Sherman v. Smith

• Decision Date: 01 December 1861
• Citation: 1 Black 587,66 U.S. 587,17 L.Ed. 163
• Parties: SHERMAN v. SMITH
• Court: U.S. Supreme Court

66 U.S. 587

1 Black 587

17 L.Ed. 163

SHERMAN v. SMITH.

December Term, 1861

Writ of error to the Supreme Court of New York.

Oliver Lee & Company's Bank, at Buffalo, was organized in January, 1844, under the act of the Legislature to authorize banking, passed 18th April, 1838. Watts Sherman was one of the shareholders. In the articles of association it was agreed that the shareholders should not be liable, individually, for the debts of the bank, and this was in accordance with the act of 1838, under which the association was organized, and which declared that no shareholder should be liable unless the articles of association signed by himself made him so. But this act contained a provision that the Legislature might at any time alter or repeal it. In 1846 a change was made in the constitution of the State which imposed ind vidual liability on the stockholders of banks, and in 1849 the statute was passed under which this proceeding was commenced and carried on to enforce that responsibility.

In 1857 Henry B. Gibson, one of the stockholders, presented his petition, agreeably to the act of 1849, to a judge of the Supreme Court of the State, setting forth that this bank was insolvent, and praying that it might be declared so and a receiver appointed, and such other relief given as might be required. The proceeding thus begun ended in a judgment of the Supreme Court, affirmed by the Court of Appeals, making Watts and the other stockholders liable in their individual capacity for an amount of the debts equal to their stock. James M. Smith, the defendant in error, was appointed receiver.

The question argued here was, whether the constitution of 1846 and the statute of 1849 were or were not in conflict with that provision in the Federal Constitution which forbids the States to make any law impairing the obligation of contracts. The point was raised below, but was decided against the stockholders in every court to which the cause was carried, including the highest.

Mr. Peck, of New York, (with whom was Mr. Porter and Mr. John Van Buren,) for the plaintiff in error, cited: 1 Parsons on Contracts, 399; Miller vs. N. Y. & Erie R. R. Co., (21 Barbour, 513, 519;) Ham vs. McClairs, (1 Bay., 93;) Calder and Wife vs. Bull and Wife, (2 Dall., 398;) Bennett vs. Boggs, (1 Bald., 74;) Schuyler et al. vs. McCrea, (1 Har. & J., 249;) Commonwealth vs. McCloskey et al., (2 Rawle, 374;) Allen vs. McKean, (1 Sumner, 302, 303;) State Bank of Ohio vs. Knoop, (16 How., 385;¢ The L. & C. Co. vs. Town, (1 N. H., 44;) Winter vs. Muscogee R. & Co., (11 Georgia, 438;) Kean vs. Johnson et al., (1 Stockton, 401;) Ex parte Johnson, (31 Eng. L. & Eq.;) 21 Barbour, 519, supra; Livingston vs. Lynch et al., (4 Johnson Chy., 573, 582, 595-598;) 1 Sumner, 314; Laws of 1849, 340, Sec. 3; Hartford R. R. Co. vs. Crosswell, (5 Hill, 383, 386;) Green vs. Biddle, (8 Wheaton, 2, 92;) Dodge vs. Woolsey, (18 Howard, 331, 359;) Piqua Bank vs. Knoop, (16 Howard, 369;) Allen vs. McKean, (1 Sumner, 278, 313, 314;) Livingston vs. Lynch et al., (4 Johnson Chy., 573, 582, 595-598;) R. vs. M. & I. R. R. Co. and P. & I. R. R. Co., (21 Howard, 442;) Mason vs. Finch, (2 Scam., 223;) McFarland vs. State Bank, (1 Pike, 410;) State vs. Williams, (2 Strobh., 474;) Town Ottawa vs. County La Salle, (12 Ill., 339;) 2 Roll. Abr., 409; Taylor vs. Homersham, (4 M. & S., 426;) 2 Parsons on Contracts, p. 13, N. r, and cases there cited; Lyman vs. Clark, (9 Mass., 235;) Jackson ex dem. Stevens vs. Stevens, (16 Johnson, 110;) Covington vs. McNickle, (18 B. Monroe, 262;) Jackson vs. Stackhouse, (1 Cowan, 122;) Torrence vs. McDougald, (18 Georgia, 526;) 7 Bar. and Cross., 643, Bu. and Brandling; Townley vs. Gibson, (2 Tenn., 701;) 1 Coke, 68, Alton Woods; Plowden, 365, Duke of Norfolk's case; 5 Greenleaf's Crim., 19, Sec. 44; 5 Greenleaf's Crim., Tit. Private Acts and King's Grants, pp. 1-53; 4 Greenleaf's Crim., 174, Sec. 26-300, Sec. 8-303, Sec. 15-345, Sec. 62, note 1; Mitchell vs. Doggett, (1 Branch, 356;) Henry vs. Tilson, (17 Verm., 479;) City of St. Louis vs. Russel, (9 Miss., 507;) Fletcher vs. Peck, (6 Cran., 87;) Dash vs. Van Kleek, (7 Johnson, 417;) People vs. Clark, (3 Selden, 385;) Gilmore vs. Shuter, (2 Mod.;) Couch vs. Jeffries, (4 Burr., 2460;) Sayer and Wife vs. Wisner, (8 Wendel, 661;) 1 Harr., 285, supra; 1 Branch, 356, supra; Hooker vs. Hooker, (10 S. & M., 599;) Bruce vs. Schuyler, (4 Gilm., 221;) Morlot vs. Lawrence, (1 Blatch. Ct. Ct., 608;) United States vs. Cases Cloths, (Crabbe, 356;) 4 Pike, 410, supra; Tow Ottawa vs. County La Salle, (12 Ill., 339;) Brown vs. County Comm's, (21 Penn.;) Sackett vs. Andross, (5 Hill, 527,) elaborate opinion of Brown, J.; Quackenbush vs. Danks, (1 Denin, 128;) Dewart vs. Purdy, (29 Penn., 113;) U. S. vs. Stane, (1 Hemp., 469;) Aurora and L. T. Co. vs. Holdhow, (7 Ind., 50;) Brown vs. Fifield, (4 Mich., 322;) People vs. C. Comm's, (3 Scam., 153;) Barnes vs. Mayor Mobile, (19 Ala., 707;) Bruce vs. Schuyler, (4 Gilm., 221;) Brown et al. vs. Lever, Sheriff, &c., (5 Hill, 221.)- Mr. Ganson, of New York, contra, cited 21 N. Y. Rep., 9; 22 N. Y. Rep., 9; 1 Rev. St., 600; Pl. R. Co. vs. Thatcher, (1 Kernan, 102;) R. R. Co. vs. Dudley, (4 Kernan, 336;) Northern R. R. Co. vs. Miller, (10 Bach., 260;) White vs. R. R. Co., (14 Bach., 559;) Stanley vs. Stanley, (26 Maine R., 191;) Charles River Bridge vs. Warren Bridge, (11 Pet., 549;) Ohio Ins. & Tr. Co. vs. Debolt, (16 How., 416;) Bank of Columbia vs. Attorney General, (3 Wend., 588.)

Mr. Justice NELSON.

This is a writ of error to the Supreme Court of the State of New York.

The proceeding was instituted under an act of the Legislature of the State of New York, to enforce the responsibility of stockholders in certain banking corporations or associations.

The judge before whom the proceedings were instituted declared the bank insolvent, and appointed Smith, the defendant in error, the receiver to take charge of its assets, and to perform such other duties as the law imposed.

The case was afterwards referred to Judge Hall, as a referee, to apportion the debts and liabilities of the bank which had been contracted after the first day of January, 1850, and remained unsatisfied among the stockholders, ratably in proportion to their stock, according to the principles declared by an act passed April 5, 1849, and report to the court. Judge Hall reported that the capital of the bank was $170,000, and its indebtedness $502,944 22; and further, that the assets in the hands of the receiver, and an assessment upon the stockholders of an amount equal to the capital of the bank, would be insufficient to discharge its debts and liabilities, and hence apportioned upon each of the stockholders an amount equal to the amount of stock held by them respectively in the bank. The sum of $7,000 was assessed upon the plaintiff in error.

The referee further reported, that this bank was an association formed 23d April, 1844, under the general banking law of the State, passed 18th April, 1838; and inserted in his report a copy of the articles of association, among which is one that declares: 'The shareholders of this association shall not be liable in their individual capacity for any contract, debt, or engagement of the association.'

The counsel for the plaintiff in error appeared before the referee and objected to the assessment, on the ground, among others, that the clause in the articles of association above referred to, and which were authorized by the general banking act of 1838, constituted a contract; that the stockholders were not to be made individually liable for the debts of the association, which was protected by the Constitution of the United States; and that the provision of the constitution of the State of New York, of 1846, imposing upon them individual liability, and the act of the Legislature of 1849 carrying it into effect, were inoperative and void. The counsel further objected, that a reservation by the State, in express terms, of a power to impair by subsequent laws the obligation of contracts between individual citizens, lawful at the time it was made, would be in conflict with the Federal Constitution.

Numerous other objections were taken to the assessment before the referee, but the above are the only ones material to notice in this court.

The referee overruled these objections, and the report was afterwards confirmed by the judge.

Thi judgment, confirming the report, was appealed from to the Supreme Court of the State, which affirmed it. An appeal was afterwards taken to the Court of Appeals, the highest court in the State of New York, in which the judgment in the Supreme Court was affirmed, and the record remitted to that court to have the judgment carried into execution.

As this case comes before us under the 25th section of the judiciary act, the only question involved is, whether or not the court below erred in denying a right set up by the plaintiff in error under the Constitution of the United States; in other words, whether the constitution of the State of New York of 1846, or the act of the Legislature of 1849, or both, which subjected the stockholders of the bank to personal liability for its debts accruing after the first day of January, 1850, impaired the obligation of any contract with the stockholders in its charter?- The general banking law of 1838, under which this bank was organized, provided in the 23d section, that 'no shareholder of any such association shall be liable in his individual capacity for any contract, debt, or engagement of such association, unless the articles of association by him signed shall have...