beyond all question, that no one of the parties to this suit, or connected with the bank, had any knowledge, or even suspicion, that the charter of the company, under which the bank was organized, was at all subject to the will or power of the Legislature, until the passage of the repealing act of February 28, 1856. And even then, it was denied by the bank, that the sections of the act reserving the power of repeal, had any application to the charter granted to the Southern Mining Company; but, on the contrary, had reference alone to the companies created by the sections of the act, which, in the order of place and number, preceded those sections which conferred the power of repeal. And this opinion was entertained, it seems, until, in a judicial proceeding, to which the bank was a party, it was declared by this court, in September, 1856, that the power of repeal extended, as well to the charter under which the “Miners and Manufacturers' Bank” claims a corporate existence, as to all the other charters of incorporation granted by the act. (See 3 Sneed, 610). And that by the repealing act of 1856, the legal existence of the bank was totally destroyed.

It appears from the proof, that the purchase of the charter by the defendants, Doolittle & Co., was partly negotiated through the complainant. It likewise appears, that the complainant was made president of the bank on its first establishment in January, 1855, and that he remained in that office up to September of the same year, when, by his purchase from Doolittle & Co., he became owner of the bank. It is shown in the proof, that prior to September, 1855, the bank had become embarrassed in its operations, mainly in consequence of large advances made to the complainant, and also, to Doolittle & Co. To relieve the bank of this embarrassment, the complainant went to Philadelphia-- where Doolittle & Co. resided--and negotiated a purchase of their entire interest in the bank.

It is also shown in the proof, that the promissory notes made by the complainant to Doolittle & Co., in consideration of the purchase of the bank, were, at the time of their execution, transferred by endorsement, in part to the defendant, Fuller, and in part to one Barnitz.

Prior to the 28th September, 1855, the date of the complainant's purchase of the bank, Doolittle & Co. were largely indebted to Fuller and Barnitz, severally, for moneys by them advanced to the former, for the benefit of said bank. For these advances, Fuller and Barnitz, respectively, held the promissory notes of Doolittle & Co., to secure the payment of which, the latter had placed in their hands various stock bonds and other evidences of debt, and also a large amount of the issues of said bank. It seems that Fuller and Barnitz were parties to the negotiation between the complainant and Doolittle & Co., in relation to the purchase of the bank. And by an arrangement between the parties with the mutual consent of all, the notes of the complainant were transferred to Fuller and Barnitz, and accepted by them, in lieu of the notes which they respectively held on Doolittle & Co.; and certain mortgages executed by complainant, to secure the payment of his notes to Doolittle & Co., were, at the same time, transferred to Fuller and Barnitz. Upon this transfer being made, the latter gave up to the former the promissory notes which they held on them; but, as further security retained the collaterals which had been pledged to secure the payment of said notes thus given up, and refused to surrender them until their respective debts were fully paid.

The proof, upon this point of the case establishes that the notes of the complainant were not accepted by Fuller and Barnitz in absolute payment of their pre-existing debts against Doolittle & Co. This fact is placed beyond question by their requirement that the liability of Doolittle & Co., should be continued by their indorsement of the complainant's notes; and, likewise, by the requirement, that the collaterals deposited with them for the security of the pre-existing indebtedness of Doolittle & Co., should still be retained. Both of these requirements are utterly incompatible with the idea that the complainant's notes were received in discharge of the prior indebtedness of Doolittle & Co.

The result of the proof, then is, that the complainant's notes were taken merely as additional security for a prior indebtedness, and...